More information on the closure of the Office of the Public Guardian in Scotland on certain days to deal with the backlog of Powers of Attorney needing processed can be found here.

The term “another week” does not seem appropriate as the title to this blog.

I do not remember all that much about the 1979 referendum and I was living in Chicago during the 1997 referendum.  Odd to think how much I do still remember about Argentina 78.  This week’s announcement ensures that 2014 will now be added to Scotland’s constitutional dateline.  A yes vote in the Autumn of 2014 leads to an independent Scotland by May 2016.  That is why this is not just another week.

What does a yes vote mean?  A yes vote means a Scottish Exchequer.  I have written about a Scottish Exchequer regularly over the last few years including in these blogs and the fiscal powers papers I co-authored with Reform Scotland.  Creating a Scottish Exchequer is not going to happen overnight.  We do though need to start somewhere.  Let’s start with the question: do we need separate HMRC and HM Treasury type bodes?  No.

We also need to look at what other institutions an independent or even a fiscally autonomous Scotland might need.  For example a one stop shop for all Scottish Government legal, registration and tax services.

We also now have to thinking about practicalities.  Would I copy en masse the UK tax legislation as exists in 2014 and declare that no changes will be made for two years?  Yes. This will ensure a degree of certainty for the general public and the business community.  Another advantage is that it would take some pressure off the new Scottish Exchequer.

I am sure I will come back to these and many other issues in the coming weeks and months.

I read with interest that Jeremy Paxman compared Scotland with Zimbabwe in an interview with the First Minister earlier this week.  I remember a similar point being put when I was giving evidence to the Calman Commission.  The transcript for this, page 478, can be found here.

Now to a question I was asked earlier this week.   How would I explain “devo max”.  Two areas need to be looked at.   Government spending and control over taxation.  The percentage that the Scottish Parliament has over each of these areas gives a good idea of how much autonomy it has.   Presently the Scottish Parliament has control over 60% of all government spending but only 7% of taxation.   The Scotland Bill increases taxation control to around 30%.   The latest Reform Scotland proposal, “devolution plus”, moves this closer to 70% for both government spending and control over taxation.  Fiscal autonomy or “devo max” would be around 90% for both government spending and control over taxation.  Fiscal autonomy does not reach 100% because control of VAT cannot be devolved with European Union states and foreign affairs, defence and some economic matters would still be controlled by Westminster.

The Liberal Democrats concerted campaign to dominate the news coverage in the run up to the March UK Budget  continued apace this week.   This week it was the UK Business Secretary, Vince Cable, calling for a mansion tax to be introduced on properties worth over £2 million.  It is estimated that a mansion tax could raise as much as £1.7 billion a year.  Nick Clegg, it is reported, also wants to speed up plans plans to increase the level at which income tax becomes payable, from its current £7,475 to £10,000.   This is presently scheduled for 2015.

Now to Europe.  I have previously blogged on how hard Ireland has had to fight to retain its low rate of corporation tax as a result of its bailout.  What is less well known is how the bailout might impact the Irish legal system.  Excellent article on this in the Law Society Gazette which can be found here.

Now to England and Eric Pickles, UK Communities Secretary, saying that councillors have a “moral duty” to sign up to the UK Government’s council tax freeze.  A moral duty to sign up to government policy.  A tax policy no less.  Interesting tactic.  Not surprisingly this has not gone down well with many English councillors.

More on business rates this week and the debate, for debate read spat, between the STUC and the FSB on the “Small Business Bonus Scheme”.  More on this can be found here.   Good to see that neither side used “morality” in their arguments.

Scottish Water has announced that its charges are to be frozen for the fourth year in a row.  The move means the average annual household charge from April in Scotland will remain at £324.  This is the same level it was in 2009-10.

Some more good news.   The UK Government has agreed to an income tax exemption for non UK competitors at the 2014 Glasgow Commonwealth Games.   This is something I have blogged about before and takes away another point of potential conflict between the Scottish and UK Governments.   Now that agreement has been reached on this and the fossil fuel levy fund I wonder which other niggly issue could be dealt with next?  How about adding aggregates duty, air passenger duty, corporation tax and alcohol duty to the Scotland Bill?  Likely to happen?  No.

