Thursday, December 31, 2015

Claus vs HMRC

A while back Taxation magazine published a spoof judgment of a first tier tax tribunal case imagined by Robert Maas.

I have taken the liberty of extracting some of the key elements from the reported judgment:

In this case HMRC were represented by Mr Scrooge. 
The taxpayer did not appear and was not represented. Mr Scrooge explained to me that Mr Claus is reputedly very eccentric. He expects people to communicate with him by writing their message on a piece of paper, folding it and inserting it up a chimney. HMRC did this.

Mr Scrooge told me that HMRC’s letter certainly was not returned undelivered. I accordingly accept that Mr Claus was duly served with notice of this hearing and I decided to proceed with the case in his absence. HMRC told me that Mr Claus has some sort of facility overseas which either manufactures toys or stores toys procured from elsewhere (I am not clear which).

Mr Claus is known to visit the UK regularly and to distribute the aforementioned toys to children. For some reason that HMRC have been unable to explain to me, he apparently comes to the UK only once a year, always during the night of 24 December, and is seemingly unwilling to speak to HMRC or anyone else during normal business hours.

HMRC claim that Mr Claus is carrying on a business. He has imported a very large number of toys in the course of that business and has supplied them in the UK. The value of the toys far exceeded the VAT registration limit for each year, which means that Mr Claus should have registered for VAT and accounted for VAT to HMRC.

HMRC are seeking the VAT due for the 20 years to 25 December 2011 on the value of the toys supplied in this country, either as VAT due on import or VAT due on making taxable supplies here.

I asked Mr Scrooge why HMRC believe that Mr Claus is carrying on a business, as I was under the impression that he distributes his toys by way of gift. It is fundamental to VAT that the supplies must be made for a consideration.

Mr Scrooge explained that HMRC hold information to suggest that Mr Claus does not give toys to naughty children. Accordingly the toys are not distributed as gifts; they are supplied as consideration for a child having been good.

Mr Scrooge drew my attention to the tests summarised by Mr Justice Gibson in CCE v Lord Fisher [1981] STC 238 as to when activities constitute a business, namely: Whether the activity is a serious undertaking earnestly pursued: it clearly is so, as Mr Claus is reputed to employ a vast number of elves as “little helpers”.

A further point that concerns me in relation to the claim for VAT on importation is the EU concept of proportionality. Apparently Mr Claus delivers the toys in a sleigh powered by eight reindeer. However these are not ordinary reindeer. They appear to have magical powers, as they propel the sleigh in such a way that, however heavily it is loaded, it remains erect with the runners on a level with the hooves of the reindeer, so that it is not necessary for the vehicle to set down anywhere in the UK. It enters from the stratosphere and hovers above the country’s rooftops.

This may sound somewhat incredible, but HMRC have not questioned the practicality of this mode of delivery, so I assume it to be accepted as correct. The commissioners have promulgated a method for dealing with VAT on importation where goods come into the UK through a recognised border, but it is not apparent, at least to me, how a taxpayer is expected to account for VAT where his delivery vehicle comes from above and hovers over a rooftop while Mr Claus descends down the chimney below.

It may be that the Commissioners have made it exceptionally difficult, if not virtually impractical, for Mr Claus to account for import VAT. I am sceptical whether it can be proportionate to expect him to account for VAT in the absence of any machinery to enable him to do so. so. IHowever, the concept of proportionality is usually raised in the context of taxpayer’s rights; it is unclear to me whether it applies also to his obligations.

In passing, I would also say that I cannot see how HMRC will collect their tax. Mr Claus has no assets here and HMRC have been unable to determine precisely the location of Fairyland, or wherever else it is that Mr Claus comes from. The UK has clearly not entered into a treaty with Fairyland for the mutual enforcement of tax debts. I also cannot see how HMRC will be able to calculate the value of the taxable supplies.

Thankfully that is not my problem though. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Friday, November 20, 2015

Tax inspectors aren't so bad

When tax inspectors die why are so many of them buried at the bottom of the ocean?


Because deep down they're quite nice people.

Friday, November 06, 2015

The Budget - Stanley Unwin gives his opinion


Unclear which year's Budget is being discussed, but frankly it wouldn't make any great difference!

Friday, October 16, 2015

Which is the oldest profession? Tax or Accountancy?

They were arguing over who had the more noble profession and agreed it was whichever had been around the longest.

The accountant, convinced he'd won, quoted the bible. Even before God created Adam he created an orderly universe from chaos. An orderly universe implied the involvement of accountants to monitor and keep track of developments. By definition some of the angels must have been accountants. There were no taxes so no tax inspectors around that early in human history.

