Author Archive

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Beware of the leopard: TIIN instructions

May 18, 2012

I am publishing at the end of this post (click on “read the rest of this entry”) the instructions on how to prepare a TIIN, a tax information and impact note.  They were sent to me by HMRC on 16th May 2012 in response to a Freedom of Information Act request.  The file is reproduced by a simple cut and paste from the RTF file supplied: I haven’t cleaned up the formatting or made any changes from what was sent to me.

Before you click to look, think about this.

The guidance on how to complete a regulatory Impact Assessment, the equivalent document for non-tax changes, is clear and publicly available.  This enables independent scrutiny via the Regulatory Policy Committee.

The RPC assesses impact assessments against well established guidance set out by the BRE IA Guidance, IA Toolkit, One-in, One-out Methodology, and HM Treasury’s Green Book.

Isn’t it now time that the government also made public the standard it sets itself when considering the evidence for making tax changes?  This guidance should be on the HMRC website and kept updated, so that everyone can see the contents – not hidden in the filing cabinet in the locked office behind the “beware of the leopard” sign.  Or on a retired tax inspector’s blog, for that matter!

Read the rest of this entry ?

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Tintacks, tintax and, er, encarta

May 17, 2012

I was at the ARC dinner last night – ARC being the Association of Revenue and Customs senior staff, of which I am a proud Life (which is to say retired) Member. So I was talking to former colleagues and the subject of this blog came up.

“I remember tintax,” someone said.

And then I realised.  I thought I had coined the name of this blog myself, from the name of the documents on which I worked before my retirement, the Tax Information and Impact Notes – TIIN – and the word tax, to make something that sounds a bit like the American name for drawing pins, tin tacks.

But no.  Actually in the dim and distant past, when the Inland Revenue was kind of cutting edge as regards computer technology (sigh) we had a guidance system called Tintax.  It was a bit like a static version of wikipedia, with all the internal guidance you could want, sitting there for you to search through.

Hey, don’t laugh.  I remember when Inland Revenue manuals came on paper, and you had a clerk assiduously go through and replace the relevant pages when there were updates, and initial the front of the manual to show they’d done so.

Tintax was cutting edge.  In its day.  Like, er, encarta was back in ’93, when having an encyclopedia on your computer – so it was searchable – was like Living In The Future.

Ah well.

I blame the drink, but none of us sitting around the table last night discussing the old Tintax system could remember why it was called Tintax.  Presumably it was an acronym – but of what?

Answers in comments, please…?

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What it says on the TIIN?

May 16, 2012

While I’m on the subject,  let’s look at what the Government actually told us about the Controlled Foreign Companies “reform” that Panorama mentioned.

You’ll have noticed this blog is called TIINtax – so let’s look at the TIIN, the “Tax Information and Impact Note” published with the Controlled Foreign Companies proposals.

First of all there were some “interim improvements”. When they were announced they were supposed to reduce the tax received in the UK by about £50 million and then year on year “the impact on receipts is expected to be in the low £10 millions.” Then the TIIN was revised to clarify that we’re giving away tax of around £25 million a year – enough to pay for, what, an extra couple of thousand nurses?

And now we have CFC “full reform”. The TIIN for that says quite openly that

A controlled foreign company is an overseas company controlled by United Kingdom residents which pays less than three quarters of the tax which it would have paid on its income had it been resident in the UK

Yes, folks, we’re looking at a special tax regime that applies to companies that are owned in the UK but paying less tax than they would have done if they’d been operating in the UK. And…

No tax will be due in respect of a CFC if the company satisfies any one of the statutory exemptions or exclusions.

Yes, what we mean by “reform” of the special rules that apply to these companies is… that we’ll invent some nice simple rules that keep them out of UK tax altogether. There ought to be a “ka-ching!” noise that you can insert into a website for moments like that.

Look at the top line of the table of impacts in the TIIN. This is how much tax we are giving away (all right, how much less tax will be due under these rules than if we didn’t “reform” them).

  • 2013-14       -175 million
  • 2014-15       -450 million
  • 2015-16       -690 million
  • 2016-17       -805 million

I don’t have the software to draw that as a graph in a blog post but imagine it – and, in your mind’s eye, while you’re following the numbers upwards, what do you think we’ll be giving away (sorry, “reforming”) in 2018? 2019?

