Archive for the ‘Regulation’ Category



December 11, 2015

They say that, if all you have is a hammer, everything looks like a nail.  Well, my particular “hammer” is regulatory impact assessment, particularly that contained in the TIINs for tax measures.  So when I was asked to comment on the draft CIS legislation here I naturally turned to the explanatory memorandum to see what it had to say about the TIIN.

This is what it says:

A Tax Information and Impact Note covering this instrument was published on 10 December 2014 and is available on the HMRC website at x- inf ormat ion-a nd- impact-notes-t iins.

I’m not by any means a conspiracy theorist: I’ve worked in HMRC and seen what can go wrong with publication.  When I looked at this for the first time, on Wednesday night, I dropped a line to the HMRC contact and to their press office with a question and with a mild comment that I was surprised they had linked here, to the overarching list of ALL of HMRC’s TIINs, rather than here, to the actual TIIN for this measure.  You will see that someone has helpfully tried to remedy this since then, but for some reason the revision contains random spaces so isn’t a clickable link.

Nevertheless, if we look at the TIIN for “Improving the operation of the Construction Industry Scheme” published on 10 December 2014 (and there is only one listed) we can see that the impact on business reads as follows:

These proposals are expected to relieve some of the regulatory burden of the CIS scheme.

The following measures, nil returns, joint ventures and repayments are expected to have a negligible impact on businesses. The measures simplifying the qualifying conditions for gross payment status will Benefit companies and partnerships by increasing their cash-flow.

The main changes to the CIS will take place in 2016 and 2017 and it is anticipated that it will affect approximately 40,000 businesses. Approximately 5 per cent of sole-trader contractors (2000) may require additional support as legislation is introduced to make verification and online filing mandatory.

Estimates of the impact on businesses will be established and published once details of the measure have been finalised.

(my emphasis)

Now, my question to the responsible official and to the HMRC Press Office was, where are the revised estimates for the impact on business, as the measure, or at least this bit of it, is about as final as you can get, surely?

Impact assessments are an enterprise that ought to be at the heart of government – an explanation of the evidence that underlies a policy decision, made transparent for the citizen to see for themselves that the government is making good, rational decisions.  They are important in the making of delegated legislation like Statutory Instruments because no parliamentary time is devoted to the Instrument’s discussion.  SIs are passed or not as they stand, and the mechanisms around their production are supposed to ensure that all the relevant factors have been taken into account before they are put before Parliament to be rubber stamped.  The Explanatory Memorandum should tell us what is being done, why, and in what policy context, that equality and human rights have been considered, that there has been consultation with those affected and the impacts have been considered, with a special mention on those impacts on small businesses, and that there is appropriate guidance in place.  Parliament should be able to take it as read, that all that needs to be done, has been done.

What we have with this draft SI is a link to an impact assessment which promises an update, but what we don’t have is an update which supports the legislation.  I suspect that the problem is simply that the original TIIN was badly drafted and that the promise of further consideration of the impacts refers to the previous paragraph, the difficult bits about mandatory electronic filing that haven’t been legislated yet and not to the whole package, but that’s not actually what it says.

It depends on your point of view.  If I had still been working for HMRC then I would have told the official what I have said above, and asked that the TIIN was updated or else the original clarified, perhaps by a note in the EM.

If I were an MP, I would consider it insulting to be asked to rubber stamp something that wasn’t ready to be passed on the nod (and I might well be asking my researcher to talk to the HoC library about his entry in Wikipedia “The last time a draft statutory instrument subject to affirmative procedure was not approved by the House of Commons was on 12 November 1969 when the House rejected four draft Orders relating to parliamentary constituencies.”)

If I were a member of the Joint Committee on Statutory Instruments I might want to draw the attention of the House to this SI on ground ix: “any other ground which does not go to its merits or the policy behind it” i.e. that the impact assessment has not, as promised, been updated.

It’s a small thing, but it shows either a contempt for the Parliamentary process or – and much more likely – that HMRC’s staffing levels have, finally, reached breaking point.


Tax wizards: to arms!

March 30, 2015

I know I have been banging on about the EU VAT place of supply changes for months now, and that the affected traders are too small for the professional tax press to be much interested (because the people whose businesses are being wiped out are too small to need the services of an agent, often).  But, if you ARE a tax wizard, why not have a look at these interviews with affected traders.  Demand your professional association and professional press take an interest.  This is where HMRC’s stakeholder model breaks down, where there IS no stakeholder group for them to engage with until people get annoyed enough to start one from scratch.

Do tax wizards do pro bono work?  Ask your organisations to add their voices to the campaign.


Small firms impact: not waving but drowning [Part 2 of 4]

February 5, 2015

A TIIN is supposed to answer seven questions.  (They are here in the TIIN instructions – the TIIN instructions still aren’t published by HMRC – and why not??? – but let’s assume the basic principle is still the same as “in my day”.)

The questions are:

What are you doing?

Why are you doing it?

Why are you doing it this way?

What will it cost/raise?

What will it cost the customer?

What will it cost the department?

Are there any other impacts?

“Why are you doing it” is a powerful question in the “better regulation” mindset, which basically reflects a worldview in which regulation is a Bad Thing in and of itself.  The idea is that regulation is nothing more than Red Tape, which would be Strangling Business unless it was itself regulated.  “Why are you doing it (at all)” is really the question, if you think that having no regulation at all is the ideal.

