Archive for February, 2013

Spring 2013 Blog (yes, nearly March)

Thursday, February 28th, 2013

It’s been a while since I posted a blog – I know it’s lame when there’s so much going on in the tax world but I’ve just been terribly busy. I guess that’s a good complaint. We’re also redeveloping our website and I thought I’d get to write some wonderful rubbish in my first “new blog” – but web development is apparently a slower thing than I thought… such is life.

The first thing to say is there are some quite good and sensible tax update documents to download on the right hand side of our website. Please read the Spring newsletter and the Year End Review as these ones are actually rather good.

In blog terms…what has been happening?….well…for tax advisers, the wonderful TV theatre of the Public Accounts Committee’s expose of tax avoidance and tax avoiders was somewhat tarnished by a feeling that we have a Government that is more interested in trial by media and grandstanding than creating a tax system that works. I laughed when the leading tax journal ran an article publicly calling Margaret Hodge the “tax prat of the year” for her ridiculous conduct. Whilst the public might say “yes hang the tax avoiders” she seemed to have forgotten the Government creates the laws that allow people to pay tax – and that avoidance is legal and, frankly, an obligation of a publicly owned company who wishes to return the maximum profit to shareholders. The multi-national company directors will probably feel they have a duty to legitimately minimise tax which, to my mind, over-rides the need to donate on a voluntary basis to UK PLC. She even lambasted KPMG and other big 4 staff who took secondments to the Treasury to help consult on new tax law AND on other tax specialists who sit on committees (unpaid, unlike Mrs Hodge). She took a gun and just fired it around the room at any target shouting “death to tax avoidance”.

That said….I did stop buying coffee in a certain nameless American chain (or I did for a week or two) and felt better about my moral backbone.

What the PAC appeared intent to ignore is that global organisations can, to some extent, decide where to pay tax and that if you create a tax opportunity (the Patent Box is one) people will want to use it and save tax. I suspect the top brass at HMRC “get it” though – otherwise they wouldn’t have agreed the transfer pricing policies these multinationals adopt in order to manage profits. Mind you, there’s an assumption in all of this that just because a company has a high turnover it has a UK profit and that’s not the case. I’m guessing that various public bodies have a large turnover (Post Office?) and make no profit (and pay no tax). Nobody said these nasty tax avoiders were failing to account for their legitimate VAT or PAYE or that they were using specific tax avoidance schemes. They simply ensured their Intellectual Property assets and other profit centres are properly offshore. To be fair, the new “Patent Box” (10% tax) rules are designed to bring that profit into the UK – we’re not the first country to realise patent royalties for global firms either generate no tax or low tax for a country – take your pick.

Of course, it’s a small world and it’s hard to collect tax in the UK if we have uncompetitive rates and I think this Budget may seem some radical “post AA rating” changes. Although I was tempted to tip a high tax on Romanian Horse Beef (is there such a thing or is “Beef” always from a cow?) I think that further cuts on some taxes might be possible e.g. corporation tax and capital gains tax. However, where will the money come from? National Insurance hike? Hmm – more VAT? The real problem is that cuts in spending haven’t really started so national debt is still growing rapidly. Don’t envy Osborne’s job much.

For those who have not been paying close attention I think the Scotland Act will start to surface as an issue soon. There are two big news changes. Firstly, we all get 10% off income tax (yippee) – by which I mean 20% becomes 10% and 40% becomes 30%. However, this isn’t really good news as we will have a Scottish Rate of Income Tax (“SRIT”). If my prediction is correct that Scotland continues to be a high tax and spend country it may be higher than in England (I might be wrong) and I would refer to it as the Scottish Higher Income Tax (“S…”). You get my point. Is this sensible… it’s not fantasy… it’s reality from April 2016. Another raft of legislation and a whole new test for Scottish residency. Rumours that Rothesay is to be our very own Isle of Man are apparently not true.

Secondly, we are scrapping SDLT at April 2015. Yippee…. But replacing it with the Land and Buildings Transaction Tax. LBTT. Consultation is out already. Expect some tinkering with rates and a removal of the “cliffs” at various price points.

To be blunt, without full independence and our own currency etc., does anybody else wonder what constructive purpose is served for our economy by creating a raft of different tax rules from England? Does this encourage or discourage inward investment? Or does it just help Holyrood politicians feel they have more power? Who voted for the Scotland Act? I didn’t – I’m sure the Parliament was created with a much smaller tax varying power….. All very strange but I feel like I’ve just given a toddler a pack of fireworks and told them to go into the garden and play with them. Even the former head of the Chartered Institute of Taxation has referred to the Scotland Act’s tax changes as “Brave” (that was without the “heart” on the end).

Just how “brave” would full indpendence be – and….come to think of it…just how much of our Government’s time up here and public money is being spent on the independence campaign compared with running the country? (or running aspects of it – with some at Westminster and some in Brussels).

I was tempted to comment on what tax system we might get post 2014 – but what’s the point – unless the Polls change it sounds like the whole debate is a waste of public money, Government and media time. The Polls leave me wondering if there should have been a referendum on the Scotland Act – “Do you want one tax system in the UK or two?”.

There are other things to say about tax, of course. As we reach another tax year end I have to ensure you all read the Year End Tax Review on our website and remember to invest your ISAs, your pensions, make charity contributions, dispose of assets for capital gains annual exemptions, check you’ve made any Seed EIS investments etc. All very exciting.

And….don’t forget the nasty 50% rate becomes 45% at April 2013. Doesn’t seem to affect many Scots during a long recession and based on what seems to be happening in the media I’m guessing that most people on anything more than a low basic wage would be delighted to give all their money in taxes on the grounds that is fair and morally right. That’s what the Politicians seem to think people want – squeeze the rich….

Final comment – as some of you know I am involved with the committee for Epilepsy Scotland’s charity fundraising “Wags Dinner” – it’s a night where 4 wags (comic speakers) go head to head – this one is a “wag of wags” again – so excellent fun guaranteed – – if you can help please come along – take a few seats, a table, or donate a prize. The work they do is excellent and we all know the charity sector continues to suffer from the recession!

Must dash – off to finalise my preparations for the seminar tonight (at 29). If you missed your place call Margaret MacKenzie in our office on 0141 887 7811 for more details..

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