Technical and Insight
Tackling Covid-19 related fraud

Ethical concerns and advice for accountants around Covid-19 fraud.


Ethical concerns and advice for accountants around Covid-19 fraud.

 

The Treasury Direction (TD) under the Coronavirus Act 2020 sets out the legal framework for the scheme and was last updated on 25 June 2020.

 

The Coronavirus Job Retention Scheme (CJRS) was introduced to protect jobs and HMRC has stated that:

 

‘the person making the claim accepts that:
(a) a payment made pursuant to such claim is made only for the purpose of CJRS and
(b) the payment must be returned to HMRC immediately upon the person making the CJRS claim becoming unwilling or unable to use the payment for the purpose of CJRS.

No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS’.

 

Ethical requirements for accountants

Ethical behaviour by advisers is critical, to ensure businesses and individuals understand government initiatives and that public funds are used as intended. The work carried out by an adviser needs to be trusted by society at large as well as by clients and other stakeholders. What a member does reflects not just on themselves but on the profession as a whole.

 

ACCA members are reminded that they should continue to observe ethical standards as set out in the code of ethics. The fundamental principles include:

  • Integrity – to be straightforward and honest in all professional and business relationships
  • Objectivity – to not allow bias, conflict of interest or undue influence of others to override professional or business judgements
  • Professional competence and due care – to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques, and act diligently and in accordance with applicable technical and professional standards
  • Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships and, therefore, not disclose any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for the personal advantage of the member or third parties
  • Professional behaviour – to comply with relevant laws and regulations and avoid any action that discredits the profession.

 

Examples of areas of concern

Examples of abuse that HMRC will target include:

 

Employer-benefit fraud

  • where an employer purports to place an employee on furlough in order to access the scheme, but in fact has instructed that employee to work, provide services or generate revenue for that employer
  • where the employer does not pay the full furlough entitlement to the furloughed employees.

 

Employee-benefit fraud

  • where an employer seeks to allow an individual not ordinarily employed by them to be regarded as an employee for the purposes of the scheme, so that the scheme will provide funds for the individual that they are not entitled to.

 

HMRC has put in place a fraud hotline (telephone 0800 788 887) and an online whistle-blower service based on a structured email form, for employees and the public to report suspected fraud in the furlough scheme.

 

Advice for accountants

ACCA members are strongly advised to review the suite of technical factsheets Professional Conduct in Relation to Taxation (PCRT), especially Help sheet C dealing with errors.

 

Professional accountants should ensure that clients understand the rules relating to the furlough claim and have systems in place to ensure compliance.

 

If they become aware that an employer-client is breaching the rules (for example an employee is carrying on work while on furlough), advise the client accordingly and ask the client to rectify the error. A member should keep sufficient appropriate records of discussions and advice given.

 

If the client rectifies the error (and repays the ‘over-claimed grant’), the accountant is free to continue to act for the client. However, should the client ignore such advice and guidance, the accountant must:

  • cease to act
  • inform HMRC of their withdrawal
  • submit a suspicious activity report to the National Crime Agency (see ACCA’s guidance on making a suspicious activity report)
  • consider carefully their response to any professional enquiry letter (also known as professional clearance letter).

 

Accountants should also be aware of their obligation on engagements in assisting a client to apply for any other government support measures such as Bounce Back Loans and the use of ‘Time To Pay’ arrangements. Accountants should fully explore what support is available for their client’s actions ethically and within the law. A professional accountant shall not be allowed to be associated at any time with information that they believe to be wrong or misleading.

The importance of process for the digital firm

Will Farnell explains why ‘process’ is the second favourite segment of his digital firm wheel.


Will Farnell explains why ‘process’ is the second favourite segment of his digital firm wheel.

 

We finished our third article on transitioning to a digital firm by focusing on the importance of client experience in meeting the shifting expectations our clients have on the kind of service they receive, and the interaction they have with suppliers including their accountants.

 

We as accountants are not Amazon and we don’t need to be. But businesses like Amazon are setting the benchmark for the experience they deliver to customers. In the last article we talked about Net Promoter Score as a way to measure client experience. Starbucks has an NPS score of 77. This is ‘world class’ and sets the bar for what we should be striving for. To achieve scores at this level you need to be delivering consistently excellent levels of client experience, so the vast majority of your clients are rating you 9 or 10 on the NPS scale. But how do we ensure we develop consistently excellent experiences?

 

The answer of course is consistent processes. If you have been into a Starbucks there is a process, it works 99% of the time meaning you get what you ordered quickly, efficiently and they know your name! It doesn’t matter who the server is or whether it is your local Starbucks or one in a city you are visiting, the experience is the same, and consistent. How then do we apply this in our firms?

 

The role for process in our accounting firms

There will be arguments that it’s not that simple for accounting firms, we have different clients with different requirements and different systems, complex pricing and so on. Of course, there are arguments for everything in life but we can choose to simplify what we do and how we do it.

 

We hear a lot about disruption, Uber, AirBNB and so on. Xero disrupted bookkeeping with the introduction of direct bank feed technology. Disruption occurs when businesses remove the friction in a process. It is that simple, anything that causes friction will impact on a customer’s experience so our processes should be designed to remove friction.

 

I enjoy talking about ‘process’, it is my second favourite segment of my Digital Firm wheel behind ‘pricing’ which we talked about in the second article. It is my second favourite topic as it is so critical in delivering that great client experience we want. Every firm I talk to wants to delight their clients, after all.

 

When I talk about process at events and conferences, I make a statement and I encourage people to write it down as I believe it is the most critical thing for firms to take away and consider. Here it is:

  • You as the accountants have to own the process

 

Let’s stop and think about that. Do you own the process in your firm? In the early days of my firm process wasn’t at the top of my thoughts, but back in 2009 we made the decision that all our clients would use KashFlow. In 2015 we made the decision they would all use Xero. This was the right approach for my firm, but I accept it's not necessarily the right one for everyone. It is, however, a significant example of owning the process.

 

As more and more firms move to subscription-based models or at the very least fixed fee pricing this next statement becomes more and more critical.

  • If you don’t control the process you can’t control the profitability

 

Assuming you are offering clients a fixed fee, if we don’t have some element of control over what the client does it becomes very difficult for us to standardise our work to deliver on the fixed fee. Let’s take an example.

 

I know that many firms will work with what the client gives them. They ask the client ‘how do you keep your books?’ to which the client replies with one of:

  • in a spreadsheet
  • on Sage
  • on Xero
  • on QBO
  • in a carrier bag
  • in a simplexD book.

 

You get the picture. Traditionally the accountant’s response to any of those would be ‘that’s fine, we can work with that’. This works if you are hourly billing the client as they pay for the time it takes. We have already talked about the fact that this does not facilitate great client experience in the earlier pricing article. Clients care about outputs not inputs.

 

In this example we are working on a fixed price fee. If we are not controlling the process here, we cannot control the profitability of the job. It becomes very hard for us to offer the fixed price fee model and get it right in this situation. If this is your objective for your firm, you have to take control of this process and dictate to the client what their options are.

 

I have on a number of occasions been challenged on this. It is not for everyone but if you are looking to build a future proof firm with client experience at the heart, for me it is something you have to embrace.

 

Let's think about what we are doing here. If we dictate a process to a client, we are the expert and the client is paying us for advice. The process we are suggesting for a client should have the aim of delivering top quality services effectively and efficiently to the client and giving them the output they need. What is so wrong therefore in setting out the best way for that to be achieved for you and the client? It is after all what our clients want from us - to give them the right solution.

 

Educating clients on our process

My definition of a digital firm is ‘a firm that utilises a mix of digital technology and digitally aware staff to deliver first class services, effectively and efficiently, through maximum levels of automation’.

