Technical and Insight
The last tax return?
Is January 2016 the last fixed tax submission date?

Is January 2016 the last fixed tax submission date? 

The government has announced that ‘by early 2016 five million small businesses and ten million individuals will have access to their own digital tax account, and by the end of the next Parliament every individual and small business in the UK will have one. The digital accounts will be simple, secure, personalised to the taxpayer — and accessible through the digital device of their choice.’  

The government has also said that it 'plans to transform the tax system' and will consult on the details in 2016. The Chancellor has highlighted that most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. 

The Chancellor’s stated aim is to ‘transform HMRC into one of the most digitally advanced tax administrations in the world, with access to digital tax accounts for all small businesses and individuals by 2016-17, delivering an additional £1bn of tax revenue by 2020-21 and sustainable efficiencies.’ 

This is all under the banner of ‘tax simplification for businesses’, yet so far there seems minimal detail on any true tax simplification measures to support businesses and reduce cost. There is little planned to simplify tax measures and reliefs. The measures highlighted seem to suggest more regular quarterly reporting responsibility for businesses and an implied acceleration of tax payments by business to the government. 

So, rather than tax simplification for business, the result seems to be that businesses will have one tax reporting date replaced by four tax reporting dates. There is, however, benefit for businesses in being able to access a digital tax account and presumably manage all taxes and correct HMRC errors. 

Your comments
Many of you commented and provided a clear view of your thoughts when we asked for your views on no tax returns last year. Over the coming months we will be asking for your views and thoughts on ‘tax simplification measures’, on costs for businesses, and on the support you need. This will include surveys aimed at businesses as well as at practitioners and your clients. 

From January you will also find regular updates reflecting your views together with articles from detractors and supporters of these measures on ACCA’s website

Ready to comment?
You can share your early views with us now by sending an email with the subject line ‘Making tax digital’ to advisory@accaglobal.com

 

 

Dividend tax – is it still worth incorporating?
Are you still better off incorporating to lower your total tax bill after the new dividend tax?

Are you still better off incorporating to lower your total tax bill after the new dividend tax? 

It seems the answer to lowering the total tax by incorporating a business is no longer clear cut. 

After the introduction of the new dividend tax – which we looked at last month – the strategy of a director / shareholder taking a low salary and a high dividend may no longer deliver the same tax benefit as before. 

Some may ask whether incorporating is still as attractive as it was before the latest tax changes, considering the burden of company reporting and compliance requirements so much broader than a sole trader’s. 

Let’s look at a number of scenarios, to illustrate the total tax bill of a sole trader with a taxable profit of £50,000 and the director / shareholder of a company with same pre-tax profit before salaries of £50,000.

These are based on 2015/16 tax rate bands and rates: 

NI Threshold

Basic

Basic

Higher

Sole Trader

Salary

8,060.00

20,000.00

31,785.00

45,000.00

Dividend

41,940.00

30,000.00

18,215.00

5,000.00

Total tax cost

12,871.75

11,963.07

13,834.90

15,569.16

12,790.15

Effective tax rate

26%

24%

28%

31%

26%

Net cash taken

37,128.25

38,036.93

36,165.11

34,430.84

37,209.85


View the five scenarios

(NB: These are basic examples and do not include other areas that may have a cost impact - for example the impact of auto enrolment.)

It seems the off-the-shelf solution of drawing the minimal salary and basic rate band dividend, so commonly used by accountants and expected by clients, is no longer the answer. Setting the salary at below NI threshold in a company has no advantage over a net income of a sole trader.

Following the introduction of the new dividend tax rates, it is important to consider various salary levels within the basic rate tax band to find optimal remuneration structure. 

Personal tax account – an introduction from HMRC
A new digital service giving people a better understanding of their tax affairs is now available to individual customers.

A new digital service giving people a better understanding of their tax affairs is now available to individual customers. 

The Personal Tax Account brings information together in one place, making it easier for people to access their personal tax affairs online. The new service won't change the way agents interact with HMRC. Agents can continue to file self assessment returns using the existing portal service. 

Agents’ clients will find a range of benefits by using their PTA. They can choose to receive electronic rather than paper communications (agents will still receive paper copies for clients who go paperless) and they can also use their account to:  

  • view and update their personal address
  • access a range of iForms which they can complete and submit online
  • view and amend an estimate of the income tax they’re likely to pay in the current tax year
  • tell HMRC about changes to certain taxable benefits from their employer. 


‘Non business' digital Self Assessment (SA) customers will move from Your Tax Account to the Personal Tax Account giving them the opportunity to use these additional services. SA customers who are self-employed, or pay business taxes such as VAT or corporation tax, will in future also be given access to their Personal Tax Account. We’ll continue to develop the account based on user feedback and in depth customer research. 

Please note that the Personal Tax Account isn’t currently designed for use by agents. We will be improving the service to provide agents with access; until then they should not try to access it on behalf of a client. Also if agents log on to submit a client return using their client's credentials, this can create security alerts which HMRC staff need to investigate. This can delay clients receiving their repayments.

