Sneaky little taxes

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Rebecca Cave reviews the proposed increases in fees, levies, rates and supplements. 

Cast your mind back a year to the pre-election period when Conservative politicians were promising not to raise taxes. On winning the election they met that promise by legislating for a tax lock which froze the rates of income tax, VAT and class 1 NIC for the extent of this Parliament. Corporation tax rates are set to reduce to 18% by 2020.

If the main taxes can’t go up, what does a politician do? Raise money in other ways of course, and hope no one notices those sneaky new taxes. Here is the evidence.

Tax tribunal fees

The Ministry of Justice is advocating fees for taxpayers who challenge HMRC decisions at the tax tribunal. Currently the taxpayer pays no court fee to have their appeal heard.

The proposed fees will start at £50 to list a basic case, rising to £200 for complex cases. If the hearing goes ahead, the taxpayer will have to pay up to £1,000 and further fees in order to appeal to the Upper Tier Tribunal. These costs will only be refunded to the taxpayer in very exceptional circumstances; for example, where HMRC’s behaviour has been unreasonable.

Probate fees

In order to active a deceased person’s will, the executors of the estate need to apply for probate and pay a registration fee of £215. This fee currently applies where value of the estate is £5,000 or more. The Ministry of Justice wants to increase that fee threshold to £50,000, but also raise the minimum fee to £300. This may relieve 57% of estates from paying any probate fee at all, but larger estates will pay fees on a sliding scale of up to £20,000 for an estate valued at £2m or more.

Apprenticeship levy

The Government wants employers to fund more apprenticeships. The logical way to do this would be to increase employer’s class 1 NIC. However, the tax lock has blocked any increase in class 1 NIC.

Instead the required funds will be raised via the apprenticeship levy. This will apply from 6 April 2017 at the rate of 0.5% of employees’ wages, calculated in exactly the same way as employer’s class 1 NIC. The apprenticeship levy will be reported in a new box on the RTI returns and every employer will have a £15,000 allowance to set against the levy. The net effect is that only the largest employers will pay the apprenticeship levy, but every employer will have to calculate the levy and claim the allowance.  

The self-employed will not pay the apprenticeship levy, but they may well pay increased rates of NIC from 6 April 2017, or whenever class 2 and class 4 are combined

SDLT supplement

Stamp Duty Land Tax (SDLT) was not included within the tax lock, so the Government is free to raise the rates or reduce the thresholds. The new SDLT supplement does both of those things, by imposing a 3% charge on the entire purchase price of a second home, or on any residential property acquired by a company from 1 April 2016.

Second homes in Scotland will be subject to a similar land and buildings transaction tax (LBTT) supplement, also imposed at 3% on the entire purchase price from 1 April 2016. The exemptions from the LBTT supplement mimic those for the SDLT supplement. For instance, neither supplement will apply to properties worth less than £40,000.

Dividend tax

Income tax rates were frozen by the tax lock, so the Chancellor can’t increase income tax on dividends. His solution was to invent a new tax: dividend tax, which operates like income tax, but only applies to dividends in excess of £5,000 per year.

Thus the UK tax system becomes encumbered by three more taxes, two more allowances, and two more sets of compulsory fees.  

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23rd Feb 2016 16:21

An Artform

Gordon Brown had already turned stealth tax into an artform, George Osbrown must have taken one of his masterclasses.

I do get the impression that Osbrown and his team have little understanding of the history behind the tax system and why it was the shape it was - such a lack of institutional memory only adds to the trend towards ever greater complexity, as new measures are added either for purely tribal political reasons, or to simply screw as much out of the economy as possible, regardless of philosophical principle or direction. [/rant]

 

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23rd Feb 2016 16:24

As I've highlighted before, the draft legislation for the apprenticeship levy does NOT aggregate the exemption across group companies, but instead applies it in exactly the same way as employment allowance. This means that of two connected companies, each with two employees earning at a rate of £8,060 per annum (value £16,120 per payroll), one of the companies will pay £80.51 apprenticeship levy.

The draft legislation does not protect small businesses.

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23rd Feb 2016 17:15

!

As a Hobbit I find the image choice offensive! 

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Looks like Rebecca Cave needs a makeover and a good meal.

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Bit of sunlight and red meat as well...

cheekychappy wrote:
Looks like Rebecca Cave needs a makeover and a good meal.

...would help with that apparent vitamin D deficiency and pasty, some might same anemic pallor.

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24th Feb 2016 12:26

Open and transparent?

I'm sure an honest approach would appeal to more taxpayers.  Why can't we have a simple and straightforward increase in income tax?  I for one would have more respect for that than this panoply of sneaky increases.

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By Mallock
29th Feb 2016 12:08

More Income Tax is Available!

accountsdragon wrote:

I'm sure an honest approach would appeal to more taxpayers.  Why can't we have a simple and straightforward increase in income tax?  I for one would have more respect for that than this panoply of sneaky increases.

