Paranoia

I am not alone in thinking that HMRC and Brown and his minions have something of an unhealthy obsession with tax avoidance (which is, as I keep repeating, perfectly legal).

The Institute of Chartered Accountants of Scotland (ICAS) also think that HMRC have lost the plot over this issue, in fact they use the word "paranoia" to describe the government's approach to tax avoidance.

ICAS recently issued a press release warning about the dangers of HMRC's/Brown's approach to tax avoidance, and the adverse effects it will have on business owners.

Now you know that things must be bad when a leading accountancy body, that has been around for well over a century, starts calling the government/HMRC paranoid!

Here is the press release in full:

"The Finance Bill provisions which give effect to Chancellor Alistair Darling's proposed new capital gains tax relief for entrepreneurs reflect Government paranoia about tax avoidance and could adversely affect thousands of business owners, according to The Institute of Chartered Accountants of Scotland (ICAS).

Donald Drysdale, Assistant Director of Taxation, said, “Entrepreneurs’ relief has been described as a partial replacement for business asset taper relief or a resurrected form of the old capital gains tax retirement relief - both of which were intended to help taxpayers disposing of favoured business assets.”

'In practice, the proposed new relief is much less readily available than either of those previous reliefs. Because of the narrow definition of qualifying disposal, the stringent test applied in determining trading status and the reintroduction of the rental test when considering associated disposals - for example, where a business and the premises from which it operates are in different ownership - there is much greater likelihood that these entrepreneurs will be denied relief because obscure technical tests are not satisfied.'

Stephen Taylor of Carters Accountants LLP and also a member of the ICAS Tax Committee, said,

'We are concerned that the proposals adversely affect taxpayers on a retrospective basis, since existing commercial arrangements that have been regarded as perfectly acceptable under the current taper relief rules will be penalised. We also believe it is unfair that employee shareholders and certain trustees will be denied relief.'

Calling for further reconsideration of the proposals, ICAS believes that the impact of capital gains tax would fall much more fairly on taxpayers if the legislation provided for a transitional period after 5 April 2008 during which a measure of taper relief would continue to be available, and if for all purposes of capital gains tax there was a rebasing of assets to a relatively recent date such as March 2002 so that inflationary gains accrued up to that date would not be taxed unfairly. "

My advice to Brown and HMRC, given this diagnosis of paranoia by a respected and leading institution, seek suitable treatment with all due haste.

Tax does have to be taxing.

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