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Manifesto Tax Policies - SNP
1 May 2015

The Scottish National Party (SNP) launched their election manifesto on Monday April 20th. Key proposals include the reintroduction of the 50p top rate of tax; a tax on bankers' bonuses; a bank levy; a mansion tax; a crackdown on tax avoidance and the abolition of non-dom status.

These are the party's pledges by area of tax:

Employment & Income tax

The SNP will vote for the reintroduction of the 50 pence top tax rate for those earning more than £150,000. They would also call on the UK government to move forward cautiously with plans to increase the higher rate threshold to £50,000, ensuring first that tax revenues are sufficiently buoyant.

The party supports increases in the personal tax allowance but will also back an increase in the Work Allowance of 20 per cent.

The SNP are also in favour of a banker’s bonus tax.

Families, Tax Credits & Pensions

The SNP will seek to reverse the married couple’s tax allowance. The party will oppose plans for further cuts in Child Benefit and Tax Credits.

They will support lower energy bills for consumers by pushing for the Energy Company Obligation to be funded through general taxation and not as a levy on energy bills.

For low-income households, the SNP backs an increase of at least the cost of living in welfare benefits, such as child benefit, universal credit and disability benefits, and also in tax credits.

The party will seek a review of the pension tax relief available to the wealthiest. They will support a single-tier pension of £160 per week and vote to continue the triple lock, guaranteeing that pensions will always rise by inflation, earnings or 2.5 per cent - whichever is the highest.

Finally, they will retain the winter fuel allowance.

Creative Industries

The SNP support the creation of a Creative Content Fund for the games industry to encourage the formation of new studios, and they also back the retention of the Video Games tax relief.

The party will back industry calls for an increase in the SEIS investment limit and changes to the Shortage Occupation List to recognise specific skills needs in the sector.

Property

The SNP support proposals for a specific tax on properties valued at over £2 million.

Levies & Duties

The SNP support a levy on tobacco firms and an increase to the bank levy.

Avoidance & Evasion

The SNP will back measures to tackle tax avoidance, including early legislation to address tax dodging and an increase in staff resources at HMRC.

The party willl put forward measures to strengthen anti-avoidance law across the UK to ensure it is as strong as new Scottish legislation.

They will also support a review of controlled foreign companies exemptions and favour a rolling review of tax reliefs as part of an ongoing programme of simplification of the tax system.

The party support calls for a global fair tax summit to agree international measures to tackle tax abuses and is also calling for the abolition of the 'non-dom' status.

VAT

The SNP will demand that VAT on sanitary products is removed.

Business

The SNP is seeking to deliver the most competitive business tax environment anywhere in the UK through their business rates policies, and the package of business rates reliefs worth an estimated £618 million in 2015-16.

The party remains committed to a Treasury review of alcohol taxation to better reflect alcohol content, while securing health benefits through minimum pricing.

Devolution

The SNP have stated that the Smith Commission proposals were, in many respects, a missed opportunity.

The party is seeking greater ability to generate economic growth, deliver more employment opportunities and support family incomes with the devolution of additional taxes.

The party has stated that it would use targeted changes in business tax allowances to encourage higher levels of investment in capital or Research & Development, and encourage the growth of SMEs.

In the meantime, the SNP will prioritise devolution of powers over employment policy, including the minimum wage, welfare, business taxes, national insurance and equality policy.

For further information see

SNP Mnifesto 2015

Analysis of other party manifestos will follow.

The CIOT is of course strictly politically neutral and nothing in these posts should beinterpreted as endorsement for or opposition to any of the policies mentioned.

James Knell
CIOT External Relations Officer
Friday 01 May 2015

Media and Politics
 
Manifesto Tax Policies - UKIP
1 May 2015

The United Kingdom Independence Party (UKIP) launched their manifesto on Wednesday April 15th. Key tax proposals include an increase in the personal allowance to £13,500; to scrap inheritance tax; to introduce a new 30p tax band for those earning between £45,300 and £55,000 and a 40% rate thereafter and a cut in business rates for small businesses.

These are the party’s pledges by area of tax:

Income tax / national insurance

UKIP will raise the personal allowance to at least £13,000 so people can earn enough money to cover their basic living costs before the state starts to take income tax out of their pay packets; this will take those on minimum wage out of tax altogether.

The party will abolish inheritance tax; assets bought out of taxed income should not be taxed again when their owners die.

UKIP will raise the threshold for paying 40 per cent income tax to £55,000 and introduce a new intermediate tax rate of 30 per cent on incomes ranging between £43,500 and £55,000.

In the longer term, the party is committed to restoring the personal allowance to those earning over £100,000 and make 40 per cent the top rate of tax for all, as it used to be.

The longer term aspiration of a UKIP government will be to create an income tax structure of a basic rate of 20 per cent, an intermediate rate of 30 per cent, and a top rate of 40 per cent, meaning income taxes will be flatter and lower

VAT

The party seeks to obtain full control over VAT through secession from the European Union.

The party has stated that it will be able to deal with distortion imposed by EU legislation and zero-rate certain goods and services that have previously had VAT charged on them. They will remove VAT completely from repairs to listed buildings and sanitary products.

Pensions and tax

The party will introduce a flexible state pension window enabling those eligible to take a slightly lower state pension at age 65 even as the state pension age increases.

UKIP will double the budget for free pensions advice to help pensioners make sound financial decisions.

The party will also make it a criminal offence to cold call someone in respect of pension arrangements.

Property taxes

UKIP would implement a policy of charging those whose homes are empty for more than two years 50 per cent more than the applicable rate of council tax, with exceptions for owners who are in HM Armed Forces.

UKIP is opposed to the introduction of any form of ‘Mansion tax’.

The party would abolish the ‘bedroom tax’.

Families, tax credits & low earners

UKIP will increase transferable tax allowance for married couples and civil partners to £1,500.

The party has also stated that it will honour the current Government’s commitment to providing a new tax-free childcare scheme, worth up to £2,000 for children under twelve.

Business taxes

The party has stated that if a business has only one property and the rateable value is less than £50,000, the business will get 20 per cent rate relief. If the business has more than one property, the 20 per cent rate relief will still apply, provided the total rateable value of all properties is less than £50,000.

