Bwahahahaha

I think the Guardian might have found a bigger idiot than Ritchie:

The research was carried out by Kevin Farnsworth, a senior lecturer at York University, who has researched and published studies of corporate welfare for more than a decade and who is launching on Wednesday an online database of grants made to companies.

To determine how much Britain pays for its businesses, he looked at the figures for the financial year 2012-13 – the last year for which there is a near-complete set of accounts. The elements of the £93bn corporate handout break down as follows:

Corporate tax benefits: £44bn Of the 93 major tax reliefs provided by the Treasury, 27 are aimed at business. The largest amount was spent allowing businesses to write off billions spent on plants, machinery and equipment among other items.

Depreciation is a subsidy now, is it?

Dear God, the stupidity.

And from one of his academic papers:

The most valuable form of tax benefit in cash terms is delivered in the form of capital allowances, which allow companies to write off investment in machinery and other forms of capital against taxation. They were originally provided in recognition of the fact that the current ‘assets’ of companies – in the form of existing plant and machinery – inevitably depreciate over time. In their contemporary usage, capital allowances do not simply provide an allowance for depreciation, they are used in order to encourage, and ‘socialise’ the costs of, new investment. The relative generosity of such schemes has tended to increase over time so that taxpayers bear an increasingly greater share of such costs. Companies can often claim close to, or even in excess of, 100 per cent of the costs of depreciation and they can do so upfront. The current UK scheme allows companies to write off 110 per cent of the costs of investment within the first year of the investment. Thus, taxpayers not only effectively pay the costs of the entire investment, the government provides an additional ‘bonus’ equivalent to 10 per cent of the total cost of the outlay. The cost to the taxpayer of such support was £21 billion in 2011-12 (1).

What?

And this bloke has an academic job in the UK?

92 thoughts on “Bwahahahaha”

  1. Maintenance costs are deducted from turnover to calculate taxable profits? Heaven forfend!

    It’s clearly and undoubtedly a neoliberal subsidy!

  2. What about the neoliberal subsidy of top rate taxpayers that allows them to keep more than half of the State’s money?

  3. Now I’ve done only accounting 101 and know little but I’m pretty sure plant and machinery aren’t current assets.

  4. Re: 110% – are people capitalising maintence contracts along with the kit itself. They are often sold together nowadays.

    Either way – its a cost deferred.

  5. From his University of York web page

    Areas of expertise

    Political economy of welfare states
    The power and influence of business on social and public policy
    Corporate welfare
    Welfare states and economic crisis
    Biography

    I joined the University of York in September 2014. Prior to that I was senior lecturer at the University of Sheffield and I’ve held visiting Professorships at the University of Toronto and Carleton University, Canada. I hold a BA (Hons) in Social Policy, MSc in Research Methods and PhD in Social Policy. I have published widely on business and public policy, corporate power, corporate welfare and economic crisis and welfare states.

  6. “Thus, taxpayers not only effectively pay the costs of the ENTIRE investment (my capitals), the government provides an additional ‘bonus’ equivalent to 10 per cent of the TOTAL cost of the outlay”

    Ritchie’s nirvana has been reached; we must now be charging CT at 100%

  7. Meritocaracy has largely disappeared from academia. They consider it unfair that some people know stuff that others don’t. So everybody gets to expound on everything.

    The true litmus test of this attitude is when people fall ill.

    It may be considered perfectly fair for a lady optician to hold forth on climate change. But when she needs her appendix out, would she think it fair to let a gynaecologist have a go?

  8. Doesn’t matter about facts or accuracy.

    Expect to see “£93bn of corporate welfare” everywhere now.

    Job done.

  9. 110% relief. Jeez, I’d better tell my PI insurer, ‘cos my clients are going to be REALLY p*ssed off that I’ve missed that one. For my entire career.

    Really, though, this:
    “a senior lecturer at York University”
    … tells you all you need to know.

  10. But when she needs her appendix out, would she think it fair to let a gynaecologist have a go?

    Poor analogy. Substitute the gynaecologist with an estate agent.

  11. ….didn’t take long. Owen Jones has already tweeted it. Expect the loons to be shouting about this from now on.