 

You just need to head to Scotland if you want to pay more Income Tax according to much of the recent press.

The whole tax system is a shambles and needs a complete re-write. It is a bit like the Lego house, which had bits added to make it a plane and more bits added to make it a ship and more bits added to make it into...a mess that needs taken to pieces and rebuilt from scratch.

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Tax simplification

Mallock wrote:

The whole tax system is a shambles and needs a complete re-write.

Absolutely. A simple taxation system that combines income tax and NICs into a single progressive tax, chargeable on all forms of personal income including dividends.

Employers NICs should be abolished altogether as these are a disincentive to employment.

Tribunal charges for challenging HMRC incompetence or vindictiveness are unjust and should not be introduced.

VAT should be removed from business-to-business transactions and all necessities - and lift a huge burden of red tape from most businesses. If that means we must leave the EU, so be it. I don't see what was wrong with the old purchase tax system which applied only to things which were generally agreed to be luxuries. If the result is a higher headline rate of income tax - well that is at least more honest, and with a properly progressive system will not hit the poor hardest.

A simple negative income tax regime for the lowest earners or unemployed would effectively work as a basic "citizens income" for all, and could then sweep away all the complexity and injustice of the tax credits and myriad associated allowances.

 

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29th Feb 2016 18:10

Couldn't agree More!

silicondale wrote:

Mallock wrote:

The whole tax system is a shambles and needs a complete re-write.

Absolutely. A simple taxation system that combines income tax and NICs into a single progressive tax, chargeable on all forms of personal income including dividends.

Employers NICs should be abolished altogether as these are a disincentive to employment.

Tribunal charges for challenging HMRC incompetence or vindictiveness are unjust and should not be introduced.

VAT should be removed from business-to-business transactions and all necessities - and lift a huge burden of red tape from most businesses. If that means we must leave the EU, so be it. I don't see what was wrong with the old purchase tax system which applied only to things which were generally agreed to be luxuries. If the result is a higher headline rate of income tax - well that is at least more honest, and with a properly progressive system will not hit the poor hardest.

A simple negative income tax regime for the lowest earners or unemployed would effectively work as a basic "citizens income" for all, and could then sweep away all the complexity and injustice of the tax credits and myriad associated allowances.

 

VAT is a wholly punitive and pernicious tax imposition!

Indeeed, it encourages "Working on the Black", since a small trader (plumbing and heating, kitchen installer etc) spends far more on materials than he charges for his own labour. His customers are invariably private citizens. Ergo, his labour rates must be 20% greater than the non-registered trader.

Purchase tax: I remember it well!

Main difference was it applied only to luxury goods: not almost everything: and only to NEW goods and NEVER to services!

I well remember Traitor Heath's lying weasel explanation: One simple tax at one simple rate of just 10%!"

Didn't stay simple for bloody long, now did it!

 

 

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Pension contributions

Anyone remember A day, contributions of up to £255,000.

We have from April effectively a higher rate of up to 60% (yes I know we already have it in respect of personal allowance withdrawal) and additional rate of 67½% with pension taper.  It is mind boggling how anyone in the taper band is going to work out if he is over or under funding in any year.  Trying to use any unused relief resulting in the next year is just plain silly.

I think we need an Office of Tax Simplification.  Whaddya mean we already have one?

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By jam2
29th Feb 2016 15:30

lottery

Has the government never thought of taxing the large lottery wins. Imagine how much they could bring in to the coffers. They could then leave the small businesses alone, who are working hard, many of them to earn a meger living.

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29th Feb 2016 18:38

Don't Give 'Em Ideas!

jam2 wrote:

Has the government never thought of taxing the large lottery wins. Imagine how much they could bring in to the coffers. They could then leave the small businesses alone, who are working hard, many of them to earn a meger living.

'Cos if they like it, they will keep extant taxes as are and implement a new tax on gaming, rub their fat little hands in glee and dream up more lovely profligate ways to waste it!

 

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small businesses

Indeed so, jam2. Income tax should apply to ALL income including gambling wins, dividends, capital gains, etc.

As for small businesses, I'm past state pension age so don't pay employee's NIC, thankfully, but I run my own company and object strongly to having to pay employER's NICs. A tax on employing myself!

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29th Feb 2016 18:02

Another Punitive Travesty!

You seem to have forgotten one, Rebecca.

Civil Court Fees.

A modest rise of from 64% up to a mind staggering 622%!

It is only a few years ago Lord Woolf trumpeted about his Access to Justice reforms: which were intended to make it easier for the little man or small business to seek and obtain justice.

Which, naturally, never actually happened. Instead, now the little guy must have deep pockets indeed...

http://www.lawsociety.org.uk/news/stories/court-fees-increase-from-monda...

http://adrianzuckerman.co.uk/files/File/woolfmlr-jen.dr2.pdf

 

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29th Feb 2016 19:48

An Increase in NIC by any other name

No-one has mentioned the increase in employees NIC by 1% (increasing to 5%) as well as the increase in employers NIC (AKA payroll tax) by 1% (increasing to 3%) as a result of the alternative state retirement pension funding (Workplace Pension!) currently being introduced.

