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2017 Spring Budget – here we go!

March 8, 2017

At present I’m poised at my computer, watching Guto Bebb in the Commons (and why is that man not an internet meme yet?) respond (as Wales Minister) to Wales questions.  Then it’ll be PMQs, followed by the Budget.  I shall keep this post open and add anything that occurs to me as we go along, so if you follow this blog and get notified when a post is updated, you might want to turn off the updates temporarily for the afternoon.

Also, I shall have twitter open in another window.  Shouting at the tv, but when the tv shouts back!  Onwards and upwards!

Update: 12:40 Chancellor has been going ten minutes.  You may not know this, but the “interesting” stuff in a Budget often isn’t in the speech itself but in the documents published “alongside” it, which by convention aren’t published till the speech itself is over.  Theoretically they should hit the “send” button on their internet publishing as soon as the Chancellor sits down, but you will find anyone commentating on the budget obsessively hitting “refresh” on these two pages for some time afterwards, I predict.  Watch this space.

Update 12:50 There’s the MTD announcement and it’s disappointing.  It will still be compulsory for businesses to keep their records digitally, but the smallest businesses (between £10k and the VAT limit of £80+k turnover) can have an extra year before it’s compulsory.  Not cool, sorry – and costed at £200m (I think) so there clearly is some granularity to the government’s data on this theoretical £945m gain from digital recording.  I wonder if we’ll get to see it???

Update 1:00 Here’s the IR35 announcement and it’s a bit feeble.  Instead of grasping the nettle of equalising NICs for different ways of working he’s confirmed the abolition of class 2 NICS but put the class 4 NICs up by 1% next year and another the year after.  It’s a start, but really the distinction between employees and the self employed is a nettle that could do with being grasped more firmly.

Update 1:10 The interest rate on the new NSI Bonds available from April will be 2.2%, available on savings up to £3,000.  It’s not much, but it’ll cover a lot of small savers.  But of course the “competitive” banking system means it won’t remain the highest rate available for long, will it, right?  I mean, right???

Update 1:35 Well that’s it for the actual speech.  Now I’m going offline for a while to look at the documents (when they turn up) on the website.  You can turn automatic notification back on if you like: I’ll put up a new entry if I have anything notable to say.

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’twas the night before Budget…

March 7, 2017

It’s the night before the Budget. Why does HMRC have four open consultations on the gov.uk website?

Let’s look at them, shall we?

Withdrawal of extra statutory concessions 2017 is a call for evidence that was issued in January and closes at quarter to midnight tonight.  Unless you’re really interested in the withdrawal of extra-statutory concessions, I suggest we leave that one well alone.

Hybrid and other mismatches – draft guidance is some technical guidance for HMRC staff and for businesses on how the legislation on, er, hybrid and other mismatches will work.  It’s complicated stuff coming out of the OECD BEPS project and I really feel as if I ought to buckle down and make an effort to understand it…

However in the real world…

Simplifying the administration of Alcohol Duty published 16 February, closes 26 April.  This seems like a private conversation between the alcohol industry and HMRC but is being conducted in public for the sake of transparency.  Again, I feel as if I ought to care enough to read it through, but again…

Finally we have:

Sanctions to tackle tobacco duty evasion and other excise duty evasion launched on 17 February and closing on 10 May (according to the website) or 12 May (according to the document). Sigh.

Incidentally I notice that the list of “who should read this” starts with “The general public”.  Seriously?  Then how are they communicating that they would welcome views from the general public?

More to the point, what is it doing sitting on the website today, the day before Budget, when you’d expect there to be a clean sheet of proposals ready for the Chancellor to start overwriting the tax rules again?

Could the answer lie in the paragraph on “getting to this stage” where it says that “at Budget 2016 the government announced that they would consult on sanctions to tackle the illicit trade in tobacco and duty evasion.” And, lo, before the next Budget… so they have.

 

 

 

 

 

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The scores on the doors

March 6, 2017

In February the Bristol East MP Kerry McCarthy asked whether HMRC had “assessed the effect” of MTD on “freelance workers in the creative industries” and “other specific sectors”.

The answer from Jane Ellison refers her to the impact assessment which, she says,

estimated the impacts averaged across the entire unincorporated business population, using established models, consultation feedback, stakeholder engagement and internal insight.

Well yes, up to a point.  There are three different fields in the impact assessment which might be relevant to the question.  First of all, is there any assessment of how much extra tax might be expected from different sectors?  Is there a particular group whose tax behaviour is causing particular concern?  We don’t know, because HMRC won’t give us the analysis of the tax figure.

I assume, though, that the question was angled more towards the costs imposed on businesses by the requirement to keep digital records.  This is contained in the “administrative burden” figure, sometimes referred to as “red tape” – the cost of compliance with government regulation.

