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The kitchen table micro

October 10, 2017

I don’t get it.

I’m a micro business, so this tweet from HMRC is directed at me, right?

What definition of “micro” business are HMRC using these days? I mean, it used to be that a “small” business was one with 50 employees or fewer and a “micro” was one with fewer than 10 employees. This seems to be the definition used in this Parliamentary briefing from last year, which tells us that, of the five and a half million businesses in the UK, fully four million are micro businesses like mine, which have no employees at all

 

Why, then, is the HMRC twitter feed telling those four million people that they need to check whether FRS105 applies to them? What the hell IS FRS105?

As far as I can tell from following the links, it’s a change to the generally accepted accounting practice (GAAP) used to prepare accounts. If you look here, you’ll see HMRC helpfully tell you

Because of the changes to the UK Financial Reporting Standards (FRS), over the next few years UK businesses will see changes to the accounting practice used to prepare financial statements. In particular, many UK businesses will be required to apply one of the EU-endorsed IFRS, FRS 101, FRS 102 or FRS 105.

The purpose of these 3 papers is to assist businesses that will be applying FRS 101, FRS 102 or FRS 105. In particular, it provides an overview of the key accounting changes and the key tax considerations that arise for those businesses that transition from old UK GAAP to the new standards.

Clear? Well maybe, if you’re an accountant, but to this retired tax inspector it conveys almost no meaning, and to the couple who run my local coffee shop and the woman who runs the local chiropodist? Nothing except another thing to ask their accountant about, if they remember.

Why are HMRC pointing “micro” businesses to changes in accounting standard? It has taken me the best part of an afternoon to work out that, no, I don’t need to worry about it personally. Isn’t there a principle of “think small first” that is supposed to exclude the very smallest businesses from tax changes altogether where possible? Surely this ought to apply to communications too? This is not a change that a business with no employees and uncomplicated affairs needs to be concerned with at all, in my view. A business with an accountant? Well, their accountant ought to be up to date, but saying “If you use an accountant to prepare your accounts, make sure they are up to date with the changes to accounting standards here” would be an insult to the accountancy profession and its maintenance of its own professional standards.

Has HMRC learned nothing from the VATMOSS fiasco at all, where a group of micro businesses – kitchen table businesses – were all but wiped out by changes that weren’t intended to apply to them and which weren’t mitigated because HMRC had no idea these micro – nano? – kitchen table? – businesses even existed. Wouldn’t it be nice in this instance if HMRC had written an introduction to the changes which made it clear most unagented businesses don’t need to be worried, and then tested it out on a group of genuinely micro businesses? And then stopped mithering people on its twitter feed about something they will, with luck, never need to be concerned with at all?

Posted in Bit of politics, HMRC | Leave a Comment »

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The magic money tree!

June 13, 2017

I’ve found it!  You know, the famous Magic Money Tree that Theresa May was saying didn’t exist?  Well hurrah, the Times is reporting this morning that apparently she has found it; there’s to be no more austerity because £2.2 billion from #MTD (along with £4 billion on “corporation tax relief” and £1.4 billion from “scrapping permanent non-domicile status”) will sort it.  Hurrah!

Except…

…as I wrote in this article for accounting web, I’m not sure there’s really £2.2 billion down the back of small businesses’ sofas.

…and as I wrote in this blog post, I’m not at all convinced there’s a correlation between “austerity” and tax receipts in the first place.

Posted in Bit of politics, MTD (Making Tax Digital) | Leave a Comment »

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Legislative v administrative

June 12, 2017

There’s a hung parliament.  Things are moving quickly: in my head, I imagine someone taking on a new job, running “legislative affairs” like Josh Lyman  in the West Wing.  Someone whose job it is to ring round the new MPs to see if they will stand for this policy or that, as each new idea for the Queen’s Speech has to be fought through separately.

Leaving aside my fantasies about there being someone competent and grown up behind the scenes, let’s look for a moment at what a hung parliament means for taxes?

Three things.  First of all, there’s unlikely to be any huge legislative change.  It’s entirely possible that the proposals to make it compulsory for businesses to keep their records on an app or computer programme and update HMRC four (five?) times a year, MTD (“Making Tax Digital”) for short, will fall.  Why would anyone back MTD when it is going to be as popular as a cup of cold sick with small businesses once they learn how it will affect them?  Kick it down the road and make it Someone Else’s Problem, would be my instinct.

