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Omnishambles? Not quite, perhaps…

May 2, 2012
The Gift Aid Small Donations Scheme in particular, and the government’s ideas for the charities sector in general, may not be an “omnishambles”… well, not quite – but I think we might be heading in that direction.

I have already blogged about how I think the consultation itself is defective because it doesn’t include an adequate impact assessment.  I await with interest the response on that point from the consultation coordinators at HMRC and at BIS.

Today, however, I’d like to look at the consultation itself.  Essentially we’re asked to comment on the practicalities of the government “topping up” cash collections by charities with an amount which is sort of a bit like gift aid, but isn’t actually.  Because Gift Aid, as you’ll know, is when you give money to charity and tell them your name and address so that they can claim back from the government the tax you paid on the fiver or whatever you gave them.  The thinking is that people putting money into a bucket in the street, or into a collection plate in a church, aren’t easily going to be persuaded to fill in a gift aid form, so can the charities have the money anyway please?

I’m not at all persuaded that gift aid is hard to understand – when was the last time you gave to charity WITHOUT them trying to collect a gift aid declaration from you?  But, by all means, let’s not discourage the government from giving our money to charity – or at least to the ones we’ve given our money to in the first place.

Here’s the response I sent.  Feel free to adapt for your own use, quote, quibble, scribble or scoff, as appropriate.

Dear Mr Jones

This is an individual’s response and is also posted online (with commentary) at https://tiintax.com/.

First, you may be aware that I have already written to the Consultation Coordinator and to BIS to say that I think this consultation document is technically defective as it doesn’t contain an adequate impact assessment (it contains the outline of what the change is, but no estimate of the costs, benefits and impacts of making such a change).  I invite you to publish such an estimate and to extend the consultation long enough for the third sector to have the opportunity to examine your estimates adequately in accordance with the government’s Code of Practice on Consultation, the Tax Consultation Framework, and the Impact Assessment guidance.

Turning to the content of the consultation, I first of all have to reject the assumption behind the policy objective that it is “disproportionately burdensome” to collect gift aid details from people attending a religious service.  Indeed, the system is so well bedded in that when I attended the funeral of an elderly friend a few weeks ago the Minister announced that it had been her last wish that people would not only donate to the church instead of sending flowers but that they should do so via the envelopes at the back of the church so that gift aid could be reclaimed on all the donations!  It is my experience as an occasional churchgoer and attender at cultural and other events that everyone knows you have to tick the box and fill in the gift aid declaration, and that “sticking it to the government” by doing so is often part of the pleasure of so giving.  Indeed I answered a Radio 4 Woman’s Hour appeal to donate some old bras to Oxfam last week and made sure to complete the gift aid sticker and add it to the package so that they could reclaim the gift aid on anything they raised from the disposal.  Sorry, but the idea it’s burdensome for charities to operate Gift Aid just won’t wash as far as I, as a small scale donor, can see.

Having broken the link between the donor and the donor’s tax in the way you describe in the section on Policy Design Considerations you then have to introduce a burdensome set of anti-avoidance regulations to ensure that the charity is actually collecting money from the public (and not just turning £x into £x+y via the magic of government funding) and not turning itself into a hundred daughter charities that can collect £5000 each – but also that the charities which are already daughter charities of a larger entity can’t go “ha ha we win!” and profit from their accidental advantage.  It’s a mess.

You say, however, that these design issues are fixed and not open to consultation, which is rather unhelpful.  Looking at the areas which ARE open to consultation, then, you seem to be trying to find a simple way of having the government top up charity cash collections without opening the floodgates to anyone to apply.  I agree that to tie the top up to an existing good record of making gift aid claims is sensible, but the attempt to get around the daughter charities/single charity with lots of locations avoidance issue via buildings is doomed.  You give (on page 19) three examples of how you think tying the top up to buildings might work:

  • example 5, lots of local groups in separate buildings are entitled to “up to” £255,000 – 50 groups at £5000 each
  • example 6, one local group in one building is entitled to up to £5000
  • example 7, a national charity with 1000 charity shops is still entitled only to the £5000 because no qualifying activity happens at the shops.

Well, I may only be a retired tax inspector but I can see clearly that if I were a national charity with a string of charity shops I’d pretty much start running qualifying activities in them right now so as to be ready to claim the full 1000x£5000 when the scheme is in force!  I’d suggest the third sector starts now, declaring the first Monday in every other month as “GASDS day”, carefully reading the small print in paragraph 5.16 to make sure they have at least 10 group members present on at least six occasions in the year and that the events are open to the public and include a small change collection…

It’s an absurd and unworkable design.  Much simpler, fairer, and in keeping with the spirit of the policy objective would be to simply top up any charity’s gift aid claim by a flat rate figure each year.  That seems to be effectively what’s going to happen, you’re just going to make the charities go through a lot of hoops (and stress, and paperwork) in order to achieve the same result.

