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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Hello, HMRC

The child benefit reforms have taken effect. Tomorrow, hundreds of thousands of people must register for tax self-assessment for the first time.

To summarise, if any member of a household earns more than a certain amount, then some amount (possibly all) of the child benefit received by the mother in the household must be paid back by the high earner in the household. The more you think about this, the more absurdities you will notice.

Some will point out that child benefit should not exist. They are right. My wife receives child benefit and I view it as a small reduction in the vast amount of tax I pay. So these changes mean I will be paying more tax.

But the real problem is that I will also have to fill in forms. I do not like filling in forms. My approach to the state is to bumble along following the path of least resistance, because there are too many other interesting things to do. Until now they have had the good courtesy to quietly steal my money without interrupting the quiet enjoyment of my evenings. I think most middle class families do the same: they get on with it and they do not think about it.

Anyone like me following this path is about to get rudely awakened because they will have been receiving child benefit since April without realising that they need to pay it all back, and to pay it all back they need to register for self-assessment.

Importantly, then: if I am to avoid jail, for the first time in my life I have to actively interact with HMRC. Ignoring them is no longer an option. The same is true for a large section of the population who would rather spend time playing with their children.

Now might be a good time to publicise the idea of a flat tax.

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32 comments to Hello, HMRC

  • Mary Contrary

    This is excellent, from the tactical point of view of persuading people to support lower taxes. I firmly believe that one of the major things that keeps up the pressure against tax rises in the USA is that so many people have to file their own taxes, instead of the silent deduction at source without calculation or filing most people in the UK experience.

    Something along similar lines is sales tax vs VAT: in the US goods in shops are marked with the shop price, and sales tax is added (and disclosed) at the till. In the EU it is illegal to do this: goods must be marked inclusive of VAT, so customers don’t notice how much of the price they pay is tax.

    In both cases, the US situation hits the citizen as an unpleasant “surprise” each time it is encountered, where the government’s responsibility for the impost is made apparent daily/annually. By contrast, the effect in the UK is to conceal the effect of taxation, creating the impression that “that’s just how much I earn” or “how much things costs”.

    Increased transparency in taxation is good. We are Taxed Enough Already. People should be encouraged to face up to that.

  • Johnathan Pearce

    Suddenly, many more UK citizens discover the joys of tax compliance. A lot of voters might imagine that only rich evil capitalists have to do this. As someone who runs a firm and has to deal with this – as does my wife – it is hard not to feel a glow of satisfaction. The more people have to deal with this crap, the more pressure there might be for meaningful tax simplification. One can hope.

  • But the real problem is that I will also have to fill in forms.

    Ultimately, it’s a tax on your time, which might be the worst tax of them all: in theory, one can always earn more money; one cannot earn more time.

  • I find the situation that prevails in the US with sales taxes to be irritating. I look at the prices on what I am carrying, add up the prices and count out the money, and the cashier comes up with an entirely different amount of money that I have to pay. Sales taxes vary so much from place to place that I can’t really figure them out until I get to the till. The nature of the imposition of US based sales taxes makes the shopping experience worse for me, in the same way that filling out tax forms makes Rob’s life worse for him. The argument that this sort of inconvenience is good because it makes us unpleasantly aware of what the taxes are and that it is therefore good to be irritating may have some merit, but we also waste time dealing with it that could be spent doing things more productively. This is a real cost.

    Australia is maybe halfway between the US and Britain in this regard. Everyone is required to fill out a yearly tax return. Prices on goods are tax inclusive, but there is always (mandated by law, I think) a statement at the bottom of receipts in stores stating how much tax you have paid. (This is certainly better than the situation in the UK, where there is often no easy way to know). In truth though, it may not matter much. All three countries are high tax, alas.

  • PeterT

    Just registered. Bastards. Now I have to look forward to actually filling the form in when it arrives. And I thought I couldn’t hate them any more than I actually did already.

    John G’s way of life suddenly seems appealing, although as I can barely remember my phone number or salary I’m probably not cut out for all the difficult secret agent stuff.

  • Mr Ed

    To paraphrase attitude of the Lieutenant of the Tower in the LOTR, ‘He who deals with Sauron does so on Sauron’s terms’.

