Technical and Insight
FRS 102 – revaluation reserve
Concerns and confusion over revaluation reserves.

Concerns and confusion over revaluation reserves. 

Following on from the feature on common issues encountered on first time adoption of FRS 102 in the July issue of ACCA's AB magazine there seems to be some concern and confusion over revaluation reserves and when and if they should apply.  

Revaluation reserves are no longer the correct treatment for changes in fair value for Investment Properties. FRS 102 paragraph 16.7 states ‘Changes in fair value are recognised in profit or loss.’ It is important here to also recognise that the definition of an investment property has changed:

FRS 102 paragraph 16.2 - Property (land or a building, or part of a building, or both) held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both, rather than for:

(a) use in the production or supply of goods or services or for administrative purposes; or
(b) sale in the ordinary course of business.

The Standard goes on to highlight that a property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property and that division is required where there is mixed use. Paragraph 16.4 states that recognition will be ‘separated into investment property and property, plant and equipment’. 

An FRC staff education note states ‘FRS 102 does not exclude from investment properties those properties that are let to and occupied by group companies, which would be recognised as investment properties in individual financial statements of the lessor. In the group accounts such properties would be part of property, plant and equipment. In certain circumstances FRS 102 permits a property held under an operating lease to be treated as an investment property....’ 

Property, plant and equipment is the other area where revaluation reserves had previously been common. For these assets a revaluation reserve still applies. On transition to FRS 102 the option exists for a revalued asset to be treated as deemed cost or to continue with a revaluation model. FRS 102 paragraph 17.15 states that, after initial recognition, an entity shall measure all items of property, plant and equipment using the cost model or the revaluation model. Where the revaluation model is selected, this shall be applied to all items of property, plant and equipment in the same class.

HMRC implementing corporation tax changes
Are you and your clients ready for some changes to business tax accounts?

Are you and your clients ready for some changes to business tax accounts? 

HMRC has stated that it will: 

  • stop issuing some non-statutory forms where there is already a digital alternative to obtain the same type of information
  • for certain non-statutory forms where the agent and registered office address are the same on HMRC’s CT system – stop issuing the duplicate company copy of the form. The agent copy of the form will continue to be issued
  • for certain statutory forms where the agent and registered office address are the same on HMRC’s CT system – stop issuing the duplicate agent copy of the form. The company copy of the form will continue to be issued.
  • when there is an authorised agent registered for a customer on HMRC’s CT systems – stop issuing certain non-statutory forms to the company. The agent copy of the form will continue to be issued
  • stop issuing paper versions of guidance notes with CT forms and make them available digitally on GOV.UK.

It plans to implement the changes from 15 August 2016 and has said the change should have very little impact on agents’ ability to continue to carry out CT based work on behalf of their clients. 

The details of the changes to the forms impacted can be found in this summary table

Register of people with significant control
What to do when you are unable to get information for the PSC Register.

What to do when you are unable to get information for the PSC Register. 

The directors of a company or members of an LLP are responsible for complying with the requirements to keep a register of People with Significant Control (PSC). 

They must take reasonable steps to determine whether any individual or any legal entity meets the conditions for being a PSC or registrable RLE (Relevant Legal Entity) in relation to the company, and if so, who that person or registrable RLE is. It may be that, having taken these steps, they cannot identify the person or confirm their details, but failure to take reasonable steps is a criminal offence. 

What are the reasonable steps to take to identify PSCs?
The following applies to a company, but would equally apply with terminology changes to an LLP: 

1) Consider all of the documents and information already available to identify if there may be a PSC. It will be necessary to consider interests held by individuals, legal entities and trusts or firms (without legal personality). Consider whether there is evidence of any joint arrangements or evidence of rights held through a variety of means that might ultimately be controlled by the same person.  Documents which should be available to the director(s) and which should be reviewed include the following:

  • Register of members
  • Articles of association
  • Shareholders' agreements (although these may not be readily available to the director(s))
  • Covenants or agreements which concern the appointment or removal of directors holding the majority of votes at board level
  • Other documents may be available and may be relevant depending on the circumstances.

Consider whether anyone has significant influence or control over the way the company is run.  Also consider whether there is a trust or firm (without legal personality) which would give rise to a position where that trust or firm was able to satisfy one of the conditions for PSC.

2) Having determined that there is a PSC for the company the director(s) should ensure they have the relevant information about him or her to enter on the PSC register.

3) Information about individuals (PSCs) needs to be confirmed before being put on the PSC register (this does not apply to corporations sole, government bodies or international organisations). Information can be treated as confirmed if the:

  • PSC supplied the information to the company
  • information was provided to the company with the knowledge of the PSC
  • company asked the PSC to confirm the information was correct, and they replied that it was so
  • company holds previously confirmed information and have no reason to believe it has changed.

4) Information about both PSCs and registrable RLEs needs to be complete before it is entered onto the PSC register. When the information about one PSC or registrable RLE is complete it should be entered onto the PSC register as soon as possible. If there are other PSCs or registrable RLEs then reasonable steps should continue to be taken to gather information on these.

5) If an individual or legal entity has been identified as a PSC or registrable RLE but the required information is not available to enter into the PSC register or confirmation is outstanding then the company should serve notice on the individual or legal entity (normally by post or email, and a record of this should be kept). If that an individual or legal entity holds the interest on behalf of someone else, they should be asked to provide the contact details of any such individual or legal entity and notice should then also be served on that individual or legal entity. 

