Archive for August, 2013

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Ice. Ice, baby.

August 30, 2013

Dear God but VAT is boring.  I mean it is, isn’t it?  I know my background is in direct tax and I’d probably feel differently about it if my training had been in VAT right from the start, but, be honest, all this stuff about the temperature of pies and when is a biscuit not a cake?  It’s just angels dancing on the head of a pin, surely?

So how would you go about simplifying it?  That’s one of the government’s priorities for the tax system, after all, isn’t it?  Simpler, greener, fairer and more competitive, remember?

Well in the words of the old joke you wouldn’t start from here, obviously.  There’s detailed legislation, shedloads of case law, and a lot of it is European anyway.  You wouldn’t start from there but go back to first principles.  Perhaps something like “if you’re a company, partnership or any other entity, or if you’re an individual in business with a turnover of more than £70k, then you have to add 20% to everything you sell, and hand it over to the government”

And then “if you’re obliged to charge 20% on your sales, you can net off the amount you have paid to other businesses or entities against the amount you receive on your own sales, and the amount you pay over to the government is the net figure.”

Too much “simplicity” and not enough “fairness”?  Maybe so.  Like I said, I know very little about VAT itself.  But I DO know, in a rational world you wouldn’t start from here.

I mean, the writers of the VAT treatment of refunds made by manufacturers consultation have done a bang-up job, so far as I can see.  It’s a sensible enough consultation document, asks the right sort of questions, even has a decent enough impact assessment at the end (yes, I know they’ve forgotten to do the small firms impact test, but the government has pretty much abolished that anyway in their latest guidance, and, yes, I’ll be coming back to that later)

So why am I not responding to it?

Because it’s rearranging the ice cubes in the silver buckets on the occasional tables next to the deckchairs on the port side of the stern of the Titanic.  Instead of, you know, dealing with the bloody iceberg

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The Guru-Murthy test

August 27, 2013

Goodness, is it that time already?  Sorry, I’ve been hard at work on My First Academic Paper (which will be delivered in September here) and I’ve missed half a dozen HMRC consultations in the meantime!  I wonder if they missed me?

Anyway, we’re still in time to look at modernising the taxation of corporate debt and derivative contracts, although I’m not sure they want the likes of you and me actually reading it: under “who should read this” it says “companies; representative bodies; tax professionals; accountants and accounting bodies”.  Well, tough.  We’re all citizens of the same polity, so we’re all stakeholders in how citizens – individuals and corporate citizens – are taxed.

Anyway, in this consultation “the Government’s aim is to provide simpler and fairer tax treatment, minimising the scope for abuse, reducing uncertainty and improving structural and legislative clarity as well as reducing administrative burdens” and I think we’re all on board with that, right?

Sorry?

Yes, I fell asleep round about page 34 (although I woke up again on page 36, or at least enough to spot that there’s probably a typo in the last of these two sentences:

For example, loan relationships are fairly simply defined, whereas the definitions of derivative contracts are longer and more complex. However, there is no obvious reason why a combined code should be able to accommodate differences of this kind.

Presumably there should be a “not” or an “un-” in the second sentence?  Sorry, it’s a compulsion.)

Round about page 56 I started thinking, I’m not sure I’ve understood one word in ten of the last thirty pages.  I’d like to hear someone explain this to an audience of small businesses.

And then I started thinking that, yes, their heart is clearly in the right place, and clearly the objective is to achieve a significant simplification of what appear to be terrifyingly complicated rules, if only for the very good reason that the complications open up whole worlds of tax avoidance opportunities.  So they’ve done the right thing, and stepped back to take a look at the big picture.

But wouldn’t it be splendid if the people working on this took the opportunity to take a step even further back?

I mean, they’ve stepped back far enough to see the big picture inasfar as  “companies; representative bodies; tax professionals; accountants and accounting bodies” are concerned.  But could you explain it to your mum?  Not a fair test?  Well, could you explain what the loan relationship rules are to (say) Krishnan Guru-Murthy, if you found yourself on Channel 4 news?  Or could you write an article in the Daily Mail that its readers might have a sporting chance of understanding?

In other words, wouldn’t it be a much better attempt at simplification if they thought to consult not just with the tax wizards but the tax muggles?  Wouldn’t the best way of simplifying the tax system be, not to talk to the tax wizards who earn a living out of understanding the difference between a loan relationship and a derivative contract, but to the tax muggles who pay what they’re told and wonder why there’s no money left?   Viva the citizen stakeholder!

