Complification

In recent times HMRC have promised a simplification of the tax laws in this country which should have led to many planning opportunities. Remember the so-called "tax simplification" of pensions in 2006. Not. The subsequent changes led to the coining of the expression "complification". And then there are the swings back and forth as chancellors rethink their predecessors' ideas. Boy oh boy.

Some of the key highlights in the small print from this week's Budget include some more complifications:

- The increase to £50,000 in the annual charge for UK non-domiciled individuals from April 2012 for those who have been UK resident for 12 or more years and who wish to benefit from the remittance basis. The definition of residence will be put on a statutorily defined basis. Then the likes of Green and Stelios should be left in peace for a bit.

- The reduction in the main rate of corporation tax to 26% from April 2011 and by 1% a year thereafter to 23% in 2014. That should help offset the impact of the proposed cuts in capital allowances.

- The increase in the personal allowance to £8,105 in 2012/13, with a corresponding reduction in the basic rate band to £34,370. That should add a big slew of higher rate taxpayers to those already paying 40% and 50% tax.

- The increase in the lifetime limit for CGT entrepreneurs' relief from £5 million to £10 million - which sounds good but won't actually affect too many people. Except maybe Green and Stelios.

- The possible integration of income tax and NICs. But how on earth will they do that without huge "complification?"

The Smart Frog makes no apologies for sounding cynical. Let's see if time proves him wrong.

How complicated can it be?

It annoys me when the taxman introduces new rules, designed to offer tax breaks, but doesn't publicise them enough for the man on the street to know about them. More annoying is when the new rules are so complicated that even accountants find them difficult to understand, let alone Joe Bloggs. A typical recent example is the wholesale changes made to the Capital Allowances system for businesses.

Huge numbers of businesses are losing out on tax breaks when they buy and sell land and property, and when they spend money doing up property they already own. Many, or perhaps even most, owners of commercial premises are missing opportunities to save tax, and the amounts at stake can be staggering.

The reason these tax breaks are being missed is that many accountants (even some of the big firms) misunderstand the rules. A survey of around 6,000 accountants, carried out at the start of 2006, showed that many are struggling to understand the rules and are failing to make adequate claims. But is that their fault? In recent years the tax system has become so complicated that you really need to be a specialist in order to keep track. Accountants in general practice have enough on their plate keeping upto date with the myriad of changing rules in auditing (don't yawn), let alone other areas such as tax and VAT.

Capital allowance claims can produce tax savings running into tens of thousands of pounds. A rule of thumb is that the tax savings can typically be up to ten per cent of the cost of the premises. Buy a site for £500,000, for example, and you could be saving £30,000 or £40,000 or £50,000, or even more. But relief is only given if a proper claim is made and the rules for claiming can be so complicated that people are put off at the first hurdle!

Changes introduced from April 2008 have increased the percentage of expenditure qualifying for tax relief. It may sound too good to be true, but in reality this is a completely legitimate tax break and claims are being made every day using the old, defunct rules. Businesses (or, more importantly, their accountants), need to bring themselves upto speed with the new rules before the strict time-limits in which to amend their claims have passed, because the opportunity of increased allowances will then be lost forever. Call me an old synic, but perhaps that's why the taxman doesn't publicise the rules as much as he should. It wouldn't surprise me.