I suspect the reasoning behind not doing this is that it would involve giving too much money away, so I have a simpler proposal yet: don’t do it!  Improve the Gift Aid scheme instead, by retaining the link between donors gifts and the amount the charity receives, but breaking the link between the donors’ TAX and the amount the charity receives.

Here’s an example.  My late father used to give regularly to the church where he worshipped.  When he retired he increased his donation, but when he came to complete his next tax return he had donated more than the tax he had paid and so was made to pay over an amount equivalent to the tax reclaimed by the church.  Yet when I gave to charity, as a higher rate payer, I was able to reclaim the difference between the tax I had paid on the amount donated and the amount the charity had claimed back on it!  Simply abolish the link between the donor’s tax and the gift aid, and otherwise let the system carry on as now.  So people who give out of their meagre pensions can carry on doing so without fear of finding they’re being personally penalised by the taxman for so doing, and people who give from abundance can carry on giving, and charities can carry on reclaiming the standard rate of tax they have paid – but no individual personally benefits from charitable by getting a repayment.

I’d like to see an impact assessment of designing the scheme like that.  But then, as I’ve said, I’d also like to see an impact assessment of doing what you propose in the document.  I rather suspect the reason you haven’t published one so far is that the policy design includes so many complexities that it’s nigh on impossible TO cost, which suggests to me it’s a bad idea.  Sorry and all that.

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Blogging against disablism day 2012

May 1, 2012

As today is Blogging Against Disablism day I thought I’d take a break from looking at tax measures and, instead, give my personal experiences of disablism.

Wait a minute, says the pedant in the corner, you’re not “disabled” – and what is this “disablism” thing anyway?

Disablism is to people with disabilities what racism is to people who are any other race than white and sexism is to people being disadvantaged by their gender.  But while most of us will remain the race and gender we were born with, most of us – whatever our health and ability – will wind up with some kind of disability in the end, if only by way of age.  My own problems are a minor hearing impairment and a dodgy back that makes climbing stairs a problem.  I’ve just taken early retirement so I don’t have to wrestle with the question of whether or not to register myself as “disabled” on the Civil Service’s personnel systems but believe me I angsted over it for some time over the last few years.

Getting a back supporting chair was an absurd struggle but at least I had a supportive physio who, ten or fifteen years ago, wrote a stern letter which said something to the effect of, buy this woman a decent back-supporting chair and she can work; don’t, and I’ll keep signing her sick certificates and by the way have you worked out how much sick pay that will cost you lately? Once I’d actually obtained the chair, a succession of supportive managers meant that I managed to keep the chair.  (I wonder where it is now?  Because, you know, they have rules that mean when you leave you can’t buy the chair from them and take it home.  No, it sits in the “furniture available for someone else to use” room until they give up and pay someone else to take it away!)

So the back?  Fine.  The hearing impairment?  Not so much.  It’s only a mild impairment – the hospital audiologist apologised and said that, although I would benefit from a hearing aid, the NHS no longer considered me impaired enough to provide me with one, and I either have to get deafer or buy one myself…

My job was in London but the last three or four years of my career I also worked remotely from Sheffield.  And there were lots of things that might have made my life easier and saved wear and tear travelling up and down.  Ninety per cent of the job could be done by email and online; the rest was face to face meetings and telephone conversations.

Which is fine.  A one to one phone call gives me no problems.  But conference calls…  It’s entirely useless to have one speakerphone (and so only one mike) available in a room with twenty people in it.  It’s entirely useless to have a presenter say “I don’t need to use the mike, do I?” so he can privilege his need to bounce around the stage being spontaneous over my need to, you know, hear what the hell he was talking about.  It’s entirely useless to have a “four corners” event where the “buzz” of activity – of everyone talking at once about four different things at the four corners of the room – is preferred to the old fashioned syndicate room where the four different conversations are, well, audible.

I could go on.  But my point is that I’m a pretty assertive middle aged battleaxe of a tax inspector and even I got tired of reminding people that I couldn’t hear what they were damned well saying if they dropped their voice like that.

And I guess that’s all I’m saying.  If there’s a binary “disabled/not disabled” categorisation (not that I think there is, but that’s a whole other story) then I sometimes think of myself on one side of the line and sometimes on the other.  But if it wears me out trying to hear what people are talking about, how tiring must it be to live with something more disabling than that?

I only once (or at least once that I can recall – feel free to remind me of others in the comments!!) blew up and had a full scale row with someone, when I had asked three times for people to speak up in a large meeting in a room with bad acoustics, and in the end threatened to walk out altogether if it happened again.

No-one should have to take the nuclear option.  If someone explains to you that they can’t hear what you’re saying, see what you’re writing, get to the room up the stairs, sit for the length of the meeting – stand for the length of the meeting [coughs and makes a noise that sounds suspiciously like “Pacesetter”] – then please adjust your behaviour.

