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The “full” story

January 2, 2015

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

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

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

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

— Wendy Bradley (@wendybradley) December 31, 2014

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

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

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

Posted in Consultation, HMRC | Leave a Comment »

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Small, micro, nano…

December 12, 2014

Dear Vince Cable

Actually, no –

Dear Department of Business, Innovation and Skills; please brief your Minister rather better.

Because Vince Cable has responded to the petition about the VATMOSS VATMESS with a response which just rehearses how we got into this mess in the first place.  The reply (which can be read in full here) says, in effect:

  • you already knew, but anyway
  • you won’t be affected, or else
  • you can just use Amazon, and if not
  • you can split your business

Let’s take these in reverse order.  Splitting your business may just prove to be the answer, or anyway the least worst cobbled together solution that can be put in place.  But the devil is in the detail, and HMRC’s new “additional guidance” is a bit thin on the “how to”.  I suspect there’s a number of people in the VAT policy divisions running around in small circles swearing as they try and find a way of doing this that doesn’t open the floodgates to the kind of income splitting that has always been considered avoidance.

The idea that most micro businesses can just use Amazon is… well, this whole change to the place of supply rules is designed to stop people like Amazon from gaming the different VAT rates on ebooks across Europe by making the rate of VAT dependent on the customer’s location rather than the supposed location of the platform.  But, as Cheryl Morgan wisely points out,

In practice what HMRC is doing is the equivalent of saying to a small farmer that she can’t sell her crops at a market stall, she has to sell them through Tesco or a similar supermarket.

Or, to put it another way, there’s no point stopping Amazon being rapacious with tax if at the same time you facilitate their rapacity towards small businesses instead.  The one-woman trader ought to be able to sell her own digital wares independently, and a complacent statement from a Minister that, oh well, you can always use a platform, isn’t helpful or equitable.

There is a relatively simple step which the government could take, which is to enforce the rule that platforms are responsible for the VAT on products sold via them: no ifs or buts.  Some people have asked for a list of platforms which conform to the responsibility.  I think this is a mistake.  What they should ask for is a declaration that:

  • selling via a platform is sufficient to absolve the individual seller from responsibility for compliance with the VAT place of supply rules
  • all platforms are assumed to be compliant unless listed on an easily available HMRC or BIS website, and
  • any trader with concerns about a platform should email their concerns to an easily available HMRC compliance address and this will be sufficient to absolve them from responsibility unless and until otherwise notified by HMRC after they have investigated – and investigated the platform, not the seller.

The onus should be on HMRC to deal with the platforms, in other words, and not the one-woman kitchen-table nano-business.  Dealing via a platform ought to be a sufficient answer to any challenge, and any issue should be taken up by HMRC with the platform not the seller or customer.

My real issue, though, is with the complacent belief in government that nano-businesses somehow ought to have known about this in advance.  As Vince Cable says:

The changes to VAT on digital products is not new or sudden – the change was agreed in 2008 and we’ve done a lot to communicate it to businesses.

Many people’s answer to that will be “oh yeah?”

HMRC’s stakeholder engagement model doesn’t work at this level.  Until the #VATMOSS twitter storm, the small businesses whose business models are most at risk weren’t members of any of the “stakeholder” organisations who might have told them about it.  It is no use telling someone about the changes via a VAT notice if they aren’t registered for VAT and so barely know what a VAT notice is in the first place.  Do you read VAT notices?  I don’t.  All I needed to know about VAT till now was “don’t worry about it till your turnover hits £80k”, and I wasn’t holding my breath.

The previous government did a lot to “think small” and there was a particularly clever move (in internal civil service terms) when the need to report on the impact on small businesses was introduced into the Explanatory Memorandum that goes with Statutory Instruments – you couldn’t get around it, you had to say something about it before you could get your legislation through onto the statute books.