6) Individuals or legal entities must contact the company within one month after becoming a PSC or registrable RLE if they are required to be on the company’s PSC register but they are not. Failure to do so is a criminal offence. 

7) If the director(s) have reason to believe that there is a PSC or registrable RLE in relation to the company but have not been able to identify them then they should consider serving notices requesting information on anyone they consider should know the identity of the PSC or legal entity or trust or firm, or could know someone likely to have that knowledge. This may include advisers known to act for them such as accountants, banks, lawyers or any other contacts such as family members, business partners or known associates. The notice which has been served requires a response to be made within one month. Failure to respond (without a valid reason) is a criminal offence.

8) If no response is received then the director(s) may send an additional warning notice. If no response is received to this additional warning notice within one month of that warning notice, then the directors can impose restrictions on any shares or rights they hold in the company (or any rights they hold in the LLP). If restrictions are imposed, the person who is not responding can derive no benefit from the shares or rights they have in the company or LLP until the restrictions have been lifted. The company is not required by law to impose restrictions but the directors must consider it as part of meeting their legal obligations to take reasonable steps. If the director(s) choose not to apply restrictions the reasons should be recorded as they may be asked to justify that decision.

Entering information on the PSC register
The company’s PSC register must never be empty. 

When the company is in the process of taking reasonable steps, this must be entered on the PSC register. You can find the example wording in the June issue of In Practice 

ACCA has produced other guidance relating to the PSC Register  

The Department for Business Innovation and Skills has produced a detailed guide relating to the PSC Register

If the tax return is wrong, who is to blame?
Such situations can be complicated – as these two examples demonstrate.

Such situations can be complicated – as these two examples demonstrate. 

The case law involving ‘duty of care’ is extensive and detailed. Rather than wade through all of the historic precedents and try to apply them to ‘wrong tax returns’ (anybody remember Donoghue v Stevenson from their studies?) it is more interesting to contrast tax cases involving errors on tax returns. In both of these cases it was accepted that the returns were incorrect but when a penalty was charged the First Tier Tribunal made different decisions on whose fault it was. 

The first case is from 2012 - Mr J R Hanson v Revenue & Customs [2012] UKFTT 314 (TC) (26 April 2012). 

The basic details of the case were that the accountants indicated to the appellant that a form of holdover relief would be available to mitigate the CGT charge on disposal of some assets. 

The client instructed the accountants to undertake the task of completing the tax return. The accountant accepted in evidence that the appellant was relying on his firm to complete the return correctly. HMRC launched an enquiry into the return and found no relief was available and that the taxpayer was liable for further capital gains tax. HMRC also charged a penalty for what it said was a careless inaccuracy in the tax return. 

The taxpayer appealed against the penalty. The judge in the case ruled:

I have no hesitation in finding that there was carelessness on the part of (the accountants). They did not suggest otherwise. The entitlement to relief for CGT purposes in these circumstances was an area that a reasonably competent accountant ought to have been able to advise upon. It is then necessary to consider whether the appellant himself took reasonable care to avoid the inaccuracy. 

I have come to the conclusion that the appellant did take reasonable care. He instructed an ostensibly reputable firm of accountants who had acted as his accountants for many years. The matters on which he instructed them were ostensibly within their expertise. He had no reason to doubt their competence or their advice that relief was available. They were in possession of all relevant facts. 

In the circumstances of this case the appellant was entitled to rely on (the accountant’s) advice without himself consulting the legislation or any guidance offered by HMRC. I have found as a fact for the reasons given above that the appellant did take reasonable care to avoid the inaccuracy in his tax return for 2008-09. In those circumstances I cancel HMRC’s decision to impose a penalty and allow the appeal. 

A clear ruling that it is not 'careless' on the part of the taxpayer not to verify professional advice given by his accountant. 

Contrast this with the decision in a high profile case decided in July 2016: Blackman [2016] TC 05218

This case involved a professional footballer who had also instructed a firm of accountants to prepare his tax return. Again the tax return had proved to be inaccurate and further tax was payable. HMRC also imposed a penalty due to the client not taking reasonable care to avoid the inaccuracy. 

The background was that the footballer had been transferred several times during the relevant tax return period but one of the ‘employments’ had been missed off the return. The footballer accepted that this was incorrect but claimed that the penalty was unfair as he was not responsible for the inaccuracy.  All of his financial information was given to his accountants therefore it was they who missed the income from his tax return. He was not a tax professional and so he should not be expected to understand a tax return and could therefore treat accountants' work as accurate. 

There were detailed arguments given for and against the appeal but a summary of the main points of the FTT ruling is as follows: 

Having taken account of the above, we consider that (the footballer) did fail to take reasonable care to avoid the inaccuracy and was therefore careless: 

  1. It is entirely reasonable to expect an individual to know and understand their employment history in a given tax year. There was no evidence in this case that (the footballer) did not know or understand his employment history in the year 2012/13.

  2. (The footballer) would have been expected to identify the error. It was an entirely obvious one to anyone reading the tax return with sufficient care.

  3. The scenario was not complex. This is a self-assessment return of an employed individual, in continuous employment throughout the whole year, and in a single employment at any one time. His tax affairs were correspondingly simple and straightforward. We do not consider that having three consecutive employments in one year amounts to such complexity that (the footballer) could not reasonably have been expected to identify the error. 

  4. Although the footballer may have left school at 16, there was no evidence that his level of educational attainment or literacy meant that he was unable to read the tax return himself, and needed the tax return reading out to him. 

Accordingly, the appeal against the imposition of the penalty is dismissed. Also interesting to note is that, for various legal reasons, the first case decision above was not deemed to be binding on the decision in this second case. 

