Archive for the ‘Consultation’ Category

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Bread AND roses

September 17, 2012

I’ve always thought the suffragists and the wobblies had it right about bread and roses:

Our lives shall not be sweated from birth until life closes;
Hearts starve as well as bodies; give us bread, but give us roses.

In other words, it’s not just the “bread and butter” financial issues that campaigning organisations need to think about but the “roses”, the things that could otherwise be put aside with the derisory label “pink and fluffy” – like equality issues, support for the arts, anything outside of the narrow horizon of simply keeping body and soul together.

So when we have a government that thinks we need to cap benefits to reduce taxes and frames its agenda in terms of an unprecedented financial crisis it’s good to see any consideration being given to the roses of, say, the television industry.

But I can’t get excited about the consultation into creative sector tax reliefs.    The consultation is into applying something like the tax scheme that works for film production to three other areas: animation, “high end” television drama, and video games.

In contrast, the government will give Arts Council England £360m this year,  around thirty per cent less than the £400m+ it has had for the last five or six years.  Against that, the amounts shown in the tax impact assessment (in millions) for the three categories of business covered by the consultation are relatively small:

Animation Television Video Games
2012-13 0 – 0
2013-14 -5 – -10
2014-15 -10 – -25
2015-16 -15 – -25
2016-17 -15 – -25

Considerably less, in fact,  (max of £15+£25m in one year) than the government has already taken from the Arts Council.

So why did I not respond to the consultation?  Not because the numbers are small – lots of the consultations we’ve looked at so far have been in the why the heck are you spending time and money asking about it if it makes no difference category.  Not because I don’t care about the subject – it would be hard for more than the three people involved to get truly passionate about, say, the taxation of unauthorised unit trusts or time apportionment reductions on life insurance policies.  I didn’t respond to this one because… well, because it’s OK.

I mean, the general principle of giving tax breaks to creative endeavour seems OK to me – whether or not you agree we have money to give to the arts, it seems sensible not to take too much from them, like not eating your seed corn.  Bread AND roses, right?

And I think they’re asking the right people – even though the amounts involved are ludicrously small in context, there are three working parties of industry representatives working with the Treasury and HMRC.  And they seem to be asking them the right questions: working on things like coming up with a workable definition of a distinctively British television programme, or how to avoid giving tax breaks for video games which are pornographic, or how do you define “animation”.

So, just this once, I’ll pass, thanks.  Keep calm and carry on!

Posted in Bit of politics, Consultation | 1 Comment »

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Garn!

September 14, 2012

I’m having trouble finding the work of literature in which I first encountered the word “Garn!” but I’m reassured by Wiktionary listing it as a cockney word that “expresses disbelief or mockery” (and hinting it was probably Pygmalion).   Having established its existence – garn, you didn’t believe I was making it up, did you? – I propose forthwith that we stop calling for a General Anti Avoidance Rule (GAAR) and instead talk about the General Anti-avoidance Rule Notion – GARN.

Because I don’t believe we’ll ever have one.  Not a rule that actually works, anyway, where “works” is defined as “making a difference”.  Look, for example, at page 33 of the consultation on A General Anti-Abuse Rule, the Tax Impact Assessment, where the Exchequer impact is given as follows:

The GAAR will support the Government’s aim of reducing tax avoidance and will both raise and protect revenue. The revenue impact will reflect the targeting on artificial and abusive avoidance schemes, but will depend on the final design of the proposal. Any final Exchequer impact will be assured by the Office for Budget Responsibility.

Uhuh.  Now, you may recall that I obtained the internal instructions on how to prepare a tax impact assessment under the Freedom of Information Act (go here to see the full instructions) but let me just quote the bit about what to say in a formal consultation document about the Exchequer Impact:

If the measure is not yet scored so a 5-year scorecard costing has not been published, don’t enter one. Instead enter a statement giving an indication of the order of magnitude of the costing, and stating that the final costing will be subject to OBR scrutiny.  (my emphasis)

Well, I see a reference to the Office for Budget Responsibility (“OBR scrutiny”) but what indication is there of the order of magnitude of the problem and the amount of any tax to be raised or saved as a result of introducing these proposals?

Anyway, this is what I sent to the policy team: the consultation closes today so you’ve still got time to send an email to study.gaar@hmrc.gsi.gov.uk if you’d like to add your two-pennorth.

