Second Finance Bill has just 11 clauses

The Second of this year's three Finance Bills was published on 30 June.

In just 11 clauses and 5 schedules it covers key elements of the June Budget regarding:

• new rates of CT, CGT, VAT and IPT
• simplification of the rules to remove tax relief from pension contributions by those earning more than £150k
• the rule requiring anyone aged 75 to use their pension fund to buy an annuity
• the exemption from tax of MPs' expenses and allowances
• the corporation tax rules on loan relationships and derivative contracts
• An anti-avoidance rule affecting insurance companies
  

The Finance Bill will receive Royal Assent before the end of the month when Parliament goes into recess. In addition to the Finance Bill, the Government has also published Explanatory Notes and Lobby Notes.

What is worse? To be a tax cheat or a benefit cheat?

Three issues conspired to prompt this post.

The first was a few months back when I was working from home. It seemed that commercial radio was full of adverts encouraging tax credit claimants to notify HMRC whenever their circumstances changed. In effect to voluntarily admit they their tax credits should be cut. "Some chance" I thought. These were not the equivalent of the adverts encouraging the prompt submission of tax returns, which are the only vaguely related tax advert I can recall.

Then, on last week's 'Now Show' on Radio 4, which I have already flagged on the Accountant jokes and fun blog, came reference to the different ways in which the public are encouraged to report tax evasion and 'benefit thieves'.

And finally I have just read a posting on the Tax Research blog: Benefit fraud is 624 times more serious than tax evasion. Leaving aside the admitted hyperbole in that post there is a serious point with which I would concur.

Of course there are differences between those who deliberately claim benefits to which they are not entitled and those who deliberately fail to notify their liability to pay tax or who lie on their tax returns. There is also the confusion caused by describing these tax evaders as tax avoiders. This lumps them in with otherwise law abiding taxpayers who have chosen to adopt what they are advised are strategies they can pursue to reduce their tax liabilities whilst staying within the letter of the law. (I'm no fan of such schemes but the taxpayers involved at least have grounds for believing they are within the law).

I suspect it is far easier to identify, track, catch and prosecute benefit cheats than it is to do the same with tax cheats. Are sufficient resources allocated to the latter however? I think not and the last Government's constant reduction in manpower within HMRC makes such prosecutions even less likely. I think that's a shame as more people perceive they are getting away with their tax fraud. They tell their friends who may choose to copy them and so the level of tax fraud grows. I know our tax system is complicated and that some people get caught out by unfair tax laws. That's again quite different to the deliberate evasion of taxes. And more resources should be applied to stop it. Do you agree?

Huge change in approach means we'll get 3 Finance Acts in 2010

The first (truncated) 2010 Finance Act was rushed through just before the House rose for the General Election.

The Budget Red Book notes at para 2.118 that a new Finance Bill will be published very shortly "to ensure swift Royal Assent for its key priorities". This will result in the Finance (No 2) Act 2010.

We are also promised a further Finance Bill in the autumn. This will be published in draft for comment in July. This is in accordance with the proposed new convention whereby the majority of tax changes are initially published in draft for consultation three months before formal publication (para 2.11 of Tax policy making: a new approach).

This third bill will then become Finance (No 3) Act 2010.

I'm telling you - the proposals for a New approach to Tax Policy Making are ambitious and very welcome. It seems clear that the professional bodies have got their points across effectively to the both the Tories and the LibDems in recent years. The last Government's approach to Tax Policy making on the hoof and the evidently rushed and botched legislation that ensued was a disgrace. These new proposals, if carried through, will set a new standard and help improve our creaking tax system.

Tax Policy Making - Oxford University Tax Conference

I was already looking forward to attending the Oxford University's Centre for Business Taxation Summer Conference on 2 July 2010. The keynote speech will be presented by David Gauke, Exchequer Secretary to HM Treasury. This is quite a coup as it is his name that appears as the signatory on page 3 of the June Budget Consultation document "Tax Policy making: a new approach."

As indicated in my last blog post I consider this to be an ambitious and welcome set of proposals to move far away from the increasingly crazy process that the last Government permitted - if not encouraged.

There is no charge for attending the Oxford business tax conference which takes place on 2nd and 3rd July 2010. Programme and booking details here.

Draft tax legislation to be available for comments

First impressions of the June Budget document on "Tax Policy Making - a new approach" are very positive. If all of the proposals therein are brought into effect this would represent a bigger change even than the move of tax policy making from the (old) Inland Revenue to HM Treasury in 2005. And these proposals are far more welcome, progressive and taxpayer friendly too.

Without attempting to summarise the entire 16 page document let me just highlight one of the most welcome ambitions expressed therein:

3.4 Subject to views from interested parties, the Government proposes a minimum of eight weeks for comments on the draft Finance Bill legislation. This will ensure that there is sufficient time for the Office of Parliamentary Counsel to consider comments and amend the draft legislation, where necessary, ahead of publication of the Finance Bill.

3.5 However, a significant volume of changes to the tax code are dealt with outside the Finance Bill, through secondary legislation. Where secondary legislation makes a substantive change to the tax code, the Government will apply the same principles and disciplines as are applied to Finance Bill legislation, including publishing the legislation in draft for scrutiny. For secondary legislation, the Government proposes a minimum of four weeks for consultation on the legislation itself.

3.6 The Government welcomes views from interested parties on the practicalities for consulting on draft legislation, including the format and channel for providing comments, to ensure that it is efficient and effective for all involved.