Chancellor's options that could affect Personal Tax

Press Release of 12 April 2002
Contacts:
John Whiting: 020 7804 4422 (O); 07710 027 595 (mobile)
Viv Rees: 020 7245 4109 (O); 07900 220887 (M)

The Chartered Institute of Taxation, CIOT, thinks the Chancellor has many options if he wants to raise taxes to expand public services.

John Whiting, CIOT President said:

“The Chancellor will not be able to raise large sums by fiddling around with allowances and thresholds. There are a number of options he can choose from, but whatever changes are made, the Institute asks that they should move towards a tax system which is simpler to understand and simpler to administer. There should be full consultations on any proposed changes.”

Three possible options identified by CIOT currently include:

• A tax cut, with an increase in the amount of income subject to the 10% “starter rate”

  · Raise the rate at which people pay NICs – normally 10%

  · Raise the level at which you currently stop paying NICs – currently £585 a week

  Areas of possible tax changes that could affect personal tax include:

  VAT

  · If the standard rate of VAT rises, it makes it even more vital to spend more time looking at whether something falls into Standard Rate, Lower Rate or Zero Rate

  Tax Credits

  It is likely that we will see a good deal of further detail in the Budget on the planned Working Tax Credit, Child Tax Credit and Pension Credit. We are waiting to see precisely who will benefit, how one calculates the credit and what help there will be for the public – we need the detail.

  · How many taxpayers will be entitled to claim (rates and thresholds)?

  · How will the basis of assessment of income work? (Joint income where there is a “couple” may produce compliance issues and misunderstandings as “pure tax” is still independent.)

  · How will the basis of assessment of income work for tax credits? (Previous year/current year may produce compliance issues and we still wait to find out what levels of overpayment will be recovered.)

  · To what extent will employers become involved in verifying income to enable individuals to claim tax credits? (Employers only have to pay Working Tax Credit but may be asked by claimants to verify income for Child Tax Credit.)

  · Do individuals realise that they must claim within three months (maximum) to get tax credits, unlike the Children’s Tax Credit which can be claimed up to five years and ten months later?

  · How complex will the forms and claiming process be?

  · What help will be given to those claiming tax credits and pension credit where the law is very different?

  · What help will be given to those claiming pension credit and paying tax where the law is very different?
  

  IHT

  · Now that the average house price in the south east almost equals the threshold for IHT, currently £247,000 from 1 April, middle income families are liable to IHT, a tax which was originally intended to tax the higher income groups. We think it is time to question the basis of this tax.

  Capital Gains Tax

  · The greatest need is for simplification of this inordinately complex tax.

  · We think there is a need to look at the tapering regime (the amount of tax payable according to the length of time the assets have been held) for non-business assets such as plc shares held by individuals.

  The CIOT has also issued releases on possible Budget changes that could affect business taxation and on some imaginative ideas that 15-17 year olds have for the Chancellor.

  Ends

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