TaxPersonal TaxLetters – 22 July

Letters - 22 July

Setting sights for training

I was surprised at the outcome of the vote, but perhaps we have our sights in the wrong place.

Yes, 60% are trained by the Big Five, but it has become too expensive for smaller firms. And what happens to that 60%? Do they stay? My observation is that most are booted out when they fail at successive stages of the promotion ladder.

So perhaps we should concentrate on what these new accountants meet when they join the rest of us. Many will go into industry, and many into the large bulk of small and medium firms.

On this basis we could re-align our training towards the practical work in smaller firms and the needs of industry. We could leave out the skills needed for large audits, and the big firms could add their own training for this specialised task.

The qualification as a CA would then meet the needs of most trainees, but it would be simpler, and cheaper, and more firms could take up training again. We would rely less on the Big Five, and they could take up the special training required by their staff, which they seem eager to do.

If we set our sights on the needs of the whole, we might arrive at a better answer.

TH Graves, FCA, Teddington, Middlesex

A very English vote result I am not sure how many qualified members of the institute are partners or employees of the Big Five firms; I suspect it must be near to or in excess of 8,000.

On this assumption, an analysis of the result of the vote on electives is most interesting, for either the members of the institute who work for those firms did not lend their support to the proposals, or they voted solidly for the proposals but the vote outside those firms was almost 100% against!

I would hope consideration of these possible analyses of the result would make training partners who currently threaten to opt their firms out of institute training, stop and consider why they are not carrying their own staff or the rest of the institute with them.

It may be the petulance of the big firm training partners in threatening to withdraw their trainees from the institute which cost them the result they wished – for it is one of the endearing qualities of the English that the more we are told to do something by someone who considers that they know better than us, be they German finance ministers exhorting us to join the euro or partners of large firms of chartered accountants, the more frustratingly obdurate we become.

There remains a wide gulf between the small firms who tend to view our larger brethren as sharks whose only consideration is their own narrow commercial interests, and in turn probably view those below as small-minded reactionaries inking our quills – both views are hopefully equally incorrect! The challenge for the institute is to reconcile its disparate wings, and to convince all that we need each other if we are to remain the force we have become.

NWH Ericsson, FCA, Hove, East Sussex

Recognising specialisation When I did my degree, many years ago, one could take a degree in engineering and become a BSc Eng. If one wished to specialise, one could become, for example, BSc Eng (Metallurgy) or BSc Eng (Geology) and so on.

In accountancy, if a student sits all the subjects at finals, he or she could become ACA. If, however, the student did electives, the designation could be ACA (Auditing) or ACA (Taxation) and so on.

Should a person who has taken electives wish, at a later date, to be regarded as an all-rounder, the opportunity should be allowed, say within seven years of qualifying, to sit, at most for say two sittings, the subjects which were dropped at finals.

This way, the institute and the public would recognise specialisation in some members and breadth of knowledge in others.

F Irish, FCCA, London W5

Unethical implications I have read Colin Faulkner’s letter (24 June) on one-person services companies and, from my experience, his assertions are incorrect.

Initially, as far as my own clients in this category are concerned, it was clear the companies were formed as an absolute prerequisite by their prospective employers who would accept no other basis.

It is also fair to say that the Revenue has, as a result, benefited substantially as opposed to losing, and thus I find the proposed legislation baffling in the extreme.

The implication in Mr Faulkner’s letter is that some members of our profession have acted on an unethical basis which, for my own part, I totally resent and reject.

GM Dingle, FCA, Heywood, Lancashire

Keeping tax complicated Heather Self (‘Keep it simple and cheer up pensioners’, 8 July) discusses the Finance Bill in the context of tax legislation generally.

Towards the end of her article, she suggests that there is a ‘tendency towards simplicity’; however, that suggestion does not sit comfortably with her earlier comment that ‘the plethora of rates now in existence makes doing an accurate calculation of your self-assessed income tax well nigh impossible’.

I heartily endorse that comment, which we measure via our tax complexity index.

Our index simply measures the number of income and capital gains tax rates potentially faced by individuals filling in self-assessment tax returns; the index baseline is 100 in respect of the 1996/1997 tax year. For that year, there were just three income and capital gains tax rates; 20% , 24% and 40%. The index has jumped to 166 for 1999/2000, since for this year there are five potential rates of income and capital gains tax:

– 10%: starting rate of income tax, and rate at which dividend income is taxed in the hands of a basic-rate taxpayer;

– 20%: lower rate of CGT, and rate at which interest income is taxed in the hands of a basic-rate taxpayer;

– 23%: basic rate of income tax;

– 32.5%: rate at which dividend income is taxed in the hands of a higher-rate taxpayer; and

– 40%: higher rate of income tax.

It is a considerable achievement by the Treasury to have jumped our index up by two thirds in just three years; I wonder whether the index will ever fall.

Maurice Fitzpatrick, Chantrey Vellacott DFK

The core of business? There was an interesting contradiction in your feature on MBA degrees (8 July).

You state that ‘business schools are promoting MBA courses as an ideal way for accountants to broaden their commercial understanding, because an MBA course brings them into close contact with other business disciplines and ideas’. I am sure you would find widespread agreement for this statement.

However, you also quote Steve Robinson’s view that ‘there is no doubt that finance is the core of business’, which seems to reflect a continuing functional fixation despite Mr Robinson having undertaken an MBA.

Is not the core of business something to do with positioning market offerings (whether goods or services) and meeting customers’ requirements?

Professor Richard MS Wilson, Business School, Loughborough University

The crux of the issue I would like to congratulate you on the courteous and dignified apology you have made in response to Mrs Anthea Rose’s letter published in your column (8 July).

While I do not wish to be seen as condoning the action of the two anonymous correspondents or, for that matter, privy to their motives, I think that the question needs to be raised why members of the association should adopt such subterfuges in order to express their views. I wonder whether this could be anything to do with the inhibition members feel in using the association’s own journal (Accounting & Business) as a ‘positive forum for debate’.

AJ Kanczula Wetherby, West Yorkshire

BSkyB’s not-so-free magazine subscription An interesting case on the front page (15 July): Customs & Excise v BSkyB. Without so much as a ‘by your leave’, my monthly subscription was increased a couple of years ago by £3 and, in return, I received a magazine that I don’t want and never read.

As BSkyB are maintaining that this is a separate supply, thus qualifying for zero-rated VAT treatment, then I will ask them to cancel the magazine and reduce my monthly subscription.

Watch this space, but don’t hold your breath.

Simon Paskin FFA Paskin & Co, Worthing, West Sussex

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