HMRC guidance points to old tax law

You can find out about criminal offences relating to offshore income and assets in a new guidance note on HMRC’s website. But the guidance points to some very old tax law.

While HMRC guidance for taxpayers published on GOV.UK does not normally include statutory references, this guidance note has six.

At the time of writing, there are links to sections 7 and 8 of the Taxes Management Act 1970 as reproduced at Legislation.gov.uk, the “official place of publication for newly enacted legislation”.


UPDATE 22 March: HMRC has deleted the links to sections 7 and 8 and apologised for the error.


The problem is that while some progress has been made in processing changes enacted in annual finance acts, Legislation.gov.uk still presents the original versions of some of the key consolidation acts. The original TMA 1970, which turned 48 last week, is here. Continue reading HMRC guidance points to old tax law

Designing good compliance into the tax system

HM Revenue & Customs estimates the total UK tax gap, the difference between the tax collected and the amount that should be collected “in theory”, at £34bn. Just £1.7bn relates to avoidance (excluding international tax planning strategies such as profit shifting, which are being addressed slowly but multilaterally), and £6bn relates to interpretation of the law.

In contrast, criminal attacks account for around £5bn and evasion another £5bn, while £3.5bn is attributed to the “hidden economy”.

Read more: My article for AAT Comment, 12 January

Tax is really complex, but where is the law?

The Scottish budget has heaped more complexity on an already complex income tax system. There are to be two new rates for taxpayers on low and middle incomes.

Already, a UK taxpayer may have income that is charged at default rates, savings rates and Scottish rates. These rates include:

the default basic rate, the default higher rate, the default additional rate, the savings basic rate, the savings higher rate, the savings additional rate, the starting rate for savings, the savings nil rate, the dividend nil rate, the dividend ordinary rate, the dividend upper rate, and the dividend additional rate …

That list is drawn from a quick look at sections 6 to 16 of the Income Tax Act 2007, as revised, published in Tolley’s Yellow Tax Handbook. (Other handbooks are available.) Continue reading Tax is really complex, but where is the law?

Scottish tax plans create additional complexity and anomalies, experts warn

Planned changes to Scottish rates of income tax would add further complexity to a system that is already difficult for taxpayers to understand, tax professionals said after Derek Mackay, cabinet secretary for finance and the constitution, set out Scotland’s draft budget on December 14.

“Complexity is the price Scots will pay for exercising devolved powers over income tax. Today’s announcement underlines the increasingly diverging nature of income tax between Scotland and the rest of the UK,” said Moira Kelly, chair of the Chartered Institute of Taxation’s Scottish Technical Committee. The proposals have the potential to “increase both the costs and complexity of administering Scottish income tax as well as throwing into the mix some interesting anomalies,” she said.

The changes would establish Scotland as “a country with a very distinct tax system from the rest of the UK,” said Lindsay Hayward, head of tax for PwC in Scotland.

My news story for Tax Analysts, December 15 (paywall)

UK government defends finance bill process amid concerns over scrutiny

Members of Parliament will have time to fully scrutinise the UK finance bill’s measures, Financial Secretary to the Treasury Mel Stride insisted after opposition MPs claimed that the government is seeking to avoid “proper scrutiny and transparency.”

Stride rejected opposition claims that the government is restricting the scope for amendments as MPs debated the bill at its second reading on December 11. Scottish National Party MP Kirsty Blackman asked why the government did not present an “amendment of the law” resolution for debate after the autumn budget on November 22.

My news story for Tax Analysts, December 14 (paywall)

‘Sufficient progress’ claimed in Brexit talks while businesses call for clarity

The European Commission is satisfied that “sufficient progress has been achieved” on three priority issues in phase 1 of the Brexit talks, the commission announced on December 8, while questions remained about the implications of commitments given regarding Northern Ireland.

It is now for the European Council to decide at a December 15 meeting whether the negotiations should proceed to their second phase, the commission said, adding that its assessment, set out in a communication to the European Council (Article 50), was based on a joint report agreed by negotiators and endorsed by UK Prime Minister Theresa May and Commission President Jean-Claude Juncker.

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

BEPS experts ponder uncertain future for arm’s-length principle

The arm’s-length principle for international transfer pricing continues to have widespread support, a senior OECD official told a London conference amid concerns about the effectiveness of the base erosion and profit-shifting project.

A discussion on the future of the arm’s-length principle on November 29 was hosted by the Oxford University Centre for Business Taxation, whose director Michael Devereux noted that the BEPS project has “triggered a material hike in the complexity of applying” the principle. Richard Collier, an associate fellow at the Centre for Business Taxation, warned that “a continued vulnerability to avoidance will present recurrent and profound difficulties.”

Tomas Balco, the recently appointed head of the transfer pricing unit at the OECD’s Centre for Tax Policy and Administration, offered a personal perspective of “where countries think we are” in relation to the arm’s-length principle … Noting that a previous speaker argued that the principle may not have a long-term future, Balco said feedback from delegates to the OECD’s Working Party 6 on transfer pricing suggests that “nobody thinks the patient is dying.” Read more:

My news story for Tax Analysts, December 2 ($)

How should we tax multinationals?

My Tax Analysts news story on the debate hosted by the Women in Tax network on November 20 is now free to view.

Governments considering how multinationals should be taxed must address the erosion of public trust in tax administrations, while businesses continue to stress the importance of certainty in tax matters, panellists told a conference hosted by the Women in Tax network at Pinsent Masons’s London office.

UK mulls royalty withholding tax to target digital economy

The UK government is consulting on an extension of withholding tax on royalty payments and is prepared to take unilateral action if insufficient progress is made on multilateral solutions to challenges posed by the digital economy, according to a position paper released alongside the autumn budget.

The challenge that digitisation poses for sustainability and fairness in the tax system can only be properly solved on an international basis, Chancellor of the Exchequer Philip Hammond told members of Parliament November 22. The position paper sets out the government’s emerging thinking about potential solutions, he said. “But in the meantime,” he added, “we will take what action we can.”

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

UK legislates for stand-alone customs regime and VAT changes

A bill to lay the foundations for a stand-alone, post-Brexit customs regime will help ensure “that goods can move smoothly and safely in and out of the UK, and that everyone pays the right tax,” the government said, a week after a parliamentary committee warned that failure to establish a Brexit-ready system would be catastrophic.

The 170-page taxation (cross-border trade) bill, formerly known as the customs bill, will allow the UK to set and collect its own duty on goods entering the country and to implement different outcomes of the Brexit negotiations, including an implementation period, HM Treasury and the Department for International Trade said in a joint release on November 21.

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

Governments must address need to restore public trust in tax, adviser says

Governments considering how multinationals should be taxed must address the erosion of public trust in tax administrations, while businesses continue to stress the importance of certainty in tax matters, panellists told a conference hosted by the Women in Tax network at Pinsent Masons’s London office November 20. Alexandra Readhead, an international tax and extractive industries consultant, said multinationals should be taxed “in a way that creates resources for public trust.”

Lizzie Arnold, a senior policy adviser at HM Treasury, outlined the UK government’s perspective on the taxation of multinationals. She described three aims, the first of which is to create a competitive corporate tax system … Giorgia Maffini, senior tax economist at the OECD, noted that residence and source are the two principles that define how multinationals are taxed. “We are trying to understand whether it’s time to think of another principle,” she said … Corporations are looking for “a bedrock of certainty” to provide stability, said Anna Elphick, vice president of tax for Asia and Africa at Unilever. Read more:

My news story for Tax Analysts, November 22 (paywall)