Other existing business rate reliefs will not be affected and will apply where the relief provided under those schemes is greater than 20 per cent. Almost 90 per cent of business properties, over 1.5 million in total, have a rateable value of less than £50,000, so are potentially eligible for this 20 per cent discount.

UKIP will introduce a scheme whereby small businesses will provide evidence of repeated late payments, beyond agreed terms, together with evidence that timely requests for payments have been made, to HM Revenue and Customs. Based on the evidence - particularly if there are multiple complaints about the same company -HMRC can then carry out an inspection of that company’s records. If the large company is found to be systematically exceeding its contractual terms of payment with small businesses, a sanction of significant fines, proportionate to the extent of the abuse of terms, will be levied.

UKIP will also seek to end a growing practice whereby large companies extend their payment terms to small companies, by arranging for their supplier to take out a bank loan to facilitate their demands.

To address both these issues, UKIP will pilot a scheme to improve access to trade credit insurance to small businesses. This insurance already exists in the market, but can prove restrictive for smaller companies, especially in certain business sectors.

Avoidance & Evasion

UKIP will not allow large companies to continue getting away with paying zero or negligible corporation tax in Britain. UKIP will seek to restore British tax sovereignty in order to end the practice of businesses paying tax in whichever EU or associated country they choose.

The party will also set up a Treasury Commission to monitor the effectiveness of the new Diverted Profits Tax and bring in any further measures necessary to prevent large multinational corporations using aggressive tax avoidance schemes.

Green taxes & Environment

UKIP will abolish green taxes and levies and withdraw from the EU’s Emissions Trading Scheme, reducing fuel bills and enhancing industrial competitiveness.

The party also intends to levy a Petroleum Revenue Tax (currently 50 per cent) on any shale profits and invest the income into a Sovereign Wealth Fund.

UKIP will discontinue the carbon floor tax on the basis that production for coal fired power stations is combined with carbon capture and storage.

Tax & Migrants

The party has stated that all new migrants to Britain will have to make tax and national insurance contributions for five consecutive years before they will become eligible to claim UK benefits, or access to more than non-urgent NHS services, save for any exceptions stipulated by the Migration Control Commission.

Devolution

The introduction of a new system (to replace the Barnett Formula) will result in substantial reductions in funding for Scotland, but, as the Scottish government is to have significant further powers over taxation, borrowing and spending in due course, it can make its own decision as to whether to raise taxes or cut public spending to balance the books.

Other

UKIP will remove road tolls where possible and let existing contracts on running road tolls expire. The party believes that motorists are already taxed highly enough through fuel and vehicle taxes.

The party will also ensure tax and planning policies support historic buildings and the countryside; offer tax breaks to smaller breweries to encourage micro-breweries and keep Council Tax as low as possible.

Finally, UKIP will revise the Armed Forces terms of service to ensure personnel on operational duty overseas do not pay income tax.

For further information see

UKIP Manifesto 2015
Analysis of other party manifestos will follow.

The CIOT is of course strictly neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

James Knell
CIOT External Relations Officer
Friday 01 May 2015

Media and Politics
 
Manifesto Tax Policies - Liberal Democrats
17 April 2015

The Liberal Democrats launched their election manifesto on Wednesday April 15th. Key tax proposals include a commitment to raise the personal allowance to £12,500; a High Value Property Levy on homes worth over £2million and a new corporation tax on the banking sector which aims to raise £1 billion per year.

These are the party’s pledges by area of tax:

Income tax / national insurance

The Liberal Democrats wish to ‘cut taxes for working people’ by raising the tax-free allowance to £12,500. As a stepping stone to this increase, they will bring forward the planned increase to an £11,000 allowance to April 2016.

Once they have delivered the rise in the personal allowance, they will raise the employee National Insurance threshold to the Income Tax threshold, as resources allow, while protecting low earners’ ability to accrue pension and benefit entitlements.

The party will also abolish employee shareholder status (‘shares for rights’) that offers employees who have sacrificed their employment rights, income tax relief and capital gains tax exemptions on shares they own in their company.

Pensions and tax

The Lib Dems would establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions, which would be designed to be simpler and fairer and which would be set more generously than the current 20% basic rate relief.

The party intend to withdraw eligibility for the Winter Fuel Payment and free TV Licence from pensioners who pay tax at the higher rate (40%).

Property taxes

The Liberal Democrats remain committed to introducing a Land Value Tax (LVT), which would replace Business Rates in the longer term and could enable the reduction or abolition of other taxes. They will extend the Business Rates review to ensure it considers the implementation of LVT, as well as interim reforms like Site Value Rating that could be completed within five years.

They will introduce a banded High Value Property Levy in 2017-18. The Liberal Democrats will consult on the implementation of this levy. The party would guarantee that for properties valued at between £2m and £2.5m the charge would be £2,000 per year or less. For £2.5m and £3m the charge would be £3,500 per year or less, for properties between £3m and £4m the charge would be £5,000 per year or less and for properties between £4m and £5m the charge would be £9,000 per year or less.

The party is proposing a Council Tax discount for significant improvements in energy efficiency in homes. The party is also aiming to cut council tax by £100 for 10 years if you insulate your home, and ban landlords from letting out homes tenants cannot reasonably afford to heat. The party will levy up to 200% Council Tax on second homes where they judge this to be appropriate. They will remove the requirement to hold local referenda for Council Tax changes, ensuring Councillors are properly accountable for their decisions by introducing fair votes.

They will establish a voluntary register of rented property where either the landlord or the tenant can register the property, to improve enforcement and tax transparency.

Capital gains tax / investment income

The party will reduce the annual exempt amount for Capital Gains Tax to £2,500, however they will allow people to transfer unused elements of their Income Tax Personal Allowance to offset against CGT liabilities.

The party will restrict entrepreneurs’ relief to those who have had shareholdings of at least 10% within the last three years and 5% in the last year. This will ensure that entrepreneurs’ relief continues to benefit genuine entrepreneurs but isn’t open to abuse.

