Well, the draft clauses for the 2013 Finance Bill were published on Tuesday and they included the provisions on the General Anti Abuse (no longer called Avoidance) Rule.

The provisions are like the proverbial curate’s egg – good in parts. The confirmation that the rule is only there to counter abuse is, to a certain extent, reassuring and the fact that the rule will only apply from the date of the Royal Assent of the 2013 Finance Act (probably July) and not 1 April 2013, as originally proposed puts off the ‘evil day’. I use the word evil, not because I think it is wrong to counter abuse of the tax system but because I still see a lot of problems.

HM Revenue & Customs are doing all they can to convince people that they are going to be reasonable. I do not mean to be cynical – OK I do – but everyone on ‘the ground’ knows that HMRC cannot be accused of being reasonable, so why should this be any different. In order to attempt to allay fears, that they will act heavy handed, they have introduced the concept of an advisory panel that will comment on the HMRC stance. However, the panel is just that, advisory and it remains to be seen what notice is taken of the panel’s views.

The idea of the panel and the general tenure of the legislation provides greater clarity on how things should work and certainly sets out a system of working that is closer to the original report by Graham Aaronson QC than the HMRC interpretation in June. Now all we need is for HMRC to fall into line. To get technical for a minute it requires them to accept that something is established practice and to apply, what has become known, as the double reasonableness test, as its intended to be.

I wait with bated breath (yes I am sick) as to what will happen. I am not confident when the use of trading losses of an earlier year, to reduce a current year’s profit is reported in the press (presumably with HMRC encouragement) as tax avoidance.

Would you employ a grumpy cobbler?

I found this phrase on a post it note with the words "2 Rules - Look the part and put the money in the till" written on it.

It was from a presentation that I had heard earlier this year when I had only got some post it notes to write on and this one was loose in my bag.  But how right these rules are when you consider customer service and customer care.

The speaker was John Timpson, Chariman of Timpsons the shoe repair people, and these were the 2 key rules that he had for his workforce.  He went on to say that he employed people with personality and wouldn't employ a grumpy cobbler.  "Customers return to the cobblers with personality" he said.

In recent months I have had some interesting experiences from both ends of the spectrum but how do we do at Crowther Beard? Customer care has been high on my agenda for over 15 years now and one of the criteria I judge team performance on is how we look after our clients and care for our colleagues.   Let us look at the 2 rules and the statement at the top.

Look the part.  What do people expect from accountants?  The current trend of professionals towards open necked shirts does not mean that people don't look the part but I had to draw the line a couple of years ago when a newly appointed manager said that he couldn't afford a suit and didn't possess a jacket.  I still think that most clients expect their solicitor and accountant to wear a suit, collar and tie. 

Put the money in the till.  Too many accountants and lawyers are hopeless at telling clients in advance what their bill will be and getting agreement to it.  The pressure on them is to bill their time and not worry about the consequences.  The problem with this approach is that collecting a fee that is contested costs in administration time and in terms of goodwill.  Wouldn't it be much better to be up front about the cost of your service and agree a fee in advance?

Employ people with personality. There are two parts to this.  A grumpy team member will bring his or her colleagues down with them, you will never manage to lift them out of being grumpy.  However the effect on the client or customer is more telling.  There is "no can do" with these people, I always liked the TV commercial which went "the answer is Yes, now what is the question".  If I don't know, or the matter is beyond my experience, then in most situations I will know someone who does know, so all of my clients can get what they want indirectly from me if not directly. 

Any customer facing industry or profession needs the can do approach and the more personality you have in your team the better it is for the interaction with your clients and customers.  At Crowther Beard we set out to look the part, agree fees in advance and enjoy working with our clients and colleagues.  After all this will make us all very happy.

Oh, and the manager who couldn't do?  He is no longer is a member of our team.

Yes even more on tax planning

Those of you that know me, realise that I'm sad enough to think that tax planning is very important. I have blogged on this subject before but, at the risk of boring people, the recent media coverage of the use of tax schemes by 'selebs' to avoid tax has prompted me to spout forth again.

