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Three international professional bodies have published a Model Taxpayer Charter. The Asia-Oceania Tax Consultants Association (AOTCA), Confédération Fiscale Européenne (CFE) (of which CIOT is a member) and the Society of Trust and Estate Practitioners (STEP) – jointly produced a blueprint of the rights and responsibilities that a ‘good tax system’ should contain.

The blueprint has been produced using data collected through surveys undertaken by the associations in thirty-seven countries, representing 73 per cent of world GDP. The purpose of the charter is to provide a model which can be used in nation states to embed in law the basis upon which obligations and rights are balanced.

The report was co-authored by Ian Hayes, Vice President of the CFE, and a CIOT member. Ian commented: ‘As we begin the search for tax systems fit for purpose in the 21st Century we need to accept that transparency, clarity and simplicity can only work in an environment where taxpayers are treated equally’.

The CIOT is supportive of this proposal and contributed to its drafting through the CFE. We believe that a clear codified charter will benefit both tax collecting authorities and taxpayers themselves. The CIOT was instrumental in the development of a UK taxpayer’s charter, which was launched by HMRC in 2009.

James Knell
External Relations Officer
Wednesday 15 May 2013

The House of Lords Economic Affairs Committee has today published its report on the draft Finance Bill 2013, focusing on the proposed General Anti-Abuse Rule(GAAR), the Annual Residency Property Tax Package (ARPT) and the Government’s proposed limit on the use of certain income tax reliefs.

You can read the report here and a press release here.

The report quotes the CIOT extensively (31 mentions in total, including citations in the footnotes), following evidence given to the committee by Patrick Stevens and Bill Dodwell and a written submission (starts p77).

Press coverage seems to have been fairly limited (the Telegraph seems to be the only national newspaper) which is a shame as it has some sensible things to say, many of them reflecting CIOT representations and arguments.

On the proposed GAAR, the Committee recognises that it has been narrowly defined and so will not apply to current issues of public concern about international tax planning techniques used by multinational companies. The Committee does not criticise this but says the Government needs to explain it to the public. The Committee says that these issues can only be dealt with at EU, OECD, G8 and G20 level and calls for an acceleration of the review of OECD rules on taxation. The Committee also calls for the scope of the GAAR to be independently reviewed after five years to ensure that it is working properly and having the appropriate deterrent effect.

On the ARPT the report draws attention to concerns about the practical workability of ARPT and recommends that the government review how well it is working three years after introduction. The Committee is not convinced that the issue justifies the length and complexity of the legislation proposed.

On the cap on income tax reliefs, the Committee considers that the impact of genuine trading losses could have significant adverse effects on economic growth and recommend that the Government reconsider this aspect.

George Crozier
CIOT External Relations Manager
Wednesday 13 March 2013
(NB. This blog draws heavily on the EAC’s press release)

Deputy Prime Minister Nick Clegg made a speech on tax at the Institute for Government this morning. CIOT President Patrick Stevens and myself (along with Robin Williamson of LITRG) were among those in the audience.

The address was more of a campaigning speech than a policy lecture. (A 'source close to Nick Clegg' told the press: "This is Nick firing the starting pistol on the Eastleigh by-election.") Nevertheless it did provide some useful pointers on the direction of Lib Dem and government tax policy, as well as providing the opportunity for questions (I asked about RTI and simpler tax - see below).

Clegg began by setting out various measures the Government had taken since spring 2010 which constituted what he called a 'distinctly liberal' approach to tax. These included increasing Capital Gains Tax and other measures to make the system farier, and some moves to shift the burden away from earned income onto unearned wealth.

The theme of tax fairness ran through the speech. Clegg said tax injustice had always 'lit a fire in the nation's belly' but, over the past few years, people had become more alive than ever to the contributions they and others make, and of whether or not those contributions are fair. He said the tax system would only be fair if it could pass three tests: "One, does it sufficiently reward effort and work? Two, does it deal effectively with wealthy individuals and big corporations who set up elaborate schemes to avoid tax? Three, does it allow local control, so that communities can benefit from the revenue they raise?"

On the first of these, he began with what the Government had already done (corporation tax cuts, raising the income tax personal allowance, etc.) before moving on to the need to ask for a furthe 'modest contribution from the very wealthy'. This could be either in the form of a Mansion Tax - a 1% levy on properties worth more than £2m - applied just to the value over and above £2m (his preferred option) or, alternatively, by introducing new council tax bands at the top end, again, affecting properties worth over £2m but integrated into an existing tax system. He summarised the approach as: "taxes on mansions; tax cuts for millions. An approach to tax that puts payslips before palaces, if you like."