As Graham Black, President of the ARC Union, said on Panorama: it’s like legalising murder and then saying your crime figures have fallen!

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Some thoughts on Panorama

May 15, 2012

Accountancy Age takes issue with last night’s Panorama, arguing that

there is a global marketplace for large businesses and, in parallel, a global marketplace has arisen for tax jurisdictions around the world.

The UK governments may not like this, but they can’t control it, only put out their best stall and package. Otherwise businesses leave the UK take tax revenue with them.

A “global marketplace for tax jurisidictions” doesn’t just “arise”, though, does it?  Tax jurisdictions aren’t natural phenomena.  If we just leave it to the “global marketplace” then what happens is that big business – the people with money, who can afford a quarter million for a “kitchen supper”, or who can afford to loan some of their staff on secondment to Ministers’ offices or to Government Departments – will argue for a race to the bottom.  We have to be nice to the multinationals because all the other countries are.

“We have to do it, because everyone else is doing it?” What are we, six?  “I have to stay up late, everyone else does.” “Well if everyone else jumped off a cliff, would you do that too?” Come on!  My grandma had that argument sussed in 1967!

Aggressive tax avoidance is legal but not acceptable: that’s the message we’re getting from some bits of the government.  The argument, of course, is whether we can recognise it.  What makes it “aggressive” and unacceptable?

I have my savings in an ISA – so I avoid paying tax on the interest.  That’s perfectly legal.  It’s also avoiding tax.  Is it aggressive?  Is it acceptable?  Obviously that’s fine – my grandma would have had no problem with that.

But say that I register a company, and then another one in Luxembourg.  I take my savings and put them into the Luxembourg bank account and then the Luxembourg company lends them to the UK company.  The UK company pays interest to the Luxembourg company and I claim a tax deduction for it.

Say what?

I still have the same amount of money, only now it’s spread about a bit and hey presto it’s wiping out all of the profits I get from, er, writing this blog.  Or whatever.

What would grandma say to that?

I think the image used by the Panorama programme, of a three card trick being played out with mobile phones, was brilliant.  Money moves magically around, and, like grandma faced with mobile phone technology, it feels as if we’re powerless to stop it.

But actually it was just the old three card trick.  Follow the lady, round and round she goes…

Panorama could have done a lot more to explain what Controlled Foreign Companies are and how they work.  But they couldn’t have found a better metaphor for it.  The three card shuffle, with a bit of shiny tech.

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Consultation overload?

May 14, 2012

I see there’s a new version of the tax consultation tracker (issued on 11 May).

Now, I realise it’s a bit of a #firstworldproblem (or #myprivilegeisshowing, as they might say on twitter) but couldn’t the government be a bit more, well, helpful about this?

The tax tracker is a PDF file, so you can’t sort it by the date a consultation closes.  Nor can you see how this version has changed from the one before (does anyone have the last one saved so we could have a look?)  Would it be too hard to print a new tracker with a note of what has changed since the old one?  Whatever happened to the government commitment to web accessibility and the desire to have triple A rating for all its websites???

There are twelve open tax consultations.  There are also (I make it) no fewer than 21 formal consultations which say “to be opened in May” Blimey, guys, there are only 13 working days of May left!  You’re going to be motoring a bit, aren’t you?

But, next time you update the tracker, would it hurt to ask the @HMRC account to tweet “Tracker updated with…” and, you know, tell us what’s changed???

For everybody else, follow me on @tiintax (where I tweet about tax and regulation) and I’ll do my best to poke you with what I find.  But I’m not the government, and I can’t guarantee I won’t miss something.

Sigh.  Another email to the Treasury:

Hi.  I have been following the tax tracker with interest (I blog about it at https://tiintax.com/) and I wondered whether publishing the tracker as a pdf rather than as a searchable part of the html content of the page is in accordance with your accessibility commitments?

It would also be extremely useful if you told people how you had updated it when you DO update it.  How about it?
Kind regards

No answers yet, (to anything I’ve sent them) but we live in hope.

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Deja vu all over again

May 10, 2012

A Bill will be introduced to reduce burdens on charities, enabling them to claim additional payments on small donations.

