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Who can really be trusted to keep a secret? Accountants or lawyers?

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When you speak with your lawyer, you can say almost anything and be confident in the knowledge that the lawyer will be able to preserve the confidentiality of your discussion.

Most people probably assume the same thing when having discussions with their accountant, especially in the context of discussing tax planning opportunities with a tax advisor.

Unfortunately, English readers should pay careful attention to the decision in a recent case, R (on the application of Prudential PLC) v HMRC, EWCA Civ 1094 if you would like the full legal citation.

This Court of Appeal decision stated that client privilege only extends between a lawyer and a client.  This means that any discussion between a client and an accountant cannot be guaranteed to be confidential.

This is an English legal case, which is binding in England and Wales only, but the judgment is based on common law, so is likely to be highly influential in jurisdictions based on the English system globally.

As the accountancy and legal professions increasingly compete, especially in the area of tax advice, this gives a significant advantage to the legal profession over the accountancy profession.

Who would you rather seek advice from: a lawyer who you are confident cannot be compelled to reveal the content of your discussion, or an expert accountant who is unable to promise confidentiality?

If you talk to a lawyer about this then they may well say they were pleased that they had this advantage over accountants.

Note of course though that if they felt like it they wouldn’t have to disclose what was said in your conversation…

According to Apple there’s an App for…something that I shouldn’t say…

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Apple is an extremely successful company. Earlier this week they released their latest set of results.

For the first time their quarterly sales exceeded $20 billion. In my opinion though the really impressive thing about the published figures was their cash balance.

They have total cash and marketable securities (stocks and shares, etc that can be readily converted to cash) amounting to a staggering $51 billion.

To put this amount of money in perspective, if they took their cash and put it in an empty company and then listed this “cash only company” on the London Stock Exchange, it would not only make it into the FTSE 100 but the “Apple cash company” would in fact be the 18th largest company quoted on the London Stock Exchange!

The blog entry here provides some thoughts on what else Apple could do with their cash if they decided to go on a shopping trip.

One of the growth areas of Apple can be found within their Apps business. Apps are “applications” (in effect software to use on their devices). 3 billion apps were downloaded in the first 18 months after their launch.

Apple has a very slick and professional marketing strategy.

Apple’s iPhone adverts such as the one below famously state “There’s an app for that” and finish with “There’s an app for just about anything”.

As well as having a very creative approach to their advertising Apple has also taken a very commercial and sensible approach to matters.

Last week the phrase “There’s an app for that” was officially classified as a trademark of Apple.

This means they will be able to prevent competitors benefiting from the phrase.

It will probably result in adverts such as the one below by US network carrier Verizon being prohibited. Verizon parodied it’s competitor  A&T (a carrier for the iPhone in the US) with this “There’s a map for that” advert.

We all make mistakes at work and I know you shouldn’t laugh but…

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On Tuesday, Microsoft were due to launch their much anticipated Windows 7 phone system. The launch event was scheduled to take place in New York with a start time of 3.30pm.

“Joe O” works for the electronics firm LG who were one of a number of phone companies that were expected to launch Windows 7 phones to coincide with the Microsoft event.

The phone companies however were under strict instructions not to announce anything until after Microsoft’s big launch.

Alas, poor Joe who is based in the UK made a slight mistake when he thought the launch time was 3.30pm UK time rather than 3.30pm New York time. The end result was that LG’s official UK blog revealed details of the phone and what it was capable of doing under the new Microsoft system some 5 hours before Microsoft started the official event.

The error was spotted by LG pretty quickly and the post was withdrawn but it was too late as it had already been picked up by a number of other websites.

Now, picture the scene. You’re part of a project team that has been working on a major project for some time. The “partner” to your company on this project is none other than the mighty Microsoft. The world’s press are anxiously awaiting the launch event and then you press a button which releases the news to the world some 5 hours early.

What would you do?

No, honestly, what would you do?

Deny it? Blame it on somebody else? Say it was a technical error?

Joe did the honourable thing and posted the following on the LG blog:

Yes, that early slip may have been my fault, I may have failed to notice the time zone was EDT, not BST, but let’s not kick a man when he’s down. And I was down, literally hiding under my desk ignoring my constantly ringing phone.

Please consider this my public confession… And remember “to err is human; to forgive divine”.

Showing that Joe has a good sense of humour he also posted the following animated GIF on the blog.

In today’s ever increasing global business environment this is a useful reminder that it’s important to remember the more simple areas of international business.

We all make mistakes though and well done to Joe for his excellent recovery!

£2.5 billion but can you have your cake and eat it?

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On Monday it was reported that China’s Bright Food Group was investigating the potential purchase of Britain’s United Biscuits for up to £2.5 billion.

Whilst on the face of it one food company buying another food company isn’t that exciting it does raise some interesting points.

Importantly, it also makes you think of whether Jaffa Cakes are in fact biscuits rather than cakes…

First of all though in classic Michael Porter’s Competitive Advantage of Nations terms then particular countries are considered to be strong in certain industries.