To all the people I have encountered in my working life where I have failed to do this, please accept my apologies.  A failure doesn’t mean you’re a bad person; it’s like having snot hanging from your nose.  Once someone points it out to you, by all means get embarrassed.  And then use a hanky, wipe your nose – and try not to let it happen again.

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Judicial Review, anyone?

April 30, 2012

Anyone fancy a bit of light Judicial Review?  I’m not seriously suggesting anyone will want to apply for a judicial review of the Gift Aid Small Donations Scheme consultation (not least because the interested parties – charities – are likely to receive more money than otherwise from its introduction) but I think they could if they wanted to.  Why, do I hear you ask? Because I don’t think it fulfils the legitimate expectation of including what the government has said will be contained in a consultation.

I retired from HMRC at the end of March and my last job title was Impact Assessment Coordinator, so what leaps out to me from this consultation is, well, the impact assessment.  Let me explain.

If the government

  • does something regulatory
  • which affects businesses or charities
  • then they are committed to doing an impact assessment
  • which contains the costs and benefits of the change.
  • Unless it’s a tax measure, in which case the impact assessment is in the Tax Impact Assessment

Hmm.

Let’s have a look at the Gift Aid Small Donations Scheme consultation.

First: is it regulatory? The definition of regulation (no, seriously) is on page 19 here and includes:

 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

Since this is about the rules under which charities would be eligible for this gift aid funding then, yes, it falls within the “regulatory” definition.

Second: does it affect charities – er, yes.

Third: is there an impact assessment….

well that’s where it starts to get interesting.  There’s a chapter in the consultation document which is headed “impact assessment” (Chapter 6 on page 27) but when you turn to it, it’s obviously not an Impact Assessment.  Normal Impact Assessments (“IAs”) are set out on a form (you can find it here if you really want).  No, this looks a lot like a TIIN, a Tax Information and Impact Note, like these ones here.

Except, well, there are lots and lots of rules about what has to go in an IA and what it will look like.  And the government hasn’t published any of the standards it will apply to the Tax Impact Assessment process… except that when he introduced the process, David Gauke said “This new tailored tax impact assessment process will be used throughout the development of tax and NICs policy and will be summarised in tax information and impact notes”

So, yes, in my view there’s a legitimate expectation that there will be a tax impact assessment with a formal tax consultation document like this, and this one doesn’t qualify because it doesn’t give the basic data you need in any kind of IA – what are the costs, benefits and other impacts and unintended consequences of the proposal.

I’ll be responding to the consultation itself over the next few days, but in the meantime here’s what I sent the HMRC consultation coordinator about the format of the consultation.  Again, feel free to adapt and use if you want to respond yourselves.

Dear Amy

I am writing to you about the Gift Aid Small Donations Scheme consultation to say that I think this consultation may be defective in that it doesn’t include an adequate impact assessment.  This is an individual’s response and is also posted online (with commentary) at http://tiintax.com/.

You will know that the government’s Code of Practice on consultations says that “Estimates of the costs and benefits of the policy options under consideration should normally form an integral part of consultation exercises, setting out the Government’s current understanding of these costs and benefits.” and that the Tax Consultation Framework additionally promises that, at each stage of the consultation, government will set out “its current assessment of the impacts of the proposed change and seek to engage with interested parties on this analysis.”

I see that the consultation document has a chapter headed “Impact Assessment” but it merely sets out the description of the proposal, using the headings

  • Who is likely to be affected?
  • General description of the measure
  • What are the policy objectives and the intended effects?
  • Background to the measure
  • Detailed proposal
  • Operative date

These are, of course, the scene-setting elements of a TIIN, explaining what the proposal that is being considered IS – but the impact assessment chapter omits the elements of a TIIN which are designed to show what the IMPACTS of the action will be:

  • Exchequer impact
  • Economic impact
  • Impact on individuals and households
  • Equalities impacts
  • Impact on businesses and the third sector
  • Impact on the public sector
  • Other impacts
  • Monitoring and evaluation

I cannot see that a proper consideration of the proposal can be undertaken without some understanding of how much money is being talked about, what will be the likely administrative cost to charities of claiming it, what will be the cost to HMRC of administering the scheme and, of course, a consideration of the statutory equalities impacts and of any unintended consequences.  It seems to me that the consultation is defective because it does not contain these necessary estimates – surely these are exactly the issues on which the department should be engaging with the charities sector to understand the possible impacts?

You will see that I suggest in my blog that the consultation would be vulnerable to judicial review and I would suggest that, as consultation coordinator, you might want to bring this to the attention of your policy colleagues and ask them to extend the consultation deadline and publish a supplementary chapter containing the information that the government has promised to include with its consultations, ie its best estimates of the costs, benefits and other impacts.

Kind regards

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Pasty Tax revisited

April 23, 2012

I see that the consultation tracker has been updated to show that the pasty tax consultation is now open for comments till 18 May and not, as previously advertised, till May 4.

