A marginal rate of 50% is unacceptable, but there are social workers earning \u00a350k <\/a>paying marginal tax rates of 80%. No Conservative should stand for this:<\/p>\n\n\n\n Many of the problems can be immediately fixed with abolition of the child benefit taper (and the Child Benefit High Income Charge) and the personal allowance taper. The cost is likely less than HM Treasury has historically believed, given the widespread taxpayer response of controlling working hours and\/or making additional pension contributions. The residual cost could be covered by a small change to the rate and\/or thresholds for the highly paid (e..g. by slightly lowering the additional rate threshold). <\/p>\n\n\n\n The impact of student loan repayments on marginal tax rates should be reviewed, together with the impact of the benefit system on marginal rates.1<\/a><\/sup>A subject where I have no expertise, so I’ll say no more than this.<\/span><\/p>\n\n\n\n 2. Fix a VAT system that holds business back<\/strong><\/p>\n\n\n\n No Conservative should accept a VAT threshold which abundant evidence<\/a> suggests is a brake on the growth of small companies:<\/p>\n\n\n\n There is a well-known solution to this that is both neat and plausible<\/a>: to increase the threshold. That would, however, only make the problem worse – the threshold would become a brake on the growth of larger companies. The real answer is to drop the threshold, and use the revenues raised to reduce the rate of VAT for everybody. <\/p>\n\n\n\n The practical difficulty for small and micro businesses shouldn’t be understated, in terms of both financial challenges and compliance headaches. The threshold should be frozen for now, with a review and consultation on the way forward, ready for legislation in Finance Act 2024.<\/p>\n\n\n\n 3. Slash the rate of inheritance tax for the middle class<\/strong><\/p>\n\n\n\n UK inheritance tax is anomalous: the 40% rate is one of the highest in the world; but it raises the same revenue as other countries with a rate of 20%<\/a>. No wonder three-quarters of people<\/a> think it’s unfair.<\/p>\n\n\n\n Time to fix both problems. Small business and small agricultural holdings should continue to be protected, but there’s no reason why the middle classes should be paying twice the effective rate <\/a>of inheritance tax as the seriously wealthy:<\/p>\n\n\n\n The answer: radically cut the rate, paid for by capping exemptions and reliefs.<\/p>\n\n\n\n 4. Make full expensing permanent <\/strong><\/p>\n\n\n\n Last year, the Government introduced “full expensing” – up-front tax relief for investment in plant and machinery. There’s a powerful argument for this – the UK tax system currently has a bias against business investment.<\/p>\n\n\n\n The problem is that, for essentially bureaucratic reasons, full expensing was introduced as a temporary three year measure. Currently it only has two and half years left. This renders it pointless – no business is going to base its long term investment planning on a relief which will disappear by the time spades hit the ground. The Tax Foundation, which has campaigned for full expensing<\/a> in the US and UK, says this means full expensing currently has no long term impact on UK growth<\/a>. A missed opportunity.<\/p>\n\n\n\n The Chancellor should have the courage of his convictions, and make full expensing permanent. Then challenge Rachel Reeves to say that Labour will keep it. A long term bipartisan commitment to maintaining full expensing would give business the confidence to invest, boosting wages and economic growth<\/a>.<\/p>\n\n\n\n 5. Abolish one pointless tax every year<\/strong><\/p>\n\n\n\n Every Conservative Chancellor should seek to emulate Nigel Lawson, who abolished one tax every year<\/a>. <\/p>\n\n\n\n The first to go? Stamp duty – not SDLT, but the ancient tax on documents, which still works in much the same way as it did in 1671<\/a>. <\/p>\n\n\n\n Stamp duty costs business a small fortune in compliance, and likely raises little or no actual revenue. We have modern taxes on securities<\/a> and land<\/a>, and we don’t need anything else. I wrote more on that here.<\/a> <\/p>\n\n\n\n 6. Simple simplification<\/strong><\/p>\n\n\n\n Everyone agrees the tax system is too complicated. But that complication is itself an obstacle to simplification. The Office of Tax Simplification had less impact than many hoped because its recommendations were often too politically difficult to implement<\/a>.<\/p>\n\n\n\n So we need to look for ways to simplify the tax system which are more modest but still high impact. One is to identify “fossils”: remnants of another area which now serve no real purpose other than complication and cost.<\/p>\n\n\n\n I identified five fossils when going through one simple example transaction<\/a>. There are many more. Even some entire taxes<\/a>. <\/p>\n\n\n\n So the Finance Bill should contain a power for tax rules and even entire taxes to be repealed by Regulations, where the OBR agrees that this can be done without a material loss of tax revenue. HMRC and HM Treasury could create a small team working on this full time. <\/p>\n\n\n\n 7. Protect the public from tax scams<\/strong><\/p>\n\n\n\n Tax avoidance used to be the preserve of the wealthy. When it failed – as in recent times it almost always did – the taxpayers could afford to pay the bill.<\/p>\n\n\n\n These days, the wealthy are mostly too well-advised to buy tax schemes. But there’s a largely unregulated industry flogging dodgy tax schemes to people with modest earnings and assets. When it goes wrong, the advisers disappear, often leaving the taxpayers with life-changing bills. It’s a scandal – a mis-selling scandal as much as a tax scandal.<\/p>\n\n\n\n The Government should criminalise unregistered<\/a> mass-marketed tax schemes (including “refund” schemes such as those discussed here<\/a>). Promoters (and their directors and owners) should be liable to penalties of twice the fees collected. I’ll be writing more about the details of this soon.<\/p>\n\n\n\n![\"\"](\"https:\/\/heacham.neidles.com\/wp-content\/uploads\/2023\/11\/image-19.png\")
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