Two similar cases with very different outcomes. As an ACCA member you need to make sure that:

  1. A robust engagement letter is in place which clearly sets out the roles and responsibilities of both the firm and the client. ACCA has recently updated its suite of engagement letters.

  2. The client is made aware of HMRC’s official guidance which amongst other things states: 

    You and your client’s responsibility for penalties
    When you are acting on behalf of a client, they still retain responsibility for their returns, calculations and payments.

    Your authorisation as an agent allows HMRC to deal with you on your client’s behalf, but any liability for penalties for late returns, late payments or any errors on paperwork legally remains with your client.

It is important the firm’s quality control policy for approval of accounts and tax returns by the client is clear and documented. 

ACCA have also produced a factsheet which covers the issue of professional negligence. Members may also wish to refer to Professional conduct in relation to taxation

Data security and the new European regulation – what you need to know
Help clients prepare for the most stringent data laws in the world.

Help clients prepare for the most stringent data laws in the world. 

On 18 Dec 2015 Europe’s General Data Protection Regulation (The ‘GDPR’ or the ‘Regulation’) was, after almost three years of negotiations, agreed. While the final wording hasn’t been released, we know it will have a material impact on organisations that hold or handle corporate, financial or personal data in any media format whether digital or physical. 

Why is the new GDPR required?
The 20 year old Data Protection Directive (DPD) – which is being replaced by the Regulation – is part of the overall strategy across the world to prevent and respond to cyber disruptions and attacks. The EU has recognised that cybersecurity incidents are increasing in frequency and magnitude and becoming more complex and cross border in nature. As such, incidents can cause major damage to safety and the economy, the EU Commission considered that efforts to prevent, co-operate on and be more transparent about cyber incidents should improve. 

The old DPD was limited because it was just that – a Directive. As a Directive it could only set the minimum legal standards. The member states could otherwise craft their legislation as they saw fit. This led to a patchwork of data protection laws across Europe.

The new Regulation is meant to solve this problem. As a Regulation it directly imposes a uniform data security regime across all EU members. There will be no need to enact the legislation, it will become law - thereby harmonising EU data protection law across the whole of the EU.

What are the major ways the GDPR differs from the outgoing Directive?

1) Increased fines for violations – if a company violates certain provisions within the GDPR – such as basic data processing principles or the rules relating to cross border data transfers - they may be subject to fines amounting to 4% of the company’s worldwide annual turnover. 

2) Data breach notification – data controllers will be required to notify the appropriate supervisory authority (in the UK this is likely to be the Information Commissioner’s Office) of the data breach within 72 hours of learning about the breach. The notification must describe the nature of the data breach, the categories and the approximate number of data subjects implicated, the contact information of the organisation’s data protection office, the likely consequences of the breach and the measures the data controller has taken or proposes to take to address and mitigate the breach.

Additionally a data processor is required to notify a data controller of a data breach ‘without undue delay’. Article 32 of the GDPR requires data controllers to notify data subjects of breaches when the data breach is likely to result in a high risk to the rights and freedoms of individuals and must notify data subjects of the breach ‘without undue delay’.

3) Data protection officers – Article 35 requires companies whose ‘core activities’ involve large scale processing of ‘special categories’ of data – defined as information that reveals a data subject's racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, genetic data, biometric data, health or sex life or sexual orientation - to designate a data protection officer. Companies should be aware that even if they don’t collect this type of data from clients they may collect some of this information from their employees for human resources purposes and therefore may need to appoint a data protection officer.

4) Greater controls for data subjects – Article 17 set outs the ‘right to erasure’ also known as the ‘right to be forgotten’ which gives a data subject the right to order a data controller to erase any of the data subject's personal data in certain situations. The Article requires the data controller to erase a data subject's personal data ‘without undue delay’ when the personal data is no longer necessary in relation to the purposes for which it was collected or processed or the data subject withdraws his or her consent or objects to the processing and there is no other legal basis for the processing.

How can companies prepare for the GDPR?
There is no question all companies will need to determine how the new GDPR will relate to them. Our conversations with clients show that organisations are taking a moralistic view to protecting personal data and we recommend any company transacting business across the world should, if they haven’t done so already, prepare for and address the following items well in advance of the GDPR coming into effect: 

  1. Are you a data controller or a data processor or a mixture of both? Review your contracts with third parties to understand where respective roles and responsibilities lie.

  2. Get your privacy policies, procedures and documentation in order and keep them up to date: data protection authorities will be able to ask for these at any time.

  3. Form a governance group that oversees all your privacy activities, led by a senior executive. If you appoint a data protection officer (recommended for companies that employ more than 250 people) they should develop metrics to measure the status of privacy efforts, report regularly and create statements of compliance that will be required as part of your organisation’s annual report.

  4. Implement a breach notification process and enhance your incident management processes and your detection and response capabilities. Any data breach must be notified to the relevant data protection authority, even if protective measures, such as encryption, are in place or the likelihood of harm is low.

  5. Prepare your organisation to fulfil the ‘right to be forgotten’, ‘right to erasure’. A strategy covering topics such as data classification, retention, collection, destruction, storage and search will be required – and it should cover all mechanisms by which data is collected, including the internet, call centres and paper.

The new rules will have direct effect from early 2018 – two years from the date of formal adoption and publication of the Regulation. Businesses have time to prepare, but there is much work to do. We are moving towards the most stringent data laws in the world. Data permeates everything we do in our digital lives and touches all organisations.