So why is the government doing MOSS at all?  Well let’s see.  The policy objective field of the TIIN (still on page A111) is where the answer ought to be, and it says:

Policy objective The measure will make business to consumer (B2C) supplies of BTE services taxable where they are consumed, thereby removing an incentive for businesses to locate offshore. This will level the playing field for UK BTE suppliers and is consistent with the Government’s aim of fairness in the tax system. The MOSS business simplification scheme is intended to reduce the administrative burdens and costs associated with this rule change and multiple VAT registrations for BTE suppliers, particularly for small and medium enterprises (SMEs).

Translated into English, I think this means there are two objectives:

  1. The main objective is to stop big companies from gaming the system by setting up shop somewhere with a low VAT rate.  Instead of VAT being charged where the supplier is located, from January 2015 it is charged (for electronic services like e-books) where the customer is located.  So small companies should have a more “level… playing field… consistent with the Government’s aim of fairness…”
  2. Because this change comes with associated costs for small companies, there will also be the “mini one stop shop”, the MOSS, which stops you having to register for VAT separately in each member state and instead handles it all in once place, the place the seller is located.

Now, I think the objectives are good ones in themselves.  Let’s make it easier for authors to sell their own works, for craftswomen to sell their own knitting patterns, for musicians to sell their own tunes, directly to the customer without having to lose a slice of their profits to a multinational selling for them.  And, yes, let’s keep the administration as simple as possible.

So what went wrong?

Let’s go back to the TIIN, to the summary of impacts that starts at the bottom of page A112.

Screenshot 2015-02-05 14.14.50

The first line shows you how much money the government expects to get as a result of this change.  The numbers are in millions of pounds, and the plus sign means the government expects to get this much tax in from the change.

The first few months of 2015 are still in the 2014-15 tax year (the tax year runs from 6th April one year to 5th April the next year).  So between January 1st and April 5th 2015 the UK government estimates it will make £70 million in VAT from the changes.  In a full year, it thinks it will make an extra £300 million plus, with the numbers rising over time.

I think we can all agree three hundred million is a sum worth having.  For the government, it’s the cost of, say, the entire NHS radiotherapy service (table 9 page 28, 2011-12 figures).  But look at this: “The MOSS element of the measure is expected to have a negligible impact on the Exchequer.”

Now, I understand “negligible” in an impact assessment to mean “less than £100,000 across the entire affected population”, which is what it used to mean in 2012 when I was last working for the government.  But have a think about that.  The entire farrago of MOSS is expected to bring in less than a hundred grand?  Seriously?

Because one of the seven questions written into the tax original impact assessment proposals, and which was still there when I obtained the TIIN instructions and published them on my blog, is

why are you doing it this way???

Why the hell are you imposing this business-busting system on people from whom you expect to raise peanuts, when you’re still going to get the moolah you want from the big businesses it’s really aimed at?  Is this really the only way?

Option appraisal is one of the key elements of impact assessment methodology: generating and assessing all the possible ways of solving a possible policy issue and then choosing the best one, even if it’s the option to “do nothing” – that’s how governments tell themselves they solve problems.

So where is the options appraisal in this TIIN?

Don’t bother to look.  It isn’t there.

Look instead at the assessment of the economic impact.

This measure should have positive economic impacts by minimising distortions to the location of the economic activity and increasing competition between large and smaller suppliers within the sectors affected.

Well perhaps it “should”.  In an ideal world it would.  But in this imperfect world, HMRC completely overlooked the one-woman kitchen-table microbusiness and introduced a system which, far from “minimising distortions” and “increasing competition” will in fact wipe out the micro businesses or else drive them into the arms of the very businesses whose behaviour caused the policy problem in the first place.

A proper options appraisal might have included:

  • excluding micro businesses from the regulation altogether
  • allowing a longer lead in time before the regulation affected small and micro businesses
  • unilaterally setting a threshold below which the regulations do not apply
  • making payment processors legally responsible for operating the regulation
  • devising a MOSS which itself operated as a payment processor for micro businesses (instead of a paypal or worldpay etc button you could have a MOSS button – your money would come to you VIA the government, but come to you guaranteed VAT-compliant)

There might have been good reasons for and against any or all of these.  But if you don’t ask the right questions of the right people, well, you’ll never know, will you?




February 27, 2014

You’re going to have to bear with me.  I’m going to talk about Intrastat, and about Administrative Burden, and unless you’re a statistician by trade or inclination, they’re about the most snooze-worthy topics imaginable.  Try and stay awake at the back  –  I’ll smuggle in a joke or a quiz somewhere- (or consider printing this entry out and reading it in bed and you’re almost guarantzzzzzzzz…)

I’m awake.  Honest!

OK then, look at this page of incredibly boring trade statistics.  Or don’t, but DO read this explanation:

These statistics record the movement – for trade purposes – of goods between the UK and both EU and non-EU countries.

They are collected from the EU-wide Intrastat survey and from Customs import and export entries, both administered by HMRC.

Now, I read this as meaning we’ve got trade statistics collected by two different methods; within the EU via Instrastat, and outside the EU from “Customs import and export entries”.  So my first thought is, are we comparing like with like?  I’m guessing that there are good reasons why not, because the EU is supposed to be a free trading zone and there are different customs duties applied to goods from outside the EU.

Intrastat is statistics (the “stats” part) from trading inside, “intra”, the EU.  With me so far?  But there’s no need, theoretically, for people to tell the authorities what they’re exporting and importing within the EU, so the Intrastat process seems to be finely balanced between forcing people to provide data that gives them no individual benefit, and obtaining data which does have some kind of collective benefit.  The benefit or otherwise of having trade statistics at all is left as an exercise for the class.  Write on one side of the paper only, and, please, refrain from showing your workings.