One last point.  If you have still not dealt with your tax return please do so as soon as possible even though HMRC have effectively put back the deadline for two days due to possible strike action.  HMRC’s new penalty regime is not something you want to have to deal with.

Have a good weekend.

Given that I am working in Dundee this week this seems like the best place to start.  Dundee is also my favourite Scottish city.  The plans for the town centre and the waterfront are very impressive.

So why is Dundee in the news this week?  Scottish Finance secretary John Swinney named a series of “hubs” where incentives will be offered to companies in manufacturing, life sciences and low carbon renewable energy.   The ports of Dundee and Leith is one of two low carbon and renewables areas proposed.   A number of questions remain to be answered including what are these “incentives”.  For example a reduction in business rates?  The announcement from the Scottish Government can be found here.

Also on business rates. The Scottish Chambers of Commerce called for the planned rise in business rates to be reconsidered.  The rate is planned to rise by 5.6% in April with the figure based on last September’s inflation rate.  This week saw the CPI rate of inflation fall to 4.2%.

Where shall I start?

I think I will start with the small matter of Scotland’s constitutional future.  The news coverage this week shows that this is no longer a strictly Scottish debate.  I personally have found it fascinating watching and listening to UK political commentators trying to get up to speed as quickly as possible.  It won’t be long before they realise that a yes vote will mean tax competition, a Scottish Exchequer, the end to the Barnett formula and less Liberal MPs (there is a bigger loss in percentage terms of MPs to the Liberals than Labour).  I am sure I will come back to this topic regularly throughout 2012.

Not to the sudden upsurge in interest on tax avoidance and the likelihood of the UK Government introducing a general anti-avoidance rule (“GAAR”).  Recent statements by both the PM and Deputy PM strongly suggest that such a provision will be approved this year. The Deputy PM has said: “there should be a general rule that you can’t play the system” and that a “simpler, more open, fairer tax system in which everyone pays their fair share should be created.”  The UK Government’s own report on GAAR came out in favour of a narrowly focused GAAR.  It seems after many years of lurking in the shadows GAAR’s time has come.  I for one welcome this as it is a step on the road to a simpler tax system.

Now back to an old favourite from 2011.  The PM has insisted that the 50p tax rate on higher earners is “temporary” and has hinted that the issue will be reviewed in the run-up to the UK Budget.  The news coverage on this issue suggests that the PM is coming under pressure from business leaders and backbench Conservative MPs.  The question is who will the PM listen to?  There is an equally strong lobby arguing for its retention.  This includes his coalition partner.  I expect to see a report within the next few weeks pointing out how little revenue the higher rate produces.  That though is only part of the debate.  The bigger picture cannot be ignored and I am sure the PM is well aware of this.

Now to a Scottish Government tax proposal.  This proposal was dubbed the “Tesco tax”.  The Scottish Government prefer to refer to this as a “public health levy”.  The supermarkets’ campaign against this proposal started in earnest this week.  The supermarkets claim that the new levy on all major stores selling alcohol and cigarettes will reduce their profits by 10%.  This debate, for debate read battle, has just begun.  An article from the Scotsman on this can be found here.

I like to remind people from time that on one side there is taxation and on the other there is public spending.  The National Audit Office produced another eye watering figure this week.  They said that more than £31 billion of taxpayers’ money has been wasted across government departments in the past two years.  They analysed more than 70 reports and found both annual overspending and waste from delayed and abandoned projects in areas ranging from welfare and capital projects to farm payments.

Now to HMRC and two positive stories.  Following a concerted campaign from numerous business and other professional bodies HMRC is reconsidering its Business Records Check project under which small businesses can be fined £3,000 for not keeping full records during the current tax year even if it later turns out that their tax affairs are in order.  While the review is under way HMRC will not penalise taxpayers and agents for poor record-keeping “except in extreme cases.”  This announcement is to be welcomed.

HMRC is also piloting a new method of resolving its disputes with small business. The Alternative Dispute Resolution (ADR) procedure will use ‘independent’ HMRC facilitators to resolve certain kinds of dispute during a compliance check but before a decision or assessment has been made.  More information can be found here.  Again a positive move by HMRC.

Europe is rarely out of the news for long.  I was interested to read that President Sarkozy is insisting that France must press ahead with a tax on financial transactions to force the issue in Europe.  It seems that the French will introduce legislation next month even without knowing if other countries will follow.  Expect to see this raised at the next European summit.

Finally to football and HMRC’s continuing interest in the so called “beautiful game”.  HMRC has sent a questionnaire to all of the UK’s leading football clubs asking about remuneration and perks for players and their families.  Can you imagine what might be disclosed?

Have a good weekend.

Happy New Year to you all.

I think I will start with something I have blogged on a few times before.  This week’s storm has caused a huge amount of damage in Scotland and in other parts of the UK.  This is going to mean a lot of extra work for our building industry.  That will mean increased revenue for the UK Government primarily through VAT receipts.  That gives us the perfect opportunity to justify a reduction in VAT on residential property repairs and improvements.  As I have noted before this already happens in the Isle of Man.

I was interested to hear what Nick Clegg was saying on Radio 4 earlier today.   In essence he said: “… the public is angered that large companies and a wealthy elite get out of paying their fair share of tax.”   It seems that the UK Government has at last realised that the public must feel that, and to borrow a well worn phrase, “we are all in this together”.  This was in fact the main point of my last blog of 2011 which can be found here.

I am also sure it is not a coincidence that the Prime Minister in his New Year message and again today vowed to tackle excessive “City” pay and to promise a new clampdown on tax avoidance.  David Cameron said: “While a few at the top get rewards that seem to have nothing to do with the risks they take or the effort they put in, many others are stuck on benefits, without hope or responsibility.”  Reward without risk is a terrible combination.

In addition HMRC have been accused of focusing on small firms while taking a more relaxed approach to the tax liabilities of major companies.  Again this goes back to an issue that I wrote about in my last blog of 2011.   It is claimed that up to 20,000 firms will be inspected from April to assess if they can back up their tax returns with paperwork going back several years.   The article from the Guardian can be found here.

The UK Government has also this week had to defend its policy of tax breaks for hiring new workers after the Labour Party estimated that just 10,000 companies had taken advantage of the incentive since its introduction.  In the 2010 Budget George Osborne said that up to 400,000 small businesses would take up relief on national insurance payments for new employees.  The BBC news report can be found here.

Couples with young children will be hardest hit by changes in the tax and benefit system, with the typical family losing more than £1,200 over five years, a new study has estimated.  The report from the Institute for Fiscal Studies also suggested that the UK Government’s welfare reforms will reduce the financial incentives for mothers to go out to work.   The BBC news report can be found here.

Now to a phrase that I had thought had gone out of fashion: “stealth taxes”.  Labour are claiming that the sharp rise in the cost of council services for elderly and disabled people in England and Wales is in effect a “stealth tax”.  Pot kettle black springs to mind.  The BBC news report can be found here.

I would also like to finish on a winter theme.  Winter fuel allowance became a news topic just before Christmas when it was reported that this payment is also made to British expatriates in Europe’s hottest countries.  These payments have almost doubled in five years to around £14m a year.  That though is not the main issue.  If we are truly in such a poor financial state not only does the payment to those living in sunnier climes need to be looked at but whether we can continue to make such a payment at all.  The cost of this allowance is now approaching £3bn.  At the very least there needs to be a debate on whether it should be means tested.

Have a good weekend.

A year in which we were told the economy would grow and the recovery would begin in earnest.   A year ending with almost everyone predicting hard times ahead.

The past year has been dominated by the economic crisis and the fiscal powers debate.  Let’s start with the economic crisis.

The link between what a government spends and how it funds this spending is an obvious one.  Whatever the government spends it needs to match by taxation or borrowing.  The consensus now is that we have a “debt crisis” rather than a recession.  The main political debate is between those who wish to restrict government spending and those who argue for more government spending to grow the economy.