Clegg also made a robust defence of the Government's decision to reduce the top rate of tax from 50p to 45p. In summary his argument was that it doesn't raise that much and the Government is taking much more (five times as much!) from the rich in other ways. This is similar to the Conservative argument though the Lib Dems tend to emphasise the second part of this whereas Conservatives usually focus on the first part. Oh, and reminding people that under the previous administration the top rate was 40p until the last 36 days.

Unsurprisingly given its current high profile tax avoidance and abuse of the system in general got a substantial passage in the speech. The DPM was at pains to stress this wasn't about 'bashing big business' and a 'level playing field' was in everyone's interest. He lauded the Swiss deal and the GAAR, describing the latter as: "Instead of HMRC doing all the running, we're shifting the burden of proof so that it's up to companies to explain why they're doing whatever it is they're doing, demonstrating it's all above board." He also highlighted the new information exchange agreement with the US, a forthcoming similar agreement with the Isle of Man and discussions along the same lines with other Crown Dependencies and Overseas Territories. Work to help developing nations and improve tax transparency also got a mention.

Clegg's third test for a fair tax system is something with a rather lower profile - local control. The traditional Liberal / Lib Dem thirst for decentralisation has arguably been somewhat lost, profile-wise, beneath the slightly more complex Cameron-promoted concept of the 'Big Society' (partly about decentralisation but also about the voluntary sector and new models of providing public services and running business). Clegg pointed out that the amount of local authority income raised locally was due to increase from 50% to 70% under the Coalition, thanks to two new powers - the right to retain 50% of local Business Rate Revenues, and the introduction of Tax Increment Financing, which allows councils, working with local businesses, to borrow against future business rate revenues using that money to invest in the infrastructure that, in turn, boosts growth. Clegg took the view that while this was probably one of the least remarked upon areas of government reform, over time it may prove one of the most significant.

The Deputy PM concluded with the observation that the British people were right to think that your approach to tax says something about who you are. The Lib Dems, he said, believe "that our tax system should empower Britain's communities, reward its hardworking citizens and, above all, make sure that everyone pays their fair share."

There was plenty of time for questions after the speech, on tax or otherwise. While the media mostly chose to focus on other pursuits (Chris Huhne's court case, Michael Gove's u-turn on GCSEs) about half the questions were tax-related.

I took the opportunity to ask the DPM about a couple of issues related to bureaucratic burdens for business (while doing my best not to get my tongue tied over the alliteration!) Clegg had mentioned cuts in CT rates during the speech. I pointed out that surveys of businesses (especially small ones) tended to find that complexity was at least as much of an issue as tax rates. The Government had done some good work (eg. the OTS) but there were a couple of areas of concern. Real Time Information would quadruple the cost of tax administration for some firms. The Government's proposals for 'Simpler Tax for the Smallest Businesses' was a great principle but bound by such conditionality that a lot of people who advise small firms reckon that virtually no-one will take it up. In essence, while the Government's heart was in the right place they are falling short on delivery. Could the DPM give the Treasury and other departments a prod to get them to take the issue of tax complexity and bureaucratic burdens more seriously?

This followed on from an earlier question posed by Rosina Pullman of Tax Aid which had been specifically about RTI and the cost of collection. Clegg had acknowledged concerns and replied that the Government was trying to administer and design the RTI system in the least burdensome way possible. In response to me he said that he would look into the concerns. Simpler tax was absolutely a priority for the Government but he recognsied the effort required to actually get there. (This is from memory and very rough notes so is the gist rather than what he actually said.) The Institute will be continuing to pursue these issues including at a ministerial level.

Someone from the Child Poverty Action Group raised a point about the interaction between the tax allowance and the benefits taper. The British Property Federation asked about infrastructure and tax increment financing. A representative from Action Aid encouraged the Government to do more to help developing countries in tackling tax-dodging multinationals. An FT reporter asked whether the Government was looking at companies the Government procures from in terms of their tax obligations. Clegg said that the Government was looking at this area.

You can read the speech in full here.

Footnote: The CIOT is of course strictly non-party political. We engage with politicians of all parties - as well as other policy-makers and opinion-formers - in pursuit of a better tax system for all involved with it - taxpayers, their agents and the tax authorities. We look forward to covering tax policy speeches from the other parties, whenever they come along!

George Crozier
CIOT External Relations Manager
Thursday 7 February 2013

MPs debated HMRC for 90 minutes yesterday. Not on a particular motion or with a vote - just a chance to express their views. There was more about the closure of HMRC local offices than about avoidance though the latter was mentioned by most speakers. Here's a summary of the speeches.

