News Analysis – Taking on the powers that be

As the political parties head to the seaside for their annual conferences they might pause to reflect on the sudden political activism of the last two weeks.

Farmers, traditionally a conservative bunch, joined forces with the truckers and succeeded in bringing the country to virtual standstill.

But they’re not the only groups to have grown more vocal since Labour came to power. Accountants and tax experts, and groups representing them, have also become increasingly loud and direct in their criticism of government policy, particularly on tax issues.

The most recent example is the classic stunt pulled earlier this month by the Chartered Institute of Taxation.

Tax simplification

As part of its long-running campaign for a major simplification of the tax system, the institute fired off self-assessment forms to MPs and challenged them to fill them out themselves, with no help their accountant or tax practitioner.

The stunt was accompanied by forthright words from the institute’s president, Richard Mannion, who declared that the exercise ought to result in a mass uprising in the House.

The English ICA’s tax faculty has also stepped up its campaign for a major overhaul of the tax system. Francesa Lagerberg, one of its technical managers, agrees there has been an increasing sense of ‘enough is enough’.

‘Someone needs to grasp the political nettle,’ she commented. ‘Every party should include tax simplification in their manifesto. If not we will want to know why not.’

But tax simplification is not the only issue at stake. Since Labour has come to power there have been a whole series of tax changes which have resulted in some very vociferous campaigning and complaining from accountants and tax experts.

The IR35 measures

Perhaps the biggest storm was caused by the now notorious IR35 press release in the March 1999 Budget.

The controversial plans, which have now come into force, albeit in a slightly diluted form, were aimed at those using personal services companies to avoid or reduce their national insurance evasion and tax exposures.

Dawn Primarolo, the paymaster general who led the clampdown, succeeded in her aim of introducing the legislation.

But she also succeeded in uniting previously disparate parts of the business community, including accountants and tax professionals, in a quite unprecedented protest.

Ann Redston, an Ernst & Young partner who led representations on behalf of the CIoT, said: ‘We have an obligation to speak out for non-tax professionals, and if we don’t understand the legislation, what chance do they have?’

‘We are not talking about fat cats here,’ she added, referring to the sort of people hit by the measure.

Like many of her fellow tax professionals, Redston is concerned about the lack of consultation on the issue.

‘People are more critical when they have not been consulted,’ she commented.

‘The profession has to put in an enormous amount of effort to get the authorities to back track. If they were to consult first then it would be a lot easier.’

Aside from uniting much of the business community in opposition, the IR35 protest was also notable for another reason – the fact that its growth and organisation was centred on the internet.

The medium has proved the perfect tool to bring together disparate groups of professionals. The web is no longer the sole preserve of world revolution anarchists, but an invaluable communications tool for business campaigns.

Wyman takes on Brown

Relations between accountants and the government also hit a somewhat rocky patch earlier this year with the very public spat between high profile PricewaterhouseCoopers partner Peter Wyman and chancellor Gordon Brown following the Budget this year.

After PwC took the chancellor to task over his plans on taxation of foreign controlled companies and double tax relief, the general public was treated to the highly unusual sight of Gordon Brown publicly naming Wyman on breakfast TV, criticising his estimates of the cost of the measure and hinting he was in the pay of the Conservatives.

PwC was not the only firm to raise the issue. David Cruickshank, head of tax at Deloitte & Touche spelt out the implications for large multinational companies the day after the Budget speech.

Ernst & Young’s John Dixon also criticised the proposals immediately after they had found the details of the proposals buried in the pile of Revenue press releases issued after the chancellor sat down.

But it was PwC who put a figure on the costs, and who took the government flak. Wyman has since maintained a dignified silence over the episode.

Tax consultants say they have always sought to correct bad legislation, but there seems to have been a sea-change. As one insider put it: ‘It is the government’s reaction to criticism that has changed.’

The danger was the row at times became very personal, and this may well have put off others wishing to voice their opposition to government policy. ‘People will think twice before raising issues,’ said another observer.

PwC maintains it will always have business at heart and will be critical of government policies that are not ‘good for business’ whatever the complexion of the government.

The CBI’s director-general Digby Jones, formerly a senior partner with KPMG, was equally critical and commenting on the amended proposals said: ‘We remain concerned that these fundamental and complex changes are being brought forward without time for proper consultation.’

Another tax move which caused consternation in the business community was the introduction of national insurance charges on share options.

Oracle and Cisco were among the companies who threatened to move operations out of the UK if the government did not back down. The protests won a partial watering-down of the measure from the government.

The Inland Revenue refused to be drawn on whether or not it had seen an increase in campaigning by business professionals, but a spokesperson said: ‘We do keep an eye on campaigns that affect us and get involved where necessary.’

So will we be seeing more high profile campaigns in the future? As one expert put it, ‘You’ve seen nothing yet.’

English ICA tax faculty

Chartered Institute of Taxation



Announced in the 1999 Budget, IR35 aimed to remove opportunities for the avoidance of national insurance contributions by the use of personal services companies where an individual worker would otherwise be an employee of the client. Would be ‘politically awkward’ for government to back-down now, though departing e-envoy Alex Allan noted in prime minister’s annual report that IR35 was ‘a cause for concern’.

NIC on share options

Introduced by the previous government, the legislation proposed to levy employers’ national insurance contributions on unapproved share option schemes. Though initially aimed at so-called ‘fat cats’, it became apparent that the hi-tech sector was going to be particularly hard hit when the legislation was amended in April 1999. Following a brief review after the last Budget, the government announced NIC could be borne by employees rather than employers.

Multinational double tax relief

Announced in a press release at the last Budget, the government proposed the reform of double taxation relief whereby companies with subsidiaries in high tax countries would not be able to get relief by setting off dividends from high tax countries against dividends from low tax countries. Caused heated debate at the time, with companies threatening to leave the country as a consequence. Limited revisions were announced in June.


Part of a move to transfer onus of tax calculation from Inland Revenue to individual taxpayers, and more recently to companies. Widely criticised for being too complex with forms proving difficult to complete, with the Revenue criticised over inaccurate tax assessments.

Tax simplification

A wide-ranging campaign reflecting the increasing burden of tax compliance. The English ICA’s tax faculty has produced a ten-point plan against which all new and current tax legislation should be judged. Constant complaints made over the ever-increasing length of the Finance Bill.

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