However, in the short time that remains before implementation, organisations will need to completely transform the way they collect and use personal information. This is not a compliance or legal challenge; it is much more profound than that. Organisations will need to adopt entirely new behaviours in the way they collect and use personal information. 

If you have any questions about the new Regulation please do not hesitate to contact your normal Lockton Associate. 

Brett Warburton-Smith - Partner
Cliff White - Senior Vice President 

Lockton Companies LLP. Authorised and regulated by the Financial Conduct Authority. A Lloyd’s broker.

Lockton Companies LLP is ACCA’s recommended broker for Professional Indemnity insurance. For information, please contact Lockton on 0117 906 5057.


Free information sources – which make life easier!
The secret accountant sorts the wheat from the chaff when it comes to promotional emails.

The secret accountant sorts the wheat from the chaff when it comes to promotional emails. 

When I opened my computer this morning I found the usual 50-60 emails demanding attention – that’s after I had deleted several while on my morning commute. 

Surveys show that we can spend between 6–13 hours per week working through our inboxes. Accountants are deluged with emails, making it very difficult to notice the useful ones let alone find time to read through them. As Shakespeare once said ‘you speak an infinite deal of nothing’. 

Yet, there are many valuable sources of information out there that can make my life as a practitioner easier – many of which are free. Some may strengthen the relationship I have with certain clients, while others will support my personal development (and CPD) or benefit my practice. 

I’d like to share some of these with you (in no particular order): 

  • HMRC – not as boring as it sounds!  Sign up for updates from HMRC, including free CPD courses and webinars, general advice updates and lots of other relevant information.

  • The Government – when you register for email alerts from you can filter the subjects that you are interested in and receive specific updates. Occasional overlap with HMRC (eg on VAT) but well worth doing.  

  • Enterprise Nation – more of a general business newsletter from Somerset House. Covers all sorts of commercial topics which give useful insights into business outside of accountancy. Basic sign up is free. 

  • AccountingWeb – commercial website which updates registered users regularly on topics that you can pre-select when you register.

  • Accountancy Age and Accountancy Age Insights – another commercial site which publishes updates, news briefings and best practice articles, which again can be filtered to suit your needs. Sign up here.

  • ACCA Practice Group on Linkedin – a closed discussion group on LinkedIn which allows ACCA practitioners to share discussion points, networking and CPD tips. With occasional input from ACCA staff. Regional groups also exist for local discussions, such as in the Midlands region

Managing these emails
There are many daily and weekly updates that you can sign up for quickly and easily. If at any stage you wish to stop receiving these, look for the unsubscribe link or button, often in the small print at the bottom (I’ve been told by an insider it then depends how frequently the publisher refreshes their mailing data before this takes effect. It may be daily, weekly or even longer). 

Using filters
Most email platforms will allow you to tag selected emails and assign them to a designated folder (in Outlook look for the ‘rules’ button under the ‘home’ tab). Give this folder a name – eg ‘updates’ – and then regularly review all of the emails in here at a time that suits you. This could be the start or end of a day, or even at the weekend. 

Putting a simple filter like this in place ensures your inbox should function more efficiently and be populated by more meaningful emails from clients and colleagues. 

Share your thoughts
Which email lists do you subscribe to? Which prove genuinely useful – and why? 

I would be very interested to hear your thoughts and perhaps view your top five list. 

Email your thoughts to and these will be forwarded to the editor of In Practice – who has offered to include a follow up article in the September issue. 

Alternatively, make immediate use of one of these resources and share your thoughts in the ACCA Practice Group on LinkedIn.

Beware of short-cuts to anti-money laundering compliance
Considering an AML solution? Some key factors to take into account.

Considering an AML solution? Some key factors to take into account. 

ACCA’s Technical Advisory Service is regularly contacted by members who have been approached by commercial firms which claim to offer a ‘complete’ or ‘one stop shop’ solution to complying with their anti-money laundering (AML) responsibilities. 

It is very important that members comply with the AML section of the Rulebook 2016 (starting page 419) and in some cases this may not be possible by simply using an outside commercial solution. Of particular importance is the ‘client identification’ section. 

A brief recap of the main things that need to be done under our regulations:

Client identification
Before any work is undertaken, the professional accountant shall verify the identity of the potential client by reliable and independent means. The professional accountant shall retain on their own files copies of such evidence, as set out in paragraph 17. 

This will involve the following: 

  • where the client is an individual: by obtaining independent evidence of the client’s identity, such as a passport and proof of address
  • where the client is a company or other legal entity: by obtaining proof of incorporation; by establishing the primary business address and, where applicable, registered address; by establishing the structure, management and ownership of the company; and by establishing the identities of those persons instructing the professional accountant on behalf of the company and verifying that those persons are authorised to do so
  • in either case: by establishing the identity and address of any other individuals exercising ultimate control over the client and/or who will be the ultimate beneficiaries of the work or transactions to be carried out
  • by establishing precisely what work or transaction is desired to be carried out and to what purpose.

If the professional accountant is unable to satisfy himself/herself as to the potential client’s identity, no work shall be undertaken. 

What commercial firms provide 
There are quite a number of firms offering AML solutions and their services vary. For instance many offer a risk-based approach to analysing transactions and online name checks/comparisons to exposed persons lists etc. ACCA acknowledges that some of these services may well be complementary to a member's overall AML policies. However, the above identification rules are often not satisfied by the commercial firm’s services, leaving the member unaware that they are in breach of ACCA regulations. 

