Abolish Income Tax (and make Payroll costs non-deductable for Corporation Tax)

This idea starts from the premise that the proper purpose of tax is to raise revenues.  (I will return to other purposes at the end.)  On this basis, Income Tax should be abolished as it fails to raise revenue; is expensive to collect and administer; and is an obstacle to enterprise.

A consideration of a number of categories of employee will demonstrate how Income Tax fails to raise revenues:

  • Individuals employed in the Public Sector (close to half our economy): gross salaries are paid from tax receipts, and a portion then taken back immediately from the recipients.  Income tax collected from these individuals is merely a recycling of funds; payment on a net basis would eliminate complexity and administration with no loss to the exchequer.
     
  • Individuals employed by large, profitable private sector firms: across a workforce of varying earnings, gross PAYE revenues amount to approx. 20% of payroll.  Payroll expenses are a deductable expense of business, with larger companies deducting at 30% (set to reduce).  The employer is given more relief than the tax taken from the employee.  By switching to net pay, abolishing income tax and making payroll no longer a deductable expense, administrative costs and complexity would be reduced, and the total revenue to the exchequer would increase.
     
  • Individuals employed by small firms: in a company paying the smaller companies rate, the tax relief to the employer is approximately equal to the tax raised from employees.  These companies are, however, particularly impacted by administrative burdens, so would benefit greatly from abolition of Income Tax.
     
  • Individuals employed by failing firms: in a loss-making firm, without sufficient profits against which to deduct payroll costs, there is a net gain to the exchequer.  A change to net pay and zero income tax might provide considerable assistance to such firms' survival, however, by reducing their cash outgoings.  This could help many firms to survive, with overall benefits to the economy and consequently total tax take.

Abolishing Income Tax entirely would increase total tax take from larger firms; save administration costs in both public and private sector enterprises; and allow deep cuts at HMRC.  Additionally, by simplifying casual working, it would increase workforce participation.

Certain conditions would need to be met for such a policy to be workable, including:

  • A national 'Tax Free Day' would need to be announced, from which date employers would have a right to re-set employees' salaries to a net basis, and after which payroll expenses would cease to be deductable.
     
  • Appropriate treatment and adjustment of pensions in payment would be required, together with accruing right expressed on a salary-related basis.
     
  • The self employed would need to be required to convert to a simple corporate form, and become taxed under the same code as smaller companies.
     
  • Suitable transitional arrangements would need to be determined to compensate for impacts to the timing and stability of tax receipts (PAYE offers the benefit to the exchequer of being collected at a consistent rate, and hard to manipulate; which can not be said of Corporation Tax currently.)

(Note: applying a similar logic, one would also create a process whereby smaller companies (charged tax on profits at 20%) that only supply other businesses (claiming relief at 20% – 30%) could opt to supply services on a non-taxable (for supplier) and non-deductable (for customer) basis, saving both administrative costs, and increasing total tax take again.)

In closing, it is appropriate to mention the other current role of the tax system – to support social engineering goals of redistribution through 'progressive' tax rates.  I make no comment about the merits or otherwise of a redistributive policy, but would argue that given our system of personal taxation fails to raise revenues that are not recycled in public sector employment or exceeded by Corporation Tax reliefs on the same payrolls in the private sector, it is a hugely wasteful and destructive way to pursue those goals.  Other tax mechanisms – such as differential bands of VAT (the Marketing community can tell us which categories of product are consumed by different wealth strata), could achieve similar or greater redistribution at much lower cost.

Why is this idea important?

This idea starts from the premise that the proper purpose of tax is to raise revenues.  (I will return to other purposes at the end.)  On this basis, Income Tax should be abolished as it fails to raise revenue; is expensive to collect and administer; and is an obstacle to enterprise.

A consideration of a number of categories of employee will demonstrate how Income Tax fails to raise revenues:

  • Individuals employed in the Public Sector (close to half our economy): gross salaries are paid from tax receipts, and a portion then taken back immediately from the recipients.  Income tax collected from these individuals is merely a recycling of funds; payment on a net basis would eliminate complexity and administration with no loss to the exchequer.
     