As far as you can spit?  You can't trust politicians as far as you can dribble.

 

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29th Feb 2016 20:16

From My perspective...

Dave Watkinson wrote:

No-one has mentioned the increase in employees NIC by 1% (increasing to 5%) as well as the increase in employers NIC (AKA payroll tax) by 1% (increasing to 3%) as a result of the alternative state retirement pension funding (Workplace Pension!) currently being introduced.

As far as you can spit?  You can't trust politicians as far as you can dribble.

 

Dave; good point.

From my perspective, NIC is simply a tax upon daring to employ people!

Perhaps the very worst is the Thatcher inspiration of Class IV NIC: the payer gains no benefit from this pernicious tax whatsoever. It is simply and only a tax on self employed entrepreneurs who try and improve their lot in life, rather then sit in a corner and demand benefits.

If one remembers, at one point post its introduction, self employed tax payers could write back 50% of Class IV against profits: then, but of course, greedy government determined to change this and remove this partial allowance.

As they are wont to do...

AE is simply an idiocy: I have had to set up for clients, three AE schemes where the employees are not at all interested: however under the rules, the employer must set up a scheme, and maintain it, even though there are NO MEMBERS, just in case three years down the line they change their minds!

In any case, with financial market returns as they are, how much real return will scheme members actually achieve?

After the scheme operator's costs, one pint of beer per week?

 

 

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AE

Michael C Feltham wrote:

AE is simply an idiocy: I have had to set up for clients, three AE schemes where the employees are not at all interested: however under the rules, the employer must set up a scheme, and maintain it, even though there are NO MEMBERS, just in case three years down the line they change their minds!

 

I wrote to the Pensions Regulator and pointed out that as my wife and I are the sole directors of our company, and in any case I am over state pension age and my wife is approaching the same state of nirvana, it is an absolute nonsense. We received a dispensation and will not be required to set up AE for our company. However, as this was just in an email from an underling, I fully expect to see penalty notices sent to me by post for not setting up a scheme. It will be interesting to see what a court makes of such nonsense when the inevitable cases are brought.

 

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01st Mar 2016 20:31

Interesting to me is:

The news today, government are planning to escalate state retirement age into the 70s...

Now, the idiots in charge, are apparently basing this latest genius concept on present mortality and increasing longevity stats.

Well, longevity, perhaps for civil servants (who threatened NuLab with a massive strike if one remembers when NuLab wanted to move the goalposts!) and then goverment backed down and agreed a deal where civil servants could continue to retire at 60 both men and women, with a Final Salary Scheme!

OK for politicians too: even more OK for MEPs.

Most of which are unfunded.

However, let's step back:: if people are expected to work until their 70s, in truth, what work can a majority do? Physical strength and endurance, energy levels, focus and concentration rapidly diminishes from 60 onwards. Thus no running up and down ladders carrying hods full of bricks then! OK I have known a couple of elderly (in relative terms) plasterers etc, still able to roduce impeccable work well into their late 60s: unusual I would suggest.

Consider: working in say a call centre, with disgruntled oiks screaming at them 7 hours per day 5 days per week? I think not!

Imagine, driving at least two hours per day on our roads (or really what passes for roads)? Hordes of trucks and white vans plus lunatics crazed on a Red Bull breakfast swerving and lane swopping? Really?

Clearly, the actual plan is what I term Fiscal Euthanasia (©:PDD(R) Ltd); clever idea!

Having worked hard all their lives and having paid into a flawed and dysfunctional scam, with the stress and pressure of continiong work, rather than live into their early 80s and become an icnreasing drain upon the NHS and social services, they all drop dead, burned out at 69 and do not actually ever draw the state pension they have paid into!

 

 

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02nd Mar 2016 12:53

Where from?

Michael C Feltham wrote:

However, let's step back:: if people are expected to work until their 70s, in truth, what work can a majority do? Physical strength and endurance, energy levels, focus and concentration rapidly diminishes from 60 onwards.

Not to mention, where are all these jobs supposed to come from?

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02nd Mar 2016 09:34

Politicians have been doing this for years, reducing the Income tax and Corp tax rates and bumping up NI and Vat. 

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10th Mar 2016 17:21

Moral decrepitude

The moral decrepitude of successive chancellors and their advisers in Treasury is breathtaking.  Fees should be fairly charged for a service, not as as disguised taxation.  HMG isn't a business and should not treat its citizens as a source of profit.

From £215 to £20,000 is just creating a tax, dishonestly labelled as a "fee".

Twas ever thus, unfortunately, we get the politicians we elect and deserve.... no wonder tax avoidance is rife: there is hardly any moral case for citizens not to avoid for all they are worth, in the face of such a shameless onslaught.

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