The UK tax system is a pile of pants
This is the rather surprising conclusion Wendy Bradley draws from the latest attempt to quantify the tax gap. In this column, she explains why those who have looked at HMRC’s tax gap report are all in agreement on this point.
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Wendy the OTS was set up to iron the pants. One of their first recommendations was to get rid of IR35. HMRC said no. So welcome to our world.
"This “anger point” is the revenue that escapes tax in the UK because it does not come within UK legislation. This is of course a policy gap..."
More of a "complete failure to understand how tax works" gap.
There seems to be a belief that we could tax foreign companies who sell into the UK without the reverse applying. If we start taxing (say) US companies who sell here, don't be surprised if the US starts taxing UK companies that sell to the US. Whether we'd end up with more or less tax as a result, I don't know but the ideal that we can act unilaterally is absurd.
Tax 'justice' campaigners are always going on about the 'moral' argument that a business should pay profits to help fund our services so why should a US company, with US employees and US factories and offices supported by US infrastructures have a 'moral duty' to pay taxes to fund UK infrastructure? Just because its customers are here?
"Losses to the UK revenue from BEPS and overseas domicile etc are not included in the UK tax gap as those taxpayers are considered to be compliant with UK legislation."
Because they aren't part of the tax gap. You might as well say that tax rates could be 100% so let's include all the tax we could collect at 100% rates but don't because rates are lower as part of the tax gap.
Which of those things do you think should be against the law?
(i) a multinational company choosing to hold its IP in a central location (and of course there would be tax to pay on the sale of the IP)
(ii) A man transferring assets to his wife tax free
(iii) Amazon having offices in Dublin (although I suspect you mean Google).
"Shenanigans". Should companies (and I presume individuals) be required to organise their tax affairs in the least tax efficient manner?
"couldn’t we make better tax law" The law is constantly being changed. Whether for the better or not will depend on your point of view. If you'd like to suggest changes, I'd be interested.
But it isn't as simplistic as some people seem to think.
"Don't be daft". I have a different view from you, that doesn't make it daft. Please don't resort to insults. It doesn't help the conversation.
Who wrote the subheading that this is a "rather surprising conclusion"? Clearly not someone that has to deal with the tax system on a regular basis.
You would think an ex tax inspector (retired or not) would know what we have to deal with wouldn't you?
Well, I'm amazed.
Not that the tax system is a "pile of pants" but that this should be considered news.
IR35 is a prime example - 20 years in the making and nobody really understands it. It's far too subjective.
Tongue in cheek
"...the open wound that is false and dubious self-employment."
"Wendy Bradley is a retired tax inspector, now working as a freelance journalist."
Wendy, there is no such thing as "dubious self-employment". Unfortunately between the EU (worker) and Gordon Brown's need to get money to pay for his inept running of our finances. our employment status is in this quagmire. Even you should realise that employment status is a commercial choice not something HMRC should get involved with. Governments can always tax accordingly.
IR35 was a response to a 'terrible tax injustice' which caused 'outrage' among the public and was an attempt to write better tax law.
Like many such attempts, its introduction was heralded as being a money spinner for the exchequer - £300m a year in tax/NIC said HMRC's impact assessment in 1999. A FOI request revealed that in the tax years 2002/03 to 2007/08, IR35 directly raised £9.2 million.
The experience of MTD for VAT particularly since February when HMRC started on a course to make agents authorisation such a complex affair with no guidance on how they were operating it just makes you wonder what sort of mess they are going to create when they start on other taxes!
Having successfully used MTD to file my own practice vat return for 12 months i have just had my authorisation to file MY OWN vat return rescinded. Nobody can tell me why. The only thing I could do was write to HMRC to tell them I am unable due to their actions to file my VAT return.
The experience of MTD for VAT particularly since February when HMRC started on a course to make agents authorisation such a complex affair with no guidance on how they were operating it just makes you wonder what sort of mess they are going to create when they start on other taxes!
Having successfully used MTD to file my own practice vat return for 12 months i have just had my authorisation to file MY OWN vat return rescinded. Nobody can tell me why. The only thing I could do was write to HMRC to tell them I am unable due to their actions to file my VAT return.
"MTD is moving taxpayers into a world of "algorithm and ping". The algorithm will tell you what kind of taxable profits are expected from this kind of business and then ping an alert if you are outside the parameters."
This is just nonsense, whilst there may be commonality amongst what on paper are similar business entities there are also quite often business entities we think are similar on the surface but in reality, as they actually operate, they may say have very different GP% outcomes. I used to have a licensed grocer client whose tobacco and alcohol sales were really high as a percentage of overall sales, circa 50%, this distinctly distorted the expected GP% (we surely all remember what I think were industry BERs)
How does HMRC have enough categories of business types /knowledge of any particular business to deal with the nuances of a trade. When I worked in retail fashion we had ten shops, one was a Benetton "proper" shop with margins set by Benetton, one was a shop selling previous season designer wear, pricing/margin depending on what we thought was decent reduction from original SP, lastly we had eight Benetton seconds/over productions shops where we bought the stock from Benetton cheaply and could achieve 70 odd percent GP%, only reduced by two annual sales.
Depending on mix year to year, shop type openings etc our GP% could and did vary, in one year we got a pull from HMRC due to GP% drop (we had wholesaled a chunk of stock to A N Other with a 10% margin) , luckily we had vast amounts of data available and I sent them homeward tae think again, but for a business that strays out of the norm re how it operates, throws out differing figures, they are going to continually have to deal with "enquiries" because they operate differently and do not conform to the norms.
I at one had a pharmacist client with really high NHS prescription income but low other item shop sales, why, because it was located in a pretty rough part of Edinburgh with a high drug dependency and dispensed vast amounts of methadone, looking at "stats" one might think shop non prescription sales were depressed, they were not, the area was just not typical . (It was also opposite the doctor's surgery)
I suspect over the years we have all had client's whose figures stepped outside our prior experience, usually for a good reason (what they did/where they did it), are they to all be attacked by computer?
That didn't work for MTD, did it?
The problem with MTD is that it (apparently) works in other countries. The difference between HMRC and the tax authorities in other countries is that they have better staff than us, not relying on zero-hours folk recruited to do specific tasks like CJRS disputes, working from some kind of minimal training.
The problem with MTD is that it is ill-conceived, badly enacted, clumsy, costly and does nothing to close the 'tax gap'
HMRC were warned on countless occasions not to bring it in but did so anyway (to the delight of the software industry). Now they want to expand it. - Cue a much larger black economy.
Never in the field of human taxation as so much cr*p been inflicted on so many by so few morons.
"HMRC were warned on countless occasions not to bring it in but did so anyway"
One of HMRC's problems is that its staff seem to think that everyone running a business spends 95% of their time making sure their tax affairs are in order and 5% doing other things, like selling stuff.
Well Wendy I can't really talk about accountant all I'm trying to do here it's just too let people know no from the posting that was on this site in 2012 va a bout my friend Tommy Scragg it has been set up up and imprisoned for 17 years for something he has not done anyway there's more to be said about this and if people want to know no the ins and outs why is in there and the people that have behind it please reply back to me asap thank