In 2006, the then Labour government introduced “pension simplification”. The idea was to sweep away a myriad of confusing and conflicting legislation which had rendered navigating one’s way through the rules somewhat of a voyage of discovery, explains Andy White. Even then, we had primary protection and enhanced protection to contend with, but those seemed to be sensible measures designed to benefit the individual so we accepted them. Then we had the proposals to restrict tax relief for higher rate taxpayers. And then anti-forestalling. Followed by fixed protection. And auto-enrolment. And flexible drawdown. And auto-enrolment So at a time when the government should be encouraging people to invest in pensions to mitigate the huge drain on the state caused by increased life expectancy, what is it doing? Overlaying complexity upon complexity making pension provision a most unattractive proposition. And worst of all, there is a significant danger of employees facing significant tax liabilities simply by becoming inadvertently enrolled in a pension scheme they have no desire to join. An isolated example? Well consider this. In the 2011 Budget, the Chancellor announced a new Inheritance Tax (IHT) relief for those leaving at least 10% of their net estate to charity. In those cases, the IHT rate would be reduced from 40% to 36%. That proposal was duly legislated in the 2012 Finance Act. What started as a simple proposal has translated itself into reams of legislation and frankly, the accountancy fees incurred in calculation the new relief are likely to exceed the value of the relief in many cases. Is that really going to encourage philanthropy? Let’s roll forward a year to the 2012 Budget and the now infamous announcement to cap income tax reliefs to the greater of £50,000 or 25% of income. Originally, of course, that proposal included reliefs for charitable giving and the government somehow allowed an impression to be created that they viewed all philanthropists as tax avoiders. But apart from the PR disaster, where was the joined-up thinking? Does the government want to encourage charitable giving or not? Look at the IHT proposals and the answer is clearly “yes”. So why limit the income tax relief? While this is an example that affects individuals, rather than companies, it is illustrative of a theme in government thinking that is counter-productive. The Chancellor often promotes himself to be the champion of the businessman, reducing corporate tax rates to among the lowest of the developed economies. Every new policy, we are told, is designed to attract businesses to the UK, to provide growth and employment. Yet what right-minded businessman would want to come to a country that ties its citizens in red tape, and whose government is so paranoid about tax avoidance that every new section of tax law seems to be accompanied by countless schedules of anti-avoidance legislation? But it’s not just paranoia about avoidance that seems to cause this malaise. Look at capital allowances. In 2008, the government introduced the “annual investment allowance”. This was the amount a company could invest in plant and machinery and obtain a full tax write-off. In the five years since it was introduced, the amount has fluctuated somewhat. From the original figure of £50,000 pa, the figure was increased to £100,000, then slashed to £25,000 and now it has been increased by a factor of 10 to £250,000! This indicates a lack of coherent thinking. After all, the economy has been in desperate need of a stimulus ever since the banking crash of 2008. So the decision to slash the rate from £100,000 to £25,000 was odd at best. But the rules that govern the calculation of the allowance where the company year-end is not co-terminus with the financial year are a veritable minefield. And if you get it wrong? Well the penalties are draconian and getting worse. Late PAYE payments? Incorrect operation of RTI? “Negligent” capital allowance claims? Failure to comply with auto-enrolment? Expect to be heavily penalised for all or any of these. So welcome to the UK, Mr Foreign Businessman. Come and open a factory here and employ our workers. Not only will we charge you a premium of almost 14% for the privilege in the form of employer national insurance, but we will wrap you in a cornucopia of red tape and penalise you to the hilt if you make the slightest mistake with our myriad of arcane rules. Is that really the message we should be giving?