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New Year, new politics

January 5, 2015

New Year, new government (fingers crossed).  Yes, it’s election year, so – advance warning – I’ll be straying quite a bit from my original brief of looking at tax consultations to take in looking at the wider field of policy and politics.

And I should explain that over the Christmas break I’ve been compulsively re-watching the boxed set of The West Wing

In the episode “College Kids” (West Wing, Season 4 episode 3) the idea is floated of making bonus payments over £1m non-deductible in calculating companies’ profits for corporation tax and using the resulting tax to make university fees fully deductible against income tax.

Why don’t we do that?

Personally I benefited from four years of free higher education and a maintenance grant and I believe that education is a public good to which every citizen is entitled.  If I were in charge I’d abolish student fees, reinstate student grants, and repay everyone who’s had to take out a student loan since they were introduced.  Parents and guardians and grandparents and enterprising students should at the very least be able to get an income tax deduction for any student fees they pay.  There is, even, a mechanism for getting that done – remember deeds of covenant?  Publish a form of words for a new Education Covenant which the donor can sign (to give an audit trail) and then let them claim back (via their self assessment) the tax on every payment they make to an undergraduate student.

About half a million students start full time university undergraduate courses each year.  Let’s ignore Scotland for the moment (sorry Scotland) and assume they all pay £9000 a year in fees.  That’s 4.5 billion, if I haven’t missed a decimal place.  Tax relief on that at 20% would be 900m, yes?  Multiply it by three (assuming they all do three year courses – back of an envelope figures) £1.8 bn

How are we going to pay for it?

The West Wing way.

The basic presumption is that earnings of more than a million aren’t really remuneration, rewards for services rendered: they are more akin to a distribution of profits.  So why should they be tax deductible for the company that pays them?

There were 11,000 people with incomes over £1m in 2011/12 of whom more than 3000 had incomes of more than £2m.

Call it about 15 billion (11,000 x £1m plus another 3,000 x £1m for the ones with £2m and then round it up by another two for the “more than” element – back of an envelope figures, sorry.)

Corporation tax on 15 billion at 20% would be £3bn and, oh look, we might be able to give some grants to the post-grads too…

Why didn’t they do it in the West Wing?  I haven’t got that far yet, but I imagine it was politics.

Why don’t we?  We have an election coming up.  Let’s put it into the questions we ask candidates.

Posted in Bit of politics | Tagged , , | 4 Comments »

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Small, micro, nano…

December 12, 2014

Dear Vince Cable

Actually, no –

Dear Department of Business, Innovation and Skills; please brief your Minister rather better.

Because Vince Cable has responded to the petition about the VATMOSS VATMESS with a response which just rehearses how we got into this mess in the first place.  The reply (which can be read in full here) says, in effect:

  • you already knew, but anyway
  • you won’t be affected, or else
  • you can just use Amazon, and if not
  • you can split your business

Let’s take these in reverse order.  Splitting your business may just prove to be the answer, or anyway the least worst cobbled together solution that can be put in place.  But the devil is in the detail, and HMRC’s new “additional guidance” is a bit thin on the “how to”.  I suspect there’s a number of people in the VAT policy divisions running around in small circles swearing as they try and find a way of doing this that doesn’t open the floodgates to the kind of income splitting that has always been considered avoidance.

The idea that most micro businesses can just use Amazon is… well, this whole change to the place of supply rules is designed to stop people like Amazon from gaming the different VAT rates on ebooks across Europe by making the rate of VAT dependent on the customer’s location rather than the supposed location of the platform.  But, as Cheryl Morgan wisely points out,

In practice what HMRC is doing is the equivalent of saying to a small farmer that she can’t sell her crops at a market stall, she has to sell them through Tesco or a similar supermarket.

Or, to put it another way, there’s no point stopping Amazon being rapacious with tax if at the same time you facilitate their rapacity towards small businesses instead.  The one-woman trader ought to be able to sell her own digital wares independently, and a complacent statement from a Minister that, oh well, you can always use a platform, isn’t helpful or equitable.