I wonder why… 😉

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The Pasty Tax: Consultation

April 18, 2012

I decided to make my first response to a government consultation this one: the consultation on “the pasty tax” (or, as HMRC calls it, “VAT: Addressing borderline anomalies”).  Published on 21 March, it’s open for comments till 4th May.  That doesn’t mean only VAT specialists can reply: you and I are welcome to reply too.  It says that:

HMRC would like to hear from businesses involved in the manufacture and retail of affected goods or the provision of affected services; consumers affected by the changes and tax practitioners

You and I are in the “consumers affected” bracket, if we’ve ever bought a pasty, drunk a sports drink, used a self-storage place, had a haircut or stayed in a caravan.  You email your thoughts to  david.roberts4@hmrc.gsi.gov.uk  and I’d encourage you to drop him a line.  No, really.

(Warning: you should understand that your name and what you said might be published with the other responses to the consultation, if that’s an issue for you.  Don’t reply from your work account!)

Here, then, is what I sent to David Roberts.  Feel free to nick any bits of it that seem interesting to you and recycle them in your responses.  Or if you really want to, send him an email saying “I agree with Wendy Bradley”, although I’m not sure that would do any good, because government tends not to listen to “campaigns” – and I should make it clear I’m not actually “campaigning” for or against the proposals, I’m just giving my personal response to the document.  Here goes:

Dear Mr Roberts
This is an individual’s response and is also posted online (with commentary) at https://tiintax.com/.
  1. The pasty tax.  As far as I can see, the government has tied itself in knots trying to keep food exempt from VAT except where it’s included in catering. I can’t see they’ve succeeded in drawing a line at all.  And I can’t see that a piece of legislation that depends on “ambient temperature” is a simplification.  It seems to me rather an invitation to frivolous legal challenge on the grounds the weather was hot, the pie was lukewarm…
  2. Equally, I have problems with a sports drink provision which depends on how the beverage is *marketed*. For example, if I were a sports drink manufacturer I’d immediately imitate Mad Men and market my zero-rated nutritional sports drink under the slogan “it’s toasted!” and defy HMRC to do their worst!
  3. I would instead suggest using a formula under which food ingredients continue to be zero rated but once they are prepared in any way the exemption depends on not breaching healthy limits (to be determined by a further consultation with medical experts) for fats, sugars and salt.
  4. So the legislation would in effect go
    1. As now, all “food of a kind used for human consumption” would be zero rated for VAT.
    2. Excepted from that would be any food which had been prepared, cooked, or subject to any kind of processing
    3. Unless the resulting food had fewer than (x%) fat, (y%) salt and/or (z%) calories.
This would achieve your stated objective of addressing borderline anomalies and of overall simplification of the VAT system, and additionally achieve the separate policy objective of improving public health and decreasing obesity.  You do not address these factors in the impact assessment attached to the consultation and they are, of course, relevant considerations in the formation of public policy (see Annex A, page 39, here: http://www.bis.gov.uk/assets/biscore/better-regulation/docs/i/11-1112-impact-assessment-toolkit.pdf)
I don’t have any useful comments for you on self-storage or hairdressers chair rental except to say the legislation seems incredibly complicated to achieve a relatively simple distinction and I wonder whether a root-and-branch review of the complexity of VAT legislation wouldn’t be a better use of your time, but still….
Holiday caravans.
I wasn’t clear what the mischief was that you were trying to address here. Surely a static caravan is a house for these purposes in the same way that a holiday home is still a house?  It’s the “stays in one place and people live in it”-ness which is the determining factor rather than the “people don’t live in it for more than a few days”-ness, I would have thought.
If that’s the policy objective and this can be achieved by reference to a British Standard which applies, roughly speaking, to park homes then this looks relatively sensible to me.  (To the extent that any VAT legislation can be thought of as sensible, obviously!) But of course you need to be sure that you can live with the determinant being a British Standard – so if the standard is changed, would you have to revisit the legislation?
There also seemed to me to be a difference in emphasis between the consultation document chapter on Holiday Caravans and the impact assessment in the annex.  Perhaps I misread one or the other, but the impact assessment suggests “holiday static caravans” ARE to be subject to VAT, whereas I had the opposite impression from the chapter!
Alterations to listed buildings
There are then six pages in the consultation on changes to the rules around alterations to listed buildings.  My only comment on these is that I haven’t a clue what the current position is, why a change is necessary, and what the intended final position will be.  Nor can I see why it’s necessary to have legislation this complicated.
Kind regards
Wendy Bradley

So there we have it.

Did you know by the way that you can also get this consultation document in Welsh, large print, audio or braille?  I’m SO tempted to ask for an audio copy in Welsh.  I’m sure it would be mellifluous in the extreme.