(From the Queen’s Speech yesterday)

You mean the Gift Aid Small Donations Scheme?  The one which was announced (at para 1.139) of Budget 2011?

introducing a Gift Aid small donations scheme. This will allow charities to claim Gift Aid on up to £5,000 of small donations per year without the need for Gift Aid declarations.

The one where there’s an open consultation (that doesn’t close till 25 May)?  The one which I responded to myself on May 2nd?  That Gift Aid Small Donations Scheme?

Yea.  So apparently a Bill will be introduced.  Whatever the result of the consultation.  So THAT’S not a pointless waste of time, then.  Right?

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Fantasy Queen’s Speech

May 9, 2012

“My Lords and Members of the House of Commons, my Government’s legislative programme will be based upon the principles of freedom from want, freedom from ignorance, freedom from disease, and freedom from squalor.

The first priority is the welfare of the people of this country, rather than its financial institutions.

Freedom from want: we will institute a new Ministry of Works which will offer paid employment to anyone who wishes to undertake it, at a living wage of £8 per hour.  This work will be entirely flexible, so that people can move in and out of paid employment and Ministry of Works employment at will.  This will also include work which people with disabilities are able to undertake; no-one will miss out on opportunities to do work of which they are capable, although they will be supported if they are unable to work by reason of disability, including the provision of assistance from people employed by the new Ministry.

The tax and benefits system will be made fairer and simpler as a result. No-one on the Ministry of Works rate will pay income tax, nor will there be any benefit payments for people without work; instead, work at a living wage will be made available.  There are jobs crying out to be done all over this nation, from repairing our roads to caring for our old, and the Ministry of Works will direct its additional, flexible workforce into supplementing but not replacing the work already being done.  Far better to pay our unemployed to do the “uneconomic” work that needs doing, than to pay them to do nothing!

It follows that Income Tax will not be payable until one earns £14,000 per annum – roughly a full year’s work at the Ministry of Works’ living wage.  Any amounts received above that will be taxed at a flat rate of 25%; any amounts over £100,000 a year at £40% and those fortunate enough to earn, or receive in unearned income, more than £250,000 a year will pay 75% on the amounts over £100,000.

Corporation tax, Inheritance Tax and Capital Gains tax will be at the same rates as Income tax but with no tax free allowance.  Tax evasion and avoidance will become criminal offences.  All UK property will be subject to UK taxes: each property will be checked to ensure that capital gains tax, inheritance tax and stamp duty were paid each time it changed hands in the last 20 years.  If no such chain of tax compliant custody can be demonstrated the tax will become payable now, either in cash or as a charge on the property.  HMRC cuts will be reversed and several thousand new tax inspectors recruited and trained.

National Insurance will be ringfenced and a Sovereign Wealth Fund set up to invest the income against future liabilities.  National Insurance will, over time, become a true insurance scheme covering all citizens.

Freedom from ignorance: we will abolish university tuition fees and reinstate student grants.  All extant student loans will be cancelled.  All Academy and Free Schools will lose all public funding and have the option of reverting to local authority control or becoming fully private.   All private educational establishments will cease to be eligible for charitable status and will be taxed as profit-seeking corporations.  They will also be required to pay back taxes on their property transactions for the past 20 years as if their “charitable” status had been abolished 20 years ago.

My Government will support freedom from disease by supporting the NHS: ceasing the plans to reorganise and privatise it and continue to support it with funding that represents the same proportion of GDP – roughly ten per cent – each year.

Freedom from squalor will be pursued by instituting daily waste collections from a single bin per household and making separation and recycling of the contents a national priority at a series of small scale recycling centres.  Funds will also be provided to local authorities to embark on an ambitious programme of council house building so that affordable high quality rented housing is available to all.

Finally, everyone will have at least three and up to ten extra bank holidays a year: when the weather is unexpectedly fine the Bank Holiday Flag will be flown from Buckingham Palace and everyone will have a day off.  And a pony.”

 

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May the fourth be with you

May 4, 2012

(When nine hundred years old we are, still funny that will be!)

I’m walking a fine line with this blog: as a former HMRC employee, I’m not allowed to write my memoirs for two years, and I’m not ever – of course – allowed to breach the Official Secrets Act by revealing anything I happen to know about what happens in HMRC that isn’t in the public domain.

