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What people will do to save tax

By Ensors Team
22nd Nov 2019

With the November Budget having gone the same way as the October Brexit (the Royal Mint are now melting the commemorative 50p coins made for 31 October 2019) some levity is needed so let’s take a periodic delve into some of the stranger tax history.

In the middle ages, King Henry I allowed knights to opt out of their duties to fight wars on behalf of the Crown by paying a tax called “scutage”.  At first, this tax was at a nominal rate but when Prince John (of Robin Hood legend) came to the throne, he raised it to a rate of 300% and this was one factor that led to the creation of the Magna Carta.

Tax can cause major change or be used to penalise a specific group.  The American Revolution started effectively as a tax dispute with the UK, and the UK tax on salt led to the Salt Marches and eventually the independence of India.  During the building of the Trans-Canada Railway (1881-1885), Canada actively sought assistance from China with an estimated 15,000 Chinese working on the Fraser Canyon section alone.  Their welcome was short-lived however, as in 1886 Canada introduced a “Chinese Head Tax” to dissuade the Chinese from living there.  The tax remained in force until 1923 when Chinese immigration was made illegal.

Sometimes taxation can follow a recurring theme.  In 1660, England placed a tax on fireplaces – so people bricked them up to avoid paying the tax.  In 1696, the window tax was brought in – so people bricked those up too.  In the 1700’s, a brick tax was introduced on the number of bricks people used.  When people starting using larger bricks in order to pay less tax, the brick tax was adjusted to take into account the size of bricks as well as the number used.

Sometimes, it is one manufacturer who finds a commercial advantage using tax.  In the 1960s, the cost of purchasing a car was extremely high in the UK.  Land Rover saw an opportunity and introduced a 12-seater option on its 109” Series II Station Wagon.  Because it was then technically classed as a minibus it was exempt from both the Purchase Tax and the Special Vehicle Tax which made it substantially cheaper than both the 10 and 7-seat Land Rovers.  Correctly registered, some of these Land Rovers are still about today, are entitled to use bus lanes and can even be exempt from some congestion-type charges.

On a personal level, tax may sometimes be behind modern living.  Until 1990, the Inland Revenue still assessed a wife’s income as part of her husband’s, with the election for separate taxation still only applying to her earnings and not her investment income.  Until 1997/98, the “Past-Year-Basis” of assessment of self-employed income owed more to the historic speed of sailing ships slowing communications to plantations in the Far East than it did to any benevolent intention by the government to provide a large gap between when income was earned and when it actually fell to be taxed.

With the increasing use and speed of computers, however, a lot of historic reliefs and taxation has been consigned to the history books – some for the better (who needed tax relief to commute by horse in the 1990s) and sometimes for the worse (those of a certain age still lament the passing of income tax relief on your bank overdraft in the early 1970s).

But for an up to date look at your taxation affairs, keep reading these blogs.

For further information on any of the above points or to discuss your affairs generally, please do not hesitate to contact Robin Beadle