Now the UK is pretty groovy in the field of administrative burden; we have a high threshold for VAT registration (is it still the highest in Europe?  Anyone?  Bueller?) We used to have a serious programme of reduction in administrative burden …

All right, it’s probably time to talk about administrative burden now.  Get an expresso, I’ll wait.

“Administrative burden” is a way of conceptualising the cost of regulatory action.  Think about it this way.  If the government makes you spend one afternoon a year filling in your tax return, you lose an afternoon out of your life.  You could have been reading a book, watching bad telly, taking your kids to the park…  But there isn’t – theoretically – a monetary value to stick on that.  But if a business has to spend an afternoon filling in forms, there conceptually is a hard monetary cost to that.  The three hours your hairdresser spends filling in her tax return is three hours that she isn’t cutting hair, so she’s theoretically lost 3 x her hourly profit.  That’s the measure of the “administrative burden” of regulation.

(Sidebar for the excessively caffeinated; in 2010 the government decided  your time in the “reading a book, watching bad telly…” example does have, if not a cost, at least a value.  It’s £14.20 an hour.  So there.)

So.  There’s an “administrative burden” – a cost to business of the time they spend filling in and sending off the forms – to “intrastat” – the statistical information about movement of goods inside the EU.

Now interestingly enough the last government had a five year mission… I mean, it set up a five year programme to reduce the administrative burden on business by 10%.  Although, rather heartbreakingly for those of us who might have agonised over some of the work on it, by the time they’d gloriously achieved the target there was a new government who didn’t give a hoot about what the previous government had done but certainly wasn’t going to let anyone crow about them having reduced the regulatory burden when the new narrative was all about the red tape challenge.  So the results were in an unpublicised Budget paper called “Delivering a new relationship with business” and oooh look at paragraph 2.5 on, would you believe it, Intrastat:

2.5 On 1 January 2010 the exemption threshold for completing Intrastat forms for arrivals was reduced from 97 per cent to 95 per cent. All VAT registered businesses who reach the threshold for their value of arrivals or dispatches (goods arriving from or going to other Member States) are required to submit Intrastat declarations on a monthly basis. The threshold reduction means that around 6900 businesses will no longer have to complete the arrivals declaration and will benefit from a share of the estimated £1.8 million admin burden savings.

Now my calculator says that £1.8m divided by 6900 is £260.  So it cost £260-ish to fill in an Intrastat survey each year back in 2009?  It says it in the impact assessment, so it must be true.

Well if we look at the consultation into a further “simplification” of intrastat (closing date for comments 8th April) there are a couple of draft TIINs for the options under consideration.  Tick v.g. to the policy team for correct use of TIIN to cost out the options under consideration, by the way – the idea of doing an impact assessment is to look at the costs and benefits of options and decide on the best policy action according to the balance of costs and benefits.

So we are currently looking at options.

One of them, is the EU proposal to collect data only from exporters.  You can see the benefits: if you only ask one side of the transaction to report, you can halve the amount of data collected.  So I sell a million widgets to France and there’s only one form to fill in, the one saying I sold them, and not two – one by me and one by them – but provided the data is shared across europe the total information collected is still the same.

However we don’t seem to like that idea.  I’m not sure why, but the condoc drips condescension towards it:

“Theoretically, there are superficial benefits to be achieved by doing this…”


“It also appears to make the existing asymmetries between Member States data disappear overnight.” (and no, not my emphasis!)

Let’s have a look at the options and what they’d cost.

Option One – SIMSTAT proposal – removal of the requirement to submit arrivals declarations (with additional data requirements at dispatch)

In other words the EU proposal, to make the data collection one sided, from the sender only.  So you’d only collect information from exporters (and not from both importers and exporters) but you’d made the exporters give a bit more detail.

If you look at page 12 of the consultation document you’ll see the impact assessment suggests HMRC would have to spend £1.1m on computer equipment and the administrative burden on businesses would go UP by £0.6m.

(Irrelevant joke insert: What do you call a man with a plank on his head?  Edward.  I told you I’d smuggle in a joke if you stayed awake till the end.)

Then there’s option two, which seems to be the worst of all possible worlds: increase the data requirements on exporters and (slightly) reduce the numbers required to give information on imports, or, as the condoc has it

Option Two – SIMSTAT proposal (with additional data requirements at dispatch) – reducing coverage for arrivals to 90% to meet national requirements

This one still costs HMRC £1.1m AND increases the admin burden by £2.3m.  So let’s not do that, eh?

(oh, and Irrelevant Joke data: you have to pronounce it ‘ead wood)

Then there’s the Third Way.

Option Three – Alternative simplification proposal: 93% coverage for arrivals and dispatches (used for illustrative and comparative purposes)

This one apparently doesn’t cost HMRC anything AND it reduces the admin burden by £3.6m a year.  Oh, and it takes 8500 of the smallest businesses out of having to produce stats at all which, my calculator suggests, will save them £423 each and that seems quite a lot more than the £260 it was costing businesses in 2009 but there you go.

Now impact assessment theology would suggest it’s a no-brainer that you simply do that one; achieves the same objective and costs less.

So why are we having a public consultation on it?

The consultation is directed at people who either have to produce intrastat declarations, or make use of the resulting trade statistics.  But it’s the “how did we get here” bit of the consultation that interests me:

The EU Commission have put forward a proposal to modernise the Intrastat system which is targeted for implementation from 2017.