HMRC continues to develop online services for agents through Agent Online Self Serve (AOSS). AOSS is being developed with input from agents to ensure that services best meet agents’ needs. Agents who meet the criteria and wish to take part in testing the AOSS private beta service can register via www.gov.uk up until 11 December 2015.

Work is also continuing to improve the digital forms functionality that is available to agents, including digital submissions, improved guidance, and saving partially completed forms. Updates on AOSS and digital support for agents will be provided through regular briefings to stakeholders and posts on the HMRC Tax Agent Blog 

Plenty of good news, but is it based on solid foundations?
ACCA gives its verdict on the Autumn Statement.

ACCA gives its verdict on the Autumn Statement. 

The Chancellor delivered an Autumn Statement and Spending Review that was full of good news, but very little detail about how they will be funded. 

Chas Roy-Chowdhury, ACCA head of taxation, says: ‘The Chancellor managed to deliver an Autumn Statement that was filled with good news, but given the lack of wiggle-room he has, it is concerning that much of the spending is based on the assumption of consistently strong growth figures, especially given the downgrade in world growth forecasts by the Office for Budget Responsibility. 

‘The breach of the welfare cap is politically embarrassing, but many believe it was a purely political, rather than economic, gesture to introduce the cap in the first place. In the long run it will likely lead to very little economic repercussions, and could even give him cover for even deep welfare cuts in the future.' 

Tax credits
The improved public finance figures have dug the Chancellor out of a big hole regarding tax credits; he’s able to wait for them to be phased out through the introduction of universal credit. He will be relieved that this avoids another battle with the House of Lords.' 

Paper tax returns
‘This is not simplicity, call it what it is - accelerating payment. Radical reform is needed to support our small businesses who simply want to get out there and get on.' 

Tax avoidance
‘As expected the Chancellor is expecting the Treasury coffers to be swelled by more anti-avoidance measures. This, alongside public spending cuts, has been the mainstay of his monetary policy; the problem now is that HMRC has just about exhausted the well of easy to reach targets. This past year saw a fall in corporation tax collected through anti-avoidance measures; this would imply that they are moving in to areas where collection is more difficult and time consuming.

'The new penalties announced under the General Anti-Abuse Rule is a further announcement of tax creep, which is unwelcome.

'The failure of the government to get the tax credits cut through the House of Lords has taken away near enough all of the Chancellor’s room for manoeuvre, so relying on the latest anti-avoidance expectation would be dangerous.'

Corporate tax devolution to Northern Ireland
'The devolution of corporation tax to the Northern Ireland Executive – to be set at 12.5% - is welcome news: it will give Northern Irish businesses a boost in their competition with businesses over the border in the Republic of Ireland.'

New apprenticeship levy
‘The new 0.5% levy is ripe for future tax hikes  - we need to be cautious around any ‘mission creep’ on the levy. It might be increased in future years and all the funding received from it should be ring-fenced and any surpluses solely used for future apprenticeships.’

Stamp duty land tax
‘On the surface the premium charged to overseas investors is good for UK residents looking to buy their own home, but we must remember that there are many Britons living outside of the UK and make sure that they do not pay the premium.'

Further education
Anthony Walters, ACCA Western Europe head of policy, says: ‘As ever the Chancellor bucked the chatter and all the trends with commitments around adult skills funding. The protection of further education funding is a welcome surprise. Allowing part-time students to access maintenance loans may help in plugging the skill gaps and improve social mobility.'

Infrastructure
‘The announcement of the funding for more rail projects is welcome – especially the trans-Pennine electrification. These were vital to the Northern Powerhouse project. Let’s not forget that this investment is not merely a vanity project, it’s about making good on decades of underinvestment which has been threatening to hold back the UK economy.'

Innovation
‘We are pleased that InnovateUK has been protected in cash terms. Encouraging innovation will be essential if the Chancellor is to deliver on his long term economic plan. Whilst accountants may be the most trusted partner of SMEs Innovate UK is an important supporter.’

For us practitioners the future is here… but what about our clients?
The Secret Accountant believes changes to UK GAAP present a valuable opportunity to re-assess your relationship with many clients.

The Secret Accountant believes changes to UK GAAP present a valuable opportunity to re-assess your relationship with many clients. 

My practice has been very proactive throughout the whole of 2015 trying to make sure that all of its partners and staff are well versed in the substantial changes made to UK Generally Accepted Accounting Practice (UK GAAP) that came into effect for accounting periods commencing on or after 1 January 2015.  At the same time, it has been providing regular updates to both clients and targets on this subject. 

While it’s fair to say that these updates have largely been around how and why the debits and credits will change there has been some subtle (and some less so) messaging to the practice on how this opportunity to earn additional fees and increase recurring fees should not be overlooked. 

This is the once in a lifetime opportunity that presented itself previously in 2005 and 2007 when the main market and AiM listed companies were mandated to apply EU adopted International Financial Reporting Standards (IFRS) in their consolidated financial statements respectively. 