    ‘Benefits’ from the State are costs to some, and it is possible to not claim the benefit, although there is a presumption that it is paid to the mother, a clear breach of the Equal Treatment Directive, based on gender stereotyping blah blah blah, but also giving the mother a small income from the State rather than her partner, a small but important step in the abolition of the family.

    You might be taxed on the basis of money that is not your income. Perhaps a chance to make mischief by suing for discrimination, but the Statists would simply pretend to self-flagellate if they lost rather than admit their hypocrisy.

    However, HMRC are simply likely to fine you or assess you at a higher amount of tax than otherwise might be due if you make a mistake or forget to file.

  • CaptDMO

    I ASSUME; Now that there’s an apparently “zero interest” loan system from HMRC(UK version of HHS/WIC/CPS/welfare/”dole”?)-
    “In the household” does NOT apply to non-cohabitant fathers, no matter HOW “estranged”?
    “In the household” DOES apply to ANY “co-habitant resident” folk” over the magically determined threshold?
    That one might eschew the “small benefit”, balanced against the “deferred repayment tax” (with interest?), and simply pay for the “kid”? (ie. Up to 26years in the US in liability for payment of “subsidized” gub’mint insurance scheme, now collected/”assessed” by IRS, as “promise to pay” for “wellness”,as determined by state/federally licensed “health” practitioners, despite “pre-existing” medical/mental “issues”, including drugs and “treatment” to keep
    school boys “manageable”, school girls “un-depressed, and “confused” children uni/omni/transsexual, and ALL of them reasonably “sober”?)

    Ranty, I know. And yet, I could go on and on and on……

  • Laird

    Sorry, but I don’t have a lot of sympathy. You take the money, you take the strings attached to it. Don’t like forms? Decline the “child benefit”. And frankly, I believe that these sorts of welfare benefits should be means-tested anyway, and there’s no way to do that without knowing the total household income.

    In the US every working person (and many non-working ones as well) has to file an annual income tax return. Yes, they make it as painless as possible with employer withholding (which doesn’t apply to the self-employed; we have to pay estimated taxes quarterly) and simplified short-form returns available to many, and a very large number of people (most?) actually get a refund because they have overpaid their taxes, but you still have to fill out the form to receive it. We don’t have anything like “Pay As You Earn” because we are eligible for various deductions and credits which reduce the tax bill but aren’t known until the end of the year. And like Mary Contrary I think that’s a Good Thing (eliminating employer withholding would be an even Better Thing). People need to know just how much the government is taking from them. “Painless” taxes are the worst of all.

    Michael, that’s just wrong; paying a sales tax doesn’t “waste time dealing with it that could be spent doing things more productively” because it takes precisely zero extra seconds, for both you and the cashier. The sales register computes the tax automatically while it’s totaling up your purchase. I’ll grant that you may find it annoying, but I submit that it’s a far better system than a VAT because it’s fully disclosed (and as a consequence it’s a far smaller percentage). We had a discussion here about this recently.

  • Rob Fisher (Surrey)

    Very well, Laird, but I am not taking any money. For one think it’s my wife and she’s a whole other person; for another thing between us the amount of tax we pay is vastly greater than this so-called “benefit”. Calling it a “benefit” is just playing semantic games. What it is, is a tiny bit of tax avoidance.

  • Michael, that’s just wrong; paying a sales tax doesn’t “waste time dealing with it that could be spent doing things more productively” because it takes precisely zero extra seconds, for both you and the cashier.

    Well, it does for me. Knowing the price before I get to the till means a simpler process at the till. Not in a big way, perhaps, but certainly in a real way. It’s also much harder for me to keep track of mistakes being made on the part of the retailer if seemingly random adjustments to the price are made at the till, too.

    Look, I am all for there being clear disclosure to the customer of the amount of tax being paid, preferably by printing the amount clearly on the receipt (or by putting both prices on the price tag). But to say that there is no inconvenience caused by the customer not being told the final price until he gets to the till is just silly.

  • monoi

    As has been pointed out, I, along with many others, am now about £2k a year worse off. That is a big tax increase, and frankly, considering the amount already being stolen from me, I have had enough. That it is a little cunt like osborne who did this only add salt to the wound.

    As far as I am concerned, this is the state changing the rules of the game whilst the game is being played. And that is not acceptable, although there is not much I can do about it.