But this was when the Small Firms Impact Test was an actual thing.  You’ll see if you follow that link that, now, the instructions are archived.  Now, all the government tells its minions to do is to “Consult enforcement bodies and business representative groups, to identify how to mitigate disproportionate burdens on smaller businesses.” (1.6.17).  In this case they couldn’t follow the default option of exempting micro businesses (because other European states have a low or zero VAT threshold and don’t want their businesses to have a competitive disadvantage) but they could, of course, have followed the third option in 1.6.9 and given them a longer period to get organized:

Extended transition period: where all businesses of a defined size are given a fixed extension to when they are required to comply compared to larger business, reducing the costs associated with implementation of new regulatory requirements. For example, the tobacco display ban gave shops below the Sunday Trading threshold an additional 3 years to comply

Give nano businesses three years to get their act together and I’m pretty sure they’ll develop an open source platform of their own that’ll take the sting out of the issue.  Give them a few grand in seedcorn money and I’m pretty sure they could get it done faster.  But telling someone they ought to have known, when you talked to organisations they aren’t members of, issued notices that aren’t relevant to them, and you didn’t know they existed in the first place… well, it’s a consultation fail.  So how about it, Minister?  Extend the transition period for the micros, the nanos, the businesses you didn’t know existed?

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

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Autumn Statement of Get Knotted

December 3, 2014

They weren’t even trying, were they? Couldn’t be bothered even with the minimalist adjustment to the visual of getting a woman to sit in the “doughnut” around the Chancellor. You could kind of see a woman’s elbow, some of the time, in the top left hand corner of the screen. Someone wearing the kind of blue suit that Margaret would have worn in her heyday. You could print out a screenshot and flog it as an allegorical artwork of the Dead Hand of Thatcherism.

Yes, well, I was watching it with The Women’s Budget Group, wasn’t I, so maybe I noticed these things more than usual. (Disclaimer: this blog post represents my own personal view and not the WBG’s. The WBG’s can be found at http://wbg.org.uk)

But really, wasn’t that the theme? Aside from the puerile insults, the smidgin of good news for orchestras, children’s TV and picturesque worthy causes, the usual promises to cut tax avoidance… The rest was machismo.

Big butch infrastructure projects. A Northern Powerhouse. Ken-doll hard-hat projects that will give good photo op.

Yes, the infrastructure needs some work. But not just the physical infrastructure: the civic infrastructure. The carers need more money and stable employment, not a morsel of NICs relief for their employers. Yes, businesses need rates relief. But local councils need the money to employ carers and social workers and keep the libraries and the sure start centres and the lunch clubs and the care homes open. Yes, householders need a sensible stamp duty system, but renters need security of tenure, reasonable rents and certainty of repairs – and some more houses available to rent and buy at reasonable prices wouldn’t go amiss, too.

The one attempt to spike the feminist guns was the early claim that the gender pay gap was closing. Well, yes, I suppose it is – there’s downwards convergence. Men aren’t getting cost of living rises and neither are women. So we all get poorer but we’re all poor together? Um, I hate to break it to you, boys, but that’s really not what we had in mind!

Posted in Bit of politics, Uncategorized | Tagged , | Leave a Comment »

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AcWriMo

November 30, 2014

So why am I sitting here on a Sunday evening reading Research Methodologies in EU and International Law?

Because it’s the last day of November, and so it’s the last day of my AcWriMo challenge.  I’m doing my last bit of the “do some academic work every day” pledge that I made to myself at the start of the month.

It’s been a tough month – I’ve been teaching a subject that’s required a significant amount of preparatory reading, my cold turned into a chest infection, and for the first time I had to go to the funeral of someone who was both a contemporary and a close friend.  But I made it to the end.  I have done some academic work aimed at my own PhD (even if it was reading on the kindle for twenty minutes at midnight before I fell asleep) every day.

This persistence was largely fuelled by some kind people who cheerleaded for me and pledged support for my modest aim to raise the funds to keep the Cavendish Cancer Charity’s premises open for an hour.  So thank you, those lovely people who have already contributed.  And if you feel moved to help me make it to the last few quid, the JustGiving page is here.  Please.

And thank you, all.

Now back to your regularly scheduled programming.

Posted in About me | 1 Comment »

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Twitterstorm: a Modest Proposal

November 27, 2014

Twitter has its uses.  How else could a number of angry individuals get the attention of HMRC and bring their concerns to the table?  The “stakeholder engagement” concept that HMRC uses to decide who to talk to breaks down when the affected taxpayers are micro businesses who typically don’t belong to any of the representative bodies who have a seat at the stakeholder table.  All power, then, to the knitters, musicians, authors and others who have created a twitterstorm over the VATMOSS/VATMESS changes I described in my last post.

