An eclectic week in “tax land”

Let’s start with the Scottish Budget.

The Scottish Government’s Budget was passed by the Scottish Parliament yesterday with the support of the Liberal Democrats.  The Budget outlines the Scottish Government’s £30 billion spending plan for the next financial year.

The amendment that stood out concerned the public health levy also known as the  “Tesco tax”.  The change will mean that instead of collecting £30m, £40m and £40m over the next three years it will bring in £5m less in each of these three years.  The Scottish Government claims that only 240 retail premises, around 0.1% of all business premises in Scotland, would pay more.  It will be interesting to see the reaction to this amendment.

Now to the news that over one million taxpayers face a penalty of £100 for failing to submit their self-assessment tax returns on time.  The figure of 1.1 million is the lowest since online filing first started and compares with 1.4 million last year and 1.6 million the year before.  These taxpayers will have to pay the £100 fine unless they have a reasonable excuse.  Valid reasons include serious illness, a bereavement, or a loss of documents because of theft, fire or flood.  After three months, additional fines of £10 a day start to accrue and could eventually amount to a maximum of £1,600.  More on this can be found in an article from the BBC news website which can be found here.

Two non football tax avoidance stories this week.  HMRC announced that its next planned crackdown will target construction workers.  Traders who carry out roofing, joinery bricklaying, window fitting and carpentry will be targeted.  The clampdown  follows other campaigns with doctors, dentists and tutors in the spotlight.  Interested but not surprised to see HMRC making it clear that they will use web searches to target those dodging tax.

The second story was extremely embarrassing for the UK Government and in particular Danny Alexander the Chief Secretary to HM Treasury.  This story concerned an arrangement reported to have allowed the Student Loans Company’s chief executive, Ed Lister, to avoid thousands of pounds in income tax and national insurance.  HMRC had authorised the SLC to make gross payments to Lester’s personal services company.

How could anyone at HMRC or HM Treasury think this was a good idea or could be justified? Am I surprised? No.  It seems that there is a section in these any other government organisations who just don’t get it.  The UK Government’s handling of the Network Rail bonuses is just another example of this attitude and I suspect, sadly, won’t be the last.  Thanks due to the BBC’s Newsnight programme for bringing the SLC issue to a wider audience.

BBC Newsnight journalist Richard Watson summed this issue up very well:  “In the current climate of national austerity and financial hardship, it’s hard to imagine a more politically charged story.  One of the most senior public servants in the land, paid by the taxpayer, granted special concessions to be paid gross through his private service company based at his home address.”

Now to an example of the carrot and stick approach to taxation and behavioural change.  I blogged about this issue last week.   The Scotsman reported this week that Scots who do not insulate their homes should be forced to pay higher council tax or face increased stamp duty land tax on their property.  Not sure about the stamp duty land tax point as it is the purchaser who pays that tax.  Nonetheless Alex McLeod, chairman of the Association for the Conservation of Energy told the Scotsman:  “… sticks as well as carrots are needed to encourage people to conserve energy in their homes.”

Interestingly the idea was attacked by a diverse range of bodies.  The TaxPayers Alliance branded the idea as “outrageous” and Friends of the Earth Scotland said that the Scottish Government should pay for everyone to have free insulation.  The article from the Scotsman can be found here.

Now to Westminster.  The jostling for position prior to the UK Budget in March continues.  This week it was Nick Clegg saying that Conservative plans to give married couples a tax break must take second place behind a proposed tax cut for low earners.  The UK Deputy Prime Minister, it has also been reported, wants his party’s plans to increase the threshold for income tax to £10,000 to take precedence over any move to recognise marriage in the tax system.

The House of Commons Public Accounts Committee has criticised HM  Treasury for the way it monitors government spending.  It seems that almost £11bn in unpaid tax has been written off without HM Treasury knowledge.   A report on the first set of “Whole of Government Accounts” by the Committee said that HM Treasury’s ability to identify financial risks needed to improve.  An article from the BBC News website on this can be found here.

Now to a worrying trend.  An increasing number of businesses are struggling to pay their tax bills after new figures show a growing number are using credit cards to make their payments.  During 2005/06 businesses made just over 6,000 credit card payments to HMRC for PAYE, corporation and personal tax bills.  This had increased to 365,000 for 2009/10.  The credit card payments in 2005/06 totalled more than £2m.  In 2009/10 it had increased to just under £486m.  Thanks to the Ashworth Law firm which conducted a Freedom of Information request to collate the data.

