Social Services in the UK – they astound me

Tags

daycare, nhs, sahm, taxes, welfare

Again, this is from the perspective of an outsider living in the UK. I am shocked and dismayed at the level of social services offered to people here in the UK. Compared to North America the United Kingdom is a vast communist/socialist state. I am stunned at how much my tax goes towards things which would stun  most in Canada.

Apparently you can get a housing allowance, the value of which flutuates depending on where you live. So you could be living in North London and get more benefits than someone living in Hampshire – because the cost of housing is higher in London. So the local council/social services will pay your rent (effectively) and then you get a weekly stipend, all calculated using some mystical formulae no one understands. The formulae consider factors such as where you live, how many children you have, what your savings are/were, how much rent you pay, your heating etc. It shocks me, as in Canada there was huge welfare reform about 15 years ago which tightened up the social support payments. I am not completely happy at how Mike Harris on Ontario did it, don’t get me wrong.

In Canada you get a certain amount of welfare/benefits. If you are a single mother with 2 children when you start collecting welfare and whilst on welfare you manage to produce another sprog you still only get enough welfare one adult + 2 children. The idea is that welfare is suppose to be a temporary stop-gap, not a lifestyle for people to increase their welfare payments with each sprog they produce. Said welfare payment does not vary where you live – if you live in Toronto you get the same as you would if you lived in Timmins or Sudbury or Barrie. The idea is that you get a payment, once a month, and it is up to you to budget and find the appropriate accomodations that your welfare dollars can pay for. When I was recovering from surgery 5 years ago and was contemplating going on welfare I was eligible for $620.00; I lived in Toronto and my rent was $1000 but it didn’t matter I was only eligible for a certain amount.

And the latest stunned moment for me was the Tory Government putting through legislation that would allow a dual-income family or single income (if a single parent family) to claim childcare expenses up to a maximum of 20% of £6000 or £1200.00. The limitation is that neither individual can earn more than £150,000 per year – so effectively you could have a family income of £300,000 and be able to get £1200 per child. I’d rather see government funded daycare or subsidised daycare and have people apply, with first preference being to those at most need. But there’s been an uproar from stay at home mothers who are whinging that they are being excluded – to which I say bullshit. My taxes go towards supporting those stay at home mothers, whilst atleast I can see the reasoning behind helping working mothers with childcare costs – as they are in effect getting a portion of the PAYE that they pay back — basically, atleast they are paying taxes.

I look around me and there are so many areas where I can easily see services that could be streamlined and made more efficient so that the support needed for those truly in need would get it, while the rest of us can live with the assurance that the necessary resources will be available when we need them.

People seem to forget there is a finite amount of resources which our taxes can pay for. So instead of trying to suckle at the public teat maybe people should view the social support as a safety net when needed, but while still able continue on contributing towards society.

So, I still firmly believe in means-testing. It can be done and efficiently and cheaply, but there needs to be political will – which is sadly lacking in the UK at the moment. And review the services the NHS pays for – not everything can be funded as yet again, there is a finite amount of resources – so don’t pay for IVF for anyone. I am sorry, but it is not a medical necessity to get pregnant. Breast enlargements because you feel sad/depressed should also not be funded. And increase the number of children per child-minder in the creches/daycare centres.

Running a Small Business/Sole Proprietorship

Tags

business, sole proprietors, tax deductible, taxes

I was asked, the other day, on Twitter whether or not software costs and app costs are tax deductible if running a business from “home”. The short answer is yes, if such costs can be directly attributable to running the business.

Most businesses are not corporations, but instead small sole proprietorships or partnerships (think of a small mechanic’s shop or a cornershop). It makes no sense to incorporate as the businesses are rather small and one of the big downsides is the issue of double-taxation. For a small business there are several issues to look at when deciding to incorporate – incorporation will protect your personal assets such as the family home if the business goes bankrupt. The downside is that the corporation becomes a legal entity, a person so to speak, and it needs to pay income tax. And the double taxation comes from the fact that the employees also have to pay income tax.

But returning to the original premise of what is tax deductible if you are running a sole proprietorship, what can you deduct?

There are several things to consider:

• any costs directly attributable to the running of the business are for the most part tax deductible
• if you are running your business from your home you can deduct a portion of your mortgage payments (the interest only, not any payments on the principle)
• you can deduct a portion of your utilities. This becomes a rather grey area, as you are also living in this home, so how much of your gas/oil, telephone, internet can you deduct? It depends really. You need to work out the proportion. If you work 8hrs a day at the business, 5 days a week, that’s 40hrs. There’s 168hrs in a week, so that is 23.8% of your costs you can deduct for utilities.
• With regards to the interest on the mortgage (if there is one) it would be based upon square footage. If you have a home office that is dedicated towards your business, then you’d take the square footage of that space and determine the proportion.
• Cars are an issue as well. The argument could be made that the car you use is also being used for personal reasons. How do you work out what you can deduct? Most Tax Authorities (CRA, IRS, HMRC) will have tables determining how much you can deduct for “wear and tear” – in Canada it is something like $0.50 for the first 5,000km and then it drops down to something like $0.32 per km. Then you need to work out how much you drove for personal reasons – which should be easy by checking what your mileage life to date was at the beginning of the year and at the end of the year, and if you track how much you’ve driven for business purposes for the year you can easily work out the proportions to be used for the calculations
• Gas receipts are easier, as you can collect your receipts.

So these examples above are with regards to how to split business related expenses from personal expenses. Other costs such as advertising & promotion, specialised software/apps, and office supplies can easily be determined.

One area most sole proprietors screw up on is having a single bank account for personal and business. Always separate the two. Same goes for credit cards – never mix business and personal.

Corporate Income Tax Rates & The Economy

Tags

taxes

I am not an economist, let’s just get that straight immediately. So I don’t spend many hours agonising over the state of the economy, pour over the minute changes in interest rates or fluctuating foreign exchange rates. I am an accountant. Accountants, other than during forecasting/budgeting season, do not spend much time with their proverbial crystal balls trying to foretell the fiscal future — the economists and analysts do that. What I can comment on is Income Tax.

When I joined Potato Inc the Corporate Income Tax Rate for a corporation functioning in the province of Ontario in 2008 was 33.5%. As of January 2012 it is now 27%. The theory from the two levels of government (both Federal and Provincial) is that by lowering business taxes this should help to stimulate the economy by making Canada and Ontario itself a much more attractive place to invest.

The premise to two-fold. Those companies looking to setup a branch-plant internationally could look to Canada and think “hmmm yes, the taxes are very attractive for doing business, yes I’ll build a business here in Canada instead of in XYZ”. And those companies already in-situ by having their taxes lowered this gives them more monies to expand and reinvest. The goal being that this would stimulate the economy and translate into more jobs for the average worker. This hasn’t happened.

Where I work, at Potato Inc, it has enjoyed having its taxes lowered – it means more monies it can use for re-investment (theoretically). What the reality is that the shareholders, senior executives and senior management have flourished with ever expanding renumeration (share options, dividends, bonuses, huge payrises) while the average worker has gotten nothing — there are people at Potato Inc who haven’t had a payrise in 5+ years, yet the senior executives have had their pay packages re-evaluated and tinkered with.

There are recent cases in the news where American companies, such as Caterpillar, took advantage of various tax incentives offered by the government to swoop in & gut Canadian companies to move operations south of the border. All perfectly legal, though highly shady moralistically.

Then there’s the issue of Vale, a Brazilian mining company, purchasing Inco up in Sudbury Ontario. What ensued was a huge battle between the employees and the foreign owner – strikes. Inco is one of the major employers in Sudbury, so it can only be imagined what this battle did to the local economy.

Governments cannot lower corporate tax rates and expect private industry to say “wow, I have all this surplus cash now, I will now hire more people and share my windfall with the average worker”. No the response has been and will probably remain “wow, I must be doing an amazing job, I deserve a huge bonus for saving the company this much money” .. even though the savings came as a gift from the government, not their own hard work.