I agree that spending must be reduced.  There is little doubt that the UK has been living beyond its means.  Even when the UK Government manages to balance its books the national UK debt needs to be serviced and at some point paid off.  The scale of the task is such that even under coalition government plans it is going to be at least another five years before the books are balanced.

If there is to be additional spending on say infrastructure then public spending in another should be reduced.  Growth is important but so is reducing the debt mountain.  The trick is to somehow do both.  Is there a simple answer to this conundrum?  Of course there isn’t.

There is though a related issue that needs to be addressed.  We are often told “we are all in this together”.   The problem with that statement is we keep hearing about sections of society that seem to be treated differently.  Bankers and their bonuses is close to becoming a cliché but what of those in senior positions in the public sector.  Can it be right that salary levels, bonuses and the numerous associated benefits of many of those who work in the public sector are so high and wide ranging and far in excess of the majority rest of the workforce?  One example.   Dave Hartnett head of HMRC is to take early retirement next summer with a pension pot of £1.7 million.  I have blogged on Mr Hartnett before.  It seems he may even get a bonus this year.

That is where the public spending debate is moving.  If public spending needs to be reduced, and let’s be clear it does, then the starting point cannot be reducing those who in the public’s eyes actually do the work.  First things first.  I keep hearing and reading about highly paid public sector managers who earn lots but no one is sure what they do.  My question is a simple one.  Is this actually true?

Then there is HMRC and the claim by the House of Commons Public Accounts Committee that there is £25bn in tax owed by large companies.  HMRC has “previous” with this Committee of which I have blogged on before.  The taxation of large companies is complicated but that is a huge sum of money.  Again this makes me wonder if we are all in this together.

The taxation of large companies is complicated but does HMRC treat all businesses the same?    Evidence gathered by the law firm McGrigors showed that HMRC is increasingly using legal powers to force the settlement of unpaid tax bills in Scotland.  The use of similar powers in England and Wales fell over the same period.  Does this mean that not all businesses are treated equally?  I don’t know but the question needs to be asked and answered.

What about the richest in our society?  Our governments, both in London and Edinburgh, along with HMRC must do more to defeat the perception that for the wealthy paying tax is a choice.  One example.  The avoidance of Stamp Duty Land Tax on valuable residential properties via offshore companies should be stopped.

Are we all in this together?  It does not seem so.

One last point before I move on to the fiscal powers debate.

The UK Government’s decision to waive VAT on the Military Wives Choir Christmas single is an example of what is wrong with how we decide as to whom and what we tax.  Is this a great cause?  Yes of course.  Are there lots of other equally great causes?  Yes there are.

Now to the fiscal powers debate.  The result of the Scottish General Election has ensured that the fiscal powers debate in Scotland has taken centre stage.  The Scottish Parliament may even refuse legislative consent for the Scotland Bill.   I like to refer to the Scotland Bill as “Calman minus”.  My own opinion is that the Scotland Bill was never meant to be fit for purpose.

The fact that the UK Government will not even agree to devolve air passenger duty or control over the Crown Estate shows how out of touch they are.   The debate has moved on.  My last few tax blogs show how quickly the debate is moving.  Even senior members of the Labour party in Scotland favour “devo max”.  Hopefully in 2012 we will learn more of what “devo max” actually means.

The fiscal powers debate is no longer confined to Scotland.  I must admit I did not see this coming.  The Eurozone crisis and proposals such as a European Financial Transaction Tax has stirred the euro sceptics and that was before the call for greater fiscal union amongst the Eurozone countries.  The analogy between Scotland’s relationship with the UK and the UK’s relationship with the European Union is an obvious one.  The European angle to the fiscal powers debate has the potential to cause problems for those who arguing for major fiscal powers for the Scottish Parliament and those who oppose this.  I suspect I will be blogging on this regularly throughout 2012.

A quick word on Ireland.  How far will countries such as Ireland be willing to go to stay a member of the Eurozone?  Will Ireland give up its treasured low rate of corporation tax?  Does Ireland have a choice?

Lastly what am I hoping for on the tax front in 2012?  Now is not the time to be greedy.  A VAT reduction for home repairs and improvements is much needed.  A tax exemption for the governing body and the competitors of Glasgow 2014 is essential for the success of these games.  Less specifically I would like to see some evidence from the powers that tax us that we are all in this together.

