April 2007 Archives

The taxman is going on strike tomorrow.

But not to worry, there will be some level of service, just not the quick, prompt and efficient service we are all used to.

An Early Day Motion (EDM) by a Labour MP (who else?*) proposing a tax on chewing gum:

That this House notes the disgusting mess that discarded chewing gum makes of streets in the UK; further notes the financial burden this blight has on local authorities; and calls on the Government to introduce a levy on every pack of chewing gum sold with the revenue being given to local authorities in order to cover the cost of cleaning up this unsightly mess.

The Fisherman may be being naive, but doubts that this proposal will be taken up. One wishes to believe that Gordon Brown is not totally lacking in shame. Greed is one thing, but one doubts whether even he would be brazen enough to impose this tax.

Not really in the mood to argue against this idea, but a few things. Will the money from the levy be hypothecated for the purpose of cleaning the streets? Doubtful. Second, dirty streets are dirty streets, whether being caused by gum chewing youths, smokers dropping cigarette butts everywhere, or whatever. Granted, it takes special effort to remove gum from the streets, but that is what we are currently paying our local authorities for, not so? The exorbitant above-inflation council taxes they charge should be more than enough to ensure that the streets are sparkling clean.

The Fisherman abhors the chewing of gum in public, but for reasons of taste and decency. A separate issue altogether.

Anyway, we will see. If this proposed levy makes it into law, you will read about it here.

* I suppose the LibDems could be just as likely to propose this, but they have been rather quiet of late.

Hat tip: Dizzy Thinks.

Photocredit. © Photographer: Gojko Vladic | Agency: Dreamstime.com

The taxman is sorry. He has been sending out incorrect late penalty notices in cases where online returns were actually filed early.

The Fisherman knows of a tax adviser who received such incorrect notices for almost half of the clients in his tax practice. That gives an indication of the scale of the problem.

Apparently it was a computer error. But tell that to the tax accountants whose aggrieved clients, on receiving the penalty notices,  wrongly concluded that perhaps their tax accountants (to whom they pay good money for this most basic of functions) had not filed their returns on time. Unsurprisingly, many are exasperated.

And that is not the end of it. Taxpayers who have been sent an incorrect penalty notice must go to the trouble of appealing against it before the taxman will discharge the penalty. But good news (of a sort). The taxman has extended the appeal deadline until 30 April 2007. How nice of him to do that.

Mistakes by the taxman are becoming commonplace, and both taxpayers and their advisers are having to deal with the consequences. However, one wonders whether the taxman would be quite as forbearing if the boot was on the other foot.

The Government is being accused of sharp practices. Well, nothing new there. This time however, it has a good explanation.

It is all to do with the petition on the 10 Downing Street website about the student loans scheme.

Some background. Ex-students who have taken out education loans from the Student Loans Company (SLC), get their repayments deducted from their salaries by their employers and sent on to the taxman. The problem is that, as the SLC only updates borrowers accounts annually, some people were concerned that they were being charged interest on payments that they had already made on a month-to-month basis. If true, this woud mean that that the SLC was charging interest on payments already made, and channelling the money into their coffers.

Not so, says the Government in a statement on the petitions website:

But while borrowers' accounts are only updated annually, the SLC is careful to ensure no borrower pays any additional interest as a result of this delay. The total annual repayment received from each borrower is credited to their account as twelve equal monthly payments in the year they were made, and the interest on the remaining balance is calculated on a daily basis each month to match. We can assure you that the Government does not gain any extra income nor does any borrower pay too much interest.

That should clear up any confusion. However, the Government could not resist adding:

It is also worth adding that the interest paid on student loans reflects inflation, and is not a commercial rate of interest like those charged for bank loans.

In other words, shut up and thank us for our largesse, you moaning ingrates.

Photo credit. © Photographer: Vallentin Vassileff | Agency: Dreamstime.com

The taxman is being charitable. Well, kinda. He is inviting investors with offshore accounts who have any taxable money in those accounts that they have not told him about, to come and do so now. They have until 22 June 2007 to tell the taxman that they wish to 'fess up, and until 26 November 2007 to spill the beans.

The taxman states darkly: "Using statutory powers, HMRC has obtained from various financial institutions details of offshore accounts and credit cards held by UK residents." This followed a court case in which some banks were ordered to hand over the details to the taxman.

Armed with the long, long list of investors handed to him by the affected banks, the taxman could investigate in order to determine which investors on the list are liable to UK tax. However, to save him the time and trouble of doing so, he would rather the affected individuals came forward instead, and paid the tax. There is talk of a reduced penalty of 10 per cent (rather than 100 per cent) of the undeclared tax, but outstanding interest will be collected, thank you very much. All payments must be made by 26 November 2007. (The Fisherman thinks that with the high interest rates charged on unpaid tax, investors with a large amount of back duty may not regard this as overly generous. Still, beats jail.)

The taxman has said that in a few rare cases, criminal prosecution may be considered, but he expects in most cases simply to take the tax (plus penalty and interest) and leave the people alone.

And what happens to people who don't confess all? Well, they can expect to face the full wrath of the taxman when he finds out. And he will. He has the list, remember?

The Fisherman thinks the amnesty is a good idea, but would just like to point out while the taxman is in such a good mood, that perhaps he might like to consider why the level of tax evasion is as high as it is at the moment. Just a thought.

UPDATE. The taxman has announced that the amnesty will be extended to investors with onshore accounts as well. More information to follow.

The Conservative Party is proposing that, if elected into office, it will establish a scheme to compensate folks whose pensions were adversely affected when their retirement schemes collapsed.

The Fisherman is heartened to hear this, but feels that the plans do not go far enough. What about restoring the dividend tax credit abolished by Gordon Brown in his insatiable thirst for yet more money? That decision has done great harm to occupational pensions, and the Conservatives should think of reversing it.

Generally speaking, as far as occupational pensions are concerned, people do not want handouts. Far better for the Government to create a favourable tax environment in which to save, and then leave it to citizens, markets, employers etc to sort out pension provision.

The Conservatives are a bit cautious at the moment. Greedy Gordon's pension tax grab brings in about £5bn per annum. If the Conservatives reverse the abolition, that would mean £5bn less for the Treasury every year. The Conservatives are wary about promising to restore the tax credits because they have no way of knowing what the state of the public finances would be when they get into office, and thus whether a £5bn yearly shortfall would be easy to cope with. Very understandable, but The Fisherman still thinks that the Conservatives should be bolder. For starters, there is so much wastage of public funds, and one could easily achieve savings of £5bn per year by addressing that. (For example, tax credits have been overpaid by around £2bn per year for the past two years.) In addition, the Conservatives have already undertaken to abolish the identity cards scheme. That should free up a few billions.

Five billion pounds a year is a lot of money, but still affordable if someone takes the public finances in hand. The Conservative Party should make that pledge, and back it up with a promise that, on being elected to office, it will restore the dividend tax credit.

Over at Plucked Goose, a step-by-step  explanation of the dividend tax credit abolished by Uncle Gordon, and how their abolition affected  pension funds.

Have fun.