Finance Act 2016 is passed

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After six long months the Finance Bill 2016 was given Royal Assent on 15 September 2016, so becomes the Finance Act 2016.

Reason why

The date the act is passed (the date of Royal Assent) is important as it marks the day certain parts of the law come into effect. There are around 40 such amendments that hang on the day of Royal Assent in this act.

Many other additions to the tax law are deemed to come into effect from 6 April 2016, or 1 April 2016 for companies, or possibly 1 April 2017, 2018 or 2019. Where the existing law is thought to be defective the changes have retroactive effect. This is the case with the entrepreneurs’ relief changes in sections 84 to 86, which are back-dated to 3 December 2014 and 18 March 2015.

Where the change in the law is required to counter some perceived tax avoidance it comes into effect the day the law is announced to Parliament. For example, the “Transactions in UK land” provisions in sections 76 to 81 which may hit UK property investors.

That is a classic example of “shoot-now” legislation which was not consulted on in advance. HMRC has said those new provisions are not aimed at UK landlords, and they will provide guidance to explain why, but that’s not what the law says. So once again we are taxed by law and untaxed by HMRC guidance.

Weight of the law     

I must say it is such a “joy” to see another 662 pages of tax legislation contained in FA 2016 added to the 19,000 or so pages already in force.

In fact, it’s not easy to precisely calculate the number of pages which make up the UK tax legislation, as not all the law is reproduced in one place. The CCH red and green tax volumes, or Tolley's yellow and orange tax handbooks, include the tax statutes, and a large number of the tax regulations (statutory instruments), helpfully listing those regulations which are not reproduced. Both publishers also include additional materials such as; HMRC statements, concessions, press releases and codes of practice which are needed to interpret the legislation, which obviously adds to the length of the law volumes.

The Office of Tax Simplification concluded that the length of the tax legislation is not the only factor which contributes to its complexity, but it is a psychological one. Indeed, it is a physical one, as the current yellow and orange volumes weigh about 12.3kg!

About Rebecca Cave

Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.

Replies

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16th Sep 2016 12:50

Nothing will improve until the politicians stop trying to use the tax system as an instrument of social change or as a way of pretending that people pay 20% tax when the vast majority actually pay 32% (20% tax and 12% NI). The main things that could be done are:

Combine tax and NI;
Replace Capital allowances with a table of allowable depreciation rates;
Remove the lifetime cap on pensions (or at least make it £10m or so to take virtually everyone out of the rules);
Treat anything provided by an employer in any way (nice general description) as taxable to stop all the clocks, bullion etc nonsense.
Scrap tax relief for travel (employers can adjust pay rates to compensate where applicable);
Scrap CIS;
Look critically at lots of other reliefs and exemptions to see whether they are really worth it (EIS,EMI,CSOP,R&D etc);
Scrap IHT and replace with a wealth tax of x% of global assets. Same goes for trusts - just charge them on a % of assets in the trust;
Scrap SDLT. It has as much logic as the window tax.
Rebase CGT assets to 2016 values.
Scrap domicile and tax based on residence.
Cap each Finance Act at 100 pages and require an equivalent amount of legislation to be repealed each time.
Put all the law into one document which is ordered in a more intelligible way.

Any other suggestions?

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to Julian Stafford
16th Sep 2016 13:01

... and how about a Flat Tax on personal income, closing all the loopholes for personal tax avoidance, so that finally everyone can legitimately say that everyone makes the same % contribution based on their ability to pay.

Provides savings to the public purse through less HMRC officers required.

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By dwgw
to TimCallaghan
16th Sep 2016 17:16

I've never understood the logic behind the claim that a flat tax would change human behaviour and the desire of so many of us to avoid/minimise tax.

My clients have rarely said "I don't want to pay x% tax". Most will say "I don't want to pay £x tax" or "I want to pay less tax" or "I don't want to pay any tax"!

A flat tax would just require the less well off to pay more tax to make up for the shortfall. What's really needed is a switch of emphasis from taxing income to taxing capital more fairly. That's what would happen in a true meritocracy but, unfortunately, this isn't one.

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to dwgw
18th Sep 2016 11:29

dwgw wrote:

What's really needed is a switch of emphasis from taxing income to taxing capital more fairly. That's what would happen in a true meritocracy but, unfortunately, this isn't one.

Problem with taxing capital, is monetary inflation. Even Thatcher recognised CGT was unfair.

Monetary Inflation (and thus loss of unit value of currency) is caused solely and only by government interference and incompetence in managing fiscal budgets through profligacy.

Otherwise you are really meaning Wealth Tax as they have in Italy and other European nation states.

Capital taxes are wholly iniquitous.

Short term gains on capital value by way of trade I agree ought to be taxed as income from trade Which was precisely what that lying weasel Wilson stated when he introduced CGT in 1965.

