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Financial Matters
– a quick history lesson looking at the collection of taxes
In these articles a lot of mention is given to the different taxes rather than the administration behind their collection, so I decided to look at the institution tasked with that job. Her Majesty’s Revenue and Customs (HMRC) was formed by the merger of the Inland Revenue and Her Majesty’s Customs and Excise in April 2005. HMRC says of itself “we are the UK’s tax, payments and customs authority“….”we collect the money that pays for UK’s public services and help families and individuals with targeted financial support.” It was Gordon Brown in his 2004 budget who announced the merger. HMRC is a non-ministerial government department responsible for the administration and collection of taxes, excise duties, national insurance, the enforcement of the National Minimum Wage, the administration of antimoney laundering as well as the distribution of Child Benefit, the Child Trust Fund and payments of Tax Credits. The protection of our borders was passed to the UK Border Agency in 2008 and then to UK Border Force and the National Crime Agency in 2013. People sometimes still lazily use the name Inland Revenue which was the government department responsible for collecting taxes from 1849 to 2005. The Inland Revenue was itself formed from a merger of the Board of Excise and the Board of Stamps and Taxes, with the latter dating back to 1665 and established out of the necessity to pay for the second Anglo-Dutch war which raged between 1665 and 1667. The Board of Taxes refined a version of Land Tax and levied Window Tax for the first time in 1696. Perhaps falsely credited with the saying “daylight robbery”, window tax was a tax based on the number of windows in a house and incredibly was applied for over 155 years. The tax was sophisticated enough to have had a flat rate element per house as well as a variable element for the number of windows above ten in the house. At that time, income tax was still regarded as intrusive and had even been discarded between 1816 and 1842 after public protest; and so a tax system based on something that could be counted from the street was regarded as the solution. Over time the window number bandings changed, and there were higher rates of tax for those houses with more than 20 or more than 30 windows. Today we can still see bricked up windows in older houses which is a good example of tax avoidance in action. Other taxes which might seem amusing to us now include Male Servants tax (1777-1852), Hair Powder Tax (1795-1869) and Clocks and Watches tax (1797-1798) which was hastily repealed within a year after almost ruining the industry manufacturing them. A tax levied based upon how many clocks and watches you owned was not the smartest idea but shows a fundamental early desire for taxes to be progressive and based on the taxpayer’s ability to pay. The modern HMRC has a broad remit and one of its five objectives is to “support wider government economic aims through a resilient, agile tax administration system.” That really is a challenge in our fast paced technological and everchanging society.
Peter Bevan Bevan & Co, Chartered Accountants peter@bevan.co.uk
