AS ANOTHER DECADE DRAWS TO A CLOSE, RICHARD CURTIS ASKS, ‘HOW WAS IT FOR YOU?’
Ten years, then: ten years since the millennium bug and us all wondering whether we would spend New Year’s Day 2000 huddled round an open fire with no electricity, gas, communications, etc, bemoaning the ‘end of the world as we know it’.
Didn’t happen did it? We still had to go back to the office a couple of days later and finish doing those tax returns by 31 January.
I wonder how may tax advisers had put off doing their self assessment tax returns on the basis that once we’d returned to the dark ages, the government would have more to worry about than whether a tax return or five hundred had come in on time.
How quickly this decade – the noughties – has gone by. At the end of the year we usually look back over the past 12 months, but at the end of a decade we can look back further. Maybe not as far as the 60s – peace and love and the decade ending with 41.25% standard rate plus 50% surtax; the 70s – the decade that style forgot (ending on 60% plus 15% investment income surcharge); the 80s – Thatcher, Reagan, the New Romantics and down to 40%; and the 90s – the end of the Soviet Union, boom time, Dolly the sheep, global warming, but still a 40% top rate of income tax.
So farewell now to the noughties, more boom, another bust, and disasters man-made and natural as we look forward to a 50% top rate of income tax.
But enough of Blair and Bush and boom and bust; what were the highlights taxwise? This is, after all, what we are really interested in. I thought that we could round off the decade with a quick call round some well-known tax figures to ask what were their favourite noughty memories.
I must admit that I had heard quite a few enlightening responses before I managed to add that this was spelt ‘NOU’ and not ‘NAU’.
Fortunately, the voice recorder was switched on at the time and we are envisaging a substantial pre-Budget boost to the Taxation 2 pension fund over the Christmas period. You know who you are: leave those envelopes of cash in the usual place.
However, having put those replies to one side, what did our more responsible respondents have to say?
Avoiding the issue
Perhaps we could say that one of the abiding tax memories of the noughties will be HMRC’s continuing assault on tax avoidance. Pete Miller, partner at Powrie Appleby LLP, certainly seems to think so.
‘The best, or at least the most interesting, memory taxation-wise of the past decade was the Ramsay development. First, Lord Hoffmann confuses things with his judgment in Westmoreland, then he puts it right in BMBF.
‘In my view, the worst occurrence has been HMRC’s apparent change in emphasis. What does sadden me is that there now seems to be a common perception that the department has become the agency that hates small businesses.
'Cases like Arctic Systems and the fiasco over the corporation tax rates – where the incorporation of a business suddenly became a form of tax avoidance – hardly show the government and HMRC in a small-business-friendly light.
‘Personal memories? I think I would mention living through two recessions, in 2001/02 and now, and the distressing human cost as firms downsize or right-size.’
Bit of a blur
It seems that I am not the only one who has found that the noughties have passed by on something approaching ‘fast-forward’ speed. Apparently, tax lecturer and consultant Mike Thexton has also found the past a little hazy as he looked back over the last ten years.
‘It’s all a bit of a blur, really’, said Mike.
‘I love all (or nearly all) of the VAT cases in the old tribunal and the new tribunal, because they are my soap opera fix. If you wait a while, all of human life passes by. I am particularly fond of reasonable excuse appeals – guessing who will win the sympathy of the tribunal is not always easy.
‘A recent example was the man (James Jeffery t/a Jeffery-Ryde TC0071) who had paid 18 VAT surcharges over the past eight years without complaining, but he really thought the nineteenth was not his fault because he had done his level best to pay on time. The tribunal agreed.
‘My least favourite memory of the noughties is the increasingly common experience of phoning an HMRC office to find out what has happened to a letter sent two months ago, and being told that they have only got up to dealing with their post from two-and-a-half months ago so far. Maybe by 2020 they will have dealt with 2015.’
A matter of trust
Mark McLaughlin of TaxationWeb said that his worst tax memory of the noughties was the FA 2006 changes to the inheritance tax treatment of trusts. He explained as follows.
‘The reason it was such a nightmare was not so much that the rules were difficult and complicated (although they were), it was because I was writing a book about inheritance tax at the time. I was on the very last chapter on Budget Day 2006, and was confident that no major inheritance tax changes would be announced. How wrong I was! When I realised that I would probably need to start the book all over again, it took a very long time to get over it.’
