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April 3, 2013

Finance Bill 2013: Why Doesn't HMRC Consult Industry Before Drafting New Legislation?

By Spear's

After 629 pages of Finance Bill landed on her desk on Maundy Thursday, MTG’s Sophie Mazzier contemplates a way HMRC could simplify its tax codes

The Chancellor’s Budget speech was focused on the theme of an ‘aspiration nation’. He may not have had the medical meaning of ‘aspiration’ in mind, but it certainly caused much aspiration (‘drawing in or out using a sucking motion’) among professional tax advisors when HM Treasury produced 629 pages of Finance Bill on Maundy Thursday.

Read more about the Finance Bill

With Easter (and its two bank holidays) falling between the date of its publication and, for some very important sections (the Statutory Residence Test for example), its implementation, the Treasury’s liturgical conjuring trick, in pulling such a vast tome out of its Easter bonnet, was more of an April Fool than an Easter egg.

Aspiration taken to its extreme, according to NHS Direct, ‘can lead to chest infections, choking or death.’ I had better let the metaphor drop there, but it brings me once again to reflect on the extraordinary and ever-increasing mass of tax legislation in the UK, and the disorganised way in which it is proliferating.

It is unoriginal of me (but I can’t apologise for this) to observe that, in the last 15 years or so, the combined total of tax books on my desk has increased from a mildly awe-inspiring stack about four inches thick to a whopping pile of around 14 inches (and that’s before the latest Finance Bill). In countries where a flat tax system is in operation, by contrast, it is perfectly possible to have a tax code which occupies a single slim volume.

And the curious thing about the UK’s tax laws is that they require self-assessment — that is, the ordinary man is expected to understand his obligations to pay tax, and to abide by them. This is a pretty tall order.

A glance at the new ‘simple statutory residence test’ for example, reminds one that the word ‘simple’ is frequently a matter of opinion. The test appears marginally clearer (albeit somewhat longer) than in previous drafts, but the concept of simplicity has continued to evade the draftsman.

To be fair, the taxman is much better at listening, and redrafting, than he used to be. Additional clauses relating to the new Annual Tax on Enveloped Dwellings (formerly known as ARPT) suggest an acknowledgement of the responses received to earlier drafts of the legislation pointing out inconsistencies and inadequacies.

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And excellent news, for testators and will draftsman alike, was the removal of a provision which would have required all those who had made a will before 8 April 2013 to re-write their wills to avoid adverse implications for trusts providing for vulnerable children and those under the age of 25. Two cheers for HMRC’s policy division for recognising the wider-than-intended implications of the original drafting.

But wouldn’t it all be so much easier if, rather than drafting a new piece of legislation (to add to the legions already enacted), and then writing more rules to carve out the bits they hadn’t really meant to include in the first place, HMRC consulted the industry first? Now that would be a great trick, and something to aspire to.  

Sophie Mazzier is counsel at private client law firm
Maurice Turnor Gardner

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