  12. Does our academic think that the cost is deducted from the taxes, or from the basis for calculation of the taxes?

    Difficult things, percentages. Don’t know why we bother to try to teach them to 11 year olds, cos they’re clearly too difficult for adults.

  13. thejollygreenman

    The only way to stop this bullshit is to insist that papers that touch on accounting be peer review by a proper chartered accountant.

  14. If I bought a diamond for £3m and sold it for £3.2m, that idiot would insist on me paying 45% tax on £3.2m.

  15. thejollygreengiant
    Unfortunately I can put a name to the chartered accountant who would get that gig

  16. “If I bought a diamond for £3m and sold it for £3.2m, that idiot would insist on me paying 45% tax on £3.2m.”

    And if you (correctly) paid your 45% only on the margin, he would insist that you’d had a 3M subsidy.

    Because obviously………….

  17. This is, unfortunately, the Tories doing way back in the day in the 90s – they created this monster, probably unwittingly when they more than doubled the number of people and institutions in higher education. The result being that the quality nosedived and nonsense on stilts like this makes its way into the contemporary intellectual scene.

    As GlenDorran says, the appalling Owen Jones has already tweeted this to a legion of morons so the ignorance continues to multiply like some demented virus into the mainstream of the body politic…..

  18. Isn’t depreciation expressly NOT included when calculating taxable profits? It certainly isn’t included for sole traders, no idea for corporations. Depreciation is included for accounting profits, but then taken off (and any capital allowance added in) when calculating taxable ones.

    And as for the State paying for investments, I’m glad to hear it – I’m planning to build a new grain store, which my accountant told me would have to largely come out of already taxed income, but he’s obviously wrong, so I await my cheque from the government with anticipation!

  19. Well, yes.

    And the lack of understanding is egregious.

    Even if a capital allowance (AIA or writing down) was at 110%*, the state isn’t letting you off the full cost, it is only letting you off 1.1 * the corporation tax rate. So 22%.

    For those who don’t already know, AIA is 100% up to £500k, with writing down allowance (which is actually different to depreciation, which is one of the reasons that statutory accounts and accounts for tax purposes can have different numbers) is either 18% or 8%.

  20. Close all non-science Uni courses, sack all staff without compensation and confiscate their pensions. Lets see how this cove fares trying to sell his shite in the market place.

    And such a move also boots the next generation of young leftist agitators out on their arses so to speak. Mummy and Daddy can pay to keep some of them afloat, the rest can discover the world of work.

  21. taxpayers not only effectively pay the costs of the entire investment, the government provides an additional ‘bonus’ equivalent to 10 per cent of the total cost of the outlay.

    So I can build a £20m factory for free and walk away with £2m of taxpayers’ money? Right, I’m off.

  22. Farnsworth is presumably suffering from IDD (intellectual deficit disorder) and should therefore be subject to pity, not scorn. He’s the university equivalent of the poor mad woman on the motorway bridge, and you lot are the equivalent of the baying mob of motorists. Shame on you. You should be putting your hands in your pockets to fund his treatment.

    Either that or kicking his arse.

  23. Worth remembering the reaction from the Left if you express doubt about the latest Catastrophic Anthropogenic Global Warming claims but aren’t an accredited climatologist. They don’t even think physicists or mathematicians or computer scientists are qualified to talk about the physics, maths, and computing that goes into those models. You’ve got a post-doc in actual climatology or you can shut the fuck up. Unless you agree with us, of course, in which case you can have a GCSE in tiddlywinks and you’re qualified.

  24. On reading the posting I thought to myself “I bet that the twat’s a sociologist”… Nice to have Tim confirm my prejudices at comment #7. 🙂

  25. A “Senior Lecturer”, eh? Well, that’s me convinced. This will be reported elsewhere as “experts say”, a particular favourite of the BBC when a group of leftist state-funded agitators release another made-up load of bollocks.

  26. I’m not surprised at the content of this article, at all.

    I am, however, surprised that GlenDorran appears to know what Owen Jones is tweeting. Are you, GD, a follower?

  27. Remember when the Left was demanding huge spending to invest in the economy? They want to encourage investment and they want to discourage investment.

  28. Jim

    Depreciation is indeed taken out, but is replaced by Capital Allowances. These are intended to do the same thing, in the most basic form, as depreciation. We move on from the basic form but do keep the principle. So Prof Farnsworth is indeed an idiot.