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Feature, not a bug

April 17, 2012

I am very impatient with U-turn stories in the press.  Changing your mind when something doesn’t work shouldn’t be thought of as a weakness but a strength – like the quote from Einstein about insanity consisting of doing the same thing over and over and expecting different results.  So I was very impatient yesterday with the stories about the cap on tax relief for charities being “watered down” and that a consultation had been newly announced.  People, consultation on tax changes isn’t a bug, it’s a feature!

It all happened in June 2010, with the publication of a document called Tax Policy Making: A New Approach.  It said that the government was going to move away from a system of announcing something in the Budget in March and then immediately enacting it in the Finance Bill in April.  Instead, the government committed itself to a new schedule, where something is

  • announced in the Budget in year one
  • There’s a public consultation over the summer
  • The resulting legislation is published in draft in the Autumn
  • A TIIN – a tax information and impact note – is published with the draft legislation, explaining how much it will cost and what its impact will be
  • The draft legislation is then open for consultation over the winter, to check that it works as intended, and finally
  • The revised draft legislation goes into the Finance Bill in year 2 (or even year 3, for particularly long and complicated measures that need more than one consultation)

They even set up a forum of tax professionals to advise and comment on how well the proposals were implemented, and the forum reported at the end of last year that it was all going pretty well.

So announcing a cap on claims to tax relief, including relief for gifts to charity, was entirely appropriate for the Budget.  And then running a consultation to find out how to do that without unintended consequences (like screwing the charities sector, for example) was the expected next step.  It’s not a climb down, u-turn or response to pressure.  It’s how the system works.

The government “consults” incessantly.  Luckily, no-one much ever responds except for the “usual suspects” – the pressure groups, professional associations and representative bodies who have staff used to how this stuff works and who know where to start.

But there’s nothing to stop anyone – anyone at all – from responding to a government consultation.  Start here to find what they’re asking about.  The Treasury helpfully provides a Tax Consultation Tracker which I see was last updated on 13th April – before all the “u-turn” stories.  The formal consultation on the “cap on unlimited tax reliefs” is scheduled for the summer.  See?  No U turn.  A scheduled consultation.  A feature, not a bug.

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Working hours

April 11, 2012

I have great difficulty working out the reasoning behind increasing the number of working hours necessary for someone to claim tax credits.

Whatever the reasoning, in the tax year just started some of the poorest working families in the country are going to… get poorer.  Because if you are working 16 hours a week at a badly paid job you will lose your tax credits, whereas if you are working 24 hours you will keep them.

Well, work is supposed to pay, and I suppose that one reasonable policy objective might have been to have people increase their hours – to wean themselves off of benefits and into work.  In the current climate, however, is it actually realistic for people to go to their boss and ask for more hours?

So here’s a thought.  How about self employment?

No, I’m not being facetious.  I’m suggesting that there are a couple of simple ways that someone on tax credits could boost their hours by taking on some kind of spare time work that fits in with their child care and other family responsibilities.  And self employment does count towards the tax credits threshold.  Make sure you inform HMRC of the hours you *intend* to work when you start up, and then tell them how many hours you *did* work at the end of the year.  So the first thing to do is pick up a notebook and write down every hour you spend on self employment activities, as well as every penny you spend on it, and every penny you make from doing it.

But what sort of self employment can someone with childcare responsibilities and no capital hope to undertake?

Well, how about internet trading?  HMRC themselves have started to crack down on people who trade on eBay, as opposed to people who use eBay to sell off the rubbish they’ve found in the back of the wardrobe.  HMRC has a useful guide here: but don’t be put off.  You don’t need to register with eBay as a business seller in order to be IN business – you just need to be selling stuff you didn’t already own, with the objective of making a profit.  And you don’t necessarily need to MAKE a profit, so long as you’re trying your best to make a profit.

So you could start with something you already owned – old clothes that don’t fit? That ornament you’ve always hated?  The teapot that you’ve had for ten years but can’t remember ever actually using?  But then when you’ve sold it, use the money you get for it to buy something else – go to a charity shop, a car boot sale, or even one of the internet sites where people give away the stuff they don’t want any more, like Freecycle – and then sell that.

The important point, for your tax credits, is that you need to spend enough time doing it to bring your hours back into the tax credit bracket.  If you’re doing 16 hours and the threshold is 24, then you need to be working at your self employed business for 8 hours a week.

I can’t give financial advice and I am not a tax credit expert, but it seems to me not impossible to lift yourself back up into the tax credit zone with self employment.  The essential thing to do is to keep a note of what you do and when you do it.

If you have access to the internet at home, then how about using your favourite tv programmes as a guide?  Coronation Street is on for two and a half hours a week, Eastenders for two and Emmerdale for three hours.  So if you had a computer at home and were on the eBay site during the soaps uploading details of your goods and answering queries from buyers, then you’d have worked for seven and a half hours a week already.  Add in a trip into town to shop at the charity shops for more stuff, not to mention a couple of trips to the post office to post the stuff you’ve sold (and the time you spend packing them up safely and addressing the parcels) you can see you could clock up eight hours working time relatively painlessly.

