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2013 ACCA Rulebook: what’s changed?
An overview of the main changes to ACCA’s bye-laws, regulations and Code of Ethics and Conduct, as published in the ACCA Rulebook, taking effect from 1 January 2013.

An overview of the main changes to ACCA’s bye-laws, regulations and Code of Ethics and Conduct, as published in the ACCA Rulebook, taking effect from 1 January 2013. 

The changes to the 2012 Rulebook have arisen from policy decisions over the past year, implementation of existing Council policy or legislative/lead regulator requirements, or the necessary clarification of existing regulations. 

Regulation changes arising from the Overview of Regulatory Procedures Working Party
Many of the substantive changes for the 2013 Rulebook have arisen from the recommendations of the Overview of Regulatory Procedures Working Party, set up in 2011 to review ACCA’s disciplinary and regulatory processes with particular reference to independence, fairness, proportionality and the public interest. These include: 

Regulatory Board and Committee Regulations: 

  • the introduction of legal advisers into ACCA’s disciplinary and regulatory arrangements. This move will further enhance the independence of ACCA’s disciplinary and regulatory committees as the provision of legal and procedural advice to committees will be by individuals independent of ACCA. Consequential provisions are included in the Authorisation Regulations, Complaint and Disciplinary Regulations and Appeal Regulations
  • a reduction in the quorum of each committee from four to three and the removal of the requirement that a lawyer should serve on each committee, save that the chairman of the Appeal Committee must be a lawyer. 

Complaints and Disciplinary Regulations: 

  • a requirement that, where an assessor has reviewed an investigating officer’s decision to close a case and has decided that a report of disciplinary allegations should be prepared, the report should be referred to the same assessor
  • an additional test of whether there is a real prospect of an allegation being found proved where an assessor considers a report of disciplinary allegations
  • an enhanced interim order regime
  • new procedures for the Case Presenter to apply to withdraw cases in place of the Case Presenter’s current power to do so. 

Appeal Regulations:

  • a further tightening of the criteria for lodging appeals in order to eliminate unmeritorious appeals. 

Other changes 

Fees Regulations
The changes reflect the 2013 membership fee, which is £205. 

Membership Regulations
The principal amendments to the Membership Regulations: 

  • reflect that, from 2013, the Professional Ethics Module is mandatory for all students
  • clarify the prohibited activities of ACCA students
  • allow ACCA students who are members of an IFAC member body outside the UK, Jersey, Guernsey and Dependencies, the Isle of Man and Ireland (and holding practising certificates from those bodies), to engage in public practice
  • reflect the requirements of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2012 in the Republic of Ireland with regard to anti-money laundering supervision
  • minimise the risk of a member unreasonably avoiding removal from the register in respect of CPD breaches or bankruptcy
  • provide that notices may be sent to an address nominated by the member which may not be the registered address. Similar provisions are included in the Complaint and Disciplinary Regulations and Appeal Regulations
  • provide flexibility, so that a hearing may proceed notwithstanding minor non-compliance with requirements for the service of documents, provided it is justified in all the circumstances. Similar provisions are included in the Regulatory Board and Committee Regulations, Authorisation Regulations, Complaint and Disciplinary Regulations and the Appeal Regulations
  • amend Appendix 2 to reflect a change in policy to allow ACCA affiliates who have complied with other IFAC member bodies’ practical experience requirements, in some circumstances, to claim an exemption from the performance objectives component of ACCA’s practical experience requirements.  

Annexes to the Global Practising Regulations 

UK Annex
The substantive amendments to the UK Annex to the Global Practising Regulations remove references to the various Boards of the Financial Reporting Council (FRC), which no longer exist following the FRC’s restructuring. Similar provisions are included in the Complaints and Disciplinary Regulations and the Appeal Regulations. 

Republic of Ireland Annex
The only substantive amendment to the Republic of Ireland Annex to the Global Practising Regulations aligns the regulations to the requirements of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, and requires members in Ireland who provide book-keeping services to obtain practising certificates from ACCA. 

Designated Professional Body Regulations
These regulations have been amended to bring about consistency with the requirements for retail investment firms in respect of commission following the FSA’s Retail Distribution Review. All references to ‘commission’ have been removed, as have several definitions that are no longer required. 

Irish Investment Business Regulations
Substantial changes have been made to the Irish Investment Business Regulations. These have been reformatted in order to clearly require firms to comply with the Consumer Protection Code issued by the Central Bank of Ireland, as well as the Minimum Competency Requirements. This has given rise to the deletion of many regulations, in order to avoid duplication with the requirements set out in the Consumer Protection Code and the Minimum Competence Requirements themselves. 

Authorisation Regulations
In addition to the amendments outlined earlier, the only other substantive change to the Authorisation Regulations reflects an interim order regime consistent with that of the Complaints and Disciplinary Regulations.

