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?


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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