This story is set in the mid-1970s, an age of innocence when milk was still delivered to your doorstep and the arcane art of bookkeeping was not necessarily understood even by those who needed to know. Small business proprietors and undertrained revenue officials alike struggled to understand each other’s ways and cope with the unexpected complexities of the newfangled Value Added Tax (VAT) system, introduced on 1 April 1973. The story is fictitious, but it includes elements retrieved from personal memory and, I think, realistically describes something of the circumstances encountered by Customs & Excise visiting officers in those days.
I scrutinised the file while I was eating my toast.
“Milkman.” I thought. “First visit; what can possibly go wrong?”
There wasn’t much to see in the file, understandably as this was in the early days. We had only just started inspecting traders’ books so the paperwork hadn’t had a chance to build up and, as this man hadn’t even had an ‘educational’ visit yet, there was only a handful of basic forms to look through. His name was John Short, he was a milk roundsman and he submitted his VAT returns monthly; that was about all there was to it. The print-out of his returns was quite typical for a milkman; each month there was a small amount of input tax claimed and sometimes a very small amount of output tax declared.
“Petrol for his milk float” I thought “and a bit of tax due on sales of… orange squash, perhaps?”
It was only a ten minute drive from my house to his, which was at the far end of one of the nearby villages, a place at the edge of our local town. I was able to finish my breakfast in a leisurely way before I set off, and then I had no problem finding my way along familiar country roads.
“Mister Short?” I enquired when he opened the door to me.
“And you’ll be Mister Stanley” he responded, agreeably enough, glancing at my brief case. In those days we carried our papers in official black briefcases which bore a small but distinctive EIIR logo on the flap, confirming our status as servants of the Crown. He stepped to one side to let me into the house. He sat me at the dining table. “I’ll get my wife to put the kettle on” he said. “Tea or coffee?”
“Coffee would be nice; milk but no sugar, please.”
This was all going very well. There was no sign that Mister Short had any reluctance to deal with me and it seemed unlikely that he would embark on one of the usual preliminary rants about ‘interfering Government officials’ or ’having to keep unnecessary records’ before we got down to business.
Before the coffee arrived we made a start on looking at Mr. Short’s business records. He produced a couple of sales invoice books, their carbon copy pages displaying the usual variable degree of legibility, some loose sheets of bank statements, and a folder of invoices from the dairy interspersed with (also as usual) tatty petrol receipts from an assortment of local garages. There was nothing unexpected about this document collection except, perhaps, that the purchase invoices were more or less in date order.
I was just asking Mr. Short if he could show me his VAT registration certificate when the coffee arrived, and a small plate of biscuits. I smiled a ‘thank you’ to Mrs. Short who was wearing her coat and was apparently on her way out of the house. She smiled back. “Off to catch the bus” she said. “Have you got everything you need?” I nodded politely and she went on her way.
Mr. Short had retrieved his certificate from a drawer in the dresser at the side of the room. “She pays the suppliers for me and looks after that folder of invoices, and she writes the customers’ bills” he said “but I have to do the tax returns myself; she won’t touch that job.” I checked the certificate against the information in my official file; the details seemed to be correct.
“So you do the return for us each month, do you?” I asked.
“That’s right, no problem.” We both sipped our coffee.
“Then you must keep a record of your takings and purchases somewhere” I hinted.
“They’re a bit rough” he replied. The drawer was opened again, and its contents yielded a small pile of undoubtedly rough pieces of paper of various sizes and origins, each marked with columns of figures and their totals, but with no helpful indication of the sources or meaning of the numbers.
“There’s one for each month” said Mr. Short.
“Right.” As there was no way of telling which month any of the sheets represented I selected one at random and tried relating it to the print-out in my own file. “This looks like September” I said, as the totals on the sheet bore some resemblance to the figures that had been declared on that month’s return. I looked in the purchase invoice file to see if I could pick out the details that appeared on Mr. Short’s handwritten list. I couldn’t.
Mr. Short may have noticed my hesitation as I tried another month with a similar result. “I don’t look at those bills myself” he said helpfully, “if I do, I get them mixed up and then I get told off by the wife.”
“So, er… how do you..?” I asked, rather feebly. I was beginning to realise that Mr. Short, although he may have been an excellent milkman, undoubtedly had a problem with figures, even if he was unaware of it himself.
“I know my round” he said confidently “I know my customers, and I’ve been dealing with the dairy ever since I started.” He was positively beaming with obvious pride. “We give everything to the accountant once a year” he continued “but he told us that it would be better if we did the VAT ourselves.”
“Right” I said, again. Fortunately, there was still plenty of coffee in my cup. I sipped thoughtfully while I considered how I should proceed.
What, I wondered, was my job here? I had confirmed that Mr. Short existed and that he was trading as a milk roundsman; the registration details we held on our computer were correct. I needed to confirm that he understood how the VAT system worked and his responsibilities: well, he understood that he should send in his returns monthly, and he clearly understood the basis on which the returns should be compiled. The only problem was with the sums he declared on those returns. Should I spend several hours painstakingly constructing my own version of a VAT account for his business and, if I did, would the outcome be worth the effort? The margin for error allowed by our official instructions was quite small, but so was Mr. Short’s net VAT liability as declared on his returns and I had seen nothing to indicate that a more accurate reconstruction of his records would produce a significantly different result. A final thought that crossed my mind was that if the Department’s theoretical timetable could be achieved, which seemed unlikely, it would be at least three years before Mr. Short was even considered for a further visit and by then I might well have found my way into a completely different job, as far removed as possible from anything to do with VAT.
“Mrs. Short makes an excellent cup of coffee” I said, rising to my feet. “Thank you for your time this morning. I think I can call it a day here and let you get on with your round.” I gathered up my notebook and papers and prepared to leave.
“Looks like a nice day” said Mr. Short conversationally “I might give the new van a wash later.”
I paused, resting my briefcase on the table. “New van?” I enquired.
“Yes. Some idiot driving a big truck crashed into the old one while it was parked at the side of the road; fortunately I wasn’t in it at the time. I’d been using it for a good few years so, of course, it was a write-off.”
“Have you claimed back VAT on the new one?” I asked; I was sure he hadn’t.
“Can we do that? I thought it wasn’t allowed.”
“Cars aren’t deductible” I explained “but a van for business use… Can you show me the invoice?”
Once more the dresser drawer was opened, and out came a proper printed invoice from one of the commercial vehicle dealers in the town. “There’s a lot of VAT on this” I pointed out “and you’re entitled to reclaim it.” The tax amount was a good ten times more than the milkman would normally have claimed on any of his monthly returns.
Mr. Short looked at the invoice. “Well I never…” he said. “I’ll be doing the next return at the weekend; I’ll be sure to include it. Thanks for telling me that.”
“No problem” I called out as I walked quickly out through the door and then, more quietly and to myself, “it’s just one example of the strange magic of VAT.”