(Oh and, while you’re about it, check out page 98?  The “tax impact assessment”?  Didn’t David Gauke issue a written ministerial statement in March 2011 saying that “This new tailored tax impact assessment process will be used throughout the development of tax and NICs policy”?  And “This new approach will consider a wider range of impacts and cover a broader range of policy changes than the existing impact assessment regime for tax.”?  And is that fulfilled by saying, in effect, ‘don’t worry your pretty little heads about it, it won’t cost any more, raise any more, or make any difference really.  But please tell us if you think that’s not true.’

Because, mate, I think there might be smoke emanating from your trouser area…)

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Living in the future

August 8, 2013

Why can’t HMRC communicate by email?

Well, why can’t they?

I spent what seemed to me an unreasonable amount of time hanging on for an HMRC helpline today.  And then answered a series of questions to confirm my identity.  And then discovered the person I was talking to couldn’t actually resolve my problem, I needed to write in.

Now, why can’t I email?

Yes, yes; identity fraud, impersonation, insecurity of sending personal details electronically, blah blah blah.  (Incidentally, I can manage my bank account via a mobile phone app.  Maybe HMRC could get one of those!)

But I’d already established my identity to HMRC’s satisfaction during the phone call.  And there’s a thing called PGP – pretty good privacy – that will encrypt an email, if you’re paranoid enough to be bothered.   (Disclosure: I’m not, so I’ve never actually tried it)

Having established my identity, the operator could have given me an email address (hers for preference, or at least some kind of postbox for authenticated email) and the necessary “key” to operate the dual key system.

And then I could have sent her an encrypted email and she could have decrypted it and actually dealt with it, in the knowledge it actually came from me.   Or something.  But don’t tell me that in the twenty-first century, communicating with a government department via email isn’t possible.  It might not be convenient for the government or its departments – no doubt in this day and age the requirement to send snail-mail acts as a preliminary filter to stop those of us who might otherwise have emailed more often than the department might like…

Remember how long it took for the old Inland Revenue to adopt the technology of the fax machine?  (Those of you under thirty; it’s an old-time machine that acted like a cross between a networked printer/scanner and a landline.)  It’s time to make another leap of faith and embrace email.

Well, OK, it’s also time for me to fix the damned printer…

Posted in HMRC | 1 Comment »

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Once more, with feeling

August 5, 2013

I wouldn’t usually blog twice in one day, but having sat down in front of the telly with twitter on my phone, I spotted a tweet from the Spartacus group reminding people that the consultation on the hard-won further consultation on the mobility element of the PIP closes tonight.

We have been here before, of course.  But I thought it worth sending another quick response.  You have just got time to do the same yourself: email pip.assessment@dwp.gsi.gov.uk before midnight if you can.  All you really need to say is no: it’s not reasonable to reduce the distance at which you get the kind of enhanced financial support that might enable you to get out and about from “being able to move 50 yards” to “being able to move 20 yards”.  Come on!

Here’s what I sent, although I’ve redacted some personal stuff about my own experiences of mobility issues.

My view is that it is unreasonable to set rigid limits, whether 20 or 50 metres, in deciding whether or not a person is entitled to the advanced rate of PIP.  In my experience disability is a fluctuating condition and fatigue is, in particular, difficult to quantify.  A person might reasonably be able to walk 30 metres one day and 10 another, for example.  They might be able to move about under some circumstances – early in the day, in familiar territory, with the use of aids – and yet unable to move the same distance under different circumstances – late in the day, in a strange place where there is additional stress, or under circumstances which include other stressors, for example.

I believe a more reasonable way of deciding whether a person should receive PIP at the lower or higher rate is to use a test analogous to that used in determining tax avoidance.  Under the General Anti Abuse Rule there is a “double reasonableness” test (see B12.1 middle bullet) Under this test, tax avoidance is not deemed to be “abusive” unless the double reasonableness test is met:

This requires HMRC to show that the arrangements “cannot reasonably be regarded as a reasonable course of action”.

This test could be adapted into the PIP regulations for existing holders of, and applicants for, the higher rate of PIP or analogous mobility allowance by specifying that the PIP will be paid at the higher rate in respect of mobility unless this “cannot reasonably be regarded as a reasonable course of action”.  In other words, rather than testing and (forgive me) harassing fellow citizens with disabilities as if they were trying to pull a fast one, you regarded them as having a legitimate need for the higher rate allowance unless it was reasonable to regard any other course of action as reasonable.