The tax inspector wasn't beaten. He listened patiently and then simply said: "Who do you think created the chaos?"

Friday, September 18, 2015

A winning suggestion....

A firm of accountants (that shall remain nameless) wanted to engage their staff in an efficiency drive so that everyone understood the need to be careful with the firm's money.

The partners introduced a suggestion scheme facility and promised a prize of £100 for the best suggestion each month - in terms of a simple to implement money saving measure.

The £100 prize was only awarded once.
It went to a manager who suggested reducing the monthly prize to £50.

Friday, September 04, 2015

7 top fun quotes about taxes

"Our tax code is so complicated, we've made it nearly impossible for even the Internal Revenue Service to understand."
FORMER TREASURY SECRETARY PAUL O'NEILL

"The United States is the only country where it takes more brains to figure your taxes than to earn the money to pay it."
SENATOR EDWARD J GURNEY (FLORIDA 1969-1974)

"The way I look at this, we essentially have a tax system that's held together by chewing gum and chicken wire."
ASSISTANT TREASURY SECRETARY FOR TAX POLICY PAMELA F OLSEN

"A friend is one who takes you to lunch even if you're not tax deductible."
JACK BENNY

"If Patrick Henry thought that taxation without representation was bad, he should see how bad it is with representation."
FARMER'S ALMANAC

"The tax code last year included 2.8 million words. The Holy Bible itself has only about 775,000 words. Obviously, God did not need to issue such copious instructions for living as we currently have for complying with tax laws."
SENATOR ORRIN HATCH

"The hardest thing in the world to understand is the income tax."
ALBERT EINSTEIN

Friday, August 28, 2015

The Utterly Uninteresting & Unadventurous Tales of Fred, the Vampire Accountant

Regular viewers of this blog will know that I generally avoid posting 'fun' items that reinforce the age old insulting misconception that all accountants are boring.

Occasionally though I come across items that just have to be featured here despite my best intentions. And this book, written by Drew Hayes and published in 2014,  is one such item.

Frederick Frankford Fletcher ("Fred") was "a mild mannered accountant" in life and in death. First with a heartbeat and then without. As one of the reviews suggests:
"He’s the same undead as he was alive – a boring accountant with low self-esteem. He also learned early on that he is not good at the whole stalking prey, eating straight from the vein thing. So, he gave that up and gets his blood from a hospital as a favor for cooking their books."
I'm no fan of the whole vampire genre but the reviews I have seen of this book were enough to encourage me to download the kindle version (it was free when I did so) from Amazon.

Further review quotes:
Goodreads
Some people are born boring. Some live boring. Some even die boring. Fred managed to do all three, and when he woke up as a vampire, he did so as a boring one. Timid, socially awkward, and plagued by self-esteem issues, Fred has never been the adventurous sort.
Zombie J 
The only small problem I had with this otherwise likeable book is it did get somewhat repetitive. Fred constantly reminded us of how boring, timid, non-confrontational, and non-vampirish he is. But he was one of those characters that is really pretty charming, even if he doesn’t know it himself. He’s quite adorkable, actually.

Friday, August 21, 2015

The value of accountants at awards ceremonies - according to Dr Sheldon Cooper

This clip from the popular TV show, The Big Bang Theory, was shown at the start of the Emmy's in 2012. In the clip the genius Dr Sheldon Cooper explains why accountants are much more than simply adding machines.


Friday, August 14, 2015

Bookkeeping and Accounting in 1945

This vocational guidance video shows what it was all about 70 years ago in 1945. It makes clear the distinction between bookkeepers and accountants, and mentions almost in passing their reliance on 'machines'.

The video also distinguishes the work of private accountants, who work in-house and public accountants who have many different clients. In the US they are still called CPAs (Certified Public Accountants). 

Accountants are also responsible for devising new bookkeeping systems and new methods of cost accounting. Accountants who specialise in this area were known as 'efficiency engineers' as an engineering background was very useful.

There's also career advice relevant to anyone considering bookkeeping or accounting (in 1945!)

Loved these quotes: 
"Because his job takes him form place to place, where he meets all kinds of people he must have a pleasing personality to be successful" NB: There is a clear presumption that all accountants were male in those days.
"Perhaps the most colourful accounting work is that of making special investigations". They worked for the FBI.


What's your favourite element of this old video?

Friday, August 07, 2015

What you might say when you're not trying to make partner.....

