Posts Tagged ‘Bit of politics’


Have I got news for you? (Well, have I?)

July 23, 2012

There’s been some very poor reporting of the speech David Gauke made this morning at the Policy Exchange – “cowboy” tax advisers will be forced to “name and shame” their clients, for example.  No they won’t, and, don’t be daft.  Some journalists need to do some research that doesn’t involve google once in a while.

The speech itself is interesting, though, in part because the Minister has a go at what’s acceptable and what isn’t in terms of tax planning:

Legitimate use of reliefs is not tax avoidance:

Claiming capital reliefs on investment is not tax avoidance – when those reliefs were introduced precisely to encourage the investment in question.

Claiming reliefs against double taxation is not tax avoidance – when the alternative would be taxpayers paying tax twice on the same income.

Claiming back tax on legitimate charitable donations is not tax avoidance – any more than ticking the ‘gift aid’ box is.

Not paying tax on your pension contributions is not tax avoidance.

Taking out a tax free ISA is not tax avoidance.

Quite.  (Although you then ask yourself why we then had the ill-conceived consultation on capping charitable tax reliefs…???)  

Buying a house for personal use through a corporate entity to avoid SDLT is avoidance.

Channelling money backwards and forwards through complex networks for no commercial reason but to minimise tax is avoidance.

Paying loans in lieu of salaries through shell companies is avoidance.

And using artificial ‘losses’ deliberately accrued to claim back tax is avoidance.

To which we say “yes!!!!” (And, when are you going to give HMRC the resources to do something about it??)

Where, though, do we find the announcement that leads to the “name and shame” the “cowboys” headlines?  Well, a consultation IS announced:

Today we consult on ways to improve the information available to the public on avoidance.  Publishing warnings for all to see, and making it easier for taxpayers to see if their adviser has promoted failed avoidance schemes in the past.

(which, you will note, suggests that it’s information about advisers that might be made public, not about their clients)

Let us turn, then, to the Tax Updates and Consultation Tracker helpfully provided by HM Treasury, which lists as To Be Published in July a consultation on “Disclosure of tax avoidance schemes (DOTAS)” Hmmm…. the accompanying PDF helpfully elucidates that this will be

Consultation on extending the DOTAS hallmarks so as to capture avoidance schemes that do not currently have to be notified.

Because, as anyone who works in tax would already know, there is already a regime which says that, if you’re going to market an avoidance scheme, you have to tell HMRC about it.  You have to give it a reference number, and you have to tell the people who buy the scheme from you what the reference number is, and they have to include the reference number on their returns.  Avoidance, not evasion, remember?  These are people who are trying to outsmart the taxman, not hide from him.

So have I got news for you?  Or, to put it another way, is this consultation “news” at all?

Well we don’t know what it’s going to say yet, do we.*



Look at the briefing note which the Law Society produces for its members, telling them what their responsibilities are if they are the promoters of a scheme and reassuring them that they aren’t going to be asked to violate their professional ethics by disclosing privileged information and they aren’t going to be caught by the legislation if they simply give advice to their clients on a scheme that someone else is promoting.

And turn to section 9, “more information”, and the list of legislation on disclosure of tax schemes.  There are thirty two of them.  So far. Including

I seem to recall that David Gauke said, in the foreword to Tax Policy Making: A New Approach that

Business and tax professionals have previously criticised the tax policy making process as piecemeal and reactive, pointing to the wide range of policy announcements in recent years that have been unexpected and insufficiently thought through.

We could discuss whether this vast train of DOTAS legislation is the result of “piecemeal” policy development that hasn’t been sufficiently “thought through”, or is a sensible use of an iterative approach.  Or we could just say that it’s the tax authorities and the tax avoiders playing whack-a-mole.

As the Minister himself said in his speech today:

There are some who might say that consultation documents on tax administration are often an effective cure for insomnia, but this is one consultation that will keep the promoters of aggressive tax avoidance schemes awake at night.

Um… are you sure, Minister?


[*Update: not twenty minutes after I’d posted this, I saw in my twitter feed a tweet from Tax Journal which had a link to the consultation itself.  So we DO know what it says.  But – having read through it – I’m afraid the rest of this still stands.  Sorry and all that.  Oh, and could someone from the Treasury please explain why they bother having a tax consultations tracker at all if it isn’t up to date, please?  Thanks!]


Not quite a smoking gun. But still terrifying.

July 10, 2012

Here on Storify you’ll find my take on the Channel 4 Dispatches story last night, as it happened, on Twitter.

The programme looked at HMRC’s Non-Execs – the Board members who aren’t civil servants, aren’t there in a management role, and are there to keep the organisation on track.  As it says on the HMRC website:

HMRC looks to its Non-Executive Directors to:

  • bring guidance and advice
  • support and challenge management about the department’s strategic direction
  • provide support in monitoring and reviewing progress

and it found that a couple of them had business interests that you could categorise as in the “interesting” end of the tax avoidance spectrum.  One was director of a company which was located in Guernsey… and as I said on twitter at the time

“We are not in Guernsey for tax reasons”? I also have a rather nice bridge I could sell you if you’re interested…?
The other was director of an estate agency group and the programme managed to find some staff in one of the group companies who helpfully advised him on how to avoid stamp duty on a big ticket purchase.
It wasn’t exactly a smoking gun, no.
To me, the worrying thing was the flood of comments (which I’ve collected in the storify link) essentially saying that HMRC is corrupt and why should I pay my taxes when HMRC is corrupt.
If I were on the Board of HMRC today what would absolutely terrify me would be the thought that the public have started to perceive of HMRC as corrupt.
It isn’t, of course.
Yes, I am absolutely confident it isn’t.  Or at least I saw no evidence of corruption in the areas of the department with which I came into contact,  my 25 year career in the Department only ended in March and I don’t believe a culture of corruption can have taken hold in a mere three months.
But I do think there is a problem, and it’s this.  Business interests have become the arbiters of HMRC’s success, rather than the interests of the citizen and the wider polity.
Look at the HMRC’s non-execs:
  • Ian Barlow – KPMG
  • Colin Cobain – Tesco
  • Philippa Hurd – ITV
  • Phil Hodkinson – HBOS
  • John Spence – Lloyds TSB

and then compare them with, for example, the BBC’s Board of Trustees

The BBC includes former employees of the organisation, academia, politics and economics as well as big business.  HMRC’s non-execs are, in contrast, almost painfully non-diverse.  Where is the trades unionist (how about Liz (Baroness) Symons who was the first female General Secretary of the FDA union?)  The former employee (how about Liz Bridge, former Tax Inspector and now construction industry taxation expert)? The economist (how about Richard Murphy)?

Are we really moving towards a society where tax is to be compulsory for the little people but optional for big business?  Where tax policy making will be outsourced (and not to citizen groups)?  Where the only people who are qualified to guide, advise, support and challenge HMRC are – bankers?


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?