Draconian tax rules

The City of London Law Society (CLLS) is calling for an independent body to be set up with the power to veto the introduction of tax legislation if it appears it cannot be implemented effectively within the timescale suggested, saying this will avoid ‘huge damage’ to the UK tax regime’s reputation for stability say Harris & Co accountants Northampton #accountantsinnorthampton

The proposal forms part of the Society’s response to the Treasury’s Office of Tax Simplification (OTS) review of the competiveness of the UK tax system, written on behalf of the 14,000 City lawyers who are its members.

The CLLS says there is a ‘disturbing pattern’ of ‘over-draconian’ legislation being introduced with ‘minimal or ineffective consultation’, which is then qualified by separate guidance from HMRC.

It further argues that this approach produces uncertainty and can also result in ‘the inadvertent imposition of tax contrary to policy’.

The response highlights the Disguised Remuneration legislation, new Salaried Members rules and the introduction of the penal 15% SDLT rate for certain high value residential property acquisitions as ‘cases where business confidence in the policy-making and implementation processes has been greatly damaged’.

The CLLS committee says it suspects there have been occasions when HMRC officials have understated the difficulties involved with proposals when briefing ministers, possibly as a result of concerns that if they miss their slot in the Finance Bill timetable their measures may be lost altogether. At other times policy has clearly been driven from the political level without due consideration, with HMRC left ‘to pick up the pieces’, the letter states.

In addition the CLLS says government and HMRC must also improve their ‘institutional memory’ in relation to policy decisions.

The CLLS said:

‘Members of our committee have had experiences of talking to HMRC officials who have no idea why particular provisions are included within given legislation, even where that legislation was introduced relatively recently. In the world of the General Anti-Abuse Rule, where it is necessary to identify the consistency or otherwise of a transaction with policy, it will in turn be necessary for that policy to be identifiable if excessive uncertainty is not to result.’

As well as an over-reliance on guidance to establish how some tax rules will operate, the CLLS says it is concerned about the involvement of experts, and especially professional advisers, in the private sector in informal, often unannounced, consultations.

The CLLS response stated:

‘We would not want to discourage this, as in our view it clearly leads to better law and policy. However, we do not believe that government is sufficiently conscious of the need not to give such individuals and their clients a commercial advantage by reason of their advance knowledge of changes.’

The CLLS response also makes a number of specific recommendations in relation to corporation tax, VAT, income Tax/NIC, stamp duty, SDRT and SDLT.