What follows are some of the more printable observations shared anonymously online by a US based accountant who describes himself as "a cynical Big 4 audit manager. I love my staff, I love my seniors, I hate this profession. I am not on the partner track."

He also admits to being drunk when he wrote the lengthy post which includes such intriguing observations as:

  • I've made it to Manager by pretty much keeping my head down and playing the game. I have a respect for accounting theory and knowledge. I just no longer give a shit about all the other stuff that accompanies it.
  • I'm convinced the biggest strategy for the Big 4 getting past PCAOB inspections is to over-document EVERYTHING. Memos for any and everything. F**king huge-ass memos filled with fluff language. They'll take one look at that 23-page Word file and nope the f**k out of it.
  • I do respect the knowledge base we have. There are some very intelligent people in our profession.
  • I hate office lingo: "Touch base", "shoot an e-mail", "let's table that discussion".
  • I wish there were more culturally and politically liberal people in our profession.
  • One of the most valuable 'soft' skills you can develop is public speaking.
  • Masturbation is a close second.

Friday, July 31, 2015

An accountant who knows nothing about their client

Rapper star 50 Cent, real name Curtis Jackson, called his accountant to Court in the US to testify
about his finances. But she knew little more about them than he did.

Jackson has already filed for bankruptcy after a jury awarded a $5million penalty against him after deciding he violated a woman's privacy by posting her private sex-tape video online.

A further penalty was in prospect and the amount would depend on Jackson's net worth. He called his accountant to give evidence to support claims his net assets came to less than $5m. Other estimates suggest a figure well over $100m.

The Californian accountant, who, it transpired has never actually met or spoken with her famous client, is employed by his business managers.  She didn't cope well on the stand and said that she doesn't know:
  • who bought the rights when 50 Cent recently sold some of his music catalog for $3 million. 
  • whether the $29 million that 50 Cent loaned to various businesses is recoverable. 
  • how much money he makes from executive-producing the TV show 'Power'. 
  • how many drivers he has on his payroll.
  • how any value could be attributed to new partnerships between his headphone company and Disney, Marvel, Lucasfilm, Intel and Reebok because they could “go nowhere and make no money,” 
  • how much money he made from a recent underwear-endorsement deal. 
  • that he had recently listed his 21-bedroom Connecticut mansion online for $11 million.
  • how much money 50 Cent makes from music royalties on the $38 millions worth of records he has sold.
You'd have thought she might have anticipated such questions and checked out the information beforehand. If only to retain some professional credibility. As it is she was a laughing stock.

Friday, July 24, 2015

How to get past HMRC 's automated phone system

The following appeared on the letters page of The Daily Telegraph on 10th July:
Taxing menu
SIR – I telephoned HMRC about a tax query. I was asked the usual questions by a robot voice and was eventually told to hold and someone would be with me shortly. After 47 minutes waiting, listening to the most awful music, I hung up and tried again.
This time my replies to the robot voice were “lamb vindaloo” and “sweet and sour pork”. To the question: “Are you making an inquiry about your own tax?” I responded: “Walls Cornetto.”
I was put through and spoke to a human adviser within two minutes.
M J Annett Horley, Surrey
Many thanks to Rebecca Cave, for bringing it to my attention.

Friday, July 10, 2015

What's one plus one?

In a test to establish who was the most worthy to act as his accountant, an entrepreneur asked four candidates for their answer to an easy question: "What's one plus one?"

The first accountant rushed to give the answer "2" and was eliminated.

The second accountant tried to be clever by offering a mathematical approach and was also dismissed. The entrepreneur wasn't interested in hearing about number bases and that "In binary 1+1 = 10 which looks like a ten".

The next accountant tried a different approach and replied by asking the entrepreneur a question. "Are you buying or selling?" He then explained that if he was buying, the answer was 2. If he was selling it was one, one - ie: eleven.

The entrepreneur was impressed but decided to give the last applicant a chance. He was sure would win over the entrepreneur. He went over to the windows and drew the curtains. He then went over to the door, locked and tested it, and went right up to the entrepreneur. Looking him squarely in the eye he said: "What would you like it to be?"

He was hired.

Friday, June 19, 2015

Five banker related acronyms for the 21st century

DEBITs - Desperate Executives Broken by Insider Trading

NERO - Naughty Executives' Regulatory Organisation

NABRO - Not Another Bloody Regulatory Organisation

MUMPIES - Middle-aged Upwardly Mobile Professionals

OPULANT - OverPaid UnderutiLised And Not Trying

BERNIEs - Banker Earning Ridiculous Notes In Eternity



Wednesday, May 27, 2015

Opening post for a client....

