This posting will be interesting for anyone who encounters difficulties with the HM Revenue & Customs brought on by the fact that they have to move away from their home that they own for work in another area but given the slow housing market are not in a position to sell the property and buy in the new area, so are compelled to rent there. Regular readers of this blog, may remember back to 2007-8 when I had such difficulties. Back in 2001 living in East London I had bought a flat in Newham. I was unable to find work in the area and was offered a job in Milton Keynes, a distance a way which proved too difficult to commute. I rented a flat in Milton Keynes and rented out my flat in London. The job was initially only a 2-year contract but I was fortunate to get a second 2-year contract with the same company, in a different post, so remained in Milton Keynes, continuing to rent out the property in London, though living there between one contract ending and the new one starting. When this job finished I got a 2-year contract in Hampshire and again rented there, unable to afford to buy even a flat in this high cost area. The contract was renewed but then I was made redundant. In the meantime, in December 2006 I and the woman and boy I had been sharing a rented house with were told to leave as the landlord wanted the place back as he was separating from his wife. In the next house we rented, the landlord defaulted on the mortgage and he harassed us only to move at his convenience, refusing to let us leave early and yet insisting when the time came he would want us out in 2 weeks. Our unwilling to comply led him to keep phoning (50 times in one 24-hour period) and photographing us as well as demanding additional money. His friends in the local police meant our complaints of harrassment were dismissed.
At this stage me and the woman were sick of renting property and realised that if I sold my London flat and combined our earnings we could buy a house to live in, even in southern England. Due to the bullying of the landlord we had no time to waste and moved in December 2007, just at the peak of house prices, but we had no option. The shock came when I sold my London flat. The estate agents, David Daniels, were worse than useless setting up dubious deals which heavily under-valued the property. While I was able to push the price a little higher, as a 2-bedroomed flat it was sold for the same price as a 1-bedroomed flat and the estate agents' staff managed to break the front door lock on the day contracts were supposed to be exchanged, leading to a dash to London to get someone to secure the flat and allow the sale. The problems did not end there. I had already been charged £16,500 by Newham Council, one of their periodic levies on private property that is in council-owned buildings. I have subsequently been told that I should have contested that charge, but handling everything from 190 Km away and with the council insisting on payment and even refusing to give a receipt, I was in a weak position.
Then came an additional shock, that I was charged capital gains tax on the sale of the flat. I detailed this back in November 2008: http://rooksmoor.blogspot.com/2008/11/property-in-uk-12-capital-gains-tax.html Bascially I was told that because I had not been living in my flat consistently throughout the six years I had owned it, and had rented it out, then it had become a business and I was liable for capital gains tax once I sold it. I was sent the wrong forms three times and was giving conflicting figures, but the final bill came in at £16,800 (now worth €19,990; US$26,700). I explained the circumstances at the time and how that the flat had not been bought as a 'buy-to-let' property but as a place to live. However, finding work elsewhere had made it seem the best idea to rent the property out especially when in the mid-2000s councils started charging 50% council tax on empty furnished properties as mine would have been and this, of course, put pressure on to rent out the property. The last 2.5 years worth of rent, which I had paid tax on was wiped out by Newham Council's charges, so it would have hardly been a profitable business. I accept the value of the property had risen and I took it that that was effectively what I was being taxed on. I could see no alternative but to pay this bill. By this time I had jointly bought a house and with the agreement of my co-owner, I got another advance on the mortgage (I had had one already to pay off Newham Council) and paid the bill.
That was how things stood, I paid each month to the mortgage which had been taken out to cover the tax and imagined it would be brought to an end now that the house we live in has had to be sold, as long as we could get a price higher than what we owed on it. However, with all the furore in 2009 over the exaggerated expense claims of MPs, there was discussion of them 'flipping' between their so-called first and second homes so as to avoid paying capital gains tax when they sold the second home. I did not really see a connection with my own situation and saw it simply as some kind of sophisticated business scam that these people pay accountants large sums of money to work out for them. I thought it had no more relevance to me than an off-shore bank account in the Cayman Islands did. Fortunately, my father pointed out the application to my own situation. The reason why these MPs were making their second home appear as their first home was because that brought them exemption from capital gains tax. Then he started asking, why had I been liable from capital gains tax when I had only ever had one property (I have only ever completely owned one property and part-owned another in my life and not at the same time).
Following his guidance, back in September 2010, I wrote to the HM Revenue & Customs outlining the issue and pointing out that I had sold my only property, the flat and put all the money (and more) into the house I now lived in (and was trying to sell). I told them that not only had I made this clear at the time, but surely with their powers they could tell what mortgages I had had and what property they had been raised on. I did remember at the time when I was telephoned with the bill, this must have been March 2008, the woman from the tax office seemed surprised that I said I might have to sell the house I lived in, in order to raise the money. At the time it had not been clear if the lender would extend my mortgage any further, me having already advanced it once, so reducing how much equity we had in the house. She seemed to believe I owned a number of properties and could simply sell one of them. I counter-acted her view, but that conversation never seemed to penetrate into my tax file and so the tax demand was made. Part of the problem was the timing. I sold the flat in December 2007 but by the time the bill was sent in April 2008, I was living in the house I had jointly bought. It seems that the tax office had believed that I had owned the flat and the house simultaneously, which would have been impossible as I could only pay into the house by selling the flat.
After having explained my situation in September 2010, I heard nothing from the tax office until December when I received a very old-fashioned form which stated that using a law from 1970, I should state why I felt that I had over-paid my capital gains tax. I wrote out the details that I have given here. I pointed out that I had tried to make this clear at the time, but due to the confusion of wrong forms and people telling me different things, I guessed that the information had not got through correctly. Staff at the tax office had made false assumptions and so charged me on that basis rather than the reality I was trying to tell them. Anyway, I sent the form in, expecting that I would have a response that told me why I had been liable and rejecting my request for repayment of the tax. As I have noted, cut-backs at HM Revenue & Customs mean they are pretty short-staffed already, one reason why it was taking months for them to produce a response. See my posting: http://rooksmoor.blogspot.com/2010/11/collapse-of-british-tax-system.html for other issues that I and many other people have encountered as a result.
