Scottish income tax rates decision adds complexity to UK tax system

Keeping Scotland’s higher rate threshold for income tax at its current level will create complexity even though it will be the only point of divergence from the wider UK income tax system, the Chartered Institute of Taxation said after members of the Scottish Parliament approved revised proposals for tax year 2017/18.

“This is a historic day for Scotland – the first time ever that rates and bands of income tax are being set by the Scottish Parliament in line with Scotland’s needs and priorities,” Derek Mackay, Scotland’s cabinet secretary for finance and the constitution, said.

…Scottish taxpayers who receive income from personal savings or dividends face additional complexity, the CIOT said. Taxation of that income has not been devolved to Scotland, and the UK rates and thresholds will continue to apply.

Read more:

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

Scottish government’s announcement

CIOT press release


Small businesses face disproportionate digitisation costs, UK tax experts warn

Tax experts questioned the published estimates of additional tax revenue, which have been cited in support of the UK tax authority’s Making Tax Digital (MTD) reforms, and told a House of Lords committee that a disproportionate share of compliance costs will fall on the smallest businesses under the current proposals.

The timetable for further consultation and implementation remains too tight, tax professionals said when HM Revenue & Customs published on January 31 its responses to the August 2016 consultations …

HMRC’s current estimate is that the transitional costs for businesses will average “about £280 per business over the period 2017/18 to 2020/21.”

Michael Steed said most people feel that the £280 estimate is “quite optimistic, and often wildly optimistic.” A more realistic estimate of the “just to get you going” costs charged by an accountant would be two or three times that amount, he said. Continue reading Small businesses face disproportionate digitisation costs, UK tax experts warn

UK businesses urge reform of ‘broken’ property tax system

The business rates system is “broken” and unfair despite recent attempts at reform, according to business representatives lobbying UK chancellor Philip Hammond ahead of his first Budget on March 8. The property tax is based on rental values, and the first revaluation in seven years is set to take effect in April.

“The current rates system is broken, and despite attempts by successive governments to introduce marginal reforms, the fundamental unfairness of business rates remains,” Adam Marshall, director general of the British Chambers of Commerce, said in a February 6 release. Businesses of all sizes, sectors, and locations “lament the burden of this high up-front cost, which they are forced to pay before making even a penny of profit,” he said.

“Some of the [smaller] businesses will face the question, ‘Do we carry on in business or do we close down?’ Without government action we are looking at a significant increase in bankruptcies,” Stephen Herring, head of tax at the Institute of Directors, told the Financial Times. Read more:

My news story for Tax Analysts, February 9 (paywall)

HMRC prepares for three post-Brexit customs duty scenarios

HM Revenue & Customs expects to be ready to implement new customs arrangements when the United Kingdom leaves the European Union regardless of whether a transitional period is agreed upon, a senior HMRC official has told members of Parliament.

The House of Commons Treasury Committee questioned HMRC on the Brexit process on February 7 as members of Parliament prepared to debate the European Union (Notification of Withdrawal) Bill for a second consecutive day …

Adopting WTO rules would be a significant change, HMRC’s Jim Harra told the committee. It would have resource implications for HMRC and other government agencies, and would require changes to information technology systems, which HMRC is currently assessing, he said. Read more:

My news story for Tax Analysts, February 8 (paywall)

Treasury committee questions HM Revenue & Customs

HMRC: The Union Customs Code


UK think tank urges overhaul of business and employee taxes

A leading think tank has called for a major reform of the UK tax system to create a level playing field for employees, the self-employed, and company owner-managers.

Rapidly rising self-employment and the incorporation of small businesses erode tax revenues, Chancellor Philip Hammond noted in the autumn statement. The government is considering “how we can ensure that the taxation of different ways of working is fair between different individuals and sustains the tax base as the economy undergoes rapid change,” Hammond said.

In a report published on February 3, researchers at the Institute for Fiscal Studies set out how the tax system can be made “fairer and more efficient”.

“The massive tax advantages that come with working for your own business are not new and not justified,” the report says.

Read more: My news story for Tax Analysts, 4 February (paywall)

IFS Green Budget 2017: tax, legal form and the gig economy

Higher rate threshold frozen for Scottish taxpayers

After the Scottish National Party reached agreement with the Green Party on a budget for 2017/18, there will be no increase in the income tax higher rate threshold for Scottish taxpayers in April, the Scottish government announced.

The deal was agreed upon after opposition parties rejected the draft budget presented by Finance Secretary Derek Mackay in December. Mackay had proposed to increase the threshold by reference to inflation rather than implementing the real-terms increase scheduled for the rest of the U.K.

The decision means that some Scottish taxpayers will pay up to £400 more in income tax during tax year 2017/18 than taxpayers elsewhere in the U.K. on a similar income.

Read more: My news story for Tax Analysts, 4 February (paywall)

Making Tax Digital concessions welcomed but concerns remain, UK tax professionals say

Tax professionals welcomed limited concessions announced by HM Revenue & Customs to ease the transition to digital tax reporting for unincorporated businesses, but they warned that the timetable for further consultation and implementation remains too tight.

“The government is listening to the concerns of smaller businesses in the implementation of Making Tax Digital,” said Frank Haskew, head of tax at the Institute of Chartered Accountants in England and Wales, after HMRC responded to six consultations published in August 2016.  Continue reading Making Tax Digital concessions welcomed but concerns remain, UK tax professionals say

Wealthy taxpayers don’t receive special treatment, HMRC says

After a parliamentary committee released a report calling for measures to improve tax collection and improve public confidence in the system, HM Revenue & Customs insisted that Britain’s wealthiest taxpayers are subject to additional scrutiny and do not receive any special treatment.

HMRC’s strategy for dealing with very wealthy taxpayers suggests that “they get help with their tax affairs that is not available to other taxpayers,” the House of Commons public accounts committee (PAC) saidContinue reading Wealthy taxpayers don’t receive special treatment, HMRC says