The Great Big Tax Lottery?

Never mind the Credit Crunch, millions of self employed businesses emerged from the Xmas festivities to the chilling horror of the 31^st January tax deadline.

We have a strangely irrational attitude to tax. Tax dodgers, especially fat cats, are despised yet we do nothing positive to legally minimise our own tax bill. The Public & Commercial Services Union recently reported that £130 Billion is cheated in taxes every year and proposed that rather than raising taxes to fill the big hole in the UK deficit HMRC ought to try jolly harder to collect what was due. As if life and human nature was that simple.

Honest? We want your money, all of it.

The tax system is horrendously lop sided against honest tax payers. Millions of us little guys overpay tax! For example, HMRC openly admit that 1.5 million pensioners have paid £250 million too much in tax. But, 500,000 by their reckoning have underpaid £100 million. So that makes it alright then?

Tax justice is not the privilege solely of the rich!

We are guilty as a nation (self employed and employed) of paying billions way too much in tax –the 2008 estimate was £7.6 billion, but no-one really knows. Quite literally we are habitually subsidising the wasters and the cheats, even though we cannot afford to.

On top of this hundreds of thousands routinely hand over further fortunes in HMRC fines and penalties. Last year over 800,000 were levied a £100 fine for not getting their tax returns in on time, The number of tax delinquents may even double this year with the recession hitting the little guy most.

We’re all in a mess –what can the taxman do?

Tens of thousands of limited companies have gone bust in 2009 and the tax is written off. No such luck for the rest of us including the self employed who are personally liable for tax debts. A huge deficit exists in the Nation’s coffers and who is expected to fill it? Answers on a postcard, please.

HMRC have very cleverly upped the ante and voted themselves new powers that came into force retrospectively covering 2008-9 tax returns. These measures are punitive and potentially devastating: HMRC can now swoop by giving you just 24 hours notice of a spot check. They can fine you £3,000 for not keeping good records -an open and shut argument where they are always right and we are wrong. If you don’t reply to their “begging” letters they can fine you £60 a day until you do. If they think you have been careless or deliberate in your tax affairs they can double your tax with penalties.

Forget the Bankers Bonus Tax which is just a piece of window dressing to keep the illusion that tax is fair. It isn’t.

I don’t do tax returns, I like pain.

Consider the case of Dave, a plumber by trade and a plonker by nature. He’s decided that he’s had such a lousy year he isn’t going to bother with tax for the moment, besides which he isn’t inclined to pay a week’s earnings to his accountant for the privilege.

Dave, true to form, has not paid his £1,000 balancing payment which was due in July 2009. By not doing his tax return he will be receiving a £100 fine in February, followed rapidly by a further tax determination of £3,000 (£2,000 assessed for the tax return he has not done and another £1,000 payment on account for 2009-10.) This new liability of £4,100 (plus interest on top) will really please his pet gorilla Gladys (Mrs Dave, that is), for sure, and the tax bill will rise by another £1,000 (2^nd payment on account) in July if he survives till then. By then, HMRC might also be sufficiently roused to fine him £60 a day until he complies.

Gladys saves the day: Do your own tax return and save loads of grief-and money.

Gladys sussed out that investing a few hours on the kids’ computer could completely transform Dave’s fortunes. First of all, she needed guidance on what Dave could claim against his earnings and she found this in a product called MrTax CD. By following the simple tax tips given she claimed for multiple items that had been missed. Bank charges, tools, the computer, broadband, even expenses without receipts could all be claimed – and she could be paid for doing Dave’s book-keeping tax free rather than spend the money on an accountant.

The Midas Touch. £5,000 debt becomes £1,000 profit.

On earnings of £15,000 (down from £25,000 the previous year) Dave only made a taxable profit of £6,000 so in fact had no tax to pay. So, not only was the July 2009 £1,000 payment on account wiped out, the earlier £1,000 on-account payment made in January 2009 was refunded. Not only was there no tax to pay in January 2010 there would be no payment needed in July 2010 either.

The good news didn’t stop. Dave and Gladys now qualified for Working Tax Credits even though they had no children. Applying for it was really straightforward once the tax return went in and netted them a further payment of £160 per month.

Not a tax fantasy, just a simple case of taking charge of your own affairs.

MPs fiddled the system because they manipulated the rules which they themselves had set. However, millions do not claim all their legitimate expenses deemed allowable by HMRC as “wholly and exclusively necessary” for their trade. Every £100 not claimed leaves you with just £72.

Who knows your business better? You or a stranger with a calculator who gets shoved a pile of receipts and invoices often without a word of explanation?

The very least that will happen by doing your tax return is that you will be able to negotiate time to pay any outstanding tax arrears as part of the Business Payment Support Scheme that our government announced in November 2007 when we were faced with financial Armageddon .

As it stands today, the people who are going to suffer most at the hands of the taxman are the vulnerable and the ignorant. Rampant fines and penalties will be the medicine offered and the final (probably over-assessed) tax claim will suck you dry.

Better than Free?

MrTax CD is an opportunity for you to fight back against unjust taxes. It’s free to try and really you have nothing to lose – unless you fail to do your tax return! The £139 purchase cost will be recouped several times over in accountancy fee savings and by being able to claim a tax free book-keeping fee for a family member.

Take a few minutes to visit www.mrtaxcd.co.uk and download a free trial of MrTax CD. If nothing else, you could find yourself hundreds of pounds better off than you thought. You still have just enough time to file your tax return - the latest date for registering with HMRC is January 21st. Even after this date, you can simply print off the MrTax CD reports and ask a local tax adviser to file on your behalf for a nominal extra charge.

You have been warned – not doing your tax return is the very worst financial option whatever your circumstances.

http://www.youtube.com/watch?v=Dds3k6OcKTU

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