Pre-Budget 2017: No Direction Home

Another Budget: another opportunity to criticise government. Inevitably some will pay more to, or get less from, government. The Press have predetermined that this is a “make or break” Budget for Mr Hammond who must try to fit a large square peg into an impossibly small, round hole. 

He has to meet the popular expectation of entitlement and an even stronger belief that someone else should pick up the tab. Yet, this same population has also set a course into unchartered waters known as Brexit. Continue reading “Pre-Budget 2017: No Direction Home”

Brexit: Follow-Up Survey – Please Help Us to Help You

 Here we are, at the end of March and the exercise of Article 50 is imminent. In fact, today the British Government announced it will issue its letter to the EU on 29th March. So now we have given notice that we are going to give notice. Maybe we should have had a bit more notice?

In June last year my firm carried out a survey of our clients to see what the business community made of the Referendum result.  Later in the summer, we carried out a more in-depth survey for our professional association, UK200Group, which resulted in our better understanding the way a wide range of business people were thinking. Now, as we approach the day of reckoning, (or the start of the reckoning in which we reckon we might some day do something) we would like you to help us find out more.

You can have a look at our previous reports, of course, on HHeLLP:

Our new survey has been shortened and focused by the comments we received in the earlier surveys, and made a little more light-hearted in some areas.  We would love to hear what you have to say, so please add your input to our Article 50 Survey, prepared for UK200Group.  We have two versions:

Thank you for helping us, and we hope the result will be that we can help you better navigate your business through the murky Article 50 waters. Or, as Monty Python once suggested, to sail the accountant-sea.





Thank you for participating. You will be able to see our report in May, when the survey has closed, immediately following the UK200Group Brexit Forum where its result will be presented.


The George Giveth, the Phil Taketh Away

Houses of Parliament

“Anti-Entrepreneur” was the first thought that entered my head, as I wondered why the Chancellor seeks to direct his tax-hoover exclusively on those whose industry underpins the greatest wealth in the UK. Then the light-bulb shone: it is politically expedient, playing to the gallery of those who are jealous, while economically, it is safe to attack entrepreneurs because they don’t complain, and cannot go on strike; they just don’t have the time.

There really wasn’t much in the speech, and the detail will emerge as the economists and tax specialists wade through the government press releases.  Our own Ian Abrey will be releasing his more technical analysis shortly, but for most business people the budget involved two sections:

  • There was the bit by which entrepreneurs and small businesses were abused, and,
  • There was another bit by which the Treasury will work out how they can abuse them more.

Entrepreneurs are the low-hanging fruit – they are just too busy working 24 hours a day to complain.  Perhaps this explains the comment that 1% of the population pays 27% of the income tax, since it is clear where the votes lie. But it does not sound like that 1% are under-contributing to me.

Compared to previous Budgets, the Chancellor was witty, for sure, and did not spend the first half-hour congratulating himself. Maybe he had his reasons. Nor did he mention Brexit, peculiarly. Much of the budget revolved around wider government policy, such as education, and I had to smirk when he indicated that after the Polytechnics were sprinkled with holy water and turned into Universities some years ago now, the trend has now gone full circle, along with rebirth of Grammar Schools and Technical Colleges. When will politicians learn to leave education (and all the professions) alone? Those involved in education may be happy to see £216m being made available for 110 new free schools – though that is less than £2m per school.

The Chancellor wants to tackle tax avoidance. How better than to turn his cannon against VAT on roaming charges and moving fixed assets into stock – matters with which no-one will be familiar. He will continue his attack on those who enable tax avoidance, and we wait to hear exactly how he defines his terms. I recall being lectured by a professional body in 2006 that we could be negligent if we failed to offer tax avoidance schemes.  We never did, but it shows how inconsistent governments can be when faced with public opinion.

Apparently the self-employed get too good a deal. He deftly ignored the down-sides of being self-employed (no holiday pay, sick pay or job security). The previous Chancellor helped them by scrapping Class 2 NIC’s. Although the real blows will be released while we are all on holiday in the summer, the taster for now is that NIC’s for self-employed people are going up 2% over 2 years. In one brilliant blow, the Chancellor will upset millions of self-employed people, for a total tax take of £140m.

All UK companies were looking forward to seeing their corporation tax rates fall, and this will not change, it seems.  What will change is that small businesses (usually entrepreneurs), who saw last year the rate of tax on their dividends go up as the tax credit regime was abolished, will now suffer more tax on their dividends. Once again the tax take will be small and the upset caused will be enormous.

Making Tax Digital (“MTD”) is supposed to be tax neutral. How then did the Chancellor conclude that deferring the entry of businesses below the VAT threshold into the MTD regime by 12 months will cost the Exchequer £180m? Do I detect some flying pork pies?

