Friday, July 29, 2011

Tax tease of the week: Cutting the 50p top rate tax

First the Evening Standard suggested that the Chancellor was considering the removal of the 50p top rate tax band. Then London Mayor, Boris Johnson, renewed his campaign for the 50p rate to be cut, saying it made Britain more expensive for executives than most rival countries.

The Evening Standard reported that Boris claimed that the tax, which hits people earning £150,000 or more a year, was "not really raking in huge sums". Of course it isn't (yet) Boris. The first year to which it related was 2010/11 and much of the 50p rate tax payable for that year isn't due until 31 January 2012.

I'm no fan of the 50p top rate and have heard many business people reference it as a reason for moving overseas and for foreign executives refusing to come to London. With the addition of the 1% surcharge on high earnings the effect is that those high earners get to keep less than half of their bonuses etc. Psychologically this is bound to be demotivating.

BUT, as yet no one can say for certain how much additional tax will be collected re the first year in which the 50p rate operated.

Thursday, July 28, 2011

The Taxman's trouble of the week: The paper shortage

I was in two minds whether to post this here or on my accountancy and tax fun blog.

Believe it or not, but HMRC has run out of paper! This means that some self employed people who are due to pay tax on 31 July will not get their reminder statement until August.

Much the same thing happened in January 2008 - as HMRC admit in their FAQs about the current farce.

HMRC are saying that anyone who is affected will not be subject to interest on the late payment as long as the tax due is paid within 30 days of when the statement arrives. Some of the people affected by the paper shortage will already be planning to pay their tax as it's an annual liability. The amount due will typically also be clear from the statements issued earlier in the year by reference to the tax due on 31 January 2011.

If you do pay the tax late I suspect that the computer will automatically charge the interest that would otherwise be due. You will then need to call or write to the taxman to get the interest charge wiped from your record.

I was going to finish by hoping that HMRC will have enough notepaper to record the details of telephone conversations when taxpayers challenge the interest charges. But the records are probably all stored online now.

Friday, July 8, 2011

Tax Failure of the week: Begbies sells tax division due to falling demand

The Evening Standard reports that quoted top 20 firm Begbies Traynor is selling its tax division, under the headline: "No money in loopholes". The Standard goes on to report that Begbies suffered from a lower demand than anticipated for its tax services:
"primarily due to a tougher stance towards tax planning activities adopted by the Government and HMRC."
Regular readers will know that I am no fan of the sort of tax schemes being attacked by HMRC as well as by successive Governments. Whist there are some boutique tax practices that focus on promoting such schemes I am surprised to read that Begbies are effectively admitting that this was a key part of their business.

There has always been and will continue to be plenty of work for good tax advisers. They do not need to advocate fancy schemes either when solving tax problems or when helping with genuine tax planning.

I would guess that the issue here is that Begbies tax division was tasked with achieving unrealistic fee income targets - perhaps by reference to the sort of fees that are only achieved when putting wealthy clients into fancy schemes. I would agree that there are fewer such schemes and that demand has fallen sharply as people become more aware of the risks and downsides. I also anticipate that HMRC will win further 'avoidance' cases in the courts over the next couple of years. Remember that these cases typically relate to tax 'avoided' between 5 and 10 years previously.

Anyway. If you want to get in touch with vetted independent expert tax advisers, you know where to go.

Related posts
  • Are Stamp Duty planning schemes worth the money?
  • NO. The Revenue do NOT approve Disclosed tax schemes
  • Tax planning to be wary of
  • Were you wasting time advocating this tax scheme?
  • Naive promoters of tax avoidance schemes
  • Tax avoidance is a card game - the metaphors multiply

  • Monday, July 4, 2011

    Some of the practical tax issues addressed recently...

    The Tax Advice Network newsletters are a key benefit provided to those who register on the website. Every week we address 3 topical practical and commercial tax issues to help accountants help their clients. The following have all been addressed in recent weeks:

    PAYE reconciliations
    The PAYE reconciliation process for the tax year 2010/11 is due to start this month, which means some of your clients may soon receive tax calculations on forms P800.

    VAT registration campaign starts
    The proposed VAT registration 'amnesty' has been launched this week under the title ' VAT Initiative'. It amounts to a disclosure opportunity for businesses that have failed to register for VAT on time.

    Accompanying papers with tax returns
    A recent case represents a clear warning to anybody enclosing information with clients' tax returns.

    Capital Allowances trap
    You will be aware the Annual Investment Allowance (AIA) cap is being reduced from £100,000 to £25,000 on 1 April 2012 (6 April for unincorporated businesses), but have you warned your clients?

    The HMRC toolkits are a bit like marmite - you either love them or hate them.

    IHT guidance
    Dealing with inheritance tax and trusts tends to be a specialist strand of tax practice, but occasionally you may have to address these issues on behalf of your client.

    SDLT and other online issues
    A new style Stamp Duty Land Tax return form (SDLT1) was introduced on 1 April 2011, which is due to become compulsory from 4 July 2011.

    Friday, July 1, 2011

    Two new thoughts about a possible UK tax GAAR

    Both of the following were inspired by listening to Graham Aaronson speak at the Wyman Symposium earlier this week.

    The acronym
    Listening to Graham speak I realised that if he does draft a GAAR it will not be a General Anti-Avoidance Rule. It will be a General Anti-ABUSE Rule. An important distinction. Same initials though....

    Who drafts GAARs?
    The Irish, Australian and Canadian GAARs were drafted by their Revenue authorities. In each case their judges have subsequently sought to temper the impact of the GAAR - perhaps because it is felt to be overly draconian and impractical.

    Graham and his expert committee have now established the principles a UK GAAR would need to satisfy. I summarised an earlier version of these as the GAAR commandments.

    Graham is still unsure whether the committee will be able to draft a GAAR that satisfies the key principles. If they succeed the GAAR will be very different to those in other countries. As such the experiences in those places will not be wholly relevant. This is a key point that those who are against the idea of a GAAR really need to take on board.