They will raise the rate of dividend tax by 5% for higher and additional rate taxpayers to more closely align them with marginal income tax rates.

Families, tax credits & low earners

The party will complete the introduction of Tax-Free Childcare, which will provide up to £2,000 of childcare support for each child and include childcare support in Universal Credit, refunding 85% of childcare costs so work pays for low earners.

They will abolish the transferable tax allowance for married couples and civil partners introduced in April 2015, stating that it unfairly discriminates against unmarried couples.

Business taxes

The Liberal Democrats will continue to reform business tax to ensure it stays competitive, making small and medium-sized enterprises the priority for any business tax cuts. They will work to adjust the tax system away from subsidy of high leverage debt and tackle the bias against equity investment.

The party will continue the banking levy and introduce a time-limited 8% supplementary corporation tax charge on banks operating in the UK to ensure banks continue to make a fair contribution to fiscal consolidation.

Their manifesto also states that they will ask the Bank of England’s Financial Policy Committee to consider the approach to paying tax taken by banks for themselves, their employees and for their customers, as part of their assessment of the risks posed by the sector, supported by an annual report by HMRC.

They will introduce a tax levy on tobacco companies so they fairly contribute to the costs of health care and smoking cessation services, subject to consultation on the detailed design and practicalities.

International

The party is intending to lead international action to ensure global companies pay fair taxes in the developing countries in which they operate, including tightening anti-tax haven rules and requiring large companies to publish their tax payments and profits for each country in which they operate.

The Liberal Democrats are committed to improving tax transparency including in low-income countries by extending country-by-country reporting from banks and extractive industries to all UK listed companies.

On corporation tax, they will limit interest deductibility; they are intending to lead from the front in implementing the rules coming out of the OECD’s work on Base Erosion and Profit Shifting. Within this work is a policy to limit the amount of debt interest that can be offset against a company’s Corporation Tax liability. The OECD work on this strand is due to complete in the autumn of 2015 and they will implement, as soon as possible thereafter.

Avoidance and evasion

The party is aiming to bring in £6bn extra a year from a further crack down on tax avoidance.

The Lib Dems would extend the loss relief rules that the coalition applied to banks operating in the UK in the 2014 Autumn Statement.

The party will increase charges on Non Domiciled Residents so that people who have been resident in the UK for 7 of the past 9 years will see a rise from £30,000 to £50,000. People who have been resident in the UK for 12 of the past 14 years will see a rise from £60,000 to £100,000, and those who have been resident in the UK for 17 of the past 20 years will see a rise from £90,000 to £150,000.

The party will introduce a general anti-avoidance rule which would outlaw contrived structures designed purely or largely to avoid tax.

The party will implement the planned new offence of corporate failure to prevent economic crime, including tax evasion, with penalties for directors up to and including custodial sentences. They will also levy penalties on firms proven to facilitate tax evasion, equivalent to the amount of tax evaded by their clients.

Green taxes & Environment

The Liberal Democrats will implement targeted green taxes to discourage pollution and reward sustainability with a long-term view to increase the proportion of tax revenue accounted for by green taxes.

There would be a programme of tax incentives and public investment for the energy efficiency sector. 50% of any tax revenues from shale gas would go into a Low-Carbon Transition Fund to fund energy efficiency, community energy, low-carbon innovation and renewable heat.

The party is committed to establishing a coherent tax and regulatory framework for landfill, incineration and waste collection to drive continuous increases in reuse and recycling rates and ensure only non-recyclable waste is incinerated, including reinstating the Landfill Tax escalator and extending it to the lower rate and consulting on the introduction of an incineration tax.

The party will commission a new Natural Capital Committee to investigate the potential for other resource taxes, including deposit refund schemes.

The party has stated that it intends to work with the automotive industry to re-band Vehicle Excise Duty in order to return revenues to those projected in 2010. This work would be subject to consultation, however we will continue to incentivise the purchasing and running of lower emission cars.

Devolution

The Liberal Democrats are committed to enabling the devolution of Corporation Tax to Northern Ireland by April 2017. They will continue to work with all parties to implement the full package of measures in the Stormont House Agreement and address outstanding issues. They will seek to build on this progress by keeping under review the prospect of further devolution of fiscal powers to the Northern Ireland Assembly and other powers that would improve the financial accountability of the Assembly.

The party has stated that the Scottish Parliament should raise in tax more than half of what it spends in its budget. A Scottish welfare system should allow the Scottish Parliament to change the benefits regime where there is specific Scottish need or priority, with a starting budget of around £3 billion.

The Liberal Democrats will deliver ‘proper’ Home Rule for Wales and a Welsh Parliament by implementing the remaining Silk proposals on financial powers for Wales. They are to consider the work of the Government’s review on devolution of Air Passenger Duty (APD), with a view to devolving long-haul APD.

HMRC and the tax system

The party would set a target for HM Revenue and Customs to reduce the tax gap and continue to invest in staff to enable them to meet it.

For further information see

Liberal Democrat Manifesto 2015

Analysis of other party manifestos will follow.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

James Knell
CIOT External Relations Officer
Friday 17 April 2015

Media and Politics
 
Manifesto Tax Policies - Conservative
16 April 2015

The Conservatives launched their election manifesto on Tuesday April 14th. The most prominent tax announcements included: increasing the inheritance tax threshold to £1m; ensuring all people who work 30hrs per week on the minimum wage pay no income tax; a commitment to no rise in VAT, national insurance contributions or income tax; increasing the personal allowance to £12,500 and raising the threshold for the 40p rate of income tax so that nobody earning under £50,000 pays the rate.

David Cameron focused his speech and the manifesto around the twin themes of having a ‘clear economic plan’ and establishing the Conservatives as the party for ‘working people’. His tax policies appear to be an attempt to reinforce those messages, particularly his pledge to alleviate those on the minimum wage from the burden of income tax. The Conservatives intend to eliminate the deficit (£90bn) in current spending by 2017-18 and move into an overall budget surplus from 2018-19.