Business rates are the big headlines at present, and a package of reliefs was offered for small businesses to do very little but make it look like government was addressing the situation, especially for everyone’s favourite local pub. As for larger businesses and how to address the virtual business economy: the government will think about it and take soundings.

Other things the government will think about are simplification of Research and Development claims and the burning issue of North Sea Oil Revenues (don’t they belong to Scotland?).

An Initial Conclusion

The achievements so far and the objectives are laudable: we have a fast growing economy with low unemployment and inflation forecast at around 2%. Yet our borrowing is £1.7 trillion. Because governments do not produce balance sheets, only income and expenditure accounts, it’s hard to see what assets are backing that up. However, the Government says it wants to build productivity and infrastructure, delivering fairness.

Yet the reality is that Government is increasing the burden of small and medium sized businesses, imposing higher effective taxes, massively increased administrative burdens through MTD and auto-enrolment, while effectively subsidising larger employers by supplementing salary costs with in-work benefits and credits, and thus distorting the unemployment figures.

Government’s words are all about developing the economy and encouraging growth, but its actions are more about restriction, control and red-tape, welcoming us back to the 1970’s.  How ironic that the squeeze on taxes and increased red-tape reminds me of the decade when we entered what is now called the EU.

There is a saving grace: at least the Chancellor did not do very much at all.

Brexit White Paper: Just a Spring Clean for the May Queen?


Today, 2nd February, the government released its White Paper, following the Article 50 triggering Bill passing through the House of Commons. It is called “The United Kingdom’s exit from and the new partnership with the European Union”. I am sure there will be a suitable acronym in due course.

Press and pundits eagerly awaited the document which, in 76 pages including smiling photographs said, what Mrs May has always said, and little more: Brexit means Brexit. I read it, being a sad man who is interested in these sorts of things, and found it to be a helpful summary of the issues that will need to be addressed, with little to say how they will be addressed or why anyone should play ball with us, except that we are really good for everyone else so why would you not let us have our cake and eat it?

It does list 12 principles for the negotiation, most of which represent a statement of the bleedin’ obvious. For example, the concluding principle is “Delivering a smooth, orderly exit from the EU”; you will be shocked to hear that the government was not seeking utter chaos.

The Paper effectively tells us that the government intends to ensure that on the day we leave the EU, everything will be exactly as it is now, and then the government will pick off the bits it does not like. It reminded me of the sculptor who said he takes a piece of stone and chips away all the bits that don’t look like the subject of his art. It is a fine idea but I cannot truly imagine the EU letting us walk out the door with the only agreed change being that we can change what we like.

The paper states clearly that the government will be transparent, on the one hand, while, on the other, necessarily play its cards close to its chest. It has certainly done so in the Paper. I don’t necessarily say it is a bad thing either, but 76 pages full of words that tell us that the government will negotiate the best deal it can? Hardly a worthwhile exercise.

We can applaud the government’s intentions, but, as an adviser to businesses, I focused on sections 7 and 8. The first of these, concerning workers’ rights, merely said that ours are higher than the EU’s anyway, so there is nothing to consider. They even slipped in a reminder that they want worker representation on Boards for listed companies.

Section 8 is informative. It presents an interesting impact summary across many industrial sectors, but was merely a statement of how great the UK is.  It is true that the UK is very strong, but that gives us far more to lose than the EU. The paper even points out that we have implemented or over-implemented every Directive and Regulation from the EU, making us perfect trading partners.

If ever there has been a document which stretched the boundaries of saying nothing in as many words as possible, it was this.  The 12 Principles are aspirations, Utopian stairways to heaven perhaps, and that is great, and the detail behind the 12 Principles is little more than advertising puff.  It is intended to make us feel better and to explain why we ought to be able to negotiate a good deal.

The Paper – if its facts are correct – should make a negotiator feel strong. But it does not suggest how the team might deal with irrational intransigence arising from a desire to give us a good kicking as punishment for leaving the club.  The EU Project is one of faith. What the UK has done is to potentially damage the EU, and there are those in the EU who want revenge and do not care about the price.

Every statement in the Paper is one that says the UK will try to do a deal which is good for everyone.  Each statement, a bit like Mrs May’s speech to the Republicans, was carefully balanced with opposites so that in the end it meant nothing: The USA has a right to protect its borders, but it must allow immigration; The world must not rely on trade with China, but should definitely trade with China, and so on.

I do hope our negotiators are successful and I wish them luck. I don’t think this Paper will help much.

Press Regulation – Good, bad or dangerous?