Action to take

  • before committing to using a commercial firm, ensure that you know exactly what you will get for your money
  • where the services do not cover the above points it will be up to the firm to carry out their own checks to ensure compliance.

In many cases ACCA members can satisfy themselves as to the identity of clients by simple measures including meeting the client, obtaining the relevant documents face to face and establishing the nature of the business by discussions and searches. 

AML solution firms can be useful to ACCA members but make sure that all points are covered by an overall internal control policy involving further checks where needed.

Auto enrolment fines
What types of businesses make declaration of compliance errors?

What types of businesses make declaration of compliance errors? 

The declaration of compliance needs to be done within five months of the staging date but it is the duty that businesses seem to fail to do. One reason is that it is not clear who will complete the declaration – the adviser or clients?  

A business must complete and submit a declaration of compliance so that The Pensions Regulator knows what actions the business has taken to meet its automatic enrolment duties. The latest Compliance and Enforcement Bulletin from the Pensions Regulator gives details of the number of times the Regulator has used its powers and has fined businesses. Two examples stand out, with each employer being fined: 

  • A garage owner failed to complete a declaration of compliance as they thought a staff member had done it.

The employer was a small independent garage owner who failed to complete their declaration of compliance or respond to the Compliance Notice we subsequently issued. As a result of this inaction, we then gave them a Fixed Penalty Notice (FPN) of £400, with a deadline of 28 days to pay. The employer asked us to review this decision, as they claimed that the job of completing the declaration of compliance had been delegated to a junior member of staff and that they genuinely believed it had been completed. We responded by confirming the FPN on the basis that this was not a reasonable excuse for failing to comply with their legal duties. The employer then appealed the decision to the Tribunal. The judge confirmed that we were right to issue the FPN, stating that it was the employer’s legal responsibility to ensure that they comply with the law – including the submission of the declaration of compliance by the deadline. He also confirmed that the fact that a junior member of staff had failed to do this on the employer’s behalf did not amount to a 
reasonable excuse.

  • A travel agent with no staff eligible for automatic enrolment failed to complete other duties such as completing their declaration of compliance after wrongly assuming the law did not apply to them.  

The employer was a small, independent travel agent who failed to complete their declaration of compliance by the deadline. We issued them with a Compliance Notice; however, the employer failed to comply by the deadline or indeed contact us, so we followed up by sending them an FPN. At this point, the employer’s accountant contacted us and explained that their client has only one employee, who is a non-eligible jobholder, and mistakenly assumed that, as they were a small employer, the new pension regime did not apply to them just yet. They also completely misunderstood the significance of the staging date.

LinkedIn live Q&A on automatic enrolment – 9 August at 10am
The Pensions Regulator has arranged a Q&A session on Tuesday 9 August from 10-11am. If you'd like to participate, make sure you join their LinkedIn group before the session starts and post a question.

HMRC’s position on voluntary tax returns
HMRC has clarified its position on voluntary tax returns.

HMRC has clarified its position on voluntary tax returns. 

'HMRC’s long-standing policy is to accept voluntary ITSA individual and partnership returns on the same basis as returns received pursuant to a s8 TMA1970 notice, where the clear intention of the person submitting the return is that it should be treated as such. We have no plans to change our policy on voluntary returns. 

This policy provides a mutually beneficial administrative arrangement for customers and HMRC. The alternative would be that HMRC would have to reject returns submitted voluntarily, issue a formal s8 notice and the customer would have to resubmit the return. This would add unnecessary administrative burdens to both customers and HMRC, causing unnecessary delay in HMRC processing returns, claims and repayments.  

Where the clear intention of the customer is that the voluntary return is to be treated as if it were a return made pursuant to a s8 TMA1970 notice, HMRC accepts the voluntary return on the basis that the same statutory consequences will follow as if it were in fact a return made pursuant to a s8 TMA1970 notice, including HMRC’s powers to enquire into that return under (s9A/12AC TMA 1970.) 

As part of our ambition to put the customer at the heart of what we do, we have introduced Simple Assessment for 2016/17 onwards to enable HMRC to send customers with straightforward tax affairs a Simple Assessment notice of their liability without the need for them to submit a Self-Assessment return. We expect that this will significantly reduce the number of voluntary returns that we receive each year.  PAYE customers, who are not already in Self Assessment, do not need to complete a SA tax return in order to get a refund. 

Longer term our plans are to abolish the annual tax return as part of our Making Tax Digital strategy.' 

Employees' right to work
Are your clients confident all employees are working in the UK legally?

Are your clients confident all employees are working in the UK legally? 

The Home Office has updated its guidance An employer’s guide to right to work checks for the changes brought about by sections 34 and 35 of the Immigration Act 2016. 

It is highlighted that section 34 applied from 12 July and that ‘a person commits the offence of illegal working if he is: 

  • subject to immigration control and works when disqualified from doing so by reason of his immigration status; and
  • at the time, he knows or has reasonable cause to believe that he is disqualified from working by reason of his immigration status.’

It is also highlighted that the offences fall within the proceeds of crime legislation and ‘the offence of illegal working is not limited to working under a contract of employment and is intended to cover all types of work, including apprenticeships and self employment’. 

The guidance also refers back to the checks that employers have been required to undertake from 16 May 2014 ‘to establish or retain an excuse against a liability for a civil penalty for employing a person who is not permitted to work for you’. This includes the 12 month check. 

The Guidance on examining identity documents has also been updated. It pictorially highlights valid and counterfeit identity documents that an employer may be presented with.

