Negligible (Quick and dirty Budget analysis #4)

November 27, 2017

What does “negligible” mean?  Well, if you will turn to page 37 of OOTLAR (the overview of tax legislation and rates) published with the Budget last week, you will see (para 3) that

Where the exchequer impact is negligible, the impact is less than £5 million in any one year.

In a country with thirty million individual taxpayers,  a million corporation taxpayers and two million VAT payers (figures rounded from the spreadsheet here) you have to work quite hard to get a “negligible” impact.

Income Tax: Marriage Allowance claims on behalf of deceased partners (page 44) is clearly negligible – the pettifogging rules around the transfer of allowances between married couples are already bad enough. It’s a purely cosmetic political measure designed to “reward marriage in the tax system” without unwinding independent taxation of men and women and the sooner it’s abolished entirely in the name of simplification the better in my view. However, if we have to have it, then yes, we shouldn’t faff about with it when one of the partners dies, I suppose. But why did no-one think of that when they introduced it in the first place?

Income Tax: mileage rates for unincorporated property businesses (page 46) however is a classic example of how not to simplify the tax system. Repeat after me, options are not simplification. Adding a different way of claiming travel expenses in a property business doesn’t make the taxation of property businesses simpler, it makes it lighter.  It means that any properly advised property business is likely to want to work out its travel expenses twice to see which method is most advantageous. Also, this seems to be a “this is the way it’s done for other unincorporated businesses” measure, which means there was, somewhere along the way, a missed opportunity to add “and property businesses” into the legislation, creating the gap this piece of nonsense is filling.  In other words, this is tinkering that would, in a properly regulated system, have been entirely unnecessary as a separate measure, because you’d have done the thing right in the first place.

Partnership taxation: proposals to clarify tax treatment (page 52)

While the rules governing the allocation of partnership profits for tax purposes and the return of those profits are clear in the majority of situations, their application in certain modern commercial arrangements is not always without doubt

Yeah.  This is why the tax system can’t have nice things.

Income Tax: venture capital trusts: limiting the effect of anti-abuse provisions on commercial mergers (page 56) is a reverse anti-avoidance measure!  There’s an anti-avoidance rule that restricts the tax relief you get on a venture capital trust if you sell the shares and then subscribe for new ones in a trust which merges with the old one, in other words stops people setting up a scheme where the investors ping in and out.  But, no!  Sometimes they do that for commercial reasons!  And it’s not fair waaah if the anti-avoidance provisions hit them then!

I have no patience with changes to tax law that are piling on the clauses for nugatory benefit: personally I’d abolish the relief entirely.  But this “problem was raised by a representative body after it was contacted by a VCT planning a merger”.  They couldn’t plan their way out of it?  Compensate their investors some other way?  Suck it up and get on with it?  Nope: they got the law changed and added another level of complexity for a change where “the number of individuals affected is not known but is likely to be fewer than 1000”.

Income Tax: Venture Capital Schemes: relevant investments (page 69).  This is just bad lawmaking, or at least this is putting duct tape on the holes in existing bad legislation.  There’s an overall annual limit on the amount of EIS and VCT investment a company can receive; then they twiddled with that to make sure it wasn’t retrospective, then there was another tweak that included a lifetime investment limit, but that didn’t take account the transitional provisions that were already in place so some pre-2012 investments are accidentally left out of the lifetime limit… and this remedies that!

It will, says the TIIN, affect “a maximum of 100 individual investors”  and “fewer than five companies have been affected by the provisions since November 2015”

Congratulations, then: this is the most pointless piece of legislation of the clauses covered by this batch of TIINs… so far…




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