No shortage of matters to blog about this week.

I think I will start with Edinburgh and in particular the City of Edinburgh Council.  Last week a “hotel bed” tax was proposed by Jenny Dawe leader of the Council.  This idea has been recycled a number of times over the last few years.  This week she proposed a voluntary “festival ticket” tax.  Clearly the Council are turning their minds to how they might meet any future funding shortfall.  Not yet clear if this is just kite flying by Councillor Dawe or whether there is serious support for one or both of these ideas.  I do though like the fact that a local politician is willing to enter into this sort of debate.

Moving on to the Scottish Parliament and John Swinney’s latest Spending Review.  Business rates have dominated the coverage of the Spending Review.  There has been a public debate. For debate read “slanging match”, between the Scottish Government and the “Centre for Public Policy and the Regions” over how much business rates revenue is going to increase over the next few years and also what the causes of this increase will be.    This debate has surprisingly overshadowed the proposal for a new “public health levy” on the business rates of large alcohol and tobacco retailers.

Interested to see that Ken Macintosh, one of candidates for the leadership of the Scottish Labour party – and yes I can name the other candidates as well – says if elected and if he wins the next Scottish General Election he would cut the Scottish rate of income tax.  Not that we have a Scottish rate of income tax yet and it is not even certain that the Scottish Government will accept the income tax proposals contained in the Scotland Bill.  Nonetheless this is a welcome sign that that the Labour party in Scotland are joining the fiscal powers debate.

More evidence has been given this week on the Scotland Bill.  As noted by a number of commentators this week we are in the position that very few people seem happy with the fiscal and tax provisions as proposed.  Numerous questions remain over the income tax proposals.  Some minor taxes recommended for devolving by the Calman Commission have not even been included in the Bill.  One of these, Air Passenger Duty, is to be devolved to Northern Ireland.  A pattern does appear to be forming here.  Borrowing powers, corporation tax and now Air Passenger Duty.

The UK Government is unhappy with the Scottish Government.  The Scottish Government is unhappy with the UK Government and in particular the UK Treasury.  No side seems to be acknowledging how complicated all of this is.   This has “it is going to end in tears” written all over it.  I still don’t understand why so much energy is being wasted on income tax and corporation tax when there are numerous other taxes which would be much easier to devolve.  These taxes even if a majority were devolved would not provide as much revenue as income tax but would provide a greater number and a more wide-ranging set of economic levers for the Scottish Parliament.  Still I am sure our politicians know what they are doing.

One suggestion.  There are going to be two new Scottish taxes: Stamp Duty Land Tax and aggregates levy.  Can I suggest that the Scottish Government involves the Scottish Law Commission in the drafting of the legislation of these taxes.  Two reasons.  Firstly the expertise, experience and reputation of this body is second to none.  In addition, as more taxes are likely to be devolved, this will ensure that we start the job of creating an expert group going forward.  The recent Scottish Government paper on Corporation Tax shows just how much work requires to be done before such taxes can be devolved.

Now to Liverpool and the Labour party conference this week.  Ed Balls renewed his call for a cut in VAT and in particular a reduction to 5% for VAT on building repairs and renovations to residential property.   I have previously blogged on the Scottish campaign for a 5% VAT rate for repairs and renovations and in particular on the fact that the Isle of Man has already negotiated such a reduction with the UK Treasury.

Let’s not forget Europe in these troubled times.  The European Commission has now formally called for a new tax on financial transactions amongst EU members.  Note EU members not Euro members.  The UK Government has made its opposition clear to this proposal and in particular on the ground that it would primarily be a “London tax”.  Not yet seen or heard what the Scottish Government think of this proposal.

I wonder if the European Commission’s proposal will be mentioned at the UK Conservative party conference.

Glad to see that the Scottish Government are prioritising the integration of our health and care services as recommended by the Christie Commission.

This is from the Scottish Government’s response to the Christie Commission:

“Renewing Adult Health & Social Care

The Scottish Government is committed to the introduction of an integrated system of health and social care to ensure that older people continue to receive the care, compassion, support and dignity they need and deserve.

Strong evidence suggests that better outcomes for people, better use of resources (money and people’s time) and better experience of care and support can all flow from services that are planned and delivered in an effectively integrated way.

Over the next 20 years demography alone could increase expenditure on health and social care by 70 per cent. Reform is necessary to help address this unprecedented challenge.”

The paper “Renewing Scotland’s Public Services – Priorities for reform in response to the Christie Commission” can be found here.  Watch out for the “public sector speak”.

