Archive for the ‘TIINs’ Category

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How to prepare a TIIN: the tax impact assessment

February 10, 2017

You may remember that I asked HMRC for the current guidance on how to prepare a TIIN (this was published here on my blog) but that the guidance referred to further guidance on how to do the tax impact assessment part of the process.  I have now received, by way of a further FoI request, the attached tia guidance

Note that the “redacted” areas are where the names of the particular officials responsible for different policy areas have been redacted.  Apparently the “more” areas refer to links to further internal guidance which was not considered to be covered by the scope of my FoI request.

More interesting, though, is the response I had to my question of why this guidance is not part of HMRC’s routine publication schedule, particularly as the TIIN is the tax version of a Regulatory Impact Assessment, and the RIA guidance and instructions are routinely published.

We have not published this guidance routinely for two reasons. Firstly it does not affect the computation of the tax that a customer pays and is therefore of interest only to a small community. Secondly, as you point out, it mirrors cross government impact assessment guidance for internal HMRC use and is not intended to materially differ from it, except to the extent that the impact assessments provided for tax provisions are presented in TIINs, and to explain to HMRC staff how to engage the right processes to generate the impacts.

Hmmmm… I am tempted to point out that another possible reason could be that other government departments’ impact assessments are subject to external scrutiny.  As impact assessment programme manager in HMRC, my job for several years included going to cross governmental meetings and saying (in effect) no, hands off, tax is different!  These days?  I’m not so convinced…

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Tax simplification and better regulation.

January 18, 2017

My PhD-in-progress asks the question whether using better regulation techniques produces tax simplification, a question to which the glib answer is, of course, “it would, if they did”. So in keeping with the Making Tax Policy Better report and the suggestion that this is just the start of a conversation, I have been wondering what progress we might make towards a simpler tax system by making better use of the tools we already have.

Look, for example, at the 51 TIINs published on 5 December to support the draft 2017 Finance Bill.  If you take these and put them into a spreadsheet, listing the three quantifiable fields (exchequer impact, administrative burden and HMRC costs) what do you find?

The measures fall into three crude categories.  Firstly, there are those measures whose overall impact will be greater than £100 million.  Insurance Premium Tax: increase of standard rate, for example, or Abolition of Class 2 National Insurance contributions.  The Chancellor must be allowed to determine how and where he raises the money he needs to fund the expenditure he incurs: decisions about these large measures is political, and we can leave them alone for these purposes.

Secondly there are the measures which have smaller impacts. Personal Tax: changes to bands for ultra-low emission vehicles in company car tax for example will raise some tax, save some admin burden and cost HMRC some money.  Personally if I were an MP debating the Finance Bill I would want these relatively trivial measures to balance out: I would only allow as many measures which increase tax by amounts less than £100m as there were measures which decreased tax or administrative burden by similar amounts.  I suspect if this balance were demanded, the number of such measures might significantly decrease.

Finally there is the category to which I would wish to draw your attention today.  There are fully twenty measures where, so far as I can see, the exchequer effect (the actual tax raised or foregone) is zero, and both the administrative burden on taxpayers and the cost increases or savings for HMRC are either nil or negligible.

The question then is – why the hell are we doing them?  Here is a random selection:

Tobacco Duty: Illicit Trade Protocol – licensing of tobacco manufacturing machinery is a provision to licence tobacco manufacturing machinery.

Co-ownership authorised contractual schemes: reducing tax complexity seems to be a tidying-up of capital allowance rules for operators of co-ownership authorised contractual schemes (CoACS) and their investors, and yet will have a “negligible” impact on the tax they pay or on their administrative costs.

Landfill Tax: definition of taxable disposal will affect approximately 150 specialist disposal firms in England (the tax is or will be devolved in Scotland and Wales) and they will “incur negligible on-going savings through the removal of the requirement to inform HMRC about certain non-taxable activities.”  (HMRC couldn’t have just written them a letter??)

The Treasury and HMRC have an easier ride than other Departments in getting legislation before Parliament: they do not have to bid for space in the legislative programme, and Finance Bills are counted as “money bills” and subject to an easier passage through Parliament as the Lords can only delay rather than amend them.  There is a broad definition of “money bills”  which includes one “which in the opinion of the Speaker of the House of Commons contains only provisions dealing with … the imposition, repeal, alteration, or regulation of taxation…”  Perhaps someone should have a word with John Bercow?  It seems to me that, were he to declare that in his opinion no measure which produces neither tax, administrative burden saving nor government cost saving was a provision regulating taxation… and therefore no Finance Bill containing such measures could be certified as a money bill…

…well, perhaps he might, at a stroke, become tax personality of the year for his services to simplification of the tax system?