However I do, of course, retain the rights of any citizen to comment on anything which IS in the public domain – like the consultations I’m responding to, and the quality standards which apply when government departments publish impact assessments and tax impact assessments.  That’s why I tend to be over-generous with my links to publicly available sources, just to make it clear I’m staying on the right side of the line.

So let’s have a look today at some non-HMRC publications.

First of all, what about this article in Taxation magazine?  (It’s behind a paywall I’m afraid so those of you who aren’t accountants or HRMC employees – there ARE people reading this who aren’t accountants or HMRC employees, right?  Right?? – won’t be able to see it, sorry.)  Essentially it’s an account of someone being pursued for a failure to include some pension income in his tax return and, when it was pointed out that the income was *on the return*, apparently being told that the entry was in a box on the return that wasn’t part of the return!  That’s some catch, that catch 22!

The article concludes that HMRC staffing levels have been cut too far too fast, and we shouldn’t blame the staff but the management.

Then there’s this, from Accountancy Age

In my opinion the widespread problems which currently plague HMRC are the result of a combination of weak leadership – from an executive committee without adequate expertise – and political interference from a Government which not only continually shifts the goalposts but also makes unreasonable demands, expecting performance to improve while costs are cut.

And then there is the ARC (Association of Revenue and Customs) forum on the FDA (union) website to which I have access as a life member but which is definitely inaccessible to non-members, sorry.  You’ll have to take my word for it, then, when I tell you the current discussions include a fairly exasperated explanation that the people working 50 hours a week – and their managers – are acting illegally if they haven’t signed the European Working Time Directive opt-out letter, and that they actually shouldn’t agree to do this in the first place.

So I don’t think I’m on the wrong side of the line in concluding that HMRC is overworked and understaffed and not strategically well-managed.

Why is this posted under the heading of “May the Fourth Be With You”?  Remember the climax of original Star Wars?  Obi Wan folds up his light sabre and lets Darth Vader cut him down, knowing that his legacy will continue if Luke and the others escape, and that he himself will survive in glowy Jedi heaven.

I was very taken by the discussion on Question Time last night and the assertion that public sector strikes would somehow be suicidal for the unions.  But I can’t help wondering whether, if the tax workers folded up their metaphorical light sabres and let us see what the country would look like without them, they would be unexpectedly triumphant out of left field, or live on in memory only, albeit in glowy moral superiority, like Obi Wan.

Let’s not try it.  Countries where the tax system is corrupt or inept aren’t places where I’d want to live.  So let’s not become one, by accident, design or underinvestment.

 

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Omnishambles? Not quite, perhaps…

May 2, 2012
The Gift Aid Small Donations Scheme in particular, and the government’s ideas for the charities sector in general, may not be an “omnishambles”… well, not quite – but I think we might be heading in that direction.

I have already blogged about how I think the consultation itself is defective because it doesn’t include an adequate impact assessment.  I await with interest the response on that point from the consultation coordinators at HMRC and at BIS.

Today, however, I’d like to look at the consultation itself.  Essentially we’re asked to comment on the practicalities of the government “topping up” cash collections by charities with an amount which is sort of a bit like gift aid, but isn’t actually.  Because Gift Aid, as you’ll know, is when you give money to charity and tell them your name and address so that they can claim back from the government the tax you paid on the fiver or whatever you gave them.  The thinking is that people putting money into a bucket in the street, or into a collection plate in a church, aren’t easily going to be persuaded to fill in a gift aid form, so can the charities have the money anyway please?

I’m not at all persuaded that gift aid is hard to understand – when was the last time you gave to charity WITHOUT them trying to collect a gift aid declaration from you?  But, by all means, let’s not discourage the government from giving our money to charity – or at least to the ones we’ve given our money to in the first place.

Here’s the response I sent.  Feel free to adapt for your own use, quote, quibble, scribble or scoff, as appropriate.

Dear Mr Jones

This is an individual’s response and is also posted online (with commentary) at https://tiintax.com/.

