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….