This is an individual’s response and is also being published, with commentary, on my blog at http://tiintax.com

First of all, Graham Aaronson’s report says that “tax planning is an entirely appropriate response to the complexities of a tax system such as the UK’s” and section 2 of the condoc says “The GAAR should not affect what the Report describes as “the centre ground of tax planning”.” I wonder therefore why you are tinkering at the edges rather than trying to simplify the tax system so that avoidance and the “centre ground of tax planning” is engineered out of the system altogether?

However I appreciate that isn’t within the scope of this consultation so I will address the specific questions you have asked.

1. Do you agree that the GAAR should be limited to the taxes and duties set out in clause 1(3) of the Draft GAAR initially?

No: but then I feel the best options, in order of preference, are a radical simplification of the tax system to engineer out avoidance, or if that cannot be effected, a broad-spectrum GAAR. In this case the GAAR itself is so narrowly drawn it will make little or no difference that its scope is also limited. It’s a fly-whisk, when you need an elephant gun.

2. Do you agree that the GAAR should be capable of counteracting UK tax advantages obtained under double tax agreements?

Yes

3. Do you agree that (1) the proposed “main purpose” rule serves as a useful filter, when coupled with the concept that arrangements must also be “abusive” and (2) a specific exclusion for arrangements without tax intent is not required? If you think a specific exclusion is required, please explain why.

I disagree: “purpose” is irrelevant. If an arrangement produces an abusive tax consequence I personally don’t care if the abuse was accidental! (And, in case it’s not obvious I’m being sarcastic here, let me be plain and say I think you’re tying yourselves in knots unnecessarily. The concept of “abuse” should be decisive enough a test.)

4. Do you agree that the proposed “double reasonableness” test operates as intended to counteract only artificial and abusive schemes (such as those described in Annex B)?

Yes. (And, incidentally, wouldn’t it be a good idea to have a similar test introduced into – say – matters like removing disability benefits from people. So the government would only stop paying mobility allowances to someone with a missing limb if they could show it was reasonable to believe that it was reasonable for the person to do without it!)

5. Do you agree that the counteraction provision in the draft GAAR is appropriate?

Yes. I assume if HMRC had sufficient grounds to penalise avoiders they would take action under that appropriate provision and the GAAR would not come into effect at all – that it’s “belt and braces” – the GAAR will be the braces, but the belt will be tried first.

6. The Government is continuing to develop its analysis regarding the appeals processes in relation to counteraction and consequential adjustments under the GAAR, and welcomes views which may inform detailed proposals to be published later in the year.

No comment

7. The Government would welcome views on the options set out regarding commencement, how transitional arrangements should be dealt with, and whether there should be different rules for different taxes where appropriate.

Good grief, we’re talking about ABUSIVE arrangements here! It should apply from the date it’s announced – preferably 1 October 2012 – and to any transaction completed after that date, just as it would if you were introducing retrospective legislation to close an obvious tax loophole. No, there’s no need for transitional arrangements – send the message, tax abuse stops today.

8. The Government welcomes views on clause 5(1) of the Draft GAAR.

No comment

9. Do you agree that it is appropriate for particular weight to be given in the legislation to the GAAR guidance and the opinion(s) of the Advisory Panel on the arrangements?

Not unless the makeup of the Advisory Panel is radically changed! At the moment it reminds me of that line in 1066 and all that, about the barons wanting to be tried by “a jury of their peers, who would understand”! At present the panel seems to consist purely of legal tax professionals. It needs to have some members who are there to represent the law-abiding taxpayer such as union or other civil society group representatives; there to represent the interests of the non-avoiding taxpayer base.

10.The Government welcomes comments on whether particular issues arise in relation to Self Assessment (where the relevant taxes operate within a Self Assessment regime) or within the existing administrative rules for those taxes that do not operate within a Self Assessment regime.

11.The Government invites comments on the general proposal that the GAAR should as far as possible operate within existing administration rules for the taxes involved; and on what adaptations may be necessary to existing administrative rules to ensure that the GAAR operates with as little as possible additional administration cost and burden for taxpayers, advisers and HMRC. Is there a case for having a new type of assessment given the cross-regime range of the GAAR?

No comment

12.The Government invites comments on whether time limits should be set for each of stages two, three and four and if so what those time limits should be.