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TIIN instructions

January 13, 2017

I have now received a response from HMRC to my Freedom of Information Act (FoI) request for the current TIIN instructions: there are some embedded in the TIIN template here:

170104_tiin_template

and some further guidance here:

170104_wendy-bradley_tiin-guidance

I am obliged to the HMRC FoI team for sorting this out, although of course it is evident from looking at the files that there are further instructions in the TIA (Tax Impact Assessment) guidance which has not  been included.  Nor is there any explanation of why this information isn’t part of the routine publication schedule – there really isn’t anything secret about it, and it’s useful data for those of us who take an academic interest in the way tax legislation is developed and produced, as well as for legal, accountancy and trade organisations who routinely give comments on tax proposals.  How about it, HMRC?

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Simple

May 17, 2016

The guidance for the Civil Service on the so-called “purdah” period before the EU referendum is contained here, in the letter from Sir Jeremy Heywood to Sir Nicholas Macpherson dated 23 February.  It is slightly different from the usual election guidance in that it acknowledges that Ministers can be arguing either side of the case and still expect support (support in the sense of provision of information and services, not in the sense of  cheerleading or even agreement) from their Departments.

Consultations on tax changes are usually in the “don’t publish” category before elections (“government consults on whether to give us all £5000 after the election.  And a pony!” doesn’t go down well with the other parties, after all.)  But equally, this is the time of year you would be hoping they would publish the batch of any consultations coming out of the Budget, so that people have time to look at them before they go on holiday and get a response in before the Autumn Statement.

So what have we got?  Not, frankly, a lot.  The first date is the closure date, not the publication date, of course.

(plus the one about licensed tobacconists I have already briefly discussed here, a purely HMT consultation about corporate contributions to grassroots sports, and a joint DCLG, HMT and VOA consultation on business rates and revaluation)

Is that the right number of consultations for this time of year, with a referendum on the horizon?  Too many?  Not enough?  Who knows!  But it puts an idea into my head.

First of all, enough with the fiddle-fiddling around with bits of the mechanism, like a hobbyist playing with his hi-fi.  It doesn’t matter where you position the speakers, where you put your chair, whether you can hear a difference between the CDs and the vinyl and whether or not you carefully place a sixpence on the record arm.  Stop playing with the system for a moment and just listen to the music!

The tax system, in this analogy, is a complex orchestral piece that will never be finished and never be perfect.  It’s creaking along, and all you are doing by fiddling with it is stopping it from falling over altogether.  Maybe instead of a “purdah” we could have a self-denying ordinance and simply Stop Changing The Tax System for a while: how about, for the rest of this Parliament, say?  Give it a rest!  Listen to the silence!

Yes, I know HMRC and the Treasury will argue they need to stop up the holes that busy people keep nibbling away at the walls.  I call bullshit.

Let’s find out how much it costs to pass a piece of legislation.  Yes, I know all about administrative burden, but I’m not talking about that.  I’m talking about “legislative burden”, if you like.  How much does it cost us, the taxpayer, to have HMRC issue a consultative document and read and analyse the responses, for Ministers to reach a decision on whether or not to go ahead and give instructions to continue, for MPs to sit in Parliament and discuss it, for the building not to fall down round their heads while they debate it, for Hansard to report it, for Parliament TV to broadcast it, for it to be printed onto archival quality paper and on vellum and for someone to walk round to Buck House and wait while her Majesty puts her signature on it, for it to be printed and put on sale and put onto the internet…

Let’s look at the TIINs.  Let’s add the legislative burden to the administrative burden and then take away the exchequer impact, and let’s think of a number.  Say, what, ten million quid a year?  Let’s simply make it a rule that no tax legislation will be put before parliament unless the TIIN shows that, after netting off the legislative and administrative burden, the change will bring in at least ten million quid a year.

Tax simplification?  It would be a start.

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Nailed

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 https://www.gov.uk/government/collections/ta 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.

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Mischief managed

August 21, 2015

Let us put away the metaphor of comparing tax knowledge to wizardry for the moment.  What would a functioning democratic tax system look like?  How would we get from where we are now to where we would like to be?

I can’t remember whether I posted this link before, to an article I wrote in The Conversation, drawing on a piece of academic research I published over the summer.  In it I, rather impertinently, offer some advice to Meg Hillier as she takes over from Margaret Hodge as chair of the PAC.  There are two things I think are essential: first, there has to be some way of including those who don’t speak the language of tax in debates about tax.  And, second, we have to form a collective view of the morality of tax: what is and is not acceptable behaviour by businesses, individuals and their advisors.

Which is all very nice, but where would we start?

