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News briefing, 8 Nov 2013

Nov 8, 2013, 08:34 AM
Authors : Taxation
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Post date : Nov 8, 2013, 09:22 AM


The chief executive of Sainsbury’s, Justin King, has criticised his fellow business bosses for failing to treat tax avoidance as a moral issue and for leadership failures that have led to a collapse in trust with the public.
Times; Telegraph

The UK’s tax system is complex and understood by relatively few people, leading various reliefs to be often seen as avoidance, which is legal but frequently conflated with unlawful evasion and therefore considered immoral. But there is no doubt moral judgements are going to be made – albeit often on weak evidence – and public companies ignore the reputational risk at their peril.

Conservative MPs have urged the chancellor to impose a windfall tax on water companies amid growing claims they are profiteering at their customers’ expense.

A business in a capitalist economy is allowed, if not expected, to profit at the expense of others, be they rival firms or clients. Financial sanctions should be levied only when there is evidence of unlawful behaviour. The industry regulator Ofwat has powers to deal with water companies if they charge too much.

Capital gains

Foreign investors could be made to feel like tax avoiders if a capital gains tax is introduced on the sale of their UK residences, according to accountancy giant PricewaterhouseCoopers (PwC).

“These people are proud to have built up capital to pass on to their children, and see investment in London as wealth preservation,” claims PwC, failing to gain our sympathy. If property is in the UK, the gain arises here; it makes sense for tax to be due here. If the situation were to slow down the capital’s supercharged property market, so much the better.

Estate planning

The Treasury is expected to clamp down on trust schemes used by wealthy families to shield their estates from inheritance tax.

No information was available on HMRC’s website at the time of writing, but it’s likely the reported action is a follow-up to the responses to Inheritance Tax: Simplifying Charges on Trusts – the Next Stage, a consultation that closed in August. The idea would be to catch families who set up multiple trusts each valued at up to the nil rate band to avoid the 6% ten-year tax charge. This sort of planning has been around for decades, and was unsuccessfully challenged by HMRC in the 2003 case of Rysaffe. Finally, ten years later, the tax authority has proposed changing the law.


Staff members are quitting HMRC in their highest numbers for four years, with 1,697 leaving in 2012/13, according to accountancy group UHY Hacker Young.
Financial Times

The decreased number of Revenue employees means slower and less efficient service on everyday matters, such as obtaining a unique taxpayer number.


Firms that pay their employees the living wage – currently calculated to be £7.65 an hour – will be given a tax rebate of up to £1,000 per worker, under Labour plans for forming the next government.
Financial Times; Telegraph; Independent; Times

Whether or not businesses would be willing to paying higher wages depends mostly on the demand for labour, which should increase as the economy recovers. The proposed rebate would be for one year, but the increased earnings of staff members would be permanent, presumably, creating a mismatch of incentives.

The people of Wales are to be given the chance to vote on whether or not the Welsh Assembly should get tax-raising powers.
Times; Financial Times

The announcement – which has been met with similar demands from English councils – is either an economic measure or a political ploy to show the Scots that further powers can be devolved short of complete independence.


UK residents are paying twice as much in property taxes as the international average, a study from the think-tank Policy Exchange has found. The country’s property tax system is “fundamentally flawed” and needs a complete, coherent overhaul, according to Rob Perrins, managing director of construction firm Berkeley Group.
Telegraph; Telegraph

The criticisms come after the new annual tax on enveloped dwellings and stamp duty thresholds were censured for not keeping up with prices. While it is true the system lacks coherence, a complete overhaul of property taxes is unlikely because the levies are relatively simple to collect.

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