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The powers that be, in the form of Margaret Hodge chairman of the Public Accounts Committee, has been exercised recently by a piece of marketing literature produced by KPMG on something called Patents Relief. Hearing this lady's comments I have been equally exercised by her attitude towards this document and I think we should put the accountants’ side of the story.
I view our job as ensuring that our clients comply with the tax rules that apply to them. We try and make sure that their tax is calculated correctly and they pay it at the correct time. We also try to make sure that they don't pay too much tax, or pay tax when they have no need to. If they have missed paying some tax for whatever reason we will tell them why, how much, and help them put it right.
In order to do my job I need to guide clients through a morass of dry and difficult to read legislation. When some of this legislation changes we let our clients know this has happened. It might have changed to benefit them, it might now be to their detriment. Either way they need to know. Not every change hits the newspaper headlines. Not every client is aware of everything that could affect them. Sometimes they are just too busy running their businesses - or their lives - to keep up with what is happening in the thrilling world of tax.
In these circumstances, we might write letters, draft articles or design some marketing literature. This could, for example, include explaining the benefits of a new set of rules to a particular group of clients. For example, it might be useful to clients with patents to know if a new relief introduced by the Government will help them. The purpose of all this is not to tell them how to abuse the rules, but to tell them how to use the rules.
According to the Treasury "The Patent Box will encourage companies to locate the high-value jobs and activity associated with the development, manufacture and exploitation of patents in the UK."
This seems a reasonable goal. But if clients are not aware of the rules, how are any of the intended benefits of this relief to arise? An accountant bringing the rules to the attention of their clients is promoting knowledge and awareness of what is, at the end of the day, a government policy.
Mrs Hodge has a further concern that the leaflet refers to one of the KPMG team being involved in writing the legislation that they are now looking to enact.
To deal with this, let's consider why the Treasury ask for the opinion of tax professionals. Secondees are not foisted upon them. All tax professionals are asked for input on the design of legislation on a regular basis. Consultations are sent out to our professional bodies every month for comments and critique. HMRC understand that we are closer to our clients than they could ever be. We understand how our clients’ businesses work. Importantly we understand what is practical and what is workable and what is not. With all due respect to the Treasury and HMRC staff, they cannot and do not have the same experience we have. If legislation is not practical and useable it will not be effective. If it is open to wide interpretation it will be not be applied fairly or consistently.
The people involved in giving this feedback, whether contributing to a written consultation or perhaps very directly on secondment within HMRC, can't help but have a better grasp of the legislation and the details behind it. But why should they be penalised for this knowledge? The automatic assumption that understanding legislation is all about abuse is frankly tiresome. To be able to use legislation at all you need first to understand it.
I can't deny that there aren't people who abuse legislation. That’s as frustrating to me too. There are uncommercial 'schemes' and 'plans' that, eventually HMRC can bring down through court cases, law amendments and so forth. But a marketing leaflet is not an abuse. Working with the Treasury to bring an external point of view is not an abuse.
What we need is good legislation. Good legislation that is simple and clear and as straightforward as possible. When a company designs a product does it not ask the opinion of the end user on what it’s done? Does it not review whether or not the product, as designed, works for them? Tax law is no different. We are ultimately the users of this law. If tax professionals can't make sense of it, if we don’t tell our clients how to apply it, then we all suffer.
Helen Thornley, Tax Consultant
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