HMRC have responded by using their new @HMRCcustomer twitter presence to offer a “twitter clinic” on the changes, today (Thursday 27th November 2014) …. between 3.30 and 5pm.  This is another enormous brick they’ve dropped, as many of the affected businesses are part-time one-woman businesses fitted in around domestic responsibilities or full time jobs, so that during the school run is the worst of all possible times to offer to talk.  Sigh.

I have been thinking a bit about the proposed changes over the last few days and I have a Modest Proposal for a solution.  First of all, HMRC need to be absolutely explicit that, where someone sells via a platform (Amazon, Etsy, Ebay…) then it is the platform’s responsibility to sort out the VAT, and saying “we aren’t responsible for VAT” in their terms and conditions (as several smaller platforms apparently do) isn’t going to cut it.  It would be helpful if HMRC were to give some kind of clear assurance that people selling via (a list of platforms) needn’t worry about/engage with MOSS at all.

However.  Clearly it’s iniquitous that changes to close a tax avoidance loophole (allowing ebook sellers to use a platform registered in Luxembourg to avoid other jurisdictions’ higher VAT on ebook sales) are being introduced in a way which drives micro businesses into the arms of the platforms that caused the problem in the first place.  People who sell below the existing VAT threshold should continue to be able to sell the odd download off their own website without having to become VAT traders for a turnover that’s often below £80, let alone the £80,000 that would require them to be VAT registered.

So.  What we need is a platform which is

  1. revenue neutral (doesn’t cost you money to use)
  2. is co-operatively owned (on the Wikipedia or AO3 models perhaps) and
  3. does the job.

Now we could probably make one, given enough time (Kickstarter, anyone?)  But HMRC have regular meetings with their software development community stakeholders.  And they have modest funds to assist charitable causes connected with tax.  So maybe they could convene a meeting, urgently (seriously, next week) between interested software developers and the micro businesses who have contacted them via twitter, and they could kick in the first hundred grand or so to get the kickstarter off the ground.

Because really the easiest solution to the #VATMESS would be for the paypals and worldpays of this world to sort out the VAT when they collect the micropayments for the affected microbusinesses.  And if there were another, independent, cooperative payments organisation available who guaranteed that they did, well… competitition is supposed to be how capitalism produces innovation, right?  Let’s just give the micros a hand up.

There isn’t time before the changes are brought in on 1st January, you say?  Well, the Judicial Review process is there for anyone who feels that the legitimate expectation has not been met that a statutory instrument would only be introduced after the government has fulfilled the commitments it has made in the past to

  • consult with affected parties
  • “think small first” by taking into account the impact on micro businesses, and
  • give due regard to equality impacts

Judicial Review is expensive (who do we know who might be affected and has “willing to bet their house” kind of sums available?  The Prince’s Trust?  J K Rowling??) but (in my opinion as a former better regulation specialist in HMRC) there is an arguable case.  One remedy the courts could provide would be to send the government back to do the consultation again properly.  Which would delay implementation.  So they could, you know, just be good guys anyway and delay implementation for anyone below the VAT registration threshold for three months while an independent platform was developed via kickstarter.

Or they could just come up with a better idea on their own…

Posted in Bit of politics, Equality, HMRC, VAT | Leave a Comment »

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VAT on ebooks

November 25, 2014

As it says on my twitter bio, I’m

By day, PhD Law student researching tax simplification and better regulation; by night, writer of science fiction and fantasy.

so today my Facebook and twitter feeds are suddenly full of people from the science fiction side of my life talking about tax.  Why?  Well, take a look at the hashtags #VATMOSS and #VATMESS.

Essentially from January the loophole that lets Amazon avoid charging VAT on e-books has been closed.  VAT will now apply at the rate applicable where the customer is located, and not at the place where the business selling them an ebook has been registered.

Except…

Except what about all of those authors who make a few quid selling their back catalogue as ebooks?  Do they have to register for VAT in France just because someone in their holiday home in Normandy logs on and downloads a single copy of their ebook for some poolside entertainment?

