Taxing times…..

I don’t do tax. At least I don’t advise on tax matters. Yes I am an accountant but tax is a very complicated area now, and is something that requires a level of expertise and experience beyond that of some letters after my name.

Having said that, as a Finance Director, I have a keen interest in tax and I am aware of many of the ways that it affects SMEs, particularly those that are owner managed or wish to trade internationally. I work very hard to keep myself update, hence my attendance at a recent seminar concerning the new tax agreement between the UK and Switzerland. Remember I do this so that you don’t have to.

The agreement was described as a “perfect Swiss compromise”, preserving the confidential nature of Swiss banking whilst enabling HMRC to start collecting tax that had previously been difficult to track down. It places obligations on Swiss based financial institutions to administer and collect tax that make PAYE seem like child’s play.

What was particularly amazing was the number of ways available to people who had, shall we say, “forgotten” to inform the UK revenue authorities of their liability to UK tax on assets held in Switzerland to “regularise” their affairs. As well as the options provided in the agreement some tax advisors are suggesting that these people should be looking to use something called the “Lichtenstein Disclosure Facility” to get everything in order.

All well and good although I can’t help thinking that the truly all-embracing Foreign Account Tax Compliance Act (FATCA) legislation that is due to come into effect in the United States in 2013, and which places the responsibility of advising whether US citizens have taxable income or not squarely on the institutions that deal with that income whether they are based in the US or not, is a more realistic pointer as to where tax legislation is headed.

In spite of not being a tax consultant I am still frequently asked about tax issues or more pertinently how to pay less of it. Naturally I do look out for opportunities to keep the tax bill down by claiming all due reliefs and allowances, particularly R&D (research and development) tax credit, a gem of a tax opportunity that generously rewards companies that invest in the future of their businesses. The scope of this is considerably wider than you might think.   

I have also been made aware of a number of creative tax avoidance schemes by accountant contacts, and while I am probably duty bound to advise clients that they exist, it is not an area that I am particularly comfortable with, not least given that they are increasingly, and it has be said often successfully, attacked by HMRC.

Tax is a(n unfortunate) consequence of profit. One of the more obvious ways to pay less tax is to make less money. However this advice does not always go down too well…..

So maybe tax should ultimately be seen as a sign of success. If you are paying what you believe to be too much tax it is more likely that you have a good business rather than a bad accountant….

Send for the accountant…..

I see that the Secretary of State for International Development, accountant Justine Greening, has been causing a stir by using her accountancy background to scrutinise budgets and ensure that value is being delivered across the various programmes that she is now responsible for.

Of course, as an accountant, she is going through the department’s spending line by line. Using her accountancy skills and training, she has already identified a number of areas of waste (as well as the odd mismatched debit and credit no doubt) and she is clearly on track to ensure that all who are involved in international development will be accountable for their actions (or at least their expenditure).

Did I mention she was an accountant? Just checking…

I hope you all noticed the one key word in the above. No not the “a” word but the “v” word. Value.

Clichés come and go but it seems that accountants are still regarded as focussed number crunchers unable to look beyond a column of figures. However, good accountants, particularly those that become Finance Directors, spend their lives disproving Oscar Wilde’s comment about knowing the cost of everything and the value of nothing.

Did I mention I was an accountant……?

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Talking of value, barely has the dust settled on another round of exam results, and the inevitable debate on standards that followed, than our coalition government have finally put egos aside and outlined a new “more rigorous” exam system for 16 year olds, the “English Bac”.

Meanwhile anybody who thinks that GCSEs are dumbed down and meaningless clearly has not been talking to the students whose D grade achievement in English, thanks to the boundaries being moved at the last minute, means that their lives are potentially blighted for ever.

Fortunately my daughters are too old to become guinea pigs in this latest Department of Education experiment re effective exams, although there seems to have been sufficient changes in course content and assessment processes during their years in the system for me to think that the education department clearly sees itself as one gigantic scientific laboratory.

The new “one exam takes all (but don’t call it an O level)” is due to be introduced in 2015 (so that it can no doubt be ditched as a result of the election due to take place that year). However I was extremely perturbed to read certain commentators suggest that there would need to be an alternative exam for “less able” students.

The cauldron that contained the Paralympic flame has barely cooled and already a term that we all hoped had been consigned to the waste bin is being bandied about without any thought for its impact or meaning.

These “less able” students, who in days gone by would have taken CSEs, could do things then with a football that I could only dream of (and no doubt now have DIY skills that my wife can only dream of).

The reality is that some students, through no fault of their own, are not suited to academic study. Most of them however will have talents in other areas that a high quality and rigorous education system would identify and nurture. This issue does not seem to be sufficiently addressed under the new proposals.

Education is a lifelong and varied process which individual people benefit from and value in different ways. There it is. That word value again. Send for the accountant….

The FD needs to know….everything…..

Many years ago when I was working for a Japanese conglomerate in their M&A department we purchased a German business based between Frankfurt and Cologne. A grand welcoming party was arranged, and my Japanese boss gave a speech in English, for which I provided a simultaneous translation into the language of our hosts. All was going swimmingly until my boss started to give a long rambling list of all of the business areas that the conglomerate was involved in. As he went on and on I became increasingly aware of the time, and the toll this list was likely to take on my German translation capacity. As he finished I took a deep breath and explained “The company does…everything!”

I was reminded of this when I gave a presentation on Social Media the other day. Yes, I know, an accountant talking about marketing. I can hear all those Twitter and Facebook gurus shouting at their screens “Why him? What does he know?” Well to put it simply Finance Directors are now expected to know, well, everything.

Because of their commercial business grounding and experience, most good FDs have come across many of the issues that companies have to deal with, be they legal, property, HR or operations. That a number of them make the transition from CFO to CEO is in no small part due to the diverse range of skills that they acquire throughout their careers.

As a part time or interim FD it is not uncommon for clients and contacts to seek my input on matters that go beyond the finance function.  Often it is because they value an opinion from somebody who has recent experience from outside of the organisation. Because of this I always look to keep myself updated in all areas relevant to my clients and contacts, and to this end I keep in touch with a number of individuals and organisations with the right level of expertise.

So back to last week’s presentation. As a professional person running my own business, I have had to be aware of a number of sales and marketing techniques, one of which in today’s world is definitely social media. Therefore I was in a perfect position to explain the subject to a group of people, many of whom may have been unsure about how relevant it all might be to them, and take them through my own social media voyage of discovery. This naturally included insight that I have gleaned from real experts in the field.    

So there you have it marketing bods and others. I am afraid the FD does need to know everything. However there is a ray of hope for you all. Most of all he or she needs to know where to find the expertise to provide the right advice to clients and colleagues at the right time. Demonstrate the relevant expertise and who knows….

Are you..er.."something" in disguise…..?

Ian Duncan Smith is up in arms about the BBC at the moment. No surprise there then. For as long as I can remember Conservative ministers have continually moaned about our state broadcaster, and how they believe it constantly highlights bad news and downplays more positive stories, particularly when the party in power has a bluish tinge.

The current spat revolves around the number of people out of work. In spite of falling GDP, double dip recession and government cuts, unemployment has not gone through the roof. The employment statistics are surprisingly robust. Jobs are being created faster than they are being lost.

For the government this is seen as good news and evidence that the economy is in better shape than is realised. Others maintain that the current impact of joblessness is being hidden by a myriad of seasonal and one off benefits as well as the significant increase in part time jobs and self-employment. It was the latter argument that the BBC latched onto, thus incurring the wrath of the Secretary of State for Work and Pensions.

I have long thought that one of the features that has set this recession apart from previous ones is that of under-employment rather than unemployment. In previous downturns it was rather like the hokey-cokey. You were either in or out or work. There were no shades of grey, let alone the 50 (ho ho? Oh well never mind…) or so that we seem to have at present. Freelancing, contracting, self-employment, however you want to term it, is one area in particular that is clouding our previous certainties as regards unemployment.

For some freelancers there is no choice. The changing jobs market and the lack of conventional employment opportunities mean that self-employment is the only option they have to earn money. For many others it is a lifestyle choice, providing a flexible working environment and the work-life balance necessary to cope with family commitments or indulge in other activities.

For SMEs and entrepreneurial companies freelancers and contractors make sense. Why go through the hassle of engaging full time employees that you don’t actually need full time when you can get what you need when you want it, and only pay for what you know you can use and which will add value?

For HMRC it is a headache, as it reduces its ability to efficiently collect tax through PAYE and leaves them reliant on the vagaries of self-assessment and corporate tax returns. Hence their ongoing efforts to get as many freelancers as possible classified as employees. Providers of loans and credit are also finding the increase in “non employment” a challenge, which may be another reason for the current lack of finance in the economy.

Nobody pretends that a life of self-employment is easy. It is risky, insecure and hard work, and I am sure that a fair proportion of self-employed people would go back to being employees tomorrow if the right opportunity arose. However in a world where flexibility is becoming the norm such opportunities are likely to remain scarce, and thus self-employment in its various guises will continue to grow.

The current situation seems to be then that HMRC want to treat freelancers as disguised employees. Others want to view them as unemployed people in disguise. SMEs and entrepreneurs meanwhile have an undisguised need for the right people at the right time for the right price. Perhaps rather than indulge in petty squabbling, the government and the BBC should work together to promote a sensible debate about the issue. If something good can emerge from all of this I for one may not be able to disguise my feelings of joy….

Olympic shorts (2) ……

Many years ago when all the Olympic participants were meant to be amateurs, the stories that surrounded their preparation were focussed on how they fitted it around their day jobs (or in the case of modern pentathlon gold medallist Mary Peters, bomb sites). Many had to beg for time off of work, and often it was unpaid. Their dedication was unquestionable, but their “work life balance”, which was a necessity rather than a choice, often worked against their chances of success.

Today it is totally different. Potential gold medal winners will effectively have had to have given their lives to the achievement of this ultimate Olympic goal. They will have put countless hours into training and development, honing what was already outrageous natural talent into something that is special enough to beat everybody else on the day to the top of the podium.

They will probably have no other career or job so to speak of, little or no social life, and probably limited opportunities for relationships unless their other half is also willing to commit themselves to the achievement of their partner’s dream. Such is the dedication and effort required to reach that pinnacle, and live the dream that they have had for so many years.

Management and leadership gurus are fond of using sports analogies to drive improvements in business performance. However I think more needs to be made of the dedication, coaching and training that is now required for sporting success.

Many successful entrepreneurs and business people are ferociously driven, with an unwavering commitment that matches that of any top sportsperson. The coaching side may sometimes be neglected, although a surprising number do have mentors or key people they turn to for advice.

Perhaps it is a little extreme to compare the dedication and preparation required of an Olympic athlete to succeed with that of an everyday member of Enterprise Britain. However I have always been struck by the fact that virtually all of the successful business people of my acquaintance have an almost single minded focus on what it is they want to achieve.

Rest and recovery does play an important role in any top athlete’s schedule but only as a part of the achieving the end goal.  In a world where much is made of work life balances, minimum holiday requirements and flexible working it needs to be realised that dedication, focus and hard work is as much an essential part of business success as it is of sporting success.