Of course a tax half-year review should be on 5 October, but as I believe that we should join the rest of the world in having a calendar tax year, I am doing mine on 30 June!


So here, in my version of ascending order of importance, are the 10 most importantUKtax developments of 2012 so far:


10. Consultation on statutory residence test


The Government intends to introduce a statutory residence test into tax legislation from next year; at present, living up to our quirky reputation, there is very little statute concerning residence, but lots of frequently contradictory case law and Revenue practice that has changed dramatically in recent years.


The problem is that international mobility is now so much greater that, for instance, commuting fromFranceto work in theUKis not a pipe dream but a reality for many people. It is not a coincidence that a number of recent key cases on residence have featured airline pilots. Whilst most countries have a residence test based on presence in the country for more than half of the year, we also have habitual and substantial visits and available accommodation to contend with, not to mention split year treatment. Simplification, clarity and certainty are highly desirable and will hopefully be delivered by the legislation when it sees the light of day.


9. Simplified accounts for small, unincorporated businesses


Another consultation on a George Osborne bright idea. Plan A was for the regime of cash accounting and (a very few) fixed expenses to apply to micro businesses turning over less than £30,000, but Plan B seems to be to extend this to businesses up to 5 times the size. For most businesses beyond sole traders with no employees, commercial considerations would make this more work rather than less, so difficult to see too many non-micros opting for it in any case. Looks good on paper, sounds good in the Commons but actually not likely to deliver very much simplification in practice.


8. Personal allowance up / age allowance cut


As personal allowances head for the £10,000 target at a rate of knots, the grey lobby were outraged as their additional allowances were frozen on the way to being cut. I have never had a satisfactory explanation of why the over 65s merited additional tax allowances in the first place, and in any case the age allowance will effectively be replaced by the higher personal allowance. Reminds me of 1970s trade union leaders complaining about eroded differentials, except the retired can’t go on strike.



7. Top rate cut


A Conservative Chancellor was unlikely to endear himself to the masses, let alone the retired masses (see #8), by cutting the top rate of income tax from 50% to 45%. He told us it hardly raised any money, but later we were told by a right wing tax think tank that high rates of income tax are a massive disincentive to entrepreneurial behaviour. They cannot both be right! Watch out for the flak to fly if this change does not succeed in stimulating increased investment in theUKeconomy, and for more Tory backbench comment about posh boys who don’t understand the problems of ordinary people.


6. Dave Hartnett and Vodafone – the National Audit Office report


No sweetheart deals were cut, and the arrangements made with multinational tax avoiders were reasonable, but not well communicated within HMRC. Mr Hartnett’s approach makes perfect sense in the light of the current state of HMRC (see #1), but again ran the risk of appearing to pander to the largest taxpayers, particularly as the aforesaid lack of communication led to HMRC sources leaking the details. Not the first high profile HMRC high-flyer to retire with tail between legs, but hopefully the last.


5. Tax relief cap


Some rich people claim a lot of tax reliefs, so let’s cap them. Cue outrage from charities and donors (see #4), who suggest that if there are 100 charities engaged in dodgy dealings and benefitting their donors, the Charity Commission might like to investigate those charities instead of the government denying large scale donors tax relief on their donations. And why should risky businesses making large losses not be able to get full tax relief for them? If ever there was a U-turn waiting to happen…


4. U-turns


3p fuel duty rise deferred yet again – when does repetitive deferral become a U-turn? VAT on and off static caravans (which must admit I always found less of an impediment to driving than mobile ones, so favourable tax treatment sort of makes a strange kind of sense) and on and off pasties (great hilarity as politicians queued up to demonstrate their ‘man of the people’ pasty-eating credentials).


And then of course there is charitable giving. The government that brought you the Big Society, with its emphasis on giving something back and the key role of voluntary organisations now brought you massive restrictions on many people’s tax relief for doing just that. Giving to charity (except dodgy ones – see #5) is not tax avoidance George, it is philanthropy, surely something to be encouraged rather than the opposite? Even if you get 50% tax relief on your charitable giving, you still have to give £40,000 to get a tax reduction of £15,000 (the government also gives the charity £10,000), so this is hardly a recipe for having your cake and eating it (see #2)


Constantly introducing tax changes and then withdrawing them may have become a habit in the past few years, but it is not a good one. Not only does it make Chancellors look indecisive, but it leaves them open to attack from all sides whenever they raise anyone’s taxes, as it makes it appear that lobbying works. The time to have doubts about your tax changes is before you introduce them, not after.


3. General Anti-Abuse Rule


Number 1 in any normal 6 months, in this Olympic year the GAAR only gets the bronze. Finally the government has got fed up with the death of a thousand cuts that is anti-avoidance and plans to introduce legislation to effectively combat abusive and artificial avoidance schemes. And it looks like it might actually work! Praise the Lord and the Aaronson committee for coming up with the precise anti-abuse model this country has needed for some considerable time, and for making HMRC use the phrase ‘centre ground of tax planning’ without flinching. Now just get it put in place and working.


2. Tax avoidance and the media


There is probably nothing worse than having the media trample all over your specialist subject, as it demonstrates the inadequate level of intellectual curiosity and the preference for a sensational headline over the truth that characterises so much of the British media (no, not just the tabloids). So we had the good (Sir Chris Hoy, bang in the middle of HMRC’s ‘centre ground of tax planning – see #3 – and defending himself to the hilt), the bad (Jimmy Carr, using a scheme for which there is no possible moral excuse) and what may be the ugly (the Icebreaker scheme, definitely in the grey area between outright abuse and the centre ground, with genuine commercial substance but a structure designed to give excessive up-front tax reliefs to investors).


Rather than clarifying where on the continuum of innocent to abusive particular actions lie, the media lumps them all together and brings confusion where it should  bring clarity. I would love to see a sensible, reasoned debate on this subject, but I am not holding my breath.


  1. HMRC staff cuts, morale and strike action


In what possible way does it make sense to demoralise the country’s tax collection authority, deprive it of large proportions of its staff and seek to reduce their pension entitlement at a time of economic crisis? Just as the GAAR promises to create a situation in which a more realistic amount of tax can be collected from all taxpayers, the government continues the process begun by its predecessor of slashing and burning HMRC. Allowed to get on with its job properly, HMRC would do just fine, but it is not being allowed to do that. And this imperils all the promise of the GAAR and other positive tax changes made in recent years. Which is why this is the number one development in the last 6 months in the world of tax.


The next 6 months may well be less eventful in the fiscal world, as it would find it hard to be much more eventful. Still, you never know …….