    What I think should have happened with child benefit is that an announcement should have been made that 9 months hence, there would be no more. So that should you have a child after that, the rules were clear when deciding to have a child or not.

  • Mr Ed

    monoi: I agree with your final paragraph, but why wait 9 months? If you planned a child on the basis of welfare, I fail to see why that should give anyone a locus to claim welfare on behalf of one unborn.

    I believe that when Child Benefit came in in the UK, it was derided as ‘the Bastard’s Bounty’.

    The despicable Bastards also giveth that which is not theirs, and the Bastards taketh away.

  • phwest

    My personal least favorite tax is quite small. My local borough has a $10 per capita tax ($10 per year for each resident between 18 and 65). It is billed separately from all other taxes. It cannot possibly make them any actual revenue – there are less than 2000 residents subject to it, and I can’t believe you can administer a process that is completely independent of any other billing they do for an activity that small for less than $10 per bill. It is complete and utter waste of my time (to open the letter, find an envelope (no return envelope for this one) write a check and mail it back). If they repealed the damn thing and just bumped up one of the five other bills they send me every year $10 they would raise more money on net and remove an annual irritant.

    Then there is the $10/year occupation tax (if you earn >$1000/yr) that I have to send a waiver form in for every year for my wife who doesn’t work, which comes along with a $52/year school tax that has to be paid quarterly if you make more than $10k. This one is at least comprehensible – it’s farmed out to a servicing company and is withheld by your employer if you actually have a job, so it’s only the self-employed who have to send in a stupid check or file to be exempted. On the other hand, I’m already paying 1% on my income as tax to the borough through a totally separate process on another set of forms.

    The 40+% marginal tax & tax credit clawbacks I pay on income is unpleasant, but it’s petty crap like this that really gauls.

  • Toolkien

    Is there any good tax? Debating that one tax method versus another is a waste of time. None of them are good to the person who is out the money. Laborer, consumer, property owner, producer it doesn’t matter. The extra evil here is the bureaucratic time on top of it all. It is yet another example of how we are to serve the state not the other way around.

  • And once you’ve filled in a form they never let go. I was without earnings for seven years but they still demanded a completed tax return every year and threatened me with penalties if I didn’t fill it in. Every time they owed me money, which I wouldn’t have claimed otherwise, because I too hate filling in forms with a vengeance.

  • The initial claim form for child benefit tells you the situation but strongly suggests that even if you earn over £50k you should apply anyway, for reasons I forget. Probably to keep bureaucrats in jobs.

  • Eric

    I find the situation that prevails in the US with sales taxes to be irritating. I look at the prices on what I am carrying, add up the prices and count out the money, and the cashier comes up with an entirely different amount of money that I have to pay.

    Hotels are even worse. When you book a hotel in the US it’ll be advertised at something like $69.99 per night (depending on where you are, of course). But you check out you find what you’re really paying is almost double. It doesn’t help that the hotels add “fees” designed to read like taxes.

    Vacationing in Bavaria I would go to the desk in the morning expecting to pay 100 euros for my 50 euro room. “50 euros? Not even, like, 54.99 euros? This is awesome!”

  • Is there any good tax? Debating that one tax method versus another is a waste of time.

    Quite.

  • Mr Ed

    Eric, Bavaria has the Pfand, a small deposit on bottles, mandated in Germany for ‘the Environment’ (die Umwelt), which annoys and baffles some tourists, but also leads to poor people roaming the U-bahn trains all day long at Oktoberfest to scavange enough bottles to make some money by feeding them back to the reverse vending machines that recycle bottles and pay out the Pfand.

    Irritating to pay a deposit by law, but fascinating to see the scavangers at work responding to a rigged price stimulus.

  • Regional

    Taxing the crap out of people doesn’t lead to prosperity and Gubbmints are still running up massive deficits.

  • Regional

    Ed Miliband has promised to give the vote to 16 year olds, freeze electricity and energy prices for 20 months, raise the minimum wage in line with inflation, cut business taxes for the nation’s 1•5 million small businesses and build 200,000 new homes a year by 2020. Yeah right! Remember Gubbmint debt is deferred taxation.

  • Is there any good tax? Debating that one tax method versus another is a waste of time.

    No, some methods are *hugely* more destructive than others.

