Sunday, May 20, 2007

A Little Tax Credit

I opened the "Tax Credits Annual Review" package from those nice people at HMRC this morning and promptly ruined my weekend.

I think all of us know how botched the entire system has been since inception, with many people in Thanet having experienced real personal hardship through Inland Revenue mistakes. Now, this latest form appears to be nothing less than a second tax return, which also wishes to know the ethnicity of the applicant.

The fundamental problem for most self-employed people in completing the return is that it requires most of the detail that would be contained in the annual tax return by the end of July rather than January of next year, with particular emphasis on "other forms" of income; i.e. were you ever paid in cash or did you receive the benefit of a chocolate bar from a previous employer?

I'm not joking about the chocolate bar. Two years ago, I had my first tax inspection - we will all have one every five years or so now - The inspector, who took the trouble to travel all the way from Edinburgh for a very simple job, spent a morning at my accountant rustling through all my receipts and pulled-out one with a trumphant expression. It was a petrol receipt which included a 36 pence 'Topic' bar.

"Was this chocolate bar included on your client's P11d" asked the Inspector.
"No" replied my accountant, "Very often my client has no time to take lunch and the chocolate bar should be classified as subsistence."

The two spent some time arguing over this vital detail before the Inspector conceded that perhaps I was not involved in an organised chocolate evasion fraud but it does illustrate how invasive, convoluted and indeed, downright stupid, the system has become under the man who is about to become our next Prime Minister.

When I was canvassing before the council elections, I met families who were being squeezed by rising interest rates and were worried by the same tax credit system that was supposed to be helping them. The guidance notes for the pack are 34 pages long and I wonder how many people will be able to read and understand the detail that is required and the implications of making a simple mistake?

Tens of thousands of people made simple errors last time around and their lives were made a misery and you can guarantee that if you don't make a mistake of your own, the in that lottery controlled by the Inland Revenue, there's an excellent chance of a mistake being made for you with little or no chance of justice at the end of it. One of Gordon's greatest gifts to the nation you might think or perhaps you have another opinion of the system we now enjoy?


Michael Child said...

My family have been self-employed for a very long time various members have come up against the increasing impossible legislation and Parkinson’s law here are a few examples.

Books are zero rated for VAT meaning that each quarter it’s usually a small amount of money either paid by the VAT man to the bookseller or the other way round. This doesn’t however mean that you don’t get VAT inspections after three days of a highly paid government employee checking through the books he emerged triumphant with an eighteen-month-old petrol receipt to enquire why it hadn’t got a VAT number on it.

One member of my family was fined several thousands of pounds for failing to fill in a form that he didn’t know existed, he had of course paid all the necessary amounts.

My shop has always been no smoking, anyone bringing combustibles near the books incurs my wrath, I have just had letter telling me that if I don’t put up a statutory new sign for the illiterate I will be subject to a hefty fine.

You can throw away old paperwork after seven years however in 1998 there was some legislation relating to compulsory employer liability insurance saying that you have to keep the certificates for forty years, just in case you didn’t read the white paper don’t throw them away.

I would add however all of the government officers I have ever had dealings with have been charming and courteous.

Doing ones best keeping honest books and wading through the reams of paper sent to one is not enough for the self-employed no matter how small ones business one has to employ expensive experts just to remain on the right side of the law.

DrMoores said...

I called the Inland Revenue helpline about the tax credit form this morning and they told me that "Any" income, including savings, has to be declared.

I then replied.. "So arey ou telling me that if we both earn £10 a month and at the end of the year, we both have £20 left over. You spend your £20 on booze and fags and I put my £20 in the Building Society to earn interest. Because at the end of the following 12 months, I have £1 more in interest than you, I will receive a smaller tax credit allowance?

Anne, the nice tax credit advisor wouldn't answer this question other than to say, "We need to know "all" income to be able to work out your tax credit entitlement"

Anonymous said...

She most probably didn't answer because the question was anal.

Anonymous said...

8.51 is being obnoxious and missing the point entirely. Our social benefit system does not take into account how you spend or not spend income. If you spend without saving or making provision for old age, you get Minimum Income guarrantee as a pensioner. If you save and invest in British industry and create jobs with your investment rather than spend it on the 'good life' you are a rich pensioner and have to do the best you can. There is a whole generation of pensioners who are now retiring who have been in full and rewarding occupation from the the early sixties; the financial state they are in is down to them. Spend spend spend and the State will bail me out in old age is a burden on the next generation, but that is the way to have your cake and eat it in Britain today!