Interesting article in the Scotland on Sunday on HMRC’s power to inspect the tax records of small businesses.

HMRC has confirmed that it is proceeding with its programme to inspect the tax records of small businesses despite facing a barrage of criticism since a pilot was first announced in March.

The article questions whether HMRC has the power to impose a fine of up to £3,000 if  the tax records of a small business are not up to date.

I agree with the comment by Colin Borland of the Federation of Small Businesses in Scotland: “If businesses received guidance rather than fines the checks could be a positive move, but in their current form they were creating alarm among many small business.”

The article can be found here.

Yesterday saw John Swinney, Scotland’s Finance Secretary, give his first Spending Review (for Spending Review think Budget) of the first term of the new Scottish Parliament.  John Swinney made a number of tax related announcements.

The announcement that made most of the headlines was the proposal for a new public health levy.  A choice of words to be followed depending it seems on whether you agree with the proposal.  This proposal is similar to the proposal in the last Scottish Parliament that was dubbed “tesco tax”.  That proposal failed as the then Scottish Government did not have a majority.   That is of course not an issue for the present Scottish Government.   The levy will be a business rates supplement paid by large retailers of both tobacco and alcohol from April 2012.

Although not given as much publicity as the above levy, Mr Swinney also confirmed funding for the freezing of the Council Tax for the next 5 years.  It will be interesting to see how Scotland’s local authorities react to this policy in the months leading up to next May’s local elections.

A proposal that has received less attention, but nonetheless and in its own way may be just as important as the other proposals, is the commitment to introduce legislation to reform “empty property relief” from April 2013.  The aim is to support regeneration and introduce incentives to reduce empty shops in town centres.

The top rate of income tax debate continues with the first sign that the Liberal Democrats are not at one on this issue.  David Laws, former Chief Secretary to the UK Treasury albeit a short lived one, said that he saw the 50p top rate as a temporary measure.  That is the position being taken by most Conservatives on this issue.

Some good news for those proposing a fuel duty discount.  On Wednesday the UK Government said that the European Commission had agreed that rates of taxation on petrol and diesel could be reduced as proposed.   The scheme will cover the Inner and Outer Hebrides, the Northern Isles, islands in the Clyde and the Isles of Scilly.  No date has yet been set for the commencement of this scheme.  An interesting story from the BBC on reaction to this announcement can be found here.

I read with great interest of how the ex-boss of Marks and Spencer Sir Stuart Rose has said in an interview that he would be prepared to pay more than the current top rate of tax.  This follows similar statements by business leaders in other countries including France, Italy and the USA and including billionaire investor Warren Buffett.  Indeed a proposal by President Obama to increase taxes on America’s wealthiest have been dubbed the “Buffet Rule”.  I wonder how many others will follow the position taken by Sir Stuart Rose.

Two new beer duties are to be introduced by the UK Government from 1 October 2011.

More information can be found here.

I received my annotated copy of this year’s UK Finance Act this morning from the Association of Taxation Technicians.

The introduction provides further evidence of just how complicated the UK’s tax system has become notwithstanding recent simplification efforts.

The Act comprises 93 sections, 26 schedules and 398 pages.

“The added pages far exceed those that can be deleted from tax legislation as a result of the repeal of redundant relieifs …, even if one were to include the further 36 reliefs on which the [UK] Government is consulting.”

The schedule on “disguised remuneration” alone adds 69 pages.  The “bank levy” schedule adds a further 52 pages.

Time for a Scottish Exchequer?

The Borders first crematorium will begin operations by the end of this year.  The crematorium will be located next to Wairds cemetery just outside Melrose and in the shadow of the Eildon Hills.  A picture perfect postcard location.

The good news does not end there.  Work has started work on a second crematorium at Houndwood Church in Berwickshire.

The facility at Wairds will be run by Westerleigh, the UK’s second largest crematorium operator, and costs approximately £2.6 million.  The building will contain an 84 seat chapel with standing room for 100 outside.   The expected annual number of cremations is 500.  It is estimated that this will rise to 900 within 10 years of operation.

Why might you ask is this such good news.  The answer is a simple one.  Until now if you live in the Borders and you wanted to be cremated your family, friends and colleagues had to travel to either Edinburgh or Newcastle.  A journey that was often long and stressful and in the winter might not even be possible.  I suspect that this is an issue that affects many other communities in Scotland.

