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News briefing, 13 Dec 2013
Avoidance & evasion
A “worryingly high” £55bn a year is being lost to the taxpayer due to fraud, error and unpaid taxes, according to the Commons’ Public Accounts Committee (PAC).
Times
The problem with the tax gap – dealt with extensively by Taxation – is the total is not a meaningful sum because it conflates evasion with inability to pay. Steps are being taken by HMRC to reduce losses by, for example, the use of specialist investigative taskforces to target business sectors around the UK.
The government expects to raise £9bn over the next five years from a crackdown on tax avoidance, evasion and fraud, affecting companies as diverse as hedge funds and oil rig leasing firms. The plans have drawn criticism from some quarters for being too aggressive.
Telegraph; Guardian; Financial Times; Telegraph; Times; Times
The authorities long ago muddied the waters between avoidance and evasion. What is now happening is businesses taking legal steps to reduce their tax liabilities but being seen by the public as evaders – which undermines confidence in the tax system because the lay taxpayer believes the government is doing nothing to stop illicit tax dodging. The main attack is on partnerships with companies as members, something that can be seen as a simple choice of business vehicle.
Business
A National Insurance (NI) contribution cut for under-21s is expected to encourage employers to take on young workers.
Telegraph; Times
The move is an interesting targeted response to high unemployment in young adults. It will make significant reductions to some employers’ bills when combined with the £2,000 employer NI exemption announced in the Budget. But some would say the latest measure is unlikely to be consolation to the 21-year old university graduate who is seen as a poor choice of employed when judged against a cheaper 18-year old school-leaver.
The UK is still the favourite tax regime of business, but the country's lead over its low-tax rivals has narrowed amid debate about avoidance, according to a survey by accountancy giant KPMG.
Financial Times
Business dislikes uncertainty more than anything else; the real key to turning around sentiment about the UK tax system was not a reduction in corporation tax rates but the direction of travel of the corporate road map, particularly towards a more territorial system of tax following reform of the controlled foreign companies rules. The avoidance debate, in which perfectly normal practices such as interest deductions are seen as suspect, will inevitably stall the bus.
Film tax credits are to be extended to theatres.
Guardian
A consultation is due next year. Theatrical producers have made use of the enterprise investment scheme, but it is not easy to adapt to the needs of stage shows. The only other tax break at present is either as a capital loss or, by concession, as a loss to be offset against “other miscellaneous income”.
Capital gains
The amount of time house owners have in which to sell a second home before they must pay capital gains tax has been halved to 18 months.
Telegraph; Times
Taxpayers used to have a window of one year before a gain became subject to tax. That was increased to two years and then three. It’s unsurprising the period is to be reduced from April 2014 given the present sellers’ market. Note that – too late to be mentioned in the tax information notice – the three-year limit has been retained in the draft Finance Bill 2014 clause for occupants who are disabled or moving into a care home.
Non-residents will have to pay capital gains tax when they sell UK properties.
Telegraph; Guardian; Times; Times; Times; Telegraph
It remains to be seen whether or not the measure will have a positive effect on UK house prices – but why is the liability restricted to residential property? Taxation pointed out this week that a non-resident who owns a UK home as a residence will be able to avoid the charge by electing for the property to be treated as the main residence, unless further changes are made to the legislation.
Income tax
More than four million married couples will be given tax breaks worth up to £200 a year.
Telegraph
Even more couples will not benefit. Those in which both partners are working and using their personal tax allowances will see no benefit; nor will the increasing number of spouses liable to tax at the higher rate.
Investment
Equity and certain debt investments into social organisations will qualify for a 30% tax credit from April next year.
Telegraph; Financial Times
The relief could encourage individuals to invest in social enterprises, but previous provisions designed to encourage specific investments such as these have not always been successful.
Policy
The prime minister, David Cameron, has hinted he would like to cut the top rate of tax cut from 45% to 40%.
Telegraph
The so-called hint is very opaque, although the Telegraph reporter may well have been briefed that this is what Cameron was meant. No one will be surprised that a Conservative PM would like lessen the tax burden on higher earning voters.
The Institute of Chartered Accountants in England and Wales has raised doubts about the effectiveness of the government's £700m plan to cut taxes for married couples.
Telegraph; Financial Times
The transfer of the personal allowance between spouses could increase the recipient’s income so that he or she receives less in the way of universal credit. It is a familiar conundrum and means there could be some tricky calculations before deciding whether or not to make a transfer.
Middle class earners will have to wait until the end of the decade for tax cuts despite the economic recovery, the prime minister, David Cameron, has signalled.
Telegraph
Which Telegraph story are we meant to believe: this one, or the one above regarding the 45% rate?
Property
Investors and property owners across the UK are sitting on billions of pounds worth of unclaimed tax relief on commercial property.
Telegraph
Where a seller of a property has made a capital allowances claim for fixtures, the purchaser will be allowed to claim allowances only if the transfer value of the assets in question is formally determined. The rules are set to change in April, when it will be important for the buyer to know about the allowances claimed by the seller, if the buyer is to be able to claim allowances on the assets.
Chancellor George Osborne's failure to make changes to stamp duty on property has been criticised by state agents and mortgage lenders, amid warnings that the tax is hindering people keen to use the Help to Buy scheme.
Guardian; Telegraph; Telegraph; Telegraph
A lot of help has already been given to encourage the housing market. The government may feel disinclined to reduce stamp duty given it easy to collect. Changes tend to distort the market because sellers can increase the price of property to take into account a lower rate of stamp duty.
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