Now to Englandshire and a matter I have covered before.  Eighteen local authorities in England have rejected an offer of UK Government money that would allow them to freeze council tax.  You may remember Eric Pickles,  the UK Government’s Secretary of State for Communities and Local Government, recent comment that councils in England had a “moral duty” to freeze the council tax.  Clearly some councils in England beg to differ on this point.  I was going to say “let battle commence” but battle clearly has commenced.

So to Europe and an old favourite.  The Ernst & Young Item Club has calculated that the UK would be liable to pay 75 per cent of the revenues from the European Commission’s Financial Transactions Tax because of the size and scale of Britain’s financial services sector relative to the rest of Europe.  Even if the UK opts out it seems that the UK’s financial sector would still have to contribute about 60 per cent of total revenues if a “reverse charge mechanism” was applied.  Something for our politicians to think about.  They might also want to consider abolishing charging stamp duty and SDRT on shares transactions if a deal was done on FTT.  I suspect there is plenty of mileage left in this particular debate.

An interesting week for football north and south of the border.  The more interesting sport stories of the week also seemed to involve tax.  This should not come as a surprise given the amount of money that exists at the top end of this particular sport.  In simple terms it was ever thus.

Have a good weekend.

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Another week in “tax land”

Let’s start with the highlight of my week.  This would have been the result of last weekend’s Gala v Melrose game but a try in the last few minutes put paid to that.  So instead it has to be speaking at Holyrood’s Scotland Bill conference.  The text of my speech can be found here.

I was very impressed with Malcolm Chisholm MSP and not just becuase he said some nice things about the fiscal power papers I had a part in drafting for Reform Scotland.  He also summed up nicely why is there is so little support for the Scotland Bill including it seemed at this conference.  His argument was a simple one.  Those who should be campaigning for this Bill are not doing so mainly because there is almost nothing positive to say about it.

Next to a worrying story from BBC News.  I am not sure what is more worrying. The fact that MPs had to put a senior official under oath or that civil servants get paid bonuses.

Members of the Commons Public Accounts committee felt they had been unable to get answers from Anthony Inglese, HMRC’s senior lawyer, so they took the highly unusual step of making him swear an oath to tell the truth.  Parliamentary staff said that nobody had been asked to swear an oath by a parliamentary committee for more than a decade.

The session before the committee was part of an inquiry into tax deals negotiated by HMRC with Vodafone and Goldman Sachs.  The full story can be found here.  An earlier story from the Guardian on the background to this can be found here.

Back to the fiscal powers debate.  Not surprised to hear that the UK Government has already ruled out giving the Scottish Parliament even partial control over corporation tax.  Graham Gudgin made the claim while giving evidence to the Scotland Bill committee.  He said he had “reliable information” that the tax power would not be given to Scotland “under any circumstances”.

As I mentioned in my speech earlier this week it seems that the UK Government is just not interested in adding any powers to the Scotland Bill or dealing with some niggly issues such as a tax exemption  for the Glasgow Commonwealth Games.

I see that the Scottish Government are again asking the UK Government to reduce VAT on home repairs and renovations.  I am wondering why they are still not referring to the situation in the Isle of Man.  If anyone from the Scottish Government is reading this you might want to have a look at this.

Now to North Sea revenue and a report by Aberdeen and Grampian Chamber of Commerce. The 15th Oil and Gas survey said confidence and investment were still being dented by the changes announced in this year’s UK Budget. More than half of oil and gas operators surveyed believe the Budget’s £2bn industry tax hike has harmed North Sea investment.  The supplementary tax on North Sea oil production rose from 20% to 32% to fund a cut in UK government fuel duty.

Have a good weekend.