Complaints and Disciplinary Regulations
In addition to the amendments outlined earlier, the substantive changes to the Complaints and Disciplinary Regulations: 

  • provide that deemed notice provisions apply to complainants as well as relevant persons. A similar provision is included in the Appeal Regulations
  • give the chairmen explicit powers to give case management directions. A similar provision is included in the Appeal Regulations
  • explicitly allow discretion for ACCA to extend the time limit by which complainants may request reviews of decisions to close cases in limited circumstances. 

Appeal Regulations
In addition to the amendments outlined earlier the only other substantive change to the Appeal Regulations provides that, if the chairman grants permission to appeal an order which was made with immediate effect, he may also grant a stay of the order if it is justified in all the circumstances. 

Code of Ethics and Conduct
In order to clarify the requirements of the Code concerning descriptions of firms, an amendment has been made to Section B4 to add the term ‘statutory auditors’ to the list of descriptions that should not form part of a firm’s name. 

Other changes to the Code include the clarification and strengthening of the requirements concerning the use of the ACCA logo. 

View ACCA’s Rulebook now.


Ian Waters – ACCA

21st century Fagin – the risk of cyber pickpockets
Advice for clients on how to avert cyber pickpockects.

Advice for clients on how to avert cyber pickpockects. 

With online sales soaring this week, the Christmas shopping bonanza gathers pace and cyber criminals are attempting to ‘pick a mobile wallet or two’. In the past shoppers had to worry about pickpockets targeting their purse, today the risks are far greater, with criminals also targeting mobile wallets, social media and websites. 

IBM has just published Cyber Monday Report 2012 which compared online sales in the US on ‘Cyber Monday’ (26 November) compared to the same day last year. 

It revealed that not only are online sales increasing – up 30.3% on 2011 – but that more and more people (18%) are using mobile devices such as their smartphones and tablets to shop. Sales via iPads accounted for 7% of online sales – up a staggering 205% on 2011, and purchases via mobile phones accounted for nearly 13% of the sales – an increase of more than 96% over 2011. 

The new vogue
Mobile ‘electronic’ wallets are the new vogue, with a number of service providers, financial institutions and retailers fighting for a share of this market. 

A few large players (such as Starbucks) have already adopted a mobile wallet payment system, while others are still sitting on the fence, aware that this is a form of technology that they cannot afford to ignore, but are nervous about selecting the wrong system. 

The benefits are clear, as mobile wallets offer a rich source of customer and transactional data that can be used for advertising, positioning and marketing purposes. On the flip side, mobile wallets are a complex proposition, which bring together a number of functions, services and support elements. Service providers need to be very careful about how they leverage the unprecedented flow of detailed customer data that mobile wallets generate. 

They also need to manage customer concern about how their data will be used and shared, as well as their vulnerability to privacy and security breaches. Another issue is who controls the data – as it originates from a number of sources. 

Along with the opportunities come the risks. 

Gartner recently predicted that the cost of cybercrime will increase by 10% per annum through to 2016, in part driven by mobile devices and mobile-based apps. With increasing amounts of customer payment information being stored on mobile phones, they will increasingly be targeted by criminals, and there is the risk of transmission signals being intercepted between smartphones and retail terminals by thieves. In addition, there are privacy risks for retailers as they will be electronically tracking individual shoppers’ daily activities, the locations they visit and the purchases they make. 

Retailer protection
So how can retailers protect their business from the risks posed by mobile and online technology? 

These risks involve people, processes and technology. First, they need robust online security systems that are constantly monitored for new risks and viruses – which emerge daily. It is also essential that their data breach response policies and procedures are in place and regularly updated and edited. Finally employees, particularly those with access to sensitive information must be trained. 

Specialist stand alone cyber liability insurance should also be strongly considered. There are now products on the market that will not just insure the financial risks of a data breach or privacy violation but will also provide support in handling the breach. Speed is of the essence when a breach happens, and how the retailer responds can make or break its reputation. This form of innovative insurance gives access to a wide range of specialist legal counsel, reputation management, PR and IT auditing forensic experts as well as client information service providers, who can all swing into action as required. 

Customer protection
What advice should retailers offer to their customers? 

They should continue to urge them to only use sites of reputable retailers, use strong passwords and use credit cards and not debit cards to pay for goods, as these give direct access to bank account details. 

An area of concern is still that most customers shop on their home computers or mobile devices which utilise web browsers that lack the latest security patches. This makes these devices a prime target for malicious viruses. Consumers also need to be warned that cyber criminals are increasingly using false coupons and incentives that include links to infected websites. Social media sites are also being targeted by these criminals and they are hiding infected links in wall postings, tweets and YouTube clips. 

Ultimately, online and increasingly mobile shopping is here to stay – but retailers and shoppers need to take the risks seriously, be prepared for a breach, and think before they click. 

Ben Beeson – partner, Global Technology & Privacy Practice, Lockton
020 7933 2857

Business Finance Advice Scheme – get involved
The government’s new Business Finance Advice Scheme is signing up accountants now. Find out why you should get involved.