There is a relatively simple step which the government could take, which is to enforce the rule that platforms are responsible for the VAT on products sold via them: no ifs or buts.  Some people have asked for a list of platforms which conform to the responsibility.  I think this is a mistake.  What they should ask for is a declaration that:

  • selling via a platform is sufficient to absolve the individual seller from responsibility for compliance with the VAT place of supply rules
  • all platforms are assumed to be compliant unless listed on an easily available HMRC or BIS website, and
  • any trader with concerns about a platform should email their concerns to an easily available HMRC compliance address and this will be sufficient to absolve them from responsibility unless and until otherwise notified by HMRC after they have investigated – and investigated the platform, not the seller.

The onus should be on HMRC to deal with the platforms, in other words, and not the one-woman kitchen-table nano-business.  Dealing via a platform ought to be a sufficient answer to any challenge, and any issue should be taken up by HMRC with the platform not the seller or customer.

My real issue, though, is with the complacent belief in government that nano-businesses somehow ought to have known about this in advance.  As Vince Cable says:

The changes to VAT on digital products is not new or sudden – the change was agreed in 2008 and we’ve done a lot to communicate it to businesses.

Many people’s answer to that will be “oh yeah?”

HMRC’s stakeholder engagement model doesn’t work at this level.  Until the #VATMOSS twitter storm, the small businesses whose business models are most at risk weren’t members of any of the “stakeholder” organisations who might have told them about it.  It is no use telling someone about the changes via a VAT notice if they aren’t registered for VAT and so barely know what a VAT notice is in the first place.  Do you read VAT notices?  I don’t.  All I needed to know about VAT till now was “don’t worry about it till your turnover hits £80k”, and I wasn’t holding my breath.

The previous government did a lot to “think small” and there was a particularly clever move (in internal civil service terms) when the need to report on the impact on small businesses was introduced into the Explanatory Memorandum that goes with Statutory Instruments – you couldn’t get around it, you had to say something about it before you could get your legislation through onto the statute books.

But this was when the Small Firms Impact Test was an actual thing.  You’ll see if you follow that link that, now, the instructions are archived.  Now, all the government tells its minions to do is to “Consult enforcement bodies and business representative groups, to identify how to mitigate disproportionate burdens on smaller businesses.” (1.6.17).  In this case they couldn’t follow the default option of exempting micro businesses (because other European states have a low or zero VAT threshold and don’t want their businesses to have a competitive disadvantage) but they could, of course, have followed the third option in 1.6.9 and given them a longer period to get organized:

Extended transition period: where all businesses of a defined size are given a fixed extension to when they are required to comply compared to larger business, reducing the costs associated with implementation of new regulatory requirements. For example, the tobacco display ban gave shops below the Sunday Trading threshold an additional 3 years to comply

Give nano businesses three years to get their act together and I’m pretty sure they’ll develop an open source platform of their own that’ll take the sting out of the issue.  Give them a few grand in seedcorn money and I’m pretty sure they could get it done faster.  But telling someone they ought to have known, when you talked to organisations they aren’t members of, issued notices that aren’t relevant to them, and you didn’t know they existed in the first place… well, it’s a consultation fail.  So how about it, Minister?  Extend the transition period for the micros, the nanos, the businesses you didn’t know existed?

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

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Autumn Statement of Get Knotted

December 3, 2014

They weren’t even trying, were they? Couldn’t be bothered even with the minimalist adjustment to the visual of getting a woman to sit in the “doughnut” around the Chancellor. You could kind of see a woman’s elbow, some of the time, in the top left hand corner of the screen. Someone wearing the kind of blue suit that Margaret would have worn in her heyday. You could print out a screenshot and flog it as an allegorical artwork of the Dead Hand of Thatcherism.

Yes, well, I was watching it with The Women’s Budget Group, wasn’t I, so maybe I noticed these things more than usual. (Disclaimer: this blog post represents my own personal view and not the WBG’s. The WBG’s can be found at http://wbg.org.uk)

But really, wasn’t that the theme? Aside from the puerile insults, the smidgin of good news for orchestras, children’s TV and picturesque worthy causes, the usual promises to cut tax avoidance… The rest was machismo.

Big butch infrastructure projects. A Northern Powerhouse. Ken-doll hard-hat projects that will give good photo op.

Yes, the infrastructure needs some work. But not just the physical infrastructure: the civic infrastructure. The carers need more money and stable employment, not a morsel of NICs relief for their employers. Yes, businesses need rates relief. But local councils need the money to employ carers and social workers and keep the libraries and the sure start centres and the lunch clubs and the care homes open. Yes, householders need a sensible stamp duty system, but renters need security of tenure, reasonable rents and certainty of repairs – and some more houses available to rent and buy at reasonable prices wouldn’t go amiss, too.

