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Life, the universe and taxation. Reflections on my retirement

To mark her retirement Heather Self was asked to contribute to a special edition of Tax Journal.
Here she looks back at the history of taxation over the last 40 years. We reproduce the article with kind permission.

When I started as a trainee at Arthur Young McClelland Moores (now EY) Manchester in 1980, the most senior woman in the office was a newly qualified audit senior. Twelve years later, I was the only woman among eleven new partners at EY, and even now women are, I believe, still underrepresented in senior roles. Women in Tax was founded in 2015 in response to a particularly high profile all male panel at an ICAEW event (where the chairman praised its diversity, because it included white, male barristers as well as white, male accountants!) and I believe we have made a real contribution to raising the voice of women in the profession since then.

I’m therefore delighted to have been asked to contribute one of my short comment pieces to this special edition of Tax Journal, in which a number of the Women in Tax team have written articles. But there’s another reason for this article: it marks my retirement from Blick Rothenberg on 30 June 2022, although I will continue to be involved in an ad hoc advisory role for an interim period. So I hope you’ll indulge me as I take a brief look back at the history of taxation over the last 40 years.

Two chancellors stand out in my memory: Nigel Lawson and Gordon Brown. Nigel Lawson’s 1984 Budget was my first as a member of the tax department: he abolished development land tax, changed capital transfer tax to IHT, and radically reformed corporation tax, taking the rate down from 52% (yes, 52%) to 35% over a three-year period, and at the same time abolishing 100% first year allowances. This career is going to be exciting, I thought.

The corporation tax changes meant I spent many late nights running deferred tax spreadsheets on the department’s PC (yes, we only had one) in order to recalculate the figures for our major clients. Prior to the changes, most companies had significant deferred tax liabilities but did not provide for them, as the expectation was that continuing expenditure would generate further accelerated capital allowances. Suddenly, that had all changed.

The significant broadening of the base meant that CT receipts went up, despite the lowering of the rate. However, by the mid-1990s very little UK CT was being paid by the biggest groups, as they all had large surpluses of advance corporation tax (ACT). Indeed, the standard planning advice was to generate as much profit as possible in the UK, since the effective tax rate after ACT offset was only around 10%.

Along came Gordon Brown, with his radical 1997 Budget which abolished ACT and the associated imputation credit, moving the UK system significantly closer to a classical system in which profits are taxed at both corporate and individual level. Again, a major change to the system which had profound effects, particularly on pension funds.

We need a chancellor prepared to create a tax system which is fit for purpose for the 2020s and beyond. Perhaps it is time we had a woman in the job

What both Lawson and Brown had in common was a clear strategic view for the direction of the tax system. The coalition government in 2010 published a roadmap for the corporate tax system, which gave business welcome indications of the future business tax environment. Sadly, this sense that there is any coherent strategy for the tax system has been lost in recent years. Whilst Rishi Sunak has, of course, had to respond to the major challenge of covid, and more recently has announced significant support in response to the rising price of energy, most of his measures seem to consist of short-term reaction rather than long-term planning.

The tax system has become significantly more complex over my time in the profession. What is particularly frustrating is that many of the problems are well known, and while solutions will not be easy, constructive ideas have been put forward by the professional bodies and others such as the IFS (see, for example, the work by Helen Miller and Stuart Adams on Pathways to well-designed taxes).

We need a chancellor prepared to address these issues and focus on creating a tax system which is fit for purpose for the 2020s and beyond. Perhaps it is time we had a woman in the job – for the first time since 1316.

Heather Self Great Queen Street
Heather Self
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