Politics make significant UK tax rises unlikely, think tank says

Chancellor of the Exchequer Philip Hammond has been “dealt a very tricky hand” and faces a choice between maintaining his commitment to getting the UK’s public finances into a surplus by the mid-2020s and responding to pressure for increased public spending, according to the Institute for Fiscal Studies.

“It is hard to see how the chancellor can both maintain the credibility of his fiscal targets and respond effectively to the growing demands for spending,” the IFS said in an October 30 release. Hammond will present his autumn budget on November 22, setting out the government’s plans for the economy, which will be based on updated forecasts from the independent Office for Budget Responsibility.

My news story for Tax Analysts, October 31 ($)

UK tax gap update highlights evasion, legal interpretation losses

A shift in the public debate is needed to ensure that everybody sees tax evasion as unacceptable, a leading UK tax expert said after official figures suggested that avoidance accounted for £1.7bn of a £34bn tax gap.

HM Revenue & Customs estimated that evasion, criminal attacks, and the hidden economy together accounted for £13.8bn, and error and non-payment for £6.4bn. Losses arising from differences in interpretation of the law accounted for £6bn, and failure to take reasonable care accounted for £6.1bn …

My news story for Tax Analysts, October 30 ($)

HMRC: Measuring tax gaps

HMRC can’t guarantee Brexit-ready customs service, Thompson says

HM Revenue & Customs will review its priorities early next year and may need up to 5,000 additional staff to secure successful delivery of a new customs service if the UK leaves the European Union without a customs agreement, according to HMRC Chief Executive and Permanent Secretary Jon Thompson.

Announcing on October 12 an inquiry into Brexit and the future of customs, the House of Commons Public Accounts Committee noted that HMRC was due to complete a five-year program for a new customs declaration service (CDS) by early 2017. Delays have meant that the CDS will not be fully operational until January 2019. Significant work is still required to meet the revised target, a National Audit Office report found in July …

My news story for Tax Analysts, October 30 ($)

Public accounts committee, oral evidence: Brexit and the Future of Customs

Consistent application of UK law under threat, Lords committee says

Experts have warned that the complexity of U.K. tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill.

Experts have warned that the complexity of UK tax law poses a threat to lawyers’ and judges’ ability to apply it consistently, a House of Lords committee reported, a day after a government minister praised lawmakers’ rapid progress in examining the current, 665-page finance bill. The House of Lords Constitution Committee called for changes to the way legislation is developed to enable thorough parliamentary scrutiny and improve the quality of law. Legislation should be made more accessible and easier to understand for both practitioners and the public, the committee said in an October 25 release …

… Members of a public bill committee “rocketed through” the current finance bill efficiently and “in near-record time,” Financial Secretary to the Treasury Mel Stride remarked as the committee completed its examination of the bill ahead of schedule on October 24. Read more:

My news story for Tax Analysts, October 27 (paywall)

Preparing better legislation: Lords call for changes to law-making

Brexit bill ‘unclear in scope and effect,’ UK tax body says

The “abuse of rights” principle against artificial VAT avoidance could be removed retrospectively by the UK’s Brexit bill as currently drafted, and the apparent error illustrates how the bill goes “beyond what seems necessary” to leave the European Union, according to the Chartered Institute of Taxation.

“The government has been clear that its intention is to provide legal continuity during Brexit by copying over the entire body of EU law onto the UK’s post-exit statute book. This is a sensible aim,” said Jeremy Woolf, chair of the CIOT’s EU and human rights subcommittee, in an October 25 release. “However, as currently drafted, it appears to us that this will not be the case …” Read more:

My news story for Tax Analysts, October 26 (paywall)

UK campaign group urges greater international cooperation on corporate taxes

While the UK government continued to defend reductions in the corporate tax rate, a new campaign group called on ministers to champion the role of tax in building a civilised and fair society and to stop trying to compete for investment through “tax cuts and giveaways.”