To my shock, last week, I went to my bank account and found the entire sum of the capital gains tax I had been charged in 2008, had been refunded. As yet, I have received no letter from HM Revenue & Customs saying that I was getting the money back or explaining what actually happened back in 2008 for such a large error to occur. Given the fact that late last year I was sent two different tax codes on the same day and was told I should inform the employer who had made me redundant five months earlier, I guess that there is chaos in the tax offices and I should not be surprised that errors creapt in. I guess I was simply labelled 'serial landlord, selling off one of his many buy-to-let properties' rather than 'man finding work wherever he can in the country selling his home in order to buy another one'. Basically if you own just one house or flat, even if because of circumstances you cannot live there for long periods and rent it out, it is not going to be liable for capital gains tax, especially if you use the money from the sale to buy your next 'dwelling house', or, I imagine, use it to pay nursing home fees. Of course, as some people have pointed out, I am still out of pocket. I have not received the interest that I could have earned if that money had been in an account or invested. I will not get back the money that I have paid in interest to the building society for this addition to my mortgage. However, at this time when I lacked the money even to put down a deposit to rent a 1-bedroomed flat, I am just grateful to have the funds returned to me.
The lesson seems to be, that we are going to face greater difficulties in having a consistent application of tax as HM Revenue & Customs crumbles even further with the cuts introduced by the Cameron regime. This is most likely going to hit ordinary people trying to go about quite ordinary day-to-day stuff and in many cases, being compelled to move around the country for work. With the property market so slow, it is very unlikely that you can quickly sell your home and buy a new property in the place where the work is and to do so, especially with the short-term contracts that are so common, can be a great cost in itself. Of course, the business people with personal accountants will always be able to squirm their way out of most liability much as the MPs did for so long. Thus, my recommendation is, if you end up in the circumstances that I did, to avoid being charged tax that you are not, in fact liable for, is to make a fuss. Keep telephoning, keep writing to them until you are certain that they have not shoved you into some convenient box designating you as something based on easy assumptions rather than the truth. The fear, has to be, as the civil service across all its branches is pressed and cut even more, many such errors will occur. They will not make a huge difference to the national budget but they can hit very hard on ordinary people.
Showing posts with label HM Revenue and Customs. Show all posts
Showing posts with label HM Revenue and Customs. Show all posts
Tuesday, 1 March 2011
Wednesday, 17 November 2010
The Collapse of the British Tax System
Recently I watched an episode of the long-running BBC television programme 'Panorama'. The particular programme was entitled 'Are You Paying Too Much Tax'. It featured a number of case studies of people sent erroneous and often conflicting information by Her Majesty's Revenue & Customs (HMRC) the part of the civil service responsible for assessing and collecting tax. One couple had been sent 13 different tax codes in the space of a few weeks. The tax code determines how much PAYE (Pay As You Earn) tax you pay. PAYE is the way that most people have tax taken from them, only the self-employed tend to avoid it. Around 40 million people pay tax through PAYE. The PAYE system is simple, most people do not study their tax code in detail and assume their employer is deducting the correct amount of tax. This year due to problems with new software being introduced 1.4 million people had underpaid by a total of £2 billion (€2.28 billion; US$3.44 billion), but 1.8 million had overpaid by a total of £4.3 billion. In total 6 million may have been affected by some errors in the past two years and a total of 18 million people if cases from before 2008 are included.
The key problem was the introduction of the NPS software which was supposed to make tax assessment and collection more accurate and efficient. However, as anyone who has worked with databases at any scale knows, significant errors creep in when moving over to a new database. A classic case of this was when the 1901 census was put online. First the database was populated by prisoners who put 'bastard' or some other derogatory phrase beside anyone listed as a police officer or prison warden. Then it was shipped out to India where in ignorance of British surnames, it was assumed from the lists that 'Ditto' was by far the most common surname in the UK in 1901. These were extreme examples, but always errors creep in because humans especially low-paid data entry clerks, are fallible.
There is also a long history of government departments suffering greatly from failing software. Just this year the £12.7 billion NHS (National Health Service) computerised record system was deemed 'close to imploding'. The project, called the National Programme, has already lasted seven years with failures in software and over-runs in implementation, unsurprisingly numerous companies have pulled out or slashed their bills for the work. You can find articles going back into the early 2000s around failed IT projects in the NHS for a whole variety of activities, often over-running. Partners like Fujitsu seem to come back to work for the NHS only to fail and withdraw again.
Air traffic control in the UK has also suffered a great deal from IT and software errors. Twice in 2000 software 'glitches' shut down British air traffic control for hours. The move of British air traffic control from West Drayton near London to Swanwick near the south coast was supposed to overcome such problems. The move did not occur until 2002, six years later than originally planned and even then software problems continued and even in 2008 they were still suffering disruptions due to the software. It was a similar story at Prestwick which handles Scottish airspace. In 2009 there was another computer failure at Prestwick, preventing cross-Atlantic flights. These are just two examples of how important parts of organisations linked to the government (air traffic control was part privatised with the formation of NATS - National Air Traffic Services in 2001), suffered and continue to suffer from computer and software problems. You could have predicted something similar for the HMRC.
Tax is becoming more complex for individuals because many of us have more than one job at a time or pick up short periods of work which we do not pay PAYE tax on. Since the early 2000s far more people have had to do their own tax returns in the way that everyone seems to in the USA, but at least if you do that then you have an idea of what figures are going in and you can tell quickly if what you are being asked to pay seems wrong.
Now, in January 2010, even before the October cutbacks were even dreamt of ('nightmared of' may be more accurate), the HMRC had announced the closure of 130-200 offices and redundancy for 25,000 staff . The amount of unpaid tax that was going to be written off, i.e. tax the HMRC was no longer going to pursue had already risen from 23% in 2006 to 40% in 2009. It is estimated there is £17 billion owed in unpaid tax and for a sizeable minority of those people, generally rich, self-employed people, they will now not ever be pursued. The amount of current unpaid tax is equivalent to 2% of all government expenditure in 2009 (£631 billion) and more than double what is spent on international development; welfare (excluding pensions) took £97 billion in 2009; defence £42 billion, so though while it would not dent those figures greatly, it is a significant amount. In October it was announced that the budget for HMRC would be cut by £990,000 but it was assumed that £7-8 billion would be recouped in going after unpaid tax, though presumably not the £1.5 billion of the bills that arose from the computers which it now seems to be being written off too, due to popular pressure. If the HMRC recoups less revenue then its funding will effectively fall further. It has seen a 24% reduction in staff since 2004 even under Labour and a further 14% (around 10-12,000 staff) in the next five years; staffing will be 58-60,000 compared to 105,000 back in the early 2000s.