  • bradley13

    “My approach to the state is to bumble along following the path of least resistance, because there are too many other interesting things to do. Until now they have had the good courtesy to quietly steal my money without interrupting the quiet enjoyment of my evenings.”

    I really like the way you say this.

    This is exactly the problem with modern government: They take your money quietly, like thieves in the night. They try to make it easiest to just ignore the massive tax-and-spend scheme.

    This is something that I appreciate about living in Switzerland: We have to save up through the year, because taxes are not automatically withheld. Then we have to pay our tax bill in one painful lump sum. This makes people aware of taxes (except for the too-invisible VAT).

    Taxes should interrupt the quiet enjoyment of our evenings.

  • CaptDMO

    “Taxes should interrupt the quiet enjoyment of our evenings.”

    And “come due” about 1 week before elections of “public servants”, IF the (actual) taxpayers are afforded such an extravagance.

  • Tedd

    Mary:

    I firmly believe that one of the major things that keeps up the pressure against tax rises in the USA is that so many people have to file their own taxes, instead of the silent deduction at source without calculation or filing most people in the UK experience.

    I know very little of how the system works in the UK, and not much more about how it works in the U.S. But, here in Canada, I once knew a thirty-ish woman who was not aware that she paid income tax at all. This was an intelligent, reasonably well educated woman (a nurse), but she had never filed her own income tax forms. Her father did it for her. She genuinely did not know that she paid any income tax — had never examined her pay stub, had never discussed the calculation her father performed for her. She received a return of a portion of the deducted taxes each year, as many Canadians do, because of how the payroll deduction is calculated. She thought this was money the government gave her, gratis.

    Assuming this woman is not a unique case (and I have no reason to believe she is), there are two disturbing aspects to this, for anyone concerned about the growth of government and the rationality of tax systems. It suggests that a fantastic degree of ignorance about how it all works may not be uncommon. More disturbingly, it suggests that a not-insignificant portion of the population would be entirely comfortable with an arrangement were other people paid the entire cost of government, and even provided them with annual cash payments, even though they, themselves, lead a middle class life.

  • Dave Walker

    I admit, the requirement to register and do a self-assessment has me perplexed.

    I’m a disinterested party here, as I don’t (and for societal reasons, can’t) have children, but it seems very odd to me that HMRC needs to require parents to do a self-assessment tax return, as HMRC should already know how much they earn – after all, they already tax them on it, and for those who are self-employed or company directors, it may lead to them having to file multiple self-assessment tax returns each year.

    The winners in all this, of course, are the private accountants; I expect many parents will need to engage the services of one to complete their tax return for them, on the grounds that it’s too complicated a document for them to do by themselves…

  • Laird

    Tedd, that is what passes for “an intelligent, reasonably educated” person in Canada? And here I thought we had troubles!

  • Mr Ed

    Tedd, Laird: ‘educated’ may be the problem, I believe that the roots of that verb are Latin ‘ex’ ‘out of’ and ‘ducere’ ‘to lead’ (cf. ‘Il Duce’) hence to be educated is to be lead out of (ignorance), whereas to be learned ‘doctus’ might imply finding out for oneself.

    Who ran the education?

  • I’m not sure it has anything to do with education either way, but rather with practical incentives – where the outlook Tedd describes is the result of the perverse kind of practical incentives.

  • Tedd

    Mr. Ed:

    You’re right, I meant “educated” in the very limited sense of having academic credentials beyond high school (which the majority of people in her age group do not have), not of having any profound knowledge or understanding. Perhaps “schooled” would have been a better word.

  • bradley13

    “I firmly believe that one of the major things that keeps up the pressure against tax rises in the USA is that so many people have to file their own taxes”

    Perhaps. However, taxes are withheld from your pay in the US, and most lower- and middle-class people get a refund when they file. They do not have the pain of actually directly *paying* their taxes. For that matter, many low-income people receive a refund that is actually greater than the total of the taxes they paid. This so-called “earned income credit” is a strange form of hidden welfare. Alternatively, vote-buying: people who receive this will never vote for a simplification of the tax-system, because any sensible system would eliminate such payments.

  • Surellin

    One minute, the mother gets the benefit but the high earner must pay back? Assuming they are not one and the same person, that sounds like the basis of a terrible comedy.