  29. BraveFart:

    No, I’m not even on Twitter.

    I just wanted to see how quickly this would propagate. Jones is usually the epicentre of this kind of thing so he was the obvious place to start.

  30. Relived to hear it GD. I’m not on twitter either, probably a function of advancing age.

    But I’ve never been persuaded of its usefulness, despite much persuasion from colleagues.

  31. I’ve contacted Dr Farnsworth with my “public understanding of tax” hat on to offer to help him with tax concepts, and he’s already come back to ask some questions about CAs and depreciation. So hopefully I can help get this tidied up a bit.

  32. “Hidden transport subsidies: £15bn Unlike motorists and the petrol levies they are charged, airlines do not pay tax on fuel – support worth about £8.5bn a year, according to MPs on parliament’s transport select committee. ”

    Do airlines make a combined profit of more than $8.5bn? If not.. where on earth could all this subsidy they’re getting be going? Surely it’s not *consumers* who are the beneficiaries of all of this? SURELY?

    Also, I love how he includes the costs of contracting out public services. I’ll happily conceded that Capita et al are cunts.. but by this rationale literally every penny the government spends is a subsidy… and he’s missed a big trick by not including the entire GP budget which goes, as it does, to bastard neo-liberal private enterprises. And Mrs Richie.

  33. I am also in direct contact.

    “I’m sorry, but you’ve entirely misunderstood what is happening.

    “The largest tax benefits provided by the UK government are capital allowances. These enable companies to write off investments in physical plant and machinery, vehicles, IT equipment and office equipment, against corporation tax. They were originally provided in recognition of the fact that the current ‘assets’
    of companies – in the form of existing plant and machinery – depreciate over time. Like subsidies, capital allowances effectively socialise the risks associated with private business investment. In most circumstances, the full value of depreciation can be claimed in the first year as accelerated depreciation. In such circumstances, a large part of the cost of the investment is effectively passed on to taxpayers whilst the value of the asset remains with the business.”

    Do we agree that corporations are taxed on their profit, not their turnover?

    Yes?

    So, profit is revenues minus costs, yes?

    So, if someone invests in some piece of kit that is an expense of the business? We are clear on this point?

    Thus, there must be some mechanism by which we can account for the costs of purchasing equipment. Some way of allocating that cost against the revenues so that we are only taxing profit, not revenue.

    We could do this on a simple cash basis. I spent £100k on a new truck this year, so that’s £100k in costs that I can offest against my revenues this year. Profit, upon which I pay corporation tax, will be calculated after that expense. This would be to treat capital investment in exactly the way that we treat current expenses like labour, or the gas bill.

    That’s not the way that most corporate tax systems work. Instead, we say that the truck will last 4 years (say) and thus you can only write off 25% of the expense each year (it’s vastly more complicated but this is the essence). So, for my £100k truck I can include in my expenses £25k in year one, £25k in year two and so on.

    A 100% capital allowance in year 1 only reverses this. It moves me back to being able to treat a capital investment just like a current cost.

    Note something very important here. I’m going to end up paying the same corporation tax either way over time.

    Say that using the truck makes me £20k. Just an invented number. Wehther I write off that capital cost over 1 year or 4, I’ve still made that extra £20k. On which I pay exactly the same corporation tax whether I depreciate the asset over 1 or 4 years.

    Capital allowances, depreciation, they might change the date upon which I pay the corporation tax. Thus there could be a cash flow issue here. But as long as a business expense is a business expense then the timing of the capital alloowance doesn’t change the amount of tax paid in total.

    It could, in theory, be true that accelerated depreciation is a subsidy. But it absolutely will not be the amount of it that is. It will be the cash flow effects of being able to write off investments earlier for tax reasons. to use my truck example, I make £5k a year taxable profit from having the truck (to repeat, these are invented numbers only to illustrate). So, on a standard 4 year depreciation schedule for a 4 year asset, I pay tax on £5k a year in profit. At 25% (another invented number) I pay £1,250 in year 1, 2, 3 and 4.

    Now I have a 100% capital allowance. I can write off the whole 100k in year one. So I make no profit on the truck in year 1. And £6,666 in year 2, 3 and 4. Upon which I pay tax of £1,666 in year 2, 3 and 4.