Change in end of year reconciliation letter
HMRC is testing a change with taxpayers.

HMRC is testing a change with taxpayers. 

From 1 August some taxpayers due a refund may see a slight change to the end of year reconciliation letter they receive (P800).  

HMRC will be testing how this change works with the aim of getting taxpayers to use their Personal Tax Account with the promise they will get their rebate quicker. It is also expected that the account will contain an explanation of why the taxpayer is receiving a rebate. 

HMRC has said that taxpayers who have paid too much tax will be invited to submit their bank details through their Personal Tax Account. They will then receive their repayment direct to their bank account within three to five days. 

It has also been highlighted that where a taxpayer is owed a repayment and takes no action within 45 days HMRC will automatically post a payable order to them. 

It is worthwhile warning clients about the change.

HMRC's improved security verification procedure
Online security being beefed up by HMRC.

Online security being beefed up by HMRC. 

In March, HMRC introduced 2 Step Verification (2SV) which involves using a code sent to a mobile or landline phone along with the usual login details in a trial for business customers registered for self-assessment. 

HMRC has said that, as part of the security measures it is introducing, it will ‘phase in the requirement for business customers enrolled in only self-assessment to use 2SV when accessing their accounts'. 

We know that cybercrime and access to clients’ records is a developing problem and we and others are working with HMRC on these issues. 

How will the 2SV service work?
When logging in, HMRC will either text or send an automated message with a code which is required to gain access to a tax account. It has said ‘if customers lose their phone or change number, 2SV can be reset by ringing the Online Services Helpdesk'. 

Why is HMRC providing this service?
HMRC has said that the main reason is security for taxpayers, commenting: ‘We know that criminals attempt to use stolen login details to access and exploit customers’ tax accounts. Without the registered mobile or landline phone, they are less likely to succeed. 

  1. It’s easy and many of our customers already do it in other walks of life. 2SV is very common across internet banking and email services.
  2. It’s free.
  3. It is popular with users – in January 2016 around 600,000 Personal Tax Account users opted-in to use the service.’

What do your clients need to do? 
HMRC has said that at this stage they are not implementing the process for agents. Its advice is that ‘to use the service, your clients simply need to follow the on-screen steps when they login to their tax account having either a mobile or landline phone to hand'. 

Protection against cyber risks
Protection of data and more generally protection of businesses against cyber threats is a key but easily overlooked area. Liability of a business for data loss, reputation loss, theft and significant business disruption are just some of the potential horrors. 

It is also becoming increasingly common, with both unsophisticated and sophisticated attacks. Insurance companies are increasingly asking specific questions around security and in many sets of terms and conditions for cloud-based software, clauses now specifically highlight that it is the business user who is responsible for data security. 

There is a need for all businesses to assess risk, to establish preventative processes and procedures and to have a plan for what action is required if an attack were to take place. A useful starting point is the guidance called Cyber essentials

This provides materials that businesses can download, including free documentation, but also contains a short self-assessment, which sets out security controls that help businesses protect themselves against the most common cyber threats.  

Interaction with government is increasingly electronic, with businesses and agents representing businesses updating key information, transferring data and paying taxes and receiving refunds based on the data held. Where there is concern over a cybersecurity breach it is advisable to contact the appropriate government department. For example, HMRC has an updated list of the latest issues highlighted to it. 

Where a breach is suspected, HMRC can be contacted via email so action can be taken quickly. One of the key parts of any security plan would be what should happen were an attack to occur and who should then be engaged with. Typically for a tax agent this would be to make contact with HMRC and any third parties that may have been impacted.

Extracting funds from a limited company
HMRC has renewed its interest in how businesses extract funds.

HMRC has renewed its interest in how businesses extract funds. 

A common scenario at any stage in the life of a private limited company would be shareholders contemplating retirement and therefore extraction of funds is on the agenda. 

Sounds straightforward enough?  Accountants advising clients know that this issue is far from straightforward-  with various options, all of which are subject to HMRC rules and regulations. 

To complicate matters further, HMRC has recently introduced Targeted Anti-Avoidance Rules (TAARs) in the 2016 Finance Bill which seek to address what they see as tax avoidance relating to certain aspects of the retirement process.

A normal retirement case
Although the distributions rules are complicated, a simple scenario might be where a company is wound up and a distribution is made. Depending on the details the shareholder would pay capital gains tax at either 10% or 20% on the distribution as it would be treated as capital. This may work to the taxpayer’s advantage as treating the distribution as a dividend might incur a higher income tax charge. 

However, consider the following examples: 

  1. The shareholder quickly starts up a new company, accumulates wealth in it, and then winds up the company again. Potentially the tax savings are the same each time he does this.
  2. The shareholder genuinely retires but quickly realises that he does not like the sedate life so starts up as a sole trader involved in the same trade.

The effect of the new TAARs
HMRC refers to the above as ‘phoenixism’ where the company is wound up and yet the same trade is then carried on either in a new company or in a different vehicle. The TAAR will treat a distribution from a winding-up as if it were an income distribution for the purpose of section 1000 CTA 2010 where certain basic conditions are met. These conditions are: 

  • an individual (S) who is a shareholder in a close company C receives from C a distribution in respect of shares in a winding-up
  • within a period of two years after the distribution, S continues to be involved in a similar trade or activity
  • the circumstances surrounding the winding-up have the main purpose, or one of the main purposes, of obtaining a tax advantage
    (note that the above provisions do not apply to minority shareholders).