I am not advocating hiking up the tax rates to try to get companies to pay more. What I would advocate for is closing some of the available loopholes which companies take advantage of which we the average taxpayer cannot. We cannot deduct the full 100% value of our rent paid to landlords. We cannot claim the full value of our medical expenses. And we cannot claim the full value of any charitable donations we make. But guess what, corporations can claim all these costs fully. They can claim the utilities they pay out against their income, thereby reducing their taxes paid. I wish I could claim my cellphone bill, internet and cable bill, but I cannot as I am not a corporation.

Close some of the loopholes, raises taxes slightly — as Canada’s tax rates are amongst the lowest in the Industrialised World, and a slight increase from 27% to even 29% won’t unduly hurt the private sector. And tax stock options.

 

Year-End, It’s nearly Done

Tags

accounting, monthend, reporting, taxes, yearend

About once a month I tend to go into hermit-mode where I don’t really stay in contact with friends or family. This period is what most accountants call “monthend” that glorious time when accountants run around like headless chickens trying to finalise the numbers for the fiscal month that just closed. In some companies this can be a leisurely 2 week period, others 5 days and other’s just 2 days. I get a day and a half to try and hammer down my numbers for my “Flash Meeting” when I report my numbers to my Director and CFO and ultimately the Regional HQ. The remainder of the days until the results are “published” are to do all the journal entries required to come up to what I had reported in Flash. This is also the time in which I need to get positive confirmation for my intercompany balances – as the units I take care of have several IC relationships, across the globe, it’s a bit of a challenge trying to get this confirmation. I have to deal with offices in Sydney, Tokyo, Mumbai, Duesseldorf, Paris, London and occassionally Athens. Sometimes there is a language barrier problem. Most times the problems I run up against are due to time – Tokyo, Sydney, Mumbai are easily 12hrs ahead of me, so when I send out an email I have to wait until the next morning to see a response. This doesn’t give me much time to adjust numbers, if necessary. As the Flash is on the P&L and IC is on the Balance Sheet I can still do adjusting entries into the system.

As well I reconcile two massive bank accounts. One of them, my USD, is relatively easy to reconcile as the only transactions that flow through there are done by myself, my AP Clerk and our Cash Receipts Clerk. So it’s very easy to trace a transaction to the initiator and figure out how to fix a discrepancy. My CAD account, which is the huge behemouth, has multiple fingers into it. There’s myself, my AP Clerk, the Cash Receipts Clerk, the HR Manager, Corporate Finance in NY, AR Supervisor in NY, Finance Systems Analysts and whatnot. It takes me about an hour to reconcile the USD account. It takes me close to 8 hours to reconcile the CAD account.

Plus I have to calculate the monthly tax provision for one of my units. To do this accurately I need to wait until one other unit is complete (as it rolls up into the legal entity that I reconcile).

So unlike some of my other co-workers I do things that the rest of them don’t. I do journal entries across company codes. I work with international counterparts. I have to make sure that the millions sitting in our bank account is correctly reflected in the GL.

And that’s monthend.

Year-end is worse.

I am not allowed to have any IC variance, not even by $1K CAD. My tax provision has to be spot on. If I had under-remitted the monthly Corporate Tax Installment I have to get a cheque cut quickly.

As well, I have to work on something called “Yearend  Pack” – which is a really time consuming and highly detailed set of reports which are used by External Auditors, Internal Auditors, Tax Auditors and other stakeholders in the overriding Corporation. Once complete it has to be signed off by both the CFO and the CEO/President. That set of signatures is required by Sarbannes-Oxley. With those signatures they are attesting to the fact that all internal controls are in place, there has been no collusion, all numbers are accurate – and that they will take criminal responsibility if the entity is lying to its stakeholders. A heavy burden, which explains why the whole year-end process is tedious, over-analysed and a godsend when it’s over.

I have one more set of reports to fill out for year-end and then it will sort of be over, for about a week. I have to complete the “Client Profitability” Report.

