UK: Weekly Tax Update - Monday 21 March 2011

Last Updated: 24 March 2011
Article by Richard Mannion

1. Private Clients

1.1 Principles of Tax Policy and Tax Policy Making

The House of Commons Treasury Committee paper on principles of tax policy has been published, concluding that tax policy should:

  • be fair (recognising that there are different definitions of fairness);
  • support growth and encourage competition;
  • provide certainty (it should not normally be necessary for anyone to resort to the courts in order to resolve how the rules operate in relation to his or her tax affairs. Certainty about tax requires:
  • Legal clarity - Tax legislation should be based on statute and subject to proper democratic scrutiny by Parliament. However the report does not consider the role of the House of Lords, or the possible Joint Parliamentary Committee, which is something the CIOT has been pressing for and is an issue that was within the scope of the Treasury Committee's review.
  • Simplicity: The tax rules should aim to be simple, understandable and clear in their objectives.
  • Targeting: It should be clear to taxpayers whether or not they are liable for particular types of charges to tax. When anti-avoidance legislation is passed, due regard should be had to maintaining the simplicity and certainty of the tax system.
  • provide stability - changes to the underlying rules should be kept to a minimum and policy shocks should both be avoided. There should be a justifiable economic and/or social basis for any change to the tax rules and this justification should be made public and the underlying policy made clear;
  • practicable to ensure that a person's tax liability should be easy to calculate and straightforward and cheap to collect;
  • coherent – the tax system as a whole should be coherent and new provisions should complement the existing tax system, not conflict with it.

www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/753/753.pdf

1.2. Proposed timetable for future Budgets and Finance Bills

  • The House of Commons Treasury Committee's report referred to above includes the following note regarding the proposed timetable for future Budgets and Finance Bills:

"Scrutiny of tax

  • 76. Tax policy and legislation could be and should be better scrutinised. This is not something that Parliament can do alone; the Government and tax profession must also play a part.
  • 77. As we have already noted, the previous administration introduced reforms to give more time for consultation on tax changes. Where possible, it published draft clauses in advance of tax legislation. This was welcome. The current Government has taken further steps to extend the time between policy formulation and enactment to allow time for better consultation before legislation is drafted and a further opportunity before it is enacted.
  • 78. The proposal is that there will be:
  • A Spring Budget in which policy proposals are announced for consultation
  • Draft Finance Bill clauses, published for comment in late summer.
  • Finance Bill published in the autumn
  • Finance Act published around the end of the calendar year to take effect from the following April.
  • 79. This will also mean that the Finance Act is in place well ahead of the tax year it will first affect. Even though 2010 was a transitional year, we have seen already more time being built into the budgetary timetable, in which a short post election Finance Bill in June was complemented by a further Bill in the autumn, which had been preceded by the publication of draft clauses in July. The Finance Bill 2011, is following the same pattern: draft clauses were published for comment on 9 December 2010 and we already know the Bill itself is due to be published on 31 March 2011. We have already welcomed this more deliberate approach to tax policy making."

1.3. Impact assessment of tax and national insurance contributions policy changes

The Exchequer Secretary to the Treasury (Mr David Gauke) issued a Written Ministerial Statement on 15 March 2011 as follows:

"As set out in "Improving tax policy making: the new approach" published on 9 December 2010, the Government have adopted a new process for undertaking impact assessment of tax and national insurance contributions (NICs) policy changes. This new tailored tax impact assessment process will be used throughout the development of tax and NICs policy and will be summarised in tax information and impact notes. These notes set out what the policy change is, why the Government are proposing the change and a summary of the impacts of the change. As explained below, they will be produced for all substantive changes in tax and NICs policy by primary and secondary legislation.

This new approach will consider a wider range of impacts and cover a broader range of policy changes than the existing impact assessment regime for tax. The Government are committed to consulting on tax policy changes and will use consultation and stakeholder engagement to inform and test their understanding of the impacts of a proposed change in policy.

From Budget 2011 onwards, the Government will publish a tax information and impact note for tax policy changes at the point at which the policy design is final or near final. This could be alongside the Budget, publication of draft legislation or final legislation, as appropriate. These notes will provide a clear statement of the policy objective, impact on the Exchequer, the economy, individuals, businesses and civil society organisations, as well as any equality and other specific impact.

Tax information and impact notes will be available on the websites of HM Treasury and HM Revenue and Customs, and will be provided to Parliament through the normal publication channels.

There will be a number of exceptions where a tax information and impact note will not usually be published alongside a routine legislative change that gives effect to previously announced policy, for example:

  • changes to rates, thresholds and allowances to a predetermined formula such as indexation;
  • appointed day orders;
  • secondary legislation enacting double taxation treaties; and
  • secondary legislation not laid before Parliament.

www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110315/wmstext/110315m0001.htm

1.4 HMRC Bank of England accounts closing

HMRC introduced a new bank account for HMRC Flexible Accounting System (FAS) in March 2009. The old Bank of England account will close at the end of March 2011 and it is therefore essential that all future HMRC FAS CHAPS and BACS payments are made using the new account details.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_PROD1_031139

1.5. Reasonable excuse for not complying with online filing

HMRC has published guidance on what it may generally consider to be a reasonable excuse and what should be done if you want to appeal against a late filing penalty.

www.hmrc.gov.uk/online/excuse-missed-deadline.htm

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