The first point I want to make is that all the schemes, such as those supposed to have been used by Jimmy Carr and Gary Barlow, are extremely complicated. The only people that suggest that they are straight forward are either journalists, looking for a headline, or people promoting the scheme. If they were as easy, as is suggested, they would be more wide spread. In the main, they rely on an interpretation of the tax legislation and a 'paper trail' that needs to be followed religiously, if they are to work.

The second point is the idea put forward, mainly by the media that they are only for the fabulously wealthy. This is probably closer to the truth, as many of the schemes have an up-front fee, for implementing the planning involved. However, there are equally many schemes where any fee cannot be described as only for the rich and are open to anybody, who has a need.

The third point is the suggestion that HM Revenue Customs are doing nothing about combating schemes that the Government have branded as ‘morally repugnant’. Just because there is not a swathe of new legislation aimed at the schemes does not mean that they are not doing anything. As stated above, schemes rely on interpretation of the tax legislation and HMRC may well consider that existing legislation is sufficient, given their interpretation of it. Take as an example a tax scheme that was implemented in the 2010/11 tax year. HMRC would not necessarily know of it until as late as 31 January 2012 and then might simply raise an enquiry to keep the matter open until the Courts decide, which interpretation is correct – probably many years later.

When you sit down with a client, to explain that they are not simple or necessarily cheap and they will not know whether they have been successful for a number of years, many loose interest. Add to this the possibility of bad publicity and there will be less interest but some will want to proceed. I do not see it as a moral problem for me to make clients aware of these schemes as long as this stops short of promoting the scheme involved. Surely it is only best practice to make clients aware of what is possible and to explain the pros and cons of each option. The client is then able to make an informed decision.

Can a business make a difference to it's community?

Twice in the last 2 weeks I have been privilidged to see and hear what a professional football club is doing not only for their local community but for a much wider geographical area.

It is normal for me to be seen at a home game for West Bromwich Albion, after all I have supported them since (well probably since) I was conceived.  My Dad was a fan and became Chief Steward and Mum was the Granddaughter of Joe Reader who played in goal from 1890 until 1901.   But a couple of weeks ago I was not to take my usual seat in the West Stand.

On 14 April 2012 I was invited to attend the game against Queens Park Rangers as a guest of the West Bromwich Albion Foundation in my role of Chairman of the Herefordshire and Worcetershire Chamber of Commerce. 

On arrival Community Director Rob Lake and his colleague Jon Ross and they showed us the work going on in the Dome and the Sports Hall.  The Dome (a covered full size football pitch with artificial turf) was home for the morning to some 40 youngsters who had travelled up with parents, in coaches supplied by the Club, for a couple of hours coaching.  They were then going to get to watch the match from the stands.

Rob and Jon told us that this was done most weeks with children from different areas.  In the sports hall we were told about the basketball and dance teams as well as the different sports for the disabled that were hosted there.   Funding comes from a number of sources including the FA, West Bromwich Albion Football Club and Local Authorities as well as the Private Sector.

Over lunch though Rob explained how the philosophy of the Club and the Foundation was linked and how they were also working with youngsters who were not in school, and those who were slightly older who were classed as not in education, employment or training (NEETS).  In his explanation he said that in these education programmes in particular they had managed to engage teenagers who had an attendance problem at school and had achieved a 93% attendance rate with their courses.   These are teenagers who will do anything to avoid school suddenly going to school and as it is a widespread problem in Sandwell the local authority are sitting up and taking notice.

The Foundation are looking to spread their wings and are coming to Worcestershire, working with the University of Worcester and the Herefordshire and Worcestershire Chamber of Commerce.  The project entitled "We are Albion in Worcestershire" is about giving opportunities to areas of the community that are sometimes overlooked whilst the payback to the Football Club is that they will generate a larger fan base.  That is bound to be possible with a schools tournament today at Worcester University featuring 16 schools with prizes presented by West Bromwich Albion and Republic of Ireland full back Steven Reid.  How many youngsters get to meet a Premier League star?

