I find it hard to remember the last time there was a credible opposition in the UK – it must have been more than 10 years ago, I think. But there was hope of better things to come last week when the Tories came out with plans to abolish inheritance tax – a death tax about as popular as a dose of the measles. Plans were revealed to scrap the tax which has already increased by 135 per cent under Labour, with £1.7 billion collected through death duties in 1997 rising to £2.3 billion last year, and a whopping £4 billion expected to be picked from the pockets of the deceased in 2007/8. Anyone else mugging a corpse would rightly be treated with disdain, and probably thrown into jail if they were not so overcrowded. Not so the UK government, it just keeps finding ways of digging ever more effectively into the pockets of those who have gone to a better place, leaving their loved ones with a mountain of paperwork and bills to contend with at a time when they are least able to do so. So it was nice to see that at long last the Tories had come up with a credible plan to put their tax cutting credentials back on the map – your main residence would be exempt from IHT, as would any assets that you had owned for more than 10 years, including a second home. The scheme was penned by former cabinet minister John Redwood, and he is likely to get a huge pat on the back from Middle England for doing so. But, and there is a big but, the Tory leadership has steadfastly refused to embrace the plans in any official capacity, with George Osborne the shadow chancellor saying it was “one of a range of options” being looked at. But that any cut would need to be offset with tax increases elsewhere, notably “green” taxes. Hmmm. Presumably they are quite happy to miss out on getting back into power any time soon then. The Tory obsession with “green” issues is laudable, but has been made laughable by leader David Cameron’s decision to leave his flooded constituents – who were in that situation thanks largely to global warming – and head to Rwanda – presumably by plane – for a 36 hour trip. Some credibility might be restored with the British people if he took the time to create some policies that might actually help them out. Here, they have been handed on a plate, yet the party is more concerned with appearance than substance that it will not allow its fingerprints to be found on its own policy report. While Mr Brown has previously not been shy to, shall we say, mirror a few popular Tory ideas with his own, it is unlikely that this will end up on his “to do” list, more’s the pity. And another ray of hope for the hard-pressed UK taxpayer was extinguished last month. UK’s tax authority, HM Revenue & Customs has a history of behaving like a spoilt child when it loses a game – it effectively tells the British people that it is taking its ball home so that no-one can play. It does not seem to matter whether you are playing by the rules that the Revenue itself has set out, even though that would mean you are legitimately reducing your tax liabilities, rather than getting involved in some underhand tax avoidance. Take the example of husbands and wives who work for themselves and try to use the tax rules as they stand to reduce their liabilities – quite legitimately. The case I am referring to is Arctic Systems, where the Revenue contended that Geoff and Diana Jones who jointly own the computing company, should be dealing with their taxes differently to the way they had their affairs set up for some time. Geoff did the fee-paying work for Arctic Systems, while Diana dealt with the administration – which is a significant job in itself, and no company would run effectively without it. The couple paid themselves modest salaries – Geoff’s was below the market rate - and the company made a profit. They did not try to shirk their liabilities under the tax rules, and paid the corporation tax due, but distributed the balance equally through dividends. Without going into too much detail, this set up was very advantageous for both National Insurance and income tax. However, the Revenue contended that Diana’s dividends should be taxed as if they were Geoff’s, because the arrangement constituted a “settlement” – where he was the settlor and she was the beneficiary. They disagreed, arguing that it did not constitute a settlement, and even if it did, the relevant legislation – Section S660A ICTA 1988 – had an escape clause (clause 6 for anyone who would like to know) that meant it did not apply to them. Accountants Vantis explained: “There was more than the mere transfer of a source of income; there was an outright gift of a share in Arctic Systems Limited, with all the rights that naturally followed.” The House of Lords agreed with the Joneses, so at last, a victory for the taxpayer over the taxman. It means that companies set up in this way with £100,000 of turnover can save £7,835 a year, according to James Hay. The case has been rumbling on since 2004, and while it may seem picky of the Revenue, the amounts at stake are significant – a quarter of a million small businesses were waiting on this outcome, as any significant increase in their taxation would have had a serious impact on their success. Francesca Lagerberg, head of the National Tax Office of accountants Grant Thornton, said: “Despite HMRC saying this case is not a test case, it does set a precedent and will provide useful guidance on how the legislation applies." However, no sooner had the House of Lords made its decision on July 25, than on July 26 the Exchequer Secretary to the Treasury Angela Eagle made a written statement to Parliament. She said: “It is the government’s view that individuals involved in these arrangements should pay tax on what is, in substance, their own income and that the legislation should clearly provide for this. The government will therefore bring forward proposals for changes to legislation to ensure this is the case. In the meantime, HMRC will apply the law as elucidated by the House of Lords and will be providing guidance in due course. “The government would not want commercial arrangements to be caught by any change to legislation. Consultation should help to ensure this.” So, there you have it – the taxman is set to take his ball home again – and it could be to the serious detriment of Britain’s businesses at a time when the economy could do with a filip more than a kick.