Let’s say a company listed on a Stock Exchange has made a decent profit and wishes to pay a dividend to its shareholders. For the sake of argument the profit is £10 per share. What should it do?
Archives for February 2015
This is a theme which we are introducing and to which we may return in future articles. On an average day, Sterling is over-valued from the viewpoint of manufacturing industry in the North of England and in Scotland. It is valued just right from the viewpoint of the City of London, and since the City is a good earner of foreign exchange, HM Government goes along with that.
Greece is asking for a loan extension. What does this actually look like? Let’s say we borrow £100,000 over 25 years at an interest rate of 4% per year and with the intention of repaying a constant amount each year, which is the typical mortgage. The repayments needed can be calculated on an Excel spreadsheet as £6,401.20 per year.
It’s time to remind ourselves that Napoleon lost the Battle of Waterloo. He was defeated, in part, by an innovative new tax called income tax, which was introduced as a temporary measure, and intended to be in substance a voluntary levy raised in order to defeat the common enemy.
Politicians love to moralise about how we should all be paying our fair share of taxes. Well, can anyone remember non-corporate distribution tax? This tax:
(1) Never appeared in any manifesto.
(2) Was introduced and repealed within the lifetime of one parliament.
(3) Is rather too complicated for the average MP who voted in favour of it to be able to do even the simplest calculations.
This information is targeted at small owner-managed companies. It is assumed that the owners do not have any children about to go to university, or already at university, for whom a student loan application is needed.
Let’s suppose that Business A has entered into a maintenance contract with Business B to keep the computers of Business B in working order. The contract was started on 1st November, Business B paid £1,200 cash up front, and both companies have a year end of 31st December.
Our business strategy is to be a product development strategy. We will use new technology so we can offer a service which is cheaper than anyone else. Once we have some clients, we will introduce more new technology (a spreadsheet for everything for example) so we can better meet the needs of our clients. Then we will stop undercutting (but protecting the position of clients who came in early) and concentrate on being good accountants.
The January 31st Self Assessment deadline is now over, and it’s a quiet time for accountants until after Easter. There is a prospect of sitting around with nothing to do, although we will be out promoting our services. We would like to take on some VAT work. This has to be done all year round, and in addition, our software allows us to start work on the preparation of the annual accounts without duplication of activity. This in turn takes the stress off the next busy period in December/January. Our innovative software has solved a major problem that accountants have. This is a pleasant discovery which wasn’t foreseen.