Merry Christmas and best wishes to you and yours for 2012.   See you again in the New Year.

Let’s start with the fiscal powers debate.

Another interesting week.  When I started writing about the fiscal powers debate I was of course writing about Scotland and its relationship with the rest of the UK.   That debate is now reaching maturity and the end of the Scottish “Phoney War” is in sight.  That being the Scotland Bill.  The real debate between “devo max” and independence is just about to break through the Ardennes.

What I have found fascinating this week is the emergence of a second fiscal powers front into the public domain.  This is no longer just an issue for a relatively small group of Euro sceptics.

Prior to WWII the Germans feared a second front.  Even though they feared it, that is what they ended up with.  The UK now finds itself fighting on two fiscal powers fronts.  The second front being its fiscal relationship with the European Union.  This goes further than the proposed European financial transaction tax.  How much fiscal union will Germany and France press for?  That is the elephant in the room.

As I have blogged on before, the analogy between these two fiscal powers debate is an obvious one and poses difficult questions for each side in the debate.   Just to add to the complexity of this matter, two other fronts could flair up at anytime: Northern Ireland and Wales.

So what has been happening here in Scotland.  The Scottish Parliament’s Scotland Bill Committee has now issued its final report.  The report can be found here.  The Committee has said it is “unable to recommend” the Bill.  The  Committee also found that the plans were “not yet fit for purpose”.

What will the UK Government do?  I suspect many in Westminster and not just in the coalition would like to see the Bill fail.  Excellent blog by Alan Trench on this point.  Alan’s blog can be found here.

The report shows perfectly how the gulf between the UK Government and those arguing for “devo max” or independence is as wide as ever.  One example.  The UK Government’s refusal to devolve complete control of the Crown Estate to the Scottish Parliament.  Last week a similar announcement was made concerning air passenger duty.  Even the Labour, the Tory and the Lib Dem members of the Scotland Bill Committee want control over the Crown Estate to be devolved.

The UK Government, and the Labour party, will also have to deal with an amendment by George Foulkes to the Scotland Bill.  His amendment calls for all fiscal powers to pass to the Scottish Parliament.

As I said another interesting week.  Also difficult to keep up with all that is happening.

A quick point on Europe.  Glad to see that the Prime Minister finally started to talk about Scotland and Birmingham in the context of financial services.  He clearly realised that continuously banging on about the City of London was not going down well in other parts of the UK.

Now to other matters.  Finance Secretary John Swinney has announced that business rates will rise by 5.6% next year.  The rate currently stands at 42.6p, and will rise to 45p.  An opportunity missed?  Possibly.  We might not have heard the last on this.

HMRC have published information on the new “Rural Fuel Duty relief scheme” for retailers of road fuel on the Inner and Outer Hebrides, the Northern Isles, the Islands of the Clyde and the Isles of Scilly.  This is being introduced on 1 January 2012.  More information can be found here.  This has received relatively little publicity.

I was not surprised to read that the controversial head of HMRC, Dave Hartnett, will “retire” in the summer of 2012.  Mr Hartnett is no stronger to controversy.  His recent apology to the House of Commons Public Accounts Committee MPs for the tax deal negotiated by HMRC with Goldman Sachs was I suspect the final straw.

Finally, I found myself agreeing with the claim made by McGrigors that tax officials are increasingly using legal powers to force the settlement of unpaid tax bills in Scotland.   Information obtained by McGrigors under the Freedom of Information Act showed the number of petitions for bankruptcy filed by HMRC in Scotland increased by 97% over a three-year period.  The use of similar powers in England and Wales fell over the same period.  The story from BBC News can be found here.  Excellent work by McGrigors.

Have a good weekend.

The Scottish Government is to raise the various limits relating to a claim of prior rights by a surviving spouse or civil partner and also as what constitutes a “small estate”.

These are pragmatic and sensible increases.

The new and previous prior rights limits can be found here.

The new small estate threshold can be found here.

Both changes come into force on 1 February 2012.