To offer a more immediate simplification, during 2013 HMRC informally consulted with businesses required to submit Intrastat declarations and users of Intrastat data on a proposal to reduce the coverage of trade on which data must be collected by the Intrastat system for arrivals from 95% to 93%. The UK, along with other Member States, worked with the EU Commission to deliver this change and as a consequence the EU legislation has been amended resulting in an increase to the Intrastat Exemption Threshold for arrivals from £600,000 to £1,200,000 from 1 January 2014.

So are we saying that we’ve already achieved option 3 and we don’t want any further change?  And that further change will add to HMRC and to businesses’ costs?  And we’re trying to persuade our fellow states that we don’t need to make any further change?

Well then, I go back to, why the consultation?

Are we – I wonder – hoping that affected international businesses will kick up a fuss in other european states and get them to back the UK proposal/status quo?  Or are we genuinely looking to confirm or refine our costing data, since there seems to be some question over the cost of the increased data requirements on the exporters if we went to the asymmetric method.

Speaking as a PhD student, wouldn’t it be cheaper, or at least more efficient, to spend some money on getting some research done?  Stick a few grand in the pot, get the other member states to do the same, and get someone to lead a research project and send a bunch of eager young PhDs and post-docs out to get some actual data from some actual businesses and write it up in a comprehensible way?  (And dear god no, I’m not pitching for the work!)

In other words, while Oliver Letwin might not think that consultation is the place to gather “views”, I’m not entirely certain it’s the right place to gather “data” either.  And maybe this is an instance where data would be more valuable than views.

(Irrelevant joke insert: What do you call a man with three planks on his head?  Edward Woodward.)

Thank you for staying awake.  As you were.


Three. Probably.

January 15, 2014

A search on “open consultations” in the category “HMRC” on today tells me there are three open consultations.  I’m not sure I believe them after the shenanigans I reported on in my 7th January post (customer service tip: if someone tells you a site isn’t working, the least helpful response is “I don’t currently see any technical problems…”) but let’s roll with it.

The three are:

Real time information: legislative changes.  Opened 29th November (so why didn’t it show up when I searched on the same terms on 7th January?) and it closes on 24 January.  Incidentally, wouldn’t it be really, really helpful if you could search on closing date on  Or at least that you could tell from the search results when the consultation closes and didn’t have to click through to find out?

Onshore employment intermediaries: false self-employment.  Opened 10 December, closes 4 February.

Assistance with electronic filing of VAT returns.  Opened 20 December, closes 14 February.

So let’s start with the Real Time Information (RTI) one.  RTI, in case you didn’t already know, is the PAYE equivalent of Universal Credit – it’s the New! Improved!  All-singing!  All-dancing! method of making sure that Universal Credit will work because the government will know, from timely information from employers, who has worked where and when, so people will – perhaps, if it all works, fingers crossed – finally be able to dip in and out of paid work without screwing up their benefits for six months.

But from an employer’s viewpoint, it’s a royal pain.  You have to report payments to employees when you make them, not at the end of the month or quarter or year or whenever you can stop to draw breath.

There’s little point looking at the actual consultation, because this is one of the Finance Bill consultations – in other words, the policy has already been decided and we’re not being asked for our opinions on whether it’s a good idea or not, just for technical comments on whether or not the regulations that have been written will actually work as described.  And I don’t really feel like doing the government’s unpaid copy-editing for them this morning so we’ll skip that.

There are a few interesting things we might want to think about, though.

First of all, the TIIN (surprise!)  They aren’t publishing a TIIN with this because they’ve already published one.  In fact they’ve published two, one for the penalty regime here and one for the actual policy change.

The one for the penalty regime says that there will be no actual exchequer impact.  In fact the government says it doesn’t expect to get any money in from these penalties at all, or at least an amount which shows up as “nil” on a TIIN.  If memory serves, that’s something like a quarter of a million threshold (grateful if anyone can confirm or amend this figure please?)

That’s a good thing, of course.  The point of penalties is to change behaviour, not to collect money.  The idea is that people should make the change to RTI and get used to sending the same information they would always have sent, just a bit earlier and in a different way.  I can see two problems with that.

First of all the level of the penalty.  It needs to be a “smacked wrist” amount – enough that you know not to put your hand into the fire but not so great that your parents get done for child abuse.  So if you’re a small business with up to nine employees, it’s a hundred quid.  Enough to make you want not to incur it, but not enough (one hopes!) to bankrupt you.

But look at paragraph 16 of the condoc:

16. Regulation 67I sets the size of the late filing penalties as follows:

 £100 for schemes with 1 – 9 employees;

 £200 for schemes with 10 – 49 employees;

 £300 for schemes with 50 – 249 employees; and

 £400 for schemes with 250 or more employees.

If I have 300 employees on the average wage of £26,500 then I’m paying out over half a million in wages every month (£26,500 x 300 / 12 = 662,500).  Now, in comparison to £662,500, is £400 a “smacked wrist” or is it, well, peanuts?  An amount which it might very well be worthwhile my incurring so I can sort out my RTI submission at my own pace?

In other words, I think they got the gearing of the penalties a bit wonky.  But it’s too late now, we’re not being asked to comment on that.

Secondly, as I have commented before, there’s not a great deal of point charging “smacked wrist” penalties if you don’t actually go out and collect them, and is HMRC now committed to sending someone round to knock on the employer’s door if they incur a £100 or £400 penalty and explain to them how it arose and, more to the point, what they can do to avoid incurring another?  Otherwise I think that “exchequer effect – nil” may turn out to be, shall we say, optimistic?  Or should that be pessimistic?

And finally, what about the equalities impact?  I said in my response to the consultation on the actual policy that I was worried about the impact on “care and support” employers, which is HMRC jargon for people who have employees but who aren’t businesses.  People who employ nannies, for example, or, more worryingly, people who are given a “care budget” instead of a home help and have to get on and organise their own support package including paying their carers and working out the tax due on their pay.

