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Income shifting: one accountant's view
Dec 19, 2007, 04:08 AM
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Dec 19, 2007, 04:08 AM
We're indebted to chartered accountant Steve Barrett for sharing what he describes as his 'diatribe', sent to HM Treasury in reaction to the recent income shifting consultation document:
Sir,
I must object to this draft legislation in the strongest manner.
1. The legislation is not clear, too broadly drafted and reliant on HMRC guidance which does not have the force of law so cannot be relied on by the taxpayer; not very “fair”.
2. It will increase the burden of compliance on small businesses, their advisers and HMRC, something the government has repeatedly pledged it wants to reduce.
3. The only way for HMRC to enforce this will be to open thousands of enquiries into individual’s tax returns. These enquiries will rest on the inspector and tax payer coming to agreement on what is “commercial”. As this is a judgement based on differing points of view it will be a different outcome every time; hardly “fair”.
4. As these enquiries will come down to a judgement I will insist that all my clients have enquiry fee protection insurance and I will take every single one of these (however small) to the Commissioners; and I expect all my colleagues in the profession will do the same. The compliance costs on HMRC will be huge. And of course this puts my clients at an advantage over unrepresented clients who will simply be stuffed with the tax inspectors cynical view of what is “commercial”. And we all know that tax inspectors are incentivised on how much tax they collect NOT on collecting the “fair” amount.
5. The tax assessment will be based on a judgement of what is “commercial”. What is “commercial” changes every year and from one place to another, I would be interested to see this legislation challenged in the high court as being too vague to be enforced, where is the dividing line between commercial and not commercial?
It goes on for another 2,000-plus words - and its steamy stuff, so we won't reproduce it in full for fear of scalding readers' brains.
We'd love to know what Taxation's audience thinks of the above. The 'comments' option at the foot of this entry is there for your convenience.
(Thanks again to Mr Barrett for letting us have a peek.)
To return to Taxation.co.uk, click here.
Sir,
I must object to this draft legislation in the strongest manner.
1. The legislation is not clear, too broadly drafted and reliant on HMRC guidance which does not have the force of law so cannot be relied on by the taxpayer; not very “fair”.
2. It will increase the burden of compliance on small businesses, their advisers and HMRC, something the government has repeatedly pledged it wants to reduce.
3. The only way for HMRC to enforce this will be to open thousands of enquiries into individual’s tax returns. These enquiries will rest on the inspector and tax payer coming to agreement on what is “commercial”. As this is a judgement based on differing points of view it will be a different outcome every time; hardly “fair”.
4. As these enquiries will come down to a judgement I will insist that all my clients have enquiry fee protection insurance and I will take every single one of these (however small) to the Commissioners; and I expect all my colleagues in the profession will do the same. The compliance costs on HMRC will be huge. And of course this puts my clients at an advantage over unrepresented clients who will simply be stuffed with the tax inspectors cynical view of what is “commercial”. And we all know that tax inspectors are incentivised on how much tax they collect NOT on collecting the “fair” amount.
5. The tax assessment will be based on a judgement of what is “commercial”. What is “commercial” changes every year and from one place to another, I would be interested to see this legislation challenged in the high court as being too vague to be enforced, where is the dividing line between commercial and not commercial?
It goes on for another 2,000-plus words - and its steamy stuff, so we won't reproduce it in full for fear of scalding readers' brains.
We'd love to know what Taxation's audience thinks of the above. The 'comments' option at the foot of this entry is there for your convenience.
(Thanks again to Mr Barrett for letting us have a peek.)
To return to Taxation.co.uk, click here.
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