by Ross Clark - Wednesday, 5th September 2007 -

I have a strange admission to make. I enjoy filling in my tax return.

I love it for its sense of the absurd. There I am, diligently working my way through it, totting up my dividends and accounting for my expenses when all of a sudden up pops the most bizarre question.

“Do you want to use farmer’s averaging?” What? “Will you be using literary and artistic spreading?”

One can only guess what this latter expression means: perhaps – I don’t know – it’s something to do with the tendency of creative types to gain weight in their middle years as they strive for immortality in their garrets.

Every year I fill out the details of my earnings as a freelance journalist only to be met with a jarring question like: “Are you a sub-contractor in the construction industry?”

What would be the implications, I have often wondered, of answering “Yes”? Would I qualify for a hard hat allowance?

Or would it mean I was allowed to pay my taxes on the end of a shovel down at my local tax office?

In fact, I recently discovered exactly what it means to be a subcontractor in the construction industry, and I have to say I am rather pleased I am not one.

For, as a builder, when it comes to income tax, you get treated on the presumption that you are a crook.

If you are a self-employed bricklayer working for a construction company, you are expected to submit your invoice in the normal way.

But your customer is only allowed to pay you 82 per cent of the invoice’s value. The other 18 per cent has to be passed by your customer to the Inland Revenue.

You can then claim the 18 per cent back at the end of the year in the form of a tax credit; assuming, of course, that your customer has remembered to send the taxman the relevant paperwork and that the Inland Revenue can find it.

Bizarrely, these provisions only apply to the construction industry; sub-contractors in every other industry are trusted to pay their tax in the normal way.

Even then, it only applies to the little guy. If you can prove that your turnover exceeds £30,000 – or, more correctly it exceeds £30,000 per shareholder – you are allowed to be paid your invoices in full.

In other words, small builders are assumed to be tax-fiddlers while larger companies are assumed to be honest. So much for the government encouraging small business.

If the Inland Revenue does raise any extra tax through the Construction Industry Scheme, as it is called, it is almost certainly wasted through bureaucracy.

Before a small-time builder can set up for business these days, he must first obtain a registration card from the Inland Revenue.

Needless to say, the Inland Revenue has had to spend several millions of taxpayers’ money to set up a telephone helpline in order to explain the complex rules.

Every time a small handyman issues an invoice, he has to send a copy to the Inland Revenue. Over the course of a year, it might mean having to send 1,000 pieces of paper to the taxman.

Even larger businesses that qualify for exemption from the scheme have to leap through several hoops before they can get the necessary “subcontractors tax certificate”.

Bruce Greig of 0800 Handyman tells me that the Inland Revenue would only accept that his turnover exceeded the threshold of £30,000 per his six shareholders after he sent them £180,000 worth of invoices.

As the company’s average job is £75, collating the paperwork was a lengthy and tedious task.

The rules, in common with much of what is produced by our great government agencies, are simply absurd.

Here is a sample, as described on the Inland Revenue website: boarding-up a broken window, it says, comes under the Construction Industry Scheme; repairing a leaking sink unit does not.

Installation of permanent floor coverings is included – unless, that is, they are carpets, in which case their fitting is excluded.

Does the Inland Revenue have any research which proves wooden floor fitters are genetically more disposed to fiddling their taxes than carpet-fitters, or is it just a case of Hector the Inspector needing something to keep him occupied?

If only the rest of us had this kind of time to waste. No wonder I can’t get a carpenter to come and see to my windows: they are all too busy wrapped up in filling out forms and in sending mountains of paperwork to the Inland Revenue.