It seems ironic that when we know that there are billions of pounds of unpaid tax and the computer system is worsening the situation, that the part of the civil service which brings in revenue is being cut even further. It clearly has been unable to do the job for the last five years (even 23% tax avoidance seems high) and this will worsen in the future. What is this going to mean to the average tax payer? Well, as anyone who has tried telephoning a UK tax office knows, you are very unlikely to have your phonecall answered. The woman in my house tried for 1 hour per day for 3 days without getting a reply. It is clear that many more of us will get the wrong amount of tax taken off us. Those people who work in a number of jobs or freelance and quite often get over-taxed as each employer charges you at the full rate, will probably never see their overpayments refunded.
Of course, in contrast to ordinary people, the government and their allies will be laughing. The Conservatives have always pushed to reduce tax levels, but it is clear now, that when that is not politically acceptable, they simply let their rich supporters not pay any tax at all or only the amount they wish to pay. Lord Ashcroft former treasurer of the Conservative Party, and David Rowland who was offered the post next but withdrew both went into tax exile or failed to pay taxes in the UK. Ashcroft saved £127 million in taxes by not being resident in the UK.
'The 'Guardian' quoting Robert Peston gives a wonderful illustration of how much Sir Philip Green, an advisor to the Coalition Government avoided paying on a single dividend in 2005: ' ...a tax saving to Sir Philip that has been estimated at £300m. That one dividend payment ... was equivalent to what 54,000 people on average earnings would earn in a year, would build around 10 secondary schools capable of educating some 13,000 young people, or, if paid in an unlikely column of pound coins, would tower 2,350 miles about the Earth's surface.' http://www.guardian.co.uk/commentisfree/2010/aug/14/public-spending-philip-green-editorial
Lord Laidlaw a big funder of the Conservative Party and because he was made a lord, a member of the House of Lords, part of the British parliament, stopped funding the party due to questions over the amount of tax he was paying. He is a resident of Monaco, not the UK. Of course, these four are only a miniscule fraction of the 6 million British tax exiles.
These men are just the tip of the iceberg. I think as a sop to people like me, the government says it is going after 'offshore' accounts held by people who owe tax in the UK. Apparently British people have £125 billion in Swiss banks and in an agreement with Swiss authorities £3 billion of unpaid tax on such money will be repatriated; close to £1 billion is supposed to come back from Liechtenstein and another £1 billion from other tax havens around the world, though not the Cayman Islands which apparently has the largest amount of British money held overseas to avoid tax. Even with a larger, better funded HMRC these people have been getting away with massive tax avoidance. How much easier is it going to be for such people now that the HMRC is being shrunk further and its funding reduced? Of course, these people tend to be Conservative voters and particularly supportive of the hard-line New Right policies Cameron has adopted.
Thus, as with so much of the current government policies, the approach to the HMRC means that ordinary people will suffer more. We will get confused statements without explanation, may be under or over charged without our knowledge and then be asked for the money back or have to wait for years for our refund, if it ever comes. I believe I have paid £16,000 too much tax because of confusion over me selling my flat to buy a house (they assumed I owned more than one property at a time, which I never did, I have only owned one property and part of another in my life and never at the same time) but I have no hope that my query will ever be answered. In the meantime, those who have already saved millions in tax will find it even easier to avoid paying any tax and presumably will be freer to reward their friends in the Conservative Party and to spend their money on boosting the income of Monaco or Belize or some other tax haven rather than contributing to the ailing UK economy. Every week it seems there is just yet another area in which the ordinary people of the UK are rapidly and vigorously being shafted so that the privileged can benefit even more than before. Clearly I should set up an IT or software company specifically selling defective systems to government departments, that would keep me in work for 6-7 years and pay me millions even if I produce nothing that works.
The key problem was the introduction of the NPS software which was supposed to make tax assessment and collection more accurate and efficient. However, as anyone who has worked with databases at any scale knows, significant errors creep in when moving over to a new database. A classic case of this was when the 1901 census was put online. First the database was populated by prisoners who put 'bastard' or some other derogatory phrase beside anyone listed as a police officer or prison warden. Then it was shipped out to India where in ignorance of British surnames, it was assumed from the lists that 'Ditto' was by far the most common surname in the UK in 1901. These were extreme examples, but always errors creep in because humans especially low-paid data entry clerks, are fallible.
There is also a long history of government departments suffering greatly from failing software. Just this year the £12.7 billion NHS (National Health Service) computerised record system was deemed 'close to imploding'. The project, called the National Programme, has already lasted seven years with failures in software and over-runs in implementation, unsurprisingly numerous companies have pulled out or slashed their bills for the work. You can find articles going back into the early 2000s around failed IT projects in the NHS for a whole variety of activities, often over-running. Partners like Fujitsu seem to come back to work for the NHS only to fail and withdraw again.
Air traffic control in the UK has also suffered a great deal from IT and software errors. Twice in 2000 software 'glitches' shut down British air traffic control for hours. The move of British air traffic control from West Drayton near London to Swanwick near the south coast was supposed to overcome such problems. The move did not occur until 2002, six years later than originally planned and even then software problems continued and even in 2008 they were still suffering disruptions due to the software. It was a similar story at Prestwick which handles Scottish airspace. In 2009 there was another computer failure at Prestwick, preventing cross-Atlantic flights. These are just two examples of how important parts of organisations linked to the government (air traffic control was part privatised with the formation of NATS - National Air Traffic Services in 2001), suffered and continue to suffer from computer and software problems. You could have predicted something similar for the HMRC.
Tax is becoming more complex for individuals because many of us have more than one job at a time or pick up short periods of work which we do not pay PAYE tax on. Since the early 2000s far more people have had to do their own tax returns in the way that everyone seems to in the USA, but at least if you do that then you have an idea of what figures are going in and you can tell quickly if what you are being asked to pay seems wrong.