Then the wonderful set of Tax Packages have to be filled out. Because our Regional HQ is in NY there has to be a filing with the IRS. Which means the above YE Pack that I had completed needs to be done again, but from an American perspective (the above is for the UK Tax Authorities). Once completed to the satisfaction of the Tax Managers in NY I then start in on preparing the Tax Packages for CRA for the Canadian filings.

So if you don’t see me much over the next month or two, know that I am doing my damndest to ensure that the stockholders will be getting their money’s worth at the annual Shareholders’ Meeting.

 

🙂

Year-end & the Nitwits I work with

Tags

a/p clerk, accounting, assistant, excel, taxes, twat, yearend

Another yearend has come and gone and for the most part I felt it was successful, for me anyways. Not in that my companies made gobs of money, but that the processes themselves for closing the year went well.

One annoyance for me, which I mentioned to Mr B, Mr M, Mz J and Mr F, is one of my co-worker’s propensity to not actually think. Her company is a subsidiary of one of mine, so all her PBT (profit before taxes) roll up into my company for tax computation purposes .. that means she reflects no Income Tax Expense in her YE schedules, but I incorporate her in as a “permanent difference” (I’ll explain later what that is if anyone is truly interested). The YE schedules automatically populate with her actuals, so  her YE schedules included a tax calculation. It requires a minor adjustment on her part to wipe out this calculation. Her lament “BEANIEEEEEEEE, how do I get rid of this?” My telling her to drilldown on a prior year YE schedule was met with mute silence, then a “butbutbut what do I do?”. Lord give me strength. Cos I have 3 companies to publish and I didn’t have the time to teach her (and I have access to her actuals in the reporting system) I just did it for her .. it was faster.

I was not feeling very charitable, especially when she asked me why her Fixed Asset Reconciliation wasn’t working (there were no formulae, that’s why) so I told her point blank — “I spoke to the IT Director, I begged him to give you Excel training” .. “Bean, please don’t tell me you singled me out” … “Yes I did”.

In general I like where I work, and I do find it heart-warming that my fellow Chief Accountant is on the ball and rarely asks me questions — except when it comes to Income Tax (since I have a stronger background in that then she does). And she only asks me excel questions when she’s trying to figure out why her vlookup or hlookup aren’t working. As well, my assistant is not afraid of me (unlike the rest of the reprobates and twits) and likes to use me as a weapon when she’s going into her own battle of wills with creative peeps.

And just this past week”Twat” (the lady who does cash applications) asked me that now that we are switching over to a new bank and banking system who will do the A/R reconciliations — I told her that she will, as it isn ‘t my job to hunt down clients who are remiss at paying on time.

Fear & Taxes

Tags

accounting, t4, taxes

Every year a whole slew of peeps ask me if I am willing to do their taxes. As I work as an accountant all day, everyday, I tend to be quite tired of accountantcy once I am home. So I do my friends’ takes grudgingly, with the proviso that I require a meal in return — and I will not accept McDonald’s, Harvey’s, Burger King, KFC, Taco Bell or Wendy’s. I want a real meal, not some $2.99 meal deal with a 2-for-1 coupon attached to it.

I, naturally as a dutiful child, do my parental units’ taxes. Years ago, when my father was rushing to get to Australia to take care of his brother who had just suffered 2 heart attacks and a stroke, my father asked me to do my mother’s taxes. Until 1997 my father had always done his and my mother’s taxes…. but March 1998 was different, he didn’t have time cos of the rush trip to Australia. As I was in the CGA Programme of Studies at the time my father asked me to complete mum’s.

I did her taxes, reviewed prior year filings and noted that my father had never claimed any of his union dues. I claimed 5 years worth of dues on my mother’s taxes. There were also other tax credits which I applied from prior years (there are certain tax deductible expenses that you can accumulate up to a 5 year period which you can then claim all at once). Needless to say, my mum got a big fat refund of $1300 while my father tended to get her about $300-400 each year. The following year my father asked my mum to hand over her T4 and other tax slips… she said no, that she’d prefer her Bean to do them for her, as I get her bigger refunds. The bint never told my dad how much I got her as a refund, and when he found out the yearly demands started — We gave you life, do our taxes. So since 1999 my parents have not done their own taxes. I manage to take advantage of all the loopholes for them, so they get nice little fat cheques; which they really need as every penny counts when an OAP.