Yes: probably one to three months. The work needs to be resourced to risk, so HMRC will need to allocate appropriate resource to push these cases forward. And the tax avoider will have little or no incentive to cooperate if there isn’t also a time limit for them to respond or lose the case by default.

13.The Government welcomes comments on the proposals relating to the Advisory Panel.

See answer 9. The Advisory Panel needs to have lay members.

14.The Government would welcome views on the proposals for producing and updating the guidance.

The government already has rules in place around guidance – that it should be ready when legislation is published, that it should be compiled in collaboration with the affected taxpayers, that it should be in plain English – if it follows its own rules it won’t need to make more!

15.HMRC would welcome comments or evidence that can improve the TIA assessment of impacts, costs and yield of the GAAR proposals.

The Exchequer Impact does not follow the internal guidance to give the order of magnitude of the problem. What amounts are expected to be raised and/or saved as a result of the introduction of the GAAR? Without that information, it’s hard to see whether the GAAR will amount to a hill of beans.

Posted in Avoidance, Consultation | Tagged , | Leave a Comment »

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Residence

September 12, 2012

I really wish I could care about the consultation on a statutory definition of tax residence, honestly I do.  I mean, I’m sure it’s a good thing to give simplicity and certainty to people whose residence status might be in doubt, and I’m sure all the work that has gone into the initial consultation, the responses document and the current consultation has been carried out diligently and intelligently and will produce the right result in the end.

Only why couldn’t we just copy out the same rules the Americans use?  The ones that fit onto one sheet of A4?

Oh, that’s right, because Americans have sensible rules “If you are a resident alien, you must follow the same tax laws as U.S. citizens. You are taxed on income from all sources, both within and outside the United States.”

In the States, the first determinant is citizenship – if you’re a US citizen, you pay US taxes, and you don’t have to faff about with residence and ordinary residence unless you’re in a non-citizen-but-still-living-there category.

Here, we still retain the imperial concept of “domicile” – if you were going out to rule the Empire, you were still an Englishman even if you never set foot in blighty till your corpse was shipped home for burial. Which might have made some sense when we HAD an Empire, but, you know, That Sun Has Set.  Now we are only a tax haven, inviting anyone filthy rich enough to settle here and pay us £50k in blood money and we won’t bother them about taxes because that’s only for the little people.  Oh, and if you’re starting to make serious money, check out your family tree – if your grandfather was born somewhere interestingly foreign or if you suddenly develop a passion for Belize then you too could become a non-dom

So you’ll forgive me if I can’t get too fussed about the detail of how to legislate the residence conditions.  The tax impact assessment shows that it’s “expected to have a negligible Exchequer impact”.  Well, what about tackling the other side of the coin and doing something which would have some impact?  Let’s stop being a tax haven, make citizenship and taxation go together, and stop faffing about.

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

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Small business and the disincorporation relief revisited

September 10, 2012

The team conducting the consultation into the disincorporation relief got in touch last week and, with permission, I’m posting their reply.

Thanks for your response and please accept out apologies for the incorrect email address (it should have a “gsi”). I am investigating getting a message out to put this right. We would accept late contributions resulting from this.

On your comments, appreciate your point regarding getting the information the Government is looking for. We have discussed with small business stakeholder groups and have been exploring ways to reach small businesses. However, this is a relatively complex area, the document was intended to try and make it more approachable but I appreciate it will still be difficult for some audiences.

On the overall ‘demand’ for business looking to disincorporate, we have the survey results from OTS and were hoping agents or rep bodies might be able to help supplement this. We will also be looking internally at the likely market for the relief if Ministers decide to take it forward. Any further thoughts you have on this are obviously welcome.

Thanks again for you contribution. Please let me know if you have any questions.

Kind Regards

Two particular points to note: it seems they’ll still take late contributions to the discussion.  And, after I went back to them and replied suggesting they tried, you know, twitter, it might be worth keeping an eye on your twitter feed.

The Treasury official twitter feed (where, presumably, they might ask for feedback) is @hmtreasury.  The HMRC feed is @HMRCgovuk.  Oh, and I’m @wendybradley, although I also do a pared down, tax only, feed as @tiintax.

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Citizens are stakeholders. Discuss.

