Banks, tax, and offsetting losses

The Telegraph today is reporting that Lloyds will not pay corporation tax until profits hit £15bn. This has been met with outrage and taken as a further sign of injustice in favour of the banks. I must disagree. While I think the banks should be held responsible for their actions which crashed the economy, in this case they are not even using loopholes, simply doing what they are meant to do.

So what are the banks actually doing to avoid so much tax? They are offsetting their losses against future profit. Here’s how it works.

Imagine a small business that made a £10,000 profit last year. The tax on profits for a small business is 20% so they will pay £2,000 in tax.

The following year, the recession hits them and so they make a loss of ten thousand pounds. Unfortunately tax doesn’t work in reverse and they don’t get two thousand back from the taxman.

That doesn’t seem fair, does it? Well to balance things up, the rules allow a company to take that ten thousand loss and offset it against profits over the next five years until it is used up.

So, in the 3rd year of our example business, they return to profit and make £5,000. They should be liable to pay £1,000 in tax on that profit. Instead, they offset it against the £10,000 loss and pay no tax. The remaining £5,000 of the loss is carried forward for future years.

Finally, in the fourth year, our business makes £10,000 profit again. The have £5,000 of their loss remaining, and so they pay no tax on the first half of their profits, and they pay the full 20% on the second half of their profits. Their tax for that year is £1,000 instead of £2,000.

Enough about small business, what about the banks?

Lloyds and the other banks are applying exactly the same rules about losses and tax as smaller businesses do. We are outraged because of all the other loopholes that the banks use such as overseas subsidiaries and tax havens, and because we have paid money in to these banks in the form of bailouts to the tune of at least £850bn. ($2.4tn if you believe the BBC, but according to this government document no one really knows.) and yet we are not getting tax in return, and because the banks caused so many of our economic problems in the first place. The public are right to be outraged over banks paying minimal tax on their profits, but in this case the anger has been directed at the wrong thing. (For the record, I am in favour of prosecuting the banks for their actions, and have never been in favour of bailing out the banks. Let them fail.)

That is not to say that the ability to offset loss against future tax is entirely fair though. What if, for example, BP attempted to offset their losses resulting from oil spills against their UK tax? Given the environmental damage that they have inflicted and the strong likelihood that wilful negligence contributed to the failure of their equipment and structure, I am firmly of the opinion that it would not be right for them to offset. There is a good case for restricting the offsetting of losses incurred overseas too. Perhaps we should consider preventing the offsetting of losses incurred as a result of negligence or deliberate policy.

One last question to leave you with. RBS has just paid out £950m in bonuses despite incurring losses of £1.1bn. Should they be allowed to offset that £1.1bn loss against tax next year?

Thanks to Frances Coppola for the discussion which prompted this blog post, and to @Puffles2010 and @ntlk for help in finding the numbers.

A sense of entitlement

This headline annoyed me. “Gaming industry lose ‘billions’ to chipped consoles

Big business and media companies frequently complain that piracy loses them vast amounts of revenue, a cry which all too often is swallowed up by the news media and wheeled out as headlines.

It’s rubbish.

Copyright violation (call it by the proper name please) costs businesses nothing like the amount that they claim it does. So what if copying a game, film, song or piece of software gives nothing to the creator at that point? In the vast majority of cases the person that copied something was never going to give the publisher any money. They either would have gone for a cheaper alternative, or they would not have paid for anything at all.

This idea that a copyright holder is losing out comes as part of a larger sense of entitlement that seems only to be held by rich people. When they see something getting popular, making money or not, they think that they ought to be getting some money out of it. This happens even when they had nothing to do with it!

There is a very strong argument that people that copy things actually generate extra income for the copyright holders. People that download a lot of music and video tend to purchase more music and video than those that don’t. People that copy software often then recommend that other people get, and usually pay for, that software, or may use a copy at home but pay for a version for work.  Photoshop is a common example of that. I’m sure Microsoft is quite happy when teenagers and students copy Windows and various development tools, because it means that they learn on those systems, and later go on to purchase and recommend those systems later in life. Microsoft has even been known to give away copies of these things to students at university in order to hook them.

Patent trolls are another example of this inflated sense of entitlement. There are companies that exist purely to gather up patents and copyrights purchased at low prices, wait until someone builds a business on principles affected by those patents but not say anything, then years down the line, suddenly threaten a lawsuit unless that business pays royalties on all of the affected products, past and future.

