tiintax

Since one of the objectives of this blog is to respond to all the government tax consultations (I had seriously thought I could look at ALL government consultations, but have you SEEN how many there are!) it’s conceivable you’re wondering about the ones that closed last week which I haven’t mentioned so far.

Here’s a quick round up.

Above the line R&D credit. Essentially the government will refund some of a large company’s research and development costs in order to encourage investment in R&D. I have nothing to say – it’s a laudable aim, a well written consultation, and includes a decent impact assessment. Stand up, R&D tax credits team, and take a small round of applause.

REITs (Real Estate Investment Trusts).  There are proposals to change the REITS regime to encourage investment in social housing.  This, again, would have been an exemplary consultation if it had included an impact assessment showing the estimated costs and benefits of the change.  Without that, in my view, the case for change is not made.

Incidentally, in passing I note that

2.34 In England, the Government has confirmed its commitment to retain the current RPI+0.5 per cent formula for social rent increases for the rest of this Parliament.

and

3.5 As mentioned above, no solely residential REIT exists in the UK. In large part, this is due to the low yield that this sector generates which is insufficient to attract investors.

Quite frankly, if I could invest my savings at RPI+0.5% I’d snatch your hand off, so I wonder whether there might be a role for someone non-rapacious (a union consortium?  A cooperative?) to set up a housing investment REIT seeking its funding from small savers.  TUC please note!

Alcohol Fraud

I’m not sure I understand why this is such a problem but HMRC looks to be working with industry to counteract it.  What they’re not doing, it seems, is looking at the impact on small firms:

Q39. If you are a small business (less than 20 employees) please provide details of the costs and impacts of this measure?

No small firms scoping meeting in advance of the consultation document?  No Small Firms Impact Test work done yet, then?

My only feedback on this consultation, then, is that it looks as if it might have left itself open to judicial review by not doing enough work with small firms at this stage.   You also might think that, given there have already been unsuccessful judicial review proceedings in this area of law – which included the allegation that the consultation and impact assessment were inadequate –  it might have been tactful of HMRC to have done rather better this time around.

Taxing remote gambling

This one is a no brainer. My only comment would be that I wouldn’t be too fussed about any responses  from industry on the difficulty of establishing a customer’s location: they already do it, as I discovered to my cost when I had a hot tip on a horse while I was on holiday in the States and found my bookie’s account was blocked – because it could already detect where I was.  Who knew that my harmless flutter would have been actively illegal in Wisconsin!

Finally there’s the closed consultation on the tax treatment of herbal smoking products.  I couldn’t really have responded to this one, because what’s being consulted on is the design of the tax, whereas what I would have wanted to respond on was the fundamental design of the policy.

Why are we taxing herbal smoking products?

Well, why do we tax tobacco?  For one thing, tobacco is both addictive and actively harmful to its users.  And so we use the price mechanism to try and dissuade people from using it – and it’s also, of course, a good little money-raiser.

So why would we want to tax herbal smoking products?

Are they actively harmful and addictive?  Doesn’t seem like it, although I’ve never smoked any and I have no particular knowledge or expertise.  Or are we actually arguing that, hey, there’s a dangerous thing that we’ve managed to price some people out of using, but they use something else instead, so we’re losing money, so we’ll tax the other thing as well???????

This is the politics of the madhouse.  But it’s not one of the elements up for consultation, because the decision is made, because

It is not intended to cover whether such changes should be made but rather how the transition can be made easier, and to provide a better mutual understanding of this segment of the market.

Now, I’m not normally a Little Englander, but see page 7, chapter 3 of the consultation, the “Legal Background”:

3.1 At present UK legislation excludes “herbal smoking products” (which do not contain tobacco) from excise duty. This contravenes European Directive 2011/64/EC (“the Directive”) which states that:

“Products consisting in whole or in part of substances other than tobacco but otherwise conforming to the criteria… shall be treated as cigarettes and smoking tobacco”

Well what genius thought that one up?  Honestly!