September 7, 2012

I have blogged before that I think there’s something fundamentally awry in the tax consultation process.  While it’s entirely laudable that the government wants to make tax changes in a considered way, taking account of the views of people who know about the subject, I think they need to look again at Tax Policy Making: A New Approach and be explicit with us.  There’s little or no debate on the Finance Bill any more, partly because all the supposed kinks in the wording have been worked out in the consultation process – but then that means there’s little or no input from MPs in their capacity as representatives of the Ordinary Citizen – or their capacity as stakeholders for Great Britain’s fiscal and economic health and welfare.  So is the point of the New Approach just to give those affected by a tax – the people who will pay it – a chance to say something about how it’s designed?  Or is it also intended to give those affected by the outcome of a tax – the people who pay their own taxes and who rely on the tax base to provide them with the common services the country uses tax receipts to provide, but who may not pay this particular tax?  Bluntly, are we trying to crowd-source (free of charge) the paid work that policy-making civil servants in the Treasury and HMRC used to do?  And are we doing so by asking the turkeys how to administer Christmas?

So I’m replying to all the tax consultations I can, even the ones where I’m not invited to do so – because I believe that the citizen is a stakeholder in all these matters.  And the other consultation which closed yesterday, the consultation on Life Insurance: Qualifying Policies said it only wanted to hear from “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”.  Tough.

Here’s what I sent:

This is an individual’s response and will be posted, with commentary, on my blog, http://tiintax.com

You say that the people who should read the consultation are “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”. I believe that the government’s intention in Tax Policy Making: A New Approach was to establish a methodology for making good tax policy which included consultation as its key element, and as a matter of principle I believe that all citizens are stakeholders in the design and operation of the tax system and therefore have a stakeholding in its development.

I have concentrated on the tax impact assessment as the best way of understanding the expected outcomes of the policy change and I see that the measure is expected to have a negligible impact on the exchequer and on the wider economy and I wonder therefore what the scale of the problem identified – of life insurance being used as a tax exempt savings vehicle – might be and whether it is cost effective to legislate. It seems very strange that, at this stage in the consultation process, you are not able to give a ball park figure of the kind of tax loss you are looking to stem and it is hard to see a justification for the enactment of legislation without this.

I also see that there is expected to be a “relatively small number” of individuals and households affected but no indication is given of how these investors fall on the spectrum of protected characteristics under the equality legislation. Is this a type of investment with a broad spread of investors where the closure of the opportunity to invest and gain higher rate tax relief will impact across the board or is it used primarily by any particular group? I am surprised you feel you have given due regard to equality issues without this information, particularly since the number of providers seems small enough that I would have expected there to be little difficulty in having or obtaining good quality information.

Nor am I at all clear what you think the impact will be on small firms. You admit there will be several providers who are small firms within the meaning of the government’s small firms impact test – have you held specific discussions with them on whether their customers are more or less likely to make use of the proposed limit? I’m not at all clear from the tax impact assessment therefore that the case for legislation is made.

Posted in Consultation, Equality, SFIT, TIINs | Tagged , , , , , | Leave a Comment »

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If it’s Tuesday, it must be September

September 4, 2012
I can see it’s going to be a busy couple of weeks as there’s a cluster of consultation deadlines coming up.  Since the Treasury persist in publishing their tax tracker in date order of publication rather than what would actually be useful, order of deadline, sigh, here’s a handy list of the ones coming up in September.  Note particularly the 9 September deadline given in the consultation document for the residence consultation differs from the date given on the tracker.  The ninth is a Sunday, the 13th the following Wednesday – take your pick.

If you’re a #citizenstakeholder and only have time to look at one, make it the first, on Real Time Information – it’s a doozy!

 

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This is not a consultation

September 3, 2012

There was another consultation which closed last week, on the Office of Tax Simplification’s proposal that there should be a “disincorporation relief”.  This is aimed at the one and two person businesses which were advised by their accountants to form themselves into companies to take advantage of the lower rate of corporation tax and who now find themselves mired in the red tape of running a company and would like to get out of it.

It’s a worthy idea, I’m sure – but a damn fool way of legislating it.  If you want to ascertain the views of small businesses, you don’t find out by sticking a formal consultation document onto the HMRC website.  You might just as well put the condoc in the bottom drawer of a filing cabinet in a disused basement office marked “beware of the leopard”.

Here’s what I sent, although I made a mistake in the third paragraph where I said that the audience for the consultation wasn’t specified – the desired consultees are in fact listed in 1.4:

The Government is interested in views from a range of audiences, including individual businesses and their representatives, as part of this consultation. It is also interested in views from insolvency practitioners reflecting the links to the Companies Act.