Good to see the that the Office of the Public Guardian in Scotland has issued a policy document that is both practical and pragmatic on amendments to a registered power of attorney.   This policy will come into force on 1 January 2012.

“The Adults with Incapacity (Scotland) Act 2000 is silent on whether it is permissible to amend a power of attorney deed once registered. The Public Guardian has taken the view that an amendment sought by a capable granter is permissible. The Amendment Policy constitutes the Public Guardian’s approach to the management of amendments to powers of attorney.

• In short, a minor administrative amendment to a power of attorney document, e.g. a change of name or address, which requires no capacity test, will be free of charge.
• Any amendment which requires proof of continuing capacity i.e. because there is a change requested to the primacy of the deed, will incur a fee of £70.”

The policy document can be found here.

Let’s start with Edinburgh.

It has been a better week for Edinburgh as we are talking about pandas and not trams or statutory repairs.  Even its pro rugby team is winning.  But what about tax?  The City of Edinburgh Council have taken the idea of a “tourist tax” a stage further.

The policy and strategy committee of the Council has agreed in principle to this revenue raising plan.  The committee has asked officials to look into the proposal in more detail.  It is estimated that the Council could raise up to £10m a year by charging between £1 and £2 per room each night.  If formally adopted Edinburgh would be the first place in the UK to levy the charge on visitor accommodation.  The exact nature of how the tax would be raised is as yet unclear.  The officials have also to look at both a compulsory and voluntary version of this idea.

Now to the fiscal powers debate.  I was not surprised to see that the UK Government has ruled out devolving Air Passenger Duty to the Scottish Parliament.  This simply provides further evidence that the Scotland Bill is “Calman minus”.

The attitude of the UK Government is though of more interest.  The UK Government seem quite happy to go against the wishes of many businesses and business organisations in Scotland on APD.  Also by refusing to devolve APD they are failing to implement the extremely modest Calman proposals of which they said they would implement in full.

To put this in context.  Who would have thought even a few months ago that  we would see senior members of the Labour party arguing for “devo max”.  The election of Ruth Davidson to lead the Conservatives in Scotland and the stance of “Scotland Bill and no further” shows, at least in the short term, where they stand.  The Liberal Democrats are trying to distance themselves from the Conservatives and that is why they created yet another Commission on this issue.  Hopefully their recommendations will not end up as “Steel minus”.

What does this mean?  The unity surrounding Calman, the previous UK Labour Government’s proposals and now the Scotland Bill is crumbling.   It may be that the Conservatives are becomming more and more distracted by Europe and just simply do not see, or maybe do not want to see, how fast the fiscal powers debate is moving.

Now to Europe and that other fiscal powers debate.  There is so much happening here it is difficult to keep up.  The call for greater fiscal union as a means of solving the Euro crisis.  The call for a European Financial Transactions Tax.  The call to safeguard the City of London and the European single market.  The call for a referendum on UK membership of the EU.  The call for powers to be repatriated to the UK.

Before the summit Ken Clarke was urging the Prime Minister to concentrate on maintaining financial stability and to forget about the repatriation of powers.   The Prime Minister is sticking to the view that any changes would only impact upon the 17 Euro countries and thus do not necessitate a referendum about the issue in the UK.

It was also not a surprise that the Prime Minister has effectively vetoed an EU wide treaty change saying it was not in the UK’s interests.   The sticking point as expected was how to “protect” the City of London.  Not surprisingly the French and others do not hold the City in such high reagrd.   They again made the point that some of the blame for why we are in this position is becuase of a lack of proper financial services regualtion in the City of London.

I have blogged before on how much pressure Ireland is under regarding its low rate of corporation tax and that was before the latest crisis.  If further powers are to be transferred to Brussels Ireland will have to have another referendum.  Will the Irish vote for closer fiscal union with its Eurozone countries knowing that its prized low rate of corporation tax will have to be conceded?  Then there is the Scottish fiscal powers and independence debate.  Who knows what impact the Euro crisis will have on this debate.

Lastly, I enjoyed the following comment piece from Eversheds.  It seems that the rule where footballers must be paid first in the event of a club going into administration is again under attack.   The comment piece can be found here.

Have a good weekend.