These are the party’s pledges by area of tax:

Income tax / national insurance

The Conservatives will take everyone earning less than £12,500 out of income tax altogether (which also acts as a tax cut for 30 million people) and pass a law to ensure a tax-free minimum wage for those working at least 30 hours per week. The party would raise the higher rate (40p) Income Tax threshold to £50,000. The party has committed itself to no increases in National Insurance or Income Tax.

The party will continue to help smaller businesses take on new workers through the Employment Allowance, which frees businesses from the first £2,000 of employers’ NICs so that a third of employers pay no jobs tax.

Pensions and tax

The Conservatives will reduce the tax relief on pension contributions for additional rate taxpayers. The size of the annual allowance would be gradually reduced from £40,000 to £10,000 for those making £150,000 a year or more.

The Conservatives also draw attention to changes made by the coalition government abolishing the 55 per cent tax on pension pots, so that when the deceased is 75 or over any beneficiary only has to pay their marginal Income Tax rate – normally 20 per cent – when they draw down the pension. And enabling anyone who dies before the age of 75 to pass on their pension pot completely tax-free, so that beneficiaries will pay no tax on pensions they inherit or on the income they draw down.

Property taxes

From this autumn, the party will introduce a new Help to Buy ISA to support people who are saving up for a deposit for their first home. A ten per cent deposit on the average first home costs £15,000, so if a prospective homebuyer puts in up to £12,000, government will put in up to £3,000 more. A 25 per cent top-up is equivalent to saving a deposit from your pre-tax income – making it effectively a tax cut for first-time buyers.

While the party does not mention it in their manifesto they have made clear their strong opposition to a mansion tax.

Inheritance tax

Inheritance tax is one of the party’s flagship announcements. The Conservatives will increase the effective Inheritance Tax threshold for married couples and civil partners to £1 million, with a new transferable main residence allowance of £175,000 per person.

Capital gains tax / investment income

There are no pledges specific to this area, though proposals to raise the non-dom charge (see below) are relevant. The manifesto also draws attention to the coalition Government’s move to enable ISAs to be passed on to a spouse tax-free, so that from this April they are no longer subject to Income Tax or Capital Gains Tax.

Families, tax credits & low earners

The party is committed to lowering the amount of benefits that any household can receive to £23,000 and continue to roll out Universal Credit.

The Conservatives will bring in tax-free childcare to support parents back into work, doubled to 30hrs per week. In addition, the party will keep the transferable tax allowance which enables married couples to transfer £1,060 of their tax-free income to the husband or wife, where the highest earner is a basic rate taxpayer; this applies to civil partnerships too, and the transferable amount will always rise at least in line with the Personal Allowance.

The Conservatives would insist that EU migrants who want to claim tax credits and child benefit must live in the UK and contribute to this country for a minimum of four years.

Business taxes

Building on corporation tax cuts in the 2010-15 Parliament, the Conservatives “want to maintain the most competitive business tax regime in the G20, and oppose Labour’s plans to increase Corporation Tax.”

The Conservatives would conduct a major review into business rates by the end of 2015 to ensure that from 2017 they properly reflect the structure of Britain’s modern economy and provide clearer billing, better information sharing and a more efficient appeal system.

A Conservative government would allow farmers to ‘smooth their profits’ for tax purposes over five years, up from the current two years, to counter income volatility. The manifesto notes the tax incentives for films, theatre, video games, animation and orchestras introduced by the current government and pledges to continue these reliefs, with a tax credit for children’s television next year and the expansion of these incentives for the creative industries sector when possible.

International

The manifesto states that a Conservative government would lead international efforts to ensure global companies pay their fair share in tax, as David Cameron did at the G8 Summit in Northern Ireland in 2013, which secured significant international progress on fairer tax rules and full transparency over who really owns companies.

The Conservatives will push for all countries to sign up to the Extractive Industries Transparency Initiative; review the implementation of the new international country-by-country tax reporting rules and consider the case for making this information publicly available on a multilateral basis.

Finally, they will ensure developing countries have full access to global automatic tax information exchange systems and continue to build the capacity of tax authorities in developing countries.

VAT and duties

The party pledges no increases in VAT.

The manifesto notes the abolition of Labour’s fuel duty escalator, but makes no commitments on fuel duty for the next Parliament.

Avoidance and evasion

The Conservatives state that they will raise at least £5 billion from continuing to tackle tax evasion, and aggressive tax avoidance and tax planning, building on the £7 billion of annual savings delivered in the last Parliament.

The Conservatives will increase the annual tax charges paid by those with non-domiciled status, ensuring that they make a fair contribution to reducing the deficit, and continue to tackle abuses of this status.

The manifesto states that ‘hardworking taxpayers’ supported the banks during the financial crisis and so the banks should in turn support them during the recovery; the party will therefore keep the bank levy in place and restrict established banks’ ability to pay less tax by offsetting their profits against past losses.

The Conservatives are also seeking to legislate a criminal offence for those companies which fail to put in place measures to stop economic crime, such as tax evasion, in their organisations and making sure that the penalties are large enough to punish and deter.

Devolution

The party will continue devolution settlements for Scotland and Wales, and implement the Stormont House Agreement in Northern Ireland. They will also progress plans to give English MPs a veto over English-only matters, including on Income Tax.

A Conservative government would implement the recommendations of the Smith Commission so that more than 50 per cent of the Scottish Parliament’s budget will be funded from revenues raised in Scotland and it will have significant new welfare powers to complement existing devolved powers in health and social care. The party will agree new rules with the Scottish Government for how the block grant will be adjusted, to take account of the new devolved tax and welfare powers, and ensure that where responsibility for taxation has been devolved, tax changes only affect public spending in that part of the country.

There would be a ‘funding floor’ to protect Welsh relative funding and provide certainty for the Welsh Government to plan for the future, once it has called a referendum on Income Tax powers in the next Parliament. There is also make a promise to make the Welsh Government responsible for raising more of the money it spends so the Welsh people can hold their politicians to account.

For Northern Ireland the Conservatives would complete the devolution of Corporation Tax powers to the Assembly, consistent with the Executive fulfilling its commitments on finance, welfare reform and efficiencies in the Stormont House Agreement.

