Vague Ambiguity

As with all matters legal and financial, the devil is in the detail.

No one is better at playing this game than HMRC.

Take, for instance, the draft legislation issued by HM Revenue & Customs (HMRC) to claw back some of the £500M lost to income shifting every year.

This follows a pre-Budget report clamp-down on income shifting that came after the government lost the Arctic Systems case in the House of Lords in July 2007. In the draft legislation, income shifting between spouses is prohibited along with long-term partners, same sex partners and unmarried couples.

Neil MacGillivray, head of technical support at James Hay, recently stated that the draft was vague and ambiguous.

However, the wide legislation, being revised by a consultation, has thrown up a number of unanswered questions according to MacGillivray.

Quote:

"It makes you wonder what they are going to ask on your tax return. If you consider yourself in a long-term friendship, does this count as a long-term relationship?

The consultation is very ambiguous and it is widely drafted to the point of vague."

HMRC has offered no time guide as to what counts as a long-term relationship, nor what constituted a same-sex relationship.

MacGillivray noted:

"If you consider yourself in any type of relationship then you could be affected by the draft, including people at the same address or housemates. As it is at the consultation stage I am sure these issues will be raised."

As with all taxes, the more complex you make them the more people spend time and effort trying to avoid them, which in turn prompts HMRC to issue more rules and regulations thus adding to the complexity.

HMRC's other weapon is that of drafting vague legislation, which gives them the flexibility to challenge taxpayers' legitimate attempts to avoid tax. Thus stacking the odds in HMRC's favour.

Wouldn't it be better for everyone, and less costly, if the tax system were simplified?

The trouble is, simplification is not Gordon Brown's thing!


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