Germany for example is renowned for the production of high powered cars such as Audi, BMW and Porsche. Japan is a world leader in high tech cameras such as Canon, Nikon and Pentax.

Britain on the other hand is a powerhouse in the production of biscuits. After all, who needs luxury cars and high tech cameras when you can have a lovely cup of tea with a nice biscuit or two?

Secondly, the fact that another company from a so called emerging market is now potentially making a significant acquisition of a company in a more developed market sends an interesting signal about the current trend of globalisation.

Both these points are all very well and good but what’s this all about a biscuit or cake discussion?

United Biscuits produce some household name products including McVitie’s biscuits, Hula Hoops and Twiglets. They also produce Jaffa Cakes.

Jaffa Cakes were the subject of an infamous tax case a few years ago. To cut a long story short the debate was whether a Jaffa Cake was a cake (considered to be a basic foodstuff and hence not liable to VAT) or a chocolate covered biscuit (considered to be a luxury food product and hence liable for lots of VAT).

So, how on earth can you decide whether a food product is a cake or a biscuit?

The deciding factor was that when a cake is left to go stale it gets hard whereas when a biscuit is left to go stale it goes soft.

The argument went to a VAT tribunal (which is in effect a type of Court) and as part of the evidence put forward a 30cm Jaffa Cake was baked and left to go stale (and hard) so as to convince the tribunal that it was in fact a cake.

The final result was that Jaffa Cakes are indeed cakes so you can now have your cake and eat it (VAT free).

Has the Big 4 become the Big 3?

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Things have changed. You won’t be hearing much about PricewaterhouseCoopers any more.

Is this breaking news? Does this mean that we will be talking about the Big 3 rather than the Big 4?

Should PricewaterhouseCoopers partners and staff be rushing to recruitment consultants to get another job?

There’s no need to panic as all is well with the company. What they have done though is undertaken a rebranding exercise.

The company has commonly been referred to as PwC since it was established via a merger back in 1998 between Price Waterhouse and Coopers & Lybrand. With effect from Monday though they will now officially go by the name of pwc.

As part of a multi-million pound make over not only will the company be known as pwc but the corporate logo and corporate colours have changed.

The new logo incorporates the letters “pwc” in lower case along with a 6 rectangle symbol in shades of orange and red.

According to pwc, the brand was refreshed “in order to strengthen, and modernise how it represents its worldwide network to its clients, its people and the communities in which it operates.”

Global brand consultants Wolff Olins designed the logo in collaboration with PwC employees and clients. The complete rebranding process reportedly took two years.

From a personal point of view, I like the new logo and orange/red spectrum colours which I think are nice fresh, clean colours.

What about people from some of the other accounting firms? My guess is that they must be relieved. With KPMG having blue/white, Ernst & Young black/yellow and Deloitte navy/green it must have been a relief all round that pwc went for orange/red.

It’s 2010 so should a Witch pay income tax or not? Well, according to the Romanian government…

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“Double, double toil and trouble, fire burn, and cauldron bubble” so goes the famous Witch’s chant from Act 4, scene 1 of Macbeth but was a similar chant taking place last week when a potential Witch Tax was rejected by the Romanian Senate?

Like many countries around the world Romania suffered badly during the recession. In an attempt to balance the books the government has undertaken cuts in public sector wages as well as raising the VAT rate.

In a somewhat unusual move last week though, Alin Popoviciu and Cristi Dugulescu, two members of the ruling Democratic Liberal Party drafted a law whereby Witches would have had to produce receipts for the services they performed and hence be taxed on them.

Now whilst the image of Witches queuing up to submit their tax returns may cast an unlikely picture there are a number of interesting issues.

First of all then surely they are just self employed individuals? From a tax point of view they are no different from for example a self employed builder or a self employed accountant who both have to pay income taxes.

Admittedly, from a non tax point of view it probably elicits some interesting expressions on the face of the person who asks them what they do for a living but back to tax and there would be some questions that needed to be answered:

What about Witches training courses? Surely they would be a tax deductible expense?

Would the costs of keeping a black cat be considered a personal expense or an expense of the business?

What about the purchase of a new broom. Would it be a capital or revenue expense?

In another move which no doubt came as a complete surprise for all concerned, fortune tellers were told that they were to be held liable for any incorrect predictions that they made.

The Witches and fortune tellers needn’t have worried too much though as Romania’s Senate voted down the proposal on Tuesday.

Popoviciu allegedly claimed that the lawmakers didn’t implement the law as they were frightened of a Witches’ curse being made on them.

Benjamin Franklin once famously said “In this world nothing can be said to be certain, except death and taxes.”

Maybe the Senators that voted down the Witches tax in Romania were concerned that the two would be combined.

PwC in the UK have just released their results. So how much did each partner make?

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PricewaterhouseCoopers is a great company. It’s one of the top companies in the world and it’s also a truly global company. The latest reported figures show over 160,000 PwC people working around the world including 8,500 partners.

On Monday PwC released their UK results for the year ended June 2010.

So, how did they do?

First of all the good news. Their turnover in the UK rose 4% to £2.33 billion.