I’ve known Mark quite some time now, ever since I was editing Tolley’s Practical Tax Newsletter; that was when I suggested to Mark that he might like to write an article that I had had an idea for, but didn’t have time to complete in time for the 14 February issue that I crucially wanted to include it in. The article has obviously stuck in Mark’s mind as well.
‘My all-time favourite recollection has to be the Valentine’s Day article I wrote with your help. Perhaps I was naïve, but I made a very innocent offer to share the writing credit for the article with you. Your reluctance to be a joint author still makes me smile even now.’
Naughty boy
‘As this decade will be remembered as the “noughties”, it seems appropriate to recall one of the “naughties” perpetuated by Mr Brown when he was Chancellor’, said Mark Lee, chairman of TaxAdviceNetwork.co.uk.
‘We started the decade with a 10% rate of corporation tax (on profits up to £10,000) introduced in his 1999 Budget. Then, in 2002, he reduced this to 0% leading to the inevitable dramatic increase in the number of small businesses incorporating as companies so as to reduce the tax on their profits.
‘Still refusing to admit the mistake, in 2004 the Chancellor then introduced the needless complexity of a new non-corporate distribution rate of corporation tax. This negated the benefit of the 0% rate if profits were paid out as dividends. Then, in 2006, the 0% starting rate was abandoned – in effect a delayed admission that professional commentators were right in 2002 when they advised of the foreseeable behavioural change it would drive.’
Top three
Independent VAT consultant and lecturer Neil Warren highlighted three favourite moments, which have taken place recently.
‘On a business level, the unexpected fall in the rate of VAT from 17.5% to 15% last December gave me a brilliant Christmas present. It was the first change in the rate since 1991 and the issues produced a feast of challenging issues. I was as busy as Father Christmas throughout December and didn’t even have to wear a red coat or grow a white beard.’
Neil’s other VAT highlight was when the courts decided that a Pringle (the food, not the woollen garment) was a cake rather than a crisp and was therefore zero rated for VAT purposes.
‘This case proved to all of my friends what a difficult and stressful life we have working in the world of VAT and dealing with the strange quirks of the tax. To quote the words of James Bond – it’s a case of “jamais plus jamais” as far as the nation’s favourite tax is concerned.’
Like Mark Lee, and in relation to non-VAT issues, Neil’s other big memory of the noughties was the introduction of the 0% rate of corporation tax on the first £10,000 of company profits.
‘It was a totally ludicrous measure and will never be repeated. It was always going to be a temporary state of affairs, a bit like Chelsea being above Manchester United in the Premier League now that I think of it.’
Good times, bad times
Finally, fresh from her appearances on BBC Newsnight’s ‘politics pen’, Anne Redston shared her memories of the past ten years.
‘Among the good times were being in the House of Lords when each Law Lord stood up in turn and found in favour of Geoff Jones in Arctic Systems: a great decision for the taxpayer after a long battle.’
A second, and more recent, good memory was the reinstatement of equitable liability. Anne describes this as ‘a victory for fairness and common sense, delivered by HMRC and the government, but midwifed by Mike Truman, Keith Gordon and others.’
‘Recent bad news is the policy-based evidence making of the ‘Working With Tax Agents’ consultation; while a surprising tax moment was being told by government that I was wrong to say that people would be upset about the withdrawal of the 10p tax band. This was, of course, shortly before an outcry from backbenchers and others and the forced adjustment to personal tax allowances to try to redeem the position – without appearing to have had a change of heart.
‘Then there are the “irritations” of the past decade. For me, prominent among these are the government’s continual fiddling with tax bands, personal allowances, National Insurance contributions thresholds and capital allowances percentages. And perhaps I should finish with my current bugbear: trying to persuade HMRC to tidy up the still dusty vaults of its departmental website.’
Ten more years
Well let’s hope that the next ten years are good ones for you. I recall that someone, somewhere, once successfully used the slogan: ‘Things can only get better’.
Looking at the world right now, I guess that things really can only get better. My best and worst tax recollections of the noughties?
I suppose that aspects of the 0% corporation tax fiasco are also prominent for me. Roger Jones kindly quoted me on this in his book, Incorporating a business:
‘Dividend tax credits became notional and the rates of tax reduced – we said there would be problems, but they didn’t listen.
‘The nil-rate band of corporation tax – we said there would be problems ...
‘The non-corporate distribution rate – we said there would ...’
And my best tax memory of the noughties? Working for Taxation and Taxation 2, of course.
