Updated: Aug 5
We’re in a world where new words are being launched all the time. Trussonomics, being just one.
So I’m going to make my own up tonight– taxflation.
‘Do what ?’ I hear long suffering readers ask…
To explain, I’ll take you back in time, to the early 90’s when (according to my children) dinosaurs roamed the earth, and more to the point, when I was a trainee accountant.
One of my first tasks was being given some forms - P11D’s to complete.. I’ll explain, benefits in kind (eg medical insurance, company cars) paid by an employer at that time only got taxed via a P11D for employees who at that time were called ‘Higher Paid Employees’. If you weren’t one of these, you escaped being taxed on it.
The threshold for being a ‘Higher Paid Employee’ was £8,500 p.a. and I remember asking my line manager why it was called that when, for example, a lowly paid trainee accountant was already in that category. I was told that the amount had been introduced into legislation in 1979, and that as over 10 years had elapsed it was ‘likely to be reviewed soon’.
It was – in the late 1990’s they stopped calling it ‘Higher Paid Employees’. But the threshold stayed unchanged….
(£8,500 in 1979, run through the retail prices index would be £45,000 today)
Let’s take a different real live example, my clients who run a hair salon as a partnership. Let’s call them Bonnet and Clive.
They don’t have any staff, have sales of £80,000 p.a. and after rent and shampoo make about £40,000 p.a. profit in total
They hang on every word their trusted accountant utters (doesn’t everyone ?), and were concerned when he suggested that to protect their income in real terms with 10%+ inflation and a rent review looming they needed to increase their rates by about 10%.
The problem is that this would take turnover to £88,000, in excess of the VAT registration threshold. Which means that the first £14,000 of their turnover disappears in VAT. So their trusty accountant suggested that to stand still they needed to increase their rates not by 10%, but by 30% to stand still. (Formula available on request). Which they felt was marginally excessive….
As was pointed out, it would make a haircut jump from £20 to £27, which for their accountant would mean a cost of about 50p per active follicle.
And when did the VAT registration limit rise to £85,000 ? 2017, adjusted for the retail prices index it should be £108,000.
Taxflation at work.
With all that’s going on, there must be a positive or two ?
We live a low crime, sunny area…We’ve always loved our tech and like to keep at the cutting edge. So we decided to upgrade all of our computers, and ordered a number of brand new boxes of California's finest. We wept slightly (for which read 'a lot') as the bank transfer went through, and waited.
They turned up two days early. That’s good.
They were left on our front doorstep. Lots of boxes. Not so good.
We weren’t there. Really, really not very good at all.
Five hours after delivery we returned home, and they were still there. It hadn’t rained and nobody had taken a shine to them…
Janine has an accountant. HMRC’s grasp of technology and its failings never fail to frustrate. Janine has been a client of ours for about 15 years. We’ve been able to access her tax data, make tax return filings and check on her payment history throughout that period.
Until earlier this year, for reasons that no-one can explain, she fell off our authorised client list. As a result HMRC refused to correspond with us, we couldn’t access her online tax account, and generally were stymied. As kicking and screaming doesn’t apparently work in an online world, we re-applied to become her agent.
Ah, except that part of the system wouldn’t let us apply as we already were. But weren’t so far as the other part of the system was concerned.
A tiny bit frustrated, I rang the ‘help’line. Who were able to confirm that we weren’t and never had been her agent (despite sending screenshots of what we’d seen previously, and the one saying we couldn’t register as we already were).
Several months and numerous letters later she now appears back on our client list. No fanfare or explanation, just sitting there like she’s never been away…
Sadly Janine’s not the only one.
We have a Girl Racer in training. I’m sure many parents of older teenagers will relate to the experience of a child learning to drive. A whole new set of skills – nine point turns to learn, hill stalls to practice, paying after filling up with petrol to be developed. Not to mention the use of indicators (believe me, as a reformed BMW driver I’m struggling with that)
Charly has recently turned 17, and is proving that the reputation for stalling amongst learners is over-exaggerated. The new technique is apparently to reach the clutch biting point, then right foot flat, left foot up and screech away. Investment advice – buy shares in tyre manufacturers quickly – remember you heard it here first.
On a related subject, I passed a crash of an almost empty French cheese lorry on the A14 earlier today. There was deux brie on the road.
Time to go – stay positive.