Now, in January 2010, even before the October cutbacks were even dreamt of ('nightmared of' may be more accurate), the HMRC had announced the closure of 130-200 offices and redundancy for 25,000 staff . The amount of unpaid tax that was going to be written off, i.e. tax the HMRC was no longer going to pursue had already risen from 23% in 2006 to 40% in 2009. It is estimated there is £17 billion owed in unpaid tax and for a sizeable minority of those people, generally rich, self-employed people, they will now not ever be pursued. The amount of current unpaid tax is equivalent to 2% of all government expenditure in 2009 (£631 billion) and more than double what is spent on international development; welfare (excluding pensions) took £97 billion in 2009; defence £42 billion, so though while it would not dent those figures greatly, it is a significant amount. In October it was announced that the budget for HMRC would be cut by £990,000 but it was assumed that £7-8 billion would be recouped in going after unpaid tax, though presumably not the £1.5 billion of the bills that arose from the computers which it now seems to be being written off too, due to popular pressure. If the HMRC recoups less revenue then its funding will effectively fall further. It has seen a 24% reduction in staff since 2004 even under Labour and a further 14% (around 10-12,000 staff) in the next five years; staffing will be 58-60,000 compared to 105,000 back in the early 2000s.
It seems ironic that when we know that there are billions of pounds of unpaid tax and the computer system is worsening the situation, that the part of the civil service which brings in revenue is being cut even further. It clearly has been unable to do the job for the last five years (even 23% tax avoidance seems high) and this will worsen in the future. What is this going to mean to the average tax payer? Well, as anyone who has tried telephoning a UK tax office knows, you are very unlikely to have your phonecall answered. The woman in my house tried for 1 hour per day for 3 days without getting a reply. It is clear that many more of us will get the wrong amount of tax taken off us. Those people who work in a number of jobs or freelance and quite often get over-taxed as each employer charges you at the full rate, will probably never see their overpayments refunded.
Of course, in contrast to ordinary people, the government and their allies will be laughing. The Conservatives have always pushed to reduce tax levels, but it is clear now, that when that is not politically acceptable, they simply let their rich supporters not pay any tax at all or only the amount they wish to pay. Lord Ashcroft former treasurer of the Conservative Party, and David Rowland who was offered the post next but withdrew both went into tax exile or failed to pay taxes in the UK. Ashcroft saved £127 million in taxes by not being resident in the UK.
'The 'Guardian' quoting Robert Peston gives a wonderful illustration of how much Sir Philip Green, an advisor to the Coalition Government avoided paying on a single dividend in 2005: ' ...a tax saving to Sir Philip that has been estimated at £300m. That one dividend payment ... was equivalent to what 54,000 people on average earnings would earn in a year, would build around 10 secondary schools capable of educating some 13,000 young people, or, if paid in an unlikely column of pound coins, would tower 2,350 miles about the Earth's surface.' http://www.guardian.co.uk/commentisfree/2010/aug/14/public-spending-philip-green-editorial
Lord Laidlaw a big funder of the Conservative Party and because he was made a lord, a member of the House of Lords, part of the British parliament, stopped funding the party due to questions over the amount of tax he was paying. He is a resident of Monaco, not the UK. Of course, these four are only a miniscule fraction of the 6 million British tax exiles.
These men are just the tip of the iceberg. I think as a sop to people like me, the government says it is going after 'offshore' accounts held by people who owe tax in the UK. Apparently British people have £125 billion in Swiss banks and in an agreement with Swiss authorities £3 billion of unpaid tax on such money will be repatriated; close to £1 billion is supposed to come back from Liechtenstein and another £1 billion from other tax havens around the world, though not the Cayman Islands which apparently has the largest amount of British money held overseas to avoid tax. Even with a larger, better funded HMRC these people have been getting away with massive tax avoidance. How much easier is it going to be for such people now that the HMRC is being shrunk further and its funding reduced? Of course, these people tend to be Conservative voters and particularly supportive of the hard-line New Right policies Cameron has adopted.
Thus, as with so much of the current government policies, the approach to the HMRC means that ordinary people will suffer more. We will get confused statements without explanation, may be under or over charged without our knowledge and then be asked for the money back or have to wait for years for our refund, if it ever comes. I believe I have paid £16,000 too much tax because of confusion over me selling my flat to buy a house (they assumed I owned more than one property at a time, which I never did, I have only owned one property and part of another in my life and never at the same time) but I have no hope that my query will ever be answered. In the meantime, those who have already saved millions in tax will find it even easier to avoid paying any tax and presumably will be freer to reward their friends in the Conservative Party and to spend their money on boosting the income of Monaco or Belize or some other tax haven rather than contributing to the ailing UK economy. Every week it seems there is just yet another area in which the ordinary people of the UK are rapidly and vigorously being shafted so that the privileged can benefit even more than before. Clearly I should set up an IT or software company specifically selling defective systems to government departments, that would keep me in work for 6-7 years and pay me millions even if I produce nothing that works.
Wednesday, 5 November 2008
Property in the UK 12: Capital Gains Tax Shock
My ongoing saga that started in December 2006 with trying to find somewhere to live has filled many blog postings here. To recap, back at the end of 2006 I was forced to leave one house by my landlord wanting the house back. Then in May 2007 (though I did not leave until December) I was forced by the harrassment of the landlord and his defaulting on the mortgage to leave another house. Then there was the aspect of trying to sell my London flat, which I had left behind when I had found work in other areas and being charged £16,500 (€20460; US$26,070) by Newham Council for the privilege of owning a flat in their borough.
Back in June 2008 I embarked on what I hoped to be the final stage: finding out what the capital gains tax was on the sale of my flat. I had to pay capital gains tax as I had left the flat in 2001 to find work in Milton Keynes and so my flat stopped being a home and apparently became business premises. I was making good rent from it about £6-7000, before tax, per year (€7,440-8,680; US$9,840-11,060) though obviously the last couple of years' rent were entirely wiped out by paying off Newham Council's charges. The advice I had always received from bankers, estate agents, etc. was to keep hold of the property because it would rise in value and make me a good profit. No-one ever said to me that I would be hit by a huge capital gains tax bill when I sold it. As it was, I sold the flat at £131,000, probably £9,000 less than it was worth because I used David Daniels, the most conniving estate agents in East London. They tried to get me to sell it at £115,000 whereas similar flats were going for £155,000. I accepted a lower price, because, due to the pressure from the landlords mentioned above I needed to move fast and get out of the rental sector.
