The economic downturn

I caught a few moments of Robert Peston's program last night. It seems that some people did know that a "market correction" was coming, but did not realise quite how bad it was going to be.

The wonder is that so many people thought that borrowing more than you could afford from your current income would all come right in the end, because house prices were still rising.

But perhaps we should not blame individual consumers for believing what they are told, and should look at the people lending to them - the mortgage salesmen. Surely they should have known better than lending more than someone could afford. But of course, their income would have been based on mortgage sales, so we cannot blame them.

So perhaps the blame should lie with the people setting up the rules for who can borrow how much - namely the bank and building society boardrooms and technical experts who have over the years made it so much easier to borrow money.

Why apportion blame at all? Because we dont want this to happen again (at least most of us dont - there are a few who will have made a profit out of this). So finding a root cause to the problem is a good idea if it means we can do something about it.

The difficult bit is then coming up with something which will work. This may come down to the Bank of England or a similar body supervising the banks and other lenders much more closely than they do at present.

Christmas is coming

For accountants, Christmas is traditionally a time of long hours and hard work. Something to do with the January deadline for filing tax returns!

Still, even we need to take some time out, so there will be a few days of rest before coming back and telling all the profitable clients what they need to hand over to the tax man in January.

So if you are reading this before Christmas, have a good holiday.

If you are reading this after Christmas, I trust 2009 will be an even better year for you

Let's be fair to the Chancellor

I have just been looking through the budget press releases again and am reminded about the "simplification" in the capital allowances rules which will produce greater "fairness" to business owners of company cars.

Under the old rules, you had to list every car which cost over £12,000. But at least you would get full tax relief for the cost of the car once you had sold it.

Under the new rules, it is much simpler. All cars go into a single pot rather than being listed separately.

The problem is, you never get your tax relief. I looked some figures up - a £15,000 Mondeo bought four years ago was worth about £3,500 in November. So if you had sold it your real loss over the four years would have been £11,500. Under the new rules, the most tax relief you would receive is £8,850 over the same period. And of course a Mondeo does not necessarily have a low CO2 emission, so the tax relief could be even less - actually a lot less - just £5,160.

Is this fair? Alistair Darling tells us it is, so it must be true.

Can you avoid these tax consequences? Yes, but only by insisting employees buy and fund their own cars, or perhaps by closing your company down every few years (since you would then get the rest of the allowances).