In the TIIN for the actual policy it says under equalities impacts that

Care and support employers will also have the option to file RTI on paper, and those wishing to use this option will report RTI from April 2014. This date has been deferred from April 2013 in line with customer feedback, to allow more time for HMRC to thoroughly test the new paper forms and guidance with customers who will use them.

So.  We’re not publishing another TIIN.  We’re not updating the equalities impact, then?  Has there actually BEEN any testing of the impact on care and support employers?  Are they happy, or at least confident they’ll be able to comply?  Does anyone know?

Sigh.  I’d write to my MP again, but it’s Nick Clegg and I think he’s probably getting sick of hearing from me about inadequate government equality impact assessments by now.  Over to you.


Guest Post: The Honest (White) Collar

January 7, 2013

This is a guest post by FTD the barrister and author behind the blog.

With much fanfare this week Her Majesty’s Revenue & Customs announced their top thirty two tax cheats of 2012. Reminiscent of ‘America’s Most Wanted’ the mug shots of these ‘tax cheats’ was shown on television, in the newspapers and has been widely publicised on the internet.

If you missed it:

I don’t like it. I don’t like it because it’s crass and tabloid.

And, I don’t like it because I’m proved right.

In 2005, I was a law student and in the early part of the year the Inland Revenue was merged with HM Revenue & Customs to become HMRC. I remember writing a scathing essay about how the ‘co-op culture’ of the Inland Revenue was incompatible with the ‘cop culture’ of Customs.

Combine that with the prospect of staff being moved over to the Serious Organised Crime Agency on the horizon and it was all getting a little culturally confusing.


England and Wales have had three ‘law enforcement’ agencies to deal with as individuals. The police, the revenue and customs.

Of those, the most ‘enforcement’ driven was customs. Customs for centuries have raised billions of £s for the treasury by enforcing the law with regard to import and export. They have very little protective function and a very high enforcement function.

If you ask the older wigs around Temple what Customs were like, they will tell you some stories. If you were against a dodgy customs officer then they put a bent copper in the shade.

Remember, the police are still tethered (although pulling) to a leash: policing by consent. British sensibilities would never allow a police force which was full enforcement orientated. Comparatively, Customs were set up with no such leash, they had a job, catch the rum smugglers etc, extract the duties owing.

Of course, not everyone tries to smuggle dodgy gin, or commits criminal offences – but, everyone does pay taxes. So, at the other end of the scale was the Inland Revenue. An enforcement agency to an extent, but an agency which tried to co-operate with the tax payer to obtain dues owing.

My fear was always that customs culture would overwhelm the co-operative culture of the Inland Revenue.

By example, prior to 2006, today’s advertised top taxcrims would have been dealt with by:

Operation Inertia – MTIC fraud (VAT) – would have been a Customs job.

Operation Hippolamp – Tobacco duty evasion –  would have been a Customs job.

Operation Recuprical – Tax fraud –  Inland Revenue (possibly police)

Operation Reinforce – Import duty evasion would have been a Customs job.

Operation Rust – Alcohol duty evasion – would have been a Customs job.

Operation Tulipbox – VAT fraud – would have been a Customs job.

Operation Snowbank – Duty evasion – would have been a Customs job.

Operation Tousle 95 – Tobacco duty evasion – would have been a Customs job.

Operation Hazel Lamp – Tobacco duty evasion – would have been a Customs job.

Operation Vara – Import duty evasion – would have been a Customs job.

… should have been a customs job.

Clearly this latest piece of HMRC PR is a customs job. And, combined with the eyes. yes, you’ve all seen the ‘undeclared income eyes’ on bill boards, the tube, the train on the sides of buses.

It would seem to me that customs culture has won out. Combat don’t co-operate. The days of Moira Stuart, the cartoon of the Revenue man in the bowler hat: tax doesn’t have to be taxing are gone.


Why do I say it’s wrong? I don’t know the figures, whether enforcement or co-operation are better. But, what I do know is that a culture of enforcement rather than co-operation widens the caste of people who are to be potentially criminalised, not only is that crass, it’s wrong.

It’s all too us and them, the Government suspects everyone, suspects we’re all at the tax dodge. Forget the fact that most of you pay your taxes PAYE.

People are less likely to be open with HMRC if they think they are a suspect rather than a customer. Afterall, to coin a phrase which all coppers love to hate, ‘my taxes pay your wages mate.’


Visit for more blog posts about criminal justice today in the UK.



Starbux redux

October 19, 2012

So the original Reuters investigation into Starbucks’ tax position reported that

There is no suggestion Starbucks has broken any laws. Indeed, the group’s overall tax rate – including deferred taxes which may or may not be paid in the future – was 31 percent last year, much higher than the 18.5 percent average rate that campaign group Citizens for Tax Justice says large U.S. corporations paid in recent years.

But on overseas income, Starbucks paid an average tax rate of 13 percent, one of the lowest in the consumer goods sector.

After the press furore earlier in the week there was also, as you would expect these days, a bit of a twitter flurry about the circumstances around the whole position.  The point I hadn’t picked up on earlier was that the 31% tax figure in the US consolidated accounts may not represent tax actually paid.  It might simply be a provision for the tax that they would have to pay if they eventually distributed the profits back to the US.

Which is the same as paying it, right?  Just paying it next year rather than this?

Well no, actually, or at least not necessarily.

