Don't trust the UK Inland Revenue Service

Wen | special contributor to Caijing Wei Cheng from London

Editor| Haozhou

When you wake up, you find that a big pie has fallen from the sky, but this big pie can neither be eaten nor thrown away. Returned to the original owner? The original owner lives in heaven and cannot be contacted at all. In the end, the dream turned into a nightmare...

This is the true story of what a single mother, Helen Peters (not her real name), went through in a seaside town in the south of England.

"Pie from heaven" becomes "time bomb"

One day in August 2020, Helen woke up to find a significant increase in her bank account: almost £775,000.

Of course, the original owner of the "big pie" did not live in heaven, but on earth - it was the British Tax Office that threw this "big pie" into Helen's bank account: they were supposed to refund the tariff of £23.39 for one of Helen's parcels, but due to a mistake in work, they refunded £774839.39!

Helen recalls her strange feelings at the time: "It was like a scene from a Hollywood movie. After the shock, I think there must be someone in the tax office who will realize that they have made a huge mistake and they will quickly get the money back. But no one did it, and the money just kept lying in my account. ”

Helen, of course, knew that this "big pie" from the inland revenue office, she absolutely could not eat, she called the British tax office many times, wanted to tell them about the mistake, but the phone was never answered.

According to the INSE's annual report, in the previous tax year, one in five taxpayers' calls to the inland revenue department went unanswered, and they had to wait an average of more than 12 minutes before someone answered the call, which was almost twice as long; they asked some of the most basic questions on the IRD's official website and waited seven months to get an answer.

Helen waited another three months, and when she filed her taxes in November, she thought the tax office would have noticed the huge mistake, but nothing happened.

When Shelen first received the huge sum, she told several friends that some people told her to do nothing and wait to see what would happen; others suggested that she invest the money in the stock market or housing market, hoping that she would never receive a refund from the tax office.

In this way, from August 2020 to November 2021, Helen waited for a full 15 months, and the "big pie" became a "time bomb". Helen couldn't stand it anymore and went to the media, hoping that the media would contact the INLAND revenue service, let the tax office know about the mistake, and then get the money back.

After hard work, the media finally contacted the tax office. When the tax office learned of the mistake, it contacted Helen and asked her to refund her.

But now Helen is facing the same dilemma as "Catch 22": Helen is not rich, and the tax office's "big pie" fell from the sky during the COVID-19 epidemic, when her training business was almost completely stopped by the epidemic, and her income was greatly reduced, spending nearly £20,000 of the tax office's money in those 15 months. If the tax office asks her to return the money, she cannot return it in full right away.

Helen said that at one point she considered investing a portion of the money in cryptocurrencies in hopes of earning back the money she spent so she could return the full amount to the tax office.

"It is better not to assume that the tax office is always correct"

The UK tax system often goes wrong, but most of the time it's not about throwing you a "big pie" but overcharging you.

For example, between July and September 2021 alone, the INLAND revenue department overcharged Britons on pensions by more than £44 million. In addition, in the first quarter of this year, nearly 7,400 Uk pensioners were overcharged by the inland revenue department, with an average of more than 3,000 pounds overcharged each person.

Another example is that a retired former tanker truck driver in Kafili, South Wales, England, was wrongly overcharged by 16 years of local taxes, and when he discovered this mistake, he was told that he could not fully recover the excess tax.

UK taxation is divided into national taxes and local taxes. The national tax is controlled by the central government, accounting for about 90% of the country's tax revenue, and is the most important source of central fiscal revenue. Local taxes are the responsibility of local governments, accounting for about 10% of the country's tax revenue, and are an important source of local fiscal revenue, but not the main source.

Local taxes in the UK, also known as municipal taxes, are actually property taxes, or council taxes in English, which are levied according to your home valuation scale. As early as the 18th century, the United Kingdom began to levy property taxes, the original tax standard is the number of stoves in the home, so it is also called "stove tax", and later changed to the number of windows in the house to collect, so it is also called "window tax". Property tax in the UK today is divided into eight levels (from A to H) from low to high, based on the valuation of the house and the area in which it is located.

Philip Phillips, 65, lives in a house that was incorrectly overvalued by local authorities, paying more than £4,000 more in local taxes over 16 years, but when he discovered the error, he was told that he would only get a refund for 6 years under the retroactive statute of limitations set by the local government, so he paid an extra £2,600 in local taxes in vain.