The one attempt to spike the feminist guns was the early claim that the gender pay gap was closing. Well, yes, I suppose it is – there’s downwards convergence. Men aren’t getting cost of living rises and neither are women. So we all get poorer but we’re all poor together? Um, I hate to break it to you, boys, but that’s really not what we had in mind!

Posted in Bit of politics, Uncategorized | Tagged , | Leave a Comment »

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Twitterstorm: a Modest Proposal

November 27, 2014

Twitter has its uses.  How else could a number of angry individuals get the attention of HMRC and bring their concerns to the table?  The “stakeholder engagement” concept that HMRC uses to decide who to talk to breaks down when the affected taxpayers are micro businesses who typically don’t belong to any of the representative bodies who have a seat at the stakeholder table.  All power, then, to the knitters, musicians, authors and others who have created a twitterstorm over the VATMOSS/VATMESS changes I described in my last post.

HMRC have responded by using their new @HMRCcustomer twitter presence to offer a “twitter clinic” on the changes, today (Thursday 27th November 2014) …. between 3.30 and 5pm.  This is another enormous brick they’ve dropped, as many of the affected businesses are part-time one-woman businesses fitted in around domestic responsibilities or full time jobs, so that during the school run is the worst of all possible times to offer to talk.  Sigh.

I have been thinking a bit about the proposed changes over the last few days and I have a Modest Proposal for a solution.  First of all, HMRC need to be absolutely explicit that, where someone sells via a platform (Amazon, Etsy, Ebay…) then it is the platform’s responsibility to sort out the VAT, and saying “we aren’t responsible for VAT” in their terms and conditions (as several smaller platforms apparently do) isn’t going to cut it.  It would be helpful if HMRC were to give some kind of clear assurance that people selling via (a list of platforms) needn’t worry about/engage with MOSS at all.

However.  Clearly it’s iniquitous that changes to close a tax avoidance loophole (allowing ebook sellers to use a platform registered in Luxembourg to avoid other jurisdictions’ higher VAT on ebook sales) are being introduced in a way which drives micro businesses into the arms of the platforms that caused the problem in the first place.  People who sell below the existing VAT threshold should continue to be able to sell the odd download off their own website without having to become VAT traders for a turnover that’s often below £80, let alone the £80,000 that would require them to be VAT registered.

So.  What we need is a platform which is

  1. revenue neutral (doesn’t cost you money to use)
  2. is co-operatively owned (on the Wikipedia or AO3 models perhaps) and
  3. does the job.

Now we could probably make one, given enough time (Kickstarter, anyone?)  But HMRC have regular meetings with their software development community stakeholders.  And they have modest funds to assist charitable causes connected with tax.  So maybe they could convene a meeting, urgently (seriously, next week) between interested software developers and the micro businesses who have contacted them via twitter, and they could kick in the first hundred grand or so to get the kickstarter off the ground.

Because really the easiest solution to the #VATMESS would be for the paypals and worldpays of this world to sort out the VAT when they collect the micropayments for the affected microbusinesses.  And if there were another, independent, cooperative payments organisation available who guaranteed that they did, well… competitition is supposed to be how capitalism produces innovation, right?  Let’s just give the micros a hand up.

There isn’t time before the changes are brought in on 1st January, you say?  Well, the Judicial Review process is there for anyone who feels that the legitimate expectation has not been met that a statutory instrument would only be introduced after the government has fulfilled the commitments it has made in the past to

  • consult with affected parties
  • “think small first” by taking into account the impact on micro businesses, and
  • give due regard to equality impacts

Judicial Review is expensive (who do we know who might be affected and has “willing to bet their house” kind of sums available?  The Prince’s Trust?  J K Rowling??) but (in my opinion as a former better regulation specialist in HMRC) there is an arguable case.  One remedy the courts could provide would be to send the government back to do the consultation again properly.  Which would delay implementation.  So they could, you know, just be good guys anyway and delay implementation for anyone below the VAT registration threshold for three months while an independent platform was developed via kickstarter.