Anyway, when I became aware in June 2007, six months before I sold the flat, that I would be liable for capital gains tax (something I had never dealt with before), I contacted the Inland Revenue & Customs (as the tax office is now known in the UK) and they advised me that the charge would be around £6,600. I budgeted for that amount. I did, again encouraged by bankers, estate agents and family, buy into a house which was too expensive for me and had to borrow to the maximum. With hindsight that was a grave error. I should have abandoned the town I was living in as being too expensive and gone somewhere cheaper. However, staying in the area kept the 6-year old boy in the house at the school he had been at since starting aged 4, so there was a sentimental element there which mucked up the economic aspect. Yet, all along, the advice has been completely the opposite to what it should have been. I should have sold the flat back in 2001 and I should have budgeted for far higher capital gains tax.
After having been sent three incorrect forms I completed my capital gains tax form in July 2008 and sent it in. I telephoned every month to find out what the bill was. However, as I have noted before the Manchester office was backlogged because of the stupid policy of the tax office to cut the deadlines for self-assessed tax submissions from 31st January to 31st October leading to overload. This time I found out that all the phone conversations I had were wrong. The officials had assumed I was talking about the assessment of my income not of the capital gains and it was only this time that I finally got through to a specialist, more than three months since I started trying. I thought I had filled the form in correctly. I followed it very carefully, but apparently I had left some relevant boxes empty and so it had been put on one side and forgotten. This is my fault and is a warning to anyone who has not done a particular form before, do not rely on the guidance booklet, take it to the tax office and ask for step-by-step guidance, unless, unlike me, you can afford an accountant. Anyway today they filled in the bits which I had thought irrelevant and told me my bill which is £16,800, just less than double what my worst fears were. I have to pay this by 31st January 2009. I would put the house up for sale, but the market is always slow this time of year in the UK especially with the credit crunch so it is unlikely I can raise the money in time. The house has lost £25,000 anyway. I am going to have to beg around family and the banks otherwise I will be a tax defaulter and someone will end up with the house anyway.
The lessons I have learnt from this ongoing process is, ignore promises you receive about property, it is far less of a safe investment than people think, especially in some local authority areas which are poor where they will squeeze as much as they can from you. Do not rent out a property especially if you do not have another one to live in, sell it as quickly as you can. When you sell it, hold back about 15% of the sale price to pay off the taxes, do not put this into another property. Do not trust the tax office to give you the correct assessment of your tax until they send through the final bill. Do not bother talking to the tax office on the telephone, go into the physical office and ask to speak to specialists, not the frontline tax staff who know very little. I know that I hit all of this at the worst time, but I would have been in little better state three years ago. It seems apparent that from the moment I arrived in Milton Keynes in 2001 I was locked on a bad path towards losing lots of money and my house. No guidance I received through that time ever reduced the impact, in fact it made it far worse. Rental housing with its fixed-term contracts and minimal rights for tenants makes it very hard to control your life anyway, but it is depressing to think that for the past 7 years I have been on this path, seemingly unable to take a step off it. It is astounding how much little decisions impact on me. If I had been faster and got one or another flat in a different borough, if I had picked on a different house when I left Milton Keynes, then a lot of this could have been avoided. The woman in my house says I should not feel blighted or destined to fail, but with my inability to shake off demand after demand for money how can I feel any other way?
Back in June 2008 I embarked on what I hoped to be the final stage: finding out what the capital gains tax was on the sale of my flat. I had to pay capital gains tax as I had left the flat in 2001 to find work in Milton Keynes and so my flat stopped being a home and apparently became business premises. I was making good rent from it about £6-7000, before tax, per year (€7,440-8,680; US$9,840-11,060) though obviously the last couple of years' rent were entirely wiped out by paying off Newham Council's charges. The advice I had always received from bankers, estate agents, etc. was to keep hold of the property because it would rise in value and make me a good profit. No-one ever said to me that I would be hit by a huge capital gains tax bill when I sold it. As it was, I sold the flat at £131,000, probably £9,000 less than it was worth because I used David Daniels, the most conniving estate agents in East London. They tried to get me to sell it at £115,000 whereas similar flats were going for £155,000. I accepted a lower price, because, due to the pressure from the landlords mentioned above I needed to move fast and get out of the rental sector.
Anyway, when I became aware in June 2007, six months before I sold the flat, that I would be liable for capital gains tax (something I had never dealt with before), I contacted the Inland Revenue & Customs (as the tax office is now known in the UK) and they advised me that the charge would be around £6,600. I budgeted for that amount. I did, again encouraged by bankers, estate agents and family, buy into a house which was too expensive for me and had to borrow to the maximum. With hindsight that was a grave error. I should have abandoned the town I was living in as being too expensive and gone somewhere cheaper. However, staying in the area kept the 6-year old boy in the house at the school he had been at since starting aged 4, so there was a sentimental element there which mucked up the economic aspect. Yet, all along, the advice has been completely the opposite to what it should have been. I should have sold the flat back in 2001 and I should have budgeted for far higher capital gains tax.
After having been sent three incorrect forms I completed my capital gains tax form in July 2008 and sent it in. I telephoned every month to find out what the bill was. However, as I have noted before the Manchester office was backlogged because of the stupid policy of the tax office to cut the deadlines for self-assessed tax submissions from 31st January to 31st October leading to overload. This time I found out that all the phone conversations I had were wrong. The officials had assumed I was talking about the assessment of my income not of the capital gains and it was only this time that I finally got through to a specialist, more than three months since I started trying. I thought I had filled the form in correctly. I followed it very carefully, but apparently I had left some relevant boxes empty and so it had been put on one side and forgotten. This is my fault and is a warning to anyone who has not done a particular form before, do not rely on the guidance booklet, take it to the tax office and ask for step-by-step guidance, unless, unlike me, you can afford an accountant. Anyway today they filled in the bits which I had thought irrelevant and told me my bill which is £16,800, just less than double what my worst fears were. I have to pay this by 31st January 2009. I would put the house up for sale, but the market is always slow this time of year in the UK especially with the credit crunch so it is unlikely I can raise the money in time. The house has lost £25,000 anyway. I am going to have to beg around family and the banks otherwise I will be a tax defaulter and someone will end up with the house anyway.