 

If this is what you are striving for, then I would hope that you see the logic in the need for you to have a degree of control over the process, to deliver that consistent service quality for your clients. So how do we ensure the clients are prepared to follow the process?

 

The key of course is education, and good process starts with good client onboarding. We can learn huge amounts from software vendors in how they support clients as they come on board. We have one opportunity to make a great first impression. As I grew my firm we had periods where we were taking on one new client a day. With this rate of new business, it is easy to drop a few balls. We certainly did. We had no process and we were making errors at the very point we shouldn’t be!

 

To fix the problem we set up a dedicated Welcome Team. It was one person initially! This approach has developed over time but today the team works with our new clients to get them up and running with the Farnell Clarke way. They get new clients signed up, they set up the software and provide training as necessary. They touch base with the client once a week at least and most importantly ensure they are doing the things we need them to do to enable us to deliver the level of service they expect within the fixed fee we have set.

 

It is really important that once we have our process set out we communicate why it is important for the client to follow it. Ultimately this is likely to be focused around fee levels. If the client does x, y and z then you as the firm can guarantee the fee, if they don’t do x,y, and z there may be additional fees. Of course, this is the stick approach, the carrot is that if the client does what they need to do they will have good quality to run better businesses.

 

Next steps

Process is a huge area and next month’s article will continue this theme as we look to explore the way process can be used to deliver more efficient compliance work, which in turn opens up opportunities to deliver added value services due to increased capacity and good quality data.

 

Ahead of next month’s article, take some time to think about your own processes:

  1. Do you own the process?
  2. How do you feel about dictating more of a process to clients?
  3. How do you ensure new clients understand what you need from them at the point you onboard them?

 

Finally, remember ‘you as the accountant have to own the process’. You have to choose how you run your firm and not let clients run your firm for you.

 

Will Farnell – Founder & Director, Farnell Clarke

Starting your own accountancy practice

What are the regulatory aspects and considerations of starting your own accountancy firm in the UK?


What are the regulatory aspects and considerations of starting your own accountancy firm in the UK?

 

It is an exciting prospect for anyone to start their own business and each year many accountants decide to take the plunge and set up their own firm. However, there are a lot of considerations and a number of steps that have to be taken – and a lot of red tape too!

 

I have recently started an accountancy practice with a new business partner and in this series of articles I will tell you about our journey and what to look out for so that it can help you if you decide to start your own practice too.

 

Aims and objectives

When exploring the opportunity to start your own practice, it is important to discuss what you and each of your business partners want to achieve. There is no point in starting a firm if you have different longer term plans and it is essential that you all have similar goals and similar timescales.

 

It is also essential that you have similar values. These are really important when you run a business as you need to really believe in your values and build the pillars of your business around them. These may take some time and some work to finalise but these should be discussed early in the process to make sure you are on the same page.

 

It is also necessary to examine each of your strengths and weaknesses. Determine areas of overlap where you have significant strengths and areas where you are less strong. These weaker areas are not a reason to give up or a reason to avoid, instead these areas are where you need the input of another person or organisation to help. This may mean that you start to plan when you get another business partner, a new employee or when you will outsource the work to another company or freelancer.

 

Structure of the business

It is important early on to decide what structure you and your business partner(s) want for the firm. This really boils down to partnership or limited company and there is really no right or wrong answer.

 

In our case, we opted for the limited company approach as we have both run a limited company before and prefer this route.

 

If you do decide to become a limited company, you will need to agree on the directors, shareholdings and the registered office address, then the next step will be to register the company at Companies House but you have one key step to do first!

 

Have you got a practising certificate?

ACCA requires that any ACCA member who is a partner (principal) in an accountancy practice must hold an ACCA practising certificate. In other words, any member working in public practice must hold an ACCA practising certificate.

 

ACCA’s definition of public practice is:

  • The ACCA’s definition of public practice work extends beyond audit and other regulated work, to incorporate all types of work generally associated with an accountancy practice, but excluding book-keeping services.

 

Therefore, you will need a practising certificate if you are preparing annual accounts, personal or corporate tax returns but not if you are undertaking only pure book-keeping services. ACCA defines book-keeping services as including:

  • the preparation of accounting records to trial balance stage
  • maintaining clients’ records in respect of payroll and employment taxes
  • maintaining basic sales tax records such as VAT.

 

When you apply for an ACCA practising certificate for the first time, it is necessary to demonstrate that you have all the necessary experience needed. You then have to complete the practising certificate experience form and send it to the ACCA Authorisation Team for approval. Please ensure that you allow up to 28 days for approval.

 

Once issued, you then will need to renew your practising certificate annually.

 

ACCA students may not start and run an accountancy firm and they cannot hold a practising certificate. A different practising certificate is required if you plan to provide audit services.

 

Business name

The next step is to agree on a name for the company. This can be tricky but you need to decide the sort of name you want and what you want it to mean. Some accountancy firms have more traditional names such as XYZ & Partners; others have more quirky names and it is all down to the preference of the individuals.

 

Assuming you are a limited company, you will need to then check the availability of the company name at Companies House. In all cases, you also need to check if the URL is available for the company and there are lots of online websites that can do this for you.

 

One factor to consider before you finally agree on the name is to consider the email and website domain. Will this be easy to remember and easy to spell? Ensure it is not likely to be prone to mis-spellings as this will result in communication issues later and reduce the footfall to your website.

 

Shareholder agreement

It is also important to have a shareholder agreement drawn up early in the process. This may seem very formal but you need to have it in place to cover all eventualities.

 

It does not need to be complex and you may decide that you do not need to have the input of a lawyer and, instead, use an online agreement that you can download from the internet and customise to your needs.

 

In the agreement, you will need to decide on a number of factors such as how the business is run, the shares of profits, what happens when a partner wants to exit. Once this is agreed, you then all need to sign the agreement and then regularly check and update the agreement as the business grows and develops.

 

Insurance

It is a requirement that all holders of an ACCA practising certificate obtain professional indemnity insurance cover against any potential claims for professional negligence. It is also essential that the insurance is from a participating insurer who is approved by your accounting body.

 

It is worth getting quotes from a number of providers as I did find that these varied quite substantially in price and the level of cover. It is also worth considering the other associations of which you are a member as you can sometimes get a discount on insurance (such as through the Federation of Small Businesses).

 

In addition to this, business insurance is also recommended in order to protect against theft or damage to your or another’s property and also to protect against personal injury around the office. You may also want to consider taking out cyber and data insurance and, if you are employing staff, you will require employer’s liability insurance too.

 

Regulatory body

If you have partners who are not all ACCA-qualified then you will have to establish the regulatory body for the firm. This is determined by establishing where the control lies.

 

For example, if you have three directors who each hold an equal shareholding in the business and two are ICAEW qualified and one is ACCA qualified then the firm will be regulated by the ICAEW.

 

If you have two directors who are equal shareholders and one is regulated by the ICAEW and the other the ACCA then this is an equal split and then HMRC will be the regulatory body.

 

Incorporation notification

When you set up a new firm, you need to inform ACCA of this via completion and submission of the incorporation notification.

 

The form provides details of the directors and also the shareholders, business continuity, AML supervisory body, insurance as well as the services you will offer. The form must be completed and submitted to the ACCA Authorisation team. Please allow 28 days for processing and, once processed, you will be issued with an ID number for your firm.

 

Please ensure that you submit your form to the ACCA well in advance as, until you have received the ID number, you cannot practise. 

 

In the next article, we will look at the further steps and tasks that must be undertaken in order to set up your accountancy firm and then in article three we will look at the systems and practicalities that you need to consider when setting up your firm.

 

Caroline Harridence ACCA – Co-Founder, C-Squared Finance Limited

HMRC prompts on CJRS errors or fraud

Letters relating to CJRS fraud should not be ignored by accountants or clients.


