Spend a pound Save a penny The Chartered Institute of Taxation points out that the Government’s new tax measures on trusts are probably the most inefficient in history - leaving aside the technical issues.
On Friday Her Majesty’s Revenue and Customs (HMRC) confirmed that the tax will collect only £15m a year. But at least a million people will have to review and rewrite their wills, at a cost of around £250 each. It will thus take over 16 years before HMRC will have raised an amount of tax which is equivalent to taxpayers’ costs of adjusting to the new regime. This doesn't count the extra costs of adjusting existing trusts to the new rules.
Anne Redston, Chair of Personal Taxes at the Chartered Institute of Taxation, says: “This is arguably the least efficient tax in history. It costs 2 pence to collect £1 of capital gains tax, 1.34 pence to collect £1 of income tax, and only a halfpenny to collect £1 of national insurance contributions. But this new tax, which raises £15m a year, will cost ordinary families £250m.”
The CIOT points out that this disproportionate burden directly conflicts with the Government’s commitment to deregulate and cut red tape. It thus does not meet the five principles of good regulation, which are summarised by the Cabinet Office as: “Only regulating when necessary and, when it is, to do so in a way that is proportionate to the risk being addressed, and to deregulate and simplify wherever possible.”
The CIOT supports the Government’s principles of Better Regulation and asks the Government to reconsider these new tax proposals in line with its own principles.
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Notes to Editors
Figures provided by the Society of Trust and Estate Practitioners (STEP).
See HMRC Annual Report 2004-5 and Autumn Performance Report 2005