50,0000 cap on tax reliefs -bill dodwells comments | AccountingWEB

50,0000 cap on tax reliefs -bill dodwells comments

Bill dodwell of delloittes had these comments which shows how cruel and one sided this is like all the state benefit caps.

We should now ask whether Budget 2012 met the objectives of ‘clear communication of policy objectives; an authentic consultation process; advance publication of draft legislation enabling further consultation; and the continuing need for effective parliamentary scrutiny’.
I’d like to focus on a single area: the proposed tax reliefs cap, due to be introduced from April 2013.
The cap will limit the deductions that an individual may claim to the higher of £50,000 or 25% of taxable income before reliefs.
The chancellor told the House of Commons that the cap would apply only to unlimited reliefs and would not apply to pensions’ contributions or Enterprise Investment Schemes (EIS).
The profile of this item was heightened greatly by the comment that the reliefs cap would include Gift Aid.
Individuals can claim four main types of unlimited deductions: costs and losses from a business in which they are personally engaged; costs and losses from investment businesses, such as buy-to-let, or losses on investments in unquoted companies; losses from tax schemes (such as the film schemes currently being litigated, or the software investment in Tower MCashback [HMRC v Tower MCashback LLP1 & Anor [2011] UKSC 19]); and Gift Aid.
With the exception of the tax scheme category, all losses are specifically sanctioned by tax law. If we follow the premise that tax should interfere as little as possible with economic choices, it’s not clear that there is any case for a reliefs cap.
However, perhaps in times of economic fragility, we should accept that there has to be a balance between encouraging wealthy individuals to invest in business and pay tax.
Equally, there seems no obvious justification to double the EIS limit.
If there is to be a cap, it should surely include all investments – but exclude Gift Aid. Any suggestion of charity abuse should be dealt with firmly by the Charity Commissioners and HMRC.
Let’s hope that the imminent consultation pays close attention to the Tax Policy Making principles.

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