The Fizz! Blog

Coming clean to the taxman

There's a very good article here in Taxation magazine by tax writer Mike Thexton.  It's about his experience of helping a friend who (through laziness more than dishonesty) had been failing to declare some income to the taxman, but wanted to come clean.  It's very readable even if you're not a tax professional.  If you've ever wondered what the process is for turning over a new leaf, tax-wise, it offers a great insight.

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Banks - an observation

If I'd asked you this morning to invest £800 in the UK banking industry, I imagine it's quite likely that you'd have declined the opportunity.  "You know what, Greg?  I'm just a bit of short of cash this month.  No can do.  Sorry about that."

If I'd then suggested that this wasn't a problem, and that you could just borrow the £800 from somewhere and then invest it, I suspect I would have been turned down once more.  "Greg, it's a tempting and imaginative plan, but, taking into account the volatile and insecure nature of the banking sector at present, along with the general fears about the wider economy both here in the UK and abroad - not to mention my existing borrowing - I think that taking out a loan in order to invest in the banking sector would suit neither me nor my investment plans at present.  Thanks - but no thanks."

But this morning, the government ordered every man, woman and child in the country to do exactly that.  You have no choice in the matter.  We, as a nation, are borrowing £50 billion to help the banking industry - that's about £800 pounds each.  We'll have to pay that amount back later on, to whoever we have borrowed it from, with interest.  If you didn't want to borrow £800 to invest in the banking sector - unlucky!  You just have.

The banks will then use the money by lending it straight back to us (in the form of mortgages, loans and credit cards) and charging us interest.  The plan is that the interest they charge us on the amount that we owe them will enable them to repay the amount that they owe us so that we can then repay whoever has lent us the £50 billion.

I'm not really saying that this is the wrong thing to do.  We are where we are, and, although it might not be an ideal situation, we have to do what's necessary to get ourselves out of it.  But when you break the plan down into its constituent parts, you have to acknowledge that it's a bizarre state of affairs.

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Doing business in difficult times...

...was the name of a seminar that I went to this morning.

It was a very worthwhile session, though one of the presenters did assert that, with a recession coming, accountants will be advising that you cut back on costs as far as possible.  For what it's worth, that's not generally my feeling.  If anything, it's even *more* important than usual in a recession to maintain your marketing efforts, recruit and develop talented staff and keep building solid systems and infrastructure.  If your competitors are struggling, it could be a brilliant opportunity to take advantage of their weakness and come out of the downturn way ahead of the game.

The presenter did then talk about a lunch he'd had with the managing partner of one of the Big 4 accounting firms, who is apparently argung over just this with his partners.  The other partners want to be cautious, cut back and lay off staff, the managing partner wants to keep pushing on in order to maintain their market position and keep the pressure on their rivals.  So that's at least one other accountant who isn't advocating cutting costs to the bone!

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