Second, the difficulty in making legislative change is unlikely to apply to actual tax rates: there are different rules.  But then why would a “continuity” government want to change the rates they themselves introduced five minutes ago?  They may have to give sweeties to their supporters (abolition of APD for Northern Ireland, would be my best guess from the weekend press).

But the third thing is that administratively, things will carry on much as before.  The rule for the Civil Service is to carry on doing your job until someone tells you differently.  So the idiotic decision to carry on with the “building our futures” plan and move HMRC into big lumps instead of a distributed network of local offices will probably carry on.  There will be a new Minister, after all.  (Jane Ellison lost her seat so there will be a new Financial Secretary to the Treasury but at the time of writing I can’t see an announcement of who replaces her) so there is no-one with a vested interest in saying “no” and the inertia of “keep calm and carry on” may let this go through.

I think that’s a shame: you may not. But what IS a shame is that there will be no will to change the way policy is made. When the coalition government came in there was a will to do things differently and the political space to think them through . No-one had a vested interest in continuity but in Getting Things Done. So we had Making Tax Policy Better and the invention of the TIIN. Sigh. Ah well, business as usual, at least for a while.

 

 

Posted in Bit of politics, HMRC, TIINs, Uncategorized | 3 Comments »

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Going postal

June 7, 2017

Imagine you’d agreed to become a school governor. Only at a meeting the day before you joined, they decided to sell off the playing fields, appoint a new headmaster and turn the school into an academy. You’d be a bit miffed, right? Because you agreed to help with the running of a school but they made it into a completely different kind of school before you had a chance to influence its direction.

It’s an analogy. The real thing is here – the report in Civil Service World that says HMRC has signed contracts for new premises during the pre-election “purdah” period. It is no secret that I think HMRC’s “Building our Futures” plan to close down its local network and move to massive regional centres is a bad idea (see here, here and here for example).

It’s also no secret that HMRC has a truly awful record of negotiating property deals (see the Mapeley deal, where it sold and leased back its own buildings via an offshore entity) and it has been reported, for “Building our Futures” that HMRC has signed inflation linked 25 year contracts with no break. Seriously? 25 years ago I was working in HMRC and we were worrying about whether we had the right number of smoking rooms and filing space, and were there enough plugs for the new computers – who knows what accommodation will be appropriate for whatever the revenue authority looks like in 2042!

HMRC get a bad idea and run with it – nothing particularly new there (VATMOSS, MTD…) but this is the day before a bloody election. If there’s a new government on Friday they may well want to look again at how HMRC is organised. Having the civil service distributed in local offices amongst the people they serve is, surely, a better way of organising society than corralling them all into Fortresses Of Doom. Signing contracts in the quiet period before an election is shocking, and has the appearance of an attempt to railroad the new government into acting on a bad idea of the old. If there’s a different government on Friday I hope the first thing they do is repudiate any such contracts, discipline the people who signed them, and have a proper look at how a modern government delivers its services.

Posted in Bit of politics, HMRC | Leave a Comment »

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Diversity matters

April 18, 2017

Diversity matters.  It really does.  Look, I know all the arguments about asking the people with expertise (the “best” people) and you only look at what they know so how does including the legendary one-legged black lesbian help take the discussion forward, so please, don’t be a bore in the comments and go over them again.

Instead, look at this: the announcement of a Treasury Committee witness session this morning where they will be looking, inter alia, at Making Tax Digital.  It’s not about all the witnesses this time being male.  It’s not about them all representing accountancy and taxation bodies (because, who else would you ask).  But it IS about hearing the voices of small businesses.  Remember a few weeks ago when they couldn’t find anyone from the construction industry who knew about MTD?  The people I know who work for the construction industry advising them on tax were a bit vexed about that.

If your meeting doesn’t look like the nation but like a badly-organised golf-club AGM then maybe, just maybe, you need to up your game and talk to some of the people affected but outside of the magic circle of “stakeholders”.

