sbnca news

The party's over? Labour fiscal 'strategy' in tatters

"A week", said Harold Wilson, "is a long time in politics." On that basis 10 months must seem like a lifetime to Gordon Brown ald Alistair Darling, probably deafened by the sound of Harold spinning furiously in his grave. Which may well be the only successful spinning going on in Labour circles at the moment. How has the smooth Labour governmental machine of Tony Blair come to this in such a short time?

Not since Denis Healey went cap in hand to the International Monetary Fund or Hugh Dalton leaked his own Budget proposals to a journalist has a Labour Chancellor been so beleaguered as Mr Darling, whose cup must have run over as he saw the Prime Minister quoted this morning as saying "I can steer this economy through difficult times - I have done it before and I can do it again."

So now we know for sure how much influence Mr Darling truly has at the Treasury; one can only imagine the volcanic reaction if Tony Blair had made similar comments whilst Mr Brown was Chancellor. I am put in mind of Denis Healey's comment upon Sir Geoffrey Howe's response to one of his Budget speeches, that it was "like being savaged by a dead sheep." Mr Darling may not quite be tomorrow's lamb chops, but he has clearly lost all credibility as a Chancellor with any authority.

Revenue extends clearance service

It is nice for a change to be able to praise a HMRC initiative as being of genuine use and value to advisers. This seems to me clearly to be the case with the extension of the non-statutory clearance regime to cover matters other than legislation contained in the last four Finance Acts.

Entrepreneurs Relief - not QUITE the new business assets taper relief

Those Labour backbenchers who this week accepted Alistair Darling's assurances about his measures to relieve the additional tax to be suffered by some categories of the lower paid as a result of the abolition of the 10% income tax band might like to take note of the cautionary tale of business assets taper relief and its 'replacement' business assets taper relief, where all may not be quite what it seems........

Definitely for turning, Darling

Margaret Thatcher famously said "You turn if you want to, the lady's not for turning." Whilst a reputation for inflexibility quite as awesome as that particular lady's would probably not be a good thing, the Chancellor is in grave danger of acquiring a reputation diametrically opposite to the Iron Lady's.

However, the Government's tendency to lack the courage of its convictions and buckle under pressure on contentious tax changes is only one facet illustrated by its latest woes over the ill-fated 10% tax rate. The other is its rather strange approach of trying to deal with major problems in one area of tax by grafting on a solution relating to a different tax. Whilst this would be a work of genius if it could be achieved, the record so far have not been encouraging, and the latest effort seems likely not to improve matters.

So does this mean that all efforts to simplify the tax system are doomed ultimately to produce still greater complexity?

Top ten Budget 2008 tax issues

Alistair Darling had his big day on 12th March, and whilst he will never win any prizes as the most exciting public speaker (just how many times did he say 'stability'?), it is of course far more important what impact his (or in some cases Gordon Brown's) tax changes will have on the economy. So what are the big issues in the 2008 Budget, and how does the Chancellor score for his handling of them? I have picked out the 10 main highlights, and had the temerity to score Mr Darling out of 10 for each change. How easy life is for those of us who know we will never be Chancellor, but suspect we could do a better job, particularly as we will never have to find out the awful truth of the matter!

Budget notes 2008

First of all an apology for a long period without posting. Unfortunately my mother, who lived in Devon, was diagnosed with a terminal brain disease in January and died just after Easter, so my attention (and often my presence) has been elsewhere. Thus my silence does not suggest that nothing has been happening by way of tax!

The first important thing to do is to update everyone on the 2008 Budget, so I have set out below my notes on the main matters arising.

"General anti-avoidance principle" - pass me my P45!

The Trades Union Congress has apparently identified £25 billion of tax avoidance, roughly equally split between individuals and companies. In response they have called for a new "general anti-avoidance provision" designed to prevent taxpayers planning their affairs so as to minimise their tax liabilities.

In a neat juxtaposition, the response of Mike Warburton of Grant Thornton to the TUC comments specifically upon the issue of non-UK domiciles, and accepts that some rich individuals in that category are paying insufficient UK tax. We now have draft legislation in respect of the Chancellor's controversial proposals to deal with this issue, which has (quite rightly in my view) attracted criticism from tax experts.

So is the Government's piecemeal approach to tax avoidance working, and if not what are the pros and cons of what I will call a general anti-avoidance rule (GAAR)? - I can't call it a GAAP because to me that means Generally Accepted Accounting Practice, which is something else altogether. And should I start retraining for another career now?

Stormclouds gather over Darling's first Budget

Now we all thought that Gordon Brown's thinly-disguised enthusiasm to see the back of Tony Blair was down to his ambition to be Prime Minister. However, I am increasingly coming to wonder whether it had as much to do with enthusiasm not to be Chancellor of the Exchequer any longer.

