Our Parliamentary Correspondent, Accountancy Age, Tuesday 9 March 2010 at 15:11:00

Treasury committee urges government to include PFIs on the book when reporting "whole of government" accounts

MPs are demanding the Treasury publish Public Sector Net Debt statistics - calculated according to International Financial Reporting Standards taking PFI contracts into account.

The demand is in a report from the Commons Treasury committee which repeated the concern of MPs that although departmental accounts will be prepared under IFRS, the PFI figures "will not appear in the calculation of net debt in the Whole of Government Accounts".

The committee said: "Future pre-budget and budget reports should include a reconciliation between public sector net debt calculated on a national accounts basis and the same figure calculated using the IFRS principles which apply to departmental accounts."

The report said Treasury ministers had told the committee that the revised timetable for preparing public sector accounts for 2009-10 - which previously slipped from 2008-09 - remains "important".

It said ministers had also reassured the committee the government remains on track to publish WGA for the first time in July this year for the 2009-10 financial year.

Accountancy Age revealed last September that around 32bn of debt would be kept off the government's externally reported figures.

Further reading:

Darlings 32bn ruse

Kevin Reed, Accountancy Age, Tuesday 9 March 2010 at 11:26:00

Industry body extols its members in new report

Management consultants add 56bn of value to their clients, according to its industry body.

The Management Consultancies Association's (MCA) analysis of 1,800 consultig projects found that the majority of projects generate returns between two and 20 times their cost.

Alan Leaman, MCA chief executive, said: Too many conversations about consulting start and end with the assumption that it is just a cost; we can now see that there is a significant return on this investment as well. This work is based exclusively on the views and experience of clients and the methodology was cautious.

Further reading:

Watch Accountancy Age TV's interview with Alan Leaman on the MCA analysis

Rachael Singh, Accountancy Age, Tuesday 9 March 2010 at 09:56:00

Global financial software company to produce programmes which can be used through the phone

German financial software company SAP, has signed an agreement that will allow it to produce applications for phones and Blackberrys.

SAP and German IT telecoms company, T Systems, signed a global partnership which will primarily focus on enhancing SAP's mobile applications as well as increasing its portfolio CBR mobility reported.

Singh Mecker, senior vice president and head of global ecosystem at SAP, said: "This partnership agreement lays an important foundation for further, even closer collaboration with T-Systems to deliver the value of SAP solutions to users in the office, on the factory floor, or on the go."

Work is already underway to create software that can be used on mobile devices such as a smartphone by the two companies

Further reading:

SAP chairman admits customer trust was lost

SAP embarks on internet software drive

Accountancy Age, Accountancy Age, Tuesday 9 March 2010 at 09:19:00

Small business to benfit from tory R&D policy

The Tories have ditched plans to scrap tax incentives for research and development if they win the general election expected on 6 May.

Party leader David Cameron welcomed a report proposing the u-turn from opposition industry 'Czar' Sir James Dyson on how to rebalance the UK economy away from over-dependence on the City.

Cameron said the Dyson Report "represents an exciting and ambitious step forward in our desire to make Britain Europe's leading generator of new technology".

Shadow chancellor George Osborne has previously proposed scrapping most of the corporation tax breaks in order to fund a reduction in the headline rate of tax on business.

But a Conservative spokesman said a Tory government "will keep R & D tax credits" refocused along lines proposed by Dyson, who urged that when public finances allow the rate of the relief should be increased to 200%.

The beneficiaries would be "high tech companies, small businesses and new start-ups "in order to stimulate a new wave of technology".

Dyson also proposed increasing the generosity of the Enterprise Investment Scheme providing relief for "angel" investors.

Further reading:

Read the Tories' statement on Sir James' report

Don't take an R&D R&R

Kevin Reed, Accountancy Age, Tuesday 9 March 2010 at 09:11:00

Liberty International to split into a REIT and a shopping centre business

The owners of Lakeside retail park and The Arndale in Manchester are splitting the company into two: with major implications for its board members.

Liberty International will split into a property investment real estate investment trust (REIT) known as Capital & Counties Properties, while the shopping centre business will be renamed Capital Shopping Centres Group.

Current Liberty FD Ian Durant will become chairman of Capital & Counties. He will step down from his role as FD of Capital Shopping Centres after a transitionary period. Soumen Das will serve as FD of Capital & Counties.

Both companies will list on the stock exchange.

A REIT is a tax efficient structure for property investment companies.

Its share price fell this morning by nearly 3%, to 492p.

Further reading:

Finance recruiter cautiously optimistic for 2010

Former 3i finance chief makes Incisive move

Rentokil swoops for Mitchells and Butlers CFO

David Jetuah, Accountancy Age, Tuesday 9 March 2010 at 09:03:00

Treasury select committee voices concern about employee engagement at the taxman affecting anti-avoidance moves

Team spirit at HMRevenue & Customs is so low that government plans to tackle aggressive tax avoidance are under threat, according to a report today by the Treasury select committee.

The cross-party panel said the morale situation was "dire" and "deeply troubling."