Ah, says HMRC, we’ve thought of that.  There’s a thing called the “mini one stop shop” – MOSS – which means you can register for VAT in just one country, the UK, and pay your French and German and Italian and Spanish VAT direct to the UK every quarter.

Wait a minute, though.  Doesn’t the UK have the highest VAT registration rate in Europe (£81,000) so they won’t have to worry about it till they are in the Big Seller Who Can Afford An Accountant category, right?

Wrong.  The MOSS threshold is zero.  Yup.  Any european sales and you have to register, make returns, keep records…

Now there are two issues here (yes, I know, there are dozens, but there are two that I want to highlight)

First of all, does the MOSS zero threshold apply to ALL sales, or just to MOSS-eligible sales (i.e. to business-to-consumer sales in European countries other than the UK)?  In other words, does selling the odd ebook to someone in the EU mean you have to start charging and accounting for VAT on all your sales, to everyone, for ever?

Secondly…. well, I’m a retired tax inspector.  I Speak Tax (up to a point).  I have spent some time this morning trying to find out the answer to the first question.  Yeah.  The HMRC VAT instructions are copious, but incredibly badly written.  (You don’t believe me?  Try this page and then tell me whether MOSS sales and non-MOSS sales go on the same return?)  The blogosphere and commentariat suggest the sky will fall on the heads of small business and HMRC sounds utterly clueless and complacent.  The Guardian’s small business network has a piece which includes a quote from HMRC which seems to answer my question:

A spokesperson for HMRC says the changes should only have a “small effect on administrative burdens.”

“Although a business needs to have a UK VAT registration number before it can register for the Mini One Stop Shop (MOSS) online service, provided it separates the cross-border part of its digital services business from the domestic part, it can voluntarily register for VAT on the cross-border business only.”

Which seems clear enough, although HOW someone who sells the odd e-book off a web site is supposed to know how to do that is a bit harder to fathom.  But the press office are quoted in the same article as saying:

The HMRC spokesperson says that it has provided a “significant amount of information” about the VAT rule changes and MOSS on the GOV.UK website. “We have worked closely with stakeholders and representative bodies to publicise the changes, been involved in various webinars, held a conference that was streamed on the web, and regularly issue Twitter alerts. We have issued regular updates over the last 12 months in the quarterly VAT Notes and we are organising a Twitter clinic that anyone can join to ask questions.”

Really?  This is a change which affects micro businesses, the muggles who don’t speak tax and don’t belong to any of your “stakeholder” organisations.  It seems to have been badly thought out, badly explained, and badly handled.  And now to have come up against an organised set of articulate and well connected tax muggles who aren’t going to stand for any nonsense.

*sits back and fetches popcorn*

Posted in Bit of politics, HMRC, SFIT, VAT | Tagged , , | 4 Comments »

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AcWriMo Week 1 update

November 10, 2014

Just a quick update: I have been keeping up my AcWriMo challenge, just about, for a week now (go to the website here if you want to encourage me with a donation for the Cavendish cancer charity). It’s been a difficult week, culminating in the news that a former colleague and good friend died suddenly on Thursday evening. So I am still working, but it’s not my focus at present, sorry.

Posted in About me, AcWriMo | Leave a Comment »

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November consultations

November 5, 2014

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

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

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

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

Posted in Consultation, HMRC | Leave a Comment »

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November already?

November 1, 2014

It’s November.  How did that happen?

Well, first of all I started doing some GTA (graduate teaching assistant) work at the university and needed to get at least a chapter or two ahead of my students.  And then I had odds and ends of other work to do (speaking at a housing conference on behalf of the Women’s Budget Group, writing a piece about CIS for Pay and Benefits…) as well as, you know, life (not to mention the universe and everything).  And then I caught the first cold of the winter – or “Freshers’ Flu” or “Con Crud” or whatever you call it when you get ill after mixing with lots of new people – and frankly it knocked me on my back for the last fortnight and I’m still coughing like Mimi.

And then I looked around and there it was, November.

So.  I’m not going to grow a tache for Movember.  I’m not, this year, going to try and NaNoWriMo my 50k words. No.  Having reached week 6 of the academic year without having done any work towards my actual PhD at all, what I propose to do is AcWriMo: during November I will do at least one pomodoro of my own academic work (reading or writing directed towards completion of my PhD) every day.

