Taxing times

Once upon a time, when I was a young student, my then-girlfriend and I suffered the worst service I’ve ever encountered, lunching at a Cambridge restaurant. Instead of leaving a normal tip (shudder) or no tip, we left a tip of one halfpenny. We thought this gave entirely the right message. The other couple at the table (which we shared because the place was busy) fully agreed.

This year’s tax bill reminded me of that. Most tax in the UK is PAYE (pay as you earn), which means that your income, both earned and unearned, comes net of tax. In previous years I’ve had nothing to pay, but rather a small adjustment in my favour. This time, they decided I owed them 10p (that’s ten pence, not pounds). I just availed myself of their online payment facility to pay it by debit card.

I don’t know how much the government’s payment processor charges them per debit card transaction. But as a datapoint, my company gets charged a flat rate of 95p each time we accept a debitcard payment online (that’s different from creditcards, where we get charged a percentage). Big businesses get a much better rate than small ones, but I feel sure HMRC must be making a net loss on a payment as low as 10p.

Heh heh.

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Posted on January 24, 2008, in tax, uk. Bookmark the permalink. 2 Comments.

  1. The tax man has just seen fit to pay my company interest of £1.03 because, it seems, I paid my corporation tax a few days earlier than necessary. The bank will charge my company a total of 97p for banking it (unless I keep it until I get another cheque, in which case the cost per item will be less – trouble is, most of my clients pay direct into the account so cheques are few and far between). So it looks like I’ll make a 6p “profit” before tax!

    With my accountant’s hat on, I can understand why these tiny receipts and payments are necessary, but with all the transaction costs it’s a shame one can’t just set them against next year’s tax bill to reduce those disproportionate bank charges to both the customer and the Revenue.

  2. I’m pretty sure HMRC refused to pay out on adjustments smaller than 10 pounds when I filled out my last tax return. Surprised they don’t just add pay-ins smaller than 10 pounds to next year’s tax bill.

    I once paid a 16p EDF Energy bill at the post office. It cost them at least 20p to send me the bill and the post office gets 12p for each transaction, so that was silly of them.

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