The ‘grey’ areas
Clearly the legislation is aimed at repeat ‘phoenix’ companies where a tax advantage is planned for. However, HMRC has not clarified what it means by a ‘similar’ trade.  If it is exactly the same this would be obvious but where a client decided to try their hand at something different but broadly related, how would this be treated? 

In addition HMRC use the phrase ‘involved’. Clearly if the former shareholder was the owner of a new company then they would be caught under the above provisions. But for instance would helping a friend or relative set up a new business and retaining a minority interest be caught? 

The third contentious area is the type of business vehicle to be used after the winding up. The legislation does not necessarily only apply to a new limited company. It could also potentially apply to a part time sole trader business in the same trade. 

The intention to gain a tax advantage
It is always important to remember that if the intention is clearly not to avoid tax then the TAAR is not effective. 

In the effort to tackle tax avoidance the legislation will have created confusion and uncertainty for some business owners who are thinking of retiring. When you are advising clients on such issues ensure that they plan ahead. In particular applying for advance clearance may be useful. 

ACCA made formal comments to HMRC on the implications of the company distribution clauses of the Finance Bill 2016 and these can be viewed here with the government’s response here

Consultation on LLP SORP changes
CCAB has issued its consultation document on the LLP SORP changes.

CCAB has issued its consultation document on the LLP SORP changes.

It includes amendments made as a result of the LLP Regulations changes in May 2016. These introduced changes to the financial reporting framework for LLPs, including raising the size thresholds and the creation of a new micro-entities regime for very small LLPs. These changes are effective for financial years beginning on or after 1 January 2016. 

There are four questions asked these concern:

  • Micro-LLPs (FRS105)
  • Small LLPs (FRS 102 Section 1A)
  • Ranking of loans and other debts
  • Statement of changes in equity

The consultation is open for comment until 1 November 2016.

Ask ACCA: member engagement webinar
Join one of our webinars next week to hear about our latest developments for members and ask us questions.

Thursday 11 August 12:00-13:00 BST

Speakers: Brian McEnery (deputy president) and
Alan Hatfield (executive director, strategy & development)


As part of our on-going effort to involve members in ACCA’s strategy and to act on members’ feedback, we will be running a series of webinars to update members on our latest development, including the exciting new alliance with the CA ANZ. The webinar will include:

  • An overview of ACCA’s performance for 2015-16. Take a look at our fifth integrated report to get a flavour of this
  • The latest developments from ACCA which benefit members
  • ACCA's 2016 AGM
  • Q&A: your chance to raise any questions.

If you cannot attend live, register in advance and you will automatically receive a reminder to watch it on demand afterwards. Alternatively, this is one of three webinars being held around the world. Why not join your fellow members in a different timezone as follows:

Webinar One: 09:00-10:00

Webinar Three: 17:00-18:00

ACCA’s Annual General Meeting takes place on Thursday 15 September, at which the results of the latest election to Council will be announced. 

Voting for Council - and a number of special resolutions - opened last week and online voting closes on Thursday 8 September. You will have received full details in a separate message from the Electoral Reform Services. 

We urge you to participate, cast your votes and play your part in the democratic process that lies at the heart of a successful membership organisation.

Webinars for practitioners
Register now for two free webinars in September.

How to do a Spanish tax return

6 September | 10.00-11.00
CPD units: 1 


Practitioners in the UK are increasingly finding that they have clients who have an income from Spain – usually through a holiday rental property there. These clients have to file a tax return in Spain as well as in the UK. This webinar will provide a basic introduction to the Spanish tax system and explain how to complete a Spanish tax return for a simple scenario where the only income is from a holiday rental home in Spain. 

Speaker: Marieta Getcheva is a senior manager in the IAS/HRS Global Mobility department of PwC Madrid. Marieta has more than 10 years of practice as a tax adviser and global mobility specialist. She has a wide experience in personal income tax compliance and consulting, as well as in the social security and immigration area.  

Cyber Security: threats, protection and prevention
20 September | 12.30-1.30
CPD units: 1 


ACCA has partnered with Barclays Bank Plc to bring you this webinar on cyber crime. The cost of fraud to the private sector in the UK is £21.2bn each year and 74% of small businesses suffered a security breach least year. This webinar will provide an overview of cyber crime as well as the top cyber threats to UK businesses and how to remain safe. Areas such as social engineering, phishing, malware, banking trojans, ransomware and cloud accounting will be discussed. Common types of cyber attacks will be illustrated together with controls that can be implemented to reduce exposure to cyber attacks. There will also be information on the help that is available.

Speaker: Graeme Brand is a Business Digital Marketing Consultant with Barclays Bank Plc. He leads, manages and maximises the digital proposition for a defined geographical area, delivering digital solutions for Barclays customers. Through his role, he supports businesses to grow through digital enablement focused on five digital areas to grow, promote and expand their online footprint: digital marketing, video, search engine optimisation, social media engagement and website development. He works with businesses to improve their digital adoption, engagement and online presence.

Business rates' consultation
ACCA responds to government consultation on business rates.

ACCA responds to government consultation on business rates. 

In its response, ACCA urges the government to reconsider whether delivering more frequent revaluations of business rates would be of benefit to the government and taxpayers in the current uncertain economic climate. 

Instead, ACCA advocates retaining the current system of five-yearly revaluations carried out by the Valuation Office Agency (VOA) - along with the two-year advance notice period before new revaluations come into effect - with a simplified appeals process.

As a safeguard, a growth trigger for earlier revaluation could be considered, thus providing a safety net for both businesses and local authorities and would account for increased or reduced growth.