  • Individuals employed by large, profitable private sector firms: across a workforce of varying earnings, gross PAYE revenues amount to approx. 20% of payroll.  Payroll expenses are a deductable expense of business, with larger companies deducting at 30% (set to reduce).  The employer is given more relief than the tax taken from the employee.  By switching to net pay, abolishing income tax and making payroll no longer a deductable expense, administrative costs and complexity would be reduced, and the total revenue to the exchequer would increase.
     
  • Individuals employed by small firms: in a company paying the smaller companies rate, the tax relief to the employer is approximately equal to the tax raised from employees.  These companies are, however, particularly impacted by administrative burdens, so would benefit greatly from abolition of Income Tax.
     
  • Individuals employed by failing firms: in a loss-making firm, without sufficient profits against which to deduct payroll costs, there is a net gain to the exchequer.  A change to net pay and zero income tax might provide considerable assistance to such firms' survival, however, by reducing their cash outgoings.  This could help many firms to survive, with overall benefits to the economy and consequently total tax take.

Abolishing Income Tax entirely would increase total tax take from larger firms; save administration costs in both public and private sector enterprises; and allow deep cuts at HMRC.  Additionally, by simplifying casual working, it would increase workforce participation.

Certain conditions would need to be met for such a policy to be workable, including:

  • A national 'Tax Free Day' would need to be announced, from which date employers would have a right to re-set employees' salaries to a net basis, and after which payroll expenses would cease to be deductable.
     
  • Appropriate treatment and adjustment of pensions in payment would be required, together with accruing right expressed on a salary-related basis.
     
  • The self employed would need to be required to convert to a simple corporate form, and become taxed under the same code as smaller companies.
     
  • Suitable transitional arrangements would need to be determined to compensate for impacts to the timing and stability of tax receipts (PAYE offers the benefit to the exchequer of being collected at a consistent rate, and hard to manipulate; which can not be said of Corporation Tax currently.)

(Note: applying a similar logic, one would also create a process whereby smaller companies (charged tax on profits at 20%) that only supply other businesses (claiming relief at 20% – 30%) could opt to supply services on a non-taxable (for supplier) and non-deductable (for customer) basis, saving both administrative costs, and increasing total tax take again.)

In closing, it is appropriate to mention the other current role of the tax system – to support social engineering goals of redistribution through 'progressive' tax rates.  I make no comment about the merits or otherwise of a redistributive policy, but would argue that given our system of personal taxation fails to raise revenues that are not recycled in public sector employment or exceeded by Corporation Tax reliefs on the same payrolls in the private sector, it is a hugely wasteful and destructive way to pursue those goals.  Other tax mechanisms – such as differential bands of VAT (the Marketing community can tell us which categories of product are consumed by different wealth strata), could achieve similar or greater redistribution at much lower cost.

Zero Rate VAT on all Residential building works

I've run a small construction company for the past 5 years which at times pre-recession, we had up to 25 people working for us, now we are left with just 2 directors. The business has been killed by red-tape and regulation not by the recession. As soon as we became VAT registered during our early growth stage we found it impossible to compete on all residential building contracts with contract values up to about £250,000. This demonstrates that there is a huge unregulated cash based side to the construction industry. We ticked every regulatory box and I estimate that it added about 30 to 40% to our costs compaired to a 1 man band builder that has 2 or 3 labourers working for him. During the construction boom years about 10% of customers were happy to pay a premium for our higher level of service and that was were we focussed our business, but now every consumer is so cost sensitive that no one will pay a premium because your business complies with all the regulations, so they naturally choose the cheapest quote that is from an unregistered cash builder.

Cutting VAT on all residential building works, would be one step in the right direction in helping to level the playing field for small construction business's. It would also be a vital stimilant to kickstarting the home improvement and residential construction industry. This will help create jobs and growth. It would mean that small VAT registered construction companies can still compete for work, and it would encourage more of the black market cash based building operations to become official, which would ultimately raise more revenue for the exchequer through increased Income tax receipts which would help plug the gap from some of the lost VAT revenue.

Why is this idea important?