The government’s new Business Finance Advice Scheme is signing up accountants now. Find out why you should get involved. 

The Business Finance Advice Scheme is a new government-backed initiative which aims to help educate businesses so that they are equipped to ask the right questions when it comes to accessing appropriate finance. 

Part of a wider initiative to encourage entrepreneurship, it ensures businesses have access to a wide choice of independent, professionally qualified advisers across the UK on a whole range of business finance options. 

Qualified accountants providing this critical service to small businesses now have an opportunity to offer ‘kite-marked’ financial advice to their clients with the minimum of red tape or expense, commencing in January 2013. 

How to participate
To join this free scheme, ACCA members in practice are required to complete an opt-in form, which lists four specialisations: 

  • business plans
  • business start-ups
  • small scale equity issues
  • bank loans and overdrafts. 

You can opt-in now by completing this form

Further information on the scheme and specialisations is available on our website. If you have any queries, please email us.  

HMRC agent strategy programme
HMRC intends to introduce new online services for agents from March 2015.

HMRC intends to introduce new online services for agents from March 2015.  

The new service will save HMRC time and cost, whilst giving agents greater control of their clients' tax affairs. A short guide on HMRC’s website provides an overview of: 

  • online agent registration - applying for a unique agent reference
  • applying for self-authorisation
  • viewing payments and liabilities for your clients. 

It is also piloting the service and you can find details of this here


Get ahead in 2013 with one of our CPD events
Details of ACCA Professional Courses in early 2013.

Details of ACCA Professional Courses in early 2013.



  • Taxation on Property
  • Enterprise Initiative
  • PAYE, Benefits and RTI
  • Trusts, Wills and Inheritance Tax



  • Succession Planning in Family Businesses
  • Business Law Update
  • Finance Bill/Act 2013
  • VAT Update



  • Accounting Standards Update
  • Tax Planning for Owner-Managed Companies


Please Note: The remaining two sessions have been left open to deal with issues arising during 2013.

Register and/or book your next course now

Statutory residence test
The government’s new statutory definition of tax residence explained.

The government’s new statutory definition of tax residence explained. 

Since income tax was introduced over 300 years ago, there has been no legislation to determine an individual’s residence. Instead, taxpayers have had to rely on case law, HMRC guidance and usual practice. 

HMRC’s guidance used to be set out in a document titled ‘IR20’, but the Gaines-Cooper case proved that it was not possible to rely on that guidance. As a result HMRC published a new, simpler guide ‘HMRC6’, but as part of Budget 2011, the government announced plans to introduce a statutory definition of tax residence. 

The government’s proposals have been through a lengthy consultation process and draft legislation has now been published. It will form part of the Finance Act 2013, and will take effect from 6 April 2013. 

The test is composed of three key elements: 

  • an automatic residence test
  • an automatic overseas test
  • a sufficient ties test. 

It will be necessary to work systematically through the tests in order to determine whether an individual should be treated as not resident in the UK. If someone does not pass the automatic residence test or sufficient ties test for the relevant year they should be treated as not resident in the UK. An online tool to assist in the process will be included on HMRC’s website in due course. 

The automatic residence test
There are four automatic residence tests, and they consider whether a person: 

  • spends 183 days (or more) in the UK in a tax year
  • has their only home (or homes) in the UK
  • works full time in the UK
  • in certain circumstances, dies during the year. 

If an individual meets one of these, and none of the automatic overseas tests (see below), they will be automatically resident for the year. 

The automatic overseas test
A person will be automatically non-resident if one of these tests is met: 

  • only a minimal number of days were spent in the UK in the tax year (fewer than 16 or 46 depending on when they were last UK resident)
  • the individual works full time overseas
  • in certain circumstances he or she dies during the year. 

The sufficient ties test
If the above tests do not give a conclusive result, the next step is to look at the sufficient ties test. Residence in the UK will depend on the number of ties with the UK in conjunction with the number of days spent here. The ties to consider are: 

  • family tie
  • accommodation tie
  • work tie
  • 90 day tie
  • country tie (only applicable if the individual was resident for one or more of the preceding three tax years.) 

The application of the factors in the sufficient ties test varies according to the person’s status in the previous three tax years. A person not resident in the previous three tax years is termed an ‘arriver’, and the sufficient ties factors will impact on them as follows: 

Days spent in UK              Impact of factors on status
Fewer than 46 days       Always non-resident 

46-90 days                  Resident if person has four factors (otherwise non-resident)
91 to 120 days             Resident if person has three factors or more (otherwise non-resident)
121 to 182 days           Resident if person has two factors or more (otherwise non-resident)
183 days or more         Always resident

Individuals resident in one or more of the previous three tax years are known as ‘leavers’, and they have a slightly different table: 

Days spent in the UK         Impact of factors on status
Fewer than 16 days         Always non resident
16 to 45 days                 Resident if person has four factors or more (otherwise not resident)
46 to 90 days                 Resident if person has three factors or more (otherwise not resident)
91 to 120                       Resident if person has two factors or more (otherwise not resident)
121 to 182 days              Resident if person has one factor or more (otherwise not resident)
183 days or more            Always resident


Although rather complex, the tests are designed to bring greater certainty and clarity to the question of a person’s tax residence and they will also help to provide a firmer basis for tax planning. For more details about the consultancy process and draft legislation, see HM Treasury's website. 

