Merry Xmas and Happy New Year!!

I wish all the readers of Accountancy Distilled a Merry Christmas and a Happy New Year. I hope 2008 will be a prosperous one. This year I exchanged the proceeds from
the takeover of Newcastle United to buy into another Geordie success story Northern Rock. I eventually sold after taking a pretty savage hit. I want the bank to survive
as an independent institution, since it is very important for the north-east of England.

Looking back on my blogs led me to do some editing on the footie ones, ie deleting
ones like "Blue Moon", which charted the improbable defeat of Manchester United to their derby rivals Manchester City. I can't believe how well Sven has started.

Postcript: How would I know that Sven would sacked by the Thai owner?

How to account for the virtual economy of Second Life!

The September 2007 edition of accounting & business takes a look at the accounting treatment of Second Life (SL) and the use of its Linden dollars L$, which can be exchanged for hard currency. The article notes the success of Chinese-born Ailin Graef, who is a German resident and who has built up a 60 strong, multi-million dollar business from SL.

The U.S Congress is expected to issue a final report on virtual commerce in early 2008. While the British tax authorities Her Majesty Revenue & Customs (HMRC) says that SL players are free to make profits up to the CGT exemption limit of £9,200 after which they should pay tax.

The top players in Second Life are Americans, Germans, French and Britons. Accountng & busines notes that in the United States it is reported that the Maryland-based firm
Katz, Abosch, Windesheim, Gershman & Freedman has started to offer accounting services to Second Life avatars. KAWG&F is one of the top CPA firms in Maryland and is merging with Siebert Kullman.

To tax plan or not to tax plan that is the question!!

You probably need an accountant if you want to venture in the murky world of tax planning in the United Kingdom today. The recent inheritance tax changes accounced by British Chancellor Alistair Darling in his pre-budget report seem to complicate matters more although they do double the inheritance tax threshold to £600,000 from the previous level of £300,000 according to the November 8th edition of Internationalmoneymarketing.co.uk.

To quote "Given the massive rise in the housing market in recent years that means hundreds of thousands of people will be affected and should review the existing terms of their wills with a tax specialist."

The edition says people should seek professional advice but existing solutions such as discounted gift schemes and loan trusts can be still considered.

I have changed my mind about Peter Hain!!

I have changed my mind about British Works and Pensions minister Peter Hain, who used to make a bit of a buck for his family by employing them on his expenses. It looks like Hain took on UK Prime Minister Gordon Brown over a resolution of the pension debacle involving companies such as Allied Steel & Wire. This is where people thought they were contributing to a guaranteed scheme and found their contribution pension schemes collapsing the same way as their employer.
I thought Gordon Brown supported the working man but he does not seem to. Anyway after that funny on-off signing of the new European Constitution, the public are seeing the true worth of Mr Brown.
Ros Altmann, a former Tresury pensions adviser, was delighted with the £2.7bn turnaround by the UK government. Altmann said the government rescue of Northern Rock was crucial since it showed the money was there. There was no explicit guarantee for
Northern Rock depositors, since the deposit guarantee fund was already
set up.
There are apparently 140,000 victims and one said Ms Altmann was an absolute hero and they would have got nowhere without her. I can't see her being in the New Year's
Honours List.

"U.S non-doms attack unfair tax."

In Saturday#s Times there was the headline "US non-doms in Britain attack 'unfair tax.'

Apparently, the American government is studying the potential impact on its citizens.
The problem arises because Uncle Sam charges tax on the worldwide income of its citizens. The British Treasury says the fault lies with the U.S tax system.
Gordon Brown, God bless him, wants to charge non-domiciled residents some £30,000 each
and this has irked the Yanks.

I would think that the privilege of living in England would cost a lot less. I said England because I don't think there are many U.S non-doms living in the Celtic fringe, although I stand ready to be corrected.

It looks like Northern Rock is facing nationalisation!

It looks like Northern Rock, the failed British mortgage lender, is facing nationalisation and then a quick sale by the UK government. I have the gut feeling that Virgin Money and Olivant will not be able to borrow enough to finance the deal.
A deal has to be finalised by the middle of January.

Bank of England governor Mervyn King has made public his displeasure at the shareholders for making the rescue operation more difficult. Apparently, one
shareholder wants £4.10 a share for Northern Rock, if it goes for nationalisation.
This contrasts with the opposite view that the equity in Northern Rock has already been wiped out and so the realistic share price is zero.

If you have any CGT problems over your holding in Northern Rock, then you might need an accountant and a local one at that.

I wonder if Northern Rock will be nationalised?

I wonder if Northern Rock will be nationalised. In the press the move would be seen as a temporary one to help the sale of the Newcastle-based bank. It would certainly
facilitate the sale of the £100bn plus mortgage book but it would not look good
if the nationalisation was a long-term move. I don't see Alistair Darling as a de facto chairman of an UK mortgage bank.
The British chancellor has better things to do such as fiddling around with capital gains tax (CGT), which still has not been sorted out yet.

Northern Rock shares are trading under a pound.

It is amazing to think that quite recently shares in UK mortgage lender Northern Rock were trading at over £12. Today the price is just under a pound and with a further fall in view with the demotion of the bank stock from the FTSE-100
index.

The Tories are opposed to a nationalisation of Northern Rock. The Lib-Dems want a temporary nationalisation so that the institution can have time to sort out its problems. These involve being proped up by the Bank of England,which must be tearing its hair out, with a £25bn loan.

One factor is the number of Labour Members of Parliament in the North-East of England, who would be unhappy about any radical surgery to Northern Rock. However, the reality is that the bank is becoming increasingly frail with the loss of retail deposits despite the guarantee of full protection. This just leaves the £100bn mortgage loan book, which is unlikely to be rock solid, given the high loan values Northern Rock was giving to customers.

The preferred bidder is Virgin Money, which is benefitting from its brand name in proposals to turn Northern Rock around. Richard Branson is known as a tough negotiator but it might be better to finalise a deal with him than go for the option of nationalisation.

Tax investigation ?

Reading based accountants Tax-Sorted Ltd highlights the problems of a tax investigation by HMRC.Shaun McGuiness puts into plain speaking and easy to read format for any small to medium business that are uncertain or concerned about this issue.

Donations or donations?

In a surprising move yesterday Work and Pensions minister Peter Hain
remembered that he had not registered donations to his failed campaign
to become Deputy Leader of the British Labour Party. Can you Adam n' Eve
it. The Neath MP blamed an administrative error over the £5,000 not being
registered with the Electoral Commission.
The £5,000 was a personal gift from Jon Mendelsohn, who later became Labour's
Chief Fundraiser.