The Joys of Tax & Finance


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The Joys of Tax & Finance

  1. 1. The Joys of Tax & Finance <ul><li>Dennis Howlett </li></ul>
  2. 2. I used to be
  3. 3. Then I became
  4. 4. Now I’m
  5. 5. Though many people think
  6. 6. Who am I? I have ‘homes’ at : ZDNet (US): Irregular Enterprise & Enterprise Alley ITPro (UK): Governance, risk & compliance AccMan: ‘Innovation for professional accountants’ IT Counts: ICAEW IT community and... TWITTER!!!!!!
  7. 7. Tax doesn’t have to be taxing Yeah right.....
  8. 8. This is us I guess
  9. 9. We’ve all got to pay so...
  10. 10. But you don’t have to leave a tip
  11. 11. Avoidance and Evasion <ul><li>Avoidance is the LEGAL use of rules to minimize tax </li></ul><ul><li>Evasion is ILLEGAL and usually involves the deliberate hiding of assets or income </li></ul>
  12. 12. Avoidance and Evasion <ul><li>All countries operate (roughly) the same way </li></ul><ul><li>Avoidance is OK (though there are limits) </li></ul><ul><li>Evasion = </li></ul><ul><ul><li>Hefty fines (KPMG $456 mill) </li></ul></ul><ul><ul><li>Government grabs assets and/or </li></ul></ul><ul><ul><li>Jail time (Club Fed) </li></ul></ul>
  13. 13. Beware the exotic
  14. 14. Don’t be stupid “ An investment banker who used his wife’s and children’s names in tax evasions dating back to 1977 was sentenced today to 50 months in prison for tax crimes, including the first criminal conviction for not paying the nanny tax.” NYT: 2007
  15. 15. Don’t be a smart ass Smart ass Club Fed
  16. 16. Offshoring We all want the Good Life - and it’s ‘over there’
  17. 17. Attitudes to tax Country Hate Don’t like UK ✔ France ✔ Germany US ✔ Spain ✔ Italy ✔
  18. 18. Attitudes to tax Country What it means UK Savvy - into avoidance ✔ France 27-30% GDP in shadow economy Germany Into avoidance, will evade US Heavily into avoidance, sometimes dumb ✔ Spain Evasion = national sport, 25% in cash Italy 3 sets of accounts - go figure!
  19. 19. Location, location, location
  20. 20. Location, location, location <ul><li>Where you conduct your business matters </li></ul><ul><li>Where you were born matters (esp UK/US) </li></ul><ul><li>The rules are not consistent around the world </li></ul>
  21. 21. Location, location, location <ul><li>In most countries you are taxed where you live and conduct your business except: </li></ul><ul><li>If you are a US citizen - you are taxed regardless of where you live AND/OR </li></ul><ul><li>You were not born but live and work in the UK which has kinda become a tax haven (nice if you can do it) </li></ul>
  22. 22. Location, location, location <ul><li>Remember : Operating through a company may bring NO benefit if the structure isn’t right and/or </li></ul><ul><li>You are using it to avoid tax plus </li></ul><ul><li>Special problems in the UK with Managed Service Companies (actually - a nightmare) </li></ul>
  23. 23. Location, location, location <ul><li>Remember : Tax is not just Income Tax but includes wealth tax and social security costs </li></ul><ul><li>UK is probably the best place to be max = 48% </li></ul><ul><li>France : ‘expensive’: effective tax rates ≈ UK but socsec is a killer = 61% </li></ul><ul><li>Spain : ‘expensive’: same as France (sort of) </li></ul>
  24. 24. Location, location, location In some European countries, it is simply not worth employing people as a person running a small business. THIS CAN MEAN IT IS NOT WORTH BEING IN BUSINESS AT ALL
  25. 25. Location, location, location Remember : If you choose to live in a country because of its lifestyle (like France/Spain/Switzerland), then be prepared to pay the price, especially if you are a high earner.
  26. 26. Location, location, location Remember : The overall tax cost of living in a country is NOT one figure but a combination of ‘taxes’ that include income/business tax, social security and mandatory pensions costs. Making direct comparisons is not easy. Therefore....
  27. 27. Oh shit! This is all way too complicated Therefore....
  28. 28. Seek the best LOCAL advice
  29. 29. and not....
  30. 30. Summary <ul><li>We all pay so get over it </li></ul><ul><li>Don’t try and be smart - they’re smarter </li></ul><ul><li>Get good local advice </li></ul>
  31. 31. Accounting: sounds like fun
  32. 32. Keep it simple
  33. 33. DIY or get help? =
  34. 34. DIY or get help?
  35. 35. Here’s the problem Most accounting systems were not built with you in mind
  36. 36. Are there alternatives? <ul><li>Blinksale: </li></ul><ul><li>Freshbooks: </li></ul><ul><li>FreeAgent: </li></ul>
  37. 37. Blinksale <ul><li>Mostly billing </li></ul><ul><li>Drop dead easy </li></ul><ul><li>Multiple currencies </li></ul>
  38. 38. Blinksale
  39. 39. Freshbooks <ul><li>Time, billing and projects </li></ul><ul><li>Multiple currencies </li></ul><ul><li>Well supported </li></ul>
  40. 40. Freshbooks
  41. 41. FreeAgent <ul><li>Income and outgoings </li></ul><ul><li>Multiple currencies - sort of </li></ul><ul><li>Works out taxes (UK but...) </li></ul>
  42. 42. FreeAgent
  43. 43. What else? <ul><li>Spreadsheet - accountants like them but </li></ul><ul><li>Error prone </li></ul><ul><li>Difficult to maintain </li></ul>
  44. 44. Why not free?
  45. 45. What else?
  46. 46. Live forever?
  47. 47. Not really
  48. 48. So save!
  49. 49. So save! <ul><li>As much as the government will let you </li></ul><ul><li>No less than 10% </li></ul>
  50. 50. Finally (phew) <ul><li>Allow for taxes 40-50% </li></ul><ul><li>Claim everything you’re allowed </li></ul><ul><li>Keep your accounts simple </li></ul><ul><li>Take advice </li></ul><ul><li>Save 10% </li></ul><ul><li>Enjoy the rest! </li></ul>
  51. 51. Thanks & Questions [email_address]