I am originally from Galashiels and still split my time between the Borders and Edinburgh.   The main road to Edinburgh is the A7.  A road that is best described as bendy with few overtaking opportunities, congested during the main commuting times and in the winter hazardous.  So little has changed that my great grandparents, if still alive, would have little trouble recognising this road today.

It is often the case that after a church service in Galashiels the body is taken to Mortonhall crematorium in Edinburgh.  Those attending the crematorium would then have to head back to Galashiels.  As is likely to be case the family will have invited everyone to a venue in Galashiels for a cup of tea, sometimes something a little stronger, and a bite to eat.  This is also a chance to pay your respects to the family.  That often meant a round trip of 80 miles and having to take a full day off work.  The opening of these crematoria will, for large numbers of people, mean not having to make journeys such as this.

As we know a time of bereavement is a difficult enough time without having added a stressful journey.  That is why this is such good news for the Borders and why I would like to note my thanks to all those who made this happen.

This article was published in the latest edition of Age Scotland’s quarterly magazine, Advantage.

Back to the grind!

Highlight of the week for me was the publication of Reform Scotland’s latest fiscal powers paper “Devolution Plus”.  I do though have to declare an interest as I am one of the authors of this paper.  The paper outlines a possible third option, if there are to be three options put to the Scottish people instead of a straight yes or no to independence.  The paper can be found here.

The debate over the top rate of income tax also continued.  What was interesting was the claim by the Institute for Fiscal Studies that the 50p tax rate may not raise any extra revenue for HM Treasury and could actually reduce it due to high earners using avoidance measures.   HM Treasury has already revised downwards its predictions of the amount that could be raised from the 50% rate from £7 billion a year to about £2.4 billion.

Excellent article in the Herald on Tax Increment Financing.  It appears that nearly half of Scotland’s councils have made applications to the Scottish Futures Trust for permission to pilot TIF schemes.  TIF involves mortgaging the future income from local business rates to borrow money from HM Treasury’s public works loan board.   The Scottish Government has already been working with Edinburgh, Glasgow and North Lanarkshire councils for several years to set up TIF schemes for Leith Harbour, Buchanan Galleries shopping centre and Ravenscraig.  The article can be found here.

A word of caution on TIF.  I first came across TIF when working as an attorney in Chicago.  One issue that has arisen in Chicago is that if too many TIF schemes are approved the benefits are diluted.

I find myself agreeing with the comments made by Everhseds LLP on the Institute for Fiscal Studies’ Mirrlees Review of the UK’s tax system.  The problem with such a major reform is that we are not starting with a blank sheet of paper.  Making such radical changes would require a huge amount of resources and even more political will.  Neither of which appears to be present just now.

The Scottish perspective is slightly different as we will have a sheet of paper that even if not blank at least has numerous blank spaces in it when tax and fiscal powers are devolved to the Scottish Parliament.  This is in fact an opportunity, possibly a once in a generation opportunity, to do something different.  Hopefully this is a point that those on, and those giving evidence to, the Scottish Parliament’s Scotland Bill Committee will consider.   The Eversheds comments can be found here.

Mrs SC for Judicial Review of a decision of the Service Personnel and Veterans Agency of the Ministry of Defence  Outer House, Court of Session, [2011] CSOH 124

The background to this case is a family dispute.  In this case the dispute is over where the body of Private Mark Connolly (MC) will be buried.   MC’s mother wishes to have him buried in Methil.  His widow wishes him to be buried in Forfar.

The petitioner in this matter is the widow of MC.  MC died on 14 May 2011 whilst on a training course in Germany.   MC named his mother and brother as his executors in his will.  MC’s widow is the sole beneficiary.

It appears that the MOD initially wished to release MC’s body to MC’s widow.  It was only when MC’s mother disputed the funeral arrangements, and after looking at MC’s will, that the MOD indicated that they would now release the body to MC’s mother.   At that point the Forfar funeral arrangements were almost complete.

MC’s widow maintained that although MC did not leave written instructions regarding his funeral he made his wishes known to her.   MC told her that he wished to be buried but not in Methil.  He wished to be buried wherever he and his wife were settled.   They had settled in Forfar.

The MOD indicated its change of mind in a letter to MC’s widow dated 6 June 2011.  It is respect of this letter that MC’s widow sought judicial review.

 Lord Brodie began by looking at the issue of competency. 