Tax Justice UK aims to fill a “void in the debate around tax” in the UK. The November 22 budget should include steps toward “taxing the new economy” and resourcing and refocusing HM Revenue & Customs, it said in an October 25 release. The group was launched in May as a sister organisation to the Tax Justice Network but is independent of it, according to its website. Read more:

My news story for Tax Analysts, October 26 (paywall)

UK lawmakers approve corporate interest restriction

The UK House of Commons finance bill committee on October 19 approved lengthy and complex rules restricting tax relief for corporate interest, while rejecting proposals for a stricter regime for PFI companies.

The Chartered Institute of Taxation said the measure, effective from April 1, 2017, has been rushed. “It is unsatisfactory that businesses have been put in a position of having to plan for these proposals before they are enacted due to their significantly retrospective effect,” it said in an October 17 submission to the committee …

The corporate interest restriction measure in Schedule 5 occupies 156 pages of the 665-page finance bill. A series of amendments proposed by Labour member of Parliament Stella Creasy would have introduced stricter rules for PFI companies. Read more:

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

OECD recommends UK tax reform amid Brexit uncertainty

Uncertainties created by preparations for Brexit in 2019 will continue to weigh on the outlook of the UK economy until those uncertainties are resolved, said OECD Secretary-General Angel Gurría while presenting the think tank’s annual U.K. survey, which recommends increasing taxes on the self-employed.

The UK economy has weakened in the aftermath of the June 2016 vote to leave the European Union, the OECD noted, adding that the June 2017 general election led to a hung Parliament and further uncertainty. “In case Brexit gets reversed by political decision (change of majority, new referendum, etc.), the positive impact on growth would be significant,” states the OECD’s 2017 economic survey of the United Kingdom.

The government dismissed any suggestion of a second Brexit vote, however. “We are leaving the EU, and there will not be a second referendum,” a spokesperson said in an emailed statement, adding that the government is “working to achieve the best deal with the EU that protects jobs and the economy.” Read more:

My news story for Tax Analysts, October 18 (paywall)

UK chancellor urged to improve tax consultation and support investment

Tax professionals and business groups have called on the UK government to improve the tax policy consultation process and take steps to support business investment, as Chancellor of the Exchequer Philip Hammond prepares to deliver the autumn budget on November 22.

The Chartered Institute of Taxation said its message on consultations was simple — that the government should “consult fully before making changes to the tax system, observing closely” the tax consultation framework published in March 2011.

“Too many consultations begin when key decisions have already been made, shutting off potential better options to achieve the same goal,” the CIOT said. Read more:

My news story for Tax Analysts, October 10 (paywall)

UK, Scottish governments at odds over air departure tax

HM Treasury has denied that devolution of the UK’s air passenger duty was flawed, after the Scottish government said that moving forward with plans to replicate an existing exemption for travel from Scottish Highlands and Islands under the new air departure tax could put those regional economies at risk if the exemption is found to violate EU state aid rules.

“It is disappointing that the Scottish government has been unable to design a tax which is compliant with EU law,” a Treasury spokesperson said in an emailed statement October 5. “It is wrong for them to try and pass the blame for their unwillingness to take responsibility for their own tax.” Read more:

My news story for Tax Analysts, October 6 (paywall)

Office of Tax Simplification consults on radical capital allowances reform

Uncertainty regarding the scope of capital allowances rules that occupy 500 pages of UK tax legislation is a major source of complexity, the Office of Tax Simplification (OTS) said as it issued a call for evidence on tax relief for the cost of tangible business assets.

Capital allowances were flagged as an area of complexity in “almost every meeting” the OTS held with businesses and advisers in its recent review of issues relating to the corporation tax computation. The OTS is now examining whether the use of accounts depreciation to provide tax relief for capital expenditure on tangible assets would simplify tax return preparation for both incorporated and unincorporated businesses …

The OTS noted that the current capital allowances regime has timing incentives for capital expenditure, such as the annual investment allowance that accelerates tax relief … Stephen Herring, head of taxation at the Institute of Directors, told Tax Analysts that the annual investment allowance enables entrepreneurial companies to “accelerate capital investment and improve their productivity which, quite rightly, the government has set as a priority.” Tax simplification is needed, he said, but “not at the price of having an uncompetitive economy.” Read more:

My news story for Tax Analysts, October 4 (paywall)