Or they could just come up with a better idea on their own…

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

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VAT on ebooks

November 25, 2014

As it says on my twitter bio, I’m

By day, PhD Law student researching tax simplification and better regulation; by night, writer of science fiction and fantasy.

so today my Facebook and twitter feeds are suddenly full of people from the science fiction side of my life talking about tax.  Why?  Well, take a look at the hashtags #VATMOSS and #VATMESS.

Essentially from January the loophole that lets Amazon avoid charging VAT on e-books has been closed.  VAT will now apply at the rate applicable where the customer is located, and not at the place where the business selling them an ebook has been registered.

Except…

Except what about all of those authors who make a few quid selling their back catalogue as ebooks?  Do they have to register for VAT in France just because someone in their holiday home in Normandy logs on and downloads a single copy of their ebook for some poolside entertainment?

Ah, says HMRC, we’ve thought of that.  There’s a thing called the “mini one stop shop” – MOSS – which means you can register for VAT in just one country, the UK, and pay your French and German and Italian and Spanish VAT direct to the UK every quarter.

Wait a minute, though.  Doesn’t the UK have the highest VAT registration rate in Europe (£81,000) so they won’t have to worry about it till they are in the Big Seller Who Can Afford An Accountant category, right?

Wrong.  The MOSS threshold is zero.  Yup.  Any european sales and you have to register, make returns, keep records…

Now there are two issues here (yes, I know, there are dozens, but there are two that I want to highlight)

First of all, does the MOSS zero threshold apply to ALL sales, or just to MOSS-eligible sales (i.e. to business-to-consumer sales in European countries other than the UK)?  In other words, does selling the odd ebook to someone in the EU mean you have to start charging and accounting for VAT on all your sales, to everyone, for ever?

Secondly…. well, I’m a retired tax inspector.  I Speak Tax (up to a point).  I have spent some time this morning trying to find out the answer to the first question.  Yeah.  The HMRC VAT instructions are copious, but incredibly badly written.  (You don’t believe me?  Try this page and then tell me whether MOSS sales and non-MOSS sales go on the same return?)  The blogosphere and commentariat suggest the sky will fall on the heads of small business and HMRC sounds utterly clueless and complacent.  The Guardian’s small business network has a piece which includes a quote from HMRC which seems to answer my question:

A spokesperson for HMRC says the changes should only have a “small effect on administrative burdens.”

“Although a business needs to have a UK VAT registration number before it can register for the Mini One Stop Shop (MOSS) online service, provided it separates the cross-border part of its digital services business from the domestic part, it can voluntarily register for VAT on the cross-border business only.”

Which seems clear enough, although HOW someone who sells the odd e-book off a web site is supposed to know how to do that is a bit harder to fathom.  But the press office are quoted in the same article as saying:

The HMRC spokesperson says that it has provided a “significant amount of information” about the VAT rule changes and MOSS on the GOV.UK website. “We have worked closely with stakeholders and representative bodies to publicise the changes, been involved in various webinars, held a conference that was streamed on the web, and regularly issue Twitter alerts. We have issued regular updates over the last 12 months in the quarterly VAT Notes and we are organising a Twitter clinic that anyone can join to ask questions.”

Really?  This is a change which affects micro businesses, the muggles who don’t speak tax and don’t belong to any of your “stakeholder” organisations.  It seems to have been badly thought out, badly explained, and badly handled.  And now to have come up against an organised set of articulate and well connected tax muggles who aren’t going to stand for any nonsense.

*sits back and fetches popcorn*

Posted in Bit of politics, HMRC, SFIT, VAT | Tagged , , | 4 Comments »

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Dear Tax Wizards: see, this is why you can’t have nice things

September 25, 2014

I really wish I had got around to reading the consultation on VAT and adapted motor vehicles before it closed, actually.  It’s about a proposal to alter the conditions under which wheelchair users can buy adapted vehicles without having to pay VAT.  Let’s pause for a moment and think about that.  Wheelchair users – and it’s clear from the condoc we’re talking about people using a wheelchair because of a permanent disability, not a broken leg, and that mobility scooters aren’t counted as wheelchairs for the purposes of this relief – can buy a car (or a boat – bizarrely, I first thought, but that was just my ignorance speaking) that is specially adapted for their use and they don’t have to pay VAT – on the cost of the entire vehicle, not just of the adaptations.