Letters relating to CJRS fraud should not be ignored by accountants or clients.

 

Practitioners will be aware of, or may have received on behalf of their clients, HMRC letters prompting them to correct any errors made on claims relating to the Coronavirus Job Retention Scheme (CJRS) grants.

 

HMRC has recently started sending out these letters – about 3,000 per week. These letters will invite the client to declare whether any overclaims were made by them in relation to CJRS grants.

 

The letters should not be ignored – they must be responded to even if the client believes no declaration is due. A response by letter should suffice for these purposes. Legal or expert advice should be sought before any ‘certificate of tax position’ is signed and submitted to HMRC.

 

It would be advisable for practitioners to start advising their clients that all claims are checked and ensure full records are available supporting the claims. Practitioners will have assisted many clients on submitting the claims on behalf of their clients and while they may been provided with computations and payroll records, they may not be aware of any other conditions that may have broken by the client or their staff.

 

The Finance Act 2020, Schedule 16 contains an amnesty for notifying HMRC of any errors or overclaims within 90 days of the later of any tax charge being payable due to the overclaim and the date of Royal Assent of the Act. As such, the earliest date this amnesty will expire will be 20 October 2020.

 

The following behaviours should be checked and corrected within the time limits of this amnesty:

  • not being aware that remote staff are working, eg work-related emails being generated or line managers asking furloughed staff to carry out some work
  • technical or computational issues – innocent errors such as where there is misunderstanding of the methods of certain calculations will not be targeted
  • delays in making payment to staff for the wages due from the furlough grants
  • deliberate fraudulent behaviour

 

This will be the only chance employers have to remedy their position without any penalties being charged so it is crucial that clients respond promptly to HMRC.

 

Penalties for those who fail to notify HMRC within the ‘amnesty’ period but knowingly received the CJRS grant or overclaimed the grant even though they were not entitled to claim it due to any changes in their circumstances will be based on ‘deliberate and concealed’ behaviour. This could potentially make the client liable to a penalty of 100% of the tax due.

 

Appealing against any penalties

While no appeal can be made against an investigation being opened, practitioners should familiarise themselves with the appeals processes once any decision has been made by an HMRC officer. The following procedures are available after the conclusion of an enquiry:

 

  1. Appeal in writing within 30 days of closure notice – this is a strict time limit and failure to give notice of appeal within this time frame can have serious consequences. A late notice of appeal with only be allowed exceptionally if there is a reasonable excuse
  1. Requesting an internal review of the decision – this will be done within HMRC by an officer not involved with the original enquiry decision
  1. Appeal to the First Tier Tribunal – this can only be requested once the first two processes have been completed and no satisfactory conclusion has been obtained. Expert or legal advice should be sought before making representations at the First Tier Tribunal.

 

Additional resources: HMRC Penalty Factsheet CC/FS7a

 

No IHT on transfer of pensions due to ill-health

Why HMRC’s stance that certain pension transfers could be hit with a tax bill has been overturned.


Why HMRC’s stance that certain pension transfers could be hit with a tax bill has been overturned.

 

A recent Supreme Court ruling has clarified pension and inheritance tax (IHT) rules, overturning a Court of Appeal decision that backed HMRC’s stance that certain pension transfers could be hit with a tax bill. This means after this ruling HMRC may not charge IHT on an inherited pension that was transferred less than two years before the holder’s death.

 

What was the quandary?

The debate centred on a case involving the extent to which gratuitous benefit rules mean pensions transferred in ill-health are subject to IHT. HMRC had argued that pensions transferred to someone else within two years of death can be caught by IHT if the owner was known to be in ill health. In 2018 the Court of Appeal held in favour of HMRC that a failure to exercise pension rights and a statement of wishes leaving death benefits to the deceased’s sons were both transfers of value and IHT was due on the entire pension fund (HMRC v Parry and others [2018] EWCA Civ 2266).

 

HMRC determined that inheritance tax was due on the death benefit, on the basis that both the transfer of funds from a company pension scheme into a personal pension plan, and the deceased’s omission to draw any benefits from the plan before her death, were lifetime transfers of value within section 3 of the Inheritance Tax Act (IHTA) 1984.

 

However, there are a number of exceptions where dispositions are not treated as transfer of value for IHT, including dispositions not intended to confer gratuitous benefit (s10(1) IHTA 1984), which were not considered in full by the Upper Tribunal.

 

The Supreme Court admitted the appeal to establish the issue whether HMRC was right to take that view.

 

What is meant by gratuitous benefit and disposition?

A gratuitous benefit is deemed to occur when a particular action is taken in relation to funds with the intention of reducing the IHT applied on those funds.

 

The word disposition has its wide natural meaning and includes:

  • all forms of disposals and transfers of cash and other property
  • both the creation and the release or other extinguishment of any debt or other right enforceable against a person or his estate.

 

The legislation expressly defines disposition to include:

  • a disposition effected by associated operations - IHTA84/S272
  • a person’s deliberate omission to exercise a right if that omission causes the value of
    • that person’s estate to diminish, and
    • another person’s estate (or property held on discretionary trust) to increase, IHTA84/S3 (3)
  • certain future payments made more than 12 months after a transfer for partial consideration, IHTA84/S262
  • an alteration of a close company’s share or loan capital, IHTA84/S98.

 

Some dispositions are expressly prevented from being transfers of value, see IHTM04151.

 

What is the stance held by Supreme Court to counter the Court of Appeal’s judgement?

The Supreme Court held that Mrs Rachel Staveley and her husband set up a company where she had a pension with the company’s occupational pension scheme. When they divorced, she transferred her pension to another pension scheme. If the pension had remained in the company scheme, on her death a sum would have been payable to her estate and chargeable to inheritance tax.

 

Just before her death in 2006, Mrs Staveley transferred funds from the pension scheme into an AXA personal pension plan (PPP). The transfer was solely motivated by Mrs Staveley’s desire to ensure that her ex-husband did not benefit from the return to the company of any surplus in the fund. The transfer was therefore not intended to confer a gratuitous benefit on her sons. 

 

Mrs Staveley nominated her two sons as beneficiaries of the death benefit, subject to the discretion of the pension scheme administrator. She did not take any pension benefits during her life and, in those circumstances, death benefit was payable to them.

 

The relevant statutory provisions are sections 3(1), 3(3) and 10(1) of Inheritance Tax Act 1984.

 

The Supreme Court has now overturned the Court of Appeal verdict and ruled that the transfer should not be subject to IHT due to the fact that a disposition is not a transfer of value if it is shown that it was not intended, and was not made in a transaction including a series of transactions and any associated operations intended to confer any gratuitous benefit.

 

What has changed due to this ruling?

Tom Selby, a senior analyst at AJ Bell, commented on the ruling:

  • after years of wrangling in the courts this ruling finally brings some certainty to people who transfer their pensions while in ill-health
  • if the Court of Appeal ruling from 2018 had been upheld then defined contribution (DC) pension transfers would have been at greater risk of being hit with a tax charge where the member died within two years of the transfer where the primary motivation was to change provider or reduce annual charges
  • this protracted case has exposed the complexity and confusion that exists around pensions and IHT
  • research has exposed a gaping lack of understanding when it comes to gifting and IHT, and this is even more pronounced when pensions are thrown into the mix
  • it is within the gift of politicians to address this confusion and the common sense solution to this complexity would be to remove pensions from IHT altogether.

 

Clare Moffat, the head of intermediary development and technical at Royal London, commented:

  • the Supreme Court decision in the Staveley case has clarified that intention is crucial when a pension transfer or switch is made in terminal ill health
  • where there is an intention to give benefits which didn’t exist before, such as a DB to DC transfer, it will be subject to IHT.

