Tuesday, 16 September 2008

Property in the UK 11: Overload at the Tax Office

As I have commented before, financially my life is very much on hold at the moment. I expect to be made redundant in August 2009 and to have my house repossessed a couple of months after that. In the meantime I am waiting for a capital gains tax bill. This is because, foolishly, I got work outside London and so instead of selling my flat immediately, I rented it out. This brought huge charges (over £16,500) from Newham Council and so no profit on letting it out. It did rise in value which is one good thing and helped me to buy my current house which otherwise I would not have been able to afford, and so stopped me being constantly kicked out of houses by greedy landlords wanting to play the market by playing with people's lives (this happened to me twice in 2007 losing me thousands of pounds in moving twice and causing a lot of stress).

Selling my 'business' has left me with a capital gains tax bill. I have no real idea how much this might be, something between £3000-£8000, with the best estimate at £6,600 (€8,316; US$11,748) and I have saved up less than half that sum so far. I rang the Revenue & Customs's 'Time to Pay' helpline which simply had a woman telling me how foolish I was not to hold back more money from the sale and that going bankrupt was immoral. Anyway, I dare not buy or plan anything until I know exactly what the final bill is going to be and so whether I need to put the house on the market or try and beg another loan from the bank. So, I asked for all the relevant forms as soon as I could once the financial year ended in April. I was sent the wrong forms twice and on the third occasion the correct form but an out-of-date one, i.e. for 2006-07 rather than 2007-08 which is what I am dealing with. Anyway, after all that, I get my form completed and in at the end of July.

Now, anyone who deals with the Revenue and Customs, which is a lot of people these days since self-assessment for small business tax was introduced in, I think, 1997, anyway, the late 1990s, knows that this year they have reduced all the deadlines. Now you have to submit any paper-based assessment by 31st October and if you want the tax people to do the tax calculations, you must get it in by 30th September. You used to be able to submit up until the end of January and the end of October if you wanted to have it calculated (and for the bulk of us who cannot afford an accountant at £1,200 per month [€1,512; US$2,136,] this is a must; I never got more than £700 per month in rent on my flat and that was before maintenance charges). They are trying to cajole people to submit their forms online. If you do that you can have up until 31st January to do it. However, given the government's appalling record of losing our data, in recent months including information about millions of child benefit claimants, names of prison officers and police applicants amongst others, few of us trust these systems and prefer to stick to paper.

Six weeks having passed since I submitted my form, I rang Revenue and Customs to see if they could tell me my bill. They said that they should be able to, but the tax office that handles my account is totally snowed under with returns brought on by the shortened deadline and that they can give no indication of when the calculation will be complete. I was told also that if I had submitted the form after 30th September then they could not have provided the capital gains tax bill until March even though the due date for payment would be 31st January and as I have been repeatedly told there is no flexibility with that date. As the man pointed out quite blatantly this means I could have been expected to pay a bill before I even knew the sum I was being asked for! Apparently this is totally legal. The trouble is of course is that they assume we all have accountants who can give us a close estimate that we can pay on and top up if we are wrong. As the man indicated, if you pay insufficient, then you get penalty charges imposed, so you might as well clear out your accounts and send it all and I may be compelled to do that if I get no information.

The Revenue and Customs's plan has backfired and they have brought a crisis down on their own heads by cutting the deadline times. They have to recognise that many people distrust online submission of things. Often you encounter poorly designed websites that send you round in circles. Often websites give no indication if the information has gone through or been received so that you have to ring up anyway to check. Then there is the issue of data security which the British government and its civil service seems to have the worst record on in the world. As I have noted before because of debit card cloning, I, like many people in the UK have moved away from using electronic payments and gone back to cash or even cheques.

So, I sit here, hoping that in some office in Manchester they can get through the backlog of forms sent in and then tell me my bill in a reasonable time, so I can start finding out whether the house which I foolishly used this money to buy and is now worth £20,000 less than when I bought it in December 2008, needs to be put on sale in the weak housing market, whether I can borrow the sum needed or whether I have to take the 'immoral' option and go bankrupt. The not knowing, though, I think is the most stressful aspect, and I am angry with Revenue and Customs for them catching me up in the consequences of their misguided experiment.

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