The Exchequer’s coffers are running on vapour and tax avoidance presents a soft target for politicians. On Monday, Nick Clegg claimed that “ethically wrong” legal tax avoidance costs the economy £42 billion a year. As a tax recruiter, I was particularly interested in whether this might have an impact on the taxation professionals that I work with.

Clegg’s Robin Hood approach is an obvious means for the Government to rake in some much needed cash. My colleague William Hepworth discussed the tightening of transfer pricing rules in Taxation 2 magazine this week so raking in some extra cash through taxation is already on the agenda.

As always though it’s not as simple as closing a couple of loopholes and suddenly the deficit is paid off. Quantifying the impact of tax avoidance on the economy is complex stuff. Business leaders argue these funds are reinvested in job creation: taking people out of the benefits system and getting them paying tax. Ultimately, the Exchequer wins anyway.

Furthermore, high net worth individuals are often entrepreneurs, contributing to the economy in areas too numerous to quantify. They’re also geographically mobile; remove the incentive to be here and they’ll be off quicker than you can say private jet.

Clegg’s ethical argument is also complex. Is it wrong for someone like Philip Green to run a business employing thousands of people in the UK with a turnover in the billions whilst himself being resident in the tax haven of Monaco? Is investing in start ups or venture capital unethical? Is investing in an ISA unethical?

Our tax system is a pretty fine balancing act between encouraging investment in quality business in the UK and ensuring people pay a fair amount for public services. Cutting down on tax avoidance strikes me as great party conference PR but ultimately it’s a minefield. Amidst all these conflicting interests and arguments it’s hard to quantify their success/failure anyway which itself is most convenient don’t you think?

Exchequer, Government, ISA, Legal Tax avoidance, Nick Clegg, Philip Green, Tax, Tax Avoidance, Taxation, Taxation 2, Venture capital, William Hepworth

Recently, there has been much scaremongering regarding the prospect of a W-shaped recession. In my opinion, people have got carried away, as it’s not all doom and gloom from where I’m standing.

The trouble stems from the Bank of England’s downward revision of their projected growth figures for 2011 from 3.5% down to 2.5% as well as Mervyn King’s ominous description of the recovery as “choppy”. Judging by the newspaper headlines last week, you could have been forgiven for thinking that our fragile confidence was about to be destroyed.

Do not be misled though as I would prefer to look at all this as the bottle being half full rather than half empty. The Bank of England is forecasting 0.7% growth for the last two quarters of 2010 and growth in excess of 2% next year. The Office for Budget Responsibility is also forecasting growth around the same level. Last year, we would have revelled at the economy growing at all, so 2.5% is still very encouraging.
Certainly, with regard to taxation, activity is increasing.

So far the focus has been on Indirect Tax and Transfer Pricing; understandably so, given HMRC’s desire to tighten the rules. Perhaps more encouragingly there has been some increase in corporate tax hiring. So far this has been limited but given the more general nature of this area, it’s an excellent barometer.

There is still little movement at the senior end of the market currently as senior tax professionals are choosing to stay put as present. However, with a bit of economic growth and some more confidence, they will become more inclined to move on and then we’ll see demand return.

My view is that the recovery is going to be slow and possibly “choppy” but it’s still a recovery and that’s definitely cause for positivity.

Bank of england, Corporate Tax hring, HMRC, Indirect tax, Mervyn King, recession, Tax, Transfer pricing

This week saw the establishment of the Office for Tax Simplification. In George Osborne’s words Britain has “one of the most complex and opaque tax codes in the world” and his “dream” is to bring some transparency to this.

The new body, headed up by Michael Jack (a former Conservative minister) and John Whiting (formerly of PwC) will initially look at two areas: firstly, streamlining all 400 tax reliefs, allowances and exemptions; and secondly, looking to simplify the tax system for smaller businesses.

So far, reaction seems to have been mixed on this one. Much concern has been expressed that simplification may act as a means of increasing the tax burden across the board through scrapping reliefs. The cynics among you will no doubt suggest that it’s no coincidence that the government is “simplifying” at a time when it is more cash strapped than ever.

On the other hand, the TUC’s General Secretary, Brendan Barber expressed concern that this is a means of reducing tax for the rich “while ordinary people see services slashed and VAT increased.”

Reality is probably somewhere in between. As the economy grows, small businesses need all the help they can get and simplification of UK tax rules has to be welcomed.

On the other hand our tax system has evolved to produce specific outcomes. A good example here is R&D tax relief which has helped place Britain at the very cutting edge of pharmaceutical and technological developments.

Every action produces a reaction (let’s not forget that when pension contributions were simplified we found ourselves with 120 pages of legislation following protests against extra tax relief for higher rate tax payers) so it will be interesting to see how simple we can make things or whether simplification serves to muddy the waters yet further.