The concept of net neutrality is needed because of another example. Take the scenario of a person at home watching a Youtube video.  The consumer pays Internet Service Provider, which we will call ISP A. The content provider pays ISP B. Both ISPs link in the middle. In the UK the link up is often at Telehouse in London. Currently, those two ISPs have an agreement to carry all traffic from each other because it balances out. But now, ISP A is demanding money from content provider to transfer information to consumer. If the content provider doesn’t pay, ISP A could slow down their traffic while speeding up that of another content provider that did pay, or worse, just dump their traffic. But hang on, the consumer has already paid their ISP to carry traffic from the content provider! ISP A is effectively taking bribes to sell out their customer.

With internet providers selling out their customers, big businesses using overly broad patents to kill innovation and small business, music copyright holders demanding extra money to use a song that you have already purchased on your MP3 player instead of a CD, and many other examples, be in no doubt that big business and its rich owners are not working in your interests.

Life with ME: My technology lifeline

I have M.E. It’s a crippling disease that robs people of their capabilities and their independence. Here’s a good video about it on Youtube. I am not as badly affected as some people with ME. I am able to leave the house, ride my motorbike (sometimes) and generally don’t need constant care. I even spend part of my time running a business. Other people that I know are not always so lucky. Even with my relatively minor disabilities, I would have quite a miserable existence if it were not for one thing.

Technology

Technology provides a massive help to me in all aspects of my life. Technology helps me sleep, wake up, eat, communicate and rest. Here are some of the things that help me.

Communications

I often get so tired that I cannot speak. I also find that when I am that tired, my brain trips up even thinking of sentences to say. When I am in this state, I have found that I can still type on a keyboard or on a touch screen phone. Not only that, but I can type coherent sentences, partly because I can edit them before sending them.

Social networks like Twitter and Facebook allow me to talk to people about anything I want, at nearly any time of the day. When I can’t sleep at 4am, I can talk to people with the same problem. When I am stuck in the house for days on end and see no one except my wife, I can talk to people on the internet.

ME includes constant muscle pain which gets worse after any activity. This applies even to the small muscles in my hand. As a result I am unable to hold a pen for very long, and activities such as filling in long forms leave me in agonising pain within minutes. I am able to type where I cannot write with a pen.

Food

In a similar vein, I cannot prepare food or cook without severe pain. Carrying a saucepan is tricky. Carrying a kettle when I don’t have the strength could be highly dangerous. Stirring food hurts. Chopping food can make me cry out in pain. I avoid food preparation wherever possible but there are frequent occasions when I have no choice in the matter. This is where frozen meals and microwave ovens are lifesavers for me. If I didn’t have access to pre-prepared meals, (Often cooked and frozen by my wife) a freezer and a microwave oven, I would need much more care than I do.

Memory

ME can affect my memory quite badly. I also have a general problem of getting so into one task that I forget to take my medicine at the correct time, forget to take one of my regular rests, and even forget to sleep. I rely on Google Calendar and on my phone to help me there. Any event or task that I have to do goes in to my calendar, which will sound an alert on my phone at the right time. I have my all too frequent rests and my multiple times-per-day medicines set as alarms on my phone. The only thing I need to do now is actually pay attention when it beeps!

Bad memory also causes a number of other problems for me. I make extensive use of Springpad to help me out. A Springpad app on my Android phone lets me write quick notes and also take photographs when I am away from my computer. It all gets synchronised with their website, and when I need to remember something I can look up the photo and the note to help me. Sometimes I really can’t remember the words that I need, or what I was about to do. I frequently refer to Google search to look for keywords related to the concept I am after, and it usually provides the word or task that I needed to remember!

Sleeping

I struggle to go to sleep, and I struggle to wake up again. (You can read about the waking up bit in my earlier blog post, A Morning With ME.) One very useful aid to sleeping and waking is my Sunrise/Sunset lamp from Lumie. It has an alarm clock and a lamp in it. At night, I can set the alarm, then press the button to get a simulated sunset which isn’t that effective for me as it doesn’t stop my brain from whirling with thoughts, but it is sometimes helpful. In the morning, it simulates a sunrise over about half an hour and provides a much easier wake up than a straightforward alarm clock.

I also struggle to rest. A big problem with ME is having too many thoughts and being unable to stop thinking about things and relax. I have to spend 20 minutes resting several times a day in order to function well, and staying there to rest is very difficult to me because I tend to think of things like this blog post, then get up to do them! The solution is that I download podcasts of radio shows, put them on my phone, and play them when I am resting.

Computing

With all my use of the computer, being sometimes physically unable to use it can be devastating. I use a few tools to help me keep using it.

f.lux is an excellent bit of software that adjusts the colour temperature of my screen based on the time of day. This isn’t the same as adjusting brightness, it actually changes the mix of colours to suit the lighting that I am using and the level of daylight available. Using a lower colour temperature at night helps reduce eye strain and makes it more comfortable to use the computer, as well as making use of the computer just before sleep less of a factor in insomnia. You can download f.lux for free here.