Westminster Hall debate on HMRC capacity and resources

Tuesday 5 February 2013

Opening speaker – John McDonnell

The first 37 minutes of the 90 minute debate were taken up with the speech of the Labour MP who had obtained the debate, John McDonnell, who chairs the parliamentary group of the PCS, the union which represents most HMRC staff. The views of these staff were quoted throughout his speech. McDonnell began by paying tribute to tax justice campaigners and accusing politicians of mismanaging tax collection and administration over decades. He said HMRC staff felt an “overwhelming sense of frustration, which has at times verged on anger that, as professionals, staff have been held back from fulfilling their role of ensuring that taxes are collected efficiently.” In particular staff were being undermined by cuts, deteriorating work conditions resulting in low morale, and the lack of appropriate professional and legislative tools to do the job. They were being left overstretched and overburdened. This was the main theme of his speech.

McDonnell spent a few minutes of his speech on avoidance. He claimed: "Although the big accountancy firms, along with banks and financial advisers, have been investing in staff recruitment and training on a scale that has produced this massive base of tax avoidance opportunities for companies, there have been massive staff cuts in HMRC and the department feels, therefore, that it has one hand tied behind its back when trying to confront the issue.” He was pulled up by Conservative Mark Field for comparing Corporation Tax payments of some companies with their turnover. He also touched on the high level of tax fraud and the backlog of tribunal cases.

McDonnell acknowledged the Government had recently overseen a rise in HMRC staff levels, but said that overall, staff numbers had dropped by 7,000 since the election. He talked about the impact of cuts on services to individual and small business taxpayers, including phone delays and high costs. He highlighted all the HMRC offices listed for closure. Three other Labour MPs weighed in with criticism of HMRC for closing HMRC officers in their areas, highlighting the knock-on effect on other businesses in the area.

McDonnell listed the causes of low staff morale at HMRC, including job insecurity, a pay freeze and the ongoing threat of privatisation. “What is most galling to HMRC staff and to us is that contracts are being handed out to corporations involved in large-scale tax avoidance.” He cited Capgemini and Accenture. He concluded by describing HMRC as a “department labouring under intense pressure without the resources to cope” and “on the edge of a crisis”. He called on the Government to “open a wider dialogue, particularly through the trade unions, especially PCS, about how HMRC will go forward”.

Other backbenchers

There was just over 30 minutes for other backbench contributions, which the Deputy Speaker limited to a maximum of five minutes each. Scottish Labour MP Iain McKenzie made similar points to McDonnell about the impact of cuts on HMRC and low staff morale.

Lib Dem Ian Swales – a member of the PAC – talked about the challenges facing HMRC: “the European Union, globalisation, the internet, rising customer service expectations and, as we have heard, tax avoidance on an industrial scale”. He stressed the importance of improving customer service, saying it was not only about pick-up times: “We also need knowledgeable staff on the end of those calls”. He called for more people in HMRC’s transfer pricing department and ‘a lot more people’ on investigation and enforcement to deal with tax avoidance. He called for an approach of “invest to collect” saying HMRC should hire more people to do what investigative journalists have done “getting right to the heart of tax avoidance”. He had visited his own local tax office and found morale there damaged.

Another Scottish Labour MP, John Robertson, spent much of his speech criticising the appointment of three new non-executive board members by HMRC, including current CIOT Tax Policy Director John Whiting. He questioned what they would be doing in that role. He concluded that the problem with HMRC was not its staff but “those who run it and are in charge of those people. That, Minister, is you.”

Conservative MP Mark Field, who represents the Cities of London and Westminster, began by saying “HMRC has a not entirely undeserved reputation as a byword for incompetence, opaqueness and arbitrary action, verging on shambolic”. He said any GAAR must be accompanied by a far better pre-clearance system and the tax system as a whole should be simplified. But he also warned of the danger of tax regulation becoming much more arbitrary: “One of this nation’s greatest assets as a place to do business is our reputation as a predictable, reliable and certain jurisdiction that is underpinned by the rule of law.” Governments and Oppositions should, he said, "cease moralising about [avoidance] and get back to legislating such loopholes out of existence”. He concluded: “we need a much better relationship and more co-operation between tax advisers, companies and individuals, and HMRC, instead of its role being portrayed as a battle with a presumption that every taxpayer is trying to rip off the system”.