First, you may be aware that I have already written to the Consultation Coordinator and to BIS to say that I think this consultation document is technically defective as it doesn’t contain an adequate impact assessment (it contains the outline of what the change is, but no estimate of the costs, benefits and impacts of making such a change).  I invite you to publish such an estimate and to extend the consultation long enough for the third sector to have the opportunity to examine your estimates adequately in accordance with the government’s Code of Practice on Consultation, the Tax Consultation Framework, and the Impact Assessment guidance.

Turning to the content of the consultation, I first of all have to reject the assumption behind the policy objective that it is “disproportionately burdensome” to collect gift aid details from people attending a religious service.  Indeed, the system is so well bedded in that when I attended the funeral of an elderly friend a few weeks ago the Minister announced that it had been her last wish that people would not only donate to the church instead of sending flowers but that they should do so via the envelopes at the back of the church so that gift aid could be reclaimed on all the donations!  It is my experience as an occasional churchgoer and attender at cultural and other events that everyone knows you have to tick the box and fill in the gift aid declaration, and that “sticking it to the government” by doing so is often part of the pleasure of so giving.  Indeed I answered a Radio 4 Woman’s Hour appeal to donate some old bras to Oxfam last week and made sure to complete the gift aid sticker and add it to the package so that they could reclaim the gift aid on anything they raised from the disposal.  Sorry, but the idea it’s burdensome for charities to operate Gift Aid just won’t wash as far as I, as a small scale donor, can see.

Having broken the link between the donor and the donor’s tax in the way you describe in the section on Policy Design Considerations you then have to introduce a burdensome set of anti-avoidance regulations to ensure that the charity is actually collecting money from the public (and not just turning £x into £x+y via the magic of government funding) and not turning itself into a hundred daughter charities that can collect £5000 each – but also that the charities which are already daughter charities of a larger entity can’t go “ha ha we win!” and profit from their accidental advantage.  It’s a mess.

You say, however, that these design issues are fixed and not open to consultation, which is rather unhelpful.  Looking at the areas which ARE open to consultation, then, you seem to be trying to find a simple way of having the government top up charity cash collections without opening the floodgates to anyone to apply.  I agree that to tie the top up to an existing good record of making gift aid claims is sensible, but the attempt to get around the daughter charities/single charity with lots of locations avoidance issue via buildings is doomed.  You give (on page 19) three examples of how you think tying the top up to buildings might work:

  • example 5, lots of local groups in separate buildings are entitled to “up to” £255,000 – 50 groups at £5000 each
  • example 6, one local group in one building is entitled to up to £5000
  • example 7, a national charity with 1000 charity shops is still entitled only to the £5000 because no qualifying activity happens at the shops.

Well, I may only be a retired tax inspector but I can see clearly that if I were a national charity with a string of charity shops I’d pretty much start running qualifying activities in them right now so as to be ready to claim the full 1000x£5000 when the scheme is in force!  I’d suggest the third sector starts now, declaring the first Monday in every other month as “GASDS day”, carefully reading the small print in paragraph 5.16 to make sure they have at least 10 group members present on at least six occasions in the year and that the events are open to the public and include a small change collection…

It’s an absurd and unworkable design.  Much simpler, fairer, and in keeping with the spirit of the policy objective would be to simply top up any charity’s gift aid claim by a flat rate figure each year.  That seems to be effectively what’s going to happen, you’re just going to make the charities go through a lot of hoops (and stress, and paperwork) in order to achieve the same result.

I suspect the reasoning behind not doing this is that it would involve giving too much money away, so I have a simpler proposal yet: don’t do it!  Improve the Gift Aid scheme instead, by retaining the link between donors gifts and the amount the charity receives, but breaking the link between the donors’ TAX and the amount the charity receives.

Here’s an example.  My late father used to give regularly to the church where he worshipped.  When he retired he increased his donation, but when he came to complete his next tax return he had donated more than the tax he had paid and so was made to pay over an amount equivalent to the tax reclaimed by the church.  Yet when I gave to charity, as a higher rate payer, I was able to reclaim the difference between the tax I had paid on the amount donated and the amount the charity had claimed back on it!  Simply abolish the link between the donor’s tax and the gift aid, and otherwise let the system carry on as now.  So people who give out of their meagre pensions can carry on doing so without fear of finding they’re being personally penalised by the taxman for so doing, and people who give from abundance can carry on giving, and charities can carry on reclaiming the standard rate of tax they have paid – but no individual personally benefits from charitable by getting a repayment.