After all, that’s what happened with VATMOSS, remember? No-one talked to the people affected, because no-one at HMRC and HMT realised they existed.  If they’d looked at their stakeholder groups and wondered why they kept seeing the same faces, well, who knows?

Posted in Bit of politics, MTD (Making Tax Digital), VATMOSS | Leave a Comment »

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The Finance Bill

April 17, 2017

Well now we know that the Finance Bill will receive its second reading on Tuesday, 18th April.

What happened to the first reading, do I hear you ask? No, I didn’t know either, but the Parliament website helpfully tells me here that the first reading is literally just someone reading it out before it’s printed ready for discussion – a formal, one might even say ceremonial, stage.

There is, however, a particularly useful briefing paper, here, which explains the background to the second reading, the change of date for the Budget and the package of paperwork which supports the Bill.

Here’s the thing.  A lot of legislation and regulation comes before Parliament.  Not many MPs are experts in any particular subject: tax perhaps has more than many other subjects.  MPs who are not experts should be able to rely on the briefing papers that come with the bill to ensure they understand it and that it is worthy of being passed into legislation.

But they have to read them.

Seriously.

As I have said before, there are twenty measures in this Finance Bill which raise no revenue, remove no admin burden and save HMRC nothing.  Why, then, are they included in the Bill at all?

No-one is, to be realistic, going to object to the entire Finance Bill tomorrow.  The real work comes in the committee stage, next.  Let’s just hope that the MPs involved in the committee stage actually read the material that comes with the clauses.  The very least we can expect from our legislature is that those twenty measures don’t pass on the nod.

 

(Late edit: I’m indebted to a twitter correspondent for this link, to the Order Paper for tomorrow, which shows the Bill will be subject to a “split committal” – there’s a motion to deny a second reading on the ground that it “is a wholly inadequate response to the economic challenges being faced by Scotland and the UK” and there’s also some split of the Bill which, frankly, I still don’t quite understand,  between clauses “committed to a Committee of the whole House” with the rest of it… “The remainder of the Bill shall be committed to a Public Bill Committee.”  No doubt all will become clear.  Or at least clearer.  Watch this space!)

Posted in Bit of politics, TIINs | Leave a Comment »

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Let’s talk about Impact Assessment

February 16, 2017

I have seen this Independent article circulating on social media quite a few times in the last few days: Louise Haigh MP talking about the government’s “cavalier attitude” to equalities in not conducting an equalities impact assessment before announcing the closure of some 78 Jobcentres. The DWP helpfully agrees it “will be conducting a full impact assessment as part of our planning”.

Let’s unpack this a little.

First of all, what do we mean by an “impact assessment”?  The kind that I know most about is the Regulatory Impact Assessment.  This is an examination of the costs and benefits of bringing in a new regulation.  For tax, this is now conducted as part of producing the TIIN, tax information and impact note, which contains the table of impacts produced as part of the TIA (tax impact assessment).  See the instructions on how to prepare a TIIN and the TIA which forms part of it, published on this blog here and here.

However because there was a helpful modernisation back in the noughties, when the word “regulatory” was dropped so the process became known as “Impact Assessment” (IA), there is now some confusion about the different forms of assessment that are required for different types of impact.

Mostly, assessing different specific impacts is folded into the process of producing a (regulatory) impact assessment, under the “other impacts” section.  This is also true for a TIIN: the list of “other” impacts contained in the latest TIA instructions includes two different tests each, unblushingly, called PIA: the Privacy Impact Assessment and the People Impact Assessment.

Equality Impact Assessment is different.  There is actual statute involved, whereas the IA, RIA, TIIN etc are basically justiciable via the concept of “legitimate expectation” (there’s clear, public, commitment to undergoing the process so theoretically you could bring a judicial review to try to overturn a decision which was made without undergoing that process).

There are two big caveats, though: equality legislation requires equality to be considered (given due regard) when reaching a decision but this doesn’t require the publication of a formal equality impact assessment document.  And government is allowed to consider, yes, this will screw this particular group of people over, but – balancing the conflicting priorities of government – we’ve decided the overall policy objective is more important than the impact on [X] group of people so we’re just going to do it anyway.