T’is the season to be equitable
Understand the concept of ‘special relief’, formerly known as ‘equitable liability’.

Understand the concept of ‘special relief’, formerly known as ‘equitable liability’. 

This is an important ‘relief of last resort’ for taxpayers who have missed all other deadlines and face a tax bill from HMRC, where there is no statutory right to amend the actual legal liability because the relevant time limits have passed. 

The equitable liability concession was previously contained in HMRC’s body of extra statutory concessions but was a relief that was very much below the radar. 

HMRC announced the withdrawal of a number of extra-statutory concessions in 2009, the equitable liability concession being one of them. This led to an outcry from the profession and ultimately to the principle of equitable liability being retained and brought within statute and given a new name, special relief. 

Although the relief has been with us on a statutory basis since 1 April 2011, it is worth reminding ourselves of this relief which can be a lifeline in some cases. 

Special relief
Special relief enables HMRC to consider waiving all or part of the tax that had become legally due where it was clearly demonstrated that:                         

  • the liability assessed or determined was greater than the amount which would have been charged had the returns, and necessary supporting documentation, been submitted at the proper time
  • acceptable evidence was provided of what the correct liability should have been. 

In such cases HMRC will accept a reduced sum based on the evidence provided, if, in their view, it would be unconscionable to pursue recovery of the full amount. Special relief is a form of overpayment relief which can only apply to amounts charged in HMRC determinations for income tax self-assessment or corporation tax self-assessment where no other statutory remedy is available. 

The treatment is dependent on the circumstances of the particular case, and is conditional on the customer's affairs being brought fully up to date before the claim can be considered. 

Under the special relief provisions, taxpayers can make a late appeal against an amendment or assessment if they either: 

  • have a reasonable excuse for not having appealed within time, or
    make a successful application to the tax tribunal. 

An important point to note is that a claim for special relief is not subject to the normal four year time limit for making claims and elections. 

There are three specific conditions that need to be met for special relief to be available. These reflect HMRC’s former practice in applying equitable liability and are as follows: 

  • A – in the opinion of the Commissioners it would be unconscionable for HMRC to seek to recover the amount which has been charged by a determination, or refuse to repay it if it has already been paid
  • B – the person’s tax affairs are otherwise up to date or arrangements have been made to the satisfaction of the Commissioners to bring them up to date as far as possible
  • C – the person has not previously claimed special relief or sought equitable liability, whether or not relief was given. 

Condition C may be disregarded in exceptional circumstances.

Any claim for special relief must include such information and documentation as is reasonably required to determine whether these conditions are met. 

HMRC is at pains to point out in its guidance that special relief is intended to be a final and exceptional remedy and that there must be special circumstances which would make it ‘unconscionable’ to collect the tax. HMRC gives the following examples: 

  • the taxpayer was suffering from a temporary or sporadic illness, including mental illness, and consequently find it particularly difficult to engage with the tax system
  • the taxpayer has not received our notices or other communications for reasons outside their control
  • the taxpayer is insolvent and failure to write-off the unconscionable amount would be to the detriment of other creditors.

HMRC also gives examples of situations where that it considers would not make it ‘unconscionable’ to collect the tax, as follows: 

  • the taxpayer registers as self-employed and never gets any business but remains in the self assessment system as a result of failing to notify HMRC of a cessation
  • the taxpayer ceases to be registered under self assessment but fails to notify HMRC of a change of address during the 12 month inquiry window; during which time, a determination is issued
  • the taxpayer is a subcontractor who suffers deductions under the construction industry scheme and believe they have nothing further to pay, so do not respond to determinations and other contacts
  • the taxpayer is aware of their responsibilities but negligently fails to communicate with HMRC. 

The above examples are HMRC’s interpretation of the term ‘unconscionable’ and these interpretations have not been tested through the courts. Practitioners should be aware that if HMRC refuses a claim for special relief, then an application may be made to the tax tribunal. 

After all, we have recently seen the tax tribunals take a far more lenient view regarding the interpretation of ‘reasonable excuse’ than HMRC; they may well also do so regarding what may be regarded as unconscionable, which the Oxford English Dictionary defines as ‘not right or reasonable’ or ‘unreasonably excessive’. 

ACCA UK's Technical Advisory website provides further tax technical support and advice.


High income child benefit charge
What the changes to child benefit will mean for your clients.

