Lloyds Bank and Formula 1 racing

Today it has been announced that Lloyds TSB has disposed of its investment in F1 team Marrussia. For those not overly familiar in motor racing, Morussia cars are the one’s that regularly get in the way of all the other drivers and always finish last. Since the team was formed in 2010 they have yet to win a single point in the annual 18 race series. In other words they shouldn’t really be on the track at all.

So what on earth was Lloyds bank doing when it invested (share capital and £38m in loans) in this pathetic little bunch of no hopers? What due diligence was carried out by those famous “underwriters” who regularly deny financial aid to many hardworking and genuine businesses? What was it about the Marrussia’s business model that gave any indication that Lloyds would make a return on its investment? Talk about double standards.

Sounds to me as some vain and deluded people high up in the Lloyds empire fancied rubbing shoulders with the likes of Ferrari, Maclaren, Red Bull and Mercedes. What good did this do for Lloyds customers and shareholders? Not a lot I suspect. Have those vain officials and the Lloyds marketing team retained their jobs? – probably and I suspect that they will not be held to account either. We have here yet another tale of wasted effort and wasted money at the expense of decent hard working business people.

In an era of cash being starved to the thousands of entrepreneurs that struggle to create jobs and wealth, it is stories like these that bring discredit to a once respected profession – bit like being a politician you might then say!

Cyprus and a cautionary tale

Let’s start with a bit of history.

February 1971 saw decimalisation of the pound – altogether a good move and one of the first steps to align us with membership of the European Club.

Then on April Fools day in 1973 came the introduction of VAT – an invention of a Frenchman and yet another important step to harmonise the UK with Europe.

Initially it was a very simple tax with a flat standard rate and a few important items that were zero rated. VAT was easy to collect as the burden rested with businesses.

Then dear oh dear the stupid politicians started to meddle with it – notably Denis Healey, Norman Lamont and Gordon Brown. The administration of VAT is now so utterly complex that the poor old business person has little chance of getting it right and consequently pays the price of draconian penalties imposed by the zealots from HMRC (now run by the incompetent Lyn Homer, formerly of the disastrously performing UK Border Agency).

This is an utterly fine example of a really simple, easy to collect tax totally ruined and over complicated by the meddling class of Politicians (who incidentally have never run a business in their lives). Oh well it was all in a good cause of the Grand European Plan.

That Plan doesn’t look so clever now. Last year we had the Spanish, Greek and Italian Euro crises. This year we have Cyprus but this one is a little bit different. Confiscation of depositors’ savings has happened before – notably in Germany before the war and this was one of the events that led to the rise of Hitler. Spain, Greece and Italy have not had any confiscations applied to their “bail outs”.

Why? Could it possibly be that because they are in mainland Europe, the civil unrest that would inevitably follow would result in a similar rise to power of far right wing politicians?

Cyprus has a significant difference – it is an island and the possibility of any civil unrest there spreading contagion to the mainland could be remote and would be more easily contained.

The UK is also an island, so just think about what might happen here if we had signed up to the Euro and then for some disastrous calamity to have happened (Ed Balls becoming Chancellor perhaps?) that required a Merkel bail out?. It just doesn’t bear thinking about.

Sweet dreams!

Tax and Morals

Well done to Starbucks, Ernst & Young and Broker Tullett Prebon for fighting back against the strident sirens of meaningless rhetoric by politicians and the press.

Starbucks has put on hold a planned expansion investment of £100million because it is constantly being attacked over its entirely lawful tax arrangements.

Tullet Prebon, along with many other City Institutions, is delaying the payment of bonuses to employees until after 5^th April when the top rate of tax reduces from 50% to 45%. Yet this is being marketed by ignorant politicians and their press “lackies” as immoral tax avoidance.

Tell me, what law states that a bonus must be paid to ensure that the highest rate of tax should be applied?

The deferment of bonuses to April is just a natural consequence of a decision by Parliament to reduce the top rate of tax. The deferment is to help the employee only and not the employer. Any right minded, employee focussed employer would do the same thing. How dare politicians say that those bonuses should be taxed at a penal rate, purely because it should be the moral duty of those people to single-handedly pay off the country’s deficit?

The introduction of “morality” into the tax debate is absurd.

Tax is payable only according to what the statutes say. If HMRC and the politicians are not happy with the current law then they have the prerogative to change it. And, why not at the same time simplify it? A tax code that exceeds 12,000 pages is the main reason that allows corporations and individuals seek ways to plan their tax affairs efficiently.

Is your business not as fun as it used to be?

Most entrepreneurs go into business because they want to have fun working and to have control of their destiny – but as a business expands their feelings can change.

Is this how you feel now?

• Considering how hard I work, I’m not making enough money
• I don’t get enough time with my family 
• My employees are not as diligent as I am and they avoid responsibility
• My time gets taken up with everyone else’s problems 
• I get bogged down in details and administration 
• I don’t know how I will get out of the business

If this is how you are feel, you need to come to our exclusive seminar!

Date: February 13 2013
Location: The Shooting Lodge, Luton Hoo Estate
Time: 09.30 am coffee; 10.00am – 12.30pm; includes buffet lunch
Cost: No charge to Thomas Cox clients and contacts; usual fee £48.00 (including VAT)

The seminar will be led by Gordon Gilchrist of 2020 Group (www.the2020group.com), an inspirational speaker and renowned expert in the field of SME business development.