I've run a small construction company for the past 5 years which at times pre-recession, we had up to 25 people working for us, now we are left with just 2 directors. The business has been killed by red-tape and regulation not by the recession. As soon as we became VAT registered during our early growth stage we found it impossible to compete on all residential building contracts with contract values up to about £250,000. This demonstrates that there is a huge unregulated cash based side to the construction industry. We ticked every regulatory box and I estimate that it added about 30 to 40% to our costs compaired to a 1 man band builder that has 2 or 3 labourers working for him. During the construction boom years about 10% of customers were happy to pay a premium for our higher level of service and that was were we focussed our business, but now every consumer is so cost sensitive that no one will pay a premium because your business complies with all the regulations, so they naturally choose the cheapest quote that is from an unregistered cash builder.

Cutting VAT on all residential building works, would be one step in the right direction in helping to level the playing field for small construction business's. It would also be a vital stimilant to kickstarting the home improvement and residential construction industry. This will help create jobs and growth. It would mean that small VAT registered construction companies can still compete for work, and it would encourage more of the black market cash based building operations to become official, which would ultimately raise more revenue for the exchequer through increased Income tax receipts which would help plug the gap from some of the lost VAT revenue.

avoid massive HMRC waste by moving the Budget date

When the Budget was in the autumn HMRC would only have to send out tax codes once because all the budget changes were incorporated between autumn and April.

 

Currently HMRC send out MILLIONS of  tax codes which are rendered wrong by Budget changes within weeks.

Why is this idea important?

When the Budget was in the autumn HMRC would only have to send out tax codes once because all the budget changes were incorporated between autumn and April.

 

Currently HMRC send out MILLIONS of  tax codes which are rendered wrong by Budget changes within weeks.

Reform of the self-assessment income tax forms

Simplify the self assessment forms for income tax and provide more widely available and useful support via the telephone.

Introduce mandatory training sessions on how to fill in the forms.

Why is this idea important?

Simplify the self assessment forms for income tax and provide more widely available and useful support via the telephone.

Introduce mandatory training sessions on how to fill in the forms.

Get the EU to continue to cut red tape – take the battle to Brussels

The EU are producing some good legislation like the Invoicing directive which is allowing companies that operate across the EU to cut back on the administrative burden of trying to comply with the different laws in each EU country and instead having a standard system and process that can be used across the EU.

But there are still too many regional differences in accounting ledger requirements, invoice numbering requirements, VAT requirements, etc… Every time one EU country creates their own different law, software systems have to be tailored, people have to be trained and it adds massively to the cost of doing business across Europe which in turn increases the price of goods that every consumer pays.

Lets make Britain the most business friendly country in Europe, and lead the way in getting the rest of the EU to follow. Examine every law and think about how it adds costs to business.

An independent company did a study and they asked businesses what they wanted in terms of invoicing law. Some of it is included in the directive, some of it was ignored. Let the UK lead in implementing those things that business wanted but the EU ignored.

The study can be found here – see the final report

http://ec.europa.eu/taxation_customs/taxation/vat/traders/invoicing_rules/index_en.htm

Why is this idea important?

The EU are producing some good legislation like the Invoicing directive which is allowing companies that operate across the EU to cut back on the administrative burden of trying to comply with the different laws in each EU country and instead having a standard system and process that can be used across the EU.

But there are still too many regional differences in accounting ledger requirements, invoice numbering requirements, VAT requirements, etc… Every time one EU country creates their own different law, software systems have to be tailored, people have to be trained and it adds massively to the cost of doing business across Europe which in turn increases the price of goods that every consumer pays.

Lets make Britain the most business friendly country in Europe, and lead the way in getting the rest of the EU to follow. Examine every law and think about how it adds costs to business.

An independent company did a study and they asked businesses what they wanted in terms of invoicing law. Some of it is included in the directive, some of it was ignored. Let the UK lead in implementing those things that business wanted but the EU ignored.

The study can be found here – see the final report

http://ec.europa.eu/taxation_customs/taxation/vat/traders/invoicing_rules/index_en.htm

ONS Burden on VAT Reg’d SME’s

We are a group of small businesses employing 25 staff and VAT registered.

 

We are routinely threatened by the ONS under a post World War Two act that we must duplicate data given by way of VAT Return.

