Tax Notes - Why is the tax legislation important?
Satwaki Chanda is a tax lawyer who occasionally lurks on accounting websites. He has decided to take the plunge and start blogging.
This is my very first post for my new blog at AccountingWEB. I must say, I was a bit hesitant about whether to start a blog here at all – seeing so many other blogs written by quite distinguished people, one wonders where my own blog could possibly fit in. But from being a lurker who just reads other people’s articles, to occasionally contributing some of my own thoughts to the discussion boards, it seemed a natural progression to start a blog here as well.
Who am I?
It is only polite to introduce myself. My name is Satwaki Chanda, I am a tax lawyer who has worked both for a Big Four accounting firm and for City law firms. Right away you can see that I don’t fit into any predefined slot – I come from two very different worlds. I can’t even claim to be a normal tax lawyer, as I actually started my professional career as a commercial litigator before switching to tax.
How and why did I get into tax? Strange to say, I had no thought of tax at all, even though I hold a Maths degree. But by chance, I got a call from my recruitment agent who said that a certain professional services firm was hiring lawyers who wanted to retrain into the tax profession - would I be interested? I went to the interview, got the job and tax has been my life ever since.
How did Tax Notes come about?
Tax Notes is the name of my own website as well as the name of this blog. It is an educational site containing articles on UK taxation, with a particular emphasis on business and property taxes. These articles are aimed at students and practitioners, but I hope that anyone who is interested in learning about the subject will find the site beneficial.
To tell the truth I hadn’t planned to write the articles you see on the site. I was initially just planning to deliver the latest tax news and also short summaries on topics such as VCTs. But then I found that a short summary on VCTs was getting longer and longer, running to 27 pages with all my little side notes, trying to make sense of all the rules – and that’s when I realised that I needed to do something different.
So the summary on VCTs has eventually become a series of articles, where I try to bring some sort of order to the myriad rules there are in the legislation. There is also a series on REITs, as well as other topics on property, business tax and a discussion of the occasional tax case.
The importance of the tax legislation
This is the theme of my site:
“The most fundamental doctrine of taxation is: “No taxation without representation” – the legal principle that the subject cannot be taxed without his consent – which in practical terms, means the consent of Parliament, as reflected in the various taxing statutes.”
And it is for this reason that the articles on the site come with statutory references included as footnotes. For it is my belief that if you happen to be a tax specialist, the legislation is crucial. You need it whether you like it or not – even if you find it terrifying, it’s part of your job to look at it when clients ask you for advice.
Of course it may be possible in practice to get by without it. I remember as a Professional Support Lawyer in a City law firm, one of our fee earners had a collection of tax books – the Yellow and Orange Handbooks – which always seemed to be in pristine condition, for she never actually opened them! And it certainly seems to have worked for her, for I believe that she’s now a partner and head of tax in another firm!
But for us lesser mortals – you do need to look at the legislation, because every thing you say must be supported by statute and legal authority. How else will you be able to advise on what the law is?
The importance of the tax legislation in practice
Strangely enough, I came across a very good example on the AccountingWEB discussion boards.
For many years I had assumed that when a business tenant pays a premium under a short lease, part of that premium can be deducted against his income profits, the amount being spread over the life of the lease. So if the tenant is treated as having an income expense of £10,000 and the lease is 10 years long, he can deduct £1,000 each year.
But what’s the position if the tenant goes bust and is forced to quit the lease early? For example, suppose he exits after three years, having claimed £3,000 in deductions, what happens to the “balance” of £7,000? Can the tenant claim this as a terminal loss?
At first glance, it doesn’t sound too unreasonable – there must be some place for the unclaimed £7,000 to go to. Until I looked at the legislation and got the surprise of my life – the fact is, the balance can’t be claimed because there is no balance! For under the legislation, the tenant can only claim a deduction for each day that he stays in the property and the full amount can only be claimed if he stays for the full term.
All from the legislation. Which just goes to show that you should never take anything for granted! (The article can be found at this link for those of you who are interested in how I arrived at my answer.)
Well, I’d better stop for now, lest I outstay my welcome. If you’ve been reading this, I thank you for your time and patience!