Onto my friends… they are terrified of taxes. I don’t know why, really. Taxes are relatively easy and can be quickly filled out in about 15-20 minutes. So they ask me to help. I don’t mind, up to a limit of 5 friends.

I have had people try to barter for my “services” – for things like ceremonial knives (athames), wands, silversmithing services, whatnot. I can’t pay the rent with a pretty knife, or a wand or jewellry. In today’s capitalistic western society money still talks, so I need money. I do accept a meal, because it means that I will be economically benefitting from such a meal — I won’t have to pay for the meal, and/or the groceries for that week.

So to those friends who want me to do their taxes — only 5 of you. If you come as a pair I will count you as “one”. And as a reminder, I am lactose-intolerant, don’t like fish and have developed a distaste for pasta and bread.

Tax Season

Tags

parents, tax returns, taxes

…it has begun!

I have received the phone call I get each year from my mother in February – “your father would like to know when you can come over and do our taxes”. I like how she uses my father as an excuse, instead of stating the obvious – they gave me life, now I must do their taxes. Naturally, I am a dutiful child and will bow to the wishes of my parental units; I’m off to their condo tomorrow to do their taxes.

Several of my friends as well, knowing that I am a CGA (Certified General Accountant) revel and delight in the fact that I could, if I wanted to, do their taxes. Only problem, for me, is that I cannot charge money for this – if I did, as per the rules & guidelines of the CGA I have to purchase professional liability insurance (which can run up to $1000). What does this mean? I do what Diresquirrel use to do – request a meal in exchange for doing taxes, so that there is no official monetary gain for me doing their taxes.. in essence I would be doing their taxes, officially, as a favour and in turn they would take me out for dinner as a thank you.

But if those of you reading this think that I will do your taxes if you offer me other items such as athames, candles, incense, etc.. think again. If I can’t charge money I want a meal – since it would help in saving me from having to purchase groceries the meal does have an impact on my monthly budget. Though athames, swords, candles, incense and whatnot are lovely they serve no purpose to me except as shiny baubles. Now, if any of you want to whisk me off to say Bali then I am willing to negotiate.

Ahhh Accounting

Tags

accounting, cra, reconciliations, taxes, vat, yearend

We are fast approaching yearend and the usual cries of despair heard the world round from the accounting profession has started here in my own little corner of corporate finance. We are madly scrambling to get project codes closed, process as many invoices as possible, reconcile everything down to the penny and make sure everything is 95% done by Christmas Eve.

Thankfully my assistant has risen to the challenge. Seems when I give her latitude to exercise a certain amount of independant thought she does well. She asks for direction, which is right and proper; once she gets the direction she’s off on her merry little way to do whatever she does that makes my reconciliation hell that much easier. Right now she’s focusing on Intercompany Billings, tomorrow it’s a cheque run. She actually enjoys the fact that I have given her the freedom to approach Account Executives and Project Managers to get their signatures, instead of sitting back and waiting passively for documents to flow back to her.

My co-workers are getting quite frenzied as well. I’m doing okay, I have gone through horrific monthends and yearends in prior companies, so I am prepared mentally for what it means to close the fiscal year. I am right now focusing on reconciling some documents I received from CRA  (Canada Revenue Agency).

One of my co-workers said to me today “Beanie, you are wonderful” and I said “you’re sucking up, it doesn’t work on me”. She wants me to reconcile her taxes as she has never been exposed to the concept of commodity (VAT)tax and how to go about reconciling CRA statements to the G/L. She also needed assistance on moving a CR balance in A/P to Bad Debts. My manager actually told her “go ask Beanie how to do it”.

I think I am loved 🙂