Kind regards

Posted in Bit of politics, Consultation, DDA, Equality | Tagged | Leave a Comment »

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A Modest Proposal

August 5, 2013

The problem with actors is that they never know whether they’re going to make any money or not – like a minimum wage worker on a zero hours contract.  The work they do is usually significantly more enjoyable and fulfilling than zero hours contract work, and there is the faint but real possibility of making lottery-winner money out of one successful contract.  After all, someone has to be Obi Wan and walk away with 2% of the Star Wars gross, even if most of us know our fate is to be the equivalent of the unfortunate stormtrooper who bashed his head on the doorway.

But think about this for a moment.  Alec Guiness died in 2000.  His estate still receives his 2%.  But should the payer deduction National Insurance before they pay it?

Yes, you may boggle.  The vexed question of actors, musicians and other entertainers comes up again in the HMRC consultation (which closes tomorrow) on “National Insurance and Self-employed Entertainers“.

What’s it about?  Well, actors are usually self employed for income tax purposes… but because they often need to claim benefits in the early stages of their careers when they are between engagements, they are employees for National Insurance purposes, so that they build up sufficient contributions to be able to claim JSA.

But, well, times change.  There’s a fundamental question about whether the royalties Sir Alec Guinness’ estate is receiving now from Star Wars is actually income from his engagement on the production (the work of acting itself) or from the intellectual property inherent in his performance.  And – not to put too fine a point on it – there’s a growing tendency for films and tv productions to be financed by special purpose vehicles (companies set up just for the duration of the production itself) and for the income stream then to come from various sources like dvd sales and downloads, and there’s an argument that making a cable tv company in Seattle, say, pay a few pence of residuals to an actor in Notting Hill under deduction of NICs is both administratively burdensome and damaging to the UK creative industries’ competitiveness.  And since the government has just introduced a tax break for the creative industries, it makes some sort of sense to make sure you’re not giving with one hand and taking away with the other…

Actually it’s rubbish.  There are two fundamental difficulties with this consultation: the difficulty of distinguishing between employment and self employment, and the difficulty in having different rules for Income Tax and National Insurance contributions.  Instead of faffing about with a piecemeal change like this one, how about doing something radical about simplicity?

So I have a Modest Proposal.

Abolish the differences between employment and self employment.

All of them.

Employment is under PAYE and self employment under SA , and the government couldn’t do without the steady cash flow it gets from PAYE receipts?  Easy!  Make PAYE a requirement of Limited Company status – if you’re a limited company, you can’t pay anyone – and I mean anyone – without deducting the tax first.  If you’re an individual, you don’t have to operate PAYE, you pay any employees gross, full stop.

Expenses are calculated differently for employed and self employed people?  Easy!  Make them the same.  Currently it’s expenses “wholly and exclusively” incurred if you’re self-employed, and “wholly, exclusively and necessarily” if you’re employed.  Abolish “necessarily”.  But if you work for a company and you are paid under PAYE you won’t have to make a tax return… unless you want to claim expenses.  And if you want to claim expenses they’d better be legitimate expenses, because HMRC will have a new squad of auditors who will examine a random selection of PAYE expense claims and you’ll be heavily penalised for, well, taking the piss.

Tax and National Insurance have different rules?  Abolish them!  Abolish the different rates of National Insurance, and instead decide what National Insurance is for.  Does it actually still pay for pensions, maternity pay, unemployment benefits and sickness pay?  Fine.  Calculate how much that came to in the last tax year, divide that by the amount of employment pay and self employment turnover there was in the last tax year, and multiply by 100.  That gives you what percentage NI will be charged at.

Hypothecate it.

Charge the NI rate that will produce the sum you need, and the tax rate that you think you can get away with (where “you” = “the government of the day”)

Employees have different rights from the self employed?  Why?  If I’m employed by a multinational and a piece of their equipment falls on me, I’ll sue them and (depending on the circumstances) they’ll pay me compensation.  If I employ a cleaning lady for a couple of hours and my stepladder breaks under her, she’ll sue me – and my household insurance will cover me (if I read the small print correctly)

Benefits?  You get jobseeker’s allowance, to be replaced by universal credit, if you lose a position as an employee, but not if you’re going through a bad patch as a self employed person.  Why?  (And, if we went with a Citizen’s Income, instead of universal credit, it would be even less of an issue.)

Now wouldn’t THAT be a simplification worth having???

Sigh.

(Here’s what I sent in response to the consultation, if you’re still interested…) Read the rest of this entry ?

Posted in Consultation, Employment, SFIT | 6 Comments »