Ever since I received my exam timetable this January, I’ve been concerned that March would be a draining month. As a trainee studying CTA, the firm sets internal progress ‘link’ exams in order to allow us to practice exam technique and keep on top of the books. These are usually set a month or so apart. In March, I had four.
You may have read my blog last year on the Autumn Statement, where I took a trip up to London Euston and assisted with the instant responses of some of our key partners in the firm. Hot off the heels of #AS2012 was #Budget2013 and I took the opportunity to head up to London again to help out with the PR team.
Whenever someone asks me why I made the choice three years ago to take up a career in tax, I have a few key lines I often spew out. Since joining Grant Thornton my opinion hasn’t changed exactly, but what I find appealing in this role has developed.
What I enjoy most about having a career in tax now is that what I do is always relevant to the big picture. Pick up any newspaper today and it won’t take you long before you find a hot topic in the public eye where tax policy is at the heart of the story. Whether this is something I didn’t notice as a student or just didn’t appreciate, I’m not sure. What I am now sure of is that this factor of my job makes it interesting every day.
However, today was slightly more interesting than any other day as it was the unveiling of the 2012 Autumn Statement. An event which might pass many people by became the focus of my day. I travelled up to our London Euston office to work with a small team offering a live reaction to the statement and provided assistance to a journalist looking to create snippets of audio for local and national radio stations.
My day started slowly but as soon as the clock stuck 12 it was all go! I, along with fellow beans spiller Lucy, watched the statement live in a room with our PR team, a number of senior partners and, notably, our Head of Tax; Francesca Lagerberg. Watching Francesca in her element was a delight and something I’m really grateful I have been able to witness with only two years with the firm. Seeing how she interpreted the information was, admittedly, a daunting experience (I have so much to learn) but it is a fascinating insight into the mind of one of the best in the business.
After the statement finished I assisted a journalist in interviewing and recording short soundbites for radio stations. This meant witnessing yet more amazing minds at work and, again, whet my appetite for knowledge of specific tax issues.
I ended the day by having a couple of pints at a local pub with a selection of colleagues from London, a refreshing end to a long day!
As I sit on the tube ready to head home I realise I’m just about to go full circle on this blog. When I’m asked why I enjoy tax, one of my standard answers is that I love how it changes and I’m always challenging myself to learn more. Today I have yet again realised that in a career where it is literally impossible to know everything, an inquisitive mind will always be satisfied, with or without George Osbourne.
For me, part of what makes my job interesting is the client base which this firm typically serves, namely the Owner Managed Business or OMBs. I enjoy this business model for two reasons. Firstly, giving advice to these clients is a challenge that requires an understanding of both corporate and individual tax issues, rather than just one of these disciplines. Secondly, there is a personal approach to providing theclient with a solution and it’s not just crunching numbers all the time. As the owner, shareholder, worker and founder are all the same person a balanced approach is required. To me, it’s just more interesting.
I am often involved in producing reports which aim to answer how the business owner can extract cash from the company in the most tax efficient way. This problem has become even more prominent given the relatively recent increase in income tax to 50% for the highest earners. As a result, tax advisers are constantly looking for ways to extract this cash at lower rates of tax, for example via a dividend at 42.5% (also without National Insurance) or via a capital gain at 28%.
Whilst this is all interesting for me, the effects have recently posed a problem for our Government as the debate as to whether or not to maintain the 50% rate is right heats up. The problem arises as owners of corporations had extracted cash before the change, or are waiting for it to go before extracting again. Our Government doesn’t seem to have helped itself by saying that the 50% band is a temporary measure and will be eradicated by 2015.
Though some would suggest we’re unlikely to be waiting that long as a recent announcement from the Government showed that the 50% rate might not be working to its desired effect were income tax revenues for 2010/11 were down on the previous year. Whilst The Beatles song Taxman is often cited for previous exceptionally high tax rates, it’s historically been the case that such high rates are detrimental to the treasury’s books. The word “braindrain” springs to mind.
So the answer is simple? Get rid of the 50% rate and stick with the current higher rate of 40% for top earners. Just like how things were before the 50% rate was introduced. Sadly, it isn’t that simple. Although companies from around the country are saying the additional rate is bad for business, the removal of a 50% rate could be a political car crash. Especially during a time where the rich get richer, and the poor struggle for work.
One way round this would be to sandwich good news against bad news in the upcoming budget. The eradication of the 50% rate could be combined with a further increase in the tax-free personal allowance to ensure that lower earners are not unfairly disadvantaged by the change. The Lim Dems have consistently claimed a 10,000GBP personal allowance is their target.
Other ways of lowering the income tax rate but continuing to tax the rich could come in the form of a mansion tax, a tycoon tax and even changes to national insurance rates. One thing is sure, it’s a headache for the Coalition Government which seems to have a Catch-22 outcome. For me personally, I’m just glad we don’t have the French-socialist outlook on income tax, because I can’t help thinking Francois Hollande’s 75% rate is a bit on the steep side.