    The total tax bill is the same (with rounding). And OK, I’ve got a benefit. A cash flow benefit. Because I pay my tax a little later. At 5% interest rates (let’s ignore current QE based near zero ones) it’s £62.50 for not having to pay that £1,250 in that first year.

    Your method of counting is trying to say that the subsidy is 100% of the capital allowance, the £100k. If there is a subsidy then it’s that £62.50 (plus other smaller amounts for subsequent years).

    Bit of a difference there really.”

  34. “I’ve contacted Dr Farnsworth with my “public understanding of tax” hat on to offer to help him with tax concepts, and he’s already come back to ask some questions about CAs and depreciation. So hopefully I can help get this tidied up a bit.”

    Well done Pellinor.

    Maybe he should have asked these questions *before* publishing his report?

  35. And lest we forget, and I am moved to use capitals – THE GUARDIAN HAS SOMEBODY COMMISSIONING ARTICLES ABOUT ECONOMICS THAT KNOWS FUCK ALL ABOUT ECONOMICS the FT or The Economist wouldn’t publish this, because somewhere in the building there are people who would read it and instantly recognise it as bollocks. New Guardian editor hire somebody who knows some economics to screen what you publish PLEASE. What is Larry Elliot doing? (you might not agree with him, but I do not think he’d have signed off this garbage).

    in addition to this nonsense, we have paying companies to do things described as a subsidy, we have various elements of the tax code that reduce effective tax rates against some IRRELEVANT counter factual described as a transfer from households to companies.

    There are good articles to be written about “corporate welfare” why the fuck is the UK’s leading left wing news paper for clever clogs not capable of writing them?

    I am repeating myself but when it comes to economics, the Guardian is no better than the Mail writing about migration

  36. What I want to know is why he felt the need to put the word assets in inverted commas like they don’t really exist or something.

  37. BraveFart

    Owen Jones is one of four people* to block me on Twitter for a reply to his comments on Kim Jong-il’s death that ‘Robert Mugabe’s Christmas Card List just got shorter’ to assure him:

    ‘Don’t worry, Owen – you’re still on it’

    Seemed to take annoyance – Whilst I don;t use Twitter that often any more, I would imagine like a number of Right wing Twitter users, I have created a second account to follow these people – we only have to look at Germany in the 1930s to see where ignoring an ostensible lunatic can lead.

    * The other ‘blockers’ being

    1/ Richard Murphy for an exchange where I called him ;the most dangerous man in Britain – he took it as a compliment and objected to me disabusing him of that notion – calling him a fat b%&tard probably sealed my fate

    2/ Eoin Clarke (The Green Benches) – Where I described his paean to Gordon Brown’s ‘essential humanity’ as ‘Comedy Gold’

    3/ Diane Abbott – took exception to me calling her one of the two leading racists in the UK.

  38. Jim,

    As other have said, depreciation is stripped out of the accounting profit numbers and capital allowances are added in to arrive at the taxable profit (amongst other calculations).

    The reason this is done is to give clarity of treatment and fairness between taxpayers. There is a wide variation between companies in their depreciation of fixed assets, and a depreciation policy that may look conservative from an accounting point of view would give rise to a more beneficial tax treatment/ The law seeks to address this by specifying the annual rate of allowances according to the type of asset rather than leaving that to the discretion of the tax payer.

  39. Van_Patten
    I am blocked by Richard Murphy and two versions of Eoin Clarke. I have not been overly abusive to Owen Jones yet, and would never be so to Diane Abbott as she is such a Babe

  40. So Much for Subtlety

    Van_Patten – “‘Don’t worry, Owen – you’re still on it’ …. 3/ Diane Abbott – took exception to me calling her one of the two leading racists in the UK.”

    Can I just say I am proud that Ironman thinks you are my sock puppet. Or perhaps that I am yours. Whatever.

    It does make me wonder who the other is.

    As for Pellinor and TW, alas, I can guess how this is going to go. To quote some other socialist:

    “It’s hard to make a man understand something when his livelihood depends on him not understanding it.”

  41. Well done VP!

    Yes it seems twitter does not lend itself to considered and restrained responses and as we’ve seen just re tweeting dodgy stuff can get you into hot water.

    I’d better stay away from it then particularly as I’m occasionally to be found posting comments after a time on the sauce.