Labour MP George Mudie, Deputy Chairman of the Treasury Committee, said the system was failing in two ways: efficiency and fairness. He said that: “For many people - the elderly, those with complicated problems, or those who just have trouble filling in forms - in many towns and regions, offices provide their only chance to meet face to face”. He did not believe a five minute wait on the phone was acceptable. He also asked about the list of 2,000 Britons with Swiss bank accounts given to the Government by Christine Lagarde two and a half years ago. “A number of them - I think 500 - were being looked at for serious fraud. To date, two years later, only one has been charged. Is that the end of it?”

Labour MP Julie Hilling focused on the tax gap, looking at each element of it. She said firms delaying bonuses to miss the 50p rate was immoral and implied that Starbucks, Amazon and Google were too. (Again Mark Field intervened, to point out they paid significant VAT and NI.) Hilling argued that local HMRC offices would have local knowledge of the scale or scope of businesses in their areas which would help ensure that the right tax is paid. She said it was also “about assistance so that people can try to get their tax right, so that they are not evading tax by error or neglect - unwittingly or unwillingly.”

Frontbenchers

Catherine McKinnell MP, Shadow Exchequer Secretary, and David Gauke, Exchequer Secretary, each spoke for 10 minutes at the end of the debate. McKinnell began by noting that Britain was “a generally tax-compliant country, with 93% of all tax paid as it should be” but maintaining and improving this figure depended on HMRC being properly resourced. She said there were “serious concerns that HMRC staff and resources are being stretched to the absolute limit, and that situation is likely to get worse”.

McKinnell quoted the NAO’s criticism of HMRC’s customer service performance. In line with concerns expressed by LITRG, she urged the minister to ensure that the recently announced move away from 0845 numbers will benefit people on low incomes, who often use pay-as-you-go mobile phones rather than mobile contracts or landlines. She quoted a survey by the CIOT of some of its members in the summer of 2012 which “found significant concerns regarding customer service provided by HMRC, including: delays in post handling; telephone calls that are passed to a customer service centre, resulting in a four-to-six week further delay; increases in basic errors; and delays in getting through to PAYE telephone lines.” She also mentioned a similar survey by the ICAEW.

McKinnell accused the Government of not thinking through how their policies will be delivered on the ground. The changes to child benefit and real time information were “just two areas of significant change where HMRC is being expected to deliver ill-thought-through Government policy with significantly reduced staff and resources.” On RTI she quoted answers to recent parliamentary questions suggest that the IT system matching employers with their bank records in the RTI pilot has a current failure rate of 25%. She also questioned whether funding for tax avoidance initiatives was indeed new or just shifted from elsewhere in HMRC, and warned about the number of highly skilled, experienced staff who have left HMRC. She concluded: “I urge the Minister to accept that there must be a limit to HMRC’s capacity to do more with less.”

The minister, David Gauke, began by setting the context of the debate, talking about the changes at HMRC since its formation. He reiterated that the Government’s strategy was one of requiring HMRC to make efficiencies to reduce its costs with some of these reinvested in tackling avoidance and evasion (and he set out how). Over the spending review period there was, he said, an increase of about 2,500 in the number of staff HMRC deploys on its compliance activities. He said he understood that the NAO would publish a report the following day on cost savings in HMRC and the way in which HMRC has proceeded.

Gauke said the Government had decided to exempt HMRC from cuts imposed on other Departments in the 2012 autumn statement and instead (a) invested a new £77 million in tackling avoidance and evasion, “through improving HMRC’s computerised risking systems; further strengthening the risk assessment capability across the large business sector; increasing the attention given to offshore evasion and avoidance, and… increasing the staff employed to target avoidance and evasion by the wealthy”; and (b) a further (apparently different) £77 million “to accelerate HMRC’s debt collection activities and bring in about £1 billion in tax over the period; reduce tax credit error and fraud and reduce losses by about £0.5 billion, and expand HMRC’s digital service to its customers”.

Gauke said the latest performance figures showed that post handling in local offices was the best since HMRC was formed. He praised HMRC’s self-assessment filing system and said the new computer system was “on track to bring PAYE up to date by March 2013”.

You can read the full debate here.

Note: The CIOT makes itself available to brief politicians of all parties on tax issues, in a non-partisan manner.

George Crozier
CIOT External Relations Manager
Wednesday 6 February 2013

Senior representatives of the ‘big four’ accountancy firms were up before the Public Accounts Committee this morning as part of their investigation into tax avoidance. They put up a robust defence of the profession and firmly rejected claims from committee members that they were in the tax avoidance business.