Paraphrase "A man goes into the City and buys something. He sells it the very next morning for a large profit but since it is capital gain he pays no tax!"

Taxes on capital ought only to be levied against value above current replacement cost; not value growth caused by inflation, caused by damned government!

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to Julian Stafford
16th Sep 2016 13:13

Gosh,
That is comprehensive, bold even! Would Sir Humphrey say it was a courageous programme?

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By reilloc
to Julian Stafford
16th Sep 2016 14:08

A lot of good, or at least interesting ideas here. However, I think that it would be better to make all work-related travel and subsistence costs tax and ni free. This would level the playing field between employees and contractors, removing the need for blunt instruments like IR35 and Osbourne'S bizarre delay in repaying travel and subsistence (but not mileage) costs to the completion of SA. This means that a contractor working a substantial distance from home has to be able to weather covering a £10K+ payment for months before it is repaid and it repayment is not guaranteed as it depends on a retrospective HMRC assessment of whether the role was under supervision, direction or control!

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to Julian Stafford
18th Sep 2016 11:19

Julian Stafford wrote:

Nothing will improve until the politicians stop trying to use the tax system as an instrument of social change

Well they have been trying to do this since Lloyd George's People's Budget. finally enacted by Herbert Asquith, in 1910 'cos the Lords kept kicking it back .

As Churchill, then a Liberal crowed at the time "We are going to soak the rich as they have never been soaked before!"

What happened? Simply, the rich consulted the leading tax barristers and accountants and set up trusts etc.

Which is how and why the recently late Duke of Westminster, Gerald Grosvenor, could inherit the Grosvenor Estates and the multi-billions involved.

Meantime, the main tax burden fell increasingly on the upper working class and lower middle class; as it still does.

Doncha just love politicians?

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to Julian Stafford
19th Sep 2016 09:37

OR just leave what isn't broken alone. And enforce the existing rules. Reduce the rate of taxation instead of trying to reduce its complexity which brings fairness.
Advocating accounts that are useless and an increase in taxation for pensioners is not particulary useful but I can see the Mob chanting for this.

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16th Sep 2016 13:03

Shoot-now, or shoot-me-now?

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16th Sep 2016 13:14

So has stuff changed since the budget?

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16th Sep 2016 13:15

So has stuff changed since the budget?

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to The Black Knight
19th Sep 2016 11:27

Yes. Very much so.

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16th Sep 2016 13:26

Firstly you need to decide what people need to live on so that a proper PA threshold can be arrived at.
Next you abolish IHT, CGT, CIS, EER's NIC, 40 and 45% tax over a five year period, adjusting the basic rate tax as you need to. Amalgamation of NIC and tax can be done straight away.

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16th Sep 2016 14:49

Excellent comment by Mr Stafford. All the Budget gimmickry should be swept away, together with ill-considered reliefs that will be seen ten years later to have contributed nothing. Anyone remember PRP? Or paying bonuses in sow belly futures to save NI? Or opening a post office in Belgium to save CGT? The list is endless. The simpler the system the more difficult avoidance becomes.

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16th Sep 2016 16:02

Whilst we have a legal system that assumes that everything that isn't specifically mentioned is this Bill is "legal" then we'll continue to have a Bill that grows and grows as well as tax accountants that rub their hands with glee each time another Bill achieves Royal ascent...

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16th Sep 2016 16:25

WINDOW TAX INSTEAD OF ALL THIS.
EASY AND CHEAP.
JUST THE PROBLEM OF FINDING THOSE THAT CAN COUNT.
CALCULUS, ALGEBRA, READING OR WRITING UNECESSARY.
THEREFORE COST OF STATE EDUCATIONAL SYSTEM SLASHED.
THINK ABOUT IT.

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to tomriv801
19th Sep 2016 13:45

tomriv801 wrote:

WINDOW TAX INSTEAD OF ALL THIS

Image this in the 21st century. Almost all of us have computers running windows. My phone is windows. I'd be taxed twice. Those Mac users will gloat even more.
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19th Sep 2016 08:20

A lot of the proposals above appear to involve loss of revenue to HMG, even if savings can be made on the number of people it employs and a simpler life for accountants (and perhaps fewer jobs too). Where will the extra revenue come from?

No one's mentioned abolishing CGT relief for PPRs. That will be a nice fiscal revenue-earner and will really create a political storm.

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24th Nov 2016 12:49

George Osborne's Budgets were very tricky, during his delivery at the dispatch box he talked about Academy schools, he avoided the tricky tax issues.

The devil was in the detail with Gordon Browns budgets same with George Osborn's its all sneaked through. 2018 and 2019 have been mentioned above, some surprises may come out then.

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