Despite all this information being made available, it continues to be of continuing concern that a good number of companies do not appear to have heard the news that the financial reporting framework is changing and they need to start preparing. 

An example of this happened recently when I was discussing with the finance director (FD) of a reasonably sized AiM company what decision, if any, had been made concerning the transition to ‘New UK GAAP’ for the parent company and its UK subsidiary entities. This company had decided to adopt FRS 101, ‘Reduced Disclosure Framework’, in all of the relevant company accounts as there were not a substantial number of IFRS adjustments required to the extant UK GAAP results to prepare the IFRS consolidated accounts. 

Simple it seemed, until I enquired whether the parent company had notified shareholders that it intended to take advantage of the disclosure exemptions in FRS 101, a condition precedent in the standard to take advantage of the exemptions. While the answer was no, I was able to reassure the FD that there was still time to notify shareholders thereby avoiding a nasty shock that would have come to light during the year end audit by which time it might just be too late to do much about it. 

While the future may have already arrived for you, don’t be so sure about your clients and make sure you don’t miss out on the once in a lifetime opportunity for extra fee generating work around the transition exercise and beyond. Once gone it may not be back for a while…

Auto enrolment: New interactive step by step guide for employers
The Pensions Regulator has launched a new interactive step by step online guide aimed at employers. 

The Pensions Regulator has launched a new interactive step by step online guide aimed at employers.  

It is designed specifically to help small and micro employers meet their legal obligations. By answering some simple questions they’ll be able to quickly find out if they have to put any of their staff into a pension scheme. 

View the guide now

 

Personal income tax deductible payments
Situations when interest paid on ‘qualifying loans’ is deductible in the tax computation.

Under Income Tax Act 2007 (ITA) s383, interest paid on ‘qualifying loans’ is deductible in the tax computation. 

Interest is deducted first from non-savings income, then from interest on income and the remaining amount will be set against any dividend income. 

Relief is not given for interest paid on an overdrawn account or on a credit card, or at a rate that is higher than a reasonable commercial rate of interest. 

For a ‘mixed loan’, the interest relief is given only to the ‘qualifying part’ of the loan (ITA07/S386). Any repayments of a mixed loan are apportioned between the qualifying and non-qualifying parts. A different rule applies, however, where capital has been recovered from an investment funded from the qualifying part of the loan. So if the taxpayer takes a loan to buy shares in a close company and then he sells those shares, he is deemed to have repaid the loan with the proceeds of sale. 

Loans that qualify for tax relief are: 

  1. Loan taken out to buy plant or machinery for partnerships or employment use. The interest is allowed in the year of the loan and the next three years. The plant or machinery must be such that the partnership (in the case of the partner) or the individual (in the case of the employee) is entitled to capital allowances on it. Where the plant or machinery is used partly for private purposes, only a percentage part of interest will qualify for relief, which is the same percentage as the restriction for capital allowances claim.
  2. Loan taken out to buy into a partnership or in providing a partnership with a loan. Such interest is a liability of the individual and not of the partnership and therefore is not allowable as an expense in computing the partnership’s profits.
  3. Loan taken out by an individual to purchase shares in a close company or to lend money to a company, which then uses the loan wholly and exclusively for the purposes of its business. A close company is a UK company controlled by five or fewer shareholders. The person claiming relief must either work for the company or hold more than 5% of the company’s share capital. Relief is not due where the individual or his spouse makes a claim for relief under the Enterprise Investment Scheme.
  4. Loan taken out to pay inheritance tax. The personal representatives of someone who has died may obtain relief on interest on a loan taken out to pay inheritance tax. The loan interest is eligible for relief only for the first 12 months of the loan being made.
  5. Loan taken out to acquire any part of the ordinary share capital of an employee-controlled company. The shares must be acquired by the individuals either before the company became employee-controlled, or no later than 12 months after it became employee-controlled. A loan to invest in a co-operative also qualifies for relief.


View a proforma income tax schedule showing the deduction of qualifying interest.

 

 

FRS102: the latest guidance
HMRC has updated its guidance on FRS101 and FRS102 with regard to the key tax considerations that arise for companies as part of the transition.

HMRC has updated its guidance on FRS101 and FRS102 with regard to the key tax considerations that arise for companies as part of the transition. 

The primary changes for FRS102 are: 

  • additional commentary in relation to non-interest bearing loans
  • updated commentary on the application of the Disregard Regulations and Change of Accounting Practice Regulations, reflecting the changes made to these statutory instruments in December 2014
  • accounting commentary updated to reflect the amendments to FRS 102 issued in August 2014 and July 2015
  • where applicable, it has been updated for any commentary specific to section 1A of FRS102.


The Draft guidance: corporation tax treatment of interest-free loans and other non-market loans has useful examples highlighting the treatment of restated loans and finance costs. For an interest free loan from a shareholder it shows how the accounting treatment applