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The sheer volume and intricacies of the 2008 Finance Bill, published today (26 March 2008) by the Government, adds to the UK’s tax complexity, says ACCA (the Association of Chartered Certified Accountants).

Chas Roy-Chowdhury, ACCA’s head of taxation, says: “The Treasury’s explanatory notes for the Finance Bill alone run into 1,148 pages but the actual Bill is 113 sections long and approximately 440 pages in total.

“Every year, the Bill becomes more complex and the volume of tax policy increases. The devil is truly in the detail when it comes to trawling through this Bill and the fundamental elements of a good tax system - fairness and clarity - are often too hard to track down simply because of the Bill’s bulk.”

The ACCA believes that simplification is desperately needed and that an independent Tax Policy Committee, modelled on the Bank of England’s Monetary Policy Committee, would help to remove complexity. Such a body could make for an efficient UK tax system – one which is stable, certain, simple and fair.

The Finance Bill legitimises a number of business and personal taxation issues which were highlighted in the Budget on 12 March, such as:

• capital gains tax: the withdrawal of indexation and taper relief for business, making the potential tax on the disposal of a business costly - rising from 10% to 18%. ACCA believes that these new CGT tax rules will have an adverse effect on economic activity because it will encourage short-termism.
• corporation tax: The impact of corporation tax changes will be felt unfairly by small business because the rate will rise for them – to 21 per cent in April 2008, then to 22 per cent in 2009. The rate then decreases for big business from 30 per cent to 28 per cent.
• Non-doms: the Bill explains residency and domicile rules at Section 22. While a £30,000 one-off charge on non-doms meets the needs of tax clarity, it sends the wrong signal to international entrepreneurs who want to do business in the UK. But ACCA is pleased that the Finance Bill confirms the Government’s promise not to ask for more money from non-doms.
• Individual Savings Accounts (ISAs): It is welcoming to see the cash ISA limit increased from £3,000 to £3,600 from 6 April 2008. This is a step in the right direction; but the incentive to save it is not credible as the overall ISA limit is raised by only £200.
• Fuel duty deferred until October 2008: Postponing the 2p fuel tax to October 2008 was widely welcomed, but this is merely postponing the pain.

But Chas Roy-Chowdhury says it is not all confusion: “There is confirmation buried in Schedule 19 of the Bill about the issue of Gift Aid, which could have fallen victim to the cut in the basic rate of income tax. But the Government has confirmed in the Bill that charities will be protected for the next three years, ensuring that for every £1 given to them using Gift Aid, they will receive 1.28p, rather than £1.25 if they had gone ahead.”