The main story of the week has to be the fact that the UK Chancellor, yes the UK Chancellor, said:  “I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs – and to be fair it’s within the tax laws – so that they were regularly paying virtually no income tax.  And I don’t think that’s right.”

Words almost fail me.  Then again maybe I should be glad that George Osborne has finally realised what was clearly obvious to everyone else.  HMRC provided the UK Chancellor with anonymised copies of the confidential tax returns submitted to them by some of the UK’s wealthiest people.  These returns showed that the 20 biggest tax avoiders had legally reduced their income tax bills by a total of £145m in a year.  According to the report, the very rich have managed to reduce their income tax rate to an average of 10%; less than half the amount paid by the average Briton.  A report on this from the BBC news website can be found here.  Helpfully the BBC news website has also outlined the most common tax avoidance schemes.  This can be found here.

I am not sure that the Prime Minister’s announcement that he will publish details of his taxes is going to help the UK Government out of the hole they are digging for themselves.  As the UK Chancellor noted, these people are acting within the law.  Take for example the proposed cap on income tax reliefs.  The cap will apply only to those reliefs that are currently unlimited, which will therefore exclude pension contributions and EIS investments, among others.  The proposals will cap tax relief to 25% of income or £50,000 whichever is greater.  It is expected the draft legislation will be published for consultation later this year.

HM Treasury has now published more information on this proposal.  The report, which confirms charitable gift relief will be included in the cap, can be found here.  The report notes that current unlimited relief policy allows individuals to pay no income tax at all, which is not permitted in, for example, the US tax system.

Is that the end of the matter?  Of course not.  The Scotsman reports that Sir Tom Hunter has criticised George Osborne’s plans to cap tax relief on charitable donations as “ill-thought-out and punitive”.  The Scotsman article can be found here.  It is quite clear that charities fear their funding is under threat.  This sums up nicely the problem facing George Osborne.  He wants to crack down on aggressive tax avoidance but that is easier said than done.  Almost any proposal to change the tax system results in a campaign to prevent or amend the proposal.

Now to another controversial issue, retrospective changes to tax law.  HM Treasury has published the process it will follow when making unexpected changes to tax law.  The statement gives an undertaking that retrospective measures will be “wholly exceptional”.  The statement from HM Treasury can be found here.  A recent of example of a retrospective change to tax legislation involved Barclays bank.  A BBC news website report on the Barclays bank matter can be found here.  If the UK Chancellor is serious about tackling aggressive anti-avoidance then I am sure we will see many more examples of retrospective changes to our tax law.

Finance Secretary, John Swinney, has announced incentives and actions to stimulate investment, in four enterprise sectors, for green energy, manufacturing and life science.  These incentives include business rate discounts worth up to £275,000 per business or enhanced capital allowances, new streamlined planning protocols across all sites, skills and training support and an international marketing campaign to promote the sites.  A press release from the Scottish Government on this can be found here.

Now to VAT and two issues I have blogged about before.  A great deal has been written about pasties and VAT since the UK Budget statement.  What though of another VAT anomaly.  Why is VAT levied on the renovation of old buildings but not on the sale of new houses?  Does this encourage energy saving?  Does this encourage the building of new homes?  Why not at least introduce a lower rate of VAT on residential renovations and repairs, as happens in the Isle of Man.  Sadly more questions than answers or signs of any change of policy.  A link to my earlier blog on this issue can be found here.

The Scottish Liberal Democrats have urged the Scottish Government to drop their plans for a single police force over concerns that the force will potentially face an annual £22m VAT bill. The eight existing forces are currently exempt from the tax due to their ties to local authorities.  A link to an earlier blog that covers this issue can be found here.  My earlier blog also includes my expectations as to how HM Treasury will view this matter.  Although I can understand the Scottish Liberal Democrats opposition to the single force policy, do they really think that the VAT should be levied?  If not, will they lobby their UK counterparts who, after all, are in charge of HM Treasury on this matter?  I suspect not.  The Liberal Democrats press release can be found here.

To Wales and the news that Welsh supermarkets have seen a massive drop in the use of plastic bags when they charge for them.  A 5p bag levy was introduced across Wales last year.  A report on this from the Daily Mail online can be found here.  Good to see the Daily Mail outlining the situation in the other parts of the UK.

The Spanish Government has announced a general tax amnesty offering taxpayers the chance to disclose irregularities in their past affairs without being prosecuted or penalised. The cost is a one-off payment of 10% of all undeclared assets and rights.  This follows similar measures in Greece and Italy.  More information on the Spanish amnesty can be found here.

Have a good weekend.

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.