So, dammit, DWP can probably get away with thinking about whether unemployed people with no money and multiple issues like disabilities can make it across towns without buses or bus fares to log onto the computers they don’t have to apply for the jobs that don’t exist and deciding, well, yes, but they have *all day* to walk miles and we’ll save money.  And do it any way.

What the legislation does require, however, is that they decide to screw their customers before they make the decision to close down the services they need, and not just assess how badly they’ve screwed them over after they’ve done it.

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

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Tax simplification and better regulation.

January 18, 2017

My PhD-in-progress asks the question whether using better regulation techniques produces tax simplification, a question to which the glib answer is, of course, “it would, if they did”. So in keeping with the Making Tax Policy Better report and the suggestion that this is just the start of a conversation, I have been wondering what progress we might make towards a simpler tax system by making better use of the tools we already have.

Look, for example, at the 51 TIINs published on 5 December to support the draft 2017 Finance Bill.  If you take these and put them into a spreadsheet, listing the three quantifiable fields (exchequer impact, administrative burden and HMRC costs) what do you find?

The measures fall into three crude categories.  Firstly, there are those measures whose overall impact will be greater than £100 million.  Insurance Premium Tax: increase of standard rate, for example, or Abolition of Class 2 National Insurance contributions.  The Chancellor must be allowed to determine how and where he raises the money he needs to fund the expenditure he incurs: decisions about these large measures is political, and we can leave them alone for these purposes.

Secondly there are the measures which have smaller impacts. Personal Tax: changes to bands for ultra-low emission vehicles in company car tax for example will raise some tax, save some admin burden and cost HMRC some money.  Personally if I were an MP debating the Finance Bill I would want these relatively trivial measures to balance out: I would only allow as many measures which increase tax by amounts less than £100m as there were measures which decreased tax or administrative burden by similar amounts.  I suspect if this balance were demanded, the number of such measures might significantly decrease.

Finally there is the category to which I would wish to draw your attention today.  There are fully twenty measures where, so far as I can see, the exchequer effect (the actual tax raised or foregone) is zero, and both the administrative burden on taxpayers and the cost increases or savings for HMRC are either nil or negligible.

The question then is – why the hell are we doing them?  Here is a random selection:

Tobacco Duty: Illicit Trade Protocol – licensing of tobacco manufacturing machinery is a provision to licence tobacco manufacturing machinery.

Co-ownership authorised contractual schemes: reducing tax complexity seems to be a tidying-up of capital allowance rules for operators of co-ownership authorised contractual schemes (CoACS) and their investors, and yet will have a “negligible” impact on the tax they pay or on their administrative costs.

Landfill Tax: definition of taxable disposal will affect approximately 150 specialist disposal firms in England (the tax is or will be devolved in Scotland and Wales) and they will “incur negligible on-going savings through the removal of the requirement to inform HMRC about certain non-taxable activities.”  (HMRC couldn’t have just written them a letter??)

The Treasury and HMRC have an easier ride than other Departments in getting legislation before Parliament: they do not have to bid for space in the legislative programme, and Finance Bills are counted as “money bills” and subject to an easier passage through Parliament as the Lords can only delay rather than amend them.  There is a broad definition of “money bills”  which includes one “which in the opinion of the Speaker of the House of Commons contains only provisions dealing with … the imposition, repeal, alteration, or regulation of taxation…”  Perhaps someone should have a word with John Bercow?  It seems to me that, were he to declare that in his opinion no measure which produces neither tax, administrative burden saving nor government cost saving was a provision regulating taxation… and therefore no Finance Bill containing such measures could be certified as a money bill…

…well, perhaps he might, at a stroke, become tax personality of the year for his services to simplification of the tax system?

Posted in Bit of politics, Budget, HMRC, HMT, TIINs | 2 Comments »

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Equality again

January 16, 2017

Well this is interesting. Cat Smith, Shadow Minister for Women and Equalities,  asked in a written parliamentary question on 13th January

when the Government plans to publish the equality impact analysis of the Autumn Statement 2016 to comply with the Public Sector Equality Duty.

David Gauke’s reply said amongst other things that

 There is no statutory requirement to prepare this information in a particular form or to publish Equality Impact Assessments.