What the changes to child benefit will mean for your clients. 

The ‘high income child benefit charge’ comes into effect from 7 January 2013. The charge is based on the adjusted net income for 2012/13, so the final charge is not known until after the end of the year. For self-employed individuals the charge may be based on their current earnings. 

The new tax is an income tax charge to ensure that child benefit is effectively removed from persons with income in excess of £50,000. It only applies if one person in a household partnership has an annual adjusted income in excess of £50,000. Thus, a single parent with income in excess of £50,000 is penalised, whereas if both parties were to receive £45,000 each, there would be no penalty. 

The charge is the ‘appropriate percentage’ of the total child benefit received by either partner in the fiscal year. Where the adjusted net income is £60,000, the appropriate percentage is 100%: and the total benefit is clawed back. 

The important thing to note is that it is not the child benefit, nor necessarily the recipient that is subject to the child benefit charge; it is the member of the family partnership with the highest income who is subject to the tax. 

What is a partner?
Taxpayers are partners if: 

  • they are a man and a woman who are married to each other and are neither separated under a court order, nor separated in circumstances where the separation is likely to be permanent
  • a couple, who are not married to each other but are living together as man and wife
  • the persons are two men, or two women, who are civil partners of each other and are neither separated under a court order, nor separated in circumstances in which the separation is likely to be permanent
  • the persons are two men, or two women, who are not civil partners of each other but are living together as if they were civil partners. 

Adjusted net income
Adjusted net income is defined in Section 58, Income Tax Act 2007. It is net income after deduction of gift aid (grossed up), pension scheme contributions and losses etc. It will therefore include dividends, income from property including holiday homes, interest on savings, pensions as well as self-employment and casual work. The self-employed should bear in mind when preparing their accounts that they need to make use of all available deductions, such as capital allowances, and maximise their pension contributions if necessary. 

A week is a period of seven days beginning with a Monday; it is in a tax year if the Monday with which it begins is in the tax year. As the charge is by reference to weeks, it will apply only to those weeks of a fiscal year for which a partnership exists. 

Example On 6 April 2013 Frances is a sole parent entitled to child benefit of £33.70 per week for her two children. Her annual adjusted net income is £55,000. 

Percentage charge: £55,000 - £50,000  = 50%

Frances is liable to a charge of 50% x £1752 (after rounding down). The charge would be £876. Note that this is the actual tax charge, not the assessable amount.        

If child benefit is being paid, and a couple start living together, the charge will arise from the time the couple live together. 

If a partnership breaks up the higher earning partner will only be liable from 6 April until the date the partnership breaks up. 

This could cause problems where people enter into serial partnerships, since HMRC are proposing to monitor the situation on a weekly basis! 

There is an exemption if one partner had previously claimed child benefit on the basis that they were living with the child and after an absence of less than 52 weeks, resumed the claim on the same basis. This would occur when a parent moves away for work and leaves the child with a family member until they return. 

One of the problems with this legislation is that both partners are required to disclose their income. This caused a lot of difficulties prior to the introduction of separate assessment in 1990/91 and many people would regard it as an intrusion into their privacy. The only way to avoid this would be to disclaim the child benefit. 

If they cannot or will not ascertain their partner’s income, HMRC is willing to help. It will try to provide the minimum information to enable them to establish whether either has a ‘higher income’. 

Election not to receive child benefit
If a partner’s income exceeds £60,000, it may be preferable to disclaim the benefit in order to avoid the charge. The election takes effect in relation to weeks beginning after the election is made. If the claimant decides to elect not to receive the benefit, because the expected income is over £60,000 and the higher income partner finds that this is not the case, the claimant can revoke the election. 

The revocation can only be backdated up to two years, provided there would be no high income child benefit charge (because the income was less than £50,000). If a partner’s income falls between £50,000 and £60,000, they could be worse off if they had elected not to receive the child benefit: 

  • the person entitled to receive child benefit may elect not to receive the benefit for one or more of their children
  • the election only applies for weeks after it has been made
  • where entitlement to child benefit is backdated the election may be made in respect of any child benefit payments in the period ending three months before the claim was made
  • the revocation has effect for payments made for weeks beginning after the revocation was made
  • if a person has revoked the election on the grounds they believed it would be subject to claw back but one did not in fact arise, the election not to receive child benefit can be revoked within two years
  • a child is defined as including somebody who is a qualifying young person for the purposes of the child benefit regulations. 

The charge
Child benefit itself is not liable to tax and the amount that can be claimed is unaffected by the new charge. The charge is levied upon the member of the household with the highest income. 

On 6 April 2013 Lisa is a sole parent entitled to child benefit of £47.40 for her three children. Her annual adjusted net income is £55,000. 

On 6 January 2014, Lisa lives with Johnny as man and wife. Johnny’s adjusted net income is £200,000. 