This is deep into policy wonk territory, of course, but there is a neat summary of the figures and how they’re arrived at here.  Essentially HMRC spent half a million pounds in 2005 on getting KPMG to conduct a research project producing a “standard cost model”: assessing a baseline figure of how much it cost averagely competent averagely compliant businesses to fulfil the obligations the tax system placed on them.  The result is better thought of as a score than an actual amount: it’s how HMRC scores its work on reducing the admin burden on business.  It reduced the burden by ten per cent overall between 2006 and 2011 – but that is an average.  It doesn’t mean that any one business would have felt a reduction of ten per cent of its costs from dealing with its tax.  A lot of the result came from changes to the construction industry scheme, for example, so contractors and subcontractors in construction would have noticed huge changes: other industries may not have felt any benefit at all.

So Kerry McCarthy’s question isn’t answered at all by reference to the admin burden figure: the standard cost model doesn’t tell you whether the creative industries, or any other specific industry, will gain or lose by a change.

The more interesting field in the impact assessment, for these purposes, is the “other impacts” section.  In a government divided into departments, with different departments having different priorities, the “other impacts” section is a kind of checklist.  If the government says it wants to reduce its carbon footprint, for example, it can add a “carbon impact” assessment to the list of things that all departments have to think through before they introduce a regulatory change.

In this instance, it’s the small firms impact test – or, as it’s now called, the small and medium business assessment or SaMBA which is where the answer to Kerry McCarthy’s question might lie.  This is where you might expect to find some granularity about how the policy might impact differently on different kinds of businesses…

…except if you look at the latest instructions HMRC staff are given on how to do this (taken from these instructions) it says

Small and Micro Business Assessment:

Small businesses (up to 49 FTE employees) – including micro-businesses (up to 10 employees):

  •   why they are included in the change
  •   what amelioration you have considered, and
  •   what consultation you have carried out.

So what does it actually say in the SaMBA in the MTD impact assessment…?

Small and micro business assessment: the MTDfB changes will improve the quality of record keeping, reducing the likelihood of mistakes (and attendant risk of unwelcome and costly HMRC compliance interventions) and help businesses to manage their cash flow more effectively. In the longer term, we anticipate a reduction in administrative burdens for these businesses.

The government recognises by their very make-up that this group includes businesses which are likely to be more affected by one-off transitional costs and digital capability issues, and may therefore find it more difficult to move to the new digital requirements.

In the consultation the government said that it wanted to consult on financial support to help some businesses make the transition to MTDfB. It sought views on the support required and what form this should take. Final decisions will be made before legislation is laid later this year.

Does this sound as though they have done some serious research into how different types and sizes of business will be affected?  As if they have the granular data that would allow them to answer the question on how creative industries will be impacted?

No, I didn’t think so either.

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Let’s talk about Impact Assessment

February 16, 2017

I have seen this Independent article circulating on social media quite a few times in the last few days: Louise Haigh MP talking about the government’s “cavalier attitude” to equalities in not conducting an equalities impact assessment before announcing the closure of some 78 Jobcentres. The DWP helpfully agrees it “will be conducting a full impact assessment as part of our planning”.

Let’s unpack this a little.

First of all, what do we mean by an “impact assessment”?  The kind that I know most about is the Regulatory Impact Assessment.  This is an examination of the costs and benefits of bringing in a new regulation.  For tax, this is now conducted as part of producing the TIIN, tax information and impact note, which contains the table of impacts produced as part of the TIA (tax impact assessment).  See the instructions on how to prepare a TIIN and the TIA which forms part of it, published on this blog here and here.

However because there was a helpful modernisation back in the noughties, when the word “regulatory” was dropped so the process became known as “Impact Assessment” (IA), there is now some confusion about the different forms of assessment that are required for different types of impact.

Mostly, assessing different specific impacts is folded into the process of producing a (regulatory) impact assessment, under the “other impacts” section.  This is also true for a TIIN: the list of “other” impacts contained in the latest TIA instructions includes two different tests each, unblushingly, called PIA: the Privacy Impact Assessment and the People Impact Assessment.

Equality Impact Assessment is different.  There is actual statute involved, whereas the IA, RIA, TIIN etc are basically justiciable via the concept of “legitimate expectation” (there’s clear, public, commitment to undergoing the process so theoretically you could bring a judicial review to try to overturn a decision which was made without undergoing that process).

There are two big caveats, though: equality legislation requires equality to be considered (given due regard) when reaching a decision but this doesn’t require the publication of a formal equality impact assessment document.  And government is allowed to consider, yes, this will screw this particular group of people over, but – balancing the conflicting priorities of government – we’ve decided the overall policy objective is more important than the impact on [X] group of people so we’re just going to do it anyway.

So, dammit, DWP can probably get away with thinking about whether unemployed people with no money and multiple issues like disabilities can make it across towns without buses or bus fares to log onto the computers they don’t have to apply for the jobs that don’t exist and deciding, well, yes, but they have *all day* to walk miles and we’ll save money.  And do it any way.

What the legislation does require, however, is that they decide to screw their customers before they make the decision to close down the services they need, and not just assess how badly they’ve screwed them over after they’ve done it.

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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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Yes, and, but.

