Taxing matters

I have been rather amused by the sudden realisation by the middle class of Jersey that their so wonderfully effective and efficient low taxing government is costing them more in tax than if they lived in the UK.  It has long been thus for some lower earners.  Actually it has also been the case for many who save and invest personally too  - if they had taken advantage of the UK's (now defunct) PEP's and still going  ISA's.  There are indeed a few who have amassed a tax free million pot.  See How to be an ISA millionaire Even at the FTSE100 dividend yield of  around. 3.5% that's £35,000 income  tax free.  Of course Jersey has no equivalent to these tax efficient saving and investing schemes


For lower earners the problem is the Jersey government's inability to comprehend that  increasing tax thresholds don't help those who fall somewhat below the thresholds.  In the  UK many equivalents of child allowances etc are credits - paid items, not exemptions.  In effect they boost income rather than allow a reduced tax bill.  It makes a difference because of course in Jersey once you are a 0 rate tax payer that's the end of the benefit.  So if like me your income is  below the thresholds by more than  a child's allowance, that allowance is worthless. That situation  does not occur in the UK where tax credits are paid.


Nor is it the case that such people will be  cushioned by having social security benefits.  The ability to claim those is quickly eroded by the  impact of capital  the potential claimant may have.  And this is not just theoretical stuff.


Each government department in Jersey  has a different perception about what is and isn't in need of assistance.  Equally each appears to think any income or assets you might have can be applied to offset any help you might get from their department alone. You can lose several times over as the same capital or income is used against you by each department  that might otherwise help.  It is a fine example of the inconsistent approach of a piecemeal  non-system without any common coherent thinking.  It is unsurprising given we elect individuals who have between them  no coherent strategy and each policy is a cobbled together compromise of individualist  foibles and interests. There is no plan or design or underpining philosophy here.


Thus it is quite possible to be in the situation I find myself.  No income tax, health charge or care charge to pay because our income falls way short of the threshold in marginal taxation.  Since I am not an employee I don't pay class 1 social security.  I am theoretically liable to play full class 2 social security ( ~£6,000 per year!), but even they have realised you cannot get blood from a stone.  Asking people with income  significantly below the tax threshold to pay that sort of money is madness.  So I have an exception. Of course I'm not entitled to most benefits and not building my pension contribution.


You might have the picture from the foregoing that we are not exactly rolling in it.  But the Education Department would disagree.  If either of my bright children want to go to university in a few years time I am, according to them, so well off that we wouldn't get a penny in help with the living costs or tuition fees.


I'll leave it to you dear reader to figure out the logic of how you can be so poor as to not be liable for tax or social security payments but simultaneously be so well off you can be expected to find £60,000 plus for each child to go to university. 

That's not employment, its just unpaid work

I've been having an ongoing problem with the new manpower returns since their introduction.  The latest twist was to get an e-mail confirmation of successful submission , despite the error below, and then followed up by a call from someone at the population office telling me in so many word that I hadn't submitted the form.  I also rather resent being called client by them. Do they know in its primary meaning it refers to a dependent, one who is under the protection of another? 

My ongoing problem isn't really about the technology. It is rather more about the lack of analysis or comprehension of  the distinction between work and employment.


I have run my company for over 25 years, and until the recent change never had any problem with the manpower return.  In the previous incarnation the return asked for data to be supplied based on hours worked (to distinguish part time and full time workers), and on a few other residency/5 year qualification etc.  Simple stuff.  It also was quite clear about working principals had to be included. That is the important bit, because a principal (ie an owner) does not have to have a contract  with a company they own, and is not necessarily an employee.  If they don't take a wage/salary or any other emolument and have no contract they cannot be an employee. That is how I have run the company for some years. 


Under the new form however it is not possible to make a return for a trading company without including the details of at least one employee. It uses that terminology, and requires a social security number and the type of employment contract (full/part/zero hours).    The instructions are clear that self employed people should complete the form - no problem if they are taking an income from the business. But what if the only person is the owner, and they are not remunerated or have a contract?

It gets even more bizarre if the company, as mine has, operates more than one business.  In this case it seems the only way to make a submission is to be employed in each company.  Goodness knows how many fake part-time or zero hour employment contracts have had to be entered by non-employed (at least in that business) principals just to get the forms submitted.


I cannot work out if the problem is a serious analysis failure, or a genuine incomprehension at the distinction between work and employment.  Anyone is free to do work gratis. How can it be otherwise?  If there is no pay or emolument and no contract it is not defined as employment (which is strictly the legal form of a master/servant relationship).  If it were not so  all those honorary police would have to appear on the parishes' manpower returns and all those charity shops would have to be filling in details of all their volunteers.


It is true that a Jersey company (not a business!) really ought to have a resident director, so there likely will aways be one person who ought to make a return of working  at the company level.  In fact if you read the new law on housing and employment even this is questionable for 'regulated' entities - since a non-resident director of one of  those can work in the Island for 10 days, sometimes longer, without having to register or do almost any of there things everyone else does under the Control of Housing and Work law 2012.  So a resident director could in fact do no work and hence not be required on the form.

If you are wondering, yes it is possible to have a business where no one is employed.  Many entrepreneurs would consider that a perfect model. You can outsource almost everything.  It costs of course, but it is perfectly legal to do so.   If what you trade is information or documentation it might be quite feasible to do that on a web site that once set up needs  no actual manual intervention.  It is one reason I don't fully subscribe to the view that promoting business will increase employment.  It aint necessarily so!



I can understand the desire to ensure people don't improperly slip through the system, but the administrative process really should be able to deal with the reality of the legal status of voluntary working principals.  It shouldn't even require that much work on the return forms and database.  The only reason I can see for collecting the data asked for is to check social security payments.  However even that is not quite right since if a director is paying class 1 contributions, there is no class 2 to pay.  Similarly if they over the pension age, self or unemployed there is no contribution to pay.


If my sources are correct this manpower return system was written by an outfit in Southampton.  Just perhaps it would have been wiser to have commissioned  one of the competent local software companies which might actually understand the local law.