The Press is being very careful at present to ensure that we all see very clearly how valuable its investigative and reporting activities are. They have a point, because if current proposals are adopted, it will be impossible for a newspaper to defend itself in court, so all we will ever read in a newspaper is how lovely everything is. Dictators and despots may approve, but no-one in their right mind would make a person who wins a defamation case pay the costs of the loser.

The Press is not a body of angels. They sometimes manipulate, and behave very badly, for sure, and Self-Regulation is important. The Press also needs to understand that they have been the key architects of the destruction of every other profession, having drawn the public into a belief that government regulation is a good thing. Some may say they have it coming, but that would be short sighted. I would not wish to see them hoist with their petard, as their freedom is too important.

Most professions are already regulated directly or indirectly by government. The results have not been glorious. I thought I might illustrate the point by considering how regulation of the accounting profession has achieved its objectives. Perhaps we can learn something. This is a potted history based more on personal recollection than detailed historical study. The events I describe are therefore seen from my perspective and others may well interpret them differently.

Regulation of accountancy came to the fore around 1975 with “The Corporate Report”, a massively important piece of academic research that concluded many things, not least that:

  • accounts of companies were (at the time) inconsistent year on year, and from one company to another;
  • few users of accounts had a proper understanding of their meaning.

Its authors considered who used financial reports and why, and proposed that a more formalised framework was needed. The profession, fearing government intervention and determined to maintain its high standards, started to regulate itself by setting standard accounting practices and principles. Professional committees produced a body of accounting rules called Statements of Standard Accounting Practice (“SSAP”). Understanding improved and there was greater consistency and comparability between company reports.

However, regulation begets regulation, and the lines between professional judgement and government policy can become blurred. Just as doctors and dentists are restricted in deciding what they do for patients but must follow rules determined by government regulators (“NICE”, for example), so government policy moved in on accountancy. It was politically necessary to harmonise our accounting practice with the EU. A series of major corporate failures during the 1980’s (DeLorean, BCCS and Polly Peck come to mind, but there were others) were blamed on accountants. Sensationalist and often ill-informed media reporting created a misconception that an audit report was a total “clean bill of health”.

Rather than clarify this expectations gap, the profession self-flagellated, and Government seized the opportunity to gradually introduce its own regulations. In 1981 a benign Companies Act, the first since 1948, introduced an accounting framework with standardised formats for accounts. In 1985, Company Law was consolidated into a single Act, and in 1989 for the first time, Accounting Standards carried the full force of statute – it was now the law that accounts should comply with Accounting Standards.

It seemed that, sitting in sack-cloth and ashes and seeking to rebuild trust, the profession worked with government to create a new regulatory framework: Financial Reporting Standards. These were supposed to be better, somehow, than what had gone before, and more relevant to the new transactions of the late 20th century. They also moved us, sometimes, closer to international standards.

The question that many asked was, would a set of accounts give a true and fair view because they comply with Standards, or as well as complying? Others were less kind. Did this now mean that previous accounts under the old Standards did not give a true and fair view? It did not matter because the Regulators became stronger too and non-compliance was not an option.

The legislative framework marched on. Companies could be small, medium or large, listed or unlisted, and that may determine the accounting rules followed, with a new, cut-down set of standards for small companies (Financial Reporting Standard for Smaller Entities), if they preferred it. Many companies could choose between Financial Reporting Standards and International Financial Reporting Standards (“IFRS”) (which are completely different).

Then, in the last couple of years, the wholly new Standard (“FRS102”) replaced all the old FRS’s and SSAP’s, but not IFRS, with a further choice for some of “IFRS-Light”. Oh.. and then there are accounts for Micro-Entities (FRS105).

Confused? You cannot be confused, surely? Regulation is there to remove confusion.

The main objectives (as above) of Regulation were to ensure there is a framework for accounting that is intelligible, universally understood, and comparable both between companies and over time. The resultant accounting standards may well be academically wonderful, but it is hard to tell because they are written with such a degree of jargon as to render them unintelligible to anyone outside of the profession (and to many in it). Comparison over time or between entities has become nearly impossible.  But Regulation has achieved a different consistency: that between government policy and accounting policies.

Milton said we should beware something “fair seeming good” (Paradise Lost). We must keep government away from regulating the Press.

The Lunatics are on the Grass


“The lunatics are in my hall
“The papers hold their folded faces to the floor
“And every day, the paper-boy brings more” (Pink Floyd, Brain Damage)

More than forty years after Pink Floyd released “Dark Side of the Moon”, the lunacy continues and only the faces in the photos have changed.  Each day, I read the newspapers with increasing concern.  Is it old age?  Or am I right to be so stunned that I struggle to find the coherent thread that links the stories? And so I decided to explore that link.

Continue reading “The Lunatics are on the Grass”