If you don’t have a computer at home, you’d have to do your eBaying at the local library so don’t forget to include travel to and from the library as well as the hours you spend at the computer.  Write down when you go and when you come back – so you can prove your hours – and how much you spent to get there.  No need to save the bus tickets, but if they have the date and time on them they might come in handy so stick them in a cardboard box somewhere and hang on to them.

In an ideal world you would need to own a digital camera or a phone that takes pictures, so that you can sell your items with photographs, but if you don’t have one you can still have a go on eBay.  You could then use any money you make from selling stuff without photographs to buy yourself a cheap digital camera and make it easier to trade the next time.  Here’s one on eBay for £2.49 plus £2.49 postage and packing, for example.

I don’t know.  I can’t see anything in the HMRC rules that suggests you can’t make up your tax credit hours through a combination of employment and self employment.  Yes, you’d have to tell HMRC you were self employed; you’d have to pay national insurance, and you’d have to prepare accounts at the end of the year and fill in a tax return.  None of this is as difficult as it sounds: if you count up everything you make on eBay and it comes to less than £73,000 (and, let’s face it, if you were making that much you wouldn’t need tax credits in the first place!) then you only have to prepare three line accounts where you would literally just need to add up how much you’d made from selling stuff on eBay – which you would have written down in your notebook every week – and put that in the line for “turnover”.  Then add up all your expenses – which you will also have written down without fail, every week, every penny, in your notebook, yes? – and that goes in the “allowable business expenses” line.  So your bus fares to the library, the amount you spent buying a digital camera, the money you spent on brown paper, padded envelopes, sellotape and stamps, and anything you spend in the charity shop buying stuff to sell, all gets added together as “allowable business expenses”. You can also add a small amount for the electricity and lighting and heating you use when you use part of your home for trading – perhaps a tenth of the total as a rough guide, or you can work it out more scientifically based on the number of hours you worked.

Oh yes, and one more thing – if you don’t have a computer of your own and start self employment using the one in the library, make sure to save up your takings in your paypal account till you’ve got enough to buy one of your own.  Because you can set off any asset you use wholly and exclusively for business purposes against tax.  Yes, work eight hours a week as an eBay trader and not only will the government carry on paying your tax credits, but they’ll let you buy yourself a computer out of money you would otherwise have paid in tax.  What’s not to like?

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I wonder…

April 4, 2012

I saw a tweet yesterday from the Institute of Economic Affairs, linking to their blog entry making fun of the length of this year’s Finance Bill – at a mere 686 pages.  And, sad person that I am, I went over to the Parliament website and had a look at the legislation they were mocking.  It goes by the splendid name of the Finance (No 4) Bill 2010-2012 (HC Bill 325) and does, indeed, stretch to three volumes – although only volume one contains the clauses of the Bill.  Never fear, there are also 38 Schedules to it, making up the second and third volumes.

Is it fair to make fun of the length of the Bill, when it comes from a government committed to tax simplification?  Well one of the problems I can see with tax simplification is that there isn’t much of a common agreement of what we mean by “simplification”.  Is a long Bill inherently adding complexity?  Wouldn’t it be reasonable to expect a long-ish Bill to be needed to repeal some of the clutter that’s accreted around our tax system over the years?

Hmmm…. Let’s take a look at one example.  Let’s all turn to clause 8, High Income Child Benefit Charge… which says (I think I can legitimately quote it in its entirety without falling foul of Parliamentary copyright):

Schedule 1 contains provision for and in connection with a high income child
benefit charge.

Simple enough: this seems to me to be parliamentary-draftsman-speak for “yes, there’s something about child benefit and tax, but it’s long and boring so we’ve stuck it in one of the schedules for the wonks amongst you”.  (I’m guessing: I don’t speak parliamentary-draftsman with any fluency)

Are you with me so far?  Good.  Let’s go and have a look at Schedule 1, then.  No, go on, it won’t hurt. Yes, I know it takes up seven whole pages of the bill (pages 130-136, to be precise)  but all is says is, in effect, well, if you have a child and claim child benefit, then you start to lose the child benefit once your earnings hit £50,000 in a year and you lose it altogether when your earnings hit £60K.  The rest of the schedule is various rules to cope with the fact that we have independent taxation (you’re taxed as an individual, not as a family) but because the model for benefits is the nuclear family, it all gets a bit tricky deciding who’s actually receiving the benefit and who they’re connected with for these purposes.

When the proposal to remove child benefits from high earners was mooted we all saw the stuff in the press about the inherent unfairness of a family with two earners just below the higher rate tax bracket keeping their child benefit when a family with one earner just into the higher rate and one stay-at-home partner would lose it. The government’s solution seems to be to say we’ll ignore the high earnings threshold (which, you may have noticed, isn’t being indexed so is gradually creeping down to the “you call THAT higher paid?” level) and instead we’ll taper it off between the arbitrary limits of £50k and £60k.