In 2004 there was a weaselly-named piece of US legislation called the the American Jobs Creation Act of 2004.  The premise was that, if US-based multinationals repatriated the profits they were keeping offshore they would use the money to create jobs, no, honest, guv.  So wouldn’t it be a good idea to offer them a tax break to do so?  Instead of charging them, say, 35% tax, just charge them 5 and a quarter per cent.  Because, you know, half a loaf is better than none, so 5.25% of a squillion is a lot better than 35% of nothing, and look at the jobs that would follow!

Yes, look.  Apparently – and I’m shocked, shocked! to read it – the companies took the money AND cut jobs at the same time.  Stellar!  As the Congressional Research Service politely puts it,

While empirical evidence is clear that this provision resulted in a significant increase in repatriated earnings, empirical evidence is unable to show a corresponding increase in domestic investment or employment.

I don’t know much about US politics except what I see on the news or read online, but I gather that there is lobbying afoot to introduce a similar tax break again…

But I stress, this isn’t about Starbucks or any other multinational.  It’s about regulatory capture of nation states by multinationals, so that tax arbitrage – finding the jurisdiction with the lowest effective tax rate and putting your profitable operations there – becomes a legitimate way of structuring your business.  And for governments it becomes routine to be offering a ludicrously low tax rate in the hope that multinationals who relocate will at least let you have crumbs from their table in sales taxes (VAT)  and the personal taxes you can levy on their employees (PAYE).

But as Richard Murphy points out, this is privileging large multinationals over indigenous small businesses.

Hmm… has anyone else noticed the disappearance of the Small Firms Impact Test from the BIS website since Michael Fallon took over from Mark Prisk?  (Was it something I said?)  I put in an FoI request a while ago to see the minutes of the cross Whitehall Better Regulation, consultation and economist networks’ meetings and am being fobbed off that they need time to think about it, because it may be exempt under the “formulation of government policy” exclusion, apparently.

What policy could they possibly be formulating?

Well, the coalition have already thrown away the rules about consultation, quietly slipping a new set of guidelines onto the Cabinet Office website.  And, if you look very, very closely at the last line (item 9) of this very boring and obscure document about Changes to Impact Assessment and Regulatory Policy Scrutiny, you’ll see that

A full update to the IA Guidance will be issued in the autumn, following the conclusions from the Better Regulation Framework Review.

Google “Better Regulation Framework Review” and you’ll find one hit, the link above (actually you may now get two, one being this blog)   But my point is you won’t find a public announcement of any such review.  Who’s conducting it?  What external input are they having into it?  And who will lay me a tenner on the Small Firms Impact Test making it into the next version?  Interesting times!


Today’s round up

October 5, 2012

We have three consultations closing today.

Let’s start with The Use of Rebated Fuel for Gritting in Rural Areas.  OK then: there’s a kind of fuel (“red diesel”) used in farming etc which has a lower rate of fuel duty applied.  It’s dyed red so that it’s easy to see whether you’re using it or not. Got that?  Well…

In recent winters, during periods of extreme weather, HMRC have, by way of a temporary relaxation, allowed tractors being used to grit rural roads to use red diesel. HMRC is now considering whether to formalise this approach.

This looks so obviously sensible to me that I’m tempted to say, well, what the heck are you consulting about, then?  Just carry on being sensible and don’t muck about “formalising” it.  We’re supposed to want to simplify the tax regime, remember, and avoid unnecessary regulation?

But the consultation document is clearly written and, in particular, has the tax impact assessment written in a way I haven’t seen before, where they simply answer the seven questions involved:

What are you doing?

Why are you doing it?

Why are you doing it this way?

What will it raise?

What will it cost customers?

What will it cost the public sector?

What are the other impacts?

as a readable narrative that actually makes sense.  Bravo!  Here’s the answer I sent:

I’m not responding to your list of specific consultation questions because I neither drive, use red diesel nor live in a rural community. That said, as a citizen stakeholder with a particular interest in consultations, I think this consultation asks the right questions of the right people and I applaud the decision to make its existence public rather than conducting it “informally” without bringing it to the attention of the wider public.

My personal response would be that neither legislation nor any other form of regulation of this is necessary and you should continue to operate under HMRC’s powers to manage the tax system. However if there are any unintended consequences (which I see you are seeking to assess in your final three questions) then perhaps you could proceed by way of an extra statutory concession, if you’re still creating new ones, so it’s clear under what circumstances you’d expect to see it operate.

Kudos to the team involved.  Next!

Well, next we have Inheritance Tax: Simplifying Charges on Trusts Now, see, I have problems with the underlying concept of this.  Because it seems to be all about making life simpler for people who have stuck their assets into a trust in order to avoid (legally) the full weight of inheritance tax.  Remember, in spite of what the Daily Mail and the other tabloids would have you believe, inheritance tax doesn’t affect most of us – you have to leave £325,000 before your estate has to pay anything at all and most of us outside London have houses worth less than that.  And, don’t forget, a married couple gets twice that, because the nil rate band is per person, so houses up to 650k are safe from the taxman.  And, don’t forget as well, that YOU don’t pay inheritance tax, your estate does – and, as I personally don’t believe in inherited wealth – I can’t really see the panic that sets in when people with a couple of million contemplate the possibility of forty per cent of it going back to the public purse after their death as being particularly, well, serious.

So trusts are used to avoid it, and there are rules to stop everyone putting everything into trust, so you have to pay a charge when you put the asset into the trust and then every tenth year after that – and this consultation is about whether it’s possible to simplify the calculation of the charge.

Hmmm.  It’d be a lot simpler to charge a flat rate 20% on entry and then 10% every ten years.  Let’s do that, eh?  No?

