If you could make one change to a tax law or practice, what would it be?
Simplicity and transparency are severely lacking in tax law. The challenges that countries face in taxing globally mobile businesses and people are not easy to solve and require multilateral solutions; however, there are easier fixes we could make in the UK. Combining income tax and national insurance is an obvious place to start and has been talked about for too long. SDLT and property taxes in general would be a close second. Changes to SDLT such as the second home premium and the removal of mortgage interest relief for buy to let landlords have had the intended effect of cooling the housing market, but is it reasonable that an average four bedroom family home in London can attract a stamp duty bill of £40,000 or more?
Are there any new rules that are causing a particular problem?
The evolution of taxation of off-payroll working is an ongoing challenge for taxpayers, advisers and HMRC. IR35, CIS and the aborted reform to NICs for self-employed individuals are all attempts to do the same thing – ensure off-payroll workers pay the right amount of tax – but the result is a messy pile of legislation, frequently changing, often confusing and sometimes contradictory.
To what extent is Brexit uncertainty affecting innovation in the UK?
I’ve not yet seen a reduction in innovation spending by my clients, but the lack of certainty is causing concern and I foresee potential reduced spending in the near term as businesses focus on dealing with whatever Brexit deal we end up with. Plus, any businesses that need to move functions to the EU may well need to move associated innovation spending too.
The latest statistics from Eurostat show that Britain lags behind European and global peers when it comes to R&D spending as a percentage of GDP (UK at 1.67% versus Germany at 3.02% and the US at 2.76%). However, the Global Innovation Index report for 2018 ranks the UK as the world’s fourth most innovative nation. Clearly the UK has been a great innovator and has fantastic potential as an innovator going forward. Whatever the outcome of Brexit, the government should focus on policies to foster increased innovation spending in the UK.
By being at the forefront of global innovation, Britain will continue to be a desirable place to invest. Furthermore, innovation is essential to increasing the productivity of the economy and raising living standards for all.
What could the government do to improve the R&D incentive schemes?
As noted above, I think the government should be looking to improve R&D spending as a percentage of GDP and some simple changes to the R&D incentive schemes would help.
Firstly, removing the capital versus revenue distinction for R&D costs, particularly for people related costs, would vastly simplify claims for many companies. This can be a complex, time consuming area of R&D claims to get right and companies incurring capital expenditure on R&D are limited to the timing benefit of R&D allowances (RDAs). Capital R&D still contributes a great deal to the economy and should be encouraged to the same extent as revenue R&D. Another option would be to introduce a payable credit for RDAs similar to enhanced capital allowances (ECAs).
Alternatives ideas could include removing restrictions on third party R&D spend, and bringing other costs into the scope of claims, such as the rent of R&D facilities and equipment.
And finally, what do you know now that you wish you’d known at the start of your career?
Be more inquisitive and ask more questions: don’t accept the status quo. Experience is key in tax, but we should always seek to re-examine old ideas
If you could make one change to a tax law or practice, what would it be?
Simplicity and transparency are severely lacking in tax law. The challenges that countries face in taxing globally mobile businesses and people are not easy to solve and require multilateral solutions; however, there are easier fixes we could make in the UK. Combining income tax and national insurance is an obvious place to start and has been talked about for too long. SDLT and property taxes in general would be a close second. Changes to SDLT such as the second home premium and the removal of mortgage interest relief for buy to let landlords have had the intended effect of cooling the housing market, but is it reasonable that an average four bedroom family home in London can attract a stamp duty bill of £40,000 or more?
Are there any new rules that are causing a particular problem?
The evolution of taxation of off-payroll working is an ongoing challenge for taxpayers, advisers and HMRC. IR35, CIS and the aborted reform to NICs for self-employed individuals are all attempts to do the same thing – ensure off-payroll workers pay the right amount of tax – but the result is a messy pile of legislation, frequently changing, often confusing and sometimes contradictory.
To what extent is Brexit uncertainty affecting innovation in the UK?
I’ve not yet seen a reduction in innovation spending by my clients, but the lack of certainty is causing concern and I foresee potential reduced spending in the near term as businesses focus on dealing with whatever Brexit deal we end up with. Plus, any businesses that need to move functions to the EU may well need to move associated innovation spending too.
The latest statistics from Eurostat show that Britain lags behind European and global peers when it comes to R&D spending as a percentage of GDP (UK at 1.67% versus Germany at 3.02% and the US at 2.76%). However, the Global Innovation Index report for 2018 ranks the UK as the world’s fourth most innovative nation. Clearly the UK has been a great innovator and has fantastic potential as an innovator going forward. Whatever the outcome of Brexit, the government should focus on policies to foster increased innovation spending in the UK.
By being at the forefront of global innovation, Britain will continue to be a desirable place to invest. Furthermore, innovation is essential to increasing the productivity of the economy and raising living standards for all.
What could the government do to improve the R&D incentive schemes?
As noted above, I think the government should be looking to improve R&D spending as a percentage of GDP and some simple changes to the R&D incentive schemes would help.
Firstly, removing the capital versus revenue distinction for R&D costs, particularly for people related costs, would vastly simplify claims for many companies. This can be a complex, time consuming area of R&D claims to get right and companies incurring capital expenditure on R&D are limited to the timing benefit of R&D allowances (RDAs). Capital R&D still contributes a great deal to the economy and should be encouraged to the same extent as revenue R&D. Another option would be to introduce a payable credit for RDAs similar to enhanced capital allowances (ECAs).
Alternatives ideas could include removing restrictions on third party R&D spend, and bringing other costs into the scope of claims, such as the rent of R&D facilities and equipment.
And finally, what do you know now that you wish you’d known at the start of your career?
Be more inquisitive and ask more questions: don’t accept the status quo. Experience is key in tax, but we should always seek to re-examine old ideas
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