Issues covered included:

• the profits made by the big four and whether tax is especially profitable
• attempts to get the panel to admit that a scheme declared under DOTAS and found by a court to be outside the law was akin to it being evasion
• whether the big four market or sell avoidance schemes
• whether advisers stick to guidelines about not attempting to secure an advantage not intended by Parliament
• observance of s172 of the Companies Act which requires a company to have regard to the impact of their actions on the community and the need for high standards of business conduct
• how it can be argued that Amazon doesn’t have permanent establishment in the UK
• why Starbucks might buy its coffee beans in Switzerland
• whether the big four are too cosy with and abuse their access to government (eg via secondments)
• whether big firms get treated better than small firms by HMRC
• tax simplification
• HMRC’s efficiency and resource levels
• why the big four have big offices in ‘tax havens’
• whether HMRC do ‘sweetheart deals’
• whether corporation tax calculations should be filed at Companies House and published
• whether the big four should get contracts from government when, in the view of committee chair Margaret Hodge, their main purpose is to cut the amount of tax the Treasury receives

You can read some media reports at:

Big Four accountancy firms deny 'playing an illegitimate game' on tax and tell MPs they benefit Britain (Daily Telegraph)
Big Four accountants accused of abusing position to create tax loopholes (The Times) (behind a paywall)
Tax chiefs hit back at criticism over avoidance (BBC News Online)
Suggestion Big Four too close to government peculiar (Comment from Accountancy Age) (paywall)
Big Four tax heads stay cool under pressure (More comment from Accountancy Age) (paywall)

If you can spare two and a half hours you can watch the hearing here. In due course a transcript of proceedings will be published here.

George Crozier
CIOT External Relations Manager
Thursday 31 January 2013

Former CIOT President and founder of the Low Incomes Tax Reform Group John Andrews was awarded the CIOT Council Award at the President's lunch yesterday. This was his acceptance speech.

Thank you Patrick and thank you to my Institute.

Eminent guests…..I won’t keep you long, but as this will be the last time I will address a large tax audience, I’d like to make a couple of observations whilst I have a captive audience. The doors have been locked.

2013 represents the 50th anniversary of when I started to study for the exams of this Institute. I was inspired to do this as a very junior tax officer in the Inland Revenue, whose training was high class and which gave young people significant responsibility very early on and they positively encouraged learning.

Perhaps there is a message there for today’s HMRC.

I love this Institute. It cares for education, for accuracy, for quality, it is apolitical, it is collegiate and together with the ATT it provides a career path open to everyone. But above all it has soul; it cares about equality and fairness; it worries when minorities are disadvantaged and it wants people debating tax to deal in facts rather than assertions. It is wary of so-called tax experts. You can always tell a tax expert……. but not much.

I know people at the top of the Treasury, HMRC and the DWP. I know they have soul too…… but far too often in their environment it is lost in the pursuit of avoidance, fraud and making their IT systems work. We are told that the 80:20 rule applies and that with reduced resources they can only cater for the majority. I don’t buy this, either strategically or practically.

It is the vulnerable and disadvantaged who almost always end up in the 20%, who get the poor service, whose problems are not considered in advance of implementation, either because these are seen as just too difficult or people operating in their silos don’t recognise the knock-on effects of their proposals; until it is too late.

I’d like the people at the top, just for one year perhaps, to say that their equal number one priority was ensuring that those right at the bottom of the economic pile got the very best service and consideration from their departments. I regard this to be the right thing to do at this time of austerity.

No policy should be allowed through that has not considered in depth the problems of the vulnerable and put appropriate measures in place to overcome those barriers.

For example, RTI would have considered the problems of micro-businesses first and ensured that their costs were minimised. Digital by default would ensure that all support was in place for the digitally excluded or disadvantaged before new online initiatives or mandation are launched. Universal Credit would plan for those with disabilities or chaotic lives as a priority, rather than last in line using so-called agile technology.

My second, and final, issue came to my mind in listening to the debate on tax avoidance in Parliament yesterday. This was generally a more mature debate and a realisation that we have an international problem that cannot be solved on our own. However, some parts were filled with heat and very little light. Other parts contained a distinct lack of facts, accompanied by impossible dreams, misunderstandings and many unsupported assertions.

This reminded me of a report in the US press last year [credit here to Rex Huppke of the Chicago Tribune] which made Facts into a mythical person and then criticised US politicians for killing Facts. The event that caused the demise was when a Florida Republican announced, without any evidence, that at least 81 of his fellow members of the U.S. House of Representatives were communists.

This made me think that some tax debates may have pushed our equivalent of the mythical person, Facts, to an early grave here in the UK.

