MONEY COMMENT
The Taxman Owes You Billions!

By Cliff D'Arcy
May 18, 2004

Habitual Fool readers may have noticed that I often write articles about ways to save tax. Indeed, earlier today I wrote Top Tax-Free Shelters, which revealed several ways to avoid paying tax on savings interest and on the gains and dividend income from shares.

However, don't get me wrong: I'm not some anti-Inland Revenue fanatic! In fact, I don't resent paying tax at all - I believe in, "from each according to his ability, to each according to his need" (Karl Marx). The state collects our taxes and uses them to maintain our nation, which I'm happy to support. On the other hand, I am concerned that millions of people unnecessarily pay too much tax . As US Appeals Court Justice the Honourable Learned Hand once observed:

"Over and over again, Courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands."

So, although I don't begrudge the Inland Revenue what it is legally due, I resent it taking a penny more than this sum. According to one estimate, eight of ten of us pay too much tax, and the Inland Revenue collects £4 billion too much from taxpayers each year!

Thus, here's my quick guide to establishing whether you've paid too much tax - if you can answer yes to any of these questions, you may be due a refund...

In the last six years, have you:

• Borrowed money to lend to a business, but failed to claim relief on the interest payments?
• Claimed all the tax credits that you are entitled to, such as the Pension, Child Tax or Working Tax Credits?
• Failed to claim VAT relief on certain materials and services for qualifying conversion, restoration and self-build projects?
• Had tax deducted from savings interest or share dividends during a tax year when you weren't working or earned very little?
• Included the capital gains or dividends from PEPs or shares ISAs in your tax return?
• Included the interest from cash mini-ISAs, TESSAs or TOISAs in your tax return?
• Lost money through an investment in, or directorship of, a private company?
• Only worked for part of a tax year, or have worked on a temporary or contract basis for irregular periods?
• Paid emergency tax at any time (indicated by tax code BR on your payslips)?
• Paid into a company or personal pension, but aren't sure whether you claimed the correct tax relief?
• Paid job-related expenses, but failed to claim these?
• Rented out rooms in, or an entire, property that was later sold?
• Sold a second home or investment property, but are unsure whether you claimed the correct amount of capital gains tax (CGT) relief?
• Sold shares, property or inherited assets, but are unsure whether you claimed the correct CGT relief (this can cost you thousands of pounds!)?
• Worked abroad during any tax year?
• Worked from home, whether self-employed or as an employee, but failed to claim all expenses relating to this employment?

Remember: with roughly 22 million Pay As You Earn (PAYE) taxpayers in the UK, the Inland Revenue only checks a tiny fraction of our tax records, so it's up to you to do the legwork yourself. Don't expect the taxman to do it for you!

More: Save Over £100,000 This Year - Tax Free | Prepare To Pay More Tax! | How To Beat The Taxman - Forever!.