  42. the spread of this foolishness has already started, I see in facebook a few dim labour left folk have shared a 38 degrees pictured comparing ’93bn in tax breaks for business’ and 12bn welfare cuts’ with the line ‘is this fair’.

    Shakes head.

  43. Van

    I too have been blocked by Richard Murphy. I didn’t abuse him; I simply pointed out that his ‘duality’ was my “telling lies Richard”.

    P.S. Could you tell me what SMFS is talking about? Actually, don’t try, it won’t help.

  44. S2,

    It occurred to me the other day that Twitter is the living embodiment of when Howard Beale tells everyone in Network to open their windows and scream “I’m as mad as hell, and I’m not going to take this any more”. And they do.

  45. SMFS

    The other of the ‘leading racists’ I referred to was Ken Livingstone’s former aide Lee Jasper, who in fairness has not blocked me on Twitter but who did threaten me with legal action over me calling him ‘a racist thug who has embezzled thousands’ – slightly problematic was the fact it is still my most retweeted tweet (more than 100 retweets) so his lawyers might have been busy.

    In terms of us being the same person, that still does make me chuckle but it was not Ironman who was the culprit – it was some random Scottish guy.

    BraveFart – Twitter and alcohol are a deadly combination – I think I have several fatwas on me from Al Qaeda and ISIS sympathisers – as well as some conspiracy theory nuts in the US….

  46. The Stigler

    Network – an instant classic!

    Rob Harries

    Arguably the three most moronic ‘social media sites’ are 38 degrees, Avaaz and Change.org – Indeed anyone posting the left wing idiocies from them on my FB feed will be removed from my activity stream – the sheer tedium is just annoying…..

  47. What will it take for Aditya Chakrabortty to realise that he knows nothing about economics or finance? Does he even care?

  48. @V_P: From what I recall I think that I was the other part of the Holy Trinity along with you and SMFS….unless that was another incident.

  49. GlenDorran

    Indeed It was the three of us who were literally the same person – which I have to say is somewhat bizarre. I think my sole altercation with SMFS in the past was over my theory that sheer demography would mean Africa would at some point surpass Europe in importance – he referenced Malthus and his failed predictions where I think I pointed to the current Eurozone debacle (I can’t find the link for now) but it was an honest debate where both people had valid arguments and we agreed to disagree.

    I do get surprised at the level of vitriol here between contributors at times at times – a healthy debate is good – but we should never forget the enemy is on TRUK(or in the case of Arnald only appears here as a troll). Any time anyone doubts that look at the comments from mass murder sympathisers Carol Wilcox and Andrew Dickie, useful idiots like Howard Reed, Mark Crown and Ivan Horrocks (‘The gang of five’) and then the pompus rantings of Richard Murphy – we can’t afford the luxury of division against such a terrifying array of evil.

  50. Hey. I’m not a troll. I don’t agree with much that goes on here but that doesn’t make me a troll. The reason I react is because as soon as my name pops up I get a whole bunch of abuse for saying nothing much.

  51. Arnald

    Your troll qualification derives from the use of the term by one Richard Murphy esquire – perhaps you are familiar with him?

  52. “Maybe he should have asked these questions *before* publishing his report?”

    He’s been on PAYE for years, probably never ran his own business, and it’s unlikely he ever had to work out his own accounts for anything. If he did, say for consultancy work (schedule D), he probably paid an accountant to do it, and even then he probably had no capital allowances to worry about.

  53. VP,
    Mark Crown seems to have disappeared.

    Perhaps he’s found someone that reflects his own saintliness even more effectively than Murph.

  54. Jack C

    Mark Crown seems to have disappeared.

    Perhaps he’s found someone that reflects his own saintliness even more effectively than Murph.

    Or, perhaps he got rumbled, and came to a messy end…;)

  55. Hang on, no wonder business isn’t borrowing to invest.

    Why would they business need to? The government pays for it all, and sticks a 10% bonus on top.

    Pretty soon, you’re just paying for new airliners or factories or whatever out of petty cash.

    It also says a lot about the laziness and incompetence of the boss class. Every minute not spent buying stuff, whether you need it or not, is a minute not maximising your 10% bonus payments.