Watch this space…

Office for Tax Simplification George Osborne Michael Jack John Whiting simple relief HMRC Government

As a fan of both sport and tax, I was interested to hear of Usain Bolt’s decision not to compete in the Aviva London Grand Prix. We understand it’s not because he’s scared to face his big rivals, Tyson Gay and Asafa Powell, but wants to avoid the tax burden following the ruling in [André] Agassi v Robinson in 2006.

Agassi decided that sportsmen competing in the UK are liable for a 50% tax rate on  appearance fee and a proportion of total worldwide earnings. As Bolt earns a fortune from product endorsements, this means that if he only raced five times this year, HMRC could tax 20% of his total earnings. His appearance fee alone for next month’s Grand Prix is reported to be £166,000 –  so we’re talking big money!

The media are currently reporting that Bolt’s decision could affect London 2012, September’s Ryder Cup and England’s bid to host the 2018 FIFA World Cup. Let’s not panic! The government tends to exempt participants in major sporting events, Agassi was decided in 2006 and there has been plenty of world-class sports action in the UK since then.

However, exemptions are often inconsistent and depend on arbitrary judgement of what constitutes a major event. Many big names were missing from the pre-Wimbledon warm-up at Queen’s Club in June and, whilst Tiger teed off at St Andrews today, major names have been conspicuous by their absence at other big events in the UK’s golfing calendar.

As we were once led to believe that the Teenies were to be the decade of sport, the time has come for some clarification. We’ve an Olympics and a Rugby World Cup in the diary already and we’re bidding for the FIFA World Cup in 2018. As UEFA have expressed previous concerns and in the context of the rollercoaster ride that has been our 2018 bid, the whole thing could benefit from clarification from HMRC.

It seems unfair to tax sportspeople who have a unique double identity as sports hero and international brand. Companies compartmentalise worldwide operations by dividing themselves into various legal entities leaving only transfer pricing as an issue.

2018 FIFA World Cup, Andre Agassi, Asafa Powell, Aviva london Grand prix, Ryder Cup, Tax, Tyson Gay, Usain Bolt

What is the word on the street about today’s budget in relation to taxes? All the leaks and speculation of the past weeks has softened the blow for most people. Middle income earners will no doubt be sighing into their calculators as they do every budget whilst higher rate tax payers will probably have their tax advisors on speed dial. Unusually this year, people who rely on the welfare state may feel more exposed than they have done under the recent Labour government, whilst those who are on a lower income have received some good news with the thresholds for income tax changing and 880,000 people now being exempt from the system entirely.

The rise in VAT from 17.5% to 20% affects anyone who buys goods that aren’t tax exempt – which is probably all of us. The retail industry has murmured complaints today about this, http://www.guardian.co.uk/uk/2010/jun/22/vat-rise-recession-fears though the share prices of some of the UK’s most prominent retailers, such as Next, M&S and Home Retail (Argos/Homebase), increased slightly this afternoon. Retailers didn’t benefit especially from the small decrease in VAT in 2009, so it’s questionable whether a small rise will have a huge impact on sales. For any business with a large supply chain or any retailer re-coding finance systems and re-pricing in shops is costly and time consuming – but a one-off task, unlike in 2009 when the reduction was temporary. On the plus side, as VAT is “real time tax”, it is a good way for the government to fill the coffers quickly. For businesses, this combined with the changes in VAT legislation earlier this year mean that effective VAT planning is more important than ever. As we’ve seen a rise in VAT vacancies in H1 already, I do not anticipate the number of roles in VAT increasing as a result of this, but it will increase the workload of many VAT practitioners!

There is a feeling currently in the tax consulting world that as corporation tax rates reduce as most personal taxes and employment taxes (such as National Insurance, which was renamed the headline grabbing “jobs tax” before the election by the Conservatives) rise, that personal tax/ compensation and benefits/ employment taxes specialists will find their skill sets in more demand as both businesses and individuals will attempt more stringent tax planning…

Buried in the 2nd half of the budget, amidst other public sector cuts, was an announcement that a new Government office was being opened – the Office of Tax Simplification.  On the face of it, this sounds like good news, but with pay freezes and low morale in the public sector, let’s hope that the right team are employed to undertake this very important work! http://www.accountancymagazine.com/croner/jsp/Editorial.do?channelId=-305535&contentId=1595881&Failed_Reason=Session+not+found&Failed_Page=/jsp/Editorial.do&BV_UseBVCookie=No

VAT increase budget tax CGT

With less than a week to go before the emergency budget, I was asked this morning (from a recruiters perspective), about the general consensus from my clients and candidates in the market,  on what the UK faces after next week’s announcement from the Chancellor. I responded by saying, ‘probably 80% apprehension, 20% optimism’. Everyday I read the financial section of a newspaper, it’s the same rhetoric,  George Osborne has to do something about reducing the UK’s £163bn budget deficit, but at the same time limiting the punishment to the public and investors alike that would come with aggressive tax hikes.

The key issue facing everyone is Capital Gains Tax. Currently standing at 18%, this could rise in line with income tax, although recent public outcry may in actual fact have caused Osborne to reconsider such an aggressive stance. Ultimately, anyone holding significant investment assets – second homes, buy to let properties, stocks and shares etc, are almost certainly facing much higher tax bills when the time comes to sell those assets.

Banks could also be in the firing line. The Conservatives have stipulated they may levy a unilateral tax on banking activity, to punish them for the credit crisis, although this thought failed to gain support at the G20.

Finally, economists believe VAT will be hiked to 20% from 17.5%. Although this may not officially come into play next week, retailers argue that the impact of this would cost over 160,000 jobs over four years as consumer spending, employment and economic growth would all be hit. On the flip side of this, it could generate an additional £12bn for the government.

Tonight’s Mansion House speech will be George Osborne’s first chance to deliver a snippet of what there is to come. It is clear that drastic action is needed, but careful management is also required to stop London and the UK from suffering, and the capital from potentially losing it’s long-held status as a powerhouse in the global financial markets.

Capital Gains Tax, Emergency Budget

Does anyone else who knows anything about tax find it rather irritating that NIC is being called “jobs tax”?  It seems to be irritating some of the tax professionals that my team are talking to at the moment, whatever their political persuasion.    As we already pay NIC comments such as:

“This prime minister would wreck the recovery by putting a tax on every job, on everyone earning over £20,000, a tax on aspiration, a tax on every business in the country,” from David Cameron (http://news.bbc.co.uk/1/hi/uk_politics/election_2010/8606332.stm) make it sound as if this is a new payment…

What is interesting is that NIC is not supposed to be a tax at all, though it is referred to as one now e.g. Gordon Brown said in the election debate on 15th April  ”We would use the National Insurance to pay for health care, to pay for policing, and to pay for schools”.    I had always thought that NIC is not supposed to be used for general government spending.  So, isn’t the real issue that this “jobs tax” is actually an increase in income tax?

election tax NIC

Though the word “tax” was mentioned 50 times during the budget speech,  tax didn’t feature that highly in the budget last week.  With “jobs”, “support” and “help” getting 26, 33 and 31 mentions respectively, this was more of a budget of politics than economics.   As we in tax recruitment normally know better than to try to call our candidates or clients when the budget speech is on, this year saw a surprising number of calls come through to the team during what is normally a quiet few hours as the eyes of most tax specialists are glued to the television… 

Many of the people I spoke to were not expecting much and post- budget the overwhelming feeling is that of a “non” budget described by various people as “a damp squib”, a “non-entity”, “very dull” and “a wash out”.    With no changes in terms of VAT, Corporation tax or CGT and the changes to personal taxes having already been announced in the pre budget report not much changed.  

So, not much change for the tax world from this budget.    However, harking back one year and onto the  Senior Accounting Officer regulations, responsibilities associated with this are now a regular feature on most manager level in house tax job descriptions…

budget, Tax, tax in house jobs, tax jobs

On hearing the recent comments of MP Paul Flynn on “bone crushing” handshakes http://news.bbc.co.uk/1/hi/wales/8485784.stm and the offence they cause him, I was reminded of a recruitment database that I used many years ago, which asked recruitment consultants to grade the candidates that they met on the strength of their handshakes in addition to skills and experience, the implication being that the strength of the handshake was seen as a measure of the candidate’s confidence in person.

I’ve probably also had more clients comment on weak, floppy handshakes than “bone-breakers in their feedback following interviews with my candidates.   Indeed, one client memorably commented that he didn’t so much shake the interviewee’s hand, rather he “caught it mid air” before it flopped to their side… though in spite of this, the candidate did get the job.

tax corporate tax paul flynn

What do the latest CIOT chartered tax advisor exam results tell us about the tax recruitment market coming into 2010?   With over twice the amount of people taking the exams being admitted to the institute than at the May 2009 sitting, what does this mean for the successful candidates and for those who haven’t passed? 

We have seen the in-house tax market pick up since Q3 2009, within banking and financial services in particular, although we’ve seen recruitment across a broad range of sectors.  We’ve also seen the ‘Big Four’ start to hire again into corporate tax teams in Q4 09.   There have been fewer redundancies during the same period and we have less people looking for jobs in tax who have been affected by redundancies which all indicates that the market is moving in the right direction. 

For people who have just passed their CTA, this is often seen traditionally as a career crossroads.  There are some good opportunities on the market but the best place to explore initially is at your own firm.   Will you get a pay rise or a promotion now that you have passed?  What options are available for you as an existing employee with a new qualification?   The external market is always worth exploring,  if only to benchmark your own package.

What if you haven’t passed?  My team have spoken to several people who haven’t passed their exams and none of these have had their contracts terminated by their employers (so far).   If this is widespread, then this is good news, as it will be yet another sign that confidence in the tax market is improving.

CIOT chartered tax, CTA results, exams, Financial Services, Secretarial and Support, tax jobs