Insurer Royal London said that in the 2018/19 tax year alone, nearly 500,000 UK taxpayers believe they overpaid their personal income tax and contacted the UK Inland Revenue Service to request a refund. Information shows that the UK Inland Revenue Department refunded a total of £5.1 billion to taxpayers during the tax year.

Becky O'Connor, a personal finance specialist at Royal London, said: "This shows that we'd better not assume that the tax office is always correct, you need to always check your tax returns every year and write down any unusual changes in your income, as this could mean you're overpaying your taxes." ”

"Tax Reef"

Over the years, reports of errors in the UK tax system have often appeared in the press and on the Internet, such as lost taxpayer letters, incorrect tax codes, inaccurate tax calculations, and inland revenue department staff sometimes issuing outrageously incorrect statements, and tax system errors involving taxpayers' losses in money, time and spirit, which are clearly more serious than most errors in other parts of government.

However, the main problem of the British tax system is not the frequent errors, but its bloated complexity, which ordinary people simply cannot understand, and this complex tax system thus feeds a large number of so-called "tax advisers".

The British tax system is mainly direct tax, supplemented by indirect tax, the main taxes include personal income tax, corporate income tax, national insurance tax, value-added tax, oil revenue tax, stamp duty, capital gains tax, domestic consumption tax, inheritance tax, customs duties and so on. Personal income tax is the largest single source of government revenue in the UK, accounting for about 30% of total government revenue, followed by the national insurance tax, which accounts for about 20%. Indirect taxes are a subsidiary to the UK tax system and account for a relatively low proportion of total tax revenues.

Just as the English common law system is different from the European civil law system, the United Kingdom does not have a separate written tax law, the British government's annual budget, usually have many new provisions on taxation, new changes, over time, the British tax system has become extremely complicated, which even makes many accountants and lawyers who make a living shout headaches, not to mention ordinary taxpayers.

In the words of a well-known British media personality, Britain's tax system continues to inflate in the headlines about the budget every year, swelling into a bizarre coral reef full of all kinds of seductive labyrinths and hidden dangers, and the annual changes bring rich jobs to accountants and lawyers, and also bring many ordinary people the trap of being fooled and deceived by accountants and lawyers.

Some people have compared the British tax system with the tax system in Hong Kong, China, and found that Hong Kong's tax law is less than 300 pages, while the British tax law has 17,000 pages.

Britain's tax system is so complicated that ordinary taxpayers who honestly abide by the law are punished because they can't afford to hire "tax consultants", so they pay more taxes and pay taxes wrongly, and those rich people who are making money every day can rely on the advice of "tax advisers" to take advantage of legal loopholes, pay less taxes, or even no taxes, which is called "legal tax avoidance".

In recent years, in the UK, the so-called "legal tax avoidance" has been a topic of considerable public concern, although there is no clear legal definition of the content of tax avoidance in British law. Tax avoidance is different from tax evasion, which refers to someone's illegal non-payment of taxes, and tax avoidance seems to be someone's behavior of avoiding paying taxes without breaking the law. However, compared with simple tax planning, the deliberate tax avoidance of legal loopholes, although it does not seem to violate specific legal provisions, is obviously contrary to the original intention of legislators to formulate these legal provisions.

But the crux of the matter is, who provides the "tax reef" for the billionaires and their "tax advisers" who dance between complicated laws? Aren't they the legislators who build a "tax maze" in the budget every year?

In fact, the British Tax Office often makes mistakes in its work, and it also has a certain relationship with the bloated and complex british tax system. Even accountants, lawyers and "tax advisers" who make money from complex tax systems are clamoring for the accumulated tax rules every year, so it is not surprising that the officials in the UK Tax Revenue Service who "hit the clock for a day" make mistakes in their work.

Helen was lucky. When the media reported that the INLAND revenue service had mistakenly remitted nearly 775,000 pounds to her bank account, the tax office may have been ashamed and did not dare to ask Helen to return all the money at once, but reached a five-year gradual return agreement with Helen.

One tax expert pointed out that because the money is not "the original owner", that is, the money was not originally remitted by the tax office to another person or another company, the tax office may never have found this mistake if it were not for Helen's initiative to contact the media.

(The author has worked as a senior journalist and editor in many well-known media outlets in the United Kingdom.) Author WeChat public number: Weicheng to see the world)