Monday, January 24, 2011
The FT questions whether there is any justification for the Chief Exec of HMRC having such a high level personal aide "(Not even Sir Gus O’Donnell, the cabinet secretary, has such a senior personal assistant.)"
The answer I supect comes back to the governance structure of HMRC and the way some people expect the person at the top to be able to speak knowledgeably on any subject related to operational matters. In practice however, the role of Lesley Strathie, Chief Executive and Permanent Secretary does not require her to understand all aspects of our tax system. And few people are able to do this anyway.
I would have expected Dave Hartnett, "the senior tax professional in HMRC", to be the one called to appear before Select Committees, not the Chief Exec. I suspect that the mistake being made is that of the MPs. The appointment of Carol Bristow may simply reflect Dame Lesley's desire to ensure that she is best placed to provide MPs with informed answers to their enquiries.
It would of course be better if the MPs could be persuaded that they should be talking to Dave Hartnett rather than Dame Lesley. BUT for them it's easier to appear to be 'in charge' if they quiz and challenge someone who they know does not have a full command of key tax matters under discussion. I'd bet they don't want to call Dave Hartnett as he would expose the Select Committee's lack of understanding of the tax system.
What do you think?
Friday, January 21, 2011
Ed Balls will spar more effectively with George Osborne than Alan Johnson would have dared. At least Ed has some understanding of the tax system and of economic policy. We can expect him to pursue more realistic economic and tax policies than might otherwise have been the case. How many will be properly costed and realistic rather than simply populist remains to be seen.
It often seemed that some of the more effective tax policies pursued by Gordon Brown when he was Chancellor could be traced back to Ed Balls. Rightly or wrongly I assumed that the worst tax changes introduced by Brown were entirely his own idea. I trust therefore that Ed Balls had no hand in the IR35 fiasco or the short-lived introduction of a 0% starter rate of corporation tax. What we do know is that he has long claimed he would not have made the mistake of abolishing the 10p starter rate of income tax.
Will Ed’s, no doubt, continued connections with civil servants from his days at the Treasury come in useful? For example, will he be able to engineer ‘leaks’ that damage the Government?
I suspect there will continue to be a need to debunk tax stories whether they emanate from the Government or from the opposition. Tim Harford does this on his Radio 4 programme, ‘More or Less’ and I have a go too on the TaxBuzz blog.
Mark Lee, Chairman of the Tax Advice Network
Thursday, January 20, 2011
“At the time the Conservatives called the National Insurance increase a tax on jobs. The Chartered Institute of Personnel and Development [CIPD] say that that would have taken 75,000 jobs, VAT would cost 250,000 jobs.”
“[Alan Johnson's] claim that the VAT rise would cost 250,000 jobs appears to be a figure plucked from the ether without supporting evidence.”This was harsh as shown on the fullfact.org website.
Tuesday, January 18, 2011
According to media reports Elmer was, until 2002, chief operating officer of the bank in the Cayman Islands. Bank Julius Baer is one of Switzerland’s top private banks and accuses Elmer of stealing the information he has now passed to Wikileaks.
As the Telegraph reports: Celebrities using tax avoidance schemes could be in the spotlight
Taking advantage of complex tax laws in order to reduce the individual burden is perfectly legal and has been standard practice among the super-rich for years.Whilst that is true, I have mentioned on this TaxBuzz blog many times, that the dividing line between legal tax avoidance and illegal tax evasion is more blurred than some would have us believe.
Sunday, January 16, 2011
Football stars plan to dodge 50p tax rateThe Press Association are reporting the 'new' story as leading to a "Crackdown on top rate tax loophole". As the Sunday Times report though HMRC have been trying to do this for years.