The criticisms come as an unknown number of HMRC staff are currently on the second day of a 48-hour walkout in protest of changes to redundancy pay.

"We are deeply concerned about employee engagement at HMRC and its effect on

performance. We accept that the relatively new senior management team is aware of the issue, and takes its implications seriously," the Treasury committee said.

"Nonetheless, we are deeply troubled by the apparent absence of any detailed plan to ameliorate the situation."

Further reading:

Read the Treasury report here

Mario Christodoulou, Accountancy Age, Tuesday 9 March 2010 at 08:45:00

PwC challenges Treasury growth forecasts

The British government will need to find another 20bn on top of estimated revenue within four years to close the fiscal gap, PricewaterhouseCoopers has warned.

The firm believes further tax rises or spending cuts will be needed to reign in finances by 2014, based on a more cautious view of medium term growth than the Treasurys.

John Hawksworth, head of macroeconomics, PwC believes public sector net borrowing will remain about 5% of GDP in 2014/15 compared with the Treasury forecast of 4.4%.

We assume the same 5% of GDP permanent loss of output due to the recession as the Treasury, but assume that the underlying trend growth rate from 2008/9 onwards is 2.25% per annum, rather than the Treasurys 2.75% central estimate and what they describe as a cautious assumption of 2.5% used in their own public finance projections, he said.

Read the full PwC statement: PwC says additional tax rises or spending cuts of around 20 billion needed by 2013/14

Mario Christodoulou, Accountancy Age, Tuesday 9 March 2010 at 08:22:00

Former office of fair trading accountant created fake company

A former public accountant has pleaded guilty after trying to defraud the office of fair trading of more than 350,000, the Daily Telegraph reports.

Asif Haque, 38, of Harrow, north-west London, used a fake company to siphon off money from the department, falsely claiming for contracts using a fictitious company, between February 2008 and July 2008.

Haque pleaded guilty at Southwark Crown Court to 11 counts of fraud and one count of concealing, disguising or transferring criminal property.

Further reading: Accountant for Office of Fair Trading admits to stealing public money

David Jetuah, Accountancy Age, Monday 8 March 2010 at 10:48:00

Taxman sends out last chance reminder letters to those intending to pay their dues by taking advantage of the New Disclosure Opportunity

People who have notified the Revenue about undisclosed offshore income have less than a week left to make their disclosures online and to pay all tax, duties, interest and penalties owed in full.

Those using the NDO will take a 10% penalty if they disclose online and pay the full amount due, including the penalty by 12 March 2010.

To give those taking advantage of the New Disclosure Opportunity every chance of complying, the taxman is sending reminder letters out this week.

Once the schemes doors are closed, those found to have undisclosed offshore assets will be subject to full tax investigation, penalties of up to 100% and in the most serious cases criminal prosecution, HMRC warned.

Dave Hartnett, HMRCs permanent secretary for tax said:

Taxpayers with offshore investments who have notified us of their intention to disclose have done the right thing, saving themselves 90% of the potential penalties for failing to disclose.

"They now need to follow through by making their disclosure online and paying in full all the taxes they owe.

Our Parliamentary Corresponndent, Accountancy Age, Monday 8 March 2010 at 10:32:00

MoD issues with its budgets were exacerbated by resource accounting issues

Serious differences between the Ministry of Defence and the Treasury over resource accounting reforms have emerged at the heart of rows over spending involving defence chiefs threatening to resign.

They resulted in repeated claims on the ground that that British troops in Iraq and Afghanistan have been starved of resources, particularly adequately armoured vehicles and helicopters, resulting in unnecessary loss of life from roadside bombs. Prime Minister Gordon Brown, then chancellor, insisted all demands for extra funding to meet in-theatre needs were met by the Treasury while overall defence spending was also rapidly rising.

The breakdown in communications over the switch from historic appropriation accounts was revealed in evidence from Brown to the Chilcot Inquiry, in which he revealed that in 2002/2003 the MoD tried to " take advantage" of resource budgeting to switch more cash from capital assets to current spending than anticipated by the Treasury.

At one point inquisitor Sir Lawrence Freedman put it to Brown that the MoD had seized "enthusiastically" on the opportunity to turn non-cash into cash, believing they were being encouraged to do so by the terms of resource accounting budgeting, and then "the guillotine came down".

Brown said the whole purpose of the change in accounting rules was to ensure departmental assets were used more efficiently.

He said the MoD was offered an increase of 3.6% in its budget and decided the process gave them more non-cash resources on top of that: "At one point it was 800m, then it was 400 million, then it became 1.3bn that they wanted to transfer into spending money."

He said the Treasury felt it "very unlikely" that in a few months efficiencies gained by the better use of assets were such that additional cash spending could reach 9%, adding: "If we had allowed every department to do what the MoD were doing, then we would have an extra cost of 12bn, which would be the equivalent of raising income tax by three pence in the pound."

Brown said he had to write to Premier Tony Blair because the issue was threatening the cash expenditure of the government. The issue was resolved - after the chiefs' revolt - with the MoD allowed to have 500m that year and 400m in each of the subsequent years.

Freedman said the MoD view was they tried to work within the rules as it saw them, only to find the rules were changed.