For the period 6 April to 5 January, the child benefit received by Lisa will be subject to a claw back charge by reason of her income. As there are 39 weeks in that period, the total child benefit would be £1848.60. As her income at £55,000 is between £50,000 and £60,000 there will be a charge to pay. This will be 50% x £1848, i.e. £924. 

From 6 January, she is in partnership with Johnny and the benefit charge will be levied on him. This would be 100% x 13 x £47.4 = £616.20. 

A person can claim child benefit even though the child is not living with them. This would occur when the person is paying for the child’s maintenance at least to the extent of the child benefit claimed. 

Exemptions apply: 

  • when an election has been made to disclaim child benefit
  • after the death of the child. 

Tax returns
Those liable to the charge will have to declare the liability on their tax returns. Now is the time to make sure that they have all the information to hand, particularly if they have not previously submitted a tax return. 

HMRC estimates that this legislation will bring another 500,000 individuals within the self-assessment regime. Now is the time to get the paperwork in order. 

Paper tax returns must be submitted by 31 October 2013 and online returns by 31 January 2014.

For further information, see ACCA's Guide To... High Income Child Benefit Charge (which you can share with clients).

Frequent problems with bank audit letters
What are the most common problems with requests for bank audit letters?

What are the most common problems with requests for bank audit letters? 

The current procedures for auditors to request bank confirmation letters have been in place for a number of years. However, a number of frequent problems have been identified that affect the smooth running of the process. 

The procedures were agreed between the bodies representing the UK auditing profession and the British Bankers Association (BBA) and are included in Practice Note (PN)16 (Revised) Bank reports for audit purposes in the United Kingdom.

In particular when requesting bank confirmations, auditors need to: 

  • provide the customer’s main sort code and main account number for each legal entity on their report request (that is, subsidiaries as well as the holding company where a single letter is sent for all companies in a group)
  • provide a facility account number for trade finance or derivative and commodity trading if such additional information is required
  • address the bank letter to the specific processing centre identified by each bank and not to the client’s relationship manager. The addresses of centres dealing with bank report requests for each bank are published on the BBA website
  • check that the authorities disclosing information to the auditors provided to the banks are valid. A new authority is not required each time a request is sent, however an updated authority is needed for new group entities and when there are changes affecting the auditor such as reorganisation as an LLP or merger with another practice. 

The request for a bank report needs to be issued on the auditor’s own headed paper using one of the three templates included in PN 16. It is essential for the auditor to choose the most appropriate template to use in view of the specific circumstances of the engagement: 

  • the standard request template should be used for all requests, except exceptional circumstances in which one of the other two templates would be more appropriate. The standard request also includes an option for additional information in respect of trade finance and derivative and commodity trading
  • the fast-track request template should be used only in exceptional cases, for example when an entity has to meet a reporting deadline within a month or less of the accounting year end (that would be the case for a listed entity). A fast-track request must state in the appropriate box the reasons as to why the auditor needs the information within less than a month and the date by which the reply is needed
  • the incomplete information request template should be used when the auditor is unable to provide the main account sort code and number for all the entities in a group or sufficient references to identify additional information required. Circumstances where an incomplete information request may be appropriate are relatively rare and might include a break down in controls of the client and subsequent lack of information, suspicion by the auditor that the entity has not provided full information in view of previous occurrences or when fraud or improper behaviour is suspected and where there is a history of poor record keeping. Auditors need to be aware that banks cannot give information in respect of legal entities that are not covered by an existing authority to disclose. An incomplete information request will also take longer in view of the more extensive searches required and might result in an additional fee. 

Where practicable the auditor should send the bank report request early enough to reach the bank one month in advance of the reporting period end date. However, it is advisable to allow more time for busy periods like December and March year ends. For standard requests the banks will endeavour to reply with a calendar month of the period end date. 

Although the outlined procedures have been in place for almost four years (they were introduced for periods ending on or after 26 December 2008), frequent problems that hinder the correct flow of the process have been identified in the regular meetings that ACCA and other professional bodies hold with BBA representatives for the purpose of monitoring compliance with PN 16. 

In some circumstances problems may have been generated by the approach taken by some banks to auditor’s requests. ACCA would like to obtain comments from its members about their experience of the application of the current procedures, including regular or isolated problems encountered with specific banks, so that appropriate feedback could be given at future meetings with the BBA to seek remedy and improve the process. Comments may be sent to 

BBA highlights a number of recurring issues that it receives from its members regarding inappropriate auditors’ behaviour that if rectified would improve the smooth running of bank confirmations. They are: 