HMRC and the tax system

The Conservatives would establish the Office of Tax Simplification (OTS) on a permanent basis and expand its role and capacity.

For further information see

Conservative Manifesto 2015

Analysis of other party manifestos will follow.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

James Knell
CIOT External Relations Officer
Thursday 16 April 2015

Media and Politics
 
Manifesto Tax Policies - Labour
15 April 2015

Labour were the first of the major parties to publish their manifesto, launching it on Monday April 13th. The most eye-catching tax announcement – the abolition of non-dom status – had been pre-announced the previous day, alongside a range of other measures badged as an anti-avoidance ten point plan.

The party’s central economic message seems to have four main strands: Labour will balance the books where the Coalition Government has failed; the party’s promises are fully funded (so no additional borrowing); the party will change the economy (high skills, higher wages, stronger and more balanced growth); the burden will be shared fairly (clampdown on avoidance, higher taxes for the rich).

This is how the promises in the manifesto and the accompanying document, ‘HMRC: Labour’s Plan to Tackle Tax Avoidance and Evasion’, break down by area of tax –

Income tax / national insurance

Labour would raise the additional rate of income tax (on income over £150,000) back to 50p and would reintroduce the lower 10p starting rate of tax introduced and then scrapped by Gordon Brown. The latter would be paid for by ending the Conservatives’ Marriage Tax Allowance. Labour promise not to increase the basic or higher rates of Income Tax or National Insurance, but the manifesto says nothing about thresholds.

Pensions and tax

Labour will restrict tax relief on pension contributions for the highest earners to help fund a cut in tuition fees. The manifesto provides no further details but the party has previously said that they would do this by reducing relief on pension contributions for people earning over £150,000 a year from to 20 per cent.

Labour support greater flexibility for those drawing down their pension pots, but there must be proper guidance for people to avoid mis-selling. The party would reform the pensions market so that pension providers put savers first, and protect consumers from retirement rip-offs.

Property taxes

The party would introduce a Mansion Tax on properties worth over £2 million. No further information is provided but in an Evening Standard article in October Ed Balls
gave a number of assurances and clarifications which so far as we know remain Labour policy:
• a banded system (eg £2-3 million) with valuations not needed for most properties “as it will be clear which band… the property falls into”;
• owners will be able to submit a self-valuation to HMRC, as with ATED;
• those owning properties worth £2-3 million will only pay an extra £250 a month but those with properties worth tens of millions will make “a significantly bigger contribution”;
• protections for those who are asset rich but cash poor – those earning below the income tax higher rate threshold will be guaranteed the right to defer the charge until the property changes hands;
• No property under £2 million will be included and the threshold will be raised each year in line with average rises in house prices;
• Labour will look at asking overseas owners of second homes in the UK to make a larger contribution than people living in their only home.

Labour would also give local authorities powers to introduce higher council tax on long term empty properties.

Inheritance tax

No proposals in this area. Labour responded to the Conservative announcement on inheritance tax by saying that this should not be a priority for extra spending compared to, eg, the NHS or cutting taxes for ‘most working people’.

Capital gains tax / investment income

Some of the measures in Labour’s anti-avoidance plan (see below) would have impact in this area, most notably abolishing non-dom status, scrapping ‘shares for rights’ and rewriting carried interest rules. On the latter, the FT has reported that Labour has “said it would not attack the core principle that private equity profits — known as carried interest — are treated as capital gains, rather than income. But it planned to tighten the carried interest rules so that private equity managers would not pay lower rates of capital gains tax – instead of income tax – in cases where they had little of their own money at stake.”

Tax credits / low earners

Labour have promised not to cut tax credits. Labour support the principle behind Universal Credit – that there should be a smooth transition into work – “but it must be affordable and fit for purpose, so we will pause and review the programme”. ‘Make Work Pay’ contracts would give tax rebates to businesses who sign up to paying the Living Wage in the first year of a Labour Government.

Business taxes

Labour will put small businesses first in line for tax cuts. Instead of cutting Corporation Tax from 21% to 20%, benefiting larger firms, the party will cut, and then freeze business rates for over 1.5 million smaller business properties. Labour promise they would “maintain the most competitive corporate tax rates in the G7”.

The party also has a number of proposals which would affect particular sectors. A Bank Bonus Tax would fund a ‘compulsory jobs guarantee’. An increase in the bank levy would fund the expansion of free childcare for working parents. There would be a levy on tobacco firms (a 15 per cent levy on the sector’s annual £1bn of profits was the proposal announced last autumn) to help increase NHS spending. Businesses who sign up to paying the Living Wage would get a tax rebate.

Additionally some of the measures in the anti-avoidance ten point plan (see below) would affect businesses, especially multinationals.

International

Labour would seek international agreement to make country-by-country reporting information publicly available, and will act at home if agreement is not reached. British Overseas Territories and Crown Dependencies will be required to produce publicly available registries of the real owners of companies based there. The party would extend the sharing of tax information to developing countries and increase DFID’s help to governments to collect more of their own taxes, tackle corruption, and ensure good governance.

VAT and duties

Will not raise VAT, or extend it to food, children’s clothes, books, newspapers or public transport fares.

Avoidance and evasion

Labour published a ten point plan to tackle tax avoidance the day before publishing their manifesto. Labour have said they will expect the Treasury to, on the first day of a Labour government, present a draft Anti-Tax Avoidance Bill to the Chancellor, setting out the necessary legislation to deliver the ten point plan. They have also said these measures would appear in a Labour Government’s first Finance Bill.
1. Abolish the non-dom rules, while introducing a temporary residence rule for those genuinely in the UK for a short period of time, such as university students
2. Re-write carried interest rules which allow private equity managers to get away with paying less tax than ordinary working people even when they have not been investing their own money
3. Close loopholes used by hedge funds to avoid stamp duty
4. Force the UK’s Overseas Territories and Crown Dependencies to produce publicly available registries of beneficial ownership
5. Increase penalties for tax avoidance including new penalties for those who are caught by the General Anti-Abuse Rule
6. Close loopholes like the Eurobonds loophole which allow some large companies to move profits out of the UK and avoid Corporation Tax
7. Scrap the “Shares for Rights” scheme
8. Tackle disguised self-employment by introducing strict deeming criteria
9. Tackle the use of dormant companies to avoid tax by requiring them to report more frequently
10. Make country-by-country reporting information publicly available

Labour say these measures will cut avoidance and evasion by at least £7.5 billion a year in the next Parliament. However the IFS has suggested that the figures put forward by all the main parties on what can be raised in this area lack credibility. Labour say they will use the proceeds of abolishing the non-dom rules to help get the deficit down; other measures will fund the NHS Time to Care Fund, abolition of the ‘bedroom tax’ and cuts in tuition fees. Any remaining revenues will be used to help get the deficit down.

