Opinion; HMRC tax review - Can big firms really research small business?

The FRSSE is so relevant that in its 200+ pages it never once mentions how to account for drawings.

But it applies to unincorproated businesses.

Good, isn't it?

The reality is we smaller practitioners by and large live in a different world from the big corporate bean bashers. But they like to set the rules.

And then assess whether they work.

Simon is right, of course.

I well remember my training at KPMG when, as Peat Marwick Mitchell & Co it was somewhat smaller than now.

I also recall that almost no one in the London office at the time knew how to prepare a "carrier bag" set of accounts. As I'd worked in a small firm in university vacations I did. It gave me a decided competitive advantage.

Things can only be worse at KPMG now.

But there is more to this story. Candidly it sickens me that a contract of this sort goes to a firm whose American division has just been fined $456 million dollars to avoid criminal prosecution over abusive tax shelters, with eight of its former partners were indicted and with the firm needing an independent monitor.

``The only purpose of these abusive deals was to further enrich the already wealthy and to line the pockets of KPMG partners,'' said Internal Revenue Service Commissioner Mark Everson at a press conference in Washington. ``KPMG's actions were a direct assault on our progressive system of income taxation.'' (Quote from Bloomberg 29 August)

Now I know KPMG London will be saying this has nothing to do with them. But that's nonsense, as we all know. This morning their website says "KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 148 countries and have around 6,500 partners, 70,000 client service professionals, and 17,000 administration and support staff working in member firms around the world." If the term "we" can be used then this is one global firm, subdivided purely for operational and liability reasons. In which case KPMG should be barred from all public contracts until they can prove they have mended their ways.

Any firm of accoutants earns substantial fee income from the tax system - sounds like a significant conflict of interest? Surely this would be better placed with an independent academic institution?

Simon/Alistair/Richard:

At last - three folk have come out of the woodwork and expressed what I am certain is a recurrent theme at many levels and a deep rooted sense of resentment among the many tier-2/3 practitioners who must feel as though they're being steamrollered by the Big Four. I have specifically attacked the Big Four in relation to issues around the new IFRS regime and the long term impact on SMBs when that changes. Tweedie is out of touch with any reality I understand and especially on the impact yet another set of regulations will have.

So here's an idea. I use AccMan Pro as a voice for the smaller practitioner. It has resonance with the concerns expressed here. It is getting attention. People are asking me 'What do I do?' I don't know - yet. So here's the callenge.

Enter the debate, help make it heard both here on AccountingWEB and there. Make it something the editors of this online media cannot ignore. Do something extraordinary that will capture the attention not just of your peers but the people 'we' serve - the hundreds of thousands of small businesses who are sick and tired of dealing with an increasingly bureaucratic state that is eagerly supported by consultants able to squeeze yet more fees from all of us through our taxes.

Here's another idea. Rather than rant (ok - this is a rant - but with a purpose), why not collaborate and canvas opinion from existing client groups within professional firms. Collate it. Present it. Show that the wisdom of thousands of clients is much greater than the collective consciousness of 4 Firms. Technology allows us to have a hosted online questionnaire ready to go in half a day. The results can be gathered in a matter of weeks to get an initial 'feel' and the analysis would take less than a week to complete.

But don't just see this as another campaign that has a definitive start and end point. See this as a way of creating new thinking that makes others sit up and think: "Yes, I want that too, yes, this can make a difference, yes this is sustainable."

The key is to show the world that professionals really do understand the needs of the SMB and that we are not all like the Big Four. And show that you don't need to spend millions to find out what people think.

see: http://bazzarz.typepad.com/accman/2005/09/ey_up_before_th.html

I always thought that the "working together" project was to gather information from the small business sector and pass it on to our future PM. Watching Mr Brown on GMTV this morning it appears we are to have a new "new labour". We already have a new "new CIS" due to start 6/4/06. So now we are to have a new "working together" but only for KPMG and HMRC.
It appears that Mr Brown IS listening but again not acting on what he is hearing. Come on Gordon, throw away your economistic mantle and bring our tax system into the 21st century. Get rid of everything and start again. Yes a NEW tax system.

If it were not so sad this situation would be laughable.

I cannot believe that any international firm could begin to understand the problems of the small businessman.

I am reminded of my trainers telling us that we had to cover incomplete records because it was in the syllabus, but actually it was ver rare in practice (admittedly this was in the 1970s but I doubt if much has changed).

I am also reminded of a much more recent example, viz a radio "phone in" where a querist was "advised" by the national tax partner of an international firm on the subject of an emergency PAYE code. It was quite clear that this bloke, for all his undoubted expertise on group structures etc, did not have the foggiest idea what an emergency PAYE code is; and thus he gave a wrong answer.

The expression "horses for courses" comes to mind.

..just another anecdote to further highlight how 'the other half' live..

I attended an accounting standards update course earlier this year for accountants in practice dealing with OMBs. The FT lecturer, freshly escaped from PWC, proceeded to reiterate the FRSSE and how it was derived from all the relevant FRS's.

When asked how a particular standard would be applied to the case of a sole-trader transferring their business to that of a limited company, she rather dumbfoundedly replied "I don't believe I have ever come across that scenario before.."!

Some laughed, some cried and many, myself included, slowly drifted off to the dulcid reiterations of reporting financial performance..

Dean

Personally I quite doubt whether KPMG or HMRC know how a small business operates. If these people do actually understand the operations of a small business what about the issues of IR35, husband and wife operations, red tapes on small businesses, small tax payers paying in excess of the actual turnover. I know of an inspector in Croydon who levied £25,000 tax on a turnover of £40,000, disallowing on practically everything he purchases. She even asked that replacement tyres, car batteries, brakes to be capitalised as fixed assets instead of repairs and maintenance.

Do they actuall know the operations of a small business - I quite doubt it. Infact I can say they are ignorant about the mechanics of a small business!

If you've got an Inspector saying replacement tyres etc are capital items then you've got one highly inventive chappie who needs a good slap.