I’d like to see an impact assessment of designing the scheme like that.  But then, as I’ve said, I’d also like to see an impact assessment of doing what you propose in the document.  I rather suspect the reason you haven’t published one so far is that the policy design includes so many complexities that it’s nigh on impossible TO cost, which suggests to me it’s a bad idea.  Sorry and all that.
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Blogging against disablism day 2012

May 1, 2012

As today is Blogging Against Disablism day I thought I’d take a break from looking at tax measures and, instead, give my personal experiences of disablism.

Wait a minute, says the pedant in the corner, you’re not “disabled” – and what is this “disablism” thing anyway?

Disablism is to people with disabilities what racism is to people who are any other race than white and sexism is to people being disadvantaged by their gender.  But while most of us will remain the race and gender we were born with, most of us – whatever our health and ability – will wind up with some kind of disability in the end, if only by way of age.  My own problems are a minor hearing impairment and a dodgy back that makes climbing stairs a problem.  I’ve just taken early retirement so I don’t have to wrestle with the question of whether or not to register myself as “disabled” on the Civil Service’s personnel systems but believe me I angsted over it for some time over the last few years.

Getting a back supporting chair was an absurd struggle but at least I had a supportive physio who, ten or fifteen years ago, wrote a stern letter which said something to the effect of, buy this woman a decent back-supporting chair and she can work; don’t, and I’ll keep signing her sick certificates and by the way have you worked out how much sick pay that will cost you lately? Once I’d actually obtained the chair, a succession of supportive managers meant that I managed to keep the chair.  (I wonder where it is now?  Because, you know, they have rules that mean when you leave you can’t buy the chair from them and take it home.  No, it sits in the “furniture available for someone else to use” room until they give up and pay someone else to take it away!)

So the back?  Fine.  The hearing impairment?  Not so much.  It’s only a mild impairment – the hospital audiologist apologised and said that, although I would benefit from a hearing aid, the NHS no longer considered me impaired enough to provide me with one, and I either have to get deafer or buy one myself…

My job was in London but the last three or four years of my career I also worked remotely from Sheffield.  And there were lots of things that might have made my life easier and saved wear and tear travelling up and down.  Ninety per cent of the job could be done by email and online; the rest was face to face meetings and telephone conversations.

Which is fine.  A one to one phone call gives me no problems.  But conference calls…  It’s entirely useless to have one speakerphone (and so only one mike) available in a room with twenty people in it.  It’s entirely useless to have a presenter say “I don’t need to use the mike, do I?” so he can privilege his need to bounce around the stage being spontaneous over my need to, you know, hear what the hell he was talking about.  It’s entirely useless to have a “four corners” event where the “buzz” of activity – of everyone talking at once about four different things at the four corners of the room – is preferred to the old fashioned syndicate room where the four different conversations are, well, audible.

I could go on.  But my point is that I’m a pretty assertive middle aged battleaxe of a tax inspector and even I got tired of reminding people that I couldn’t hear what they were damned well saying if they dropped their voice like that.

And I guess that’s all I’m saying.  If there’s a binary “disabled/not disabled” categorisation (not that I think there is, but that’s a whole other story) then I sometimes think of myself on one side of the line and sometimes on the other.  But if it wears me out trying to hear what people are talking about, how tiring must it be to live with something more disabling than that?

I only once (or at least once that I can recall – feel free to remind me of others in the comments!!) blew up and had a full scale row with someone, when I had asked three times for people to speak up in a large meeting in a room with bad acoustics, and in the end threatened to walk out altogether if it happened again.

No-one should have to take the nuclear option.  If someone explains to you that they can’t hear what you’re saying, see what you’re writing, get to the room up the stairs, sit for the length of the meeting – stand for the length of the meeting [coughs and makes a noise that sounds suspiciously like “Pacesetter”] – then please adjust your behaviour.

To all the people I have encountered in my working life where I have failed to do this, please accept my apologies.  A failure doesn’t mean you’re a bad person; it’s like having snot hanging from your nose.  Once someone points it out to you, by all means get embarrassed.  And then use a hanky, wipe your nose – and try not to let it happen again.