You will take away a host of new ideas that you can quickly implement in your business plus a workbook and a copy of our new book ’57 Ways to Grow Your Business’ value £19.99.

Interested? Call us today on 01582 482224 or email peter@thomascox.co.uk

Autumn Statement – So what’s in it for me?

A statement delivered in December is not in my view an “Autumn Statement” but more of a “Winter Chiller” – more so now that we are now beginning to feel  the chills allegedly sweeping in with the “Beast from the East”.

So what’s in it for me you might say? Not a lot really.

The only real gem is the increase in the annual investment allowance to £250k as from January. Beware though, that this gets apportioned according to your accounting period. This means that if you have a 30^th June year end and in January go out and buy a new piece of plant costing £200k, you will receive an annual investment allowance of just £100k not the £200k you spent.

Big businesses will be charged corporation tax at 21% as from 2014. This is only 1% higher than the rate for “small companies”. What is the logic in this? Clearly George Osborne wants to be seen to encourage Global companies to remain within or come to the UK but what about the smaller entrepreneurial businesses – don’t they also merit a reduction in the corporate tax rates that they pay? Putting this into context, the rate for “bigger businesses” was 30% in 2007 and will be 21% for 2014. The “small company” rate has remained at 20% throughout that same period!

Tax relief on pension contributions is being reduced from £50k pa to £40k but then to be honest we haven’t got any customers able to pay premiums that large.

The past promise of tax simplification just is not happening and in my view is never likely to. Each year we get more and more rafts of ever complex legislation. Someone needs to stand up and be bold and then maybe we will hear less about the “morality issues” being promulgated by uninformed and screeching rhetoric from politicians. Real simplification would be a far better way to deal with the more obscene elements of tax evasion.

Another missed opportunity was the continued application of employers NI costs to businesses that employ 15 or fewer people. That tax is a real disincentive to the employment of more people. 

All in all then, a statement that just tinkered with the existing frameworks and, apart from the increased capital allowances point, delivered no incentives to entrepreneurial businesses. 

Now I read that the Treasury wants to start taxing employer provided perks – like subsidised canteens! When will these stupid people start to learn? And isn’t it any wonder why entrepreneurs get so exasperated.

Are we now on the up?

The appointment of Mark Carney as the next Governor of the Bank of England is to be welcomed and is an inspired piece of “out of the box thinking” by our own Chancellor. Mark Carney will be a fantastic breath of fresh air.

He has a formidable International reputation as the holder of the equivalent post in Canada, where he has sailed a steady ship through choppy economic waters. He also has a reputation for being tough on banks and this is to be applauded. The UK banks need to face up to the dodgy debts that they hold but refuse to acknowledge. Remember that Japan fell into this trap 20 plus years ago and are still paying the penalty for their inertia. These banks are conservatively estimated to be required to raise £60billion as new equity capital so it really is in their best interests to come clean now. I am sure that we will all be the better off for it.

I expect interest rates will start to increase in 2014 but that will be because Mark Carney will be setting firmer foundations for economic growth – good news for all entrepreneurs.

I also fully expect him to be robust in defending the UK from those idiot Brussels bureaucrats and the likes of the French Bank Governor – Christian Noyer – who now wants to “control financial transactions within the EU bloc”. Let’s not revert back to the 1970’s with that sort of state control tosh that has already been utterly discredited.

An Engaging Vision will Engage your Stakeholders

In my experience I have found that there is generally only sporadic business support available out in the market place but nothing specifically for entrepreneurs to really help guide them to identify those factors that bring sustainable success.

One of my “passions” is to look at how successful people maintain business growth steadily and what drives that long term success. Identifying and maintaining those themes that drive ambition and how the impact of “holding yourself to account” will help drive business success are vital elements.

But, there’s not much point advocating a need for self-management if there’s no vision for the organisation. By vision I mean, a picture of what you want your business to look like “when it’s finally done.” In the absence of knowing (and being able to clearly communicate) where you want to go it’s virtually impossible to get buy-in from your team and without that you have zero chance of getting there.

The well known writer and management consultant Peter Drucker reminds us that most organisations start out with a vision built around a purpose that serves the interests of all stakeholders but within a few years after it gets to a size where it’s commercially viable its leaders tend to lose sight of what they started out to create and they focus more on efficiency rather than effectiveness.

In other words, there’s a shift in mindset from having a leadership perspective to having a management perspective and unless someone in the organisation is thinking about future possibilities and constantly reminding people about the “end play” the organization hits a barrier that’s reflected by modest growth in revenue and profit, lower team engagement leading to higher turnover of team members as well as the loss of clients. Essentially, the business morphs into a malaise.

The key is to have a clear picture of what you want your business to look like in say 10 years from now. I think it’s essential to connect with your team members in formulating that vision and ensure they have the opportunity to be directly involved in working towards its accomplishment—this will only happen if their needs are aligned with the vision and if that’s not the case either the vision or those people have to be replaced! The vision needs to be summarised in the form an “elevator” speech and it needs to be continuously referred to at every opportunity. It’s your business’s guide for strategy implementation.

I am developing these entrepreneurial themes in more depth in a workshop on 25^th September so if this article has aroused your curiosity then just give me a call on 01582 482224 to check availability.