A break for the confused taxpayer

The Inland Revenue has responded to calls for guidance, says Roger Trapp

It is often assumed that tax accountants love confusion and complexity, since they would give them plenty of opportunities to practise their art. For their part, the professionals themselves are keen to stress a fondness for certainty.

And that view is clearly apparent from the Chartered Institute of Taxation's response to the Inland Revenue's consultative document on pre-transaction rulings, or the means by which the organisation gives guidance to tax payers on how a particular tax situation will be treated. Indeed, the institute points out that it has called for a rulings system for some time - especially in the recent book A Request for Rulings by its research fellow Daniel Sandler.

"A rulings system can contribute to the certainty a tax system should have - particularly when that system is a complex one that operates in a complex environment, as is the case in the UK," the institute says in the response published last week.

The document follows the revenue's publication of a somewhat tentative paper on the subject late last year. Its author, Simon Oakes, describes it as a "high-level document" that does not propose the introduction of a specific scheme. Instead, it reviews the reasons for the pressure for reform and looks at different approaches to introducing rulings.

As that document describes, the Inland Revenue in effect already gives pre-transaction rulings that taxpayers can rely upon in certain circumstances. These fall into two categories: statutory clearances and approvals, and informal rulings on the interpretation of the law in other circumstances, in accordance with guidelines set out some time ago. However, this situation falls short of what would be provided under a formal rulings scheme. In particular, such a change would make the rulings more comprehensive and more structured.

Much more attention, though, has been focussed on the revenue's concerns about tax avoidance. This was prompted by the devotion of a section of the paper to the introduction of a general anti-avoidance provision along the lines of those that exist in other countries, notably certain members of the Commonwealth.

This section points out that countries such as Australia and New Zealand, which do rule on avoidance, have general anti-avoidance provisions; that broadly drafted general anti-avoidance provisions add to the uncertainty those involved are seeking to reduce; and that the attitude of the courts "would be a crucial factor in determining the scope and effectiveness" of such a provision.

But having set out the ground, it holds back from actually coming to a view. Mr Oakes merely says: "What is tax planning and what becomes abuse of the tax law is not easy to determine."

The institute is not nearly so ambivalent. Pointing out that any system under which an individual or company obtains an Inland Revenue decision on how it will be treated beforehand should be properly resourced and strike the correct balance between the taxpayer's and the authorities' interests, it says: "The institute does not believe that a rulings system would lead to greater tax avoidance."

John Whiting, the Price Waterhouse partner who is chairman of the institute's technical committee, adds: "We believe a formal rulings system is part of a modern tax system; together with such statutory clearances as there are and the current informal guidance the revenue will give in some areas, there will be proper mechanisms for the taxpayer to comply with self-assessment and other responsibilities."

Though he goes on to say that he looks for a speedy announcement of the intention to introduce a rulings system, he cannot be expecting things to happen so soon. The paper is, as he stresses, "the start of the debate on this issue".

Certainly, Mr Oakes is expecting to have to do more work following the deadline for responses at the end of this month before the matter is completely dealt with.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
News
i100
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
PROMOTED VIDEO
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Financial Analyst - Forecasting - Yorkshire

    £300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

    Business Architect - Bristol - £500 per day

    £500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

    Regulatory Reporting-MI-Bank-Cardiff-£300/day

    £200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Day In a Page

    Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

    Hunters protect Russia's rare Amur tiger

    In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
    Transfers: How has your club fared in summer sales?

    How has your club fared in summer sales?

    Who have bagged the bargain buys and who have landed the giant turkeys
    Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

    'I'm a realist; I know how hard this business is'

    Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
    The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

    The best swim shorts for men

    Bag yourself the perfect pair and make a splash this summer
    Has Ukip’s Glastonbury branch really been possessed by the devil?

    Has Ukip’s Glastonbury branch really been possessed by the devil?

    Meet the couple blamed for bringing Lucifer into local politics
    Dress the Gaza situation up all you like, but the truth hurts

    Robert Fisk on Gaza conflict

    Dress the situation up all you like, but the truth hurts
    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

    In grandfather's footsteps

    5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
    Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

    Martha Stewart has flying robot

    The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
    Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

    Do women cyclists need 'pootling lanes'?

    Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

    The dining car makes a comeback

    Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
    Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

    Gallery rage

    How are institutions tackling the discomfort of overcrowding this summer?
    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

    Eye on the prize

    Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
    Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

    Women's rugby

    Tamara Taylor adds fuel to the ire in quest to land World Cup