Alistair Darling may be coming to share the feelings of Admiral Doenitz on inheriting the leadership of the ruins of the Third Reich on Hitler's suicide; it might be a job you always wanted, but what a terrible time to get it.

"Give us the tools and we will finish the job"

Of course Sir Winston Churchill was speaking in what he referred to as both our darkest and our finest hour. Recent events with the HMRC self assessment on-line filing system have brought the quote to mind, but while this may be HMRC's darkest hour, it is certainly not their finest.

The events of the past 48 hours have been a nightmare on all sorts of levels, and not just for HMRC. I now treasure particularly the conversation I had with a tax officer at Altrincham Tax Office on 31 January 2007 as I hand delivered some last minute tax returns, and she suggested that all of this could be avoided if we were to embrace on-line filing. Well we now have, but at times yesterday the option of popping down to the local tax office with some paper returns started to look extremely attractive. At least that way the process is under our own control, and not dependent on the vagaries of HMRC's computer systems.

The timing of this meltdown is particularly bad, because HMRC is going hell for leather to encourage as many people as possible to file on-line next year. Indeed, if you wish to file your 2007-08 self-assessment return in any other way you will have to do so by 30 September 2008, a whole 4 months earlier than the on-line deadline. So where shall I start with the potential implications 12 months hence?

1. The option to give up in disgust, write out your entries on the paper tax return and take it to your local tax office, available to those in extremis this year, will not be next year.

2. Given the natural propensity to leave things until the last minute, particularly dare I say things that we do not particularly like doing, the number of people filing online is likely to increase dramatically next year (which is indeed what HMRC purports to want). So if the system buckled under the pressure this year, when paper filing remained a viable option for all taxpayers, what are the chances of it standing up to the strain next year, when it becomes the only game in town?

3. Given that HMRC clearly wishes the vast majority of taxpayers to move to on-line filing for the 2007-08 return, what impact will recent events have on public trust in the system, and thus their willingness to use it to complete their next tax return?

Also, obscene amounts of money have been spent on HMRC computer systems, which appear to be less than robust, to put it generously. Is it too much to ask that suppliers provide a system that will work, or suffer severe financial penalties if it proves not to?

There were reports yesterday of taxpayers calling HMRC to complain about the crashing system to be told "You shouldn't have left it until the last minute." I don't think HMRC is in a good position to complain on this score, having had ample opportunity to observe taxpayer behaviour over 10 previous years of self-assessment (which has always reflected a tendency to brinksmanship) and still failed to put in place a system capable of coping with that tendency.

And then, on top of lost data, two-tier security systems for taxpayers and crashing computer systems, the man who has become synonymous with self-assessment, Adam Hart-Davis, was interviewed on the radio about the latest HMRC disaster. During his interview he delivered himself of the entirely reasonable opinions that the Inland Revenue and HM Customs & Excise merger has caused internal problems, and that the tax system is far too complicated. He then said that he considered that his time as HMRC's self-assessment frontman was probably up, which may now prove to be a self-fulfilling prophecy!

The ultimate irony is undoubtedly HMRC's high profile ad campaign to remind taxpayers of the 31 January deadline, which has now become the 1 February deadline thanks to their own failing systems. How easily, one wonders, can those systems be adapted to avoid penalising those who file returns today, or will we spend weeks and months fighting off erroneous penalty notices on behalf of our clients?

It cannot of course be pure coincidence that all of these things are going horribly wrong at a time when HMRC is shedding staff at a dramatic rate and my sources within HMRC (yes we do talk to each other about things other than tax) are telling me that staff morale is declining dramatically. So perhaps the hard-pressed and overworked HMRC staff who remain are as entitled as those of us in the tax profession to say "Give us the tools and we will finish the job."

Mark Simpson

1 February 2008

"Some Animals Are More Equal Than Others"

Readers may have noticed a slackening of blog activity this month - I could blame the usual January tax return rush, or serious family illness issues, but I am back and raring to go with two postings today, and hopefully more to come as the exciting tax year 2008 unfolds (nurse - the screens!)

I just had to post an entry about the furore that blew up over the weekend about on-line return filing, and the fact that certain categories of taxpayer are unable to file their tax returns on line. This apparently affects members of the royal family, MPs and 'celebrities', whatever that means in 21st century Britain. The implication appeared to be that such high profile taxpayers are worthy of a higher level of protection for their data, which in view of numerous recent data security lapses appeared worrying for we mere mortals who, by implication, are worthy only of a lower level of data protection.