“Critically, nothing in the letter of 6 June 2011 affects the rights or interests of anyone and indeed it does not purport to do so.  It neither constitutes nor expresses a decision.  All that there is in the letter is a statement of intention to transfer custody of the body to the other party that the writer of the letter understands is entitled to its custody as a matter of law.  Whether or not that understanding is correct, neither the writing of the letter nor the implement of the intention expressed in any way alters parties’ respective rights or interests.  Were it to be the case that the petitioner is entitled as a matter of law to demand custody of the body, neither the letter nor a transfer to the second respondent in implement of the intention expressed in the letter would affect that.  Put shortly, in my opinion there is nothing here to judicially review.  I recognise that in similar circumstances in England that courts may take an approach to applications for judicial review which is more pragmatic and closer to what parties would have wished me to do here …, but the nature of the equivalent English jurisdiction is different from that in Scotland.”

Although Lord Brodie decided to dismiss the petition as incompetent he decided to address the petitioner’s claim that the decision of the MOD contravenes her rights under article 8 of the European Convention of Human Rights.  Indeed Lord Brodie went as far as to say that: “I may be wrong on my conclusion as to competency.”

Article 8 claim

Article 8 of the Convention provides:

1. Everyone has the right to respect for his private and family life, his home and his correspondence.
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

MC’s widow contends that her article 8.1 rights are engaged because the decision of which she complains deprives her of the opportunity of taking custody of her husband’s body, arranging his funeral and determining where he is interred.

Lord Brodie split his analysis into three parts.  (1) Whether there had been interference with the petitioner’s rights under article 8.1, (2) whether any interference was according to law and (3) whether such interference was justified by any of the other provisions of article 8.2

Interference

On the question of whether there had been interference, Lord Brodie proceeded “upon the basis that transfer of the deceased’s body would amount to an interference with [MC's widow's] article 8.1 right to respect for family life.”

According to law

Lord Brodie then discussed what he thought was the position under both English and Scots law.

Under English law the executor has priority when it comes to funeral arrangements but that this right may be restricted by the courts.   Lord Brodie noted that there is no direct authority on this point under Scots law.

The case of Evans v McIntyre was though discussed and Lord Brodie noted  some of Sheriff Scott’s comments in that case:

“On the basis of the authorities to which I was referred and the submissions I heard, I would see that there is no question but that a confirmed executor or someone who entitled to be confirmed as an executor and who intends to seek confirmation (the prospective executor) is a lawful custodier of the body of a deceased for the purpose of burial.”

Lord Brodie, however, did not feel “that matters are as cut-and-dried” as in Evans and noted:

“The fact that he [the executor] pays does not make him responsible for arranging the funeral.  It is the surviving spouse and next of kin (not the executor) who have rights to solatium for unauthorised interference with the dead body.”

“Thus, in Scots law, I would see near relatives as well as the executor or prospective executor as having rights and interests in respect of the body of the deceased.  The nature of these rights is not the same.”

“Determining what are appropriate funeral arrangements by reference to the quality of relationships within a family appears to me a task for which the court is quite unsuited.”

The “intends to seek confirmation” comment from the Evans case, see above, is also important as interestingly Lord Brodie was not certain that MC’s mother would be appointed as executor due to her answer to his question on her being confirmed as executor.  MC’s mother said she would take legal advice before deciding.

Other provisions of Article 8.2

“To respect the rights of both the [the MOD] cannot avoid favouring one.“  Lord Brodie felt that the MOD were in an impossible position and that its actions were justified under Article 8.2.

In summing up Lord Brodie said:

“The first respondent [the MOD] may therefore lawfully transfer the body of the deceased to the second respondent [MC’s mother] but he may also lawfully transfer the body to the petitioner [MC’s widow].  Nothing in this decision should be construed as an expression of preference of my part of the position of the second respondent [MC’s mother] over that of the petitioner [MC’s widow].”

Conclusion

Although Lord Brodie held the petition to be incompetent he helpfully continued with his analysis of the matter.  Lord Brodie saw that the MOD were in an almost impossible position here.  Whatever it did the other party would feel aggrieved.

One final point.  I was surprised that more was not made on the fact that MC did not appoint his widow as an executor because of erroneous advice from the army.  The army it was claimed had told MC that it was not appropriate to appoint the same person as executor and beneficiary.

The full case report can be found here.

Given the amount of coverage this Bill receives on the various news outlets you might be excused for thinking that this Bill applied to Scotland as well.  It does not.  That said, it is still of interest and relevance to us here in Scotland as it shows the way that the debate is moving in other parts of the UK.

The Bill passed its third reading in the House of Commons last week and is due to move to the Lords in October.

These articles, firstly from the BBC and also from the Guardian, outline the main points of debate including within the UK coalition government.

The Bill and a summary of the key points can also be found here.