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News briefing, 6 June 2013
Our weekly comments on tax stories by the national press
Avoidance & evasion
A High Court judge has appeared to rule that tax practitioners have a duty to advise wealthy clients to avoid tax.
Times
The judge, Mr Justice Silber, seems to have decided that all tax advisers are duty bound to tell their clients about avoidance schemes, including abusive ones – which is an odd stance to take in the current climate of anti-avoidance. It is not clear whether or not the taxpayer in this case was non-domiciled, and it is unknown how the decision will fit with the imminent general anti-abuse rule.
The prime minister, David Cameron has asked the senior ministers of all the UK’s overseas territories to help root out billions of pounds of tax evasion by signing up to agreements to share tax information.
Guardian
The hope is that the crown dependencies and overseas territories will all sign up to agreements to provide details of holders of bank accounts in their jurisdictions. UK taxpayers with money in places such as Bermuda and the British Virgin Isles may want to think about their options – transferring cash to Liechtenstein to take advantage of the LDF, perhaps – because it is only a matter of time before HMRC will find out about hidden assets.
Business
The tax burden faced by big retailers has risen by 65% since 2005, according to research by accountancy giant PricewaterhouseCoopers.
Financial Times; Telegraph; Independent
Business rates are seemingly to blame because they are linked to inflation, which has been well above its 2% target for some years. Corporation tax rates, on the other hand, have fallen.
HMRC say they will deal quickly with all complaints about breaches of minimum wage legislation, after forcing nine companies to pay out almost £200,000 in total to interns who had been required to work without pay.
Times
In addition to ensuring workers receive at least the minimum wage, businesses in general will probably also be keen for the rules to be enforced to ensure they are operating in a level playing field.
Income tax
Tens of thousands of people could be paying the wrong amount of tax after being issued with incorrect codes by HMRC.
Times
As reported by Taxation last week, some employees have received new codes that do not include all their taxable benefits. HMRC claim it is a glitch related to the new real-time information system, but given the numbers of incorrect codes, there is suspicion that another, larger problem exists.
Policy
Married couples should not expect tax breaks as a “trade off” for the government’s decision to legalise gay marriage, according to Helen Grant, the justice and equalities minister.
Telegraph
The break for married couples promised by the Conservatives cannot be delivered until the £10,000 personal allowance in the coalition agreement has become a reality. With it due to happen next year, there is a possibility of movement from the chancellor, although the dire state of the public finances will most likely leas no more than a token gesture from the Treasury. The result would be a lot of extra cost for very little additional reward. It would make more sense to plan for a bigger shift to joint filing for couples in the future, with genuinely transferable allowances.
The government should simplify the tax system and do more to encourage entrepreneurs, to break a “dangerous cycle” of more onerous taxes exacerbating the shadow economy, according to a report from the Institute of Economic Affairs (IEA).
Telegraph; Guardian
The report, from a free-market think-tank, says taxes, regulation and prohibitions all create a propensity towards a shadow economy – which is calculated by the IEA at £150bn per year in the UK (still only about half the level estimated in Spain and Italy). While the PR around the report predictably calls for a simplified tax system, the document itself is more detailed, looking at deterrence, amnesties, and exempting some informal income from tax – but the main problem is that the econometric and highly theoretical methodology for calculating the shadow economy is too complex to be comprehensively explained even in the full report. The estimate of £150bn for the turnover sits uneasily with the HMRC tax gap figures of £4bn for evasion and £5bn for ghosts and moonlighters.
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