CPD: High quality events for practitioners
Plan for your annual CPD return with an autumn training event.

Our Professional Courses events provide high quality training for practitioners. Find the right event for your CPD requirements now.


Commercial, employment and company law update 16 September, Ashford 

PRACTICE WORKSHOPS Guide to practical audit compliance for partners and managers 

20-21 September, London

12-13 October, London 

13-14 December, Manchester 

Practical guide to ISQC 1 for partners and managers

22 September, London

8 December, London


Saturday CPD conference three for practitioners

08 October, Glasgow

15 October, Birmingham

22 October, Bristol

29 October, Manchester

05 November, London

12 November, Swansea

26 November, Sheffield

03 December, London 


Accounting conference: Accounting standards update 
1 October, London  

Business advice conference: HMRC and the practitioner
12 November, London   

Taxation conference:
Topical tax update 
3 December, London


Inheritance tax and trusts
20 September 2016, Douglas 

Financial crime: anti-bribery and corruption/anti-money laundering
20 October 2016, Douglas 

Accounting and auditing refresher
27 October 2016, Douglas 

VAT refresher
22 November 2016, Douglas


19 November, Aberdeen

Save 25% off BPP entire catalogue
Get 25% off cutting edge and exciting learning programmes and bundles.

Now through August 2016 get 25% off cutting edge and exciting learning programmes and bundles perfect for busy professionals looking to expand their skillset, grow their network or advance their careers. Enter promotional code ACCA25 at checkout. 

Save on learning – 25% off BPP entire catalogue

Building your employability
ACCA learning pathways help you achieve your career goals.

We know that the role of the professional accountant is changing and that you will need to do more to ‘stand out from the crowd’. ACCA learning pathways help you achieve your next career goal by providing a structured learning experience to really develop the core skills that employer’s value. Book now and take advantage of our earlybird discount…

Building your employability and growing you as a professional

Improve your engagement letters
Put our updated ACCA Engagement Letters Tool product to good use.

Purchase your copy of our updated product now. 

There are times when problems can arise in practitioner-client relationships. By setting out terms of engagement, which clearly state the exact terms of agreement, you can avoid legal disputes later. 

ACCA in partnership with VS Consultancy has produced engagement letter templates which can form the basis of a contract between practitioner and client for a variety of different scenarios. These are available for ACCA members to purchase for £30 + VAT. 

This time-saving tool consists of self-loading Microsoft Word engagement letter files, which you can then tailor to your needs. The product consists of standard letters of engagement for a series of different business types and services. 

It also offers guidance on the following: 

  • What an engagement letter should cover to clarify the scope of your services
  • How to confirm the agreement with the client.
  • Writing a framework for how the work will be performed
  • Establishing an appropriate working relationship
  • How the engagement letter should address fee arrangements.

This product will run on systems using Windows XP and subsequent versions. 

The product can be purchased online




2020 Webinars - 50% discount
Big savings for your practice on webinars from 2020.

2020 Webinars - 50% discount in partnership with ACCA 

2020 webinars provide a great source of CPD from the comfort of your office or home.  Webinars provide delegates with the option to join the live broadcast - where you can submit questions to the speaker - or access the recording at a date and time that's convenient to you.  Any supporting notes and slides will be made available to registered delegates 1 - 2 days in advance of the webinar by email and the recording will be emailed within days after it has taken place. 

As an ACCA member you are entitled to 50% discount (off the 2020 Non Member rate) on the following 2020 webinars:

  • CPD Webinars - 12 CPD webinars covering essential tax, accounting and audit topics, practice assurance and money laundering.
  • Monthly Tax Update Webinars - these webinars will give you all you need for an essential tax update in just one hour per month.
  • Practice Management and Development Webinars - during this series of four webinars, Gordon Gilchrist will bring you the latest trends, successful ideas and opportunities from firms around the world to motivate and inspire you.
  • FCA Webinars - Ian Fletcher's popular quarterly FCA Updates are designed to refresh delegates on the FCA regime and to ensure that they are up to date with all the latest FCA developments and rule changes.

A full list of all the 2016 webinars can be viewed in the 2020/ACCA webinar brochure 

Please visit for full details and to book.

Queen’s Award for Promoting Opportunity
Could your firm, or a client, win this new social mobility award?

Your firm or one of your clients may wish to enter this new social mobility award.

The Queen’s Award for Promoting Opportunity is designed to encourage social mobility within business while recognising and rewarding organisations for the important role that they play.  These are the UK’s most prestigious awards bestowed by the Sovereign on business.  

Promoting Opportunity through social mobility
To apply for the Promoting Opportunity award, you must also:

  • have had a social mobility programme running for more than two years
  • show that the programme has had a positive impact on your commercial success over two or five years (for example, it has improved your reputation or led to savings in the business)

Your improvements should be in one of the following areas:

  • work experience, careers advice or mentoring for young people
  • offering non-graduate routes such as traineeships or changing recruitment practices
  • giving equal support and progression opportunities to all employees.

Why enter awards? 

  • Confirmation of your greatness … and a morale booster for staff, current and to-be: winning an award creates a feeling of well-being among your staff, and makes your firm more attractive to prospective talent and clients. 
  • Marketing opportunity – Speaking of clients, you get to present your firm – in the region in which you work, your sectors - as the best in the field.
  • The discovery process - You’d be surprised at how few firms review their progress or really have a grasp of what they do best. Entering awards forces you to take stock of your situation.

To find out more and apply before the deadline of 2 September, visit The Queen’s Award website