 

This should be terminated and replaced by completion of the "Linking" programme which, subject to safeguards, should allow access to HMRC data.

Why is this idea important?

We are a group of small businesses employing 25 staff and VAT registered.

 

We are routinely threatened by the ONS under a post World War Two act that we must duplicate data given by way of VAT Return.

 

This should be terminated and replaced by completion of the "Linking" programme which, subject to safeguards, should allow access to HMRC data.

Scrap Double Taxation On Start Up Capital for SME’s

Has anyone noticed that an entrepreneur is taxed twice on start up capital?

First at the point of where the income was derived, ie bonus from previous job –  taxed through PAYE,  savings, inheritance, shares and capital gains.

The capital invested into a start up business has somehow been previously taxed. 

Now, if the business owner draws a small wage through the business, this drawing is now subject to PAYE.  

The business owner has been taxed twice on the capital invested in the start up business.

Why is this idea important?

Has anyone noticed that an entrepreneur is taxed twice on start up capital?

First at the point of where the income was derived, ie bonus from previous job –  taxed through PAYE,  savings, inheritance, shares and capital gains.

The capital invested into a start up business has somehow been previously taxed. 

Now, if the business owner draws a small wage through the business, this drawing is now subject to PAYE.  

The business owner has been taxed twice on the capital invested in the start up business.

Construction Industry Training Board Levy

I have to pay a levy of 0.65% of my wage roll which apparently goes to training operatives within the construction industry.  I feel it is unfair that I should be legally obliged to pay this levy to provide a pot of money for people to dip in to.  I have trained all my operatives in the work they carry out and have an impeccable health and safety record.  Why should I not have the option to opt out.  If I hadnt paid in to this fund then naturally I wouldnt expect to take from it.  It pains me there are mickey mouse customers who have friends of friends of friends  that apply for NVQ funding and the like and effectively go through a paper exercise to receive these funds.  I can honestly say hand on heart that I have experienced a number of my employees being awarded these "qualifications" with little more than a tick box exercise being carried out.

Why is this idea important?

I have to pay a levy of 0.65% of my wage roll which apparently goes to training operatives within the construction industry.  I feel it is unfair that I should be legally obliged to pay this levy to provide a pot of money for people to dip in to.  I have trained all my operatives in the work they carry out and have an impeccable health and safety record.  Why should I not have the option to opt out.  If I hadnt paid in to this fund then naturally I wouldnt expect to take from it.  It pains me there are mickey mouse customers who have friends of friends of friends  that apply for NVQ funding and the like and effectively go through a paper exercise to receive these funds.  I can honestly say hand on heart that I have experienced a number of my employees being awarded these "qualifications" with little more than a tick box exercise being carried out.

Synchronise Accounts Submission HMRC & Companies House

Companies must currently submit the same end of year accounts to both Companies House and the Inland Revenue.  Each has different deadlines.  This is a waste of time.  As they must be submitted electronically from next year, the deadlines should be made the same and the filing achieved with a single submission.

Why is this idea important?

Companies must currently submit the same end of year accounts to both Companies House and the Inland Revenue.  Each has different deadlines.  This is a waste of time.  As they must be submitted electronically from next year, the deadlines should be made the same and the filing achieved with a single submission.

Tax relief on business expenses

The tax law on deductible expenses under Schedule D Case I should be based on the general principle that tax should follow the accounts, whether this is replacing capital allowances with the accounts depreciation charge or giving tax relief to all business expenses.

Why is this idea important?

The tax law on deductible expenses under Schedule D Case I should be based on the general principle that tax should follow the accounts, whether this is replacing capital allowances with the accounts depreciation charge or giving tax relief to all business expenses.

No corporation tax return for very small companies

For VAT registered very small companies (turnover £50k) who file their VAT online (a) provide them with the option to have PCTCT (profits calculated and used for determining corporation tax) based on the previous 4 quarters VAT returns, and (b) thereby eliminate the requirement to support and file a separate corporation tax return calculation and full statutory accounts.

In addition, for very small companies electing to continue to file the existing summary corporation tax return, an ultra simplified self assessment form and half  page guidance note should be introduced. 