 

Useful resources

 

Full details of Supreme Court judgement

 

Inheritance Act 1984

Corporation tax trading losses: individual company and group relief

New guide helps handle group trading losses.


New guide helps handle group trading losses.

 

Last month, we highlighted guidance on early relief from corporation tax in situations where trading losses are anticipated due to the current economic downturn in relation to Covid-19.

 

While the government has put into place various measures to help businesses survive the effects of the pandemic on their trading results, it is becoming more evident that many businesses will have incurred or anticipate trading losses.

 

We have prepared a short guide that incorporates the trading losses early relief as highlighted in the above article. This now includes further guidance on situations where group relief might also be considered to apply and taken advantage of by a group or consortium of companies.

 

The in-year group relief rules are contained in Part 5 of CTA 2010, whilst the carry-forward group relief rules are contained in part 5A of CTA 2010. Under both sets of rules, there is a concept of an ‘overlapping period’ for which losses can be surrendered, as follows:

 

Subject to various restrictions, limits and order of relief, a claim for group relief is possible where the ‘surrendering company’ consents to the claim and the claimant company and the surrendering company are in the same (75%) group for an ‘overlapping period’. An overlapping period is a period of at least one day in common between ‘the claim period’ and ‘the surrender period’.

 

The claim period is the accounting period of the claimant company for which it claims group relief. The surrender period is the accounting period of the surrendering company to which the losses and other amounts have been carried forward to. The surrendering company means the company that has the losses or other amounts.

 

View the guide on corporation tax trading losses claims now

 

 

 

 

 

Latest changes on Trust Registration Service

HMRC has updated its guidance on the online Trust Registrations Service (TRS).


HMRC has updated its guidance on the online Trust Registrations Service (TRS).

 

For any years that the Trust is not liable to tax, no changes need to be updated. However, the register must be brought up to date in the first year that relates to any of the following changes.

 

Updating trust details

Only the following changes must be updated using the online TRS system:

  • Primary or other trustees
  • Beneficiaries
  • Settlor(s)
  • Protector or other relevant individual.

 

Declaration

Declaring on the Trust Register that the details of the persons associated with the trust are accurate and up to date, regardless of whether any changes have been made or not. If a self-assessment tax return is being completed for the trust, this must also contain a declaration that:

  • the details on the TRS have been updated, or
  • there have been no changes to the trust.

 

Deadlines

  • for any changes prior to 6 April 2020, if the Trust was liable to tax for any of the three tax years up to 6 April 2020, details must be updated by 31 January 2021
  • for any changes in tax year 2020-21, if the trust was liable to tax for that year, details must be updated by 31 January 2022
  • the same deadlines apply for a declaration that no details have changed on the TRS in any year that the Trust is liable to tax.

 

Closing a trust

The TRS must be updated when the trust comes to an end by confirming that the details on the Trust Register are up to date and inform HMRC the date the trust ended. Note that a tax return may need to be submitted for the year in which the trust ended.

 

Cyber risks when working from home

Steps to take to protect your and your clients' businesses from cyber threats.


Steps to take to protect your and your clients' businesses from cyber threats.

 

As most of us now find ourselves working remotely, it’s quite incredible to see how things have changed so dramatically in such a relatively short space of time.

 

There have been challenges of course, and perhaps some triumphs too as we have figured out new ways of doing business. One fact is unequivocal. Home and personal work stations are often less secure and more susceptible to hackers, meaning that we need to identify and manage the additional cyber risks involved in working from home.

 

Cyber criminals are using the coronavirus as a time to exploit weaknesses in network security and human fallibilities as we figure out new ways of using technology. Never being ones to miss an opportunity, criminals are taking advantage of this disruption and uncertainty and launching cyber-attacks on remote workers at home and on supply chains.

 

From a cyber perspective, be vigilant! Now more than ever, it’s vital to keep our wits about us as the bad actors are relentless, taking advantage of our insecurities as well as the goodwill that is inherent within the majority of us.

 

A secure WFH environment

WFH has resulted in the growth of the use of personal devices and home networks. The security of employees’ home computers and home networks is usually beyond the control of the companies for whom they work. The absence of necessary security on home networks creates a heightened risk of system disruption for the company.

 

What should you do?

  1. Advise all staff to avoid public wi-fi
  2. Ideally, ensure that any work network is accessed via a virtual desktop such as those provided by Citrix or Cisco, with properly configured remote access solutions. This will limit the ability to store sensitive information on the employee’s computer and to prevent malware from migrating from an employee’s home computer to the company’s systems
  3. Ensure multi-factor authentication is required to access company systems
  4. If a virtual desktop is not available, advise employees to ensure home systems are secure by using a Virtual Private Network (VPN) and:
    • encrypting computer drives
    • requiring strong passwords for wireless networks
    • patching software on a regular basis
    • installing strong antivirus software that is regularly updated
    • enabling session timeouts
  1. Use portable device management solutions (including encryption) to limit the risks inherent in using personal devices (including mobile phones)
  2. Insist that employees keep personal data and work data separate
  3. Train employees about what to do if they think their computer or their company account has been compromised
  4. Install updates when they are available
  5. Backup data on secure platforms
  6. Use security controls with Zoom, Teams, WebEx, etc.

 

The cyber risk environment

The increased susceptibilities of WFH mean that cyber-criminals have upped the ante. Cyber-attacks, while clearly evident pre-Covid, have exponentially increased as criminals take advantage of the disruption and weakened network securities. From the early days of remote working, hacking events have surged as compromised technology and security have allowed easier access to network systems.

 

Evidence suggests that phishing attacks alone have increased by 667% just in March of this year.


Phishing with Covid-19 as bait

Cyber-criminals are exploiting human frailties. The fraudulent attempts to prey on our generosity of spirit are repugnant. Bogus websites have been set up posing as charities to channel funds into cyber-criminals’ bank accounts.

 

Our natural fears and anxieties are being used against us as criminals seek to offer us fraudulent PPE, home-testing kits and cures. The appeal is all too obvious. These fraudulent activities are carried out via email, phone scams (eg offering free home testing kits or the promotion of bogus cures), or hoax texts (including one that offered a $30,000 ‘relief’ package from ‘The Financial Care Center’ and another that informed recipients that they must take a mandatory online Covid-19 test: both attempts to obtain banking and other personal information).

 

Another ‘in’ for these hackers is bogus updates on Covid-19, which are being sent by email or via social media. Phishing attacks involve emails to employees that appear to come from senior executives, emails that purport to attach updated policies around remote working, or emails that pretend to be from health agencies.

 

We are aware of emails purportedly from the World Health Organization ostensibly providing Covid-19 updates via an attachment. Rather than providing helpful content, the attachment, once clicked, launches malware or ransomware into the victim’s computer.

 

Phishing with psychology as bait

Again, preying on human behavioural patterns, fraudsters often craft phishing emails encouraging the recipients to take action whilst manipulating our willingness to be efficient, helpful and proactive. Examples include:

  • ‘Your mailbox exceeds 3.5MB of storage as set by the administrator. To validate your account, click here’
  • ‘Welcome to the new Outlook web app for staff. Login here’
  • ‘You have a new voicemail message. Click here to access’.

 

The phish, if successful, may provide remote access to an employee’s computer or network, often the precursor to installing ransomware. Alternatively, or perhaps coterminously, the scammer uses valuable information to commit fraud or identity theft.

 

What should you do?

We are all generally becoming more educated in our ability to spot phishing emails: we’ve been told about checking for clues such as bad grammar, spelling mistakes, poor stylistics and odd-looking links. Unfortunately however, the sophistication of these emails is also improving at the same rate, and even the most seasoned cyber-guru can get caught out.

 

While spotting a phishing email is becoming increasingly difficult, the National Cyber Security Centre (NCSC) has put together some common signs to look for:

  1. Authority - Is the sender claiming to be from someone official (eg your bank, doctor, a solicitor, government department)? Criminals often pretend to be important people or organisations to trick you into doing what they want.
  2. Urgency - Are you told you have a limited time to respond (eg in 24 hours or immediately)? Criminals often threaten you with fines or other negative consequences.
  3. Emotion - Does the message make you panic, fearful, hopeful or curious? Criminals often use threatening language, make false claims of support, or tease you into wanting to find out more.
  4. Scarcity - Is the message offering something in short supply (like concert tickets, money or a cure for medical conditions)? Fear of missing out on a good deal or opportunity can make you respond quickly.
  5. Current events - Are you expecting to see a message like this? Criminals often exploit current news stories, big events or specific times of year (like tax reporting).

 

Further:

  • avoid clicking on links in unsolicited emails and beware of email attachments  
  • all emails related to the pandemic that invite the recipient to click on a link or open an attachment should be treated as suspicious. That is particularly true if they appear to come from governmental organisations or large companies with which the recipient has no connection. Use trusted sources including legitimate, government websites, for up-to-date, fact-based information about Covid-19
  • as always, emails that seek personal information should be viewed with extreme scepticism. Do not reveal personal or financial information in emails, and do not respond to email solicitations for this information. This is particularly true now with respect to emails concerning the pandemic
  • educate your employees about how to recognise phishing emails on both mobile devices and desktop/laptops.

 

The overriding message is: Do not trust information that doesn’t come from official sources and be suspicious of messages coming from a company from which you don’t normally receive communications.

 

Data protection

One final but very relevant point needs to be made in relation to data protection. There may be a temptation to share information more readily when WFH, particularly when operating a mobile device, whether a smartphone or tablet.

 

Psychologically, because we are not ‘in the office’ and are not sitting at our desk, we can become a little relaxed about our work practices, which may translate into more liberal sharing of data, perhaps without the normal thought processes being engaged.

 

It is vital that employees continue to maintain strict data policies when it comes to the handling of data. Inadvertent sharing of information regarding affected employees or clients could result in significant repercussions both from a financial, regulatory, and reputational perspective.

 

Additional pieces of the jigsaw

Awareness, education and technology solutions all help but are not failsafe. Detection must be combined with an effective incident response plan and business continuity plan. Cyber insurance ought to be considered as part of this process.

 

The 24/7 breach response services offered as part of a market-leading cyber policy will be crucial in the immediate aftermath of a cyber incident, providing access to experienced consultants in IT, legal services, PR and crisis management specialists, during a stressful and vulnerable time.

 

Vanessa Cathie – Vice President, Global Cyber & Technology, Lockton Companies

vanessa.cathie@uk.lockton.com

 

If you have any questions please contact your Lockton Account Manager for further advice or email ACCAaccountants@uk.lockton.com 

 

Lockton is ACCA’s recommended broker for professional indemnity insurance

 

FinTech track – the latest learning in digital technology

The new FinTech track is a bundle containing ACCA content designed to set you on the right track to broaden your knowledge of digital technology related to finance and accounting. The track consists of three online courses in machine learning, robotics and cyber security, plus bonus content in the form of podcasts, videos and webinars.

Complete the content and earn 21 CPD units, your annual verifiable CPD requirement.

 

The price for ACCA members is £149 (£229 for non-members) and you have access for 12 months. More information is available on our website

Property loss relief for landlords on cessation of business

How to handle a common query from clients who are landlords.


How to handle a common query from clients who are landlords.

 

One of the questions often asked by landlords is: what would happen if they have sold the last property held on their buy-to-let property business? Are the accumulated losses lost forever?

 

The answer is – it depends. In the case where the business is treated as continuing, losses can be set against income derived from letting after the dormant period.

 

When can it be construed that the business is continuing?

The property rental business ceases when the last let property is either:

  • disposed of or
  • used for some other purposes.

 

As the income from all properties is considered as one property rental business, any one disposal of the property out of a portfolio of properties does not make the business ceased. Sometimes if the rental activities do stop and restart, it is necessary to consider whether the original business continued after a dormant period. In the absence of this, the original business may presume to be ceased and a new business will commence when the rental activities start again. Again, it is a question of fact, and will depend on various factors such as:

  • the length of time between lettings
  • whether the activities of the rental business are the same before and after the dormant period
  • whether the same property is let before and after the break in letting.

 

Examples

  1. where the business consists of the letting of one house, the business will not normally cease if one tenant leaves and there is a break before a new tenant is found, particularly if the property remains available for letting throughout
  2. a property business is not normally treated as having ceased if the property is not let for a period to enable repairs or renovations to be undertaken
  3. the business may be regarded as ceasing and recommencing if the property is used as the taxpayer’s main residence between lets
  4. the activities after a given date are merely concerned with winding up the activity, perhaps before retirement; here the business has ceased, and the customer is getting rid of the business assets or changing their use
  5. the activities after a given date are a continuation of the business to facilitate the realisation of the assets; here the customer continues to carry on the business, perhaps in the hope of selling a going concern for a higher price.


Normally, HMRC applies a general rule of thumb by which it regards the old business as ceasing if:

  • there is an interval of at least three years between lets
  • different properties are let before and after the interval in the old and new activities.

 

HMRC does not normally challenge a gap of less than three years if the landlord was trying to continue the business. Otherwise the landlord would need to provide evidence business was continuing.

 

What can be done to preserve the property losses for temporary cessation?

If the landlords are considering starting property rental business soon, these accumulated losses should still be declared on the tax return and carried forward as normal.

 

How are the property losses relieved in general?

Generally, any rental business loss is automatically carried forward and set off against the same rental business profits of the following year as specified within s118/S119 of Income Tax Act 2007.

 

  • Property businesses which are treated as separate by statute:
    • a UK property business and an overseas property business are treated as separate property businesses
    • a loss arising to a Furnished Holiday Letting (FHL) business may only be used against profits of the same FHL business
    • a property business which is run in different legal capacity. For example, an individual has a property business on its own and, he has a separate property partnership business. These are treated as two separate businesses for loss relief.

 

However, there is an exception to the above rule for farmers. Where agricultural land is a part of the rental business losses, these losses may be set off against their general income. The agricultural part is the expenditure claimed in their business accounts on maintenance, repairs, insurance and management of the agricultural land. Interest payable is not an allowable agricultural expense for this purpose.

 

There is separate guidance for the corporation tax treatment of losses arising in a property business carried on by a company, which can be found at HMRC manual PIM4230.

 

The above loss relief only applies when the properties are let on commercial terms. Any property rented on uncommercial terms cannot generate losses and the claimable expenses are capped up to the rent received on that property.

 

Useful resources

HMRC manual  PIM2500

 

Covid-related anxiety and how to find a way out

Resources to help accountants facing mental health challenges.


Resources to help accountants facing mental health challenges.

 

The Covid-19 pandemic has had an unprecedented and wide-ranging impact on people’s lives, and undoubtedly one of the most critical areas has been mental health, with many reporting feeling anxious, overwhelmed or depressed as a result.

 

Whilst in a normal environment mental resilience is part of every practitioner’s toolbox when it comes to dealing with clients, meeting deadlines or making sense of new and constantly changing tax reporting regulations, the pandemic has added a new layer of uncertainty around much more fundamental aspects of public practice, such as the future of clients’ businesses and new ways of working for practitioners post pandemic. Keeping your staff morale up is also very important and hence any support that you can provide for your staff will be an investment in your practice’s future.

