Archive for the ‘Consultation’ Category

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The “full” story

January 2, 2015

If only they had missed out the word “full”.

Yes, I know, “full story” or “full release” is how they signal all their press releases on their twitter feed.  But still, for a Press Office – presumably full of communications specialists – it’s a remarkably cloth-eared phrase.

There was a smidgin of good news in there.  If you follow the link to the HMRC press release you will see a brief account of the VAT changes which came in on 1 January, but with the smidgin of good news spun into a bushel of support, as in “UK digital firms get support with new EU VAT rules”.  But…

@HMRCpressoffice While I think HMRC have done some sterling work mitigating worst results, this whole #VATMESS was still a consultation fail

— Wendy Bradley (@wendybradley) December 31, 2014

The MOSS itself is a laudable attempt to give UK businesses a single place (a “Mini One-Stop Shop”) to deal with the multiple EU jurisdictions.  Letting small businesses register for MOSS without losing their UK VAT exemption threshold is sensible.  Conceding that they can use the location information provided by paypal and their ilk is helpful (albeit described as a “temporary” concession).  You can’t, I suppose, really fault the way HMRC have responded to the nano business community once they became aware of their existence.  But why on earth weren’t they aware of their existence before the twitterstorm?

What was needed was some outreach during the consultation and publicity process.  But HMRC seems to have consulted with the “usual suspects”: the representative bodies and professional associations comprised in their “stakeholder” base.  Which is less than helpful if you are dealing with nano businesses – kitchen table craft businesses – too small to warrant using an accountant, too small to cover paying membership fees for something like the Federation of Small Businesses.

There were organisations they could have consulted with: writers organisations, for example, would have known about self-published ebooks and about conventionally published authors using their own websites to sell ebooks of their long tail publications once they have won back the rights.

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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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November consultations

November 5, 2014

There are 111 open consultations across government, according to the direct.gov website this morning.  Three of them are from HMRC:

Extra-statutory concessions: seventh consultation on draft legislation 27 November 2014 11:45am
Control of raw tobacco 30 January 2015 11:45pm
Withdrawal of extra-statutory concessions 8 January 2015 11:45pm

(Incidentally, ESC team, you know the idea of closing a consultation at 11.45 is to close it at quarter to midnight, not midday, right???)

So, although I’m focusing on my academic writing this month (yes, five days and counting of AcWriMo!) I will be back to look at the consultations, if for nothing else.

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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.

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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???

 

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Extra-statutory

September 15, 2014

Oh no!  I hope I don’t get delayed finishing this piece until after the consultation into Legislating Extra Statutory Concession D33 closes!  It closes at 3.30 today (because, reasons) so hurry along!

Actually that’s about the only comment I have on this consultation, sorry.  It’s a sensible idea – in the general tidying up of extra-statutory concessions that followed on from the  2005 Wilkinson case they have reached D33.  D33 was a sensible way around the possibility of a capital gains tax charge arising when someone received a compensation payment. Basically you’d get an imaginary “cost” or “value” of the right to take action equal to the actual amount you received, so you wouldn’t pay CGT.  There was a limit of half a million, after which you had to write to HMRC and ask nicely.

Now the limit is to be a million, and after that you pay CGT, but as the consultation points out, the courts will know that and, presumably, adjust the compensation accordingly.

Simplification that’s actually effective?  Well done!

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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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“throughout the development…”

September 10, 2014

Traditionally an Impact Assessment is published with a consultation document.  But Impact Assessment for tax changes is conducted via the “tailored tax impact assessment process” and published in a TIIN “at the point at which the policy design is final or near final”.

Does this explain why there were four separate consultation documents published by HMRC without any consideration in them of the impact the proposals might have, or at least of any coherent statement of the possible impacts?

The four consultations which closed yesterday (at 11.45pm.  Because, reasons) were on four separate aspects of the PAYE regime which the Office of Tax Simplification had identified as ripe for simplification.  There were 27 pages on exemption for paid or reimbursed expenses, 21 pages on abolition of the £8500 “higher paid” threshold, 29 pages on voluntary payrolling and another 17 pages on trivial benefits exemption. They each have different officials named as lead and, aside from identical forewords from David Gauke, appear to have been written by different hands.  But although they all talk about the administrative burden saving that will flow from any change, none of them has the usual table of impacts quantifying these impacts, nor any statement of what the impact might be on equality groups or on small businesses.

I wonder what would happen if someone were to make a Freedom of Information Act request for sight of the current state of the “tailored tax impact assessment process” for each?  I’m just saying…

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Bless!

September 9, 2014

Let’s have a quick gallop through the consultations closing today.  I haven’t actually sent in a response to any of them: I’m becoming sufficiently cynical to think there is no point in an individual responding to a consultation at all, particularly when your feedback could be summed up as “you aren’t telling me enough to let me formulate a sensible answer”.

First, let’s look at the one that closes first (5pm, as opposed to 11.45pm.  Because, reasons.)  It’s on VAT Prompt Payment Discounts: there’s a change to the way businesses have to invoice if they give prompt payment discounts.  According to the impact assessment, it’ll affect a quarter of a million businesses and add around £8 million of one-off costs and around £3.5 million of annual recurring costs to their administrative burden.  Yet all HMRC can say by way of small firms impact is “the measure will impact on all businesses that offer or receive prompt payment discounts, including small firms.”  So will it cost them more or less than large businesses?  How many of them are affected?  Have you spoken to them?  Will they be able to cope with the change?  Who knows?  I’m tempted to add – from HMRC’s point of view, it seems – who cares?

I note in passing that David Cameron believes that adding a specific question about family impact to impact assessments will mean that “Policies that fail to support family life will not be allowed to proceed.”  Just like adding a small firms impact test to impact assessments prevented policies with a disproportionate impact on small businesses from proceeding, right?  Bless!

 

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