  56. He’s asked me whether, and to what extent, I think accelerated capital allowances could be said to represent a subsidy. I’ve told him that if you take normal CAs as a baseline, accelerated allowances are essentially an interest-free loan of part of the cost.

    The amount of subsidy you get from spending £100k on plant and getting 100% up-front relief is therefore at best a couple of grand (time value of 20% of 82% of the £100k). It’s an incentive to invest, but in financial terms it’s pretty small compared to the investment itself, or even compared to the cost of borrowing.

    He’s also asking about allowances exceeding the cost of the asset, but as I’ve never come across these I’m struggling 🙂 I’ve asked for an example.

    It’s interesting thinking this stuff through – although as GlenDorran says, discussing it after publication is a little later than would be ideal :-\

  57. Sadly York University does not have a department/school of accounting with a reputation to preserve and staff available to march across campus and string the interloper upside down by the Trossachs.
    I am wondering if the way that the Guardian has bigged this nonsense up may yet become a Defining Moment.

  58. Slightly off topic (OK, more than slightly) but I seem to have missed Murphy writing his “my usual budget slot on Radio 2” post today. Where can I find it?

  59. Normally when you do an investment valuation the capital allowances do not form part of the P and L evaluation. They are of course used in any DCF analysis which confirms they are a cash flow item . Some companies even restrict the cashflow benefit to the tax liability of the project rather than the company as a whole .This I think shows how companies value this supposed subsidy. In the past investment grants and eu grants were a real subsidy and taken into the profitability as a reduction in capex

  60. “Slightly off topic (OK, more than slightly) but I seem to have missed Murphy writing his “my usual budget slot on Radio 2″ post today. Where can I find it?”

    Maybe he’s a victim of BBC funding cuts.

  61. I’ve read throught this thread, but I’ve had other things on my mind today and not being a sociologist I may be misinterpreting things. But basically, is what he saying?

    If you buy a truck for £100,000, then if the government doesn’t immediately charge you another £20,000 on top, then that represents a £20,000 subsidy to your business?

    Is that it?

  62. Surreptitious Evil

    Hey. I’m not a troll.

    Looks like, walks like and qucaks like. Yet, somehow claims

    I don’t agree with much that goes on here

    There are quite a few of those. And then there is you.

    The reason I react is because as soon as my name pops up I get a whole bunch of abuse for spouting maliciously and egregiously ignorant leftist drivel.

    You could even be French.

    Oh, wait …

  63. Kevin B

    No.

    This university lecturer believes that, If you buy a truck for £100K, the government will give you back £110K, ie subsidise you to the tune of 110%…

    Thus, taxpayers not only effectively pay the costs of the entire investment, the government provides an additional ‘bonus’ equivalent to 10 per cent of the total cost of the outlay.

    Seriously.

  64. PF

    This university lecturer believes that, If you buy a truck for £100K, the government will give you back £110K, ie subsidise you to the tune of 110%…

    So apparently does the Guardian.

  65. If that is true, why dont trucks cost a million pounds, as the demand for them must be phenomenal. The buyers are guaranteed a 10% gift from the State with no risk.

    Why aren’t we all buying trucks?

  66. Not just trucks either.

    I’ve just put in an offer to buy Greece. I’m going to convert it into an Austerity Theme Park, for the entertainment of the anti-Disney left. They love a bit of poverty p0rn.

    Actually, I shan’t be making too much of an effort: I’m just going to bank the 10% bonus.

    Kerching!

  67. Or, perhaps he got rumbled, and came to a messy end

    God, I’m so stupid. He didn’t get rumbled, that was the whole point?

    Perhaps he got bored out of his skull that whatever he said, however ridiculous, he just continued to get away with it.

  68. Why aren’t we all buying trucks?

    That sounds like the kind of question that a sociologist might have a view on…

  69. So Much for Subtlety

    The Stigler – “It occurred to me the other day that Twitter is the living embodiment of when Howard Beale tells everyone in Network to open their windows and scream “I’m as mad as hell, and I’m not going to take this any more”. And they do.”

    I think Twitter must be like what it is to be seriously Autistic. You get all these messages but without their social context. You don’t see the other person’s face or the nuances of their expression. All you get is a short, cut-off and isolated message.