Now I’m going to pause there and point out that disability isn’t a simple binary, and some people might use a wheelchair some times and not others (People with relapsing-remitting MS, for example) and some people might have mobility problems yet find crutches and a mobility scooter better adapted for their needs.  Nevertheless the policy aim, of relieving people with disabilities from this particular tax burden, seems laudable.

And what happens?

1.18 The relief is being targeted and abused by individuals and organisations that purchase vehicles at the zero rate of VAT in order to sell them on for profit. This is clearly not what the relief was designed or intended for.

So… we have a laudable policy aim, a piece of legislation that is being clearly abused, and we tweak the law to try and delineate more clearly between the virtuous and the sinner?  This is how tax law becomes complex.

However.

3.5 Rather than adapting vehicles to meet the needs of the individual disabled wheelchair user, some dealers add the same low cost, easily removable, item to all the vehicles they zero-rate using the relief. These adaptations do not meet the individual needs of wheelchair users that require the vehicle to be substantially adapted.

Does HMRC have evidence to back up this assertion?  Because if they have, why are they not prosecuting the fuck out of the “some dealers” who are doing this?  I mean, what kind of person sees a piece of tax legislation that is supposed to help out people with disabilities and thinks to themselves “hey, if I get one of the lads to weld a bit of junk on the side I can make 20% on this!”  How do you sleep at night?

And then.

3.16 HMRC and the police have found that the relief is being abused by individuals and organisations purchasing expensive vehicles with minor, low cost, adaptations at the zero rate of VAT. They remove the adaptations immediately after purchase and sell the vehicles on for profit.

3.17 Some motor dealers have colluded in purchasing vehicles at the zero rate of VAT from one another. They then sell the vehicles on for significant profit.

3.18 Criminal gangs have been exploiting the relief to launder money and finance other illegal activity.

And again, why are we faffing about tweaking the law and not prosecuting the “individuals and organisations” to the full extent of the law, listing them on the “most wanted” website and showing us the thrilling details on “Saints and Scroungers“?

From the impact assessment:

The best estimate is that annually the adapted motor vehicles relief costs £65 million, of which about £25 million could be from fraudulent sales.

£25 million quid? How many people are working on hunting these people down, collecting evidence, and getting them in front of the courts?

Not enough.  A couple of years ago the ARC union said that if they could have £45.5m invested in another 150 trained lawyers and 50 legal assistants, they thought they could bring in £2,000m. (Line 7 of the table)  How about we just do that, and see?

 

(For the avoidance of doubt, yes, I think tweaking the law to make it a bit clearer – only one vehicle per person every three years – is a good idea.  But faffing about with mandatory declarations and fussy attempts to define the permissible adaptations aren’t.  Prosecute the bastards, please, and remember that disability isn’t a binary)

 

 

 

(Edited 25/9 to remove the duplication of “consultation” in the first sentence)

Posted in Bit of politics, Consultation, Equality | Tagged , , , | 2 Comments »

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A fine that isn’t a fine.

September 23, 2014

Yes, there were four other consultations which closed last week and on which I haven’t yet commented.  The Landfill Tax – Liability of waste ‘fines’ consultation closed last Friday, 19th, (at 5pm.  Because, reasons)  And, genuinely, it’s an interesting document.

The “fines” we’re talking about aren’t monetary fines to start with but

the smaller fractions of waste produced by any waste treatment process that includes an element of mechanical treatment. These fines are separated from other material using screening equipment (including large rotating screened cylinders called trommels) and can include a wide variety of wastes, including soil, paper, plastic, wood, metal etc.

All right then.  So why do we need a special bit of tax legislation about the mulch that comes out of a trommel?

Because there are two rates of Landfill Tax (I didn’t know that.  Did you know that?)

 a standard rate (currently £80 per tonne) for active wastes such as household waste which decays; and  a lower rate (currently £2.50 per tonne) for less-polluting wastes.

So a honking great differential between “active” and “less polluting” waste.  And, oh look, there’s a provision that says a load of less polluting waste that’s mixed with a bit – a “small amount” – of non-qualifying material, well, it can still get the lower rate rather than the upper rate.

Now, the consultation document isn’t clear on why identifying the proportion of non-qualifying material in “fines” is harder than in other waste but I’m guessing it’s because the “fines” are mashed up in processing so you can’t tell from looking at it.  There is, therefore, a proposal that a clear, objective, laboratory test should be used, the “loss on ignition” test.  As far as I can tell, you send a sample off to a laboratory where someone sets fire to it and sees what’s left over.