The lessons I have learnt from this ongoing process is, ignore promises you receive about property, it is far less of a safe investment than people think, especially in some local authority areas which are poor where they will squeeze as much as they can from you. Do not rent out a property especially if you do not have another one to live in, sell it as quickly as you can. When you sell it, hold back about 15% of the sale price to pay off the taxes, do not put this into another property. Do not trust the tax office to give you the correct assessment of your tax until they send through the final bill. Do not bother talking to the tax office on the telephone, go into the physical office and ask to speak to specialists, not the frontline tax staff who know very little. I know that I hit all of this at the worst time, but I would have been in little better state three years ago. It seems apparent that from the moment I arrived in Milton Keynes in 2001 I was locked on a bad path towards losing lots of money and my house. No guidance I received through that time ever reduced the impact, in fact it made it far worse. Rental housing with its fixed-term contracts and minimal rights for tenants makes it very hard to control your life anyway, but it is depressing to think that for the past 7 years I have been on this path, seemingly unable to take a step off it. It is astounding how much little decisions impact on me. If I had been faster and got one or another flat in a different borough, if I had picked on a different house when I left Milton Keynes, then a lot of this could have been avoided. The woman in my house says I should not feel blighted or destined to fail, but with my inability to shake off demand after demand for money how can I feel any other way?
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.
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.
Tuesday, 12 August 2008
The Morality of Bankruptcy
Bankruptcy, as I have noted before, has become a fact of life for many people in Britain over the past few years. Once it was just the realm of businesses, but now thousands of people each year are going personally bankrupt. This is not surprising in a country where food, fuel and accommodation are already among the most expensive in Europe and where salaries rise very slowly and 80% of the population earns below the average salary. The UK is a country where the companies which control the basics of living such as water, sewage, gas and electricity are making millions of pounds of profit whilst people are shoved into fuel and water poverty. Repossessions of houses have risen 48% in the past year and are set to increase meaning that more people are thrown on to the very diminished public housing sector and into private rented accommodation where landlords/ladies can abuse them and increasingly where rented properties are also being repossessed by banks leaving tenants homeless without even notification of the process going on until they are evicted, even if they have been paying their rent religiously throughout.
For our young people, we have got to a situation where you cannot get a job or at least a decent job at all without a degree. However, studying at a university is will put you into at least £20,000 (€32,000; US$40,000) in debt. It is clear why this is wanted, it effectually makes graduates indentured and dissuades them from doing anything risky or radical and certainly not protesting against the state. However, it does saddle them with debt from the start of their working lives (assuming they can get a job with unemployment rising sharply) and is effectively meaning that 5-15 years from now even fewer people will be able to afford to buy a house than at present and yet no-one is making provision to increase either the social housing or the private rental market. It can be seen as a big boost to those rentiers currently snapping up houses and flats put on the market by people who had a 'buy-to-let' property which they cannot keep up. It will put many more people into the hands of the unscrupulous (and you show me a decent landlord/lady, I have yet to meet one, they are greedy and mean and have no consideration at all for the tenants who provide their income treating them all as if they are criminals and seeking to screw every last penny from them) landlords/ladies. They will have increased demand in the next decade that they can exploit to keep rents (that have no control on them in the UK) high and the quality of what they provide very low.
You have to earn over £15,000 in order to start paying back a student loan and most graduates (and I spoke to a man who researches this) earn only £17,000 per year (about £7000 less than the national average salary). Of course the debt does not go away until either they reach 65 or are so disabled that they can no longer work. Even if they go abroad it hangs over them. I can see the rise of UK student loan exiles in France, Spain and the USA rising. Of course taking a degree should be seen as an investment in your future, but of course it is not, because now everyone has them. It is like having to pay £20,000 to buy a school-leaving certificate. Rather for UK people it is a beginning of the process of British society draining as much money from them as possible with giving minimum back. We are the donors to keep the wealthy very rich. There is no sense that you can ever be without debt in the UK. You are hooked up to the blood-draining device at the age of 16 and are never let free because if you were then some rich people might actually have to work for their income rather than suck it from you. I can see where the writers of 'The Matrix' got their idea for humanity being a resource drained by parasitic controllers!
Currently there is one escape from all these pressures on people: bankruptcy. Though student loans are exempt from bankruptcy. Now, I have noted a trend to try and plug this gap. Of course bankruptcy is not the easy solution. It means that for six years you will find it very difficult to get credit for a mortgage, a car or anything and in the UK that effectively bars you from purchasing so many things. Bankruptcy also bars you from entering professions such as the law or accountancy, as if most of us had a chance of getting into either of those, though they are popular with graduates, so for them this is an issue. Also many of your possessions will be taken, that new computer and that ipod and the DVD player will no longer be yours. You can have old furniture and an old car (well I am in a fine position, my car is now 11 years old and rusting and my furniture was second hand when I got it 6 years ago and is coming apart, I can afford nothing newer). Make sure no-one dies and leaves you an inheritance while you are bankrupt because that too will be taken. Avoid winning the lottery too, unless it is such a big win that it can wipe out your debts. So bankruptcy is a way out but it is not an easy way or a decision that is taken lightly.
Now, to stop people using bankruptcy to escape the indenturement that society wants to shackle them with, I have noticed that people have started talking about how 'immoral' bankruptcy is. I heard this first from the Inland Revenue's sickly-named Time-To-Pay Helpline. If you ever want to be told how foolish you are and how you are trying to cheat the state and are a despicable you are and do not happen to have an irascible elderly relative handy then call these people up. They portray you as a tax cheat if you dare even mention bankruptcy. I noticed even the Money section of 'The Guardian' talks of the questionable 'morality' of bankruptcy. Putting this moral censure on people is utterly perverse. Who questions the morality of utility company and petrol company bosses awarding themselves million pound bonuses as they squeeze ordinary people into poverty? Who questions the morality of landlords/ladies who charge high rents and then provide no service to their tenants and then come after them for fictitious charges?
In the UK it is clear that the perspective on morality has become totally twisted. What is clearly moral now in the view of the civil service and the media is to exploit ordinary people to the fullest extent that you can. It is no longer a question of 'I'm Alright Jack', what we are being told to adopt is 'I'm Alright Jack, but I must get more money from you and you are going to suffer as a consequence'. Any attempt to escape from such rapacious behaviour is being condemned. In the UK society insists that you make yourself amenable to being exploited and to not having a stable let alone comfortable life. If you dare challenge your exploitation then you are the ones portrayed as immoral. This is sick. This is a sick society, stay away from it if you have any sense.