Their profit before tax in the UK however fell 3% to £665 million.

This fall in profit was put down to some significant investment during the year including recruiting 1,750 staff, appointing 57 new partners and moving into a new environmentally friendly office in London (incidentally, there’s a previous blog entry on the proximity of a PwC office to a Ernst & Young office here).

As maybe a positive sign on their view as to which direction the economy is heading they also stated that they were planning on creating 800 new jobs in the UK over the next year as well as continuing with their significant graduate recruitment by taking on 1,200 new graduate level joiners.

Now onto the exciting bit that I’m sure lots of people are interested in and that is what is the average payout for each of the 820 PwC UK partners?

Although it was down by 2% on the previous year it was still a healthy average figure of £759,000 per partner.

PwC’s UK chairman, Ian Powell, was reported as receiving £3.6 million.

Vodafone and their involvement with CFC (no, not Chelsea Football Club)

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There’s a pretty good chance that either you or somebody you know has used a Vodafone network.

Vodafone are the world’s largest mobile telecommunication network company and last week they announced better than expected results for the quarter ended 30 June 2010 with revenue rising for the first time since the recession began (rising by 4.8% to £11.3 billion for the 3 months).

Also announced was an agreement with the UK tax authorities over a Controlled Foreign Company (CFC) investigation that dates back to 2001.

In simple terms, CFC is a set of rules which prevent UK companies from avoiding tax by the use of subsidiaries in tax havens around the world. If for example a company pushes profits into a subsidiary in a low tax jurisdiction it would avoid paying the higher rate of tax on these profits in the UK. The UK tax authorities can counter this by applying CFC legislation.

The Vodafone case was a complicated one involving a holding company in Luxembourg. It had made a provision of £2.2 billion for settlement of the dispute but has now agreed to pay £1.25 billion to settle all outstanding CFC liabilities to date as well as reach agreement that no further CFC obligations will occur under current legislation.

This is not only good news for Vodafone but also a number of other multinationals that are currently in negotiations with the tax authorities over CFC issues. It also reportedly signals a more flexible approach by the tax authorities as the new UK government has stated that they wish to make the UK open to international business. Over recent years a number of companies have moved operations away from the UK to for example, Ireland where there is currently no CFC legislation in place.

Allegations about two of the Big 4 and “espionage”? Make sure you don’t do this in your exam…

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So the June ACCA exams are finally starting today. After all the hard work students all over the world are facing that unique mixture of excitement, fear and anticipation as they turn over their actual exam papers for the first time.

One thing that really goes without saying though is that when you’re sat in the exam hall you shouldn’t be looking at the person next to you and trying to see what they are writing.

Although exams aren’t being sat in these two particular buildings occupied by PricewaterhouseCoopers and Ernst & Young in London, there have been various allegations recently that the buildings are a little too close for comfort.

Three years ago PwC moved into an office next door to EY. At their closest point the buildings are approximately 10 metres apart. This has led to concerns that the rival companies could spy on each other.

PwC have apparently made the first move to reduce the threat of “espionage”. In order to prevent EY employees spying on them through the windows they have installed automatic blinds that close as soon as audio-visual equipment is turned on. The offices have also been designed so as to prevent any computer screens from being visible through the windows.

EY were reported to be evaluating their options in response.

Whatever the outcome of this is, all of us here at ExP would like to wish you the very best in your exams and sincerely hope that you don’t feel the need to try to spy on your neighbour in the exam! GOOD LUCK.

If you’re heading to the exams next week then do you care whether this is a car or a van?

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On the way into the office this morning I was stuck in traffic next to a Peugeot 207 vehicle which was identical to the model to the left except that it was red rather than white.

If you’re heading to the ACCA UK stream tax exams on Monday then do you care if this vehicle is a car or a van?

The vehicle is certainly a nice looking Peugeot 207 and whilst most people would say it’s a car the fact that it doesn’t have side windows behind the driver and passenger doors makes it almost certain to be treated as a van by the tax authorities.

The good news is that you’re NOT going to be examined on the detailed rules of what is a car and what is a van (or lorry or truck for that matter) so should you care about the distinction between cars and vans?

The short answer is that yes, you should care!

I’m personally pretty certain that the exams on Monday will include a capital allowance computation which involves cars or commercial vehicles such as lorries or vans.

There are some new rules being examined for the first time by the ACCA this session (see chapter 5 of our F6 ExPress notes for a quick summary) so I think this has got a good chance of being examined.

In summary, vans and lorries are commercial vehicles and are therefore eligible for the AIA and FYA within capital allowances. Cars on the other hand do NOT qualify for the AIA or FYA (unless a low emission car which gets a 100% FYA).

Also, don’t forget to look out for the CO2 emission rate of the car as if it’s >160g/km then it only gets a 10% WDA as part of the special rate pool.

On the VAT side of things then VAT can be reclaimed on lorries and vans unlike with cars where it is not possible to treat the VAT as input VAT.

Being a tax tutor I’m one of those strange people that find all of this interesting and apologies to any of you that don’t share my excitement at discussing the distinction between cars and lorries…