Labour will also ask the Bank of England to focus on risks from the informal economy, including avoidance, evasion and the tax gap, in delivering its financial stability objective. The manifesto includes a target to reverse the (absolute terms) increase in the tax gap under the current government and get back to avoidance and evasion falling at £1.5 billion a year.

On evasion, Labour say it “is unacceptable that HMRC has taken forward just one prosecution out of over 1,000 people with accounts at the Swiss branch of HSBC who are known to have not paid tax that was due”. This is one of the justifications for their review into the culture and practices of HMRC (see below).

Devolution

Labour will keep its vow and implement the Smith Agreement in full. Rates of income tax will be set in Scotland. They promise to “go further, with a Home Rule Bill to give extra [unspecified] powers to Scotland over tax, welfare and jobs”.

HMRC and the tax system

Labour promise an immediate ‘root and branch’ review into the culture and practices of HMRC “so that everyone follows the same rules and we increase the rigour of the tax system”. Additional information on this has been set out in a paper, ‘HMRC: Labour’s Plan to Tackle Tax Avoidance and Evasion’, published the day before the manifesto was published. The review would cover HMRC processes for managing investigations, prioritising resources and the focus of HMRC’s leadership on tax avoidance and evasion. The review would have full investigatory powers and support from the Treasury. It would begin on day one of a Labour government.

Labour also promise to deploy resources more effectively within HMRC – for example, by liberating resources currently tied up in administering the Government’s “shares for rights” scheme – to provide HMRC’s specialist investigation, enforcement, compliance and anti-avoidance units with the expertise they need.

The party would build on the ongoing programme of improvements to HMRC’s digital service: “Such improvements will save money for both HMRC and the taxpayer. We recognise that different size businesses have different needs and that one size doesn’t fit all.” There is praise for measures such as updates to online help, including video tutorials and webinars, and improvements to individual web-based accounts which have allowed businesses to calculate and pay a wider range of taxes online more easily. “These services are not without their problems, but a Labour Government will ensure continued investment in digital services, aiming to save money for both HMRC and the taxpayer.”

Finally the party argues HMRC needs to be more visibly accountable to the taxpayer. As well as a general promise to “encourage stronger independent scrutiny of the tax system and the government’s efforts to tackle tax avoidance” the party proposes strengthening the powers of the National Audit Office to scrutinise tax reliefs and wants the Chancellor and Chief Executive of HMRC to give evidence to the Treasury Select Committee annually on the Government’s efforts to tackle avoidance and evasion and the progress made on reducing the tax gap.

For further information see

Labour manifesto 2015
HMRC: Labour’s Plan to Tackle Tax Avoidance and Evasion

Analysis of other party manifestos will follow.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Wednesday 15 April 2015

Media and Politics
 
Election Q&A: Intent and evasion, and four other quick fire questions
13 April 2015

With the general election imminent, where do the political parties stand on the key tax questions?

We posed 16 questions to the parties and have posted the questions and answers over the course of the last week. These are the final five, where we sought brief one sentence answers.

Quick fire questions

1. In normal times, what share of GDP should be raised in taxes?

Conservatives
The current OBR forecast sees total government revenue settling at around 36% of GDP from 2016 onwards. Conservative tax cut proposals aim to reduce this a little.

Labour
We would not set an arbitrary target - the important thing is that we fund the public services we all rely on and bring down the deficit.

Lib Dems
The current OBR forecast sees total government revenue settling at around 36% of GDP from 2016 onwards. Lib Dem tax increase proposals aim to increase this a little.

SNP
We believe our public services should be properly funded to maintain quality of provision and continuous improvement – the level of taxation should ensure that this can continues.

Greens
Around 45%

2. Should married people be treated differently by the tax system?

Conservatives
It is right that marriage is recognised in the tax system. From April 2015, the new transferable allowance will allow married couples and civil partners to save up to £212 per year.

Labour
No. We would scrap this Government’s transferable tax allowance for married couples, which only benefits one third of married couples and one sixth of families with children and use the money to help fund the reintroduction of the lower 10p income tax rate.

Lib Dems
No. The party would scrap the transferable allowance.

SNP
We do not support the Coalition government’s married couple’s tax allowance to be introduced in 2015 and have previously stated our support for abolishing the allowance.

Greens
No.

3. Should prosecutors have to prove intent to evade tax before someone can be criminally convicted?

Conservatives
The party supports the introduction of a new strict liability offence for those who have not paid the tax due on offshore income.

Labour
This is a complex area but we need to strike a balance so that honest mistakes are recognised as such, but we do not set the bar so high that prosecutors are unable to deal with evaders.

Lib Dems
“For offshore evaders, following consultation we will introduce a new strict liability criminal offence, so you can no longer simply plead ignorance in an attempt to avoid criminal prosecution.” (Danny Alexander)

SNP
We are unequivocal – tax evasion is obscene, immoral and wrong. All avenues should be explored by the UK government to ensure that we have the strongest possible framework for prosecuting those who engage in this activity.

Greens
No.

4. Is there such a thing as unhealthy tax competition?

Conservatives
The UK is in a global race to attract investment and in 2010, the party set out a priority to make Britain the most attractive place in the world to invest. From April 2015, corporation tax will reduce to 20%, which the party argues makes the UK the most competitive regime in the G20.

Labour
A country’s tax system should result in a race to the top where countries compete for long-term, sustainable investment. The Chancellor’s current economic plan commits us to a race to the bottom.

