Saturday, 9 January 2010

Your Money and your Life.

I had a nice letter from Mr. Turpin the Taxman today.

"Dear Mr. Leg-iron,

Hand over your money or else. We need it to give to people who want to get into your house and stop you smoking in there. Soon we'll need more for people who want to stop you drinking in there and then more to stop you having any sort of fun at all within the four walls you thought you owned.

Pay up or we come round and take it anyway and give you a good kicking into the bargain.

Yours cordially,

D. Turpin
The Tax Office."

The old Dick Turpin just took your money and that was the last you saw of him. He didn't use it to pay people to come round and make your life hell afterwards. No wonder he's a folk legend and the taxman is reviled.

I haven't yet filled in my tax return. It's due by the end of the month but I will skirt the deadline just like anyone else who has to fill in a tax return for one simple reason. It's called 'tax on account'.

On account of what, you may ask? On account of they want me to pay next year's tax this year. This was dreamed up as a great wheeze to double the income into Government coffers by charging everyone tax in advance. What it actually achieved was something quite different. As usual.

It only worked for the first year. Everyone in that first year had to pay double tax. Tax on this year's income and tax on next year's too, which was assumed to be the same income as this year.

You might have heard that most small businesses fail in their first year. In that first year they have startup costs, probably a low initial income as they get known and build contacts and at the end of it they face double tax. So it's not really surprising so many throw in the towel in their first year.

In the second year, you've already paid this year's tax so you just have to make a balancing payment if you've earned more, then pay the tax on account for next year. So once you get past the first year you're okay, but the government isn't getting any extra tax boost any more. They just get that tax on account. They can never stop doing this because that would lead to a year of seriously dented income. It was a stupid thing to start up but that's British government for you.

The thing is, if the business isn't doing as well this year as last year, you can reduce your payments on account. But you have to do that by Jan 31st and the tax year doesn't end until April 5th. If you set the figure too low, you get fined. If you set it too high, you pay more tax than you owe. Nobody is going to set their tax on account payments in August. We're all going to do it right at the end of January when we can make a pretty good guess at the earnings for that year because there are only two months left. At a pinch we can just hold back invoices until after April 5th so we don't get fined for working too hard.

This year, my tax on acount payments will be lower than last year. My income was lower and expenditure was up because I now have to pay rental on lab space, which was previously charged directly to the companies I work for. I also had to buy some equipment.

The tax I'm due to pay on the current demand is mostly paid. In fact, once that lab expense goes in, I think all my current tax bill was covered by what I paid on account last year. So no more from me on that line, Taxman.

This year has been slow, so I'll be reducing the payments on account. I won't be the only one.

Therefore, in the year when the government needs every penny it can squeeze out of us, we'll all be paying less tax because the tax for the current year is already paid and the Gorgon has already spent it. All he has left is the tax that should be due next year. The tax that represents reduced income for most businesses in the country.

If they'd left the tax system alone and hadn't been greedy for a one-off tax grab on every small business, there would now be a lot more small businesses paying tax and we'd now be handing over thousands more than we will actually be paying this year.

There will be a lot of audits. I'm likely to get one because of the sudden change in expenditure but my accounts are such that an auditor could complete the job in five minutes. There is not one expense on my books that is not accompanied by a receipt. There is not even one cash transaction - the nature of my work makes that impossible. I don't claim any 'home office allowance' because it's not worth the effort of working it all out and there's no vehicle associated with the business. An auditor will find I'm under-claiming, not over.

So, less money into government coffers this January, and all because of past greed.

With any luck, this will mean less money for ASH and their associated control freaks, but somehow I doubt it. More likely it will mean a higher tax rate next year. Although Eyebrows isn't likely to be Chancellor next year.

What about it, Tories? Are you going to bust us with more tax, or are you going to stop funding freaks and perverts who are trying to gain access to private homes, especially ones with children, for their own vile pleasures?

Whose side are you on, Dave?


Pogo said...

Dave is on Dave's side.

Dick Puddlecote said...

Great post on a particular bugbear of mine. What I have always wondered is what they spent that huge double receipt boost on in the year when they changed the rules. It's all gone down the swanee yet nothing noticeably changed.

A shocking waste which can never be changed back as no government could survive an entire year with no tax receipts whatsoever.

TheFatBigot said...

As I recall the change did not require the instant payment of double tax but was phased in over 3 (or was it 5?) years with a bit being added to each year's bill.

How it applies to new businesses is beyond my knowledge.

Now I have to say something truly awful. I apologise in advance.

In all dealings I have ever had directly with the Inland Revenue (as it was) they have been entirely friendly and helpful. On all but one occasion (about which a written apology from the head honcho arrived, unprompted, once he investigated it) the same has been true of the VAT people. Time and again they have brought to my attention ways in which I could reduce my tax bills.

Perhaps things have changed since I retired five years ago, I'll find out next year when my resumption of work shows on my tax return.

Longrider said...

"How it applies to new businesses is beyond my knowledge."

You work for one full financial year. You pay what is owed on that year, plus on account for the next split into two payments in January and July. It's a bugger.

I've been caught twice by this recently - I started self employment then briefly went back into PAYE and have gone back to working for myself. This tax year I have to pay for a particularly good first year but reduced on account as the second year was lower - at the level I expect it to be from now on.

Ed P said...

If it was phased in over 3-5 years, as TFB said, then Dave could phase it out similarly.
And it might give him the excuse he needs for some, unfortunately probably essential, tax increase.

John Pickworth said...

Regardless the level of taxes... its about time someone returned us to an enterprise economy. Simpler taxes, less paperwork and reduced regulation.

That fool Brown (and his grinning predecessor Blair) have done untold damage to this country. I can't believe they'll get away with it AND be rewarded with fat ex-Gov pensions, book deals and lecture tours.

I hate them all.

Anonymous said...

Very valid point about ASH's real reasons for visiting homes with cheeeldren in - and indeed it raises the question whether the parents in those homes visited have the right to see the CRB check of anyone who knocks on their door, or at least to request written confirmation from the "authority" in question that a CRB check has been made and that the visitor in question is certified free of all criminal offences. And, of course, if they have one and can show it, it would certainly be worth telephoning the "authority" in question to ask - in all innocence, of course - why the visitor/s were so keen to visit the children's bedrooms whilst the parents stayed downstairs so as not to "interfere with their investigations." After all, a clear CRB doc doesn't prove you're not a crook or a pervert or a nutter - it just proves that you haven't been caught for being any of those things. Could be a chance to hoist a few interfering busybodies by their own petard, methinks?

Anonymous said...

Whoops! Sorry - meant to post the above under the previous article. Have re-posted it there.

paulo said...

Wasn't this introduced by the greatest Chancellor this country has ever known?

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