Well, if I were Meg Hillier I’d start with a concrete example – say the patent box.  (Other tax measures which annoy different people for different reasons are available).  I’d take the TIIN and look at how much it said the measure would cost.  I’d ask whether the costs and benefits had been reviewed yet.  I would ask, specifically, whether the cost for 2014/15 had in fact been £800 million or some other figure, and what economic benefit had been achieved by giving businesses this tax break.  Can the government provide details of factories built, jobs created and protected, research invested in and proving productive, products in the pipeline or other positive results that flow from this decision to allow businesses to save £800m of tax last year?  I’d want to ask what the final compliance costs to business and to HMRC had turned out to be, and then I’d want a new cost benefit analysis prepared to show whether the measure had been worth doing.  And then I’d want to advise the government that either this was an economically sound decision which – although it looks like corporate welfare – was actually doing the job of boosting the economy.  Or that it wasn’t.  So it ought to be sunsetted (or, in plain English, repealed).

Then I’d make it very clear that my committee would be looking systematically at tax changes, at the cost benefit analysis which validated the decision to introduce them, and at the evidence of whether those analyses had been accurate, and recommending repeal of the ones which weren’t working.

The general public can understand this kind of discussion, surely?  The government said it would change the rules in a way which would save businesses £800 million last year.  Was it actually £800 million?  Or more?  Or less?  And what did we, the rest of the country, get as a result?

Move the conversation into this space, using the tools which are already there in the TIIN and the other supporting documents from the introduction of a measure, and we can all look at the government’s decision making.  And, since sunlight remains the best disinfectant, this would also improve its decision making in future.  (Crosses fingers)

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Here we go again: equality impact assessment

July 17, 2015

The Summer Budget OOTLAR (Overview Of Tax Legislation And Rates) contains 124 pages, including 110 of TIINs (Tax Information and Impact Notes). They are signed off (on page 12) by David Gauke as containing “a reasonable view of the costs, benefits and impacts of the measures”

No, bear with me, it’s important.

Remember 2010, when the Fawcett Society took a judicial review against the coalition’s “Emergency” Budget? Although they were denied permission (mainly, as I understand it, on the grounds that the Budget had been debated by Parliament by the time the judicial review proceedings were launched and, as any law student knows, Parliament trumps judges).  However the Treasury were pretty much caught with their trousers down as regards conducting equality impact assessment of budget measures and promised to do better in future.

One of the “doing better” changes was to include reporting on equality explicitly in the TIINs that accompany any changes.  The equalities impact field in the TIIN is the only guarantee we have that the Minister responsible for making the decision has had the question of the public sector equality duty put before him or her at the moment of decision.

In that light… David Gauke’s view of what is a “reasonable” view of the equality impact doesn’t have a great deal in common with my own, shall we say?

Take for example page 24 of OOTLAR where there is the table of impacts for the changes to personal allowances. In the equalities impact field there are figures showing clearly that there are more lower paid women than men and more higher paid men than women. The public sector duty in the equalities act requires the government to have due regard to the need to eliminate unlawful discrimination, advance equality of opportunity and foster good relations between those who share a protected characteristic and those who don’t. The equalities impact field of the TIIN is the government’s evidence it has done so: on this evidence it has noted the facts of inequality but given no consideration to advancement of opportunity.

Or look at page 27, which has the table of impacts for the reduction in corporation tax.  It is noted that by 2020-21 the change will give away an anticipated £2,475 million.  The equalities impact shows “changes to the CT rates affect corporate entities and therefore do not have equalities impacts” in spite of the fact that this single measure gives away an enormous chunk of the tax base, for an unquantified economic benefit of making the UK “more attractive as a destination to locate business activity.” They can probably get away with this, because the judicial review proceedings held that equality could be considered on a measure by measure basis rather than looking at the Budget as a whole.  But a bit of common sense and political nous might lead us to wonder whether that was a good decision, when consideration of whether a corporate tax cut is a priority over, say, tax credits for those in working poverty is left unaddressed.

Then there are the changes to inheritance tax: “the government has no evidence to suggest that the measure will have any significant adverse equalities impacts”. (p34) This is not the public sector equality duty and does not provide evidence that the government has paid “due regard” to the right issues. Does “due regard” require consideration of what evidence the government doesn’t have, but could reasonably acquire?

The “exploding head” moment for me came when I reached page 118: yes, the idea of HMRC having power of direct recovery from bank accounts is back!  And apparently “will not impact disproportionately on people with any of the legally protected characteristics” – so the government is confident it won’t be trying to take money directly from the bank accounts of people in mental distress or illness, are they?  We have been here before when HMRC thought they would only be using the power around 17,000 times a year and I suggested, well, in that case, why not limit the power so that it can ONLY be used 17,000 times a year?   So that they would have to prioritise the serious cases and not introduce mission creep.  And it would be used to recover debts from individuals, businesses and partnerships, so I suggested a three year trial of the power applying it only to non-natural persons, ie to companies and LLPs and the like, before they let it loose on the rest of us.  I observe that the current proposals are suggested to affect

 11,000 individuals (including self- employed taxpayers) and businesses a year.

And yet (look at the last field of the table of impacts) the power won’t affect small businesses?  I believe someone’s trousers are on fire.