Financial matters

[Michael]

more shareholders revolt against top executives enormous pay packages. Today the biggest car dealership in the U.K., Pendragon is the latest       -------   HOLD ON,   HOLD ON.    I'm sure I've heard that name somewhere before.



    Mike

[Michael]

   Much to do for the last day or two in press/TV about dubious activities by the Banks and/or their employees.

  But thats nothing new. We have all heard the old joke about the banker offering an umbrella whilst the sun is shining.

  But --- in the mid 1950s I was very active in the National Union of Bank Employees (NUBE). In those days the Banks didnt publish a "true" figure of their annual profits. By some obscure process they were legally allowed to cook the books to show whatever they felt like showing. I have no idea why that was so, also I have no idea what shareholders thought about it. At a guess, a complete guess, it was something left over from the war period. I dont suppose anyone would have wanted Hitler to know how much or little our banks were making.

   Anyway, these very well watered down profit figures were always thrown at us NUBE people if we were trying to get a salary increase.

  A Mr Norman Stanion was the President of NUBE. He worked in an obscure office in the H.Q. of the District Bank in Manchester.
This office was highly specialised, it was called something like "Exchange Control operators." At that time it was impossible to just send £10 to Spain because your Wife had run out of money on holiday. No sir, Exchange Control would have none of that.

  However Normans little office managed to produce a profit larger than the published profit of the whole District Bank and their five or six hundred branches.

   Nothing new under the sun.    Mike

[Fester]

Nothing has changed Mike...

If you take a look at the balance sheet of any major bank, they declare a valuation of property 'assets' on their books.

If anyone believes that the portfolio property values stated bear any relation in the real world to actual property values, then they are sadly deluded.
However, neither the banks, nor the government nor our pension funds DARE let the truth be known.... or we really are up the creek.

[Michael]

Hello fester you old financier trying to pretend you are just a humble pier kiosk operator.

   Just one question I would like to ask. I am not joking, I honestly do not know. Which way are these property assets adjusted?. Up or down relative to their true value. Or ---- are some down because no one has got around to revaluing and some up because they are hoping to sell?Mike

[Fester]

Mike, in banking, you will find that the institutions have probably not adjusted their property portfolio values down at all, since 2008.
They dare not do it, because if they do the banks assets will look decidedly sick, and the share price of the bank even sicker.

In Spain and Ireland, large swathes of property or land is effectively worthless, but exposing this fact to a small degree has meant downgrading the assets of those banks who own it, to junk status.

A cynic might say that the bonuses of the bankers would be the real casualty, so the over valuation in the UK is fraudulent.

However, in reality, I believe that the government allow them to continue this practise, as the alternative would be a colossal hole in our pension funds.

I am no financial expert Mike, but I did have to prepare auditable accounts for companies (or departments) that I have managed.
You would not believe the insidious pressure I was often put under to value certain elements above their REAL value, especially when Directors bonuses were linked to end-of-year results, or the company share price!

[Ian]

Not sure how many this affects, but the new child benefit tax regs are - to say the least - rather tricky.  This is advice from HMRC:

The legislation refers to the person required to pay the charge as ‘P’ and their partner is ‘Q’. However, the cast of characters also includes ‘R’ and ‘S’.

If child benefit is not claimed by the person with whom the relevant child lives it can be claimed by another person (R) who pays maintenance for the child if they pay a weekly amount at least equal to the child benefit due. This will usually be an absent parent.

If R claims child benefit the high income child benefit charge rules apply to R (and R’s partner) as normal; i.e. a charge will be imposed if either individual has adjusted net income in excess of £50,000.

However, if R claims child benefit but neither R nor R’s partner is liable to the claw back charge (because their income does not exceed the £50,000) then the charge can arise on another person (S) with whom the child is living in that week, as if S were entitled to the child benefit payments.

Example

Roger and Sandy got married in 2000 and subsequently had a child, Zack. They separated in 2008; Roger moved to a new home and Zack remained with his Mum.

Roger and Sandy have both subsequently re-married; Roger to Cassie and Sandy to Dave.

Roger contributes to the cost of providing for Zack and it had been agreed that he would therefore make the child benefit claims.

The adjusted net income of each individual is:

• Roger (R) £44,000
• Cassie (partner of R) £42,000
• Sandy (S) £20,000
• Dave (partner of S) £70,000

What are the high income child benefit charge implications?

Roger is claiming child benefit and so a high income child benefit charge would be imposed on him, or his partner Cassie, if either of their adjusted net incomes exceeded £50,000. This is not the case and so neither individual is liable to the charge. Roger will continue to receive child benefit in full.

S681D of ITEPA 2003 requires, in these circumstances (where Roger is paying maintenance of an amount in excess of the child benefit claimed) that the person with whom the child is living (S) is treated as though they were entitled to the child benefit themselves. If more than one person could be S (i.e. Sandy or Dave) the entitlement is deemed to arise on the person with the highest income for the tax year (i.e. Dave).

As Dave has adjusted net income of £70,000, he will be liable for the high income child benefit charge. This will be equal to the full entitlement accruing to Roger.

Whether Dave (and/or his tax agent!) will be aware of this scenario, or the entitlement to which Roger has, is another matter.

Good job its not complicated, then...

[Merddin Emrys]

Dave's mentioned a lot I see!    How can anyone who is not a lawyer understand all of that? 

[Yorkie]

Dave's mentioned a lot I see!    How can anyone who is not a lawyer understand all of that? 

Plenty of lazy layabouts will get to grips with it in no time at all!    The scroungers seem to have a brain like a "Mr Fixit" Lawyer!   

[Ian]

    Dave's mentioned a lot I see!    How can anyone who is not a lawyer understand all of that? 

Plenty of lazy layabouts will get to grips with it in no time at all!    The scroungers seem to have a brain like a "Mr Fixit" Lawyer!   

Except that this applies to relatively high earners. Still, it's keeping accountants in business...

[Yorkie]

Except that this applies to relatively high earners. Still, it's keeping accountants in business...

Have you seen how much some of the fiddlers have been getting?    Many are now up in the six figure bracket, including some prominent politicians!   

[Fester]

My attention was drawn today to the National Debt situation in the USA.

You can look at the figures below, they are mind boggling.
But, then you can knock off 8 zeros, and then the figures can be related to a normal household budget.
It is a very frightening situation to be in.

Actual Figures.
* U.S. Tax revenue: $ 2,470,000,000,000
* Fed budget: $ 3,620,000,000,000
* New debt: $ 1,150,000,000,000
* National debt: $ 16,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual family income: $ 24,700
* Money the family spent: $ 36,200
* New debt on the credit card: $ 11,500
* Outstanding balance on the credit card: $ 161,710
* Total budget cuts managed so far: $ 38     

Its totally unsustainable, and the American Govt cannot even agree on the urgency of the problem, not how to tackle it.

[DaveR]

The unfortunate thing is that we're not in a significantly better position in the UK... 

[Yorkie]

Got to thinking about our next Holiday and as usual did a quick scan on the exchange rates.  The Tourist Rate for the Euro is now down to 1.12 and looking as though it still has some way to go before it gets to its nadir.  Will have to ask for a Pension increase!   

[Bri Roberts]

Yorkie, I suggest you book Bangkok – Southampton with Fred departing in three weeks time. 

At a price from £1,799 for 38 nights and the onboard currency being GBP you will not have to worry about the Euro or a pension increase.

[Yorkie]

Oh! Sugar!  My insurance only covers holidays up to 31 days!