Back in March I was at the annual conference of the British Chambers of Commerce.  One speaker was the Chairman of Timpsons, the shoe repairers, John Timpson.  He was saying that they worked with some local open prisons and as a policy were happy to employ ex-offenders in their business.   He also told us that 98% of them didn't re-offend.  In addition he said that the cobblers in the shops often were characters that customers were more than happy to engage with.  The benefit to the business was increased customer retention.

So separate businesses and different industries, but similar strategies and similar ways of making a positive difference to communities and groups of people that Society often reject.   

Where do you draw the line?

Back in November Graham Aaronson QC published his report on whether the UK needed a General Anti-Avoidance Rule (GAAR). His conclusion was that a “broad spectrum anti-avoidance rule” would not be right as it might prevent “responsible” tax planning and he proposed the introduction of a “moderate” rule that would not stop this responsible tax planning but would tackle “abusive” arrangements. So far so good, especially for me, who over the past 30 plus years have, I hope, always gone in for responsible tax planning.

However, this starts alarm bells ringing with me. The whole issue of a GAAR is to be consulted on over the summer, with a view to legislation being introduced next April. My first concern is whether the views expressed in the report or the views of HMRC, who are thought to favour a more far reaching rule, will prevail and be legislated. My second and larger concern is, if we do end up with a rule similar to the one proposed in the report, who will decide what is responsible tax planning and what is abuse?

The biggest problem with our tax system is uncertainty and it can only add to the uncertainty, if you are unsure whether any advice given will be attacked as going too far and being considered irresponsible. OK very simple solutions are likely to be unaffected but much is done that, although fairly basic tax planning, HMRC do not like. Will we be faced with a situation that anything disliked by HMRC becomes irresponsible? The government have already done a very good job of blurring the distinction between tax avoidance and tax evasion and this might be a chance to bring tax planning in, to further “muddy the waters”.

In all my years, I have come across very few clients who do not want to pay any tax, most just want to pay a fair amount, and it is only when the tax bill is considered unfair that they consider tax avoidance solutions or even some of the schemes that are extremely artificial and must therefore come under the heading of abuse. If we face being attacked over tax planning, as well as solutions, it will be somewhat challenging.

Where does that leave us now? I do not want this to be an advert but the only certainty, that tax planning will not be attacked, under a GAAR, is to do it now. Tax solutions have their place, as do some of the more artificial schemes, as long as the pros and cons are fully discussed. The latter will certainly be ruled against and some of the former may also fall foul of the new legislation, so it may well be a case of buy now or miss the chance.

My best guess is that anything done before the pre- budget statement, later this year, will not be affected by any changes made. However, this guess does not extend to anything to do with Stamp Duty Land Tax because the Chancellor in his budget signposted the fact that he would retrospectively act against this avoidance.

Charity - Close to my heart

Each year we choose a charity to support and this year the charity is Ataxia UK.

This may be a little known charity but is an organisation I am very pleased to support. I am especially pleased with this year's charity because I suffer from Cerebellar Ataxia, one of the many forms of Ataxia. Thankfully my symptoms are mild and amount to no more than a problem speaking, a problem writing, difficuties with co-ordination and, at times, feeling generally "washed out". If anything, it could be described as frustrating because, often, I can't do what I wish or what I used to do. Equally, this might just be down to getting old.

Ataxia is a degenerative brain condition and is progressive - meaning that it does get worse. It gradually robs sufferers of mobilty, co-ordination and speech. The speed at which the condition progresses varies greatly from person to person. In the word of one doctor "It might be many years before there is any deterioration but I wouldn't advise taking up rock climbing".