 

Our emotional response to challenges brought on by Covid-19 is specific to each of us but whatever the personal impact, dealing with fear, anxiety or overwhelm is often a matter of acknowledging and reframing the problem and then approaching it in a way that is less destructive and less damaging to us. It is not easy to do it alone.

 

Below we share a range of resources that may help you and your colleagues deal with any mental health challenges:

 

  • Anxiety UK works to relieve and support those living with anxiety disorders by providing information, support and understanding via an extensive range of services.
  • Breathing Space is a free, confidential phone and web-based service for people in Scotland experiencing low mood, depression or anxiety.  It is here in times of difficulty to provide a safe and supportive space by listening, offering advice and information.
  • Depression Alliance can assist people affected by depression. It has a national network of self-help groups and operate a pen-friend scheme. It also speaks for people with depression and lobbies government to influence policy making in this mental health field.
  • Sidebyside is a supportive online community where you can be yourself, and is run by Mind, which also provides confidential mental health information services.
  • Samaritans provides confidential, non-judgemental emotional support for people experiencing feelings of distress or despair.
How to survive a Covid-related HMRC enquiry

Practical tips to help accountants and clients manage HMRC Covid-19 enquiries.


Practical tips to help accountants and clients manage HMRC Covid-19 enquiries.

 

It has recently been reported that up to £3.5bn in Coronavirus Job Retention Scheme (CJRS) grants amounting to as much as 10% of the total CJRS cost may have been overclaimed as a result of fraud or error. Now that the CJRS is winding down, Covid-19 related enquiries are expected to feature prominently on HMRC’s enquiries agenda, alongside standard tax investigations.

 

Approach to a Covid enquiry

As with most enquiries, HMRC’s approach in Covid enquiries will be risk-based and focus largely on fraudulent claims rather than genuine errors. Pulling historic and current data from across HMRC’s systems as well as utilising information from other available sources including third party reports of incorrect CJRS claims will be aimed at identifying high risk cases.

 

With the high volume of cases and automation that is likely to be involved in identifying potential high-risk claimants, it is possible that practitioners may encounter situations where an enquiry is opened despite no evident irregularities to the best knowledge of the practitioner or the client. In these cases, it would be advisable to consider making contact with HMRC to understand their concerns and build a relationship with the investigating officer, although this may not always be possible or effective.

 

Time limits of enquiry

Once a high-risk claim is identified, the enquiry will look at the whole period of the claim to assess whether any grants need to be repaid.

 

What will HMRC look for during an enquiry into CJRS claims?

HMRC is likely to focus on assessing whether the qualifying conditions to make a claim were met at the relevant time. This broadly means:

  • that employees for whom claims were made were genuine employees and that they were on the payroll on the qualifying dates and submissions were made with respect of these employees at the relevant times: for claims made before 15 April 2020 - as at 28 February 2020 and for claims made on or after 15 April 2020 - as at 19 March 2020
  • that the process of designating affected employees was followed and employees notified of the change to their contract
  • that the employees were not working when on furlough with a particular employer
  • that directors for whom claims were made were not involved in any activities that involved revenue-generation or supply of services to the company
  • that the correct amount was claimed
  • that grants obtained under CJRS were correctly passed to employees as wages.

 

Why should you comply?

Provided HMRC’s request for information and documents is reasonable and relevant for the purpose of the enquiry, there is no reason not to comply with the request and timely cooperation during the process will enable the enquiry to be concluded sooner.

 

How to best handle the enquiry process

The best way to handle the process is to be forthcoming with the information as long as the request is reasonable and relevant to the enquiry. Demonstrating goodwill on the part of the client and disclosing any errors to HMRC at this stage may help mitigate penalties in case of certain errors. Where information cannot be provided within the timescales set by HMRC, for example due to Covid-restrictions on movement, making contact with the investigating officer to obtain any time extension will enable the enquiry to progress.

 

How long will the enquiry last

The enquiry will remain open until the officer is satisfied that all the points of the enquiry have been addressed. An enquiry into CJRS claims is an aspect type of enquiry focusing on one particular area, therefore the process should be relatively quick to conclude in most cases. Where disputes arise with regards to CJRS eligibility due to complex circumstances, or where significant irregularities identified lead to a full or cross-tax enquiry, the process may be lengthy and require significant resources to handle. Practitioners should refer to their engagement letter to establish if ongoing assistance with the enquiry is part of the schedule of services already agreed.

 

Concluding the enquiry

Where HMRC accepts that no adjustments or repayments of the grant are due, a closure notice will be issued by HMRC.

 

Where the enquiry concludes that the CJRS grant was improperly or incorrectly claimed and not corrected, the amount overclaimed will be repayable. It is not currently known how long the claimant will have to repay such amounts and whether HMRC will allow any repayment plans.

 

Penalties

Penalties levied in CJRS enquiries are likely to be based on the client’s behaviour. If reasonable care was taken by the client when making a claim, no penalty is likely to be charged. Where the incorrect claim was a result of carelessness or the behaviour was deliberate and concealed, penalties are likely to be significant. Being able to successfully argue that a client has been merely careless rather than acting with intent is likely to make a significant difference to the investigation outcome, penalty percentage applied as well as the potential to have the penalty suspended.

 

Disputes

By their very nature, HMRC enquiries lead to and focus on disputed areas. In the case of CJRS enquiries, disputes may arise in relation to the eligibility criteria, amount of the repayment, or amount of penalties. One of the tools clients may use to resolve such disputes is to apply to HMRC’s separate Alternative Dispute Resolution (ADR) team to mediate and broker a resolution. If done at the earliest opportunity once it becomes clear that the dispute may come to a grid-lock, ADR may be the best way to enable the enquiry to move forward.  

 

It is not currently known whether claimants will be offered any form of formal independent review similar to those offered in some tax enquiries. It seems unlikely that referring Covid-related cases to a tribunal will be cost effective and increase clients’ prospects of success, although any future disputes in large corporate claims could create a precedent if heard by a tribunal.

 

How to protect yourself

Up to date and accurate book-keeping and payroll records, email correspondence, eligibility and risk assessment checklists maintained on client files, bank statements and other properly kept records will be essential in case of CJRS investigations. Poor record keeping will leave clients in a vulnerable position and open them up to closer scrutiny as part of a potential wider-ranging enquiry. It is important to keep any records on tax advice sought if applicable, in order to justify a claim made at a later date or mitigate client exposure to penalties. Obtaining fee protection insurance may cover the cost of dealing with CJRS claims.

 

Scrutiny beyond CJRS

As it has been announced that extensive post payment review of stimulus and support payments will be carried out by government agencies to identify fraud and recover the money, we may expect that similar level of scrutiny will be applied in time across other Covid schemes, including grants for the self-employed and business loans. The qualifying condition of impact of Covid on the business as well as reliability of financial performance figures used as a basis for a claim are likely to be the focus point for SEISS and business loan applications enquiries in future.

 

HMRC tax penalties and available mitigation

Guidance and worked examples on when HMRC can issue a tax penalty.


Guidance and worked examples on when HMRC can issue a tax penalty.

 

HMRC can charge you a penalty for various reasons, if you do not comply with the tax rules. For example, if you:

  • submit a tax return late
  • pay tax late
  • fail to notify HMRC about changes that may affect tax liability
  • make an error that understates your tax liability unless you took reasonable care.

 

The penalty regime is very much a behaviour-based system under which the level of penalties is determined based on three behavioural concepts. These are:

  • reasonable care
  • whether the misdemeanour was deliberate
  • whether the parties then try to conceal it.

 

Establishing the deliberate and concealment motives is more of a problem for HMRC but establishing whether somebody has taken reasonable care is far more subjective. However, both taxpayers and agents alike are expected to take 'reasonable care' when dealing with their tax affairs.

 

What is reasonable care?

