Letters – 23 July

Ginger theme a step too far?

In response to ‘Ginger Group welcomes all’ (‘Letters’, 11 July), I don’t really know that I want Chris Evans (aka Virgin Radio) as a spokesperson for minority (?) views – or have I got the wrong Ginger Group?

Anthony Taylor, Harborne, Birmingham

I’ll quit ACCA over merger I have been a member of both CIMA and ACCA for over 20 years – a sufficient length of time to make comparisons, I believe.

My view is that ACCA is second-rate compared to CIMA on many fronts:

– the CIMA council and its administrators always act in a dignified manner; the latter cannot always be said of the corresponding ACCA bodies.

– the membership services and area organisational structures of CIMA are vastly superior to those of ACCA.

CIMA’s magazine Management Accounting is in a different league compared to ACCA’s Accounting & Business, and allows members to express their views in a monthly ‘letters to the editor’ column, even when those views do not accord with council. ACCA members do not have the same voice. Just ask how many members’ letters have been published in Accounting & Business (or equivalent ACCA titles) in the last ten years.

Anthea Rose’s latest indiscretion in writing to CIMA and CIPFA members over the heads of their governing bodies has led me to conclude that there is no point in belonging to what I regard as a second-rate organisation or to continue to contribute towards salaries of those whose actions I deplore.

Accordingly, I will let my membership of ACCA lapse at the end of this year. In the meantime, I shall be voting against ACCA’s proposed merger plans and hope the vast majority of CIMA members support my view.

Malcolm Howard, FCMA, FCCA, Banstead, Surrey

… If we need only one currency in Europe, surely we need only one accountancy body! Go for it, is what I say.

Martin Dalby, FCCA, Christchurch, Dorset

Graduates get the full scoop On the same day last week, I read in Accountancy Age and a serious newspaper that: only the Big Five, (which almost exclusively recruit graduates), have adequate skills to give cashflow advice to small and medium-sized firms;

– although the country has a record number of graduates, many cannot find a job due to a lack of numeracy, literacy and communication skills (nothing new there); and

– PricewaterhouseCoopers in announcing its merger used the sentence (sic): ‘Which is why we just brought 140,000 of them together.’ Whatever happened to subject, object, verb?

I wonder if the three items are connected? I think we should be told.

DCD Moore, Hull

Provoking a reaction Your leader ‘Standing up for financial reality’ (18 June) was brilliant. More of this type of comment, please. Plenty to say – controversial – should stimulate a reaction. Well done.

CJ Bowling, London E17

There must be a better way Your article on the threat to the City of the proposed abolition of VAT groups (2 July) cannot be understated. That only the exempt sector is being targeted in my view creates grounds for a legal challenge on the basis of proportionality – the burden imposed is clearly out of proportion to the object in view – and will cause more VAT to be irrecoverable.

The VAT cost is so high that the overall purpose of the VAT system will be distorted and specific businesses with higher recovery rates may choose to go elsewhere – for example, Ireland, where there is a strong financial service sector and VAT groups are to be retained.

In the UK, insurance regulatory law and the Department of Trade and Industry require insurance groups to be recharged facilities and staff costs from a separate service company.

Most insurers retain their service company within their VAT group. Recharges are VAT-free, but VAT incurred is allocated under a ‘partial exemption method’ to each company in the group which then claims its deductible proportion, depending on the extent to which it makes supplies with the right to recovery.

On leaving a VAT group, the service charge will become mainly VAT-exempt, as in ‘the provision of assistance in the administration and performance of insurance contracts including the handling of claims’ (VAT Act Schedule 9 Group 2 Insurance Item 4 Note (1) (c)).

So VAT incurred by the service company will be fully irrecoverable by virtue of the exempt recharge – when previously it benefited from say 50% or whichever VAT recovery rate it enjoyed.

The high recovery rate would have come about by virtue of a large proportion of its business emanating from outside the European Union – it might have been fully recoverable because it took re-insurance wholly from the US market – and now moves to total irrecoverability because the VAT is swallowed up in the exempt service charge. Is that not madness?

In my view, the right to a deductible pro rata, whether 1%, 50% or 100%, is fundamental and enshrined in Article 17(5) of the EC 6th Directive. Neither Customs & Excise nor indeed the EU can introduce rules which effectively and fundamentally curtail that entitlement.

This goes so radically against the face of the VAT system (especially when brewed up with the regulatory rules of insurance), that if the proposal goes ahead, I would urge insurers (who have the problem of mandatory service companies and mandatory exemption for service charges) to consider mounting a challenge – perhaps judicial review of referral to Europe.

And do not think it is just insurers. It is also the bancassurance combination that is vulnerable here. Something will have to go – either the business abroad or preferably the Customs proposals. I know which option is better for UK plc.

Peter Mason, Group VAT manager, Abbey National plc

Don’t blame it on Yorkshire Your article regarding the English ICA booklet ‘Winning Business Strategies’ (9 July) is a further example of the institute’s detachment from reality.

What was particularly galling, however, was the bravado with which Mr Spofforth reacted to criticism (‘Taking Stock’, 9 July).

In most jobs, the wasted money and incompetence would have led to a severe dressing down by his superiors, if not dismissal, but Mr Spofforth seems to take refuge in his Yorkshire roots.

How many times have I heard Yorkshiremen use their birthplace as a reason for downright rudeness and arrogance? Rudeness is rudeness wherever you were born.

Daniel Baum, London W1

Short shelf life for PwC icon Is it not interesting to note that PCW is already outdated, although you can occasionally find one for #25 in the small ads section of your local paper.

I refer, of course, to the Amstrad PCW (personal computer word processor).

Will the newly merged firm become just as quickly outdated and an icon of a passing phase?

James McElhinney, ACA, Ipswich

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