Facts had a long life and I believe was born in ancient Greece, the child of Aristotle who saw that evidence was essential for his nurture. As Facts grew up people like Edmund Burke observed "Facts are to the mind what food is to the body."

Facts helped to discover gravity, break the Enigma Code, discover DNA and, perhaps, introduce self-assessment.

In 2012 however, people seemingly unable to understand how tax systems work, began to doubt and ignore Facts. Opinion became the new truth and reprinting of such opinion in the press confirmed this new truth as correct. No feedback from Facts was thought necessary.

Facts had suffered serious injuries at the time of the 10% tax rate debacle in 2008 and through the misplaced assertions in 2010 about millions of errors being produced by the new PAYE system.

His health was improving, when early last year he was laid low by the absence of any sensible discussion about the granny and pasty taxes.

But nothing was to prepare him for the cruel assault which led to his demise in the final month of twenty-twelve. Assertions in the press that you can judge the right amount of tax a multinational should pay by looking at its turnover; followed by the revelation that for certain there was a £69.9 billion tax gap caused by avoidance, caused Facts to have a major stroke.

He was still in intensive care in hospital when the final straw came. His cousin TaxLaw was the one to break the news. TaxLaw had been admitted to the hospital’s isolation unit and had been ignored by all and sundry, including, at times, the Public Accounts Committee. The oxygen was rushed to Facts when he was told that a coffee bean company was now to be the arbiter of the amount of tax that people should pay; but it was too late.

That news coupled with the whisper that a burger chain would set the CPI in future had done its worst.

You will have seen from his obituary that Facts was aged 2,372 and was buried, at his request, in the birthplace of Parliament - the Isle of Man. He is survived by two brothers Rumour and Dogma and a sister Shout Loudly.

Donations in his memory may be made to HMRC in a brown envelope marked “corporation tax”.

I hope that the CIOT pro-actively pick up the challenge in 2013 to ensure the resurrection of Facts and to protect his cousin Taxlaw from also being sent to an early grave.

I’m sure we are in good hands. Thank you again for this award.

Posted by George Crozier, CIOT External Relations Manager
Wednesday 9 January 2013

The NAO report issued today on HMRC customer service makes some important observations and sensible suggestions around the answering of calls and post by HMRC.

The CIOT was asked to provide some evidence for the study carried out by the NAO. The CIOT therefore polled its Technical Sub-committee members, who responded with valuable input, which was collated and supplied to the NAO. It is therefore good to see that a number of issues highlighted by many members have been picked up by the report and we’d like to thank all those members who provided valuable input.

The report correctly acknowledges that HMRC has made efforts to improve performance in a challenging environment, from a low point in 2010, and highlights that HMRC:
• answered 74% of calls in 2011/12; and
• responded to 66% of letters within 15 days.

While these statistics are below industry standards and those for other government departments, the NAO note that the trend of these statistics is starting to move in the right direction. However, they acknowledge that, despite improvements, those who deal with HMRC are still not getting a good service. This echoes comments frequently made by CIOT members.

We would also note that HMRC has started to publish its own statistics on call handling, following discussions CIOT, LITRG, ATT and other bodies have had with them through the Joint Agents group.

The report also notes that despite an increase in the percentage of calls answered, the time callers have to wait to speak to an HMRC adviser has increased, and that between April and September 2012, nearly 6.5 million people (20 per cent), waited longer than 10 minutes per call.

This in turn pushes up costs for the private sector. The report highlights that, based on estimates provided by HMRC, the cost of time that callers spend waiting for HMRC to answer calls is around £141m. We are pleased to see that the NAO acknowledge that good service makes economic sense, as poor service imposes costs on HMRC and its customers.

In addition to the concerns around cost, another concern over poor call answering is that for unrepresented taxpayers in particular, some will simply give up trying to call, which itself increases the risk of non-compliance and error.

The report supports the call of the Public Accounts Committee to phase out costly 0845 numbers. The CIOT has suggested that some research is carried out to see if some callers would be prepared to use a premium number if the call was picked up more quickly, so that callers could take a commercial decision as to which number to call.

It is worrying that that the NAO also has concerns around whether HMRC can meet its enhanced targets, given the introduction of RTI and other tax changes, which are likely to trigger additional calls to call centres. It recommends that HMRC needs to set out, by the end of March 2013, its strategy to improve customer service beyond 2015 and set appropriate performance targets.

As part of its strategy the NAO recommends that HMRC better design their service around those that use them and facilitate more contact on the web and customer 'self service'; The CIOT supports such a stance, providing that:
• there are adequate safeguards for those unable to use such services; and
• the services are adequately designed with both agents and taxpayers in mind.

