CIOT's 2003 wish list slams complicated tax legislation

The Chartered Institute of Taxation (CIOT) has identified key areas requiring legislative change in 2003, many of which centre around the legislative burdens of the current taxation system on small businesses.

The CIOT's paper leads on its call for Parliament to extend the time it spends reviewing major changes to the tax system.

It also requests such changes are given higher prominence rather than being 'relegated to Regulations that are not reviewed by MPs,' which it says happens often.

The CIOT paper also calls for a change in the way tax legislation is introduced.

It said: '[Tax legislation] tends to be complex, and changes in one part of the system affect other parts of the system. Complex legislation needs to be drafted carefully and needs to be exposed for comment to ensure that it is workable, does not have unintended consequences and does not contain drafting errors requiring early correction. Recent experience shows that where there is proper consultation, this results in better legislation.'

The paper also called for an end to the 'cliff-edge' problem of VAT registration, where those providing services for private individuals face difficult decisions when they cross the registration threshold: namely, whether to increase prices (thereby risk losing customers) or to bear all or part of the VAT chargeable themselves (thereby reducing their profits).

The Institute also called for the Government to review the Dependent Subsidiary Legislation, which covers employees' shares.

The legislation currently requires those holding shares in the company they are employed by to certify they are not evading tax within two years of accepting the shares to avoid being penalised by default.

The CIOT said: 'We suggest legislation that assumes you are guilty until you certify otherwise is totally unreasonable.'

Vincent Oratore, CIOT Chairman, said: "There should be a detailed review of how new tax laws are made with the aim of ensuring that when there are major changes in the tax system, Parliament has had time to consider whether the laws are properly drafted and, most importantly, whether they will work.

"We have layer upon layer of legislation that has grown over the years with little attempt to rationalise it to make it work more smoothly. For example, the Tax Law Rewrite Project has recently identified 21 different charges for pension income."

Other issues covered by the CIOT's budget paper include:

• quarterly instalment payments of corporation tax;
• abolition of withholding tax on interest, annual payments and royalties;
• reform of section 765 TA 1988 (migration of companies);
• Legal Professional Privilege;
• New Tax Credits;
• basis of assessment of pension income;
• abolition of the scheduler system of corporation tax; and
• compliance with EU law.