But then, since my email (sent to the address cut and pasted from the condoc) never actually reached its destination as the address is “not found”, it probably doesn’t make much difference either way.

Delivery to the following recipient failed permanently:

disincorporation@hmtreasury.gov.uk

Technical details of permanent failure:
DNS Error: Domain name not found

So, waves hopefully to HM Treasury, (you DID pay your broadband bill this month, right?) and…

This is an individual’s response and will also be published in due course, with commentary, on my blog, http://tiintax.com.

I’m afraid I’m completely confused by this consultation. You say in chapter 7 (7.2) that “the consultation is a call for evidence regarding how to help small companies disincorporate”, but I cannot see how you are going to acquire such evidence. The consultation is written in a technical register suitable for communicating with fellow tax professionals and not in the plain English you would use to communicate effectively with micro businesses.

You do not specify at what readership the consultation is aimed, but you appear only to have published it on the government website where – if you’ll forgive me – it’s only likely to be read by “the usual suspects” – professional and interest groups (I am attempting to respond to all the government’s tax consultations as part of a blog project so would include myself in the “interest group” category here). But what you’re not going to do, is reach the small businesses who would be affected by any disincorporation relief.

Given the costs involved (both for the government and for professional and interest groups) in conducting a proper consultation exercise I have to say that I feel this initial stage of consultation would have been better served by an alternative methodology such as the government’s own Small Firms Impact Test. I would be interested to learn whether any such group was in fact convened?

As I said, this isn’t a consultation, this is box-ticking.

Posted in Consultation, SFIT | Tagged , , , , , | 2 Comments »

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Not A Mansion Tax

August 24, 2012

Yesterday was the closing date for the consultation on “Ensuring the fair taxation of residential property transactions” or the Not-A-Mansion-Tax.  Because, as we all remember, the Lib Dems came into the coalition with a commitment to a “Mansion Tax”  (“Introducing a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level” P14).  This is not that policy.

What this is, is a proposal that people who own properties worth more than £2 million via an “envelope” – for example by owning an offshore company that owns the property in question – should have to pay stamp duty when the property gets transferred to someone else, and should have to pay capital gains tax when they sell the property even though the legal owner might be a non-resident company (non-residents don’t normally pay UK capital gains tax) AND there should be a bit of an annual levy on the value of the property over £2 million.  Not quite the promised mansion tax, then, but enough to get the lib dems off the cons’  backs perhaps?

Anyway, here’s what I said:

This is an individual’s response and will also be published, with commentary, on my blog, http://tiintax.com. I have addressed your consultation questions in turn.

Annual charge

Question 2.1 Do you think that the current criteria for the 15 per cent SDLT rate should also apply to the annual charge? If not, what exclusions or additions would you make to the coverage of the annual charge? Why would you recommend such changes?

Yes, I agree it’s sensible that the criteria should be aligned. As a natural person, a citizen and a taxpayer, I would be in favour of the criteria being aligned in as broad a scope as possible – personally I would include ALL non-natural persons and not just “certain” ones, for example.

Question 2.2 Is the exclusion for property development businesses sufficient both to address the risk of avoidance and to ensure bona-fide businesses are excluded from the charge? If not, what changes to the exclusion for property development businesses would you recommend and why? How could such changes be policed?

I think the exclusion for property development businesses is unnecessary and would be adamantly imposed to any relaxation of the current proposals. Personally I’d go for the simplest option here and have no exclusion at all – the charge is, frankly, minimal for a company which is genuinely developing property and would (a) be factored in to their costs and (b) prove an incentive, if only a marginal one, for them to get on with the development and bring the property back into use.

Question 2.3 How might it be possible to develop an exclusion from the annual charge for collective investment vehicles which distinguishes between widely-held funds and quite narrowly held ones (that might potentially be used for avoidance)?

As you will have deduced, I have little or no sympathy for exclusions or limitations to this charge, so I would be against any such potential loophole.

Question 2.4 Should the definition of ‘residential property’ be the same as that used for stamp duty land tax? (See Annex B). If not, what amendments or exclusions (in addition to those set out above) need to be made and why?

Yes. Simplicity is very much to be favoured in developing a policy where the sense of entitlement and privilege of the potential payers is such that they will be actively looking for arbitrage and avoidance opportunities.

