The Positive Accountant - Vol 2 Ed 30
Updated: Aug 5
Simplification.
Now there's a word that I bet you all think you know the definition of. To quote the OED, 'The process of making something easier to do or understand'
So why is my blood running cold when I read that the Chancellor has asked the Office for Tax Simplification (1984 anyone ?) to look at reviewing CGT ahead of the Autumn Budget.
What do we think that means ?
Let me give you some clues.
Not many people pay any form of CGT (you have to have chargeable gains - 'profits' - of more than £12,300, homes are generally exempt). Its top rate is 20% unless residential property (which goes to 28%), yet most people who pay it are in the 40% or above income tax threshold.
Investing in things like Vintage Wine, classic cars and the like do not attract CGT.
Any clearer yet on what 'simplification' really means ?
Some research groups have estimated that abolishing those exempt assets and aligning CGT to income tax rates could yield as much as an additional £90bn p.a. And let's face it, the country's coffers could do with that.
Now, my crystal ball starts to get a bit fuzzy at this point, and therefore all of the following is complete speculation. So take action with care.
But let's say you have a vintage Ferrari worth £2m that you bought for £100K. If that gain suddenly becomes taxable, it's going to hurt when you sell.
So why not think about selling the Ferrari now (under current rules) and buying a Bugatti for £2m. Then, when you sell the Bugatti in the future you will be comparing the sale price with £2m.
The tax analysis of this is that the gain on the Ferrari is tax free (sold under current law), and the sale of the Bugatti isn't at a profit, therefore no tax.
(I may have lost some of you there. Let's change it so you sell a red one and buy a blue one in its place.)
The same principle works with any asset standing at a gain. It might, for example, be worth selling something and paying some tax now (at, say, 20%), locking the base cost into a new asset.
Sadly the closest I have to a classic car is an MOT failed 1993 Nissan coupe, which will cost more to scrap than it is worth. But a chap can dream can't he - especially when he has the looks and charm of Leonardo di Caprio...
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What are my positives today ?
1. Online Shopping
I'm really sorry, I know I have clients who are retailers. And as a former (failed) retailer I do share your pain. (Yes, you heard right, although I try and keep it quiet...)
But I really can't stand the idea of queues, socially distanced shopping and face masks. So for me, Sir Tim Berners-Lee's invention is the way forward...
Mind you, in our shop (bought 2004, closed 2005) social distancing would never have been a problem, a customer a day would have been a bonus...
2. Latin 'Camp' is going really well
Anyone who reads this as a parent will understand what I'm about to say.
You know that you want to help your children with their homework, but there comes a point when you're in danger of displaying complete and utter ignorance.
Over recent years I've impressed myself with recall of trigonometry, simultaneous equations, Newton's Laws, Macbeth, the Tudors etc. But there are some subjects where there is a complete blindspot.
Lizzie has just completed Lower Sixth studying 'A' Level Latin, and right now should be should be on a two week summer Latin camp. That would be fine.
Except it's being done remotely, so we've been dreading the 'I'm stuck, can you help ?' question.
Luckily it's going really well. Let's hope it continues !
3. New DJ's on Kiss FM
The school run (I normally did the morning drop-off) means I get to 'enjoy' Youth Culture.
One of the things I didn't miss during the lockdown was the reasonably new pairing of the accented Tom and the gormless Daisy on Kiss FM. Who replaced the likeable trio of Ricky, Melvin and Charlie...joined at the hip and sharing the same braincell.
Over the last few days I've been taking Charly out in the mornings and - she's found Kiss FM on my car radio again.
As a result I gather there are new DJ's lined up for a couple of week's time - Jordan and Perri (you'll doubtless recognise them from the dance group Diversity).
I'm sure they'll be smashing.
Stay safe, stay positive
Adrian