Exactly how to define reasonable care is subjective but HMRC has issued its own view on this in the Compliance Manual Handbook at CH81120.

 

Special rules apply when considering what is reasonable care for inaccuracies relating to avoidance arrangements in a document submitted on or after 16 November 2017, which relates to a tax period that began on or after 6 April 2017 and ended after 15 November 2017.

 

FA07/SCH24 Schedule 24 of the Finance Act 2007 introduced the tax penalty regime and a change of emphasis in how penalties are charged on tax transgressions.

 

Where a document is submitted to HMRC containing an inaccuracy arising from the use of avoidance arrangements the behaviour will always be presumed to be careless unless:

  • the inaccuracy was deliberate on the person’s (P’s) part, or
  • the person (P) satisfies HMRC or the tribunal that they took reasonable care to avoid the inaccuracy.

 

This means that when these rules apply and where a person has used an avoidance arrangement the onus is on them to show that they took reasonable care.

 

The burden of proof to demonstrate that a person’s behaviour is deliberate is on HMRC.

 

A taxpayer who can demonstrate that he acted on professional advice from a person with the appropriate expertise, which takes account of their personal circumstances, will normally be able to demonstrate they took reasonable care.

 

HMRC guidance gives some specific examples:

  • a reasonably argued view of situations that is not upheld
  • an arithmetical or transposition inaccuracy that is not so large, either in absolute terms or relative to the overall liability, as to produce an odd result or be picked up by the quality check
  • following advice from HMRC that later proves to be wrong, provided that all the details and circumstances were given when the advice was sought
  • acting on advice from a competent adviser which proved to be wrong, despite the fact that the adviser was given a full set of accurate facts.

 

Additionally, HMRC acknowledges some of the following practical hindrances in filing the tax return on time as a reasonable excuse (when you have taken reasonable care to meet the deadline):

  • your partner or another close relative died shortly before the tax return or payment deadline
  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
  • you had a serious or life-threatening illness
  • your computer or software failed just before, or while you were preparing your online return
  • service issues with HM Revenue and Customs (HMRC) Online Services
  • a fire, flood or theft prevented you from completing your tax return
  • postal delays that you could not have predicted
  • delays related to a disability you have.

 

You must send your return or payment as soon as possible after your reasonable excuse is resolved.

 

How much is the late filing penalty for self-assessment?

There are filing penalties for submitting tax returns late. These penalties apply even if you do not have a tax liability. The penalty dates for 2019/20 tax return late filings are as follows:

 

Late filing

Late penalty date

Penalty

Miss filing deadline

 31 January 2021

£100

3 months late

 30 April 2021

daily penalty £10 per day for up to 90 days (max £900)

6 months late

 31 July 2021

the higher of £300 or 5% of the tax due

12 months late

 31 January 2022

a further £300 or 5% of the tax due (whichever is higher)

 

There may also be penalties for failure to notify chargeability and for error if there is a mistake in a return.

 

The amount of the penalty depends on:

  • the behaviour type involved
  • whether the error was prompted or not
  • the potential lost revenue.

 

All partners can be charged a penalty if a partnership tax return is late.

 

How much is the late payment penalty for self-assessment?

The late payment of tax will generally attract a late payment penalty. Since 18 November 2015, HMRC has had the ability to instruct banks and building societies to deduct amounts to settle taxpayers' tax debts directly from their bank accounts, often referred to as the ‘direct recovery of debt’ (DRD) provisions. As a result of these, it is less likely that more than one late payment penalty will be issued by HMRC, as the tax can be directly recovered from the debtor’s bank account.

 

Section 107 of FA 2009, Schedule 56 provides a schedule for a guidance to determine which provisions are in force for the late payment of tax. The late payment penalties for unpaid tax due on 31 January 2021 would be:

 

Delay in making payment after due date

Late penalty charge date

Penalty

After 30 days

 3 March 2021

5% of tax outstanding at that date

After 6 months

 1 August 2021

a further 5% of the tax outstanding at that date

After 12 months

 1 February 2021

a further 5% of the tax outstanding at that date

 

  1. The ‘penalty date’ is the day after a period of 30 days have expired after the original due date. This means that the penalty date is 31 days (30 days plus one day) after the original deadline. For online returns due by 31 January this means that the first penalty will be levied if the tax is paid on 3 March (2 March in a leap year) the same year or later. HMRC tool on GOV.UK can be used to estimate the late payment penalties under Self-Assessment.
  1. The subsequent penalty dates occur six months and 12 months after the original due date.

 

Example:

Mark files his return online by the deadline of 31 January, with a liability of £15,000 tax to pay. He makes a payment of £9,000, leaving £6,000 unpaid. If the amount is still outstanding on 3 March, then he is liable to a penalty of £300 (£6,000 x 5%).

 

If it remains outstanding on 3 August, then a further penalty of £300 is due.

 

The rules apply to balancing payments of tax due by 31 January after the end of the tax year. They also apply to late paid payments on account, but only where an amount is still outstanding following 31 January after the end of the tax year.

 

The penalty must be paid within 30 days of the issue date of that notice. There is interest payable on unpaid penalties after the due date.

 

However, no penalty will be chargeable if HMRC agree there is a reasonable excuse for the failure to pay on time – for full details refer to CH155550.

 

Can HMRC suspend penalties?

Yes, it is possible. Finance Act 2007 Schedule 24 paragraph 14 allows HMRC to suspend all or part of a penalty for a careless inaccuracy by notice in writing.

 

The penalty provisions in Finance Act 2007 seek to influence behaviour by encouraging and supporting those who try to meet their obligations and penalising those who do not.

 

If HMRC charge you a penalty for a careless error, you can ask them to suspend the penalty for up to two years. In those circumstances, HMRC will be only collecting the penalties if you do not keep to the terms of the suspension. Additionally, you may have to pay any other penalty due in relation to the new error as well.

 

Once HMRC is satisfied at the end of the suspension period that you have met all the conditions, the suspended penalty is cancelled, and you do not have to pay it.

 

You can review this flowchart to assess whether HMRC is able to suspend the penalty due to failure to take reasonable care. 

 

Can HMRC penalties be appealed against?

Yes, you can appeal against:

  • any penalty notice and ask for it to be suspended
  • HMRC’s refusal to suspend a penalty
  • the conditions HMRC have set relating to a suspension.

 

You must appeal within 30 days of the date HMRC sent you the penalty notice and have a reasonable excuse for late filing.

 

Useful resources

 

HMRC internal compliance handbook

 

SRA updates guidance for law firms and accountants

Updated guidance for anyone planning for and completing an accountant's report issued by the SRA.


Updated guidance for anyone planning for and completing an accountant's report issued by the SRA.

 

Updated SRA guidance for accountants highlights when and how it would be appropriate for law firms to take money for their costs especially anticipated costs (both the firm’s fees and disbursements).

 

The guidance should be read by reporting accountants as planning and work programs will need to be altered. The SRA is very clear that the guidance is designed to help:

  • plan what work might need to be undertaken and how to assure that client money is properly safeguarded
  • assess what factors might lead the accountant to decide that the report should be qualified and therefore submitted to us for further consideration of the risks posed.

 

Guidance for reporting accountants

 

Guidance for law firms

 

NEWS
Careers in SMPs: a new ACCA and CA ANZ report

Practical insights on talent attraction, development and retention.


Practical insights on talent attraction, development and retention.

 

The opportunity for small and medium sized practices to grow in today’s business environment is unprecedented. Digital transformation, in particular, is truly enabling smaller accountancy firms to reimagine the services they offer, but successful change is critically dependent on attracting, developing and retaining the right people. 

 

ACCA and the Chartered Accountants Australia and New Zealand (CA ANZ) have recently released a co-branded Careers in small medium-sized accountancy practices that provides a breadth of practical insights on talent attraction, development and retention within SMPs. The report is based on the findings of more than 60 interviews conducted with SMP experts from around the world.