We can agree someone on £60k is higher paid, right?  Roughly the MP/middle range Civil Servant sort of level? Well, let’s leave that aside for the moment.  One person on £60K – end of child benefit.

I don’t have a child.  Or a partner.  Or any particular skill in parsing legislation or interest in the intricacies of how the child benefit clawback is going to work.  Nobody pays me to understand this stuff any more, and my brain started to scream in desperation and demand coffee and chocolate around clause 681E(2)(c).

My point is: it’s complicated, because the policy objective is complicated.  Saying “if you earn more than x, you get no child benefit” is reasonably simple.  But that’s not what’s being said.  What’s being said is “if there’s child benefit, then look at all the people who might be getting it, or might be involved in looking after the child we’re talking about.  The one of them who earns the most, loses an amount the same as the child benefit once they hit £60k annual earnings.”  (I can’t be absolutely sure that’s how it works because, as I said, I gave up on page two of the seven pages.)

Now, if you go back to “about me”, you’ll see that I’m a former tax inspector.  In other words, I’m supposed to be able to parse tax legislation.  And if I’m having trouble, what about the rest of the people involved?

After all, this isn’t the law yet – it’s a Bill.  It has had its first reading, will have its second reading on 16th April, and will then go into the Committee stage where it will be scrutinised.  Then there’s a Report stage and… well, you can google it as well as I, but the timetable is laid out here.  So Parliament will look at the Bill, and their expert scrutiny will make sure that what’s actually passed into law is correct, works as intended, and fulfils the government’s aims?

You’d think.  But have a look here: this is OOTLAR, the  Overview Of Tax Legislation And Rates, published with the Budget.  Yes, it’s another hearty 208 pages (with weaselly numbering of pages 1-26 and then A1-144 and B1-26 – I don’t vouch for my addition which makes that 196, but the printer tells me it would be 208 pages to print)

Go straight here, to page A23 and the Tax Information and Impact Note (TIIN) for this chunk of legislation.  The TIIN tells you in plain English what’s being proposed and what the impact will be.  And you’ll see a few oddities.

Like what, do I hear you ask?  Well look at the equalities impact:

Analysis suggests that this policy would affect the 51 to 65 age group more than other age groups, but this is because they are generally more likely to be higher earners with children. No other significant affects on protected groups have been identified.

Now those of you familiar with the Equality Act 2010 will realise that there are several “protected characteristics” that are relevant to equality – the government’s own guide to the Public Sector Equality Duty reminds us that they include

  • pregnancy and maternity
  • sex

and I would have thought that they might be a bit more relevant to a child benefit restriction than age.  Will the taper of child benefit for people earning over £50k impact more women than men?  Will it have any impact on people who are mothers? Or in the words of the guidance:

The Equality Duty has three aims. It requires public bodies to have due regard to the need to:

• eliminate unlawful discrimination, harassment, victimisation and any other conduct prohibited by the Act;

• advance equality of opportunity between people who share a protected characteristic and people who do not share it; and

• foster good relations between people who share a protected characteristic and people who do not share it.

You see, I don’t know, but I suspect that losing an amount equivalent to child benefit from my earnings because I had once had a relationship with someone and they had a child and received child benefit for him/her might not foster good relations between the person sharing the protected characteristic of maternity and the person who doesn’t.  And I’d also wonder whether the change will be helpful in advancing equality of opportunity between people who have children and people who don’t.  I’m not saying I know the answers, but these are the questions I’d have asked, and they don’t seem to be answered in the TIIN, or in the distributional analysis that was published with the Budget but which looks at the overall impact rather than the impact of individual measures like this one.

And then look at the impact on business.  You might think that, if you’re going to lose the child benefit, you might want to go to your employer and say, look, can I drop my hours a bit so that I earn just under £50K instead of just over?  I’ll still get the same amount of money but at least I’ll be able to pick up the kids from school once in a while.  So there might be an impact on businesses if they have enough people in that sort of pay bracket who might conceivably want to have that conversation – and then if you start allowing the people WITH children to work more flexibly, the people WITHOUT children might very well start asking for the same kind of flexibility.  And, again, I’m not saying that’s a bad thing, but it’s an impact that has to be taken into account.

Well what does the TIIN say?

The charge will apply to individuals so there will be no direct impact on business or civil society organisations. To the extent that there are changes in labour supply, businesses may be affected. The introduction of a taper raises the marginal tax rate for households in the taper range. Affected households will have an increased incentive to reduce their gross income, for example through increasing non-taxable contributions or working less.

Yes, I think that kind of means what I just said, although you’d think they’d have some idea of how many people it was likely to affect and so how big the impact might be, and maybe whether there’s any particular industry or sector or size of business that’s more likely to have employees in the taper range.  But look again.