For our young people, we have got to a situation where you cannot get a job or at least a decent job at all without a degree. However, studying at a university is will put you into at least £20,000 (€32,000; US$40,000) in debt. It is clear why this is wanted, it effectually makes graduates indentured and dissuades them from doing anything risky or radical and certainly not protesting against the state. However, it does saddle them with debt from the start of their working lives (assuming they can get a job with unemployment rising sharply) and is effectively meaning that 5-15 years from now even fewer people will be able to afford to buy a house than at present and yet no-one is making provision to increase either the social housing or the private rental market. It can be seen as a big boost to those rentiers currently snapping up houses and flats put on the market by people who had a 'buy-to-let' property which they cannot keep up. It will put many more people into the hands of the unscrupulous (and you show me a decent landlord/lady, I have yet to meet one, they are greedy and mean and have no consideration at all for the tenants who provide their income treating them all as if they are criminals and seeking to screw every last penny from them) landlords/ladies. They will have increased demand in the next decade that they can exploit to keep rents (that have no control on them in the UK) high and the quality of what they provide very low.
You have to earn over £15,000 in order to start paying back a student loan and most graduates (and I spoke to a man who researches this) earn only £17,000 per year (about £7000 less than the national average salary). Of course the debt does not go away until either they reach 65 or are so disabled that they can no longer work. Even if they go abroad it hangs over them. I can see the rise of UK student loan exiles in France, Spain and the USA rising. Of course taking a degree should be seen as an investment in your future, but of course it is not, because now everyone has them. It is like having to pay £20,000 to buy a school-leaving certificate. Rather for UK people it is a beginning of the process of British society draining as much money from them as possible with giving minimum back. We are the donors to keep the wealthy very rich. There is no sense that you can ever be without debt in the UK. You are hooked up to the blood-draining device at the age of 16 and are never let free because if you were then some rich people might actually have to work for their income rather than suck it from you. I can see where the writers of 'The Matrix' got their idea for humanity being a resource drained by parasitic controllers!
Currently there is one escape from all these pressures on people: bankruptcy. Though student loans are exempt from bankruptcy. Now, I have noted a trend to try and plug this gap. Of course bankruptcy is not the easy solution. It means that for six years you will find it very difficult to get credit for a mortgage, a car or anything and in the UK that effectively bars you from purchasing so many things. Bankruptcy also bars you from entering professions such as the law or accountancy, as if most of us had a chance of getting into either of those, though they are popular with graduates, so for them this is an issue. Also many of your possessions will be taken, that new computer and that ipod and the DVD player will no longer be yours. You can have old furniture and an old car (well I am in a fine position, my car is now 11 years old and rusting and my furniture was second hand when I got it 6 years ago and is coming apart, I can afford nothing newer). Make sure no-one dies and leaves you an inheritance while you are bankrupt because that too will be taken. Avoid winning the lottery too, unless it is such a big win that it can wipe out your debts. So bankruptcy is a way out but it is not an easy way or a decision that is taken lightly.
Now, to stop people using bankruptcy to escape the indenturement that society wants to shackle them with, I have noticed that people have started talking about how 'immoral' bankruptcy is. I heard this first from the Inland Revenue's sickly-named Time-To-Pay Helpline. If you ever want to be told how foolish you are and how you are trying to cheat the state and are a despicable you are and do not happen to have an irascible elderly relative handy then call these people up. They portray you as a tax cheat if you dare even mention bankruptcy. I noticed even the Money section of 'The Guardian' talks of the questionable 'morality' of bankruptcy. Putting this moral censure on people is utterly perverse. Who questions the morality of utility company and petrol company bosses awarding themselves million pound bonuses as they squeeze ordinary people into poverty? Who questions the morality of landlords/ladies who charge high rents and then provide no service to their tenants and then come after them for fictitious charges?
In the UK it is clear that the perspective on morality has become totally twisted. What is clearly moral now in the view of the civil service and the media is to exploit ordinary people to the fullest extent that you can. It is no longer a question of 'I'm Alright Jack', what we are being told to adopt is 'I'm Alright Jack, but I must get more money from you and you are going to suffer as a consequence'. Any attempt to escape from such rapacious behaviour is being condemned. In the UK society insists that you make yourself amenable to being exploited and to not having a stable let alone comfortable life. If you dare challenge your exploitation then you are the ones portrayed as immoral. This is sick. This is a sick society, stay away from it if you have any sense.
Tuesday, 1 July 2008
Property in the UK 10: Watch Out! Capital Gains Tax
As regular readers of this blog will know last year I had to move twice, had a £16,500 bill from Newham Council in London for owning a flat in their borough, got ripped off by my estate agent selling the flat and overcharged on the house I was trying to buy. After all that, I thought this year in terms of housing (despite the landlord from the last place still trying to get a further £1400 off me) things would settle down. Like the bulk of the population in the UK and across the world, I have been finding it hard to get by with rising food and fuel prices and have had to cut back severely right across everything I buy. I have now had no new items of clothing for 3 years. However, my problems are just beginning and that is because of capital gains tax.
Now, most people do not have to pay capital gains tax when they sell their house. However, I made a huge mistake when I left my flat in Newham and went to Milton Keynes for a far better job. Everyone told me that I would be foolish to sell the London flat as the value of property in London rises far faster than anywhere else in the UK and also I could get a good income from letting it out. That all turned out to be fantasy, I should have sold the flat as soon as I knew I would be working beyond commuting distance. The flat was worth more than when I bought it, but almost any property I bought in the UK would have been worth more after a few years and I lost out on at least £10-12,000 (€12,200; US$19,900 - €14,600; U$23,800) because of using such a bad estate agents. I was overcharged £5000 on the house I bought and in the recent slide in prices it has lost £20,000 on what I paid on it. Every choice I made basically cost me money. The £16,500 bill from Newham Council wiped out all the rent I had ever earnt on the property, so the only gain was in value and I had had a lot of hassle being a landlord at a distance too, costing me at least £2000 (€2,400; US$3,900) in upkeep of the property each year and some years as much as £4,600.
