On The Spot Blogs
New Year's Resolution? - Make Tax Understandable
As the sun rises on a new decade, let's try to achieve real tax simplification during the next 10 years. Here are a few ideas to help make tax understandable for the public:
- Training Costs - Allow all relevant business training costs paid by a sole trader to be tax deductible, as they are for limited companies. Surely training is a good thing?
- Class 4 National Insurance - Link Class 4 NICs paid by the self employed to benefits. Currently they are the most expensive NICs paid by the self employed but they provide no state pension credit or any link to benefits or the NHS. They are really no different from charging a further 9% of income tax, except they start to be paid at income levels £3.5k lower.
- Gift Aid Carry Back - Allow charitable donations to be carried back to the prior year even if that earlier tax return has already been submitted to HMRC. Why should someone who has delayed sending in a return be treated more favourably?
- Corporate Gifts - Apply the same rules for VAT and corporation tax. Corporation tax rules require the presence of a logo and the gift can't be food or alcohol, but there are no such restrictions for VAT. With a merged tax department surely this can be aligned?
- Property Partnerships - Similarly, treat jointly-owned property as a partnership for both income tax and VAT purposes. Currently, only the VAT department will automatically describe this as a partnership.
- S/EIS - Be more reasonable with the practical operation of S/EIS. If a taxpayer only needs to claim capital gains tax relief why insist that dummy income tax relief is claimed in a tax return? The investment is either eligible or not. And surely it doesn't matter if the wrong form is completed by mistake, as long as adequate, relevant details have been provided?
- Making Tax Digital - Ensure MPs aren't exempt from the biggest change to tax reporting for years. If MPs aren't subject to the same rules, there is no incentive to make them understandable, relevant and proportionate. Is it right that a sole trader preparing perfectly good handwritten tax figures all his working life and filing returns online with HMRC, is now forced to adopt new software because MPs have said so? Whereas well paid supported MPs don't even need to think about this for themselves?
- Personal and Tax Free Allowances - The interaction of these is so complicated even HMRC hasn't yet managed to code everything correctly into their software. KISS!
It's these and many other strange rules which don't help the public's perception of HMRC and paying tax, which also adds to the feeling that the system is set up against them. This New Year and decade could be the time to tackle this properly.
Accountant explaining tax to people every day...