Tag Archives: commerciality

Alex’s Corporate Finance Blog – Part 2

In my previous blog I gave you a brief background to our Corporate Finance team, as well as touching on some of my experiences within Lead Advisory and Public Company Advisory.  As recruitment season is well and truly upon us, I will share some of my experiences hunting for a placement, what I think made me successful and how I have been making the most of the opportunity.

The first point worth mentioning is that your university will probably be pushing for you to apply to as many placements as possible. Whilst this scatter gun approach has some benefits, I would offer a word of caution. In my experience there is often an inverse relationship between quantity and quality of applications.  Applying for fifty placements sounds impressive… Read this post

Being an in-charge at Grant Thornton

“The price of greatness is responsibility” – Winston Churchill

Having now been at Grant Thornton for over a year and a half, one of my objectives this year was to in-charge a small audit before Christmas. So a few weeks ago I had my first in-charge job – objective…Tick!

So OK, being an in-charge is not quite on Winston Churchill’s levels of ‘responsibility’… Read this post

Autumn Statement 2012: The Big Picture

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.

Autumn Statement 2012: The Facts

Yesterday the Chancellor, George Osborne, delivered his 2012 Autumn Statement to Parliament.

In the Statement, as well as discussing the economic outlook for the country, the Chancellor often announces proposed changes to our taxation system.

Because of this, the Autumn Statement and the Budget are particularly important days for those of us who work in tax. Announcements on the day can include, amongst other things, changes in rates and allowances, new types of relief, reliefs being removed and tax “loopholes” being closed.

On 5 December 2012 the Chancellor was fairly quiet on changes in tax (although more should be revealed when draft clauses for the Finance Bill are released next week). The speech focussed more on the economic state of the country and whether we were meeting our targets to reduce the deficit and national debt (this is what we would expect as most of the tax announcements would normally take place during the Budget speech in spring).

This year, some of the changes that were announced were measures to tackle tax avoidance and evasion, an further reduction in the main rate of corporation tax in Financial Year 2014 bringing it down to 21%, an increase in the personal allowance next year to 9,440 and a reduction in the pension annual allowance to 40,000. All of these are things which will affect our day-to-day roles as tax advisors.

Applicants for roles in Accountancy firms often say that the most challenging part of an interview to prepare for is the Commercial Awareness. If you’re applying for any role in an Accountancy firm but in particular if you’re applying for a role in tax then I would definitely suggest paying attention to the Autumn Statement or Budget. In fact, I remember that my interview for my internship at Grant Thornton took place only a few days after the Budget speech in 2009 and most of my Commercial Awareness responses were based around it! Even better, in the days following there will be a wealth of articles surrounding the subject on websites such as the BBC, the Financial Times and Accountancy Age and, of course, Grant Thornton’s own website.

With that in mind, I would recommend having a look at Grant Thornton’s response to this year’s Autumn Statement (complete with videos from some of our partners!):

http://www.grant-thornton.co.uk/Services/Tax/Budget/

Or, if you’re feeling brave, you can read the full Autumn Statement document released by the Treasury here:

http://www.hm-treasury.gov.uk/as2012_documents.htm

The Question of Tax Morality

When I started life as a tax advisor (only 3 years ago) I never really questioned the morality of my job. I help people structure their tax affairs efficiently and ensure that they can protect their wealth whilst providing for future generations.

However, since the recession took hold in 2009, there has been a huge shift in public opinion. The general public are disgruntled by the likes of Jimmy Carr and Starbucks and understandably so when times are so difficult for the vast majority.

This makes the job that I do even more interesting. On a daily basis there are news articles announcing the latest ‘tax avoider’ and my friends are even becoming interested (sort of) when I discuss tax at the pub!

However, on the eve of the 2012 Autumn Statement where tax avoidance is likely to dominate the headlines, this shift in public opinion is verging on a profound change in the role of a tax advisor. Nobody is accusing Jimmy Carr or Starbucks of breaking the law and they are simply structuring their affairs so they pay the least tax possible whilst keeping within the remit of the law. Instead they are being accused of, in my view, an equally heinous crime of acting immorally!

By reference, one of the most famous quotes in tax planning comes form Lord Clyde in a decision he gave in 1929:

“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores.”

The current state of play goes against this basic principle which has been followed for so long. The argument that sticking within the law is no longer enough concerns me greatly, as who defines morality and ethics? As far as I am aware there is no law, act or statute defining the morally correct ethical taxpayer. It is a long established principle that individuals and companies are well within their rights to structure their affairs efficiently. However, we have reached a stage where doing this is classed as immoral and unethical!

The most simple tax efficient structuring such as making use of pensions, ISAs and transfers between spouses, all perfectly legal, are now being called into question. Are these transactions immoral or simply doing as Lord Clyde told us to all those years ago?

I understand people’s frustrations that some companies may pay more tax than others. However, we also need to consider that these companies contribute a lot more to our economy than corporation tax. They all employ a substantial amount of people, pay their business rates, fuel duty, national insurance etc. and have helped shape our economy into what it is today.

Also, and more importantly, these companies are, from the current facts available, not breaking the law. Surely, the general public should be lobbying the government to change the law in order to curb this perceived immorality, instead of attacking law-abiding individuals and companies. The Government’s proposal is to introduce a General Anti Abuse Rule (GAAR). This will seek to tackle abusive tax arrangements and will aim to set the borderline between what is acceptable and what is not. However to resolve the issue of multinationals’ corporation tax, it is likely that the OECD model of a tax system based proportionately on revenue will need to be adopted.

However my concern remains about what defines a moral ethical taxpayer? Does it need a definition? Who can even contemplate making such a definition? And are the lines between what is legal and what is moral diverging?

