Tag Archives: Economy

The Controversial Side of Tax

Hi I’m Rhys, a new starter in the corporate tax department in Birmingham. Since joining Grant Thornton in September, there has been a lot of interest in how much tax companies are paying and I’ve been a keen follower of the coverage and condemnation of the affairs of Starbucks, Amazon, Google and the like. The media have been hot on the case of companies paying immoral levels of tax for the profits that they are making, in times when most are looking after their money more closely than ever.

Whilst I was flicking through the paper on the short train journey to work and saw the headlines that Tui Travel had paid no corporation tax despite their 390 million GBP pre-tax profits, it seemed like they were the latest company to be added to that list. Newspapers rolled out another ‘name and shame’ piece to fuel the public fire (http://www.guardian.co.uk/business/2012/dec/04/tui-travel-paid-no-corporation-tax/http://metro.co.uk/2012/12/04/tui-pays-no-tax-despite-390m-profit-3276095) and the issue was discussed in the wider media; BBC business correspondent Simon Jack stating that it was ‘all perfectly legal, but all still pretty controversial’ on his radio programme.

However, as I read the article I was surprised that this nil tax bill was due to prior year losses which had been rolled forward and offset against the profits made (a relief that I had learnt about during my Tax Induction Module down at Bradenham, rather than an aggressive piece of tax planning dreamt up in a boutique). Rolling forward of losses is an automatic relief designed so that companies, or indeed sole traders, only pay tax on their net profits over their trading life.

These losses were incurred as a result of restructuring over the past couple of years, as First Choice and Thomson have been brought under one umbrella, something that initially created losses but has flourished into a profit making business. In my opinion, this activity should be very actively encouraged in the current climate, rather than being treated in the media as one and the same as aggressive tax avoidance or even evasion.

Jack later back-tracked on his statement and experts came out to defend the company but as is often the case in the media these retractions and explanations were far less visible when reading your paper than the original story. If there is a lesson to be learnt, it’s to read the detail in the article as well as the headline and form your own opinion on the matter before ruling options out when booking your summer holiday or when reading around recent business issues if planning for any potential interview.

Despite the occasional elaboration over standard practice, there have been some signs that the negative media coverage, supported by demonstrations from organisations against tax ‘dodging’ such as UK Uncut, is having an effect on those companies exposed. Starbucks have announced that they will be paying 10m GBP in tax for each of the next two years.

One view is that the public have spoken and Starbucks, fearful of losing some of their substantial market share, have listened and agreed to at least start working towards a morally accepted level of tax. The optimistic view would be that those who have been exposed as ‘dodgers’ start to see their bottom line hit by a public boycott. This could then even possibly result in companies advertising their effective rate of tax as a promotional tool, similar to those displaying ‘Free-range’, ‘Fairtrade’ or ‘carbon neutral’ logos.

The other view says that the absolute figure stated (and you can bet that they won’t be paying a penny more) demonstrates the sheer control that these companies have over their ultimate tax bill. To announce this figure prior to knowing any profit figures also suggests that this amount is comfortably short of what would be due without any tax avoidance taking place and to cynics reads as though Starbucks, having taken the brunt of the attack, are paying a bit of tax just in case UK Uncut’s demonstrations get the response they desire and the general public do start to talk with their feet. (http://www.guardian.co.uk/business/2012/dec/09/starbucks-stores-uk-uncut-protest). The more proper and correct stance to take would be to say that the company won’t seek to avoid tax – but that is unlikely to bring much additional promotion for the company and would probably cost a lot more. The sceptic also reads the two year period as very finite, the powers that be at the company hoping that by then all this will have blown over and the media will have someone else to pick on.

I deliberated long and hard on which way round to put the two views on the article, but ultimately I couldn’t stop the cynic in me having the last word. Watch this space; I hope he is proven wrong…

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.

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.

Interview with a Partner

If the Spilling the Beans website has taught me anything, it’s that trainee experiences are important. This view is also reflected within Grant Thornton, amongst all members of staff and to keep a record of our experiences nationally, we have the Talent Newsletter. This is a quarterly newsletter which is produced by trainees and published for the benefit of trainees with each business unit taking part over a three year period.

In January 2012 it was down to Bristol, Cardiff and Southampton to step up to the mark. I took the opportunity to be managing editor and along with fellow ‘Beans Spiller’ Will (as well as several other trainees) we have produced a great edition of the newsletter – if I do say so myself.

One of the articles I wrote involved sitting down with Stephen Mills, the Office Managing Partner in Southampton, to discuss several topics such as the firm’s balanced scorecard, the future of Grant Thornton, the work-life balance and career progression.

The great thing about speaking with Stephen is that not so long ago he was a trainee at Grant Thornton and has worked his way to the top of the tree – something I’m sure a number of trainees aspire to. The interview gave some great insight into the firm and is something worth blogging about.

As Stephen is proof that you can start at the bottom and make it to the top, I wanted to know why he stayed at Grant Thornton after completing his training contract. It’s no secret that some trainees use firms to simply obtain a qualification. However, at Grant Thornton, things are slightly different and Stephen explains why.

“To excel, you must constantly venture outside your comfort zone, to push new boundaries and challenge yourself. Throughout my career I found I was able to do this with the constant support of my colleagues” Stephen explains. “It is this supportive culture within Grant Thornton that sets us apart from other firms”.

I couldn’t agree more. I started as a Tax Associate last January and have worked on this website, spent a week in Scotland, been an editor of a newsletter, climbed three mountains and am currently undertaking a secondment in a different department. Throughout all these experiences I have received full support from my colleagues and seniors.

Stephen goes on to comment on Grant Thornton in the current economy and our future as one firm. “Two years ago, when we set ourselves targets for 2012, we knew they would be challenging, but if they’re not challenging there is no point” admits Stephen, “The economy has made for difficult conditions but recently we’ve made strong headway, so much so that we?ve already set an equally ambitious target for 2015”.

These are refreshing comments. In an economy which is stagnant and harsh, the firm is not just looking for survival – it is looking to grow. Our ambition during such a bleak outlook sets us apart from other firms. In times of despair, this progressive drive combined with fantastic internal support makes it an exciting time to be a Grant Thornton trainee.

Making a Statement

There’s a strange aroma in the air. No, it’s not the creaky offices of Grant Thornton House in Euston, it’s the indefinable smell of anticipation. Anticipation is a wicked thing – it permeates the senses and manifests as a spring in one’s step, a crease of one’s smile and a knowing sense that we may witness a profound and fundamental change to the modern economic and taxing regime.

AUTUMN STATEMENT DAY. HUZZAH!

Twice a year, all Grant Thornton bods eagerly await the Budget and Autumn Statements (formerly the Pre-Budget report), given by the Chancellor of the Exchequer of the day. Today’s statement was particularly moving, especially, it would seem, for Ed Balls who sat in what looked like a well-rehearsed pantomime mock outrage pose throughout; his tonsils have never looked better.

All aspects of the country’s economic, social and financing directions are reviewed, detailed and announced. Any changes, in particular those to our taxation system, directly impact our clients and the advice we are able to provide. It is essential that we as tax professionals, understand, find solutions to and continually work to protect and maximise our clients’ wealth, be they individuals, owner-managed businesses, corporates or multi-nationals.

As members of the Private Client team, we are relied upon to study all aspects of the statement, understand how it will impact our clients (broadly high-net-worth individuals and their businesses) and provide our thoughts and analyses to the UK national press.

Earlier in the year, during the main Budget of 2011, we were embedded at different papers – The Times and The Evening Standard. Both provided an exciting, bustling and often frantic environment as the journalists raced to meet their print deadlines (in between guzzling high caffeine espresso shots) where we acted to give them our expert opinions, thoughts and angles for an edgy story!

Today, during the Autumn Statement was a much more laid back affair as we worked in the Media Response Unit back at GT’s headquarters. Less frantic, but no less interesting, we dissected the statement document provided by Her Majesty’s Treasury, and briefed our colleagues taking calls from the press.

Just another day in the life of a Grant Thornton professional.

Kieron and Liam.