  • additional information requests: a recurring problem is that of confirmation requests for which the boxes about additional information about trade finance or derivative and commodity trading have not been ticked where such information is actually needed. Failure to do so in the original request slows down the process. Auditors should therefore check carefully before sending their request whether the additional information boxes should be ticked
  • multiple requests: it is acceptable for auditors to send multiple bank letter requests by post; however banks have pointed out that, when faxing requests, auditors should ensure that a separate fax is sent for each letter. The reason for this is that faxes are received and stored electronically by banks and where multiple requests are received in a single fax, the additional time required to separate the requests for individual entities or groups is likely to delay reply. There is no issue with having multiple entities on the same letter (i.e. for members of a group); a problem may arise where different, unrelated requests are sent on the same fax
  • use of fast-track requests: it has been reported that there has been an increase in the use of fast-track requests. In some cases it seems that this is a policy choice by some auditors to try and accelerate responses, rather than a genuine request in accordance with the guidance in PN 16. Apparently different requests sent by the same auditors may state the same reason for fast-track requests, indicating possible misuse of the service. The fact that an auditor has delayed the submission of bank confirmation requests and that there is little time before the accounts filing deadline is not an acceptable reason for a fast-track request. Occasionally the reasons for a fast-track request, which are required by the template, are not given at all. Fast-track requests should be used for entities subject to tight deadlines, like listed companies; however it would be acceptable to submit a fast-track request when an auditor has been appointed after the end of the reporting period and near the accounts filing deadline
  • copies of cheques: the request for copies of cheques is not part of the bank audit confirmations process and should take place via a separate request addressed to the designated teams of each bank. The BBA will publish a contact list for copies of cheques requests on its website.

VAT and the transfer of a going concern
HMRC issues Brief 30/12 following Tribunal decision.

HMRC issues Brief 30/12 following Tribunal decision. 

HMRC has released Revenue & Customs Brief 30/12 following the First Tier Tribunal decision in Robinson Family Limited [2012] UKFTT 360 (TC). 

The case concerned a Transfer of a Going Concern (TOGC). A TOGC is where if certain conditions are met the sale of the assets of a business or part of a business when sold as a going concern are not considered a ‘VATable’ supply. One of the conditions is that the assets are used in carrying on the same kind of business. 

It becomes more confusing when property is involved, especially when it concerns a property development or property rental business. With property businesses, for there to be a TOGC the interest in the land being transferred must be the same as the interest by the transferor. If what was transferred was less than the transferor’s full interest in the land and as there was a retained interest, HMRC interpreted this as not meeting the conditions of a TOGC. 

For example a freeholder granting a 999 year lease on a piece of land would be seen as the freeholder retaining an interest and therefore would not fulfill the condition for a TOGC to apply. 

The Robinson Family Limited (RFL) case looked at HMRC’s interpretation of this law. The RFL operated as a property developer that purchased a 125 year interest in a site from the Belfast Harbour Commissioners. RFL intended to create six units from this site and to grant sub-leases. Due to restrictions imposed by the Belfast Harbour Commission, for one of the units being sub-leased RFL created an interest of 125 years less three days. As interpreted by HMRC this could not be treated as a TOGC, its guidance in VAT Notice 700/9 paragraph 6.3, bullet point two, states: 

‘If you own the freehold of a property and grant a lease, even a 999 year lease, you are not transferring a business as a going concern. You are creating a new asset (the lease) and selling it while retaining your original asset (the freehold). This is true regardless of the length of the lease.  Similarly, if you own a head-lease and grant a sub-lease you are not transferring your business as a going concern.’ 

The Tribunal rejected HMRC’s argument, referring to the fact that distant three days reversion and the small economic benefit retained did not alter the substance of the transaction, which is to put the transferee business in the same position as RFL’s business. 

HMRC has now revised its interpretation in light of this decision and has decided not to appeal. It accepts a small reversionary interest does not change the nature of the transaction. Small meaning small enough not to disturb the substance of the transaction and the value of the interest retained is no more than 1% of the value of the property immediately before the transfer. This should be applied on a property by property basis where a number of properties are being transferred. 

HMRC is encouraging retrospective claims; if you believe that you have overpaid VAT – due to HMRC’s misinterpretation of the law and the RFL case – a claim can be filed with HMRC subject to the usual time limits. For details please view VAT Notice 700/45.

This also raises an issue around stamp duty, which is paid on the VAT inclusive amount. HMRC is currently considering this point and will issue guidance on whether a retrospective claim for overpaid stamp duty can be administered and paid back in cases of overpayment. 

Understanding annual investment allowances
Ten things you need to know about the new annual investment allowance.

Ten things you need to know about the new annual investment allowance. 

One of the headlines of the chancellor’s Autumn Statement was the increase in the Annual Investment Allowance (AIA) from £25,000 to £250,000 for two years commencing 1 January 2013. 