Question 2.5 What, if any, policy issues do you see with the proposed application of the annual charge to properties which either move into or out of liability or to multiple property ownership interests? What rules for valuation and submission of returns of annual charges in these circumstances do you think will be most appropriate?

The simplest possible. Base the charge on the valuation at the five year point and simply keep it that way for the next five years. This has the advantages of simplicity and certainty, and the tax charge could simply then be factored in to any price on any change of interest in the interim.

Question 2.6 Do you think a prior agreement service along the lines described will be helpful to property owners? If so, what would be the best way for it to operate from a stakeholder point of view?

Of course it would. But whether this would be beneficial for the remainder of the taxpayer base is moot: in my view the costs of achieving certainty in this area should be borne by the potential taxpaying entities. However a “determined once and then remaining stable for five years” solution (proposed in 2.5, above) would minimise the need for such a service.

Question 2.7 Are there any other aspects of the valuation proposals that will cause difficulties or require further clarification?

Not that I am aware of.

Question 2.8 What length of time do you think is reasonable for submitting the annual charge return and why? Would monthly payment instalments be a more preferable option?

Normal rules, I would have thought? Monthly *payment* options, fine, but annual *returns* on the same schedule as everyone else.

Question 2.9 What will the impact of the annual charge be on (i) the high value residential property as a whole, and (ii) landlords and tenants? What evidence do you have to support your view?

If the charge were to discourage non-resident entities from buying up the top end of the residential property market I think this would be a positive outcome as the drag caused by the increasing prices at the top end of the market has a negative effect on affordability for actual UK residents.

Question 2.10 To what extent do you think the impact of the 15 per cent SDLT charge will differ from that of the annual charge? Should the Government continue with both measures once the annual charge is in place? If not, why not?

If the country is in a fiscal crisis which requires removing cost of living pay rises from public servants, charging civil servants more for their pensions, exerting downward pressure on disability payments, selling off playing fields and rationing cancer treatments, then I think it is completely fair that owners of multi-million pound properties should be required to make a substantial contribution to deficit reduction as well. I am wholly in favour of both charges and absolutely against any relaxation.

Question 2.11 Do you think there are any equality issues that arise for people with protected characteristics as a result of the proposed annual charge?

There is a strong possibility that the charge will weigh more heavily on non-UK citizens than on UK citizens. I think that is wholly proportionate to the level of fiscal crisis described by the government and to the nature of the entities to be taxed.

Capital Gains Tax

Question 3.1 Are there entities or forms of ownership whose status as an individual or non- natural person requires clarification?

Interesting question (to which I have no answer). But I look forward to reading the responses document!

Question 3.2 Are there entities or other forms of ownership, other than charities, which should either be relieved from or included within the charge?

Absolutely not. And I’m not at all sure about charities in this context!

Question 3.3 Would the introduction of a £2 million threshold create any particular difficulties or adverse behavioural effects? If so, what are these likely to be?

No doubt there would be the usual rash of sales agreed at £1,999,999 and attempts to value fixtures and fittings sufficient to put the property below the threshold but no more than for other property taxes.

Question 3.4 Would a limit to properties valued at over £2 million create any particular complexities? If so, what are these likely to be?

As for 3.3

Question 3.5 Would this cause any compliance difficulties for collective investment arrangements or where share ownership is heavily diluted? If so, please explain what these would be.

No opinion.

Question 3.6 Does the adoption of the SDLT definition of ‘residential property’ (in Annex B) create any problems? If so, what amendments or exclusions (in addition to those set out above) need to be made and why?

Again, I think this is a policy area where simplicity is very much to be preferred in the design of legislation, if only in order to eliminate future avoidance activity.

Question 3.7 Are there any other issues concerning the design or delivery of the policy that need to be considered?

Yes: how are you going to collect tax from a non-resident entity if it doesn’t make a return in the first place and doesn’t come to the UK? I would strongly urge a simplified procedure where any unpaid tax creates a charge on the property and leads, ultimately, to confiscation.

Question 3.8 Do you think there are any equality issues that arise for people with protected characteristics as a result of the proposed extension of the CGT regime?

No.

Kind regards

Wendy Bradley
http://tiintax.com

Posted in Consultation | Tagged , , , | 1 Comment »

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Unit trusts and the citizen stakeholder

August 22, 2012

I posted yesterday my response to the consultation on the tax treatment of unauthorised unit trusts.  These aren’t the kind that are sold to the likes of you and me: they’re not regulated by the Financial Services Authority.  They’re investment envelopes used by institutional investors.