Brown insisted that at the end of the day chief of staff Lord Walker had signed a letter describing the settlement as tight but not the cause of subsequent modernisation plans, which reduced the size of the infantry.

However Lord Walker himself earlier insisted to the inquiry there had been under-funding and the chiefs "were not happy with any of it".

Misunderstanding by defence chiefs reported at the time included their belief that by scrapping half the Harrier jump-jet fleet they would reduce spending when in fact writing off assets early increased current expenditure.

Criticism continues with the latest report of the Commons Defence Committee accusing the MoD of wasting huge sums by continuing with unaffordable spending commitments - 674m alone by delaying a contract building two super aircraft carriers.

Further reading:

MoD's accounting could threaten British defence capability

Mario Christodoulou, Accountancy Age, Monday 8 March 2010 at 10:26:00

World's second largest economy to use standard on Wednesday

Listed Japanese companies will begin using the new international fair-value accounting rule this week.

Come Wednesday, Japan will allow use of IFRS 9, the international fair value rule reworked in haste following the global financial crisis, the Financial Times reports.

The fair value principle forced companies to value assets at their market price and was blamed for amplifying the crisis as the value of financial instruments fell in illiquid markets, following the crisis.

The new standard works on a mixed measurement model which will allow controversial loan books to be valued at amortized cost, removing a key element of volatility.

Japan joins Australia and New Zealand, which have also absorbed the new rule into their accounting code.

Japanese adoption will place further pressure on Europe, which has so far failed to indicate whether it will absorb the standard.

Further reading: Japan in support of fair value accounting

Kevin Reed, Accountancy Age, Monday 8 March 2010 at 10:04:00

Prince Max encourages UK citizens with undeclared tax liabilities abroad to funnel the money through the principality - and take advantage of its tax amnesty

Liechtenstein's royalty is encouraging the wealthy to put their funds into the principality so they can take advantage of its tax amnesty deal with the UK.

Prince Max said that British citizens from Switzerland, the Far East and the Channel Islands were the most likely to move their funds, reported the FT.

The basic premise of the Liechtenstein deal is that penalties are capped at 10% of the unpaid tax plus interest going back ten years.

Further reading:

Hartnett targets Swiss accounts in fight against tax evasion

Paul Grant, Accountancy Age, Monday 8 March 2010 at 09:41:00

Changes to IAS 19 could see move out of equities and a loss of 8.7bn in UK company profits

Potential changes to how pension schemes are accounted for could see a mass switch away from investment in equities.

Proposed amendments to IAS 19 will see significant drops in profit for those companies heavily invested in equities, reports the Financial Times.

The move by the International Accounting Standards Board will stop companies with defined benefit schemes assuming their equities will bring greater returns than lower risk bonds, wiping out the incentive to keep them.

Consultants Mercer estimate the changes could wipe 8.7bn off the annual profits of UK companies.

David Jetuah, Accountancy Age, Monday 8 March 2010 at 09:39:00

Public and Commercial Services union takes 48-hour industrial action which sees Revenue staff walk out

HMRC staff are staging a walk out as part of union moves protesting against redundancy pay changes

The Public and Commercial Services union has advised up to 270,000 civil servants including Revenue workers to down tools for a 48-hour strike.

"The dispute is over changes to the civil service compensation scheme which will see staff robbed of up to a third of their entitlements and see loyal civil and public servants lose tens of thousands of pounds if they are forced out of a job," the PCS said.

"The union fears that the government wants to make it easier for whoever wins the general election to cut low paid civil and public servants on the cheap."

An HMRC spokeswoman said the exact number of Revenue staff was not known and customers coul experience delays, but every effort was being made to maintain services:

HMRC is disappointed with the decision to strike and is doing everything it can to maintain services to the public.

Whilst our customers may want to delay contacting us until Wednesday when the strike is over those who need to speak to us urgently can do so as our contact centres and enquiry centres are open for business. We are able to take calls on all our aspects of our business but customers may find it takes longer than usual to get through.

Further reading:

Union outraged as 1,700 HMRC jobs under threat

Matthew Broomfield, Accountancy Age, Friday 5 March 2010 at 15:20:00

Money channelled through a Belize-based company raises new questions about Conservative vice chairman

Lord Ashcroft has sparked new controversy, as it emerged he used several companies to move money from the tax-haven of Belize to fund the Conservative Party.

A Belize-based company, Stargate, bought shares in a small British company which then bought shares in another company, Bearwood Corporate Services. This led to money being moved from Belize to Britain.

All the companies are thought to be connected to Lord Ashcroft, and the donations were attributed to him by Tory officials. Bearwood Corporate Services is one of the Conservatives biggest benefactors, donating more than 5m during the past six years, reports the Telegraph.

The arrangement was ruled legal yesterday by the Electoral Commission, which regulates political donations. However, its ethical basis has been questioned.

The Conservative peer, and deputy chairman, caused controversy earlier this week by admitting he was non-domiciled and therefore only paid tax on his British assets.

Further reading:

Ashcroft admits non-dom status

Labour attacks Ashcroft