It derived from the Manifesto which provided:
You’ll remember the Budget Red Book published last week which recorded an increase of 7.5% in the rate of tax paid on dividend income above £5,000:
The Red Book was very careful not to describe it as an increase in income tax rates. Osborne, too, skirted around the issue in his budget speech:
At times like this, lawyers always reach for Lord Templeman in Street v Mountford, who famously observed:
Because, as the Income Tax Act 2007 makes clear, a tax on dividend income is a tax on income:
And an increase in the rate at which you pay tax on dividend income is an increase in income tax rates.
The Finance Bill – published earlier this afternoon – attempts to weasel out of this conundrum by redefining the tax lock:
As redefined it includes some, but not all, rates of tax on income.
But as Gavin Kelly noted in the Observer of the so-called National Living Wage:
Just because I call my cat Rover, it doesn’t make it a dog.
It’s hardly an insignificant increase either, as these yield figures from the Red Book make clear:
Farewell, then, the Manifesto Pledge and Tax Lock: smashed before installation.
(NB: Edited to add Red Book yield figures).