  1. What is AIA?
    Annual Invest Allowance is effectively a 100% first-year allowance for business expenditure on qualifying plant or machinery.
  2. What are qualifying plant and machinery?
    Qualifying plant or machinery covers almost all assets a person may buy for the purposes of his business. The only business assets not covered are land, buildings and cars.
  3. Who can claim AIA?
    AIA can be claimed by an individual, a company and a partnership of which all the members are individuals, carrying on a qualifying activity. A qualifying activity includes trades, professions, vocations, ordinary property businesses and employments or offices. Trusts and partnership of which a company is a member do not fall within the definition of a qualifying person.
  4. What is the maximum AIA?
    Maximum AIA is:
    £250,000 on expenditure from 1 January 2013 to 31 December 2014
    £25,000 on expenditure incurred from 6 April 2012 (1 April 2012 for corporation tax purposes) to 31 December 2012
    £100,000 on expenditure incurred from 6 April 2011 (1 April 2011) to 5 April 2012 (31 March 2012)
    maximum allowance is proportionately increased or reduced where the chargeable period is more than or less than a year.
  5. What happens if the accounting period straddles the affected dates?
    Transitional rules apply for chargeable periods which straddle the affected dates. For example a business with the year end 28 February 2013 would have three chargeable notional periods. The maximum AIA that this business would be eligible to claim on qualifying expenditure is £68,750 ((£100,000×1/12+£25,000×9/12+£250,000×2/12). However this amount is subject to an additional overriding rule for each notional chargeable period. The maximum allowance must be calculated as if the limit were for that national period. For more practical examples on maximum AIA please see our Guide To… AIAs [ADD LINK].
  6. What happens if the business spends more than AIA limit?
    Where businesses spend more than the annual limit, any additional expenditure is dealt with in the normal capital allowances regime, entering either the main rate or special rate pool, where it will attract writing-down allowances at the 18% or 8% rate respectively.
  7. Are there any other restrictions on AIA?
    Businesses under common control and group of companies are entitled to only one AIA. It is not available on assets not used immediately in the trade, or on a transaction with a connected person, or in the chargeable period in which the qualifying activity is permanently discontinued.
  8. What about expenditure on energy-saving plant and machinery?
    Investment in certain green technologies is eligible for enhanced capital allowances. These are in addition to the AIA allowance and, like the AIA, would be eligible for 100% tax relief in the first year.
  9. When is the expenditure treated as incurred?
    Capital expenditure is treated as incurred as soon as there is an unconditional obligation to pay, even if all or part of it is not required to be paid until some later date. However, expenditure is treated as incurred on a later date where any part of the expenditure is not required to be paid until a date more than four months after the date determined above.
  10. What is the economic impact?
    Increase in AIA should encourage small and medium size businesses to invest in plant and machinery, stimulating growth. For a higher rate taxpayer it would mean a 50% reduction of tax on any amount spent on qualifying equipment.

Download ACCA’s Guide To.. Annual Investment Allowances for further guidance (which can also be shared with your clients).


Professional fees
How to treat professional fees for tax purposes.

How to treat professional fees for tax purposes. 

A deduction for fees and subscriptions paid to professional bodies or learned societies under Section 344 ITEPA 2003 (formerly Section 201 ICTA 1988) is allowable where: 

  • a statutory fee or contribution shown in the list is allowable where employees (E) pay this out of their earnings from an employment, and are required to pay this as a statutory condition of following their employment
  • an annual subscription to a body shown in the list as approved by HMRC is allowable where employees (E) pay this out of their earnings from an employment and the activities of the body are directly relevant to the employment
  • the activities of a body are directly relevant to an employment where the performance of the duties of that employment (E) is directly affected by the knowledge concerned or (E) involves the exercise of the profession concerned. 

The list shows professional bodies and learned societies, approved by HMRC for the purposes of Section 344 ITEPA 2003 (formerly S201 ICTA 1988).

For example you will find ACCA listed asChartered Certified Accountants, Ass’n of **Acronym ACCA.’



Shares of negligible value
HMRC’s list of shares of negligible value.

HMRC’s list of shares of negligible value. 

HMRC provides a list of shares or securities formerly quoted on the London Stock Exchange, which have been officially declared of negligible value for the purposes of a claim under S24(2) Taxation of Chargeable Gains Act 1992 by the Shares and Assets Valuation Office.  

The negligible value list gives a tax year or a specific date at which Shares and Assets Valuation has accepted that the share or security is of negligible value.


VAT in Cyprus and other EU states
Changes to Cyprus’ VAT rate and a summary of VAT across Europe.

Changes to Cyprus’ VAT rate and a summary of VAT across Europe. 

Below is an update on VAT in Cyprus, while ACCA has also produced a helpful analysis of VAT in the 27 EU countries that includes details of: 

  • what VAT is called
  • the EU country code
  • the standard rate of VAT
  • the form of the VAT registration number
  • the normal filing period
  • government website details to access further information.

As previously proposed, the Cypriot VAT rate has been increased. As part of Cyprus’ financial bail-out the standard rate of VAT will increase by 1% to 18% from 1 January 2013. A further 1% increase is proposed from 1 January 2014, bringing the rate of VAT to 19%, and in line with mainland Europe. The increase due in 2014 will also be complimented by a similar increase to the reduced rate of VAT, a 1% increase to 9%.

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