Gordon Brown vowed this week that he would see the end of off balance sheet financing. This has been an issue in accounting since I started training - so it was in the last century.
What is it?
Off balance sheet financing is the use of legal form of transactions to bypass normal accounting standards. This allows an entity to fund assets withoutcthe true liability showing in it’s books and this the books look healthier than they really are. Clearly this is not good if you rely on accounts as true.
Who uses it?
Probably the largest user of these techniques in recent times has been the UK government! Their PFI schemes defer very large liabilities which extend for years into the future. And yet because of the legal form of these transactions they do not appear in the accounts. The London Underground is a prime example.
So if Gordon means it then well done and good riddance. If not then noone’s any the wiser anyway!
September 20th, 2008
Well it sounds like one of those rather nice biscuits with cream sandwiched in between. Unfortunately, it’s more akin to a business which owes money to banks through loans and overdrafts finding itself sandwiched between a rock and a hard place.
As the banks restrict lending more and more those businesses exposed to high borrowings will be the first to suffer. This is either through lending being withdrawn and/or the cost of borrowing increasing substantially. Either way in an environment where sales are under pressure as well, it’s getting less pleasant a situation as each day goes by.
Still, at least there isn’t a recession in the UK (but only if you ask the Government).
August 14th, 2008
More of a plea than anything else, a message for the Chancellor to please stop making U-turns. Taking the analogy a little further, I ask this as a fellow road user. Why not buy a map? A map would provide a guide to your route given a starting point and a desired destination. Simple yet effective.
So what’s the Chancellors problem? Well a map isn’t much use unless you know where you’re trying to go. Aimlessly picking random routes and destinations will only ever cause confusion and delay and annoy other road users.
So please Mr Chancellor, decide on a path to follow with a clear destination, tell us what it us, then take us on that journey. But don’t keep changing the destination - otherwise you may find yourself left at the roadside trying to hitch a ride!
May 22nd, 2008
It appears that confusion reigns on the subject of office closures and redundancies at HMRC. In line with Gordon Brown’s claim to reduce numbers of public servants (yet to be delivered on) somewhere between 5000 and 7000 jobs could be lost at numerous HMRC offices.
I’d have no issue with that if everything could be done online or with call centres - but it can’t. HMRC’s self assessment system failed on 31st January 2008 and the call centres are not what they could be. Add to that the fact that a local tax office was taking four months to open its post and staff cuts don’t seem like a way forward.
Amusingly, the Revenue are bemused at where the figures have come from and how they were calculated. I am similarly bemused, what with the high level of security over information at HMRC these days.
March 5th, 2008
No! Not for us - not this year anyway.
However, Tax Blagger will be attending this evening. In his best bib and tucker.
So stop by to say Hi if you’re lucky enough to have a ticket.
November 14th, 2007
Not so much a pre-budget report as a budget, the general thrust seems to be one of lower economic forecasts with chnages to Inheritance Tax designed to stump the other political party, and changes to Capital Gains Tax to stump the Private Equity brigade.
And the real effect?
Inheritance Tax changes are an improvement in that there is now no need to pay for the tax planning that was required to achieve the same effect. Probable losers here are the firms of solicitors that have drummed up an industry out of such plans. The backdating of the changes to apply to existing widows/widowers should have an almost immediate benefit for many.
Capital Gains Tax changes appear to simplify the current regime. A single rate and the lack of taper relief calculations will certainly assist my aging memory-banks and might save some money by allowing me to invest in less powerful computers (as they need to do less calculations). Will it be that simple? I doubt it. There is much detail to be produced, and that is usually where the devil likes to lurk.
And the losers? Well, private equity appears to have lost 8% to CGT (the increase from their minimum rate of 10% to the new flat-rate of 18%). But they have said that they would suffer 15-20% during the hearings before parliamentary sub-committees that have been pursuing them for political correctness. We’ve known for some time that private equity would be hit at some point.
Also losing are the millions of small businesses that have similarly lost 8% on the increase. The loss of any incentive to hold business assets will be an expensive addition to the tax bill of the SME. The gainers will be those holding shares and property who previously had to hold those asssets for at least 10 years in order to achieve a CGT rate of 24%.
Also included in the smallprint is a pledge to stop couples frm income-splitting in the style of Arctic Systems!
October 11th, 2007
The National Audit Office have published their report into the tax management of big business in the UK. And interesting it is too. There are headline figures in it such as 33% of the 700 largest companies have paid no corporation tax recently, whilst a further 10% paid less than £10 million.
HMRC have defended the statistics suggesting that there are a number of ways in which this situation might occur. And indeed, the large additional payments to pension funds could create losses ( or at least smaller profits) for some of these businesses.
Even so though, as a small business owner it does raise the eyebrows when you see headlines like that.
August 29th, 2007
We’ve split Tax Blagger away from the main Cumulo Accountancy and Taxation website. Tax Blagger will continue in its current form as the magazine-style face of the firm. You need do nothing as there’s a link to here on the main site, or you can come directly by using www.taxblagger.co.uk and the main site will be at www.cumulotax.co.uk.
This change will allow us to put specific and complex technical information on the main website, better describe our range of services to users, whilst retaining the Tax Blagger as the lighter side of things.
August 26th, 2007
After too long away, podcast number 5 is here or if you have iTunes you can click here.
Covering news in the practice, the Arctic Sytems descision from the House of Lords and the implications for both tax authority and taxpayer.
Finally, Richard Kilburn’s MSc dissertation on “The FRSSE - Who decides?” is covered.
August 12th, 2007
Rumours abound of a potential for local authorities to charge an additional local element of council tax to businesses, in order to fund local infrastructure projects.
I don’t think that all those that were around at the time when business rates were set locally are dead yet. And so, you have to ask how we’ve gone from a locally set rate, subsequently argued as unfair and biased and so equalised across the Country through introduction of a Uniform Business Rate, back to what is essentially a locally set rate. This would not be the first occasion in history when the public sector has gone full-circle in a decade. In fact, it’s par for the course.
A cynic might argue that this is Central government dumping on local government to collect and spend revenue that would otherwise have been funded centrally.
An optimist might suggest that this is simply a more effective way of achieving improvement to local infrastructure.
A businessman might argue that there’s a limit to how much small and medium-sized businesses in this Country can sustain in terms of overall taxation.
A politician might argue that he can’t hear the other arguments.
August 9th, 2007