February 3, 2017

Is there a communications manager for Making Tax Digital yet?  Because – apologies if there is – but it seems to me the communications so far have been, well, pants.  Apparently we are no longer MTE (Making Tax Easier) or even Making Tax Digital (MTD) for example, but “MTDfB”.  This inelegant acronym stands for “Making Tax Digital for Businesses”, presumably because we don’t want to frighten the taxpayers horses by suggesting that pensioners and others on PAYE will have to play.  Yet.

More importantly, there seems to be no plan to communicate with anyone outside the rather small circle of people who are already tax mavens, with those unrepresented businesses who will be hardest hit by the changes.  You don’t believe me?  Put “making tax digital” into google and hit the tab for “news”.  There is virtually nothing in the general press, although the professional press is of course full of it – but no-one at HMRC is, seemingly, listening to them.

Look, there’s a serious misunderstanding here.  The consultation response says that “respondents overwhelmingly support the move to a digital tax system.”  No, it’s a recognised letter-writing technique.  You don’t think your bank really means you’re “dear” to them when they write to you, do you?

Well, generations of people have been trained to deliver unpleasant messages using the format “yes, and, but…”  You start off by finding a point of commonality, something you can agree on.  (Yes, it would be good if HMRC had a modern computer system.)  Then you go on to add something else you think you can agree on.  (Yes, it would be great if tax returns were prepopulated with the information HMRC already holds) and only then do you deliver the unwelcome message. (But making it compulsory to keep electronic records and update four times a year are terrible ideas!)

Yes, and, but.

It’s plain as the nose on your face if you look at the Treasury Select Committee’s report which helpfully summarises the responses under the heading “support for the principle” – yes, we welcome the digital principle, and we think the changes go with the grain of progress BUT… we’re worried about the timetable, about the lack of free software, and above all about mandation.

The whole basis of the current proposal is undermined in HMRC’s own Impact assessment.  The projected extra tax in this parliament (to 20-21) is £945m. The projected extra costs to business in the same period? £920m.  Extraordinarily, the impact assessment quantifies no costs for HMRC for the proposal, although the original consultation document justified mandation by saying that without it “the return on the £1.3bn investment in transforming tax administration would not have been realised” (para 2.6)

In short, HMRC, your comms are pants, you have misunderstood people’s feedback, and your numbers don’t add up.  Sorry and all that.

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MTD, the response documents

January 31, 2017

Well, here we go: the responses to MTD are now live.  There’s a ton of stuff to read, so I’m going to post my immediate responses “live” as I go through them.  Watch this space! (or, temporarily turn off notifications if you get update notices)

  1. The overview.  It’s not easy to find.  Starting from the “consultations” page on gov.uk I got all excited when today’s list showed MTD updated 31 January.  But when you go to it, it’s not immediately obvious what’s been updated at all.  The actual response document is linked from the paragraph that reads

Over 1,200 people responded to this online survey and individual responses were fed into the other consultations to support the government’s thinking. Many of the responses helped influence key outcomes.

Now, maybe it’s just me, but I wouldn’t immediately have thought that “other consultations to support the government’s thinking” was a signal for “look!  Here’s the responses doc!” (updated 3.20pm)

2. Ah!  I see!  There’s an overview document (like there was for the original pack of consultations)  Right then: here’s a link to the overview.  Speed reading: first reaction?  Great flying spaghetti monster but it’s a complacent piece of spin.  Everything is for the best in the best of all possible worlds, and a committee of MPs has published a report but we’ve addressed “many” of their recommendations.  (As I recall, the Treasury Select Committee report wasn’t happy at all).  Not sanguine!

3.40 pm.  Aha!  I just had an email from the MTD correspondence address:

Dear stakeholder,

Thank you for responding to our consultations on Making Tax Digital last year. We’re extremely pleased with the level of response to the consultations and grateful for the time and effort that you took to send us your views.

A summary of feedback received, the government’s decisions and our next steps have been published today in six response documents on GOV.UK. If you’re short of time, we’ve also published a short overview which draws out the key conclusions from each of the consultations.

Over the consultation period, we held a number of events with interested parties to communicate and discuss the proposals, including face-to-face meetings, and webinars for the public and tax agents, which attracted over 3,000 participants. HMRC also attended a range of conferences and events to reach as many stakeholders as possible. Feedback from these events has also been considered as part of the formal consultation exercise.

Your input is important as it has not only informed the development of policy and draft legislation, but has also helped give us a clearer understanding of the needs of our customers as we implement Making Tax Digital.

Thank you again for your participation.

Jim Harra

Director General, Customer Strategy and Tax Design, HMRC

Onwards!  Next reading: the revised impact assessment.

4. The impact assessment.  Er, the admin burden savings figures have been revised.  A lot.  And, lo!  The transitional costs of £100m, £500m and £350m to 2020 add up to £950m.  Now, where have I seen that figure before…????

The MTDfB changes will contribute £945 million to the Exchequer by 2020 to 2021.

Oh yeah, that was it.