The consultation comes out of an industry working group and suggests a regime of partly mandatory and partly random testing, to be conducted by landfill site operators and for which they will pay (and presumably factor into their own charging) and it all seemed pretty sensible to me at a glance…

Except…

Current situation

2.2 We estimate there are approximately 6,000 waste transfer and treatment plants in England, Wales and Northern Ireland, of which about 450 produce fines, with approximately 4.5 million tonnes being produced each year. There are about 200 landfill site operators registered for landfill tax across the UK.

Well, except that, although I’m sure all the landfill site and waste disposal operators are lovely people and honest as the day is long, there is nevertheless a commercial relationship if not a commercial dependency between the landfill site operator and the person trucking their fines to landfill. And there’s a honking great differential between £80 a tonne and £2.50 a tonne, which would max out at £348,750,000 (the difference between £360 million and 11.25 million).  And where there’s a potential £348 million at stake I wonder how much corruption and graft might eventually creep into the best-conducted industry and how much potential there is for a race to the bottom.   I know we’re in an era of light touch regulation, and co-regulation, and unprecedented austerity and all that, where we let industries regulate themselves and we don’t have any government funds for civil servants or, goodness me no, scientists.

But I’d sleep a lot better at night if we didn’t have this consultation at all, and instead just had a few government inspectors turning up at random to do the checks themselves, on support of honest operators everywhere, and in protection of the rest of us.  Sigh.

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

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The West Lothian Question

September 19, 2014

I’m on the run out the door to a conference, but did I hear David Cameron correctly?  They’re hoping to settle the West Lothian question – to arrive at a constitutional settlement for England, Wales and Northern Ireland – to the same timetable as the devo max settlement with Scotland – by November?  By a Cabinet Committee?????

Without involving the Labour party?   Or any women??  Or any other ordinary people who don’t happen to have been appointed to the least diverse cabinet since the original Cabal???

What are they planning to do, issue a consultation document and give us three weeks to respond?  (I’m tempted to add, “and then ignore the responses”)

I’m busy reading up on Constitutional Law at present and it can be summed up as “tl:dr – it’s complicated”

I don’t have a great deal of confidence that it can be replaced by Christmas.

Posted in Bit of politics | Leave a Comment »

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Duck

September 16, 2014

Property again.  Was it the duck houses that irrevocably tainted the relationship between our government and the governed in the area of property policy?  Anyway, duck houses are the first things that come to my mind in connection with the idea we should reduce the administrative burden of the ATED – the annual tax on enveloped dwellings.

Because ATED is a rich buggers’ tax: it’s the “not-quite-a-Mansion-Tax” tax on houses that are owned by some kind of corporate entity to avoid Stamp Duty Land Tax.  The idea is that if you and I live in a house we own and then sell it we don’t pay capital gains tax but, if the house is worth enough, we have to pay stamp duty.  If we own two houses and sell one of them, well, we only get the CGT exemption (broadly) for one house at a time.  So if we had to sell the estate in Scotland to finance the country house in Berkshire we’d have to pay capital gains tax on the estate (pause for hollow laughter, because capital gains tax is a notoriously voluntary tax) and Stamp Duty Land Tax.  So we’d put the estate into a company, preferably offshore, and just sell the shares in the company instead, right?  Hence ATED, an annual tax on “enveloped dwellings” – houses that are put into some kind of corporate ownership rather than being owned by a natural person.

In that light, the fact that the tax only started in April last year and already the buggers are wanting the “burden” of administering the tax to be eased seems preposterous to me: the condoc says upfront that the entire aim of ATED in the first place is

to discourage enveloping, to encourage the de-enveloping of property and to ensure that those who continue to hold property in this way pay a fair share of tax

The consultation also says it should be read “by those currently within the charge to ATED… those who are likely to fall within the regime in the future, ATED practitioners and representative bodies” (Pause to boggle at the thought that there are already “ATED practitioners”)  Yes, I know that there are inoffensive businesses which have to claim exemption from ATED and it is, presumably, reducing the administrative burden on these which is the aim of the consultation.  They are listed as:

1) property rental businesses (including preparation for sale, demolition and conversion);

2) dwellings opened to the public;

3) property developers (including exchange of dwellings interests);

4) property traders carrying on a property trading business;

5) financial institutions acquiring dwellings in the course of lending;

6) dwellings used for trade purposes (occupation by qualifying employees and partners);

7) farmhouses (occupation for the purposes of carrying on a trade of farming) and

8) providers of social housing. (2.6)

You know, I might have been persuaded that there was some legitimate policy aim in here, if I hadn’t read on, past the list of inoffensive businesses to the list of those who have already been engaged in “informal discussions” with HMRC.

