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Creative accounting

Creative accounting

Just having a discussion with my brother in law this week-end. He was employed all his working life and has the viewpoint that the self employed shouldn't have all their expenses allowed against their income. I have just caught up with a client's accounts and tax returns for four years. Provisional tax returns were done and the client has paid his taxes on estimated earnings. I claimed just enough capital allowances to make the profits come out at the estimated profits because there was a huge profit in 2015. I could have claimed more allowances in earlier years and got the client refunds but the downside would have been 40% tax in 2015. When I mentioned this to him, he as worked in banking all his life, he said it was just another example of creative accounting and said he wasn't allowed to do things like this when he sat his banking exams. As far as I knew I thought capital allowances could be claimed whenever it was beneficial to the taxpayer?

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22nd Feb 2016 09:15

Bankers

Know nothing about tax. Given the financial meltdown, they don't know much about banking either.

You can disclaim CA's and carry them forward if it is beneficial to do so.

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22nd Feb 2016 09:28

Tell your brother in law

If only all bankers paid so much attention to what was right and proper the world's economy wouldn't be in the toilet. Also that he should probably not venture forth on subjects wholly unrelated to his sphere of knowledge.

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23rd Feb 2016 08:42

Ma man!!

Duggimon wrote:

If only all bankers paid so much attention to what was right and proper the world's economy wouldn't be in the toilet. Also that he should probably not venture forth on subjects wholly unrelated to his sphere of knowledge.

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22nd Feb 2016 10:00

Just imagine the difference, between

those of us, who are self-employed and, those who are employed.

Your brother-in-law probably never had to find the resources for his training? The self-employed generally do and, in addition, if a sole trader, lose business while they are otherwise engaged. I guess your brother-in-law, will have forgotten all those holidays he was paid for, whilst missing from the office? I'd imagine, that if he'd fallen sick, he may have benefited from 100% full pay, for the first six months and, 50% of his full pay, for the second six months.

If the self-employed are fortunate and, manage to qualify for the Employment and Support Allowance, they may well have to attend a medical assessment, even if the illness or disability has been certified by a medical practitioner. The "benefit" is quite frankly, an insult.

But, of course, your brother-in-law, who spent a lifetime in banking, will know all of this. After all, bankers know everything. Just look at the s**t-trail they left behind.

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By Matrix
22nd Feb 2016 10:13

Quote

This is no different to all the taxpayers having a go at google. He could always use his bonus to pay a tax adviser to minimise his taxes, this is all google did, although there is probably more scope for tax planning for self-employed than employees but more risk per above etc.

If you didn't minimise your client's taxes then you would not be doing your job properly.

See quote:

Duke of Westminster v Commissioners of Inland Revenue 19 TC 490:

‘Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be compelled to pay an increased tax.’

 

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22nd Feb 2016 10:28

Accountants

Some accountants also know nothing about tax. Are you saying that if someone bought some equipment costing R100k which qualified for AIA in say 2013. He could claim R100k in 2013. But if his profits were only say R20k he could disclaim AIA and only claim R10k . Same in 2014 Profit of R20k and only claimed R10k capital allowances.

Then in 2015 profit of R90k, are you saying that he could claim the remaining R80K capital allowances in that year??

I hope you did not do that

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22nd Feb 2016 11:03

Annswer to Scott

Scott Gnat wrote:

Some accountants also know nothing about tax. Are you saying that if someone bought some equipment costing R100k which qualified for AIA in say 2013. He could claim R100k in 2013. But if his profits were only say R20k he could disclaim AIA and only claim R10k . Same in 2014 Profit of R20k and only claimed R10k capital allowances.

Then in 2015 profit of R90k, are you saying that he could claim the remaining R80K capital allowances in that year??

I hope you did not do that


No. Each year had quite. a lot of equipment bought and the extra 18% on unused CA'S brought forward was enough to take client out of 40% tax
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22nd Feb 2016 10:33

Literally nobody said anything of the sort.

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By mabzden
22nd Feb 2016 12:58

In my experience...

.. bankers always think they know much more about tax than professional accountants. And they know much more about law than lawyers, and much more about baking bread than bakers.

Given how amazingly amazing they are, it makes you wonder how our banking system melted down and almost crashed the global economy.

On the basis of the information given, it sounds as if you haven't done anything wrong with the client's tax returns. But I would consider getting a new brother in law.

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22nd Feb 2016 11:29

People are assuming that the "brother in law" and the "client" in the OP's post are the same person. Perhaps they are, but that was not my understanding on an initial reading. Perhaps the OP would clarify.

The point is that if there are two completely unrelated scenarios one might have two different responses to suggest to the OP rather than just one.

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22nd Feb 2016 22:59

They are not the same person

My brother in law is retired on a large bank pension he got at 60 but is niggled that he has to pay tax on it. My client is no relation to me and I don't act for any friends or family because in my opinion it causes complications.

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22nd Feb 2016 11:35

With the exception of mabzden I think we're all clear that the brother in law is not the client. If he was I'm sure he'd be all too happy for the OP to be minimising his tax bill rather than spouting off like a pompous ass[***] about what he feels these over entitled freeloading self employed people shouldn't be allowed to claim.

Legitimate business expenses indeed, what nonsense!

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22nd Feb 2016 11:50

Clarify

Can you clarify what you mean by "caught up with a clients accounts and tax returns for four years. Provisional tax returns were done and the client has paid his taxes on estimated earnings".

Like your brother in law I am also annoyed that someone can get away with paying taxes on what he thinks he would like to pay and taking a guess at his income for the past 4 years.

Employed people do not get the opportunity to guess what tax they would like to pay for 4 years.