Scheme being considered by Manchester United, Arsenal and Liverpool means players can get salaries as interest-free loans
Friday, January 14, 2011
The FT's headline, as you might expect is more accurate, suggesting that ‘Non-dom’ numbers fall in wake of levy'. However the article also reveals the figures for 3 years:
- 2006/07 -117,000
- 2007/08 - 139,000
- 2008/09 - 123,000
It's also worth noting that, contrary to some reports, the figures do not represent 'the number of wealthy foreigners' who live in the UK. HMRC's figures are simply of those people who have ticked a specific box on their tax return each year. And many of them will be second or third generation immigrants who can technically claim non-dom status despite having no great wealth or assets outside of the UK. They might just be hedging their bets.
Anyway, the guidance as regards ticking the 'non-dom' box changed in 2008/09 so many people who ticked it in 2007/08 no longer had to tick it in 2008/09.
I doubt that they all left the country. And, in any event, by my reckoning there were 6,000 more non-doms here in 2008/09 than there were two years previously. Another two years have since passed. I wonder how many are here now?
Thursday, January 13, 2011
The latest PAYE failing is an announcement that during 2008-9 and 2009-10 state pension income was omitted from the tax codes issued to 250,000 pensioners with second pensions or other earned income. The state pension is taxable; the tax due is normally collected through the tax code used to calculate the net income from their second pension. Where insufficient tax has been paid in such cases, the Government has announced that pensioners will not be asked to pay up.
Wednesday, January 12, 2011
The writer seems not to understand how most entrepreneurs and growing businesses operate as he concludes his letter:
British job creators must be allowed to keep more of what they earn so they can hire more staff, purchase more equipment and reinvest in their businesses. The chancellor must take heed by removing the 50p income tax rate.Most 'British job creators' run companies that pay corporation tax on their profits. The main rate of Corporation Tax is not 50%. It's just 28%. Only monies paid out of the companies to the owners and directors are subject to 50% INCOME tax (on amounts above £150k pa).
Together with National Insurance, the 50p tax rate means that the highest earners keep less than half what they earn. This cannot be ideal but there do seem to be political reasons to keep the 50% rate for the moment.
Monday, January 10, 2011
HMRC's twitter policy statement says that if you follow this account, you can expect 1-2 tweets a day covering information about HMRC and tax, including news, publications, web content, consultations, speeches and publicity campaigns.Todate the emphasis has been on the forthcoming self assessment online tax return filing deadline but the taxman's tweets have also contained useful tips re the VAT flat rate scheme, payroll and corporation tax changes.
Sunday, January 9, 2011
This may be what the public thinks it wants but at a time when the Government wants to increase tax receipts it makes no sense.
Imagine a bank has a profit of £10m. How much tax gets paid if it pays no bonus?
Just Corporation tax on the profits. That's 28% of £10m which is £2.8m
If the bank ignores requests for restraint and pays out £8m as bonuses, how much tax is paid?
Well, in addition to the bonuses the bank will pay employers' NICs on the bonuses. So that's 12.8% of the £8m, being £1,024,000.
The bank will still pay corporation tax on the remaining profits: That's £10m-£8m-£1,024,000 = £976,000. And 28% of that is just £273,280.
The total tax paid by the bank then is:
Employers' NICs : £1,024,000
Corporation tax: £273,280
Total.................. £1,297,280 - compared to the £2.8m tax if it paid none of the bonus.
But that's not the end of the story as the bankers will be subject to tax on the bonuses they receive: Income tax @50%, so that's £4m, plus 1% national insurance = £80,000
So the total tax paid if the bank pays £8m of bonuses is:
- Tax paid by the bank: £1,297,280
- Tax paid by bankers: £4,080,000
Of course if Labour's one-off banker bonus tax were reintroduced it would generate even more tax. But that's a different argument. The PM should be explaining why he doesn't want to do this, rather than arguing for smaller bonus payouts. That makes no sense as the bigger the bonuses the more tax is paid.
Thursday, January 6, 2011
Almost a year ago in February 2010 I wrote a post on this blog explaining WHEN tax rises actually generate money for the Exchequer. I focused on those key taxes that contribute the most money each year. So I looked at income tax, corporation tax, National Insurance and VAT.