Lib Dems
The party promises to “maintain the stable and competitive corporate tax regime developed by the Coalition to continue to attract inward investment”.

SNP
We support a business tax system that gives Scotland, and key sectors within Scotland, long-term competitive advantage.

Greens
Of course: any competition that erodes the tax base and undermines public services and a healthy society.

5. Do you support a ‘mansion tax’?

Conservatives
No. The party regards the ‘mansion tax’ as a fundamentally bad idea and opposes it.

Labour
Yes. Our ‘mansion tax’ on properties over £2m would raise vital funds for an NHS Time to Care Fund as part of our plan to save and transform the NHS.

Lib Dems
The party would introduce a High Value Property Levy (which it often describes as a mansion tax) in the form of additional council tax bands for the highest value properties.

SNP
We believe a mansion tax should be explored, but we are yet to see a detailed, costed proposal that we can support.

Greens
No, but we would add additional bands to Council Tax.

Sources: Conservative answers from Budget Red Book March 2015; David Cameron remarks, December 2013; David Cameron’s speech to Conservative conference, October 2013; miscellaneous media reports
Labour answers provided by Shabana Mahmood, Shadow Exchequer Secretary
Lib Dem answers from Budget Red Book March 2015; Fairer Taxes - Policies for the Reform of Taxation, passed by Lib Dem conference September 2013; parliamentary statement by Danny Alexander, 19 March 2015
SNP answers provided by Stewart Hosie, SNP Treasury Spokesman at Westminster
Green Party answers provided by Molly Scott Cato MEP, Green Party Spokesperson on Finance
NB. UKIP declined to take part in the Q&A and Plaid Cymru did not reply, but we’ll be blogging on their tax policies later in the election campaign.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Monday 13 April 2015

Media and Politics
 
Election Q&A: (11) The role of tax advisers
13 April 2015

With the general election imminent, where do the political parties stand on the key tax questions?

We posed 16 questions to the parties and are posting the questions and answers over the course of a week.

11. Eight million people and businesses use tax advisers in the UK every year. How do you see the role of tax advisers / tax agents in the tax system?

Conservatives
David Gauke has spoke of the need for advisers to ensure that people are compliant, and has also praised the input of professional bodies into the policy-making process. However Gauke and other ministers defend ‘high risk promoter’ legislation “to tackle the small minority of tax advisers who are persistently uncooperative and are not transparent in their dealings with HMRC.”

Labour
Tax advisers play an essential role in the tax system. Their skills and knowledge are vital in supporting individuals and businesses navigate the system. However, this advice should always have the aim of ensuring that the appropriate amount of tax is paid. Where it is found that advisers are giving advice that falsely reduces the tax liability owed then swift action should be taken to clamp down on this behaviour.

Lib Dems
No public statements on this topic have been found but the party has been supportive of government policy in this area.

SNP
We understand that the UK tax system is complex and companies, particularly those who wish to invest in Scotland, will often need support from experts to ensure they pay the taxes they owe. We believe that it is critical that people have trust in tax advisers and that they can have confidence that they are serving their interests with integrity and transparency. We see value in the Public Accounts Committee’s recommendation that a code of conduct should be introduced for all tax advisers.

Greens
We believe that tax should be used to change behaviour, except for solidaristic tax-paying behaviour! We would like to see tax advisers working to encourage companies and individuals to reduce their energy use, resource use, and waste production. Given the general anti-abuse legislation we would enforce firmly, we would see much less of a role for tax professionals offering avoidance advice. Some of these are welcome to join HMRC!

Sources: Conservative answer from David Gauke remarks to CIOT parliamentary reception, June 2012; David Gauke speech at HMRC Stakeholder Conference, November 2014
Labour answer provided by Shabana Mahmood, Shadow Exchequer Secretary
SNP answer provided by Stewart Hosie, SNP Treasury Spokesman at Westminster
Green Party answer provided by Molly Scott Cato MEP, Green Party Spokesperson on Finance
NB. UKIP declined to take part in the Q&A and Plaid Cymru did not reply, but we’ll be blogging on their tax policies later in the election campaign.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Monday 13 April 2015

Media and Politics
 
Election Q&A: (10) Devolution of tax powers
12 April 2015

With the general election imminent, where do the political parties stand on the key tax questions?

We posed 16 questions to the parties and are posting the questions and answers over the course of a week.

10. Devolution of tax powers. How far should it go, and what do you see as the main risks/benefits?

Conservatives
David Cameron has promised that the Conservatives will support the granting of further tax powers to Scotland, as set out by the Smith Commission. Recognising that Northern Ireland faces a uniquely competitive disadvantage through a border with the Irish Republic, devolution of corporation tax has been legislated for. The people of Wales will soon vote in a referendum on a major transfer of income tax powers from Westminster. In September George Osborne observed: “When Scotland is rightly given greater control over its taxes, I suspect the people of Scotland will choose to put them down not up.” The party has promised that the English will “get more control over their taxes and their laws too” with “English votes for English laws”.

Labour
We would devolve business rates to city and county regions, so that they can invest to grow businesses in their area and benefit from any additional revenues in general. Such reforms can have an important affect, and we support measures that can increase inward investment and economic rebalancing, but they need go hand-in-hand with policies in other areas such as infrastructure and skills.

Lib Dems
The promised new powers must be delivered to Scotland irrespective of any issues in the rest of the UK. The party’s policy goes further than the Smith Commission, arguing for devolution of inheritance tax and capital gains tax powers too. The Lib Dems also back tax-varying powers for Wales.

SNP
The SNP remains committed to independence for Scotland. However, we accept that independence was not the choice of the majority of the Scottish people in the referendum. In its submission to the Smith Commission, the SNP Scottish Government set out the case for devolving all taxes in Scotland to the Scottish Parliament unless there were good reasons for them being reserved. Greater fiscal responsibility both increases the accountability of the Parliament to the people of Scotland, financially and democratically, and allows the Parliament to use its fiscal powers to pursue policy objectives.
Under the Smith Commission proposals for further devolution for Scotland, the Westminster Government will continue to control around 70% of tax-raising powers. That isn’t Home Rule; it’s continued Westminster rule. A strong team of SNP MPs in the House of Commons will make the case for more powers at every opportunity.