HMRC didn’t seem to be clear why people would use unauthorised unit trusts in the first place and sought to understand the legitimate uses of them as an investment vehicle to distinguish that from their uses in avoidance, and whether the introduction of a new kind of investment,  Tax Transparent Funds, would make the whole process moot.

The respondents to the first consultation – 14 of them – are listed in the Annex to the latest consultation.  Basically they are a list of the “usual suspects” with only perhaps the Law Society  having any wider community stakeholder interest and that’s only because I’m not a legal specialist so I’m a bit numb and vague about what, precisely, the Law Society’s function in this kind of transaction is.

That’s beside the point.  My point is, nobody not already a tax specialist was asked, involved, or expected to have an opinion.

That’s not necessarily a bad thing at this stage of the process; this was a second consultation, to settle the technical details of a piece of legislative change, when the principles of whether there was any need for a change at all and, if so, how it ought to be framed, was supposed to have been covered in the first stage.

One fundamental change the coalition was supposed to have made was to the making of tax legislation.  In the landmark Tax Policy Making: A New Approach we were supposed to have moved to a more considered, strategic method of making changes.  Policy ideas would be tested, options explored, and only then would the preferred option be looked at from a technical viewpoint by the experts in the field, so that the final legislation that went before Parliament was as good as could be achieved.

You know, there’s a missing section in there.  It’s all very well having an Office of Tax Simplification but look at their biographies.  I have written before about the failure to carry out the Small Firms Impact Test to look at the possible impact of legislation on micro businesses.  So even though the government is committed to talking to small businesses, it doesn’t exactly cover itself in glory in putting that into practice.  But look at the process from the point of view of its owner, the ordinary taxpayer.  There isn’t even a commitment to ask Joe and Josephine Public what we think are the priorities for tax and tax simplification.

Citizen stakeholder, to the barricades!  Well, all right, to twitter at least…

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

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Unit trusts

August 21, 2012

So there”s a lot of reading to do before HMRC are interested in your views on the taxation of unauthorised unit trusts. The consultation document tells you to go and read the first consultation, published in June 2011 and which closed in   September of that year first – because summarising  it would be too much like hard work?  The twin aims are to reduce tax avoidance and to achieve administrative simplicity but it is, in my view, another of those reviews which makes the fundamental error of considering only “commercial users of UUTs, administrators and industry professionals” as stakeholders, rather than seeking the opinions of the wider citizen stakeholder.

Well, for what it’s worth, this is the response which this citizen stakeholder sent before the consultation closed yesterday.

This is an individual’s response and will in due course also be published, with commentary, on my blog, http://tiintax.com
I am not commenting on the technicalities of the legislative proposals, but the impact assessment is curious for this stage of the consultation. It does not quantify any costs or benefits from the proposed changes.  While I can see that you might not have precise figures for either the amount of the tax gap you think will be closed by the anti-avoidance element of this proposal or for the administrative burden saving for affected firms, I would have expected to see some indication at least of the order of magnitude involved.  Will you be saving billions of tax and millions of admin burden?  Or thousands and hundreds?  Or is it the other way round – protecting fourpence but saving the industry forty million?  It is hard to say the case for change is made without this information.
I can’t help but notice that you have reverted to talking about “third sector” organisations rather than “civil society organisations” and wonder whether this has any significance in context – I would be interested to know whether there are any third sector or civil society organisations which are also UUTs or TTFs or otherwise could be considered first order stakeholders in this change?
I am particularly curious about the request for specific information on admin burdens – surely the method of quantifying admin burdens is in the control of HMRC as owners of the original database of legislative admin burdens and how each is scored – so are you not able to tell from the proposed legislative changes which burdens will be removed or replaced?  Or are you talking about a wider set of costs to business than the specific list measured in the admin burden database?
Finally you say that “it is not expected that affected customers would include small firms”.  I find that extremely hard to imagine, as the test of “small” for the purposes of the small firms impact test is, surely, the number of employees?  I can see that an UUT might have extremely large sums of money at its disposal: but would it have a payroll of more than 20 employees?  If not, then it is a small firm according to the small firms impact test, isn’t?

Posted in Consultation, HMRC | Leave a Comment »

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