Wednesday, January 5, 2011
"Workers could be fined more than £440 million this year for handing in their self-assessment tax forms late or miscalculating how much they owe, it has been estimated."
Tuesday, January 4, 2011
‘The cost of many goods and services will rise by more than three times the rate of the VAT increase as businesses use the tax to mask a more dramatic price review, leading industry experts warn today.’
‘John Lewis, Marks & Spencer, Tesco and other big retailers have said they will delay (sic) the introduction of today's VAT increases on most or all of their products for at least a few weeks as they wait to see what action their rivals take.’
‘Middle-class households will have to pay nearly £600 in extra taxes this year after today’s 2.5 per cent rise in VAT, according to new research carried out for The Times.’
‘Shoppers face chaos from today as many stores are neglecting to adjust the price tags on goods for the VAT rise and will simply charge more at the till. Retailers will also use the VAT rise to disguise hefty price hikes of more than three times the necessary amount, it was claimed last night.’
‘STRUGGLING Brits are being hit with a triple whammy – a painful VAT increase along with huge rises in train fares and petrol prices.’
Headlines sell papers. Notice the confusion though. Some report that retailers are increasing their prices by more than the increase in VAT. Others report that retailers will have to absorb the increase and will suffer reduced profits as a result. Depends who you ask I guess.
And let's not forget that:
- VAT also went up by 2.5% last January.
- The average rate of VAT in the EU is almost 21%.
Monday, January 3, 2011
As in previous years many of the posts were inspired by tax related stories in the media.
If there's one consistent theme it is one of debunking myths and misconceptions about our tax system. Many of these are spread by partly informed journalists and commentators (online, on radio or on tv).
The other key areas covered by blog posts were much the same as in 2009 - with a heavy emphasis on tax avoidance, the prospects of a General Anti Avoidance Rule, HMRC Spotlights and tax amnesties.
I also highlighted a number of key lessons about the tax system drawn from decisions of the Courts and Tribunals, offered predictions and shared my view on various topical issues including tax issues specific to MPs (again).
Here are what I consider to be my top ten posts of 2010:
9 Nov: Many people may have paid the wrong tax - why is that? - One of 3 posts that debunk elements of the confusing Panorama report on the PAYE story about 6 million wrong tax codes.
26 Oct: The IoD needs to be careful what it wishes for re IR35 - An objective look at the rationale for the rules known as 'IR35'
4 Oct: "The taxman is happy with my return' - Sure? - Debunking the idea that your tax return has been agreed.
20 Sept: No - ISAs are not a form of tax avoidance - Debunking this myth once and for all
20 Sept: Doesn't everyone try to avoid or evade taxes? - Well, a large majority anyway. Let's stop the double standards.
1 Sept: Tax planning schemes - The latest in a series of posts that debunk the idea that 'abusive' schemes are attractive or worthwhile in the majority of cases.
1 June: CGT: Since when does an automatic relief constitute tax avoidance? - Debunking misleading press stories
21 March: Why did the BBC's Sian Williams' appeal get to the Tax Tribunal? - Debunking reports of this tax case
31 Jan: Is it ever morally acceptable to fiddle your tax form? (Radio4) - Debunking the biased reporting in the radio programme concerned.
29 Jan: Retrospective tax avoidance legislation ruled LEGAL - Highlighting the implications of a key decision by the Tax Tribunal
What can readers expect in 2011? Well, subject to a multitude of requests to the contrary, I see this blog evolving in 3 key ways:
- There will be fewer topics aimed directly at accountants. Most of these will instead appear on my blog for ambitious professionals (which I started in May 2006)
- Blog posts here will be shorter and with briefer commentaries.
- The main focus will be debunking tax stories in the mainstream media - online, on tv, on radio and in the press.
A similar, but more in depth, review last year also examined the original motivation and targets for this blog: Review of TaxBuzz blog 2009