Allow very small companies to use their accounting period as the tax period if it ends within 3 month of the tax period (currently, if the accounting period does not coincide with the tax period then two separate tax calculations need to be prepared each year using two different accounting periods and sets of accounts — just by reading this you can start to see just how unnecessarily overcomplicated and bureacratic filing is for very small companies).

Why is this idea important?

For VAT registered very small companies (turnover £50k) who file their VAT online (a) provide them with the option to have PCTCT (profits calculated and used for determining corporation tax) based on the previous 4 quarters VAT returns, and (b) thereby eliminate the requirement to support and file a separate corporation tax return calculation and full statutory accounts.

In addition, for very small companies electing to continue to file the existing summary corporation tax return, an ultra simplified self assessment form and half  page guidance note should be introduced. 

Allow very small companies to use their accounting period as the tax period if it ends within 3 month of the tax period (currently, if the accounting period does not coincide with the tax period then two separate tax calculations need to be prepared each year using two different accounting periods and sets of accounts — just by reading this you can start to see just how unnecessarily overcomplicated and bureacratic filing is for very small companies).

Create a self assesment tax help forum

Create a website with open an forum where people can post tax questions. Tax advisors would be offical moderators and any questions answered would be visible to all. Using the forum method will allow popular and more current questions on tax to appear first.

Why is this idea important?

Create a website with open an forum where people can post tax questions. Tax advisors would be offical moderators and any questions answered would be visible to all. Using the forum method will allow popular and more current questions on tax to appear first.

Mandatory Tax Rebate & Tax Credits

If you go back to work/change jobs then you should not have to tell the government departments. With use of IT nowadays when an employer gets a p45/p60 it should register on a database where Tax rebates and Tax credits will be paid from. When the person leaves the company just remove the NINO from the database. All the HR department should have do is register the NINO to the system and the HMRC pays out what the person is entitled to. All the employee would have to do would be register their child.

Why is this idea important?

If you go back to work/change jobs then you should not have to tell the government departments. With use of IT nowadays when an employer gets a p45/p60 it should register on a database where Tax rebates and Tax credits will be paid from. When the person leaves the company just remove the NINO from the database. All the HR department should have do is register the NINO to the system and the HMRC pays out what the person is entitled to. All the employee would have to do would be register their child.

Full statutory Annual Accounts should not be required for very small businesses

Remove the requirement for very small companies (turnover <£50k, taxable profit less than £50k) to prepare full annual accounts.

Why is this idea important?

Remove the requirement for very small companies (turnover <£50k, taxable profit less than £50k) to prepare full annual accounts.

Exempting charities from VAT

The main bureaucracy/admin burden on charities are the complex rules around VAT.  As well as having a direct cost in terms of the VAT that cannot be recovered (which will get bigger with the increase to 20%), there is a huge admin burden in working out how different transactions should be recorded, how much VAT can be reclaimed, getting specialist advice on appropriate treatments etc.  A simple blanket rule that charities are exempt from VAT would be a huge relief.

Why is this idea important?

The main bureaucracy/admin burden on charities are the complex rules around VAT.  As well as having a direct cost in terms of the VAT that cannot be recovered (which will get bigger with the increase to 20%), there is a huge admin burden in working out how different transactions should be recorded, how much VAT can be reclaimed, getting specialist advice on appropriate treatments etc.  A simple blanket rule that charities are exempt from VAT would be a huge relief.

Class 2 National Insurance should be collected through tax return

Class 4 National Insurance contributions for self employed are collected through the tax return. Class 2 are collected separately using an entirely separate system that has to track much of the same information. This is an incredible waste of resources. Class 2 collection should just be added as another box on the tax return or possible just abolished.

Why is this idea important?

Class 4 National Insurance contributions for self employed are collected through the tax return. Class 2 are collected separately using an entirely separate system that has to track much of the same information. This is an incredible waste of resources. Class 2 collection should just be added as another box on the tax return or possible just abolished.

Merge National Statistics collection with VAT return

Merge the collection of data for Government use into one type of return:  Suggestion use the VAT return.  E.g. Only one form for companies to fill out every month/quarter for government tax and data requirements.  This should also apply to other data requests from other government departments which should be added to the same return when applicable.