They haven’t said anything about the possible impact on small businesses.  Now, I don’t know about you, but if I were a small business with one or two workers and one of them decided they want to change their hours to avoid losing their child benefit it would be a bigger deal than if I were a big firm with dozens of people in that sort of pay bracket, no?  And there’s a thing called the  Small Firms Impact Test which the government has committed itself to do for all changes that might add to or reduce costs on businesses for exactly that reason.

Ah, but the link says the small firms impact test is a mandatory part of the “Impact Assessment (IA) process” I hear you say, and this isn’t an IA, it’s a TIIN?  But look here: at the Written Ministerial Statement made by David Gauke in March last year, when he replaced IA for tax changes with the TIIN process.  He said:

This new approach will consider a wider range of impacts and cover a broader range of policy changes than the existing impact assessment regime for tax.

In other words, the TIIN isn’t any less effective or rigorous or serious than an IA, but it’s broader, covers a wider range of impacts for more changes than were covered by IA.  Wouldn’t you think that would also include the “mandatory for IA” small firms impact test?

So, yes, if I were an MP sitting on one of the committees or speaking on one of the debates around this year’s Finance (No 4) Bill, I’d want to ask whether we’re sure the “High Income Child Benefit Charge” has been written with “due regard” to equality, and whether there was any consideration of the possible impact on small businesses if people ask to change their hours as a result of the changes.

So that’s one provision.  Anyone doing any analysis of the other six hundred pages?

Posted in Regulation | Tagged , , | 4 Comments »

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Proper job

April 3, 2012

Yesterday there was a letter in the Daily Express (which I read only because my mother takes it, she hastened to add) asking for a law to be passed saying that MPs have to have 10 years in a proper job before they become eligible for election.  I tweeted that I thought this was a good idea and wondered how many of the current crop of MPs would pass.  Various other people suggested “being special assistant to the MP for provincialshire”, being “part of a flow chart drawing club” at party HQ, or “‘directorships’ they were in no way qualified for” wouldn’t count.  In other words, not something pink and fluffy connected with politics, but a proper job.

Wouldn’t that make all MPs over 40?  Not at all!  I started work at school with a Saturday job at a bakers and then at Boots.  It’s still legal for someone to start work as a paperboy or girl at 13, and to help with a milk round at 14 (and often hard to fill that kind of early morning job).  So I’d have no problem with a 23 year old MP who had started her paper round at 13, progressed to a Saturday job in her sixth form and done a bit of bar work at Uni, provided she did a few months full time shelf stacking or something first.

I wondered how the present intake of MPs would stack up against the Proper Job test.  Not well, I have to tell you.

Let’s start with the Quad.  David Cameron comes the closest, with his seven years at Carlton Communications.  Only seven, but an actual paid job, however fluffy.  Close, Dave, but no cigar.

Nick Clegg doesn’t even come close I’m afraid.  His official biography gives him “a brief spell in journalism” and some unspecified period as “a business consultant and part-time university lecturer” but it’s pretty clear that, at his age (45) he didn’t have ten years of space between his education, European experience and entry into domestic politics to fit the “proper job” criteria.  Sorry and all that.

George Osborne’s bio doesn’t seem to suggest a day’s work outside of politics in his life, so, no, George.

And the final member of the Quad, Danny Alexander?  All his work experience is, I would argue, outside of the “proper job” criteria on the grounds of being for political organisations – apart from his two years as press officer for the Caingorms National Park.  So, again, a fail.

What does it mean for the country that the four people who make the decisions on the Budget haven’t had a proper job between them?

(Twitter: @Tiintax – for the conversation about politics, tax and regulation, or @wendybradley for the same conversation but with added wittering about science fiction, train journeys, and Benedict Cumberbatch)

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

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About me

April 2, 2012

My name is Wendy Bradley.  Until last Friday, I was a Civil Servant in Her Majesty’s Revenue and Customs.  I’m now a retired Civil Servant and full time writer.  I’m working on a thousand page fantasy novel which doesn’t as yet have an actual title but whose working title is “Game of Thrones: With Cowboys!”  It may take me a while.  Watch this space.

In the meantime, I thought I might also blog about some of the stuff that you can’t write about when you’re a Civil Servant, for example “Just How Stupid is… (insert whatever government innovation is the current flavour of the month) exactly.” My particular interest is in regulations: the idea that all regulations are bad and can be categorised as Red Tape (which is, of course, “strangling business”).  Five minutes browsing the comments at the government’s own “Red Tape Challenge” website will disabuse most of us of that notion.

But the government has put mechanisms in place to make sure it doesn’t make BAD regulations.  No, honestly.  There has to be consultation according to the government Code of Practice and consultation is usually accompanied by some sort of assessment of the impacts of the change.

So that’s my focus.  With mechanisms to regulate the making of regulation, how could anything possibly go wrong?

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