Tax

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“All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, a fresh water system, and public health, what have the Romans ever done for us?”

The famous outburst by Reg, leader of The Peoples’ Front of Judea, in Monty Python’s The Life of Brian could equally have been a comment on Roman occupation of Britain, except that it misses one other significant Roman import – taxation. The first taxes assessed and collected in Britain were during the Roman occupation. Understandably this innovation wasn’t too popular with taxpayers and although there may have been no Reg or Peoples’ Front of Judea, the queen of East Anglia, Boadicea, led a revolt against corrupt tax collectors, which before it was crushed by Emperor Nero, resulted in 80,000 deaths, including all Roman soldiers within 100 miles and the capture of London.

Roman rule may have ended in the fifth century but the legacy of taxation is something that has remained with us ever since.

Significant dates in the development of the UK taxation system

55 BC – The first Roman campaigns against Britain, leading to Roman occupation and the introduction of taxation

60 AD – Boadicea’s revolt

4th century onwards – Saxon power grew as Rome’s influence waned. Saxon Kings levied taxes on land and property as well as substantial customs duties.

991 – The first documented instance of taxes being levied to be paid in tribute to Viking raiders to save England from being ravaged. Later referred to as Danegeld, over 100 tonnes of silver was ultimately paid as tributes.

1050 – Lady Godiva’s legendary naked ride through the streets of Coventry in response to a promise from her husband, Leofric, Earl of Mercia, to reduce the high taxes he levied on the local residents in return.

1369 – After a lull, the Hundred Years War resumed as the nobles of Aquitaine rejected oppressive tax policies of Edward, The Black Prince.

1377 – Polls show that taxes had now clearly become progressive, with the Duke of Lancaster paying 520 times the amount of tax typically paid by members of the peasantry.

1487 – John Morton, Lord Chancellor, devised the ingenious approach to tax collection subsequently known as Morton’s Fork.*

1649 – The execution of Charles I. His problems with Parliament stemmed from a disagreement in 1629 about the respective taxation rights of the King and the Parliament. In the intervening years, Parliament had imposed excise taxes on essential commodities and foodstuffs in order to pay for the army commanded by Oliver Cromwell.

1800 – An annual emergency income tax was introduced to help fund the Napoleonic Wars.

1816 – Income tax was repealed but this was to be a temporary respite. Contemporary opponents of the tax had wanted all records of it destroyed to prevent its subsequent re-introduction. Consequently, the documents pertaining to income tax were indeed publicly burned by the Chancellor of the Exchequer. However, copies were retained in the parliamentary basements. Technically income tax is still a temporary tax and even today is only ever imposed by parliament one year at a time.

Morton’s Fork

Henry VII became King of England and Lord of Ireland at the Battle of Bosworth Field on August 22, 1485 through the defeat of Richard III. He inherited a much divided country following the political upheavals of the Wars of the Roses. He is generally credited with restoring political and financial stability through highly successful wide-ranging administrative, economic and diplomatic policies. One of his first significant appointments was making John Morton first the Archbishop of Canterbury in 1486 and then the Lord Chancellor the following year. In this latter role, Morton was primarily tasked with restoring the royal purse, which had been heavily depleted during previous reigns. Morton appointed Edmund Dudley and Richard Empson as tax collectors and using the policy that became known as Morton’s Fork successfully replenished the royal estate. Morton’s basic approach was that a taxpayer who lived an extravagant life could clearly afford such expenditure and therefore had ample surplus income and could afford to pay a high tax bill. However, a taxpayer who was more frugal clearly had low outgoings and therefore must have substantial savings and could therefore afford to pay a high tax bill. Or as John Morton himself said: “If the subject is seen to live frugally, tell him because he is clearly a money saver of great ability, he can afford to give generously to the King. If, however, the subject lives a life of great extravagance, tell him he, too, can afford to give largely, the proof of his opulence being evident in his expenditure.”

Or, to put it another way, you are shafted now matter what you do!

Britain’s rich history of taxation is reflected in today’s taxation practices and legislation. For example, the Trust was introduced as a device for the protection of goods and chattels of departing Knights in the times of The Crusades but remains an essential part of tax-planning today for most UK expats and virtually all who have assets in excess of the Inheritance Tax threshold of £325,000. Company cars in the UK were taxed as a benefit using a 19th century tax code that was originally introduced in respect of horses.

More significantly for many expatriates, issues such as domicile, which have a very long precedence in UK law, are currently under the microscope in a modern world where labour and capital are able to move much more freely than in the past. As a result, the UK Taxes Acts and their interpretations for expatriates are currently changing faster than at any previous time. The implications of the high profile taxation judgements in the cases affecting expatriates such as Robert Gaines-Cooper and Lyle Dicker Grace are that sweeping changes that have already taken place in the bases of UK taxation of expatriates are most likely only the thin end of a very thick wedge.

A timely review of taxation arrangements and potential liabilities with a UK expatriate tax expert is essential. This is one of those very rare situations where there genuinely is now a limited window of opportunity to act. Of course, if you do not plan now and you find yourself facing higher UK tax liabilities than you would have envisaged as an expatriate, you could always offer to ride naked around the streets of Coventry but we doubt that is likely to reduce any tax liabilities that you may face in the 21st century.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]