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What’s on your Budget wishlist?

Without any economic or tax policy for more than 400 days, having a date for the Budget is cause for minor celebration. Philip Fisher draws up his wishlist for the annual fiscal event.

16th Jan 2020
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HM Cat Gladstone met with new HM Chancellor Sajid Javid

Chancellor Sajid Javid has set the date for the upcoming Budget as 11 March, but he may not have a lot to say when he stands at the dispatch box. His PM has already put on the handcuffs by committing to maintain rates of income tax, National Insurance Contributions and VAT. We shall have to see how long that lasts.

For the vast majority of tax specialists, the most that the belated Christmas gift will mean is a concerted attempt to simplify the tax system.

Having sat on a committee at the Office of Tax Simplification (OTS), it is apparent that simplifying tax is anything but simple. In implementing the whims of bigwigs such as the Chancellor of the Exchequer or the Chief Secretary to the Treasury, representatives of the Treasury and HMRC have developed a nasty habit of ignoring the best ideas.

As a result, the OTS has achieved far less than those involved would have wished, despite having worked extremely hard.

How we got to the position where tax legislation is more voluminous than the Bible and War and Peace combined is a mystery for some.

What has actually happened is that a relatively simple tax code has been complicated, either in attempts to offer politically-motivated incentives, or to prevent perceived abuse. As the perceived abusers wisened, the legislation expanded and expanded.

What the Chancellor should be looking to do is target some easily understood goals. 

Firstly, the best way to simplify tax for both taxpayers and inspectors is to take people out of tax completely.

Secondly, you can look to take individuals (or companies) out of the remit of certain taxes. The most effective way of achieving this might be to abolish them but, alternatively, you can raise thresholds or take certain kinds of transactions outside the net. 

This has been achieved to some extent in recent years by implementing what is effectively a zero rate for income earned by individuals from certain types of investments. Reducing the number of tax rates would also help.

However, there is a more aggressive development which appears to be in favour with every political party and that is increasing the scope of taxation on certain types (unspecified so far) of tax avoidance.

In principle, by introducing a wide-reaching General Anti-Avoidance Rule, it would be possible to scrap dozens or even hundreds of pages of tax legislation.

As ever, many readers will be screaming at their computer screens in horror at the suggestion that their livelihoods might be circumscribed. It is worth reminding them that they benefit from complex tax legislation, particularly where it is not well-drafted, as is often the case. 

Therefore, it is not wholly reasonable for a government to seek a means of protecting the Exchequer by drafting more effective legislation to achieve what was intended in the first place.

Who knows what Sajid Javid has in mind for his opening sally, but it would be nice to think that tax simplification will be high on the agenda.

Replies (5)

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Chris M
By mr. mischief
16th Jan 2020 17:07

My main wish is to have it on the perfectly feasible date of 13 February, instead of the clearly stupid date of 13 March. Apart from anything else, 13 March just gives the SNP yet another justification for independence from the clueless folks in London who just ignore Scotland.

Thanks (0)
By peterdell
16th Jan 2020 21:04

I hope that the changes to the IR35 rules for big organisations are deferred by a couple of years.

This will kill small business in the UK. All the contractors that go on to set up their own businesses will now be forced into Employment and the jump to setting up your own business is so much greater.
Thatcher's Enterprise nation is well and truly coming to an end. So sad and by a Conservative government!

I have at least 10 companies where the initial contact was as a contractor, and then from there the contractor has started a business employing people.

Thanks (2)
By Ian Bee
17th Jan 2020 11:51

One I have thought of recently is the ability to disclaim all or part of the personal allowance.

I came across a couple of people who were living off savings for a year or two before retirement and whose income was below the personal allowance. At the same time they had existing gift aid donations made by direct debit. Result was they had to pay the tax on the gift aid that the charity had reclaimed.

Thanks (0)
Replying to Ian Bee:
By CptCave
17th Jan 2020 13:22

Kind of this, I just think if your earnings are below PA good old HMG should just top it up anyway and do not make the generous individuals who make the charitable payments pay tax on it.

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Replying to Ian Bee:
By memyself-eye
19th Jan 2020 15:40

the charity only reclaims gift aid IF the donor signs a form allowing them to do so..
OK - I admit most folks DO sign that form.

The answer is that gift aid should be mandatory for individual donations to registered charities regardless of tax status, perhaps at a lower rate - 15%?

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