 

Skills and attitudes fit for SMPs

In the interviews that we conducted, SMP leaders reconfirmed the importance of attitudes and skills set out in ACCA’s seven professional quotients.

 

The importance of adaptability and readiness to engage in continuous learning, openness to sharing and readiness to take responsibility during early career stages, and comfort with technology were recurrently underlined as key for a successful career in SMPs. Shared values are becoming increasingly important for both employers and employees working for small practices.

 

Building the recruitment brand

The recruitment brand is as important for SMPs as the client brand: key arguments for attracting talent to SMPs need to be clearly communicated. Branding fulfils a dual function: on the one hand, it is a way of attracting talent by promoting and differentiating the practice. On the other hand, it acts as a filter so that unsuitable candidates sift themselves out.

 

Alastair Barlow, a case study in the report and founder of London based SMP flinder, says:

‘Most firms work on marketing for the purpose of bringing in clients. But at the early stages, we realised the biggest challenge isn’t winning the clients – but bringing in the right people. Essentially, we said our key target is potential team members.

 

‘Recruitment was a challenge until the firm started marketing itself directly to candidates, exposing its working culture via social media channels, such as Twitter, LinkedIn and Youtube.’

 

SMPs have a compelling story to attract talent, and practice leaders are actively using social media both to convey their message to potential candidates and to engage them in a dialogue. We suggest 10 clearly formulated key areas for talent attraction that can be used by practice leaders building their recruitment brand.

 

 

 

 

Attraction strategies

The recruitment techniques used by SMPs are evolving. Some SMPs use psychometric testing or profiling, particularly when looking at the balance of skills they want to bring into their teams; others ask their candidates to submit videos about themselves instead of writing covering letters and CVs. Those innovative practices have proved their value during the Covid-19 pandemic, when face-to-face interviews were impossible.

 

Both entry-level and experienced talent is in demand by SMPs. There is no universal pattern among accountancy practices and a lot depends on the business model and strategy of a particular practice.

 

Talent development and retention

Staff retention can be a critical issue for smaller practices. Progression is often said to be key to retention, with the opportunity to learn and develop new skills. It is important to look at development and retention in conjunction. The majority of SMPs do not restrict their employees to in-house development programmes, but instead support their initiatives for self-curated training and provide financing for external training opportunities. The use of mentoring, inter-generational cooperation, working in pod systems, networking, and involvement of employees in community work are just some of the approaches used by SMPs to develop staff. Building a continuous learning culture that can engage and support the workforce to adapt and transform in line with business needs is of supreme importance for SMPs.

 

Lessons learnt from Covid-19

The Covid-19 crisis has shown that the majority of SMPs, particularly those with a strong digital core, are ready to adapt rapidly to the changing world and could drive the transformation of the sector as a whole, thanks to their agility. Their pre-existing remote working culture and adaptability have facilitated the transition of SMPs to the 100% virtual environment that has been essential for most during the lockdown. A number of SMPs have decided to keep working 100% remotely. This will require a review of their approach to talent management, including remote on-boarding and mentoring.

 

Top tips for SMP employers, employees and candidates

To assist the SMPs’ talent management activities, this report offers practical checklists for both SMP employees and employers for talent attraction, development and retention that  are also available at the report page as stand alone documents.

 

Kick start your digital journey

Introducing our suite of resources for practitioners who are in the early stages of their digital journey.


Introducing our suite of resources for practitioners who are in the early stages of their digital journey.

 

 

Going digital - member experience podcasts

This series of podcasts features ACCA practitioners discussing how they digitalised their practices and is packed full of top tips:

 

  • Graeme Tennick of Graeme Tennick & Co - the emotional journey and mistakes along the way
  • Peter Jarman of PJCO Accountants Ltd - practicalities and the importance of an in-house champion
  • Eriona Bajrakurtaj of Major's Accounts & Co Ltd - the obstacles to digitalising a traditional family practice and how collaboration with other practitioners would have made a huge difference.

 

Videos

  • Alan Woods FCCA of Woods Squared walks us through his TechStack (the software in his practice) and the resulting client experience in this video

 

Webinars

 

 

Latest webinars for practitioners

Register now for our current series of free technical webinars for practitioners.


Register now for our current series of free technical webinars for practitioners.

 

Inheritance tax planning 21 September (12:30)

Speaker: Paul Soper, tax lecturer and consultant

 

Landlord reliefs and taxes 28 September (12:30)

Speaker: Paul Soper, tax lecturer and consultant

 

Differences between realised and distributable profits and a recap of key areas 7 October (12:30)

Speaker: Helen Kerrigan, Future Finance Training Ltd

 

Business recovery options 13 October (12:30)

Speaker: David Fleming, Duff & Phelps

 

VAT issues with online trading 23 October (12:30)

Speaker: Dean Wootten, Wootten Consultants Limited

 

Register for any or all of these sessions using this link. If you are unable to join us for the live webinars then you will be able to watch them on demand at your convenience. Each webinar will count for one unit of verifiable CPD where it is relevant to the work that you do.

 

IFRS e-learning series from ACCA and PwC Academy

Comprehensive learning in the application of IFRS.


Comprehensive learning in the application of IFRS.

 

Suitable for finance and accounting experts already familiar with fundamental accounting processes.

 

19 courses and 4 bundles available

  • Courses from £30
  • Bundles from £80

 

Our next Professional Courses events

Find training to suit your CPD needs now.


PRACTICE SEMINARS:
Time: 09:30-12:30
Fee: £60 + VAT (£72.00) per webinar
CPD: 3 units per webinar


Anti-money laundering and fraud update - 01 October
Protecting your firm's and client’s reputation - 08 October
Inheritance tax planning - 15 October
Businesses in trouble – how to help your clients in times of crisis -12 November
FRS 102 practical issues – learning from others - 19 November
IR35 - how to prepare for 2021 - 26 November
Wealth and asset protection -  03 December
Auditing update - 15 December

 

 

GENERAL TAX UPDATE
This live webinar provides a current tax update for finance professionals working across all business sectors.


Fee: £115 + VAT (£138.00)
CPD: 6 units
Time: 09.30-16.00

 

Dates:
10 November (Scotland)
13 November
14 December

 


ACCOUNTING STANDARDS UPDATE
This live webinar has been designed to update finance professionals on the recent developments in accounting standards.
Fee: £115 + VAT (£138.00)
CPD: 6 units
Time: 09.30-16.00

 

Dates:
27 October (Scotland)
29 October
30 November

 


COMMERCIAL, COMPANY AND EMPLOYMENT LAW UPDATE
This live webinar is aimed at accountants working both in private practice and in commercial settings generally. It is a general update of all legal areas relevant to such professionals.
Fee: £115 + VAT (£138.00)
Time: 09.30-16.00
CPD: 6 units

 

Dates:
18 September
08 December (Scotland)

 


Saturday CPD conference three for practitioners - 24-27 November
This conference consists of four sessions, which makes it a cost-effective way of staying informed about the latest technical issues.
Topics include:

  • Claiming allowances and reliefs for individuals and owner-managed businesses
  • Protecting your data and digital privacy
  • Autumn budget update
  • Cross-border VAT in 2020 and beyond

 

Fee: £115 + VAT (£138)
CPD: 8 units

 

 

Saturday CPD conference two for practitioners - Recorded webinars
This conference consists of four sessions, which makes it a cost-effective way of staying informed about the latest technical issues.
Topics include:

  • Construction industry tax update
  • Employment law update
  • Knock your socks off service in these challenging times
  • Accounting standards update

 

Fee: £115 + VAT (£138)
CPD: 7.5 units