They’re helpfully listed in Annex A: let’s play “spot the one whose interests most closely align with your own.”

Barratts PLC

British Land Company

British Property Federation

Burges Salmon

Cadogan

Chartered Institute of Taxation (CIOT)

Clifford Chance

Council for Licensed conveyancers

Deloittes

Ernst & Young

FTI Consulting

Grosvenor

Hunters Solicitors

KPMG

Law Society

National Landlords Association

Rawlinson & Hunter

Smith & Williamson

Stephenson Harwood

Taylor Wimpey PLC

All worthy enterprises, of course, but what about the rest of us?  Isn’t this all really a bit like… asking MPs to decide their own expenses claims???

 

Posted in Avoidance, Bit of politics, Consultation, HMRC | Tagged , | 3 Comments »

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Property

September 12, 2014

I’m fascinated by the rationale behind the sixth and final tax consultation closing this week, into the Stamp Duty Land Tax rules for property investment funds.

As the foreword says:

The UK Investment Management industry is an important and successful part of the economy.  It accounts for 1% of GDP and a similar proportion of UK tax revenues, is a significant employer and is a key part of our wider financial services sector.

While the UK is Europe’s leading centre for fund management, often the funds themselves are located elsewhere.  About 36% of all assets under management in Europe are managed in the UK but only 11% are domiciled here…

The aim of this strategy is to improve the UK’s leading global role in fund management and increase our market share of fund domicile…

Reading between the lines (and not very far between them, to be honest) the consultation seems to have resulted from pressure from the investment management industry to relieve two types of investment from stamp duty land tax.  The first, CoACS, is a type of “authorised contractual scheme” introduced last year, a “co-ownership scheme” (the “co” from CoACS).  Investors own the underlying assets, but there’s a collective investment scheme doing the buying and selling.  Theoretically, they could be charged to SDLT every time someone joins or leaves the scheme, because the remaining investors’ shares of the property would go up or down.

The second type is PAIFs, property authorised investment funds, which were invented to enable people to invest in a mix of residential and non-residential property as well as real estate investment trusts.  Here the problem seems to be that when properties are moved into a PAIF even when the beneficial ownership doesn’t change there is a charge to SDLT and the consultation wonders whether these “seeding” transactions should be relieved from tax and, if so, how.

My issue with all this, of course, is that I genuinely don’t care if rich speculators have to pay some tax when they move their investments around from one kind of investment vehicle to another.  Looked at in that light, this isn’t a consultation that ought to be answered only by “the asset management and property sectors” but by the rest of us as well.

For example, in 2.6 we are asked to believe that the main impact of making the changes would be that property investment portfolios would be transferred into CoACSs and PAIFs which would “create larger pools of assets and benefit from economies of scale”.  But in 2.7 we learn that “more property funds would also mean greater competition within the sector”.  Would it, though?  Or would it just mean that the companies that blight the landscape with shopping malls and cookie cutter student accommodation would be enabled to do so without enduring some of the tax consequences?

Basically, what are we wanting from the property market?  Do we want to encourage “investors” to buy up (particularly residential) property in giant megacorps, or do we want the property market to be driven by something other than profits – like, say, the need actually to house people?  “Collective investment schemes are increasingly investing in residential property and [the government] does not want to limit growth in this area” (3.9)  You know what?  Fuck that.  If we were talking about assisting organisations that were planning to BUILD residential property then yes, I’d say let’s make life easy for them.  But we’re not.  We’re talking about the organisations that bundle and securitise assets, squeeze all the profits they can out of them, and then walk away.  Let them at least pay taxes on doing so.  One per cent of the economy?  The housing market is somewhere between five and 18% of GDP.  Let’s concentrate on the bit that actually provides houses for people to live in, rather than profits for investment portfolios.

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