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Editor's desk

26 Mar 08

Is the growing mountain of regulation and red tape partly the result of a cat and mouse game between professional advisers and the tax authorities?

by Robert Outram

Alistair Darling appeared in his Budget speech last month to be competing with his predecessor for dourness. None the less, he did manage to raise a laugh, intentionally or otherwise, with his assertion that the tax provisions being brought in to deal with “non-doms” will not change substantially “in this Parliament or the next”.

Admittedly, much of the laughter came from the Opposition benches, reflecting scepticism as to Darling’s confidence that he and his party will still be calling the shots after the next election.

The changes for non-domiciled residents are among the most controversial measures in the Budget. They reflect a theme in current tax policy: to make use of public outrage over “fat cats” to bring in tax measures that actually target those of middling wealth.

The Russian oligarchs, Asian steel billionaires and others who make up the new super-rich population of UK resident non-doms will hardly notice the charge for non-doms. It will make a big difference, however, to many of the admittedly well paid but hardly super rich overseas citizens who work in the City, or in high-tech industries. There is a danger that they and their employers will find the UK a less attractive place to do business, and that could hurt the economy.

It’s a similar story with the “simplification” of capital gains tax. The argument that private equity big shots should not be allowed to pay tax at a lower rate than their cleaners struck a chord with the public. But as a result, we have a CGT regime that will make for a much less advantageous tax regime for people who have built up a business over many years.

True, there is an “entrepreneurs’ relief” that allows for £1m of gains to be exempt, over a lifetime. While that sounds like a lot of money, for someone who is building up a real business of scale and ambition it is a limit they may soon come to, especially for the “serial entrepreneurs” who plough their money into the next venture, and then the one after that.

At least the controversial measures on “income shifting” between spouses in a family business have been postponed, hopefully for a major rethink. Overall, the relationship between the tax authorities and professional advisers is fairly frosty right now, and the often-criticised complexity of tax law has a lot to do with the cat and mouse game that HMRC like to call “avoidance” and the profession, “tax planning”.

Lengthy and complex tax regulations are partly the result of tinkering and poor drafting, but also partly a response to what HMRC sees as “aggressive” tax avoidance schemes. The Government is looking to engage with professional advisers, however, and last month the HMRC’s acting chairman David Hartnett attended the ICAS Council meeting to talk over some of the issues in a frank and friendly discussion.

Maybe a period of stability in the fiscal regime, fewer aggressive schemes and a truce between HMRC and advisers would mean less Budget paperwork for tax experts to plough through, and would make the UK a better place in which to live and work.

These are exciting times at CA Magazine, with the launch of camagonline.co.uk, our new website, imminent as I write this. We are looking to make the content of each month’s magazine available to read online, with a searchable archive of past features.

More than that, we’ll also be including exclusive features for the website, including a daily news update, topical video clips and online-only articles.

Log onto camagonline.co.uk from 2 April to find out more, and see also page 62 of this issue for details.

Rob Outram, Editor rob@connectcommunications.co.uk

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Budget | Alistair Darling | tax

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