One area the CIOT notes as a disappointing development is the proliferation of iForms in their current format. These have great promise, but many of those currently available have not been designed with users in mind, as the balance between excessive validation and low usability seems inappropriate. Improved accuracy is not useful if few can use them easily.

We are pleased to note that the NAO have recommended that HMRC should ensure services remain available for those less able to use the internet.

As recommended by LITRG the report reflects the need for HMRC to improve accessibility and usability for customers with disabilities.

All in all, this seems to be a useful report, which we trust will encourage HMRC to continue to improve its services. Although some of the concerns of CIOT members, such as around the quality of responses from HMRC, are not addressed, we appreciate that further studies on HMRC’s service are likely to be carried out by the NAO. We are pleased that the NAO is keen to work with the CIOT and other professional bodies on such issues – we share a common objective of a better more efficient tax administration system.

Tina Riches
CIOT Director, Technical
Tuesday 18 December 2012

The CIOT has once again been busy on Autumn Statement day.

The first reaction of our Tax Policy Director, John Whiting, to the statement can be read on Accountancy Age's website. Two of the issues highlighted by John - the increase in the annual investment allowance and the Government's decision not to legislate to tax 'controlling persons' at source, have also been the subject of CIOT press releases. The Institute's Low Incomes Tax Reform Group have also issued two press releases, on tax credit changes and the increase in personal allowances.

Both CIOT and LITRG are analysing the statement and attached documents further and there may well be further comment tomorrow.

George Crozier
CIOT External Relations Manager
Wednesday 5 December 2012

Answer: Low business taxes are seen as key to competitiveness but access to finance and regulation are seen as bigger burdens on small business than taxes. Mutuals and employee share ownership are flavour of the month, and awareness is growing of the potential impact of universal credit on small business

This is the third of a short series of blog entries looking at what we learnt about the direction of tax policy at this year’s political party conferences. These are based on the extended version of an article by CIOT External Relations Manager George Crozier that appears in this month’s edition of Tax Adviser.

Low business taxes are seen as key to competitiveness...

The Conservatives repeated the Government’s commitment to further cuts in business taxes. Corporation tax has already fallen to 24p and is due to fall a further 2p in the next two years. In his keynote speech the Chancellor, George Osborne, said these cuts were part of “the fundamental, deep-rooted changes needed so our country can grow and compete and prosper”. David Cameron set out an ambition to “make Britain the best place in the world to start a business, grow a business and help that business take on the world and win”.

...But access to finance and regulation are seen as bigger burdens on small business than taxes...

As ever all the parties are keen to present themselves as the party of small business. Labour has relaunched its Small Business Taskforce under the chairmanship of Bill Thomas, a former Senior Vice-President of Hewlett Packard. However tax was not one of the four key areas for action picked out by Thomas during a conference discussion. Getting finance to small business was his top priority. The Lib Dems are to carry out a nationwide survey of small businesses this autumn to ask them what they need on tax, from the banks and on a range of other issues. For the Conservatives the key issue appears to be regulation and restrictive employment laws, though the influential Free Enterprise Group of MPs are calling on George Osborne to raise capital allowances for companies to 100pc as well as doubling the size of the Business Bank.

...Mutuals and employee share ownership are flavour of the month...

Mutuals, co-operatives and employee share ownership are all in vogue. Lib Dem members backed a policy paper containing various measures to make mutuals, employee-owned, and employee-share-owned businesses a more viable business option, including removing adverse tax consequences for companies which wish to transfer shares to Employee Benefit Trusts, and giving discounts on capital gains tax for business owners who transfer a significant stake in the business to employees. The paper also proposes changing the law to enable private equity-owned companies to have HMRC tax-advantaged employee share schemes, and permitting employees, where ownership is held collectively rather than individually, to receive a ‘profit share’ tax free which would be related to the maximum which they would have been able to receive under an all employee share scheme.

At Manchester, Shadow Chancellor Ed Balls promised (so far unspecified) active support for mutuals and co-operatives, and Labour MPs joined business thinkers at a roundtable discussion on the topic. The need for a level playing-field between treatment of debt and equity was one of the issues to emerge. Labour’s Prosperity and Work Policy Commission highlighted submissions arguing that the party should explore the role of the mutual sector and credit unions in banking.