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22nd Feb 2016 12:10

Just as well

Scott Gnat wrote:

Can you clarify what you mean by "caught up with a clients accounts and tax returns for four years. Provisional tax returns were done and the client has paid his taxes on estimated earnings".

Like your brother in law I am also annoyed that someone can get away with paying taxes on what he thinks he would like to pay and taking a guess at his income for the past 4 years.

Employed people do not get the opportunity to guess what tax they would like to pay for 4 years.

 

Just as well they have now caught up and paid all the tax they were legitimately due to pay which, happily for all concerned, was the same as what they had already paid thanks to making the required amount of capital allowance claims. You should probably try not to get too annoyed until you find something someone has actually done wrong.

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By DJKL
22nd Feb 2016 12:26

It is not the norm, tilting against an outlier.

Scott Gnat wrote:

Can you clarify what you mean by "caught up with a clients accounts and tax returns for four years. Provisional tax returns were done and the client has paid his taxes on estimated earnings".

Like your brother in law I am also annoyed that someone can get away with paying taxes on what he thinks he would like to pay and taking a guess at his income for the past 4 years.

Employed people do not get the opportunity to guess what tax they would like to pay for 4 years.

But they cannot get away with paying taxes on what they think they would like to pay, this is possibly a case where an accountant is steering a client to HMRC redemption, it is hardly the norm; there are consequences within the system for such lateness/ action.

Your point is akin to my being annoyed that people commit murder; but they do, despite laws against it, and again there are consequences if they are caught/confess..

 

 

 

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22nd Feb 2016 23:06

The client was handed to me

Scott Gnat wrote:

Can you clarify what you mean by "caught up with a clients accounts and tax returns for four years. Provisional tax returns were done and the client has paid his taxes on estimated earnings".

Like your brother in law I am also annoyed that someone can get away with paying taxes on what he thinks he would like to pay and taking a guess at his income for the past 4 years.

Employed people do not get the opportunity to guess what tax they would like to pay for 4 years.


by a colleague who has got into financial difficulties in the last four years. He filed the provisional returns with his estimates of profits for last 4 years. I had to spend all January 2016 putting accounts and tax returns together. The correct figures have now been filed and capital allowances used in the years where they were of the most advantageous to the client. No creative accountancy principles have been employed and the client has paid the correct tax.
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By nrw
22nd Feb 2016 12:44

I don't much like that when my business is in trouble it's my problem, but when a banker's business is in trouble it's the taxpayers problem.

Poor, poor bankers.

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22nd Feb 2016 13:02

Bankers?

There seems to be a lot of animosity ( or jealousy) towards bankers here. The OP did not say he was a banker just that he worked in banking. Maybe he never passed his exams and was a humble teller for 40 years or maybe he was a "banker by experience".

Perhaps Duggimon can enlighten us.

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22nd Feb 2016 13:11

It was the OP's client who worked in banking, not the OP.

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22nd Feb 2016 13:31

No, the OP's brother in law worked in banking, the OP's client is the tax evader

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22nd Feb 2016 13:45

Tax Evasion

Scott Gnat wrote:

No, the OP's brother in law worked in banking, the OP's client is the tax evader

 

Tax evasion has not happened in this case.

Carry on arguing with yourself though. It's mildly amusing.

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22nd Feb 2016 23:11

My client has not

evaded any taxes. He has just paid £3,000 tax on his 2015 taxable profits. This year the client has turned 65 and is drawing pensions therefore he will be paying at least £6,000 in tax.

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22nd Feb 2016 13:36

Can't see how the OP's words can be interpreted that way, but who knows. However if your interpretation is right the OP has announced on a public forum that he has breached client confidentiality by discussing his client's affairs with his (the OP's) brother in law. Hardly likely that he would do that of course.

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22nd Feb 2016 14:07

Perhaps Scott Gnat is Gideon (or one of his lackeys) undercover...since he doesn't seem to see a difference between avoidance and evasion

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By Matrix
22nd Feb 2016 14:15

I should add that I used to work in the tax department of a wealthy bank and your brother-in-law should rest assured that, to the extent tax can be mitigated on bonuses, share options, etc, then it is done.  

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22nd Feb 2016 14:18

Sorry I apologise, I did not realise bunging any old figures onto a tax return for 4 years and claiming they were provisional was  legitimate tax avoidance planning.

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22nd Feb 2016 14:30

Me too

Scott Gnat wrote:

Sorry I apologise, I did not realise bunging any old figures onto a tax return for 4 years and claiming they were provisional was  legitimate tax avoidance planning.

Sorry, I did not realise that putting words into the mouths of other people so you can argue with them was a legitimate form of discussion.

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By Briar
22nd Feb 2016 16:31

Collective noun for a group of bankers?

A Wunch! (with thanks to Reverend Spooner)

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22nd Feb 2016 16:37

Lion Taming

I wonder how many people in banking are former chartered accountants working their way towards lion taming?

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24th Feb 2016 16:39

In any given year you can claim

some, all or none of your capital allowance entitlement.  ie you can disclaim capital allowances if you wish and carry forward an increased pool upon which WDAs can be claimed in later years.

It is an entirely legitimate method to effectively get the profit figure you want, subject to the parameters of profit after claiming the maximum entitlement and profit with no claim at all.

It is a very useful tool and can be used to save lots of tax in all sorts of situations and it is one that your software won't automatically do for you! Using it to make the actual profits the same as the estimated ones shows imagination!

I doubt that client confidentiality has been breached, surely the conversation would have been along the lines of "a client of mine (generic description of circumstances, but unnamed) blah blah".

 

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