Civil Liberties

Last Updated Apr 22, 2008 1:06 PM EDT

Recent events show how far we have gone from a country governed by Parliament to one ruled by out-of-control civil servants.

HM Revenue & Customs is crying "tax-avoidance" to make a really big change in the UK's tax law. You can search the budget speech and the Treasury 200-page summary and not find this change. Try Release 63 and read it slowly -- it's all about tax avoidance.

For as far back as I've searched, UK tax law has allowed individuals and companies to offset losses on one trade against another trade's profits. This was to encourage people to fund up businesses as sole traders. Say someone funds a fishing boat and rents it to fishermen. In some years, there will be good catches, in others not. Or someone could fund a wind farm where, until the blades are turning, losses are inevitable.

This was the most basic form of venture capital -- people take unlimited risk and generate commerce and employment. Under the cover of "tax-avoidance" HMRC is pretty well banning all of this for individuals and because it's "tax-avoidance". It is doing so retrospectively and without consultation.

HMRC will of course continue to fully tax any profits. The Revenue cannot tell me what volume of abuse exists or what volume of relief is obtained. But it surely could have dealt with it less painfully.

So farewell to the most simple form of support for new and volatile businesses. Tidy and easy for HMRC. If we stop all forms of enterprise, there would be no tax avoidance -- much more simple for HMRC.

Second, a short piece in the "Sunday Times" tells me that new powers announced last week were to allow the Pensions Regulator to insist that pension schemes are topped up and not simply bought and sold for profit. Who could possibly object? Never mind that there was no need for new powers -- the regulator already has enormous clout.

Under cover of Robin Hood-like probity it is now seeking powers unrelated to the stated need, most notably a Draconian power where a pension liability could be assessed without evidence of unscrupulous behaviour.

The regulator is doing away with the test of good faith, which it says is an intolerable hurdle. Companies could then be arbitrarily assessed for enormous liabilities -- without even an appeal process. You could do nothing wrong and suffer an enormous penalty without process or appeal.

This is in a section of the law originally said to be a moral hazard provision. The law could now deem a business guilty without trial or appeal, with dire consequences for any company caught in the net.

This being done retrospectively, using the fiction of pension funds being ripped up in takeovers to justify the absence of proper process. Spin is a polite word for this. Deceit would be closer.

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