In Birmingham, George Osborne announced a new, voluntary, equity ownership scheme, aimed at fast-growing start-ups, which would offer a CGT exemption where employees give up certain employment rights in exchange for shares in their business. This neatly combines Lib Dem enthusiasm for employee share ownership with the keenness of the Conservative right to limit workers’ rights. However it has faced widespread criticism, especially but not only from the left. There have already been warnings it could open up avoidance opportunities, and even employer representatives think its appeal will be limited. The plan – which the Coalition wants to fast-track through Parliament to implement in April 2013 – is estimated will cost the Government £100m in lost CGT revenues by 2017-18.

...Awareness is growing of the potential impact of universal credit on small business

A key issue raised at all three conferences by the CIOT was the potential impact of the Government’s universal credit proposals on small business and the self-employed. At Lib Dem conference, Chief Secretary Danny Alexander agreed to raise the issue with his DWP colleagues in his next conversation with them. Business Secretary Vince Cable told the CIOT he was aware of the issue and that it was important we do not choke off the current growth in self-employment. At Labour’s Conference, Shadow Chief Secretary Rachel Reeves also expressed an interest, saying she was well aware of glitches in the UC system. The issue has also been raised with Conservative ministers, outside the conference season, and the CIOT is continuing to pursue it.

George Crozier
CIOT External Relations Manager
Friday 9 November 2012

Answer: The income tax threshold will continue speeding away from NI, but there will be no further change in the top rate in this Parliament, and a transferable allowance is probably not imminent

This is the second of a short series of blog entries looking at what we learnt about the direction of tax policy at this year’s political party conferences. These are based on the extended version of an article by CIOT External Relations Manager George Crozier that appears in this month’s edition of Tax Adviser.

The income tax threshold will continue speeding away from NI…

Danny Alexander has confirmed that a £10,000 income tax threshold will be delivered before the next general election. He also promised that, at the next election, the Lib Dems will promise to raise that figure yet further, to £12,500: “So that you don’t pay any Income Tax until you are earning more than a full-time salary on the minimum wage.” Lib Dem President Tim Farron was even more enthusiastic, saying he favoured a tax threshold that “rises and rises and rises”.

The question of why the IT threshold is leaving the national insurance threshold behind was broached at a Lib Dem fringe meeting. Stephen Williams MP said that there was some evidence that people see NICs as a stake in society and believe that paying them gives them some entitlement. For this reason people’s reaction to the prospect of being ‘taken out of national insurance’ is often one of alarm rather than delight! A similar point was made by a speaker at the Conservative conference.

There were the first signs of dissent on this policy though, with people at all three conferences wondering if there will come a point where too many people are ‘losing their stake in the system’ by being taken out of IT.

… But there will be no further change in the top rate in this Parliament …

In his leader’s speech, Nick Clegg announced that there would be no further reduction in the income tax top rate in this Parliament. However both coalition parties defended the reduction from 50p to 45p. In his keynote speech the Prime Minister responded directly to Ed Miliband’s characterisation of the cut as “David Cameron… writing a cheque for £40,000 to each and every millionaire in Britain”. “Ed... Let me explain to you how it works,” said Cameron. “When people earn money, it's their money. Not the government's money: their money. Then, the government takes some of it away in tax. So, if we cut taxes, we're not giving them money - we're taking less of it away. OK?” George Osborne attacked the “cripplingly uncompetitive 50p rate that raised no money and cost jobs.”

However, as well as defending the cut on competitiveness grounds both the Prime Minister and the Chancellor also stressed that the rich would still pay a greater share of tax in every year of this Parliament than in any one of the thirteen years under Labour. Osborne made a particular defence of the increase in the capital gains tax rate that had ended the situation where some in the City “were paying lower tax rates than their cleaners”. Nick Clegg had made similar points at Lib Dem conference and emphasised that he had ‘conceded’ the cut as part of a wider package of measures which would take more from high earners in other ways.

The most high profile call for the rate to be cut to 40p came from London Mayor Boris Johnson. Meanwhile Labour are clear that while they would reverse the cut if they were in power now the general election is a long way away and the situation may have changed by then.

… And a transferable allowance is probably not imminent

Work and Pensions Secretary Iain Duncan Smith is leading the fight for a transferable allowance for married couples. The tax break appeared in the Conservative manifesto and is referred to in the Coalition Agreement in the context of provision being made for Lib Dem MPs to abstain on budget resolutions to introduce it. Duncan Smith said that next year’s Budget ought to bring in the tax relief to show the Coalition is pro-marriage. However at a fringe meeting former minister Tim Loughton blamed Lib Dem ministers for blocking Tory attempts to introduce the tax breaks. He said that the Lib Dems “do not quite get it on family [policies]”. If this comes in at all before the election it is likely to be only at a tokenistic level.

George Crozier
CIOT External Relations Manager
Thursday 8 November 2012