JOURNAL 47

SOME SNIPPETS FROM THE FINANCE BILL DEBATES

Mr Timms (Chief Secretary to the Treasury) “In the past year, 35,000 of the 600,000 estates attracted an inheritance tax liability. The proportion of estates liable for inheritance tax is just 6%. The remaining 94% pay no inheritance tax whatsoever”.

Adam Afriyie MP “…has he rolled that figure forward? What proportion of estates and how many families does he predict will be caught in 2010/11?”

Mr Travis “The answer is 6%. I expect the proportion in the year that the hon Gentleman refers to and that is covered by the clause to be precisely the same as now – 6%. That is very different from the impression that one might get from reading some newspapers.”

Are you one of the lucky 6% whose assets will exceed £310,000 if you die in the year to 5 April 2001? The median house price in the last quarter of 2006 was £175,000. In the South East and London it was £292,000 which, Mr Timms pointed out, are within this year’s nil rate band. So do few Londoners die each year (so few fall within the 6%) or does the average Londoner to die leave his house and a mere £8,000 of other assets? And if London and S E house prices grow by 2% pa in the third quarter of 2010/11 the median value will be £316,000 as compared with the £310,000 IHT nil rate band. They will have to grow by les than 1.6% pa to be under £310,000 by 31 December 2010. The Halifax House Price Index for May indicated that house prices are actually growing at an annual rate of 10.6%, i.e. the December 2006 £292,000 house is already worth more than £310,000. Accordingly the Treasury must be predicting that having Gordon Brown as Prime Minister for the next four years will lead to a significant negative growth in house prices.

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Rob Marris MP “…even though by some standards we do not earn a fortune I am very well paid for being a Member of Parliament, and I have no other source of income. I am happy to pay tax at the highest rate. I do not regard myself as wealthy, and I should be quite happy to pay the inheritance tax were my estate valued above that threshold”.

The annual salary of an MP is £60,675. The UK average wage at April 2006 was £447 pw (£23,244 pa). It was £470 pw (£24,440 pa) in the SE and £572 pw (£29,744 pa) in London. What on earth is Mr Marris (who has been an MP since 2001) doing with all that money if he thinks it doubtful that he has £300,000 worth of assets?

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Ed Balls (Economic Secretary to the Treasury) “The comments just made by the Hon Member…which draw on her own experience, show that it would be desirable to debate the regulations under the affirmative procedure if that can be done. In the policy area in which I have been active in the Treasury I always welcome the use of the affirmative procedure. When important areas of policy are taken forward, it is right that there should be an opportunity to discuss the details in the House.”

The Finance Bill 2007 contains 40 provisions enabling either the Treasury or HMRC to make regulations, of which only one (the power to increase the £600 daily penalty for failure to notify a tax avoidance scheme) requires the affirmative procedure!

Incidentally I thought that I’d have a look at Ed Ball’s personal website. I can’t tell you what’s on it as it tells me that “By accessing and using this Web Site you agree to be bound by the Terms and Conditions set out below,” one of which is “the User undertakes that they will only view the Information for their own private purposes and it (sic) will not publish, reproduce, store or retransmit any of the Information contained in the Web Site.” So much for open government!

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John Healey (Financial Secretary to the Treasury) “Some have suggested that the word “influences” …captures all the advice given by accountants and advisers, but there is a world of difference …between a person who provides independent, tailored advice to a client, who is then able to consider that advice before accepting it or rejecting it, and the person who simply supplies a client with a standard solution or product that the client accepts. It is not the intention that the former situation – the provision of advice – be considered to be influencing in this context. However the latter situation – supplying a standard solution or product – is regarded as influencing.”

Well done to anyone who understands the distinction the Minister draws. I certainly don’t. What most of my clients are seeking are solutions; they want advice simply in the context of what is the most satisfactory way to solve the particular problem that they face. In that context there is no difference between a standard solution and a bespoke solution, other perhaps than that a standard solution is a tried and tested answer whereas a bespoke one is untried. Does Mr Healey think that advice is considered by the client but a standard solution is simply accepted? I would not want a client to accept a solution without understanding it and considering whether to accept or reject it, and I doubt that any other accountant would either. I find it difficult to conceive why anyone should seek my advice if he does not believe that obtaining that advice will influence what he does.

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Ed Balls, “The main purpose [of arrangements] may be inferred from the action of the parties to the arrangements, but it is best understood by the person making the arrangements. It is therefore not necessary to set up a clearance regime when the person best placed to judge whether the rule applies is the person who makes the clearance application.”

Lewis Carroll eat your heart out! There is no need for a clearance procedure because the taxpayer knows if he is doing something for tax avoidance purposes – but the reason why he is doing it is actually irrelevant as the law will infer a purpose from the actions that took place. In other words what matters is the inference that HMRC, and ultimately the courts, draw from the actions. But if that is right surely the taxpayer needs a clearance procedure because he can have no idea what inferences HMRC are likely to draw from his proposed actions unless they tell him in advance so that if they perceive it to be avoidance he can forbear from entering into the transaction. So is the answer that the government do not actually want to deter tax avoidance; they want to encourage it so that they can collect more money by penalising it?

Robert W Maas