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Will Silsby’s article ‘The end of the road’ (Taxation, 19 January 2023) is very helpful and highlights the potential need for the careful planning and timing of capital expenditure that is eligible for relief using the annual investment allowance (AIA).
As Will Silsby mentioned in his article, the current permanent AIA limit of £200,000 was to be ‘ignored’ in place of a temporary AIA limit of £1m introduced in October 2018 for two years with effect from 1 January 2019, then extended for a further year to 31 December 2021, then extended again until 31 March 2023, as announced in the Autumn Budget 2021, before reverting to the £200,000 permanent AIA limit on 1 April 2023.
In the so-called mini-Budget, which resulted in various devastating effects, it was announced that the temporary £1m AIA limit was to be made permanent with effect from 1 April 2023. Then Jeremy Hunt, the new chancellor of the exchequer, confirmed in his Autumn Statement on 16 November 2022 that the permanent AIA limit would be set at £1m from 1 April 2023 as well as reversing most of the other mini-Budget announcements including the increase in the main rate of corporation tax to 25%.
Finance Act 2022, s 12 legislated the temporary extension of the £1m from 31 December 2021 to 31 March 2023. Finance (No 2) Bill 2022 was introduced in order to put certain matters on the statute books but it did not include the temporary £1m AIA limit becoming permanent from 1 April 2023. Finance (No 2) Bill 2022 received royal assent on 10 January 2023 and became FA 2023.
My expectation is that the spring 2023 Finance Bill will introduce the legislation to make the temporary £1m AIA limit permanent from 1 April 2023.
Currently, CAA 2001, s 51A(5) sets the maximum allowance as £200,000. The £200,000 in s 51A has not been substituted (my emphasis) by any of the legislation dealing with the temporary increase in the AIA limit to £1m; rather the temporary increase has been by way of legislation (FA 2019, s 32) that has effect as if (my emphasis) the £200,000 were £1m. I therefore expect FB 2023 to include a clause that substitutes the £200,000 in CAA 2001, s 51A with £1m.
I also hope that the 2023 Finance Bill will address the well-made point in the last paragraph of Will Silsby’s article that FA 2019, Sch 13 para 2(3), as amended most recently by FA 2022, be repealed.
As things stand, the legislation only extends the temporary AIA £1m limit to 31 March 2023 and there is nothing yet in place for making the AIA limit permanently £1m from 1 April 2023.
So, if the Treasury and HMRC do not include the appropriate legislation in the 2023 Finance Bill, I am sure comments and feedback on the bill will suggest suitable amendments as it passes through the various stages and debates before receiving royal assent. Tim Hervey.
Will Silsby responds:
Thank you for this feedback – which is helpfully consistent with my own reading of the situation.
The thought occurs to me that it could be useful for the Treasury or HMRC to comment, should they wish. That could assure readers that the points identified both by Tim Hervey and myself would be properly addressed.
Going forwards by going backwards
In his article ‘To regulate, or not to regulate...’ (Taxation, 12 January), Mark Lee gave us the benefit of his views on regulating the tax profession. In that piece he built upon the foundations laid by contributions from Allison Plager, Andrew Hubbard and Mala Kapacee all published in late 2022.
Mark makes the point that having some form of professional qualification does not protect clients from receiving ‘duff, dangerous or incomplete advice’. His view is therefore that whatever system is used to bring up the quality of tax advisers (and their advice), space needs to be found for those without formal qualifications who instead rely upon experience.
Registered practitioner database
It may be a function of the world I see in my day job, but I’m more and more inclined to think that there needs to be a period in which tough love is practised. That would manifest by requiring any – and I do mean any – person offering tax advice to be a ‘registered practitioner’ on a searchable database.
I would have the tax return include a box (HMRC is very fond of boxes) to record the index number of any adviser who has prepared the return, assisted in the return or had any input into any of the transactions included (or excluded) on that return. Traceability of advice should be key.
If a transaction is included which is on the basis of advice from somebody not on that register, it could (arguably should) be a risk factor that HMRC can use to start a more detailed investigation.
Responsibility for making sure that the correct adviser index number is on the return will rest with the taxpayer and be something that cannot be delegated to the adviser or party completing the return. In other words the taxpayer/client needs to acknowledge and participate in the process of completing and submitting the return and should not be wholly reliant upon an ‘adviser’ doing everything for them.
Who would create and maintain this register?
In an ideal world the professional accounting and tax bodies would come together to produce this. Existing members of those bodies who are up to date with fees and continuing professional development would get an entry – if they apply for one and pay a modest fee. Perhaps part of the annual subscription is used for this.
Those who are not members of such bodies can apply but would have to demonstrate suitable and relevant experience. Here I’m thinking about former HMRC officers (we are seeing many more seeking work outside the agency these days) and perhaps those who have worked in accounting or tax advisory firms for a minimum period, say three years. Again a modest fee would be applicable.
I would see HMRC not as a guardian of this register or even an administrator but rather a party with the ability to remove a name from the list. While it would be sensible to have a minimum criteria for why a name is removed, we must also recognise that some HMRC investigations may result in them having doubts as to the integrity of some advisers, before a case reaches the public stage. Perhaps a designation that an adviser on the list is moved to a ‘pending’ box would be a sufficient safeguard for HMRC and the named individual.
Unpopular
Mark does say that having an independent register of ‘suitable’ advisers would not be popular with the professional bodies as it may ‘devalue and disadvantage their “real” members’. I cannot see that.
Almost all tax advisers worth their salt take pride in their job and great care to ensure that what they tell those who pay their salaries is correct, accurate and in the best interests of all. I see their name appearing on my register as a badge of approval – a kite mark – that acts as an additional level of accreditation.
I do agree with Mark that expecting the FCA or the FRC to undertake this exercise is akin to finding the nearest patch of long grass high enough to hide in for years. We’ve recently seen this approach taken over the ‘single regulatory body’ proposed and consulted on by government in relation to issues in the contractor and umbrella sector. Waiting for any public agency to pick this up is the triumph of hope over experience.
The burden of improving the quality of advice and adviser must therefore fall upon those paid by and for those professionals.
High cost of lack of regulation
I have seen too many lives ruined by those claiming to be ‘tax experts’ when in reality they are just very good at learning a script and delivering it and subsequently deflecting enquiries into irrelevant nonsense. Sadly some of these people have been members of professional bodies and would probably qualify in the first instance for inclusion on my register. I suspect however that when the dust settles on HMRC investigations, there may be cause to remove them.
I am fully aware that the proposal here will be seen as a hard line by many and that it will exclude some people who have valuable skills. I would hope that those able to demonstrate such skills would find a place on the register, even if that requires some effort. I would also hope that those with no tax skills would never find a place.
Ultimately, whether the register exists or not, it’s only valid if taxpayers/clients actually use it – preferably before a transaction is undertaken.
We cannot force clients to use a properly registered and qualified tax adviser. They will do so only if they are aware of the consequences of not doing so (perhaps removing protections from some penalties) are well advertised and understood. That requires some sort of education campaign.
We will never stop the unscrupulous from preying on those naïve in the ways of tax. We do, though, have an obligation to do our best to provide clients with the correct advice and to drive those profiteering from deliberate and deceitful lies about the tax effects of transactions, out of business and out of our profession. Graham Webber.
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