One accountant I know had a client who never opened any official looking envelopes. The accountant had to do this when he visited each month. And he then told the client what action needed to be taken in each case.

In an effort to get the client to open letters from the accountant himself he started sending them in distinctive grey coloured envelopes. However the client rarely opening these either. On one occasion the accountant wrote: "I'm writing this letter knowing that I'll be the one to open it when I come to visit you next month."

On another occaison the accountant sent his bill in a pretty coloured envelope. The accompanying letter started: "I hope you like the envelope. I used it in the hope that you'll have opened it without realising it was from me!"

Monday, April 20, 2015

The liar, the Revenue and the wardrobe

A little late to the party on this one, but worth recording for posterity. And yes, the title is a variation on the same theme adopted in most other reports of this story.

A bookkeeper, keen to avoid arrest in connection with a £140,000 VAT fraud, hid in her bedroom wardrobe.  Unsurprisingly, after looking under her bed, the wardrobe was the next place that police officers looked.

The accused, Donna Magee (44), was arrested by HMRC in February 2012. Concerns had been raised by reference to fraudulent VAT repayments for the construction of non-existent new business premises.  She has since been tried, found guilty and sentenced.

Mike Parkinson, of HMRC, explained that the investigation shows that tax fraudsters have "no place to hide".  That is certainly true for those who attempt to hide in their own bedrooms!

Friday, February 20, 2015

A '50 shades of tax' pun

"I use gaffer tape to stick down the envelope for my tax return... 

 Cos its Tax duct tapeable. DUCT TAPEABLE"

With all due credit to Arnie Haybridge who posted this on twitter

Friday, February 13, 2015

The importance of getting your tax return right

HMRC (Her Majesty's Revenue & Customs) has returned a Tax Return to a man in STANSTED after he apparently answered one of the questions incorrectly.
In response to the question: "Do you have anyone dependant on you?" he wrote:
2.1 million illegal immigrants, 1.1 million crackheads, 4.4 million unemployable Jeremy Kyle scroungers, 900,000 criminals in over 85 prisons plus 650 idiots in Parliament and the whole of the European Commission.
HMRC stated that the response he gave was unacceptable.
The man's response back to HMRC was simple:
SORRY - Who did I miss out?
Many thanks to Brian Cruickshank for highlighting this for me. 

Monday, February 09, 2015

Hugh's new client

The following story comes from long-time subscriber to my newsletters and blog posts, Hugh Dunlop.

Hugh is a practicing accountant who is close to retirement in Scotland. He tells of a self employed person who came to him a couple of years ago to file the SA100 tax return.
As it was the first year of the business and he had previously been employed under PAYE I was able to get him a tidy tax rebate. 
In 2014 I told him that he had made a profit just under the personal allowance and as a result he would have no tax to pay. The reply was 'Does that mean I won't get a tax rebate again?' I said that as he had not paid any tax he could not get one. 'OH. Does that mean I won't have to pay you?'
Some clients just don't get it do they?

Friday, January 23, 2015

A good deal?

I got a good deal the other day by paying just £12 for two copies of Accountancy for Dummies. They're normally £4.99 each.

Friday, January 16, 2015

Being a good accountant takes 5% talent and...

Being a good accountant takes 5% talent...

           ... 13% maths and 81% spotting what's been missed

            ... 10% attitude and 90% knowing what's right and what's wrong

            ... and 95% avoiding distractions on the internet












Friday, January 09, 2015

The accountant (actor) at number 39 on the Top 50 financial power list

This year's tongue in cheek entry on Accountancy Age's annual Top 50 Financial power list 2015:
39 (New Entry) Ben Affleck, actor Can Ben Affleck succeed where Jason Donovan failed? The public perception of an a-typical accountant looks set to get a serious make-over with the latex-clad Batman v Superman: Dawn of Justice thespian reputedly signing up for the lead in a film called...you guessed it...The Accountant.  
The broad concept of the movie is about a man who juggles the twin perils of GAAP by day, and the less taxing demands of being a high-class assassin by night. So can Affleck and screenwriter Bill Dubuque paint the profession in a sophisticated light akin to that of the legal profession? Previous attempts, including an accounting drama starring the aforementioned Donovan, were met with limited success.
Jason's drama featured on this fun blog four years ago. I'm also reminded of KPMG's efforts, back in 1997, to have the lead characters in dramatic films be accountants rather than lawyers.

HOW strong is HMRC's case?

Years ago a senior official was talking about HMRC prosecution policy. He mentioned an occasion when he had lost a case and went back to his...