Overnight Budget commentaries - what's the point?

Many years ago the Chancellor's March Budget heralded tax changes that would take effect from the following 6 April.

In those days there was a real client service need to summarise the Chancellor's announcements, what they would mean in practice and what action clients might need to take as a result.

That was then. This is now.

Ken Clarke moved the Budget to the Autumn - at which point the overnight Budget commentaries became of far less value. Many larger firms however continued to rush something into print within hours of the speech. This was often before anyone had had a good chance to digest and consider the implications of the detail contained in the supporting papers.

Some firms still produce their own or buy in a commercially produced 'overnight' Budget commentary to send out to their clients. I've hard the arguments for this. "Clients expect to get one from us." "They get one from every other accountant in the town." "They like them" (really?). To my mind there are plenty of better ways for accountants to distinguish themselves from the competition and to provide real client service. These Budget booklets are of very little value.

When Gordon Brown became Chancellor he moved the Budget statement back to March but enhanced the Autumn spending statement. Thus began his game of announcing tax changes two or three times in Budgets and pre-Budget reports.

The introduction of self assessment and computerised tax returns also constrained the facility for significant changes to be made at (very) short notice. Those that will take place with effect from 6 April 2008 were announced either last October in the PBR or even earlier.

So I repeat my question. What is the point of producing overnight Budget commentaries? Most of the National daily papers will have devoted more time to their commentaries than anyone rushing to create a Budget booklet. And of course the Booklet is out of date - sometimes within just 24 hours as further papers, con docs and clarification are published by HMRC, the Government and the Treasury.

The Tax Advice Network will not be producing an overnight Budget commentary. Indeed, as I noted in our newsletter this week, we will issue next week's newsletter ahead of the Budget. As usual it will feature 3 practical and commercial tax tips for accountants in general practice. Tax Adviser members of the Network may choose to add Budget commentary articles and blogs to the website after the Budget. But we won't be rushing to do so unless there is a good reason for so doing.

Is it one rule for MPs and another rule for the rest of us?

The papers are currently rife with stories of how MPs are arranging their affairs to enable them to draw the maximum allowances to supplement their salaries.

MPs place properties in trust, employ family members and do whatever they can to justify claims worth thousands of pounds each year. And the media damn them for bending the rules.

The recent party funding rows are much the same.

There is rarely any suggestion that anyone has broken the law. No. They have simply looked to secure the maximum reward for their efforts within the strict wording of the rules.

Those involved have adopted a literal and precise approach to interpreting the rules. Not a purposive approach.

When it comes to tax planning however the courts are increasingly adopting a purposive approach to interpretation of the law. What was Parliament's intention when the law was introduced or amended? More and more often HMRC are winning cases where the tax avoidance motive was more of a catalyst for the transaction in question than was the business motive.

Is there one rule for MPs and a different rule for everyone else? It's ok for MPs and political parties to adopt a literal approach to the rules and laws concerning allowances and funding. But everyone else is expected to comply with the intent behind tax laws rather then the specific wording thereof.

I have long been concerned by the way that people accused of criminal activities can escape on technicalities but that taxpayers are held to a higher standard. HMRC and the Government talk about 'unacceptable tax avoidance' which is invariably within the letter of the law but arguably undermines or runs contrary to the purpose of the legislation.

This seems to me to be evidence of the most audacious double standards.

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Large firms providing tax support

I have just become aware of another change in the marketplace. Another niche tax practice has been acquired by a much large quoted specialist professional services organisation.

The press release includes refers to the group's "extensive network of general practice accountants and other professionals who need to seek outside assistance to help service tax client’s needs”.

I've no doubt that's true however I wonder how many in that network will want to use the services of a large professional services firm? Well, I would say that wouldn't I?

One of the catalysts behind the creation of the Tax Advice Network was the realisation that thousands of smaller firms of accountants only go to the larger firms when they have no other option.

I spent 3 years as director of tax support for professionals at WJB Chiltern plc. Although a large number of firms used the tax helpline the level of fees generated from those firms was generally very low. They didn't like the high fees, the London base, the tiers of management or the fact that the tax practice was linked to an accountancy firm that might be competing for their clients.

Since then Chiltern plc has been taken over by BDO Stoy Hayward. Now Shaws (or Shaw Tax as they used to be known) has been taken over by Begbies Traynor.

It's early days but I'm hopeful that accountants will prefer to engage with members of the Tax Advice Network when they require tax support. Vetted and cost effective independent tax advisers. No tiers of management or needless overhead costs and advisers who understand the pressures of running their own practice so that they and the accountants can relate better to each other.

Should we call for MORE tax investigations?

When the merger of IR and HMC&E was announced I was privileged to attend a meeting (as a rep of ICAEW) at 11 Downing Street when Gus O’Donnell tried to justify the staff cuts that had also just been announced.

I recall saying to him (and still believe) that the tax take would go up if there were more people telling their mates about how they’d been caught out by the Revenue.

That would require more investigations (risk based and random) so as to catch out more people who have tried it on. I’m afraid that human nature being what it is there are probably plenty of people sailing close to the wind and also a goodly number who consciously underdeclare their self employed income.

In the first year of, what was then, the new Self Assessment system 10 years ago the Revenue seemed to be adopt a generous and laid back approach. There were far fewer enquiries even in the final month of the first enquiry window. So us professionals advised our clients to expect more enquiries the following year. But it didn’t happen then either. In fact it never happened.

Over the last ten years there has been a systemic failure by the Revenue to ensure that cheating tax payers are discouraged and honest taxpayers encouraged to fully declare their income.

The Government’s targets seem to place all of the emphasis on the aggregate level of tax, interest and penalties collected through their investigations. I think there should more emphasis on the number of enquiries and investigations. As things stand I’d bet more people ‘down the pub’, at 'the golf club' and elsewhere swap stories about what they’ve ‘got away with’ than about how they’ve been caught out.

Until and unless that situation changes the headline figures of tax collected through investigations will have no impact on the chancers who do not pay the ‘right’ amount of tax. None of their mates have been caught so those big numbers must relate to the big boys. After all, the Revenue are no longer interested in ’small fry’. At least that’s my view of the general perception. What do you think?

Taxpayers' Charter - a comeback? Spin? or a worthwhile exercise?

On 10 January Financial Secretary to the Treasury Jane Kennedy stated that:

'HM Revenue & Customs is today announcing that it will begin the process of working with interested parties on the development of a Taxpayers' Charter, which will set out both taxpayer rights and responsibilities in a single accessible document.'

The move is part of the powers consultation and is a welcome development. But what will it mean in real life even if it comes to pass?