Government should engage earlierwith professions on tax law reforms

Published on Sunday 24 February 2008 18:51

WHILE it is and always will be a government's prerogative to make changes to the law, I feel it is time we look again at how we amend our tax legislation.

My interest in this issue stems from my experience in dealing with a number of changes and proposed changes to the tax regime in the last few years. This includes the introduction of stamp duty land tax (SDLT) in 2003, the inheritance tax trust changes of 2006, the proposed planning-gain supplement and the recent changes to the capital gains tax (CGT) regime. The various problems with each of these changes have been well documented.

That said, we need to learn from what happened. This is also not just an issue for HM Revenue and Customs (HMRC) or HM Treasury but just as importantly for organisations such as the Law Society of Scotland.

One issue is the period between the legislation being agreed and it coming into force.

I wonder if legislation should only come into force when the underlying government administration is ready, in the same way that much of our legislation requires a regulatory impact assessment. Any delay between enactment and implementation could also be used to further publicise the changes and allow the government, the civil service, individuals and business to prepare. When SDLT was introduced in 2003 we did not even have enough forms.

The second issue is a "first things first" point. Before we even get to the stage of launching a formal consultation, the government should take some time to ascertain whether the issue it proposes to consult on is in fact a real issue. This would be akin to a pre-consultation consultation and could be done outwith the public gaze.

The third issue relates to the length of time a consultation lasts. My preference is for a fairly short period of consultation that has clear deadlines. I also see no reason why consultations should be done in a number of stages. That said, cutting short a consultation such as the SDLT'shas been a disaster. Five years on we are still dealing with particular Scottish issues that were not dealt with in 2003 primarily because the consultation was abruptly halted.

The fourth issue is whether legislation should automatically be reviewed after a certain period. In many cases, it is only after the changes are actually in force that problems come to light. Again, SDLT is a good example. This though would only work if parliamentary time was to be put aside specifically.

The fifth issue relates to the devolved settlement. The UK is now a much more complicated place for legislation. There are competing bodies and it is no secret that they do not always work in harmony. The proposed planning-gain supplement was a good example of this point. This was as much a Scottish matter – as it dealt with housing and planning – as a UK taxation matter.

My sixth and final issue is the fact the UK has more than one legal system. HMRC and HM Treasury need to ascertain whether there are any particular Scottish issues at a much earlier stage. Organisations such as the Law Society are only too willing to get involved and give advice, preferably at an early stage as possible, ideally before the consultation process begins.

Early engagement is in fact the key to almost all of the issues raised. We can do better.

&#149 James Aitken is a senior associate at HBJ Gateley Wareing and sits on the Law Society of Scotland's tax law committee.