Well it’s true that I don’t know enough about trusts and how they work to make any useful contribution to the discussion on this – the problem is, that I don’t trust anyone who does to have the interests of the taxpaying citizenry as a whole in mind rather than the narrow interests of those rich enough to exercise the privilege of tax planning.

Here’s what I sent anyway.

Can I first of all say that I believe that this consultation needs to balance the interests of the wider taxpaying population against the narrow interest of those wealthy enough to exercise the privilege of tax planning via trusts. As one of the former rather than the latter, I’m very much against any simplification which gives a relaxation of the regime. To that end I’d be in favour of achieving simplicity by making the tax charge on entry into a trust a flat rate 20% and keeping the exit and periodic charges at the same rate but without any adjustments for reliefs or historic values or other adjustments. In other words, simplify the whole regime so that any distribution is charged at the same flat rate (whether capital or revenue) and the periodic and exit charges are also flat rate on the current asset value. Presumably calculating what this flat rate should be to arrive at roughly the same charge as if the trust did not exist would be do-able? If trusts are entered into for legitimate, non-tax reasons then a result which gives roughly the same result as you would get without the trust is eminently reasonable. And if trusts are entered into for tax planning reasons… why on earth is it a legitimate object of policy to facilitate legal avoidance?

Finally, your tax impact assessment says you have no evidence to suggest the measure will have any adverse equalities impacts: I cannot agree. You say there are only some 900 trusts affected by ten yearly or exit charge calculations each year. You have not given due consideration to equality if you have not considered the privilege accorded to these 900 taxpayers in contrast to the treatment of the rest of the population.

And finally, we have the technical consultation on Delivering a cap on income tax relief.  This, you will remember, is the proposal to stop rich people claiming all the reliefs that exist (on their investments in start up companies, for example) so that they reduce their income down to nothing and pay no tax for the year.  There was a bit of a furore over the inclusion of charitable donations in this and the proposal has now been revised to exclude charitable giving from the cap.  This seems fairly reasonable to me, although I would point out that in a democracy we have this thing called a government, which we elect, which is charged with collecting a contribution from everyone and then deciding on where the priority areas for spending are – the NHS or the army?  Street cleaning or child support?  The arts or sciences?  Bread or roses?  Allowing millionaires to opt out of this and decide to fund their own priorities is… well, Not Cool.

Nevertheless, I haven’t really got anything to add to the actual consultation, per se.  The impact assessment is really good, too, until you get to the end…  well, anyway, here’s what I sent to them.

Since this is a technical consultation I find I don’t have any useful insights to contribute in response to the specific questions on page 16 of the condoc. However I have a few comments in response to your final question, on the tax impact assessment.

I thought the TIA was exemplary in its clarity, particularly in the impact on individuals and households and in the consideration of equalities impacts. Well done.

However I think I might have to take issue with your assessment of the possible impacts on small businesses. I’m not clear from the consultation document how many of the reliefs now to be capped are designed to enable the funding of start up enterprises which are likely to come into the category of “small”. The section on “other impacts” in the TIA rather glosses over any substantive analysis of the effect on small firms and I wonder whether you have done any proactive consultation (with small firms who have benefited from early trade losses reliefs or qualifying loan interest relief, for example?) to make sure these proposals won’t have any unintended consequences. In an era where we are constantly being told we are in such a financial crisis that benefits, pensions and public sector salaries need to be frozen or cut and that austerity plus growth is the only policy that will save us, I would find it very strange if the proposal were to be legislated without some clearer assurance that this change will not impact negatively on growth by impacting on the flow of finance to start ups.


Regulated justice

August 14, 2012

You might be remember that I blogged a while ago about the changes to legal aid and suggested the new regulations might be vulnerable to judicial review because the MoJ hadn’t dotted the “i”s and crossed the “t”s in passing the regulations, in both the impact assessment (of the enabling legislation) and SFIT (the conclusion that the specific reg wouldn’t impact on small firms, when the IA to the enabling legislation clearly says that it does).

I mentioned I was trying to track down the Regulatory Policy Committee’s independent assessment of quality of the IA for the enabling legislation (The Legal Aid, Sentencing and Punishment of Offenders Act 2012).  The RPC secretariat told me I would have to ask the MoJ.  The MoJ sent me this letter in response to an FoI request for sight of the Opinion.

Freedom of Information Request 

Dear Ms Bradley

Thank you for your email of 20 July 2012, in which you asked for the following information from the Ministry of Justice (MoJ):

  • I am seeking the Regulatory Policy Committee’s opinion on the Impact Assessment no MoJ088 entitled “Central Funds”. 

I understand that you did not receive an acknowledgement letter to your request, please accept my apologies this was due to an administrative error within the department.

Your request has been handled under the Freedom of Information Act 2000 (FOIA).

I have searched the MoJ’s correspondence system and I can confirm that the Ministry of Justice (MoJ) does not hold the information that you have requested.

However, I can confirm that the Regulatory Policy Committee’s (RPC) opinion was not required on the Impact Assessment in your request as the policy did not amount to regulation.

You can find out more about information held for the purposes of the Act by reading some guidance points we consider when processing a request for information, attached at the end of this letter.

You can also find more information by reading the full text of the Act, available at and further guidance

You have the right to appeal our decision if you think it is incorrect. Details can be found in the ‘How to Appeal’ section attached at the end of this letter.

Yours sincerely

So the response is – there isn’t one, because it *isn’t a regulation*!!!