Web pages often have small text, clashing colours, backgrounds that are too bright and worse. There are two ways that I cope with this problem. The first is Readability. Readability is installed as a bookmark button in the toolbar. When I find a long web page that is difficult to read, I only have to click the bookmark and the page transforms into large, good contrast text with a much darker background. Brilliant! Or, err, less brilliant. Cool. (Install Readability here.)

Sometimes I can’t physically sit at the computer. This is where a Kindle ebook reader is useful. The Kindle has an electronic ink screen which is designed to look like paper. It is not backlit like an LCD computer monitor is. It is equiped with WiFi and documents can be emailed to it. I use a tool called RekindleIT which again, is installed as a bookmark button. When I click the button, the web page that I am reading is emailed to the Kindle ready for me to read in bed or on the sofa. (Install RekindleIT here. I have written more about putting documents and website on the Kindle at my business website.) I should also mention that the Kindle allows me to read large, heavy books that would otherwise hurt me to hold and read for very long.

Working

Having all these things wrong with me makes it hard to work for a living. With incapacity benefit and disability living allowance disappearing, I don’t have much choice. For the last year I have worked as hard as I can (even at the expense of any remaining health) to set up a computer repair and web development business along with my Dad and other family members and friends. I’m rapidly heading in to one of the worse parts of my illness though, and I expect to spend a few weeks, even months, in bed starting any day now.  Mobile technology will allow me to keep working to some extent. I can answer technical support queries and direct my business through email and chat. I can setup websites for my customers using my laptop from my bed. It won’t be pleasant, but unlike the last time I was imprisoned in my own bed, this time I don’t have to go insane, and I might even still do some work.

In summary, then, technology allows me to:

  • Keep communicating when I can’t speak
  • Chat to people when I can’t get out
  • Write long texts and fill in forms when I can’t write with a pen without pain
  • Heat my own food instead of requiring someone to do it for me
  • Remember to take medicine and rest at the correct times
  • Keep notes and photo notes to help me remember information
  • Remember words, concepts and tasks by searching the internet for related things
  • Wake up in the morning
  • Rest without getting too distracted
  • Keep using my computer by adjusting it to prevent eyestrain
  • Keep reading when I can’t physically use my computer
  • Undertake paid work when I can’t even get out of bed

ME has tried its best to rob me of a decent life. Technology has given me a way to fight back. I don’t have to accept my quality of life being taken from me. Technology can help others to say the same.

Marketing on Twitter: Don’t spam me!

In this article I will discuss various different ways of using Twitter and how to make use of it as a small business. The advice contained here is aimed at the very small business, as well as individuals who are their own brand such as authors, journalists and artists. Continue reading “Marketing on Twitter: Don’t spam me!”

Teetering on the edge

Starting a business seems to be a bit like standing on the edge of a cliff and not quite falling off.

I’ve stepped right out of my comfort zone, and am wobbling about on the edge of the cliff. As I get more customers, more contracts, I am building up the business around me but step too far ahead and I will go crashing down, never to be heard from again. Half of business seems to be having the guts to ask for the work. I have to learn  to price my services appropriately, allow enough time for the work, then march up to the customer and say “You need x service, y product, and it will cost you z thousand.” Amazingly, when I do that, it works! The problem is, I agonise over every detail, don’t allow enough time, charge too little, and then worry that I am trying to sell the customer something they don’t want.

Things are changing now though. We are beginning to get enquiries, requests for quotes, referals. Suddenly starting a business is like a roller coaster.  The long, slow, tedious build up. The fear as you reach the top. The rush, the adrenaline as you suddenly shoot forward in to the unknown, the big loop turning your world upside down. But then, you come to a halt at the end of the ride. And you want to go again and take everyone you know on it too.

Argh panic panic

I’m nervous. I can’t sleep.

In a few hours my dad and I will visit a customer and present the findings of our first real consultancy work. If all goes well it will lead to several thousand pounds worth of sales and an ongoing contract. You know, almost as if this is real and I’m not just playing at it.

Getting this work will mean that we go from loss to break even, that we can not only pay our bills but also take out some of our expenses. Maybe even wages! All within our first year too. More than that, it also marks the transition from having time to waste to being too busy. We actually have several ongoing jobs at the moment and this week our advert and article go in Vale magazine. If we’re lucky then this week is where the business becomes reality.

Nervous? I’m bloody terrified!