Like many tax practitioners, I sometimes help relatives or friends on modest incomes to sort out their tax affairs, and over the years have been increasingly troubled by the complexity of the system facing those on the very borderline of tax-paying income.
While politicians widely support the concept of clearer taxes, few seem to be able to improve matters upon reaching office. It seems unacceptable in a civilised society that the poorest taxpayers should not be able to understand the tax they are expected to pay.
The Inland Revenue’s response is to offer advice through its chain of Tax Enquiry Centres, but these may be miles away and many taxpayers, particularly older ones or those with hearing difficulties, find telephone communication difficult.
For these reasons, the Chartered Institute of Taxation established a Low Incomes Tax Reform Group, which is examining the particular problems that tax complexity creates for certain vulnerable groups of taxpayers – including older taxpayers and people moving in and out of work – with a view to encouraging reforms. We are only concerned with those who are not able to afford to employ tax advisers.
Initially, we are focusing on older taxpayers and our first researches have revealed several common themes. There is the complexity of the tax law itself. Age allowances, allowances in terms of tax, and the tapering rules, are poorly understood. Worse still, age allowances are often missed because the Revenue is unaware that the taxpayer has reached retirement age, and has not inferred the possibility from the receipt of a pension.
Withdrawing the right to claim back tax credits on dividends from April 1999 will penalise many older people on very low incomes and also make it even more difficult for them to decide how to protect their savings.
The Revenue has been helpful to us in reacting to the issues we are trying to tackle. But, without prejudging our recommendations, it will be interesting to see our new government’s reaction to the tax plight of the poorest taxpayers.
We are currently trying to compile as much evidence as possible of the problems tax complexity causes for older taxpayers and I invite readers of Accountancy Age to write to me at The Chartered Institute of Taxation, 12 Upper Belgrave Street, London SW1X 8BB with any relevant experiences you may have had.
John Andrews, tax partner at Coopers & Lybrand, is the immediate past president of the Chartered Institute of Taxation.
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