A personal tax roadmap would help address complexity, says OTS

Misunderstandings remain about UK taxation of savings income, but a personal tax roadmap would help address its significant complexities, the Office of Tax Simplification said last month.

A range of tax reliefs to encourage saving works well for most taxpayers, and 95 percent of people pay no tax on savings income, the OTS said. But the interaction between rates and allowances is so complex that HMRC’s self-assessment computer software has sometimes “failed to get it right,” the OTS pointed out in a 50-page report titled Savings Income: Routes to Simplification.

My news story of May 29 for Tax Notes (paywall) is now reproduced in full with permission: U.K. Office of Tax Simplification Calls for Personal Tax Roadmap (pdf).

Charity Tax Commission invites comments on effectiveness of tax reliefs

An independent commission reviewing the UK’s tax treatment of charities has suggested that Brexit may present opportunities for addressing several issues. The Charity Tax Commission, which the NCVO established in October 2017, has invited comments by July 6.

Tax reliefs for charities are estimated to be worth £3.8 billion a year, and reliefs for donors are worth £1.5 billion, according to the commission.

My news story of March 19 for Tax Notes (paywall) is now reproduced in full with permission:

UK charity body launches review of tax breaks (PDF)

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)

‘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)

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.

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)

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 ($)

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

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)

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)