Why is this idea important?

Merge the collection of data for Government use into one type of return:  Suggestion use the VAT return.  E.g. Only one form for companies to fill out every month/quarter for government tax and data requirements.  This should also apply to other data requests from other government departments which should be added to the same return when applicable.

VAT lowered for Private College owners

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

Why is this idea important?

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

Drop VAT from refurbishment work

At present refurbishment of buildings is liable to VAT while new construction isn't. Dropping VAT on refurbishment would help developers keep precious old buildings and would help incentivise energy efficiency retrofits.

Why is this idea important?

At present refurbishment of buildings is liable to VAT while new construction isn't. Dropping VAT on refurbishment would help developers keep precious old buildings and would help incentivise energy efficiency retrofits.

VAT lowered for Private College owners

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

Why is this idea important?

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

VAT be lowered for Private Colleges

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

Why is this idea important?

Can the VAT not be lowered for Private College owners/Private University owners??  It feels like if you dare to do well- you get penalised as all the ‘‘profit’’ goes in VAT.  We’re a small outfit of eight permanent staff members- with part time lecturers and approx 400 international students. With the VAT rising next year – if we dare to do well, we’ll be making just enough money to stay in business!!

Abolish the Enhanced Capital Allowances (ECA) Scheme

The Enhanced Capital Allowances (ECA) scheme (see www.eca.gov.uk) is intended to encourage businesses to invest in plant which saves energy, reduces carbon emissions or conserves water. While the intention is laudable it doesn't work in practice because of the way it has been implemented. In order to qualify for the allowance the plant you buy or the contractor you employ has to be on the approved government list.

Our company has made a significant investment in a water recycling system whereby water is collected from the roof of our warehouse, stored in tanks and used in priority to water from the mains. The work was carried out by a local plumbing contractor and the tanks are adapted agricultural storage tanks; neither, of course, are on the list and the expenditure therefore doesn't qualify for the allowance. And yet we are conserving water in precisely the way this scheme is intended to encourage.

Even when we have been able to claim ECAs they have been for only one component of a larger piece of plant and at a fixed rate which is not necessarity related to the cost of the item. Identifying the component which qualifies requires specialist engineering knowledge and a long trawl through the published lists.

I strongly believe that the scheme should be abolished or at least, in these days of self-assessment, the taxpayer should be allowed to decide whether the capital expenditure qualifies based on criteria and not on a list. Since I'm not generally in favour of the government trying to alter people's behaviour using taxation (except for smoking!) my preference would be for abolition. After all, aren't the savings generated by reducing electricity or water consumption enough of an incentive? And is there any real evidence that ECAs have tipped the balance by encouraging businesses to invest in this type of plant when they might not have otherwise done so?

Why is this idea important?

The Enhanced Capital Allowances (ECA) scheme (see www.eca.gov.uk) is intended to encourage businesses to invest in plant which saves energy, reduces carbon emissions or conserves water. While the intention is laudable it doesn't work in practice because of the way it has been implemented. In order to qualify for the allowance the plant you buy or the contractor you employ has to be on the approved government list.

Our company has made a significant investment in a water recycling system whereby water is collected from the roof of our warehouse, stored in tanks and used in priority to water from the mains. The work was carried out by a local plumbing contractor and the tanks are adapted agricultural storage tanks; neither, of course, are on the list and the expenditure therefore doesn't qualify for the allowance. And yet we are conserving water in precisely the way this scheme is intended to encourage.

Even when we have been able to claim ECAs they have been for only one component of a larger piece of plant and at a fixed rate which is not necessarity related to the cost of the item. Identifying the component which qualifies requires specialist engineering knowledge and a long trawl through the published lists.

I strongly believe that the scheme should be abolished or at least, in these days of self-assessment, the taxpayer should be allowed to decide whether the capital expenditure qualifies based on criteria and not on a list. Since I'm not generally in favour of the government trying to alter people's behaviour using taxation (except for smoking!) my preference would be for abolition. After all, aren't the savings generated by reducing electricity or water consumption enough of an incentive? And is there any real evidence that ECAs have tipped the balance by encouraging businesses to invest in this type of plant when they might not have otherwise done so?