Greens
We believe in full independence for Scotland and, eventually, for Wales, NI and the English regions. Our principle is that tax should be collected locally and sent to wider levels of government by agreement. This needs to be supported by requirements for richer regions to share with poorer ones. We also support devolution of local taxation powers to local authorities. In particular we would not cap what local authorities are allowed to raise in Council Tax, allow local Councils to conduct revaluations and to set their own multiplier rates provided they are more progressive, and not require a referendum when they do so. We would also allow local authorities to set local business rates, and then distribute the whole of Council Tax receipts and Business Rate receipts between local authorities on a basis decided by a Commission independent of central government set up by local authorities themselves.

Sources: Conservative answer primarily from George Osborne’s party conference speech, September 2014
Labour answer provided by Shabana Mahmood, Shadow Exchequer Secretary
Lib Dem answer from Danny Alexander’s speech to Lib Dem conference, October 2014
SNP answer provided by Stewart Hosie, SNP Treasury Spokesman at Westminster
Green Party answer provided by Molly Scott Cato MEP, Green Party Spokesperson on Finance
NB. UKIP declined to take part in the Q&A and Plaid Cymru did not reply, but we’ll be blogging on their tax policies later in the election campaign.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Sunday 12 April 2015

Media and Politics
 
Election Q&A: (9) Helping taxpayers on low incomes
12 April 2015

With the general election imminent, where do the political parties stand on the key tax questions?

We posed 16 questions to the parties and are posting the questions and answers over the course of a week.

9. What single measure would you enact that would best serve the interests of the individual taxpayer on a low income?

Conservatives
Conservatives draw attention to their plans to raise the tax-free personal allowance from £10,500 to £12,500, taking one million more of the lowest paid workers out of income tax, and meaning that if you work 30 hours a week on minimum wage, you will pay no income tax at all.

Labour
We will help those on middle and lower incomes by cutting income tax for hardworking people and introducing a lower 10p starting rate of tax.

Lib Dems
Further increases in the income tax personal allowance. The party would link the personal allowance to the minimum wage so that in future no-one with a full-time job on the minimum wage would pay income tax.

SNP
Reducing inequality, as well as being a key objective in itself, can also have a positive impact on economic growth. Central to our economic strategy is the promotion of Fair Work. The Scottish Government already leads by example by paying everyone within its pay policy the Living Wage and developing a Scottish Business Pledge to promote payment of fair wages in the private sector. We believe any future UK Government should make an equally clear commitment to the Living Wage.

Greens
The more we can increases taxes actually received from the wealthy and from tax avoiding corporations the less we need to tax those on low incomes. Our longer term proposal to move to Basic Income and abolish the income tax personal allowance will benefit everybody who earns less than around £40,000 pa.

Sources: Conservative answer from David Cameron’s party conference speech, October 2014
Labour answer provided by Shabana Mahmood, Shadow Exchequer Secretary
Lib Dem answer from Fairer Taxes - Policies for the Reform of Taxation, passed by Lib Dem conference September 2013
SNP answer provided by Stewart Hosie, SNP Treasury Spokesman at Westminster
Green Party answer provided by Molly Scott Cato MEP, Green Party Spokesperson on Finance
NB. UKIP declined to take part in the Q&A and Plaid Cymru did not reply, but we’ll be blogging on their tax policies later in the election campaign.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Sunday 12 April 2015

Media and Politics
 
Election Q&A: (8) The OECD project on Base Erosion and Profit Shifting
11 April 2015

With the general election imminent, where do the political parties stand on the key tax questions?

We posed 16 questions to the parties and are posting the questions and answers over the course of a week.

8. What outcomes would you like to see from the OECD/G20 project on Base Erosion and Profit Shifting?

Conservatives
BEPS solutions should be consistent with the Government’s wish to promote UK growth and competitiveness. Tax authorities must be enabled to clamp down on those who refuse to play by the rules. The OECD’s recommendations should help us ensure that economic activity is taxed where that activity takes place.

Labour
Where companies are able to shift profits and operations between countries, these issues need to be tackled at an international, as well as a national, level. We would like to see that, as a result of the BEPS project, taxes paid by multinational corporations will better reflect the actual location of economic activity. We want developing countries fully involved in the process.

Lib Dems
Lib Dems would continue to work closely with other governments and the OECD to reform international tax rules, in order to increase the consistency of tax treatment and reduce the ability of large businesses to avoid tax by shifting income and profits between countries. Key principles include greater banking transparency and effective information exchange between countries.

SNP
We understand that tax avoidance is an increasingly global issue – there should be nowhere to hide for those who seek to avoid taxation. We support efforts to support developing countries that are harmed by tax avoidance to tackle this issue in their own countries and to play their part in finding global solutions.
This issue will only be addressed when we have strong international rules in place, which are implemented by national governments, and where developing countries have the capacity and influence to address the issue fully.

Greens
We oppose tax competition between states. As under 5, we believe that companies should report their profits where they earn them and that we have a common consolidated corporate tax base. We have been lobbying hard for a full inquiry into Luxleaks and have achieved a special committee of the European Parliament. We are convinced that with determination we can ensure that companies pay a fair level of tax and that this could fund the infrastructure they rely on.

Sources: Conservative answer from David Gauke, written parliamentary answer, 24 November 2014
Labour answer provided by Shabana Mahmood, Shadow Exchequer Secretary
Lib Dem answer from Fairer Taxes - Policies for the Reform of Taxation, passed by Lib Dem conference September 2013
SNP answer provided by Stewart Hosie, SNP Treasury Spokesman at Westminster
Green Party answer provided by Molly Scott Cato MEP, Green Party Spokesperson on Finance
NB. UKIP declined to take part in the Q&A and Plaid Cymru did not reply, but we’ll be blogging on their tax policies later in the election campaign.

The CIOT is of course strictly politically neutral and nothing in these posts should be interpreted as endorsement for or opposition to any of the policies mentioned.

George Crozier
CIOT Head of External Relations
Saturday 11 April 2015

Media and Politics
 

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