This is fun

The Accenture UK 2010 accounts state it paid no UK corporation tax that year on £123m of profits and no UK corporation tax in 2009 on £64m of profits. It paid foreign taxes of £6.7m.

Its latest accounts to August 2011 state it paid £2.8m of corporation tax on £81.8m of profits, which will include UK and foreign taxes. The accounts disclose its “deferred tax” was £12.7m, which is tax the company may one day be liable to pay.

If they\’re actually declaring those profits in the UK then they cannot be using transfer pricing, royalties and all the rest to reduce the tax bill. Because such declared profits are after all such shenanigans.

So they must be doing something else: deferred losses? Capital allowances?

Or is there something odd about their structure: are they some blend of partnership and corporation? So that partners pay income tax on their share of the profits?

Anyone know?

11 comments on “This is fun

  1. From its SEC filing:

    “Accenture plc is an Irish public limited company with no material assets other than Class I common shares in its subsidiary,
    Accenture SCA, a Luxembourg partnership limited by shares (“Accenture SCA”). Accenture plc’s only business is to hold these
    shares. Accenture plc owns a majority voting interest in Accenture SCA. As the general partner of Accenture SCA and as a result
    of Accenture plc’s majority voting interest in Accenture SCA, Accenture plc controls Accenture SCA’s management and operations
    and consolidates Accenture SCA’s results in its Consolidated Financial Statements. We operate our business through subsidiaries
    of Accenture SCA.”

  2. I have taken the ten seconds it requires to do a companies house search, and Accenture UK seems to be a private limited company, not a partnership.

    As for what the profits/tax relate to.. I’m not prepared to go the extra mile and hand over my quid to actually look at the accounts. But the assumption that there’s no transfer pricing wotnots only works if the accounts only relate to UK activity. If, however, they are accounts whch consolidate some overseas activity then there could be funny business. Amazon’s US filed accounts will include all the activity from the EU, and so despite being US accounts, will contain all the impact of their EU tax planning.

    Given that these Accenture accounts include some foreign tax payable, we have to asssume that the numbers include some foreign activity.

    The tax notes in UK accounts do actually include a simple reconciliation between the standard rate of UK tax and the tax actually paid. I wish the chumps writing these articles (who’ve paid their quid) would report a little on what those notes say. Though, of course, that might require them to have the first fucking clue what they’re talking about.

  3. That’s the top company.

    But there is an Accenture UK Ltd, a UK registered company, number 04757301, which one would expect would be paying corporation tax on its profits.

    Possibly there’s a UK partnership structure, with the company (Accenture UK Ltd) as the general partner? I don’t know.

  4. Got the Accenture UK accounts.

    Indeed, no UK tax, although there is £3.3m overseas tax.

    Most of the non-tax is due to £28.4m of “other timing differences”, which isn’t very helpful.

    There is also:
    . £6.6m tax saved due to “non-taxable group income”, whatever that is;

    . £5.3m for “share compensation relief” (I think that’s where you’re allowed to treat share options as salary for tax purposes even though it isn’t an expense in the accounts);

    . £3.7m for R&D tax credits.

  5. Accenture UK Ltd isn’t just a UK operation; it also owns the Jersey subsidiaries, an Italian HR operation, a US broadband company and the group’s Azerbaijan operations.

    Presumably those subsidiaries’ profits are consolidated, so included in the UK parent company’s profits, but they will be taxed in the countries in which they operate, not the UK. In accordance with proper Murphy principles.

  6. Good work, Richard.

    Timing differences are where the period in which profits are recognised are different to the periods in which they are taxed. So that’s where stuff like capital allowances comes in… although I can’t imagine that Accenture have many of those (large professional service firms tend to lease everything).

    The fact that we have Jersey operations within those accounts shows that there *is* a possibility that there’s some ‘avoidance’ going on (and, thus, Tim W’s assumption is rash.. if not still potentially accurate). It depends what those Jersey operations are. Murphy principles would be that the tax should follow the ‘economic substance’, not necessarily the legal substance.

  7. I assumed that the Jersey subsidiaries were actually doing things in Jersey (lots of accounting and consultant types out there), but that may have been optimistic.

  8. Income tax form should have two boxes. One marked “Income”, another marked “Tax due”.

    Company tax should be a little more complicated. Three boxes. One marked “Money in bank at beginning of year”, another marked “Money in bank at end of year”, the third marked “Tax due”.

    The beauty of such a system is that capital expenses, timing differences, cash set-aside, preferential treatment of share capital and whatnot, all ends up at the same number over time, at the real rate, not semi-fictitious blue-sky thoughts. And into the bargain we get to release millions of unproductive accountants into the wider economy to do something productive with their labour time.

    I commend it to the house.

  9. Arn’t Accenture just paid in tax anyway? Every big job they seem to get is a government contract, and they always go over the deadline and over the budget.

    Its sort of like charging government workers income

  10. Non-taxable group income will be dividends, which aren’t generally taxed when received by a UK company.

    Share compensation relief is the deduction for share options granted. That gets treated as an accounting deduction, but while the accounts do a complicated calculation every year to predict the cost based on the Black-Scholes option pricing formula, for tax purposes you just take the difference between what the shares are worth and what people pay for them. So you can get a pretty hefty difference between them, especially as the tax deduction doesn’t come until you exercise the options whereas the accounting deduction is done in advance. If there’s been a rash of people exercising options you’d get a big deduction now.

    Other timing differences could be almost anything: pension contributions, perhaps, if they’re catching up with (or pre-paying) those. It won’t be capital allowances, those always get disclosed separately (unless they’re immaterial)

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