MPs question ‘huge’ variation in digitisation cost estimates

A comprehensive pilot of the Making Tax Digital project is needed to establish whose estimates of additional compliance costs for small businesses are closest to reality, according to Andrew Tyrie, chair of the House of Commons Treasury committee.

“There are huge differences between the Federation of Small Businesses and HM Revenue & Customs about the administrative burden. This is the heart of the matter,” Tyrie said in a March 27 statement.

“The FSB think that with MTD, businesses might spend three times as much time on their tax obligations as they currently do. This could cost them around £3,000 a year in time, salaries, and accountants’ fees. HMRC thinks that they will spend less time, leading to a small net saving,” Tyrie added. He has asked the Administrative Burdens Advisory Board for an independent view, based on its members’ business and accountancy practice networks, of the responses provided by HMRC and the FSB. Read more:

My news story for Tax Analysts, March 29 (paywall)

HMRC may change ‘customer relationship manager’ job title

HM Revenue & Customs will consider changing the job title of its customer relationship managers dealing with the tax affairs of wealthy individuals, after the House of Commons Public Accounts Committee suggested a change to “something that better describes what [CRMs] do, and does not suggest an overly close and inappropriate service to the wealthy.”

The change will be considered as part of a wider review of compliance by wealthy individuals, HMRC said in a Treasury minute published on March 28 , setting out the government’s responses to recent PAC reports.

HMRC’s strategy for dealing with taxpayers with wealth of more than £20 million suggests that they get help with their tax affairs that is “not available to other taxpayers,” the PAC said in January. But HMRC said its high-net-worth unit offered “absolutely no special treatment for the wealthy.” Read more:

My news story for Tax Analysts, March 29 (paywall)

Treasury minutes, March 28

Experts flag new NIC and benefits challenges facing the self-employed

In the recent controversy over false self-employment, and the disparity in rates of national insurance contributions between employees and the self-employed, two forthcoming changes have received little attention.

The transition to universal credit will have an adverse impact on many self-employed people, particularly those with fluctuating incomes, and changes to the structure of class 4 NICs will make preserving entitlement to state pension much more expensive for self-employed earners on very low profits, as the Low Incomes Tax Reform Group (LITRG) highlighted on 20 March.

Yesterday in Parliament, the work and pensions committee heard evidence from experts from LITRG, the Institute for Fiscal Studies, the RSA, the Social Market Foundation and others on “self-employment and the gig economy”. Continue reading Experts flag new NIC and benefits challenges facing the self-employed

UK should consider reduced VAT rate for Northern Ireland tourism, MPs say

The UK government should consider setting a reduced rate of VAT for Northern Ireland’s tourism sector when the UK leaves the European Union and has the power to make its own VAT rules, according to a House of Commons select committee.

“The tourism industry in Northern Ireland has undoubtedly had some great successes in recent years, and we are optimistic for the future, notwithstanding the current political situation,” said Laurence Robertson, a Conservative member of Parliament and chair of the cross-party Northern Ireland Affairs Committee, in a March 20 statement.

Northern Ireland’s tourism sector is subject to a VAT rate that is more than twice that in the Republic of Ireland, the committee noted. Read more:

My news story for Tax Analysts, March 23(paywall)

Parliament: “Treasury must investigate if post-Brexit tax powers can boost tourism

Uber faces VAT challenge as tax barrister demands receipt

A tax barrister is set to begin legal proceedings that could, according to his own estimates, result in Uber Technologies Inc. being held liable for VAT of almost £20 million based on its smartphone-app-based operations in London alone. Uber maintains that it is not liable because it is not providing transportation services.

“Drivers who use the Uber app are subject to the same VAT laws as any other transportation provider in the U.K.,” an Uber spokesperson said in an emailed statement on March 21. Most drivers are likely to have an annual turnover well below the current VAT threshold of £83,000, so that they do not need to charge VAT …

Read more: My news story for Tax Analysts, 22 March (paywall)

Thoughts on the partial NIC ‘lock’ law

The Conservative manifesto for the May 2015 election committed a Conservative government not to increase “the rates of VAT, income tax, or national insurance” in the next Parliament (ie. this one).

But the NIC lock, enacted in the National Insurance Contributions (Rate Ceilings) Act 2015, applied only to the class 1 NICs paid by employers and employees.

Writing in The Sun on March 16, chancellor Philip Hammond said he and the prime minister had decided, a week after announcing a proposal to increase the class 4 NICs paid by the self-employed, that it was “not enough simply to stay within the letter of our tax lock law”. Continue reading Thoughts on the partial NIC ‘lock’ law

Longest ever finance bill aims to modernise UK tax system

The 762-page finance bill, accompanied by more than 400 pages of explanatory notes, includes measures to make the tax system fairer while modernising it for the digital age, HM Treasury announced March 20.

It is the longest finance bill ever even though the 2017 budget, released March 8, contains surprisingly few tax measures. “Today’s finance bill is the longest on record, beating the next longest by a country mile. This rate of change and quantity of additional legislation will make life more complex for taxpayers and tax advisers alike,” said John Cullinane, tax policy director at the Chartered Institute of Taxation …

The Office of Tax Simplification has pointed out that while the length of tax legislation can give the impression of complexity, longer legislation can be easier to understand …

Read more: My news story for Tax Analysts, 21 March (paywall)

NICs U-turn fallout extends beyond UK tax debate

The UK government’s decision to abandon a proposal to increase national insurance contributions for the self-employed raised questions about its competence at a critical time in the Brexit process, as well as its ability to increase taxes, commentators suggested. The government announced on March 20 that it will invoke article 50 of the Lisbon Treaty on March 29 to begin the formal process of leaving the European Union.

The “political mauling” of chancellor Philip Hammond raised fears in the City of London, where he is regarded as one of the most important advocates for business, and fuelled Tory divisions over Europe, Financial Times financial editor Patrick Jenkins wrote …

Even by the standards of recent budget U-turns, the one performed on March 15 “takes some beating,” said a Guardian editorial …

The U-turn underlines the need for a rethinking of the way budgets are made in the UK, said Jill Rutter, program director at the Institute for Government. “The chancellor has fallen victim to the failure to prepare the ground for reform, too much secrecy, and the cavalier treatment of tax policy in the last Conservative manifesto,” she said. Read more:

My news story for Tax Analysts, 21 March (paywall)