    Which is, no doubt, why people are happy to unleash their inner psychopath on Twitter. Why we see so much bullying from the SJWs and the like. In person, it is much harder to maintain the same levels of rage and vitriol. Which is why I am sure Ironman is a perfectly nice chap in real life. He just comes here to act out. Like Arnald really.

  70. So Much for Subtlety

    PF – “That sounds like the kind of question that a sociologist might have a view on…”

    Surely he would say that trucks are class markers and so even if the government offers us massive subsidies, the cost in terms of social capital to anyone in the groups A, B, C1 and even part of C2 would be too high for them to even think of it.

    Can I just say that actually I think the Mondeo is really not a bad car.

  71. Tim / Pellinor,

    If you covered this above, then apologies, there’s a lot to wade back through.

    But I would suggest the idea that there may be a small benefit (discounted cashflow) from having access to AIA’s rather than WDA’s as also flawed.

    WDA is a proxy (of sorts) for depreciation and the idea that tax is calculated on profit rather than cash.

    However, for a lot of smaller businesses, if you have paid out 100 as an expense (in cash), why on earth should you have to wait until later for the tax relief on that simply because some accounting standard calls it a fixed asset (rather than a P&L expense). You have paid the cash out; and (for small businesses especially) cash is king.

    Ie, one can argue that AIA’s (100% first year CA’s) should be the normal default position (matching cashflows), and from which any move at all to WDA’s is the government “reducing” tax relief?

  72. PF: yes, that’s a perfectly good position to take. A big question in tax generally is whether you should follow the cash, or follow the accounting.

    My general feeling is that you should follow the accounting, as the whole point of accounting principles is that cash doesn’t reflect the underlying position very well. “Profit” is an accounting concept, and if you’re going to tax profit then I think it seems only sensible to use accounting principles. Having said that, I also think that for some things you ought to defer tax charges until cash is available – rollover relief when you swap one building for another, for example.

    With major capital assets, I’d agree that from a cash perspective AIA makes more sense – if you assume that the asset is paid for in cash up front. If it’s financed, though, the position gets a lot more complicated, so I’d drop back to letting the accountants do all the hard work – letting me the tax advisor just multiply their result by 20% and job done 🙂

  73. “Bwahahahaha”

    There’s nothing funny about the fact that academia is infested with lefty propagandists. Ignorant or not they get the message out and people believe it because of where it comes from. It is exceedingly effective.

  74. Pellinor

    me the tax advisor just multiply their result by 20% and job done”

    And probably even less straightforward after yesterday!

    This was the party that said it intended to simplify the tax system – and then Osborne delivers yesterday’s “performance”!

    it’s too early to comment, but it almost appears to me that he’s trying to “crystallise” (or accelerate) a number of taxes ahead of schedule, ie in this Parliament that might naturally have arisen later.?

    For example:

    Divs 7.5% – watch lots of dividends being declared in March, raising extra taxes in 2015/16.

    BTL, but note by 2017 onwards – hence, perhaps watch transfers into Ltd Co’s triggering earlier than expected tax from CGT (to date) and stamp duty receipts? Etc…

    All very tactical / political – which is typical Osborne – and as some commentator (IEA) said, “too clever by half”…

  75. Quarterly instalment payments for large companies, too. Tax due 3 months into the year?!? Good lord. It’ll be monthly on account soon.

    Incidentally, I bet the increased tax paid won’t show up on companies’ P&Ls as a charge, and so clearly it will have been avoided. We need country-by-country reporting to ensure this sort of stuff gets disclosed! 😉

  76. Done!

    Dear Dr Farnsworth,
    I refer again to the recent Guardian piece here , which is apparently based on your research. It was drawn to my attention, along with your other work, by Mr Tim Worstall in this blogpost, which provides a robust appraisal of it.
    Maybe you could discuss some of your more (ahem) interesting insights past your colleagues here to see what extra light they can cast on your remarkable assertions.
    https://www.york.ac.uk/management/research/subject_groups/finance/
    I have taken the liberty of copying this email to Professor Philip Linsley, head of the Accounting and Finance Group at York Business School who I am sure will find your thoughts challenging and innovative.
    Tax is one of the more difficult areas of accountancy, and you have been remarkably brave in tackling it over the course of a decade as an autodidact with a non-numerical background.
    Warm regards,
    Andrew K ACMA

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