The OECD thinks the UK tax system is too complicated (no, really?) and that VAT reliefs are complicated and regressive. Has it been reading this blog? Here are three recurring issues that cast doubt on our ability to improve.
Windfall tax
In May 2022 we discussed the difficulties inherent in a windfall tax on energy companies being imposed after steep price rises. A windfall tax wasn’t a good idea then and it isn’t one now but various government spokespersons have recently proposed that if energy companies engage in profiteering (in other words, if they are perceived to have raised prices by too much), they will be taxed to take away that benefit.
This is worth thinking about:
- energy company raises its prices
- consumer pays high price
- government takes “excess” in tax; therefore
- consumer pays that tax, not the energy company
VAT and food
In another post, a year ago, we cast some doubt on the wisdom of a Court of Appeal decision concerning VAT and marshmallows. In our view, remitting the case to the First-tier Tribunal was not only a stupid waste of time and money, it was also unnecessary. So it has proved: the First-tier Tribunal has, as expected, decided that giant marshmallows are usually not eaten with the fingers, they are eaten (roasted) from a skewer, or as part of a s’more (that is, roasted and sandwiched between sweet biscuits). HMRC insisted that the taxpayer had to “prove” the statistics of giant marshmallow eating methods but the tribunal said it was obvious common sense that a red-hot roasted marshmallow was not eaten with the fingers.
One new development came out of the tribunal’s decision, which is not sufficient to justify all this unnecessary litigation but is interesting nonetheless: to the suggestion that a s’more is eaten with the fingers, so the roasted marshmallow within is likewise eaten with the fingers, the tribunal cited a burger analogy (yes it all gets sillier and sillier, doesn’t it?). A burger is indeed usually eaten with the fingers but nobody would claim that the ketchup within is eaten with the fingers; so too the marshmallow within a s’more.
One more amusing fact about this case: the presiding Tribunal Judge was Amanda Brown KC, the taxpayer was represented by barrister Tim Brown and HMRC by barrister Charlotte Brown.
Government Money
We have complained many times about public money being wasted in tax litigation that only decides how public money is allocated and reallocated (see, most recently, Tax news catch-up). Another egregious example has recently raised its ugly head.
A further education college received government funding in return for providing education to students. There was a VAT issue over whether the funding directly paid for the education. Instead of getting together and choosing one or other result and adjusting the college’s funding (and that of similar colleges) accordingly, the parties ended up in the tax tribunals. The funding issue was decided in the college’s favour at first instance and the Upper Tribunal agreed. However, the Upper Tribunal dismissed the college’s appeal on an unrelated ground, so HMRC won. HMRC could not then appeal the Upper Tribunal’s decision on the funding issue, because it had already won.
Instead of leaving it at that and adjusting the college’s funding (and that of similar colleges) accordingly, HMRC decided to engineer an appeal instead. That involved HMRC deliberately acting as if it had won the funding issue, so the college had to appeal again. HMRC then inevitably lost the appeals at the First-tier and Upper Tribunal levels, so it could go to the Court of Appeal and try to get the original Upper Tribunal decision reversed.
Guess what? The Court of Appeal upheld the Upper Tribunal’s view of the funding issue. Of course it did. But even if it hadn’t, this would still have been a monumental waste of resources. Anyone who cares about how public money is spent should be appalled by this sorry tale.