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Another week in “tax land”

Firstly to Belarus and Tax Information Exchange Agreements.  It was reported in this month’s STEP Journal that Belarusian human rights campaigner Ales Belyatsky has been arrested.  He was arrested soon after the Polish authorities gave the Belarusian authorities information relating to his bank accounts.   The Belarusian authorities had described him as a suspect in a tax investigation.  The Poles treated this as a routine request and handed over full details of his bank accounts.  He has been charged with tax evasion via a foreign bank account.  Belyatsky says the foreign bank account is used only to collect foreign contributions to his political movement.  The Polish Government has admitted it should not have disclosed Belyatsky’s bank details and has sacked the director and deputy head of its international cooperation department.

HMRC announced this week that approximately six million people are set to receive tax rebates averaging £400.  Another million people will learn they have underpaid their tax by about £600.  It is the second year that tax and National Insurance discrepancies have been identified by a new computer system.  HMRC said that the number of cases would reduce “as the new system beds in”.  Those who will be told they have not paid enough tax are expected to owe between £500 and £600 on average.  In a similar exercise last year, HMRC were criticised for being insensitive over their treatment of underpayers.  Another example of the complexity surrounding the UK tax system.

The Scottish Government announced a consultation on giving local authorities new powers to tax empty homes. The proposals would give local authorities the power to impose an extra levy of up to 100% of the standard charge. It is hoped that this could help raise millions of pounds to build new affordable houses.  The announcement stated that 25,000 properties have been empty for more than six months and are liable to pay council tax.  In Glasgow there are over 1,800 empty homes.  It is also claimed that if every local authority decide to use these powers they could raise up to £30 million per year.  I wrote about the connected issue of how local authorities are using funds gained from reducing the council tax discount in an earlier tax blog.  This blog can be found here.

This is something I have not come across before.  The Intergenerational Foundation called for tax breaks to encourage downsizing and help free up some of the estimated 25 million unused bedrooms in England.  The charity says that older people should be encouraged to move into smaller homes to help tackle England’s housing crisis.  The UK Government did not respond positively to this proposal.

Both sides in the battle over what independent schools have to do to justify their charitable status claimed victory last week.  The Independent Schools Council and the England and Wales Charity Commission are each claiming that the decision of the Upper Tax Tribunal vindicates their position. A similar debate is taking place in Scotland.  The tax issue here is the fact charities have a number of tax advantages including rates relief.

Now to the fiscal powers debate. Interesting to see Malcolm Chisholm MSP openly reject the Calman proposals. His comments mirror views recently expressed by former First Minister Henry McLeish.  Malcolm Chisholm is the first serving Labour MSP to openly reject the Calman proposals. The Scottish Government has renewed its call for control over Air Passenger Duty after the UK Government cut air passenger duty for Northern Ireland.  I also suspect that the Scotland Bill may be mentioned once or twice at the SNP conference which began yesterday.  The announcement that North Sea oil production will continue to at least 2050 ensures that oil and gas tax revenue is back at the top of the political agenda.

I have been asked to speak at Holyrood Magazine’s Scotland Bill conference on 8 November.  More information can be found here.  I can already hear myself saying: “does Scotland need a separate Registers of Scotland, Stamp Office, Companies House and Inheritance Tax office? Then again I have been making that point for 5 years now and no-one seems to be listening.

Have a good weekend.

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Funding announced for short breaks for carers in Scotland

Once in a while politicians do something that is without question the right thing to do.  This is one such case.

More than 3,500 adult carers and young carers from across Scotland are set to benefit from a funding package for short breaks.

Fifty-eight organisations have been offered a share of almost £954,000 for a variety of short breaks projects. This includes 14 groups who help carers purchase their own breaks.

The funding will support young carers and adult carers who care for disabled children, people with dementia, mental health problems and other long-term conditions, substance misuse problems, adults with learning disabilities and adults with physical disabilities.

More information can be found here.

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Another interesting week in “tax land”

Tax stories from all four home nations and Denmark this week.

I will though start with some facts and figures.  It was reported this week that the average pensioner household paid £5,124 in tax over the past year.  That means the average UK pensioner household pays out 27% of its income to HMRC.  That is a combination of direct and indirect taxes which add up to an annual tax bill of more than £34 billion.   Further evidence of how large a contribution this age group contributes to national and local government finances.

Now to Wales and the Welsh Government’s introduction of a plastic bag tax.   Anyone who wants a plastic container to carry their shopping in will need to pay a 5p levy for the privilege.  They will also need to pay for plastic packaging for fast food items.

