David Martin enjoyed a career spanning 23 years as a tax lawyer within a large City Law Firm, latterly as Head of the Tax Department, before retiring in 2002. During that time he advised both company and individual clients. In a new series of four blogs, he looks at simplification of business taxes.
Next week, the CPS will publish my two draft papers “The Reform of Business Tax”, and “The Business Tax Act”, setting out a concrete proposal for the tax reform of business as outlined in recent Tax Simplifier blogs.
“The Reform of Business Tax” will contain a statement of the principles that might apply on a reform of business tax law, together with a detailed examination of all the sections in the major tax acts to see whether they are still needed in the light of these proposed principles.
“The Business Tax Act” will set out how tax law might then appear as a consequence of applying the first paper.
These papers are too long to be printed in hard copy, and consideration of the detail in them would be a task for tax specialists.
Some non-specialist readers may still wish to glance on their computer screens at the first 13 pages of “The Reform of Business Tax”, setting out the principles, and perhaps go on to glance at some of the detailed analysis of the sections which comes after the first 13 pages to get an impression of the nature of the proposals and the basis on which they are put forward.
The law to be set out in the “Business Tax Act” would of course be subject to revision in a number of ways, including how it should be formatted. Further it is inevitable in a lengthy exercise of this sort that there will be some errors of judgment and other mistakes. Certain issues, in particular the adequacy of the accounting approach to Islamic finance, and also to manufactured dividends, need further analysis. Other areas would benefit from specialist tax or accounting input. But the objective has been to obtain a reasonable idea of what tax law might look like using the “one-bucket approach” outlined in this series.
It is intended that all the tax law that would normally be needed for small or uncomplicated businesses should be given in Parts A- E of “The Business Tax Act”, which is just 14 pages long (with Schedules A-E providing more detail if certain issues arise, which are linked by cross-references from those 14 pages).
More sophisticated businesses would potentially have more complicated tax law to cope with in the remaining Parts and Schedules of the “Business Tax Act”. But they would not be subject to a different tax code - just more tax sections which might apply to them.
In terms of length it is noted that “The Business Tax Act” is about 400 pages long, which is the equivalent of about 320 pages in Tolleys Tax Manuals, taking account of the smaller print size in Tolleys. It has not seemed worthwhile to reproduce in “The Business Tax Act” some reliefs, and some rules for special types of companies, which would not be changed under the suggested approach. But the total length of the revised “Business Tax Act” would still be only about one eighth of the aggregate 3200 pages in the Taxation of Chargeable Gains Act, the Capital Allowances Act, the two Income Tax Acts and the two Corporation Tax Acts which are analysed in The Reform of Business Tax.
Is reform pie in the sky? I don’t think so. If we are to make real progress Treasury ministers, their officials, and the tax profession, need to engage with the problems at a more fundamental level than has happened to date.
If accepted, it is recognised that effective implementation would be crucial. It is all too easy to spoil a worthwhile policy because its introduction is badly administered.
Anyone with a particular interest in tax reform that has comments, positive or negative, general or detailed, supporting the approach outlined in this series or the papers next week (or not!), or suggesting variants, would be very much appreciated - please contact me at [email protected].
We are faced with the question – is it possible and practicable to reform our tax law, perhaps making it much more logical, and attractive to both British and overseas based users, or do we have to accept that we are stuck with more or less what we have, and that this will be bequeathed accordingly to future generations. It would be great to hear your views.
David Martin's draft papers have now been published.