The coalition actually defined regulation when they started regulating the way regulations are made: the definition is at annex A (bottom of page 19) in the impact assessment guidance:

Definition of Regulation
A rule with which failure to comply would result in coming into conflict with the law or being ineligible for funding and other applied for schemes. This includes: EU regulations; Acts of Parliament; Statutory Instruments; rules, orders, schemes, regulations etc. made under statutory powers by Ministers or agencies; licences and permits issued under Government authority; codes of practice with statutory force; guidance with statutory force; codes of practice, guidance, self-regulation, partnership agreements with Government backing; approved codes of practice; bye-laws made by Government.

so… legislation that requires that the Lord Chancellor “must secure that legal aid is made available” doesn’t put him into conflict with the law if he fails to comply?

See, this is why I was a Civil Servant and not a barrister!

The only get out clause I can think of is that the Act isn’t published with an impact assessment, and the impact assessment isn’t connected specifically with the Act – the connection comes from the Explanatory Memorandum to the Statutory Instrument (The Costs in Criminal Cases (General)(Amendment) Regulations 2012) which says

10. Impact

10.1 The impact on business, charities or voluntary bodies was set out in the final Impact Assessment that was published with the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which can be found at funds.pdf

Maybe the MoJ have deluded themselves that publishing an impact assesssment at round about the same time as a piece of legislation covers them in case someone says “where’s the impact assessment” but doesn’t oblige them to take into account any of the rules around what an impact assessment is supposed to contain or how the legislative process is supposed to be governed?  I don’t know.  But if some stroppy legal aid lawyers would care to arrange a judicial review of the regulations I’d love to be in the public gallery.  With popcorn!

Seriously, when the coalition took over with its brave new world of deregulation and cost cutting and asked serving civil servants for their suggestions I made a serious suggestion that they should abolish my job (at the time) and the jobs of all the people working in Better Regulation teams across Whitehall and simply let the legislative process take its course.  The requirement to publish an impact assessment and to conduct a small firms impact test, where appropriate, is enshrined in Statutory Instrument Practice, the bible of how to make regulations (well, it wasn’t in the actual SIP last time I had access to a copy, because it hadn’t been updated for… well, that’s a whole other story, but it was there in one of the supplements).

So MPs ought to know, when they debate a bill (or at least when they let a Statutory Instrument go by on the nod) that it should have an impact assessment and it should tell you what its impact will be on small firms in the EM.

Let them ask questions in Parliament if they aren’t happy with the quality of the legislation they’re getting put in front of them.  Because so far as I can see, all the mechanisms they’ve put in place to raise legislative quality have become mechanisms for explaining why – although it’s a jolly good idea, Minister – it doesn’t actually, you know, apply in this case…


FSA: show me the money

June 28, 2012

So there was a tweet going the rounds this morning which said that the £59.5 million of fines which Barclays are going to pay for attempting to manipulate the LIBOR and EURIBOR rates of interest will go direct to the FSA… and reduce the fees which banks pay to the FSA for being regulated!

Let’s have a quick look.  The FSA website explains they are independent, receive no government funding, and charge fees to those they regulate and, yes, if you look at the paragraph “Who Pays for the FSA” you will see what they do with any fines they receive.

When financial penalties are imposed on firms or individuals, the proceeds are used to reduce fees in the following financial year.

So no worries, boys!  Be naughty this year, you’ll pay us less the next!  Champagne cocktails all round.

However there is this:

The FSA will be replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013. The Financial Services Bill currently undergoing parliamentary scrutiny is expected to receive Royal Assent by the end of 2012.

Yes, the FSA is going to be wound up.  At the moment, according to their annual report and accounts, they already have funding in place to cover the transitional costs of the transfer of responsibilities to the new Financial Conduct Authority and Prudential Regulation Authority that will take over their function.  So what becomes of the £59 million?

Well, under Schedule 21 Part 1 Para 2 of the Financial Services Bill (HL Bill 25) which seems to be working its way through the House of Lords at present it looks to me as if the FSA has to sort it out with the Bank of England and the Treasury:

Transfer schemes

2(1)The FSA must make one or more schemes under this paragraph for the
transfer of property, rights and liabilities of the FSA—

(a)to the PRA or the Bank,

(b)to the PRA and the Bank, to be held jointly, or

(c)to the FSA and either the PRA or the Bank or both, to be held jointly.

(2)A scheme under this paragraph made by the FSA is not to be capable of
coming into force unless it is approved by the Treasury.

(3)The FSA may not submit a scheme under this paragraph to the Treasury for
their approval without the consent of the Bank.

So perhaps one of the Noble Lords might like to check that our £59.5 million – as well as any other fines that might accrue from any other ramifications of what looks set to be a fair old scandal – go back to us, the taxpayers, rather than indirectly benefiting the people whose offences caused the fine.

If you want to ask a Noble Lord to do so, go to this list of members and pick one – they don’t have constituencies like MPs, so you’re entitled to ask any of them.  I picked the one with my surname (no relation!) but you might someone you’ve heard of who might have an interest, or simply pick one at random.  And then ask them to take an interest.  I want our money back!


World’s shortest campaign (or maybe “great minds think alike” – no) but George Osborne picked up the same thing in his speech on Barclays today.

Here’s what he said:

Under the previous government’s regime fines paid to the FSA are used to reduce the annual levy other financial institutions are asked to pay.

I am far from convinced that in all cases, this is the best use of the money.

We are considering amendments to the Financial Services Bill that ensure that fines of this nature go to help the taxpaying public, not the financial industry.

I have also asked my officials to urgently investigate whether this legislation could be applied to the fine imposed on Barclays Bank.

Well well – evidence that even politicians are capable of going “that’s really stupid – let’s not”.