The reason why I should have sold my flat immediately when I left London is because I would have been free of yet another charge, capital gains tax. This is aimed at you when you sell up a business and really should cover things like factories and machinery. As such you cannot set any loss in income (I made a huge loss in the final year of renting out the property due to all the charges) against this tax. I am now liable for at least £6,600 (€8000; US$13,100) and possibly as much as £8,000. I cannot get the final figure as Her Majesty's Revenue and Customs (the name now for the tax office) sent me two sets of the wrong form and another partial form covering the tax year 2006/07 rather than the one we are dealing with at present 2007/08. I telephoned to ask them if I could pay instalments on the tax and was told that because it is over £2000 that is not possible. They offered to allow me to start paying it now rather than on the deadline of 31st January, but given that I have no money that is no benefit.
What made the whole experience of talking to the tax office was not the fact that again the advice I had received (that you could pay in instalments) was wrong, but their whole manner. The woman said I had been foolish to put all the money I had earnt from the flat sale into buying my new house and should have held back enough money to pay the tax. I am no tax expert and usually selling a property you only get stamp duty. How much should I have held back? If I had kept back £4000 then it would have seemed a lot but would have been insufficient. As it was I bought too expensive a house, I listened to those people who said it was a good investment, but now, just six months later it looks like it will have to be sold to cover my capital gains tax. I asked if I could go bankrupt and the woman said it was possible but sneered at me accusing me of trying to dodge my taxes by going bankrupt. I accept I have made mistakes, I accept that all the financial I have received for the past ten years has been utterly wrong and has cost me thousands of pounds, but I do not need some official rubbing it in, goading me and portraying me as if I am trying to defraud the country.
Like so many people I was pressurised to buy a house, by the fact that it is the only way to get any kind of investment growing in the UK, the fact that I was pushed around by landlords/ladies and that you have no standing in this country if you are not a property owner. Like so many people I am going to have to give up that house now, if I can sell it that is or face as the woman told me with glee (she seemed eager to get proceedings started immediately) I will face legal proceedings. I just dream of a day when I can just go to work, come home and go to sleep without people coming after me for money. I am happy to pay tax but cannot keep conjuring up thousands of pounds on demand. We are not all rational business thinkers, we are pushed by other pressures than pure economics. I keep wishing I had killed myself last August and got away from all these sleepless nights (exacerbated by the prospect of losing my job in August 2009). No wonder people are angry. I was once comfortably off and seemed to have a future, many people have had it far worse than me. If I am angry and disheartened no wonder the one-in-six British people who envisage losing their home to creditors in the next year are furious and suicidal. We played the Thatcherite game of becoming property owners not realising that we had lost even before we had started and only the super-rich can win in this system.
Now, most people do not have to pay capital gains tax when they sell their house. However, I made a huge mistake when I left my flat in Newham and went to Milton Keynes for a far better job. Everyone told me that I would be foolish to sell the London flat as the value of property in London rises far faster than anywhere else in the UK and also I could get a good income from letting it out. That all turned out to be fantasy, I should have sold the flat as soon as I knew I would be working beyond commuting distance. The flat was worth more than when I bought it, but almost any property I bought in the UK would have been worth more after a few years and I lost out on at least £10-12,000 (€12,200; US$19,900 - €14,600; U$23,800) because of using such a bad estate agents. I was overcharged £5000 on the house I bought and in the recent slide in prices it has lost £20,000 on what I paid on it. Every choice I made basically cost me money. The £16,500 bill from Newham Council wiped out all the rent I had ever earnt on the property, so the only gain was in value and I had had a lot of hassle being a landlord at a distance too, costing me at least £2000 (€2,400; US$3,900) in upkeep of the property each year and some years as much as £4,600.
The reason why I should have sold my flat immediately when I left London is because I would have been free of yet another charge, capital gains tax. This is aimed at you when you sell up a business and really should cover things like factories and machinery. As such you cannot set any loss in income (I made a huge loss in the final year of renting out the property due to all the charges) against this tax. I am now liable for at least £6,600 (€8000; US$13,100) and possibly as much as £8,000. I cannot get the final figure as Her Majesty's Revenue and Customs (the name now for the tax office) sent me two sets of the wrong form and another partial form covering the tax year 2006/07 rather than the one we are dealing with at present 2007/08. I telephoned to ask them if I could pay instalments on the tax and was told that because it is over £2000 that is not possible. They offered to allow me to start paying it now rather than on the deadline of 31st January, but given that I have no money that is no benefit.
What made the whole experience of talking to the tax office was not the fact that again the advice I had received (that you could pay in instalments) was wrong, but their whole manner. The woman said I had been foolish to put all the money I had earnt from the flat sale into buying my new house and should have held back enough money to pay the tax. I am no tax expert and usually selling a property you only get stamp duty. How much should I have held back? If I had kept back £4000 then it would have seemed a lot but would have been insufficient. As it was I bought too expensive a house, I listened to those people who said it was a good investment, but now, just six months later it looks like it will have to be sold to cover my capital gains tax. I asked if I could go bankrupt and the woman said it was possible but sneered at me accusing me of trying to dodge my taxes by going bankrupt. I accept I have made mistakes, I accept that all the financial I have received for the past ten years has been utterly wrong and has cost me thousands of pounds, but I do not need some official rubbing it in, goading me and portraying me as if I am trying to defraud the country.
Like so many people I was pressurised to buy a house, by the fact that it is the only way to get any kind of investment growing in the UK, the fact that I was pushed around by landlords/ladies and that you have no standing in this country if you are not a property owner. Like so many people I am going to have to give up that house now, if I can sell it that is or face as the woman told me with glee (she seemed eager to get proceedings started immediately) I will face legal proceedings. I just dream of a day when I can just go to work, come home and go to sleep without people coming after me for money. I am happy to pay tax but cannot keep conjuring up thousands of pounds on demand. We are not all rational business thinkers, we are pushed by other pressures than pure economics. I keep wishing I had killed myself last August and got away from all these sleepless nights (exacerbated by the prospect of losing my job in August 2009). No wonder people are angry. I was once comfortably off and seemed to have a future, many people have had it far worse than me. If I am angry and disheartened no wonder the one-in-six British people who envisage losing their home to creditors in the next year are furious and suicidal. We played the Thatcherite game of becoming property owners not realising that we had lost even before we had started and only the super-rich can win in this system.
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