Staying with fast food but moving to Denmark.  Denmark has introduced what is believed to be the world’s first “fat tax”.  They have introduced a surcharge on foods that are high in saturated fat.  Butter, milk, cheese, pizza, meat, oil and processed food are now subject to the tax if they contain more than 2.3% saturated fat.  The UK Government are also considering such a tax the Scottish Government are not.  The  Scottish Government plans to work with manufacturers instead.

Now to Edinburgh and the latest local politician to suggest a tax change.   This time it is Colin Keir SNP MSP for Edinburgh Western.  His idea is to cut VAT rates for the tourism and golf services industry and as presently happens in Ireland.

There were this week a number of interesting announcements on additional tax powers for the Scottish Parliament.  The Scottish Government has called for the revenue from alcohol duty to be devolved to Scotland.  That makes sense when you consider that health is already devolved.  What though of tobacco duty?  Also why is the Scottish Government simply asking for this revenue to be assigned to it but not the power to vary duty rates or control over the underlying law?  I suspect that this “request” will receive the same reaction from the UK Government as the call for control of corporation tax and the Crown Estate.

More interesting was the call from a group of newly elected Tory MPs for the Scottish Parliament to have full tax raising powers in a book billed as the way forward for the Conservative Party.

Mixed news for Northern Ireland on fiscal powers this week.  Looks as if it will be given some Air Passenger Duty powers but that the devolving of some restricted powers over corporation tax will be at best delayed.

Few surprises at the Tory conference.   George Osborne confirms the English Council tax freeze and that there will be no temporary tax cuts.  This almost certainly means no change to the 50p rate of income tax or VAT.   The Tories also confirmed their opposition to a European Union financial transactions tax.  Iain Duncan Smith did though go off message when he called for breaks for the poor and married couples.

Finally to Peebles and the rejection, albeit narrowly, to the creation of a Business Improvement District by local businesses.  The plan would have seen Peebles firms within a designated area pay a set levy towards improving their surroundings and thereby encouraging economic growth.

Have a good weekend.

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Mental Health Strategy for Scotland 2011-2015

The Scottish Government has published its proposals for a new national mental health strategy.   The poposals seek to improve mental health services and in particular the Scottish Government are looking for views on the direction of travel for the next 4 years.

The consultation can be found here.

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Scottish Government’s response to the Christie Commission

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”.

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Scotland’s care industry – part 4

In my fourth article in this series I am looking at the UK Government’s decision to withhold Attendance Allowance funding when the then Scottish Executive decided to introduce its policy of Free Personal and Nursing Care (FPNC).

First thing’s first.  What is Attendance Allowance?.  Attendance Allowance is a tax-free benefit.  You may get Attendance Allowance if you’re aged 65 or over and need help with personal care because you’re physically or mentally disabled.

A reminder of what the 2007 Sutherland review of FPNC recommended on this issue:

“Address imbalance in funding streams.  The UK Government should not have withdrawn the Attendance Allowance funding in respect of self-funding clients in care homes, currently amounting to £30 million a year.  That funding should be reinstated in the short-term while longer-term work to re-assess funding streams takes place.”

When researching this issue I also found an interesting article by the economists, Jim and Margaret Cuthbert.  The main point of this article is that the Department for Work and Pensions (DWP) and HM Treasury breached their own rules in coming to this decision.  The full article can be found here.

The decision to withhold Attendance Allowance funding appears to have more to do with not understanding that devolution means the power and ability to do things differently.  When you consider the reaction to other proposals such as a local income tax or the devolving of corporation tax powers a pattern appears to be forming.   It is also worth noting that institutions such as DWP and HM Treasury are meant to act for the whole of the UK.

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Patient Rights (Scotland) Act 2011

The Scottish Government has launched a consultation on the proposed secondary legislation to support implementation of the Patient Rights (Scotland) Act 2011 and in particular the regulations and directions relating to the treatment time guarantee, patient feedback, comments, concerns and complaints and the Health Care Principles to be upheld by relevant NHS bodies and service providers.

The consultation can be found here.

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New guidance – people with learning disabilities

A number of guides and booklets on “People with Learning Disabilities and the Scottish Criminal Justice System” were published by the Scottish Government on 8 August 2011.

These useful guides and booklets can be found here.

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