Taxation. Would it make sense to...

JimmyTheWig

danothy wrote: »

While I don't necessarily disagree with the bolded sentiment, I've yet to hear a valid deterministic argument as to why they 'should'. After all, 'should' indicates that it is an obligation, but the statement, as it stands, lacks the reasoning for this obligation.

I think they should because they are able to.
I think that's how a society should work.
If I am on a train and a pregnant woman gets on then I think I should (and I do) give up my seat for her. I am more able to stand for the journey than she is, so I should stand.
If I go shopping with my children then I should (and, again, I do) carry most of the weight of the shopping. Because I am more able to do so.

Pennywise

richbeth wrote: »

Of course you hear the odd story about somebody having a new kitchen put in then getting a recipt for working on their office but this is straight fraud and should be treated as such. There's no need for new taxes or rules to do this.

Absolutely spot on there.

A businessman can't get tax relief for wages to his wife if she doesn't actually do the work. If a business does, then it's HMRC's fault for not enquiring and disputing it.

Same with the likes of claiming for dresses, suits, shoes, etc - it's just not allowed for most businesses - people claiming it are getting away with it because HMRC aren't checking up properly - they're not allowed to claim for it.

I've just had a client try to claim for the latest Ipad against his tax - because there's no sign of him using even a PC for his business, I questioned how much time he used it for business - he replied none (as I expected), but had put it through the books because all his mates had done so! As such it's not going in his accounts and tax return - he genuinely thought it was allowed!

So much "pub talk" and so little proper research, made worse by HMRC's incompetence at checking up.

chewmylegoff

well lucky then that we have a taxation system which reflects what you think should happen - taxes are a % of income, and ratchet up to higher %ages when you earn over certain thresholds. the result is that those with more income (i.e. those who can afford to) pay more. similarly with taxation on consumption, if you buy more stuff (as a result of being able to afford to) you pay more tax.

yes the system is imperfect because people can manipulate where and when their income is earned, so some people scam the system, as they would with any system. however, in general, the system ensures that those who are able to do so shoulder the majority of the tax burden.

danothy

JimmyTheWig wrote: »

I think they should because they are able to.
I think that's how a society should work.
If I am on a train and a pregnant woman gets on then I think I should (and I do) give up my seat for her. I am more able to stand for the journey than she is, so I should stand.
If I go shopping with my children then I should (and, again, I do) carry most of the weight of the shopping. Because I am more able to do so.

Ok, so you think things should be a certain way (not that I am disagreeing as such), but why does being more able to do something mean you should do more of it? What is it about capability that compels?

ILW

JimmyTheWig wrote: »

I think they should because they are able to.
I think that's how a society should work.
If I am on a train and a pregnant woman gets on then I think I should (and I do) give up my seat for her. I am more able to stand for the journey than she is, so I should stand.
If I go shopping with my children then I should (and, again, I do) carry most of the weight of the shopping. Because I am more able to do so.

On the same theme, if there was someone bigger and stronger than you around, do you think they should be forced to carry your shopping for you because they are more able to do so?

lovinituk

chewmylegoff wrote: »

surely if you can't increase your prices your turnover is down (as you have had to build VAT into your current pricing structure) as turnover is stated net of VAT and your profit is also down.

but in any case, if all businesses suddenly had to pay output VAT but could not claim back input VAT then all businesses are going to be looking to put their prices up at the same time as effectively you have just massively increased taxation on business (well most businesses anyway, a very high margin business whereby turnover was very similar to profit before taxd would probably be better off), but their shareholders still want the same net return.

Not sure if my post was missed as it was the last one on page 1 but I would be interested in your thoughts on my response to post #20 as to whether I have understood VAT correctly or not.

JimmyTheWig

lovinituk wrote: »

Lets say I sold something pre-VAT reg for £100 and say made pre-tax profit of £30. Now come VAT reg, I can't increase that sale price so still sell at £100 - the VAT I owe on that is £16.66 so my pre-tax profit is now £13.33 (assuming I can't claim any VAT back, which in reality I probably could on the purchase of the stock). So basically I have to sell two and half of those (turnover of £250) to make the same pre-tax profit. Am I wrong?

chewmylegoff's point was that if your price used to be £100 and is now £83.33+vat then selling two and a half of these will contribute £208.33 to your turnover, not £250, as turnover doesn't include VAT.

That is why he says your turnover has gone down. Pre-VAT registration your turnover would have been £250 for this sale but post-registration it is £208.33.

But I think your point is that your turnover has increased because your business is expanding, rather than because of the VAT registration. (And the VAT registration is because of the business expanding.)
So last year you sold two units for a turnover of £200. This year you sell two and a half for a turnover of £208.33. So as far as you are concerned your turnover has gone up.


But you are absolutely right that you can claim back the VAT on the stock that you bought to use for the business. So your profits won't be as high as if you weren't charging VAT, but they will be higher than you have quoted above.

CLAPTON

lovinituk wrote: »

Not sure if my post was missed as it was the last one on page 1 but I would be interested in your thoughts on my response to post #20 as to whether I have understood VAT correctly or not.

you have understood the maths of VAT and indeed your profit has now been reduced

as you recognise, you can offset your payment with any VAT you have paid on inputs to your business.

also and probably no consolation, you have benefited previously by being VAT free in comparison to any VATed competitors.

JimmyTheWig

danothy wrote: »

Ok, so you think things should be a certain way (not that I am disagreeing as such), but why does being more able to do something mean you should do more of it? What is it about capability that compels?

To enable those less capable to do less of it.

ILW wrote: »

On the same theme, if there was someone bigger and stronger than you around, do you think they should be forced to carry your shopping for you because they are more able to do so?

Not forced, no. But if I see someone struggling with a buggy on a flight of steps, or a bike or heavy bag then I will offer to help.
I don't know how things work but I would like to think that if I was too weak to carry a reasonable amount of shopping that I would be entitled to some sort of disability benefit that would enable me to afford to have my shopping delivered, etc.

JimmyTheWig

chewmylegoff wrote: »

well lucky then that we have a taxation system which reflects what you think should happen - taxes are a % of income, and ratchet up to higher %ages when you earn over certain thresholds. the result is that those with more income (i.e. those who can afford to) pay more. similarly with taxation on consumption, if you buy more stuff (as a result of being able to afford to) you pay more tax.

yes the system is imperfect because people can manipulate where and when their income is earned, so some people scam the system, as they would with any system. however, in general, the system ensures that those who are able to do so shoulder the majority of the tax burden.

And I'm not suggesting that that changes, in the most part.
But you do get some very wealthy people paying very little in tax. That's what the proposed Mansion Tax is about addressing. I think that it is a problem that needs addressing but I'm not convinced that a Mansion Tax is _quite_ the right way to address it. So was thinking of alternatives.