Now, there is no requirement to assess and publish the impact of the Budget or the Autumn Statement as a whole, a giant loophole in equality legislation that was opened up or at least exposed by the Fawcett case (when the Fawcett society brought a judicial review of the 2010 “emergency” Budget).  Nor is there a requirement to prepare a separate document called an Equality Impact Assessment.

However the outcome of the Fawcett case was – I always understood – an undertaking from the Treasury that they and HMRC would assess the impact of individual measures in a better, more systematic way.  And – I always understood – this was reflected in the design of the TIIN, which includes a specific field for the result of the work done on assessing the impact on equalities.  If you refer back to May 2012 where I published the TIIN instructions you will see they included this passage:

Equalities Impacts

This test concerns people with protected characteristics. All policies must be signed off as compliant with this statutory test. At each stage of policy development you must comment on what work you have done to see whether you have given due regard to any impact on people with these characteristics and say so explicitly if you think it has none. You must keep an audit trail of your consideration, and retain this written record in the policy area so that the Department can show it is fully compliant with the law, now and in the future.

The policy is likely to impact on Equality and therefore required to complete a separate equality assessment if you answer yes to any of the following five questions:

Will the policy or its implementation have a particular impact onindividuals with one or more of the equality groups below?

Are particular communities or groups likely to have different needs,experiences and/or attitudes in relation to the policy or itsimplementation?

Are there any aspects of the policy or the way that it is implemented that could contribute to inequality?

Could this policy or its implementation have a positive impact on equality groups?

Could the aims of the policy be in conflict with equal opportunity,elimination of discrimination, promotion of good relations?

There are 10 protected characteristics that you need to consider:

Racial Group, Gender, Transsexual/ Transgender, Disability, Carers, Age, Sexual Orientation, Religion or Belief, Marital Status/ Civil Partnership, Political Opinion (NI only).

It is important that you look at the Departmental guidance and liaise with [Personal data redacted under Section 40 of the FOI Act 2000] in ICD when considering Equalities impacts as they now ‘own’ this part of the process.

And this is what it says in the current TIIN instructions, which I published last week:

Equalities impacts

This box needs to show we have had “due regard” for equality to comply with section 149 Equality Act 2010 (and similar Northern Ireland legislation). So it is not enough to say that the measure does not discriminate. A mistake that is often made is to say that there is no equality impact when there is: just about any change to personal tax for example will have an equality impact, because it will tend to affect some groups differently to others. A lot of business tax changes do too.

If the measure affects people this box should be used to say what we know about who those people are (men/women, young/old etc). The Customer Equality team in Central Customer Directorate (CCD) can advise.

Has there been a substantive change?  The Minister asserts there is no statutory requirement to publish the equality impact in ‘any particular form’.  Well, no: there isn’t a statutory requirement.  But there is a reasonable expectation, surely? Equalities impact was and remains a fundamental part of the TIIN process, and a TIIN is published with all tax changes.  Amusing as it may be for politicians to play the great game of answering parliamentary questions with as little information as possible, might it not have been more helpful to have said that?

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

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Worst of all possible worlds

December 6, 2016

You will no doubt remember the six (seven, if you include the summary) consultations on the ambitious “Making Tax Digital” proposals, which closed on 7 November.  At the Autumn Statement there was nothing in the actual speech, but, buried deep in the documentation, there was a statement that the government would be issuing a consultation response in January.

This sounded hopeful, because – if MTD is to be mandatory from 2017 or 18 – then the legislation needs to go into the 2017 Finance Bill and the draft clauses for that were published today, 5th December.

But look what it says here, in OLD (The Overview of Legislation in Draft) at the end of paragraph 6.1:

To ensure that the views of respondents to the consultations are fully considered, the government will publish its response to all 6 consultations, together with draft Finance Bill 2017 legislation in January 2017.  [my emphasis]

So not only is there an absurdly short timescale for the government to consider the multiple responses it is “pleased” to have received on MTD, but it plans to bring forward the legislation, or at least some legislation, anyway, except it will be out a month later than all the rest, shortening the time available for that to be scrutinised.

Poor show all round, I say.

Posted in Bit of politics, Consultation, MTD (Making Tax Digital) | Leave a Comment »

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