James Mason from accountants Fifth Element talks straight about business
Death and taxes
A day in the life of ‘Honest Harry’ and how just going home can be taxing…
Honest Harry starts work at 7am. At 10am his boss says he’s not working hard enough. He doesn’t have time for a lunch break and at 3pm he’s wondering how to get four hours’ work done in two hours. At 5pm he has to work an hour’s unpaid overtime. At 6pm he still hasn’t finished but Honest Harry’s troubles really start when he sets off for home.
At source
Harry collects £100 of wages. The business owner comes over as he gets into his car. “Hey, wait a minute, Harry! Payroll forgot to take off your deductions. We’re going to need £20 back for income tax, £12 for your NI contribution, £2 for the NI that exceeds the Upper Earnings limit and another £13.80 for the NI that we have to pay on your earnings over the Secondary threshold. We have to pay this on your behalf so it’s only fair that you pay it.” Harry frowns, a bit confused, and reluctantly pays back £47.80. “Okay,” he thinks, “it could be worse; I’ve still got £52.20.”
It’s your duty
Harry pulls into a petrol station. He puts £49.50 of unleaded into his car and walks to the kiosk. “Hello,” says the owner, “it’s your lucky day. Customers only have to pay the duty charges on their petrol.” He continues, “All we need is 60 per cent of what you’ve spent to cover the tax and duty we have to give the government for the fuel you’ve used to be able to drive to work.” Harry hands over £29.70. He’s pleased, but puzzled why he’s £29.70 down despite having spent nothing? He scratches his head. “I know,” he thinks, “I’ll cheer myself up with a take-away and a bottle of wine.”
The more you give
“Good evening,” says the take-away owner, “it’s your lucky day. Customers only have to pay the tax on their food” Harry excitedly orders. Ten minutes later he gets his bag. “That’ll be £7, sir.” “Oh,” says Harry, “I thought food didn’t have tax on it?” “Ah, well, sir,” explains the owner, “food sold above an ambient air temperature does, unless of course it’s freshly made bread, then it doesn’t, although if it’s part of a meal that would normally be taxed, then it does. Harry scratches again, and hands over £7. Next, he buys a £10 bottle of wine. Same offer, same deal, 55 per cent and £5.50 later, he gets home.
Grim and reaping
Unpacked, uncorked, Harry sits on his sofa. £10 rests on the coffee table left over from his day’s efforts. He switches on the television, grabs his chest and dies of a heart attack. He rises up to heaven but he hasn’t made a will. The next day he’s looking down when he sees a Probate Officer in his living room. “Oh,” says the officer, “look, there’s a tenner on the table. We might as well have that.” Remember this… most tax avoidance isn’t “morally-repugnant”, talk to your accountant about wealth management and visit an estate planning specialist, soon.
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