If you would like to offer encouragement by way of sponsoring me for doing so, I also have a JustGiving page here.  I won’t be cluttering up this blog by posting everything I’m doing (although I’ll try and keep a running tally) but please feel free to cheerlead or arse kick, as appropriate, if you see me flagging.

Now – off to do some real work!

Posted in AcWriMo | Leave a Comment »

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Dear Tax Wizards: see, this is why you can’t have nice things

September 25, 2014

I really wish I had got around to reading the consultation on VAT and adapted motor vehicles before it closed, actually.  It’s about a proposal to alter the conditions under which wheelchair users can buy adapted vehicles without having to pay VAT.  Let’s pause for a moment and think about that.  Wheelchair users – and it’s clear from the condoc we’re talking about people using a wheelchair because of a permanent disability, not a broken leg, and that mobility scooters aren’t counted as wheelchairs for the purposes of this relief – can buy a car (or a boat – bizarrely, I first thought, but that was just my ignorance speaking) that is specially adapted for their use and they don’t have to pay VAT – on the cost of the entire vehicle, not just of the adaptations.

Now I’m going to pause there and point out that disability isn’t a simple binary, and some people might use a wheelchair some times and not others (People with relapsing-remitting MS, for example) and some people might have mobility problems yet find crutches and a mobility scooter better adapted for their needs.  Nevertheless the policy aim, of relieving people with disabilities from this particular tax burden, seems laudable.

And what happens?

1.18 The relief is being targeted and abused by individuals and organisations that purchase vehicles at the zero rate of VAT in order to sell them on for profit. This is clearly not what the relief was designed or intended for.

So… we have a laudable policy aim, a piece of legislation that is being clearly abused, and we tweak the law to try and delineate more clearly between the virtuous and the sinner?  This is how tax law becomes complex.

However.

3.5 Rather than adapting vehicles to meet the needs of the individual disabled wheelchair user, some dealers add the same low cost, easily removable, item to all the vehicles they zero-rate using the relief. These adaptations do not meet the individual needs of wheelchair users that require the vehicle to be substantially adapted.

Does HMRC have evidence to back up this assertion?  Because if they have, why are they not prosecuting the fuck out of the “some dealers” who are doing this?  I mean, what kind of person sees a piece of tax legislation that is supposed to help out people with disabilities and thinks to themselves “hey, if I get one of the lads to weld a bit of junk on the side I can make 20% on this!”  How do you sleep at night?

And then.

3.16 HMRC and the police have found that the relief is being abused by individuals and organisations purchasing expensive vehicles with minor, low cost, adaptations at the zero rate of VAT. They remove the adaptations immediately after purchase and sell the vehicles on for profit.

3.17 Some motor dealers have colluded in purchasing vehicles at the zero rate of VAT from one another. They then sell the vehicles on for significant profit.

3.18 Criminal gangs have been exploiting the relief to launder money and finance other illegal activity.

And again, why are we faffing about tweaking the law and not prosecuting the “individuals and organisations” to the full extent of the law, listing them on the “most wanted” website and showing us the thrilling details on “Saints and Scroungers“?

From the impact assessment:

The best estimate is that annually the adapted motor vehicles relief costs £65 million, of which about £25 million could be from fraudulent sales.

£25 million quid? How many people are working on hunting these people down, collecting evidence, and getting them in front of the courts?

Not enough.  A couple of years ago the ARC union said that if they could have £45.5m invested in another 150 trained lawyers and 50 legal assistants, they thought they could bring in £2,000m. (Line 7 of the table)  How about we just do that, and see?

 

(For the avoidance of doubt, yes, I think tweaking the law to make it a bit clearer – only one vehicle per person every three years – is a good idea.  But faffing about with mandatory declarations and fussy attempts to define the permissible adaptations aren’t.  Prosecute the bastards, please, and remember that disability isn’t a binary)

 

 

 

(Edited 25/9 to remove the duplication of “consultation” in the first sentence)

Posted in Bit of politics, Consultation, Equality | Tagged , , , | 2 Comments »

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