I anticipate that the next few years will be instrumental in the future of tax planning. With the current public opinion, the introduction of the GAAR and a shift of focus from legality to morality, the tax planning arena will be shifted into uncharted territories where it appears we will all have to learn what is ‘right’ and what is ‘wrong’ all over again.

Nick’s thoughts on aggressive tax schemes

For as long as I can remember, our media has been hunting down and naming and shaming certain figureheads in the country for their financial wrongdoing. Not so long ago it was the politicians’ expenses scandal, then bankers bonuses and now, in what seems to be a bit of a surprise, it’s Jimmy Carr.

I’m sure we can all appreciate that Jimmy Carr is just the tip of the iceberg, and that there are huge numbers of high-net worth individuals who operate aggressive tax saving schemes. However, this leads us to an interesting point as taxpayers and, in particular for me, a tax adviser: when does tax-efficiency become tax-immorality?

What Jimmy Carr and Co. have done is not illegal, but using the tax aggressive scheme has given him a poor public image, something which could well impact his earnings as a comedian.

This raises a new problem for the publicly-lit tax-savvy as there is now a required balance between saving on the tax bill and maintaining a good public image.

The British media and public have proved to have very clear cut views on this. Whilst some tax avoidance planning is acceptable, lowering your tax bill to 1% is front page news and immoral.

The controversial question which sits in the back of my mind is this: is it Jimmy Carr’s fault? If he has a legal outlet by which he can lower his tax bill, can we blame him for not taking it? Or it is the fault of our legislators who have allowed such a loophole to exist? How would we act in his position?

There certainly seems to be a bitter taste amongst the British people in relation to residency also. As an F1 fan, I can tell you that seven of the 12 teams in F1 are based in Britain. However, despite having three British-born F1 drivers, none of them are resident in the UK – all three are in Monaco. Do the British taxpayers not mind tax avoidance provided the individuals don’t benefit from tax revenue?

This leads me to another point which I find particularly interesting about UK tax and my job on the whole. Tax advice isn’t about crunching numbers, it’s not about saving ‘x’ or ‘y’, it?s about finding a solution which works, as well as providing a personal solution which suits out clients.

I see this recent development as another point for the tax advisor to focus on when advising clients, but what isn’t clear to me is how far the tax-efficient should go before they are regarded as tax-immoral. It’s a difficult balancing act and one which will continue to add the human element to what is often regarded as a black and white job.

As always I would be interested to hear your thoughts on the recent press on Jimmy Carr and other aggressive tax avoiders. Are they right to avoid their taxes or is a new wave of morality biting through our cash-strapped Treasury?

Nick’s thoughts on the 50% Tax Rate

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.

Nick’s thoughts on the Eurozone Crisis

Last weekend I was celebrating a colleague’s birthday when conversation somehow loomed into the Eurozone crisis. Whilst many had clear views on what is happening, I thought I’d share my view with you all here at the Spilling the Beans site.

When I was applying for my role as a Tax Graduate back in the winter of 2009 the feeling of austerity had been within the UK economy for a couple of years. At the time, we were seeing the beginnings of quantitative easing and the focus was largely on what would the Bank of England do with the interest rates.

Fast forward two years and that feeling of austerity hasn’t disappeared, Quantitative easing is still part of the government’s plans and low interest rates have become accepted by UK populous. The impact of Northern Rock and Lehman Brothers, whilst still apparent, is something for the financial history books.

Today, the hot potato on all economists’ and businesspeople’s minds alike is the Eurozone crisis. While previously much of the Eurozone benefitted by the generous and poorly aligned monetary policies of the EU, now that the bubble has burst, there are a lot of politicians scratching their heads.

The lesson being learnt is that a single currency union cannot be achieved effectively without fiscal union, an issue of the Euro from day one. So while the larger Eurozone economies benefitted from an almost artificially devalued exchange rate, others benefitted from the low interest rates. It was win-win, and something had to give.

When financial services failed in those economies which grew too-quick-too-soon, the respective governments were jeopardised and their austerity packages have had a damning effect on their elective.

Recently, David Cameron utilised his veto in the EU conference to pull out of talks aimed at working out a new EU treaty. Whilst the media has drawn the expected black and white conclusions, it might be worth considering how this reflects our UK economy, and what lessons could be learnt.

The Eurozone ran into problems because its central management failed to generate policy that benefited the geographical area as a whole. David Cameron pulled out of the treaty because it was not in Britain’s interests. Of course, a large proportion of the UK’s GDP is made up of financial services, but we also have flourishing hi-tech manufacturing, competitive retail, world-class design and some of the best inventors on the planet.

So the question I keep asking myself is this; was the veto in Britain’s interest, or London’s interest?

There is really no excusing that London has outgrown much of the rest of our country. With average house prices several multiples higher than the least wealthy areas and salaries reaching much higher amounts when paid in the capital.

It must be that the UK as a whole benefits from London’s activities, and to accept regulation from Brussels in the world’s largest financial center would seem a little odd. But, if we make a large proportion of our wealth in the capital, and policy is made there, do we miss a trick? Did Brussels forget what was important to the people living in Greece or Ireland? Did David Cameron really have a choice over the veto? Should the UK rely so heavily on one city for its national wealth?

I’d be really interested to hear what you think about the Eurozone crisis and whether you’ve been speaking about it during interviews for graduate and school leaver jobs. In addition, what is the solution? Will the Euro disappear? Or will some of the 17 members slowly drift away? Can it really continue to encourage more countries to join after this rollercoaster ride?

Thanks for reading and please feel free to comment below.