Archive for the ‘Look at the date’ Category

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The Great Simplification Act

April 1, 2017

As we are all now aware, there will be a Great Repeal Bill to sort out the complexities of the interaction of EU and UK law as part of the process of Brexit. Basically a short bill that says something like “all EU law is now transposed into UK law” and then donkey’s years of statutory instruments and faffy-about bills to un-transpose the bits we don’t want.

Sources tell me that, since we’re doing a big sort out anyway, the government has decided this is the ideal time to sort out tax simplification once and for all.

VAT is the obvious example: fiddly rules to distinguish food from, well, recreational food (whether a jaffa cake is a cake or a biscuit for instance) will be incorporated into UK law in the Great Repeal Bill and then quietly squashed in some nicely boring SI that no-one except the really serious policy wonk will bother even to read.

So the Great Repeal Bill is likely to include a footnote which says “*and all tax law” so that HMRC can quietly sort out this tax simplification thing in a series of SIs that go through on the nod while parliament is getting itself into a lather over the Brexit stuff.

My sources tell me the ultimate shape of the tax system after the legislative process has run its course is likely to be rather similar to the Unitary Tax proposals which were put forward a couple of years ago but never found their way into legislation, although there are some suggestions that tax competitiveness will require business taxes to be aggressively lowered with compensatory aggressive increases in personal taxes. However a further roll out of Making Tax Digital should sort that out, because if sole traders each have seventeen grand down the back of the sofa as HMRC’s tax gap figures suggest, then presumably larger businesses have commensurate quantities of overlooked turnover.

We could well end up with a three line tax code and, instead of having the longest tax code in the world, wind up in the Guiness Book of Records for the shortest. HMRC guidance would similarly be reduced, particularly after the restoration of the death penalty for promoters and users of avoidance schemes. The current draft is a record-breaking four words long and is circulating for comment amongst stakeholder groups already, the main controversy being over whether or not to include the third word and the punctuation mark. If you have any comments on the draft guidance (reproduced in full here: “Pay your fucking taxes!”) please send them through the usual channels.

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Consultation day

April 1, 2016

It’s that time of year again: the Budget is over but the summer recess isn’t quite upon us yet.  A good time for publication of consultations for some of the more, er, challenging ideas the government has in its bottom drawer.  If you go to gov.uk and search on today’s date you’ll see the following new consultations are out there from today.  And some are further out there than others!

  1. Set up a rival Revenue and Customs body.  Like the old joke about “how come there’s only one Monopolies commission?”, it has long been argued in certain quarters that HM Revenue and Customs would benefit from the injection of a little competition.  Well, now you have your opportunity to comment on the proposals.  Once HMRC retreats into its 13 redoubts, the proposal is to ask a couple of venture capitalists to provide the start up funds for new networks of tax offices and customs centres, based on the schools academy proposals.  The idea is that a local tax office would be part of a chain of offices owned by (say) Richard Branson or Lord Sugar.  Tax customers would then choose whether they wanted to pay the standard HMRC tax, the Sugar Tax (where all the tax rates would stay the same except for the one on Sugar, obviously) or the Virgin Tax, where apparently there would be spectacular savings for certain taxpayers who could pass some rather stringent conditions.
  2. Tax competition.  It has long been a government ambition for our country to be a place which is seen as “open for business”: where multi-nationals want to base their headquarters because the tax rates are low and the tax authorities are sympathetic souls who will understand.  The government now wants to extend this to individual taxpayers.  Tax competitiveness is for the many, not just for the few, is the slogan out front of some rather interesting proposals.  Essentially anyone with income over £50,000 a year will be eligible to register to vote in any constituency, not just the one in which they happen to reside.  They will be taxed on their income, using the Scottish Income Tax model, on a variable rate depending on their constituency.  Constituencies will be able to offer competitive tax rates via a new organisation led by Lord Gerry of Mander which will assess the likelihood of new voters changing the balance of power, although I have to say it is not entirely clear from the consultation document whether altering it is considered a good or bad thing!
  3. Tax simplification.  There’s a rather interesting proposal from the Office of Tax Simplification that would reduce the length of the tax code considerably.  In essence, it’s a new application of the “one in, two out” principle that applies to regulatory measures.  How it will work for tax is, however, quite markedly different, if the proposals are legislated in accordance with today’s consultation.  The lead proposal is to cap the tax code at its present length and reduce it by two pages for every page of new legislation introduced.  The clever part, however, is that the creeping repeal of existing legislation is done on a very simple brute-force basis.  If a Finance Act adds one page of new legislation to the “end” of the tax code, it simply repeals the first two pages from the “front” end.  If each new Finance Act introduces no more than fifty pages of new legislation at a time, the entire tax code will be down to nothing by 2356!
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Consultation: simplification at last

April 1, 2015

Considering that the provisional title of my PhD is “tax simplification and better regulation”, and that the original purpose of this blog was to monitor and respond to all tax consultations, I’m a little embarrassed to have missed this one.  It’s big.

In what will presumably be the last consultation document published by the Coalition, “A simpler tax system: the fast track to delivery” there are some far-reaching proposals put forward for simplification of the tax system.  This is a surprisingly radical attempt to achieve, at a stroke, the first of the Coalition’s priorities for its tax policy making (which, I’m sure we all recall, were that tax should be simpler, fairer, greener and more competitive).

As anyone involved in taxation knows, there have long been calls for the tax system to be simplified, and as anyone involved in tax policy making knows, it isn’t as easy as it looks. Anyone who gains by tax simplification is unlikely to show any gratitude to the government responsible, whereas anyone who loses under simplification is likely to be vocal in their opposition. However in a gratifyingly statesmanlike-display of cross-party agreement, the new proposals are being put forward in a multi-lateral document endorsed by all the major parties and are widely expected, if enacted by the next administration, to bring about a major simplification of business and personal taxes across the UK.

Building on the proposals in the Budget document “Making Tax Easier: the End of the Tax Return” where there is the aspiration that “it will feel like paying a single tax“, the change – in a project provisionally named unitary taxes – will retain all existing taxes and national insurance, but move to a per person, rather than a per tax, administration. Everyone will have a basic allowance of £12,000 below which they will not pay any tax on any income, gains or transactions. Between £12,001 and the current VAT threshold of £81,000 they will pay 20%, whether on income from employment or self employment, gains from capital transactions or interest on investments. Between £81,001 and £120,000 the rate will be 40% and from £120,001 it will be 60%. There will be no mansion tax, but neither will there be any exemption from capital gains for only or main residential property with the gains from any house sales folded into the unitary tax.  There will be no exemptions, allowances nor deductions – a change likely to have serious repercussions in the savings industry but which was perhaps foreshadowed in the Budget announcement of abolition of tax on the first £1000 of interest payments. The section on ISAs in the consultation document is particularly radical, consisting of three words: “ISAs are out”.  There will be some interesting recalculations to be done with the dramatic adjustment to the inheritance tax thresholds as inheritance tax, too, becomes subject to a one-off unitary tax charge on the estate of the deceased, bringing virtually all estates into its remit.  And of course capital gains tax planning is likely to prove challenging with the abolition of all possible reliefs, whether farming, entrepreneurs or even the minor chattels exemptions and merger of its thresholds with the single unitary threshold.

VAT will remain largely unchanged with its threshold remaining static and the current rules and rates remaining untouched.  However the total exemption for small and micro businesses from the revisions to place of supply rules is a surprising concession and it seems that there will be a further document after the election, on a similarly multi-lateral basis, proposing further radical simplifications including the abolition of all reduced and zero rates and the removal of all alternative calculation methods.

It is perhaps the changes to National Insurance (NI) which are the most radical.  In future NI will be charged at a single rate on all earnings, gains and transactions.  There will be no upper or lower thresholds, and the rate will change annually.  It will be calculated by taking the previous year’s total expenditure on pensions, disability and unemployment benefits (but not in work payments like housing benefit or working tax credits) plus the total cost of the NHS and of personal care provision, and then dividing this by the previous year’s unitary income.  Although National Insurance receipts will always lag behind National Insurance Payments (as pensions and benefits will in future be known) there will be a clear link between them.  If at any point the rise in GDP is such that unitary NI receipts are greater than the previous year’s NI expenditure the excess will not be used to reduce the following year’s rate but to start a sovereign wealth fund, with the intention of, ultimately, building up a capital sum sufficient to make abolition of NI payments altogether feasible, although the timescale is, it has to be said, ambitious.

Preliminary costings in the accompanying TIIN for this radical package seem rather optimistic, in that they suggest an administrative burden saving of more than a billion pounds and an exchequer impact of zero. Furthermore the economic impact appears to assume that the entire tax avoidance industry will close its doors at once and its employees and partners be immediately re-tasked to economically useful activity, thus creating a 5.8% spike in GDP.

Root and branch tax simplification has been the subject of much hopeful persiflage in the past but there have been few concrete proposals. Although these proposals are radical and the numbers are, to say the least, sketchy, it is to be hoped that the tax industry will respond to the consultation in the spirit in which it is put forward. In future, who knows, we may thumb through our slim pamphlets of tax legislation and look back on today as the end of an era.

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Demerger

April 1, 2014

Today, some interesting rumours reach me of proposals to de-merge HMRC and restore the historic brands of HM Inland Revenue and HM Customs and Excise.  I hear that the proposals, which are to go out to consultation in the next few months, will also include a clever exit from the once-controversial Mapeley contract and a move out of leased and into properties owned by the taxpayer, saving millions in rent and services payment and creating several thousand jobs in providing building and other services direct by newly-appointed staff who will also be available to perform “back office” functions at times of need.

The de-merger will also herald the de-industrialisation of tax, as both restored departments return to a local office structure.  The main change that taxpayers will see is that they will once more be able to speak to someone, face to face or over the phone, who actually knows what they are talking about, will give their name, extension number and email address, and will then take responsibility for working an issue through to its conclusion.

I hear that the de-merger will come with a hefty staffing and budget increase, to be paid for by the expected rise in collection and compliance yield and narrowing of the tax gap.  There is also likely to be a new task force bringing long-standing disputes to a conclusion via rapid litigation, following which the task force will direct its expertise into prosecution of all tax offences resulting from the new alignment of prosecution thresholds for tax, customs, excise and benefit cases.

Whether the coalition can bring this off in time before the election is, of course, in considerable doubt, but I hear that the timetable is

May 2014 consultation

July 2014 consultation ends.  Enabling legislation passed

September 2014 contracts signed for new local office accommodation

December 2014 first District Inspectors appointed and begin appointment of supporting staff

February 2015 New offices occupied and shadow operations begin while skeleton staff winds down the last of HMRC operations

1st April 2015: New IR and New C&E begin operations.