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item0051C 814, 815 814 12 September 2003 Abdroids in the family 
This weekend, this sketch is striking terror into tens of thousands of UK small-business households. Clever accountants have over the years devised a myriad schemes of tax avoidance, based on this sketch. They have introduced, into the lives of ordinary business families, the abdroid - or "artificial personality" - that's the dotted circle. Now, the Inland Revenue (who are very clever people, as University Challenge has conclusively proved...) has refused to accept the sophistries of the accountancy profession, and the Revenue is unpicking their tax avoidance systems. For many husband-and-wife tax-avoiders, this will be an un comfortable weekend. Let me explain. The "device" of artificial personality, invented by the Victorians in 1856 to facilitate the management of commercial mega-projects, has proliferated throughout the world. My term for every such artificial person is abdroid - an abstract droid, always under the control of its human manipulators.And while the device has served society well, facilitating many new forms of organisation, it has nasty side-effects. We should treat it as a poison, valuable in small doses but deadly in many applications, needing constant monitoring and supervision. And the accountancy profession - which was also invented in 1856 by the Victorians to be the "auditors" of these new artificial persons, has flourished with them. The whole profession is underpinned by the audit role, and that function has catapulted the profession to its influential heights, throughout the world. But abdroids have not been limited to "big projects", for which they were intended. And as the incidence of taxation increased during the 20th century, abdroids came to be used by tax advisers to avoid tax liabilities. It was not until 1965 (for example) that UK abdroids got their own form of taxation - Corporation Tax. That sets the scene. The current problem arises from the use of abdroids to avoid tax payable by married couples. In law, the husband is still presumed to be the principal earner for the family, even though the wife now has the right to be taxed separately on income earned in her own right. Since that became possible, in the case of Mom-'n-Pop businesses Accountants have used abdroids to "separate out" the wife's income, reducing the husband's earnings and shunting business income sideways into Mom's account, paying Tax at a lower rate.
By introducing an abdroid into the family (Mom-n-Pop Limited, the dotted circle) they created two new "status options" for Mom - (a) as a Director, capable of receiving fees for her Board services, and (b) as a shareholder, receiving "dividends" from Mom-n-Pop Limited. This has enabled the profession to devise all sorts of sophisticated tax avoidance schemes, charging fees for their services in doing so.The Inland Revenue has simply said that it regards this whole jiggery-pokery as a device to avoid paying Income Tax. They say that in most cases, the sensible conclusion is that the husband is carrying on business as a sole trade (e.g. a plumber) and his wife's roles as Director and Shareholder of a domestic services company is a mere sham, which they intend to ignore - as they are legally entitled to do. They claim to be applying principles firmly laid down from 1936 onwards - although they are now permitted only to "unpick" tax accounts for the last six years...
15 September 2003 Vive la Commune!
In October, I will set out for Brittany, seeking to negotiate new communal relations with the commune of Hennebont, near Lorient. The 36,000 communes of France are the glory of that great country. And those communes have powers of independent initiative which would make the eyes water, of every UK Parish, Town or Community Council...I am a lawyer by original profession, with a keen interest in constitutional law. In 1964 I had the marvellous opportunity of studying for six months at the Supreme French Administrative Court, as a stagiaire at the Conseil d'Etat. I came to understand some of the inwardness of the Constitution of the Fifth Republic - De Gaulle's Constitution. That's the one they've still got. And De Gaulle made it a prerequisite of any candidate for the Presidency that the Nomination Form be signed by at least 100 One of the key perceptions of that Constitution was the centrality of the smallest building-block of the Constitution, namely la commune. Communes come in all shapes and sizes, from a few hundred residents in remote rural and mountain areas to the management of substantial towns, even cities. They are very inconvenient for Paris, and the denizens of a centralising State - and I have sympathy for those who would like to see a systematic reduction in their number - 20,000 would be a much more reasonable number, and that would still represent an average population of c 3,000 per commune. But I am convinced that the presence of the Commune, as a governmental focus for the most local of day-to-day concerns, is a key factor in the French civic order, which is broadly one of contentment and peacefulness. L'ordre publique, la tranquillete publique, turn crucially on the role of the commune in local public life. UK citizens with houses in France warm universally to to local sense of pride and identity conveyed by the presence of the commune, the Maire and the communal councillors.Labour is clearly planning to tap those same political roots, as it explores its "new localism", as a keynote of its Third Term Manifesto. But does Westminster have the necessary understanding to deliver such a strategy? I fear not. Even the loquacious Dr John Reid (who suffers the grave political liability of being able to defend anything incredibly well) is trailing Foundation Hospitals as forerunner of the new local state - yet they are woefully deficient, in the fragility of their "democratic" content. My hope is that Labour will come to understand the true character of local independence, but the omens are not good. The hapless Nick Raynsford, detailed off by Downing Street to discipline local authorities, shows little sign of understanding the true nature of devolution - by threatening beleaguered local councils with further "capping" in 2004, if they disagree with the Government's view of next year's permissible expenditure.
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