Rather than spend a lot of time describing the difficulties that sufferers can go through I will post some links to short You Tube videos that can describe things better than I ever could. http://www.youtube.com/watch?v=gxv_5nyO1QE
http://www.youtube.com/watch?v=3wnugGhdr4o
http://www.youtube.com/watch?v=nj2WQfu4MhU
http://www.youtube.com/watch?v=bVJcAVaW87g

The first is rather hard hitting but the others are more "optimistic".

Our aim is to raise awareness of Ataxia and to raise as much as possible over the next 12 months. This will be formally launched at our Budget Breakfast Briefing on Thursday morning but we have prepared a charity page at http://www.justgiving.com/Crowther-Beard-llp for donations. Your support would be vey gratefully received.

We don't think its enough to just ask others to give and apart from our fund raising activities (including a Cream Tea in June and a Golf Day in October) and asking for donations we are going to pledge that some of the money we receive for the services we provide are paid to Ataxia.

For each new client - we will pay for Ataxia UK to send DVDs to 5 young people learning to cope with Ataxia.
For each piece of tax planning – we will pay to print 100 info leaflets to raise awareness.
For each piece of business planning - we will pay to run the helpline for a day.

Please help.

Pensions – The Annual allowance
I have just penned an article to be published in the UK200 Technical Advisor In Focus magazine and wanted to share it with you.

HM Revenue & Customs realise that, following reductions of the annual allowance (AA) for pensions, more people should be declaring on their tax returns an annual allowance charge. It is important that a return of any charge is made to avoid the possibility of interest and penalties. A potential liability is not well known but HMRC do not accept ignorance as an excuse.

The AA, i.e. the maximum pension savings that qualify for tax relief, reduced to £50,000 from 6 April 2011. The use of the term savings is done purposely because, importantly, the provisions apply not only to defined contributions schemes but also to defined benefit schemes (final salary schemes). Just as importantly, it applies to all contributions made to a pension scheme and, therefore, includes employer contributions.

If contributions exceed the AA the excess is liable to a charge at marginal tax rates. For most people caught by this provision, that will be 40% or, perhaps, even 50%.

The AA can be more than £50,000 because it increases by allowances unused in the previous 3 tax years. For these purposes, the allowance for 2008/09 through to 2010/11 are taken to have been £50,000 (although, they were higher). A simple example is that, if pension savings were £30,000 for each of the years 2008/09 to 2010/11, the allowance for 2011/12 is £110,000 (£50,000 plus £60,000 brought forward).

To further complicate the position, the concept of a PIP (pension input period) and how pension savings are calculated for defined benefits scheme, come into it.

PIPs do not have to follow the tax year but have to be allocated to tax years, as the pension savings of a PIP have to be compared to the AA for tax years, to calculate if there is a charge. This is achieved, normally, by allocating the PIP ending in a tax year to that tax year, i.e., PIP to 31 December 2011 ends in and is the PIP for the tax year 2011/12.

If the scheme is a defined benefits scheme the measure of pension savings is the increase in projected pension benefits in the PIP, which could bear no relationship to contributions made.

No more busy fool

The months of November, December and January are extremely busy for all accountants paticularly those heavily involved in tax. The deadline of 31 January for submission of personal tax returns tends to take over and the other urgent things, that need to be done in these months, leaves very little time for doing the other important things.

It is hard at times to realise that not putting time aside to spend on the less time critical, but no less essential, matters such as strategy and planning means that you are no more than a busy fool.

Please do not think that I do not recognise that phones need to be answered, e-mails need to be responded to, questions dealt with and scheduled work completed. It makes the business go around and is very rewarding but if you spend all your time working "in" the business you are just dealing with the present and neglecting to think about what you need to do so the business has a future.

Unfortunately having ideas and developing a plan is only part of it. Until there is action things do not happen. So you do not only have to do the "normal" work - you also need to have plans and carry them out. It sounds daunting but can be best achieved by setting aside specific time to work "in" the business and other time to work "on" the business, i.e. working on your plan.

It can help to "keep you honest" if you have someone to help you work on your plan and this is, of course, something we can do.