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The ‘let’s get the accountants’ Budget

17th Mar 2014
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While looking into pending consultations and possible Budget announcements, John Stokdyk has seen the tide turning in uncomfortable directions for the profession.

Time was that the Conservatives were viewed as the profession’s friend and Austin Mitchell and his socialist pals on the Labour benches were the politicians that accountants feared most.

New Labour may have changed that, but as well as giving banks a light regulatory touch, they gave accountants a relatively easy ride.

Get ready for Budget 2014

- TaxCalc Budget sweepstake - How many times will Osborne say "tax"?

- Budget discussion group

- More Budget comment and previews

- Register now for Rebecca Benneyworth's Small business Budget report (available 24 March)

When more than 50 MPs came to Westminster in 2010, AccountingWEB celebrated in the hope that we would see a more dispassionate, evidence-based approach to tax legislation. Initial signs were good with a new approach to tax-making policy promised by the coalition.

But the longer this Parliament has gone on and the more campaigners have ramped up the stakes on tax avoidance, the harder things have been getting for many practitoners (and I haven’t even mentioned RTI, which was driven by the coalition’s big universal credit reform).

Legislation being readied for Parliament in the coming months includes Draconian measures against marketed tax schemes that have advisers up in arms, and draft clauses designed to prevent limited liability partnerships from using disguised employment to avoid tax.

Some loopholes may be closed, but the impact will be felt particularly hard by accountancy firms (and junior partners within them) that have adopted LLP status and will be caught by the new anti-avoidance law.

What has also become apparent during the past few months is that the Treasury and HMRC appear to be losing sight of the principles behind the new policy-making approach. Campaigners against the marketed tax avoidance provisions point out that the consultation document was published at the height of self assessment season on 24 January and only allowed a month for responses at a time when we know that the profession has a lot of other things on its mind.

On the LLP partnership rules, the focus of the legislation has changed to the point that the Lords Economic Affairs Committee called for them to be delayed.

“Given the change of approach to the provisions that took place in December, we conclude that there is too little time to settle all the outstanding issues, get the legislation right and enable businesses to adapt to that legislation in time for a 6 April start,” the committee argued in its report on the draft clauses.

And what about that other great hope - tax simplification? It has become another of those projects that start with good intentions that ends up skidding off track into the political sand. It could be argued that the complexity of the tax system is what keeps many accountants in work, but the clear hope that has emerged from AccountingWEB members over the years is that it really is time for someone to sort out this ridiculous mess - for example by the reasonably simple expedient of merging income tax and national insurance contributions.

Did you ever have any expectation that this would be an accountant-friendly government? And do you share my pessimism about the impact next week’s Budget is likely to have on the profession? For more preparations and debate, visit our Budget discussion group.

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By mgbacchus
14th Mar 2014 23:27

No-one is out to get the accountants
I agree that the current government is making tax avoidance harder.  I don't agree that this translates to "let's get the accountants". Frankly, if marketed tax schemes and disguised employment schemes went tomorrow I, and I speak as an accountant, would not shed a single tear.  We shouldn't be advising our clients on aggressive tax avoidance schemes in the first place and if people go into them regardless, then they should plan and expect for those schemes to be outlawed at some point. We certainly have to advise clients on tax, not least because the rules are so complicated.  And this is where I will agree with the article - if tax was simplified there would be less need for client advice, hopefully (although not certainly) less scope for aggressive avoidance, and we could concentrate on providing clients with a worthwhile service in improving their businesses. We all have to spend far too long on tax matters in what is ultimately a no-win game. I've written a piece on my new blog, baccma.blogspot.co.uk, which covers my views on the LLP mess and concludes that we would be in a far better place now if HMRC treated limited partnerships like limited companies and in an even better place if government would bite the bullet and merge income tax and national insurance.

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By Morgan Hunt
18th Mar 2014 10:10

A budget for demand in skills

The budget announcement is an important forecasting tool for Recruiters as it sets what is likely to be the demand side for skills. 'Getting at Accountants' isn't a consideration in the equation. What is more important is that any new regulation/legislation is manageable and enforceable through available skills. We applaud the above comment which highlights the importance of concentrating on providing a service to improve a client's business. This is where accounting can add most value and indeed where the most sought after skills are. Accounting skills are changing; they evolve over successive governments, budget periods, after key events and global market disruption. Morgan Hunt always look to find which sector disciplines of accounting are doing well, for example Real Estate, and anything resulting from the impact of the budget or otherwise.

For more information on accounting sectors that are doing well go to: http://goo.gl/g8uGN2

Paul Thomas

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By David Heaton
19th Mar 2014 11:08

If only it was so easy ...

As to the LLP changes, it's not really about avoidance - if a worker (be that worker a waiter in an LLP-owned and -run restaurant, or a professional in a big law firm) is a member of an LLP, he is not an employee.  Look at the economic position of 'fixed share' partners in failed law firms such as Halliwells and Cobbetts. It's about raising more money for the Exchequer by changing the rules.  Some of those affected are wealthy professionals, some are people working hard in small  businesses.  It's badged 'anti-avoidance' to justify it.

As to merging tax and NI, if it was so easy it would have been done by now.  I have invested huge amounts of time over many years on various DSS/IR/HMRC committees to look into it, and it is simply not practical without a very major upheaval that no Chancellor has yet thought worthwhile.  You'd have to rewrite the contributory benefits law because you'd have to break and re-design the link to contributions.  You'd also need very extensive and long-lasting transitional rules because of the link to the state pension.  It might simplify payroll administration marginally (it's all done by computer now anyway), but at the cost of re-writing HMRC's and DWP's systems.

And the political capital to be squandered by admitting that NI is just another tax, which makes the basic rate 32%, is immense.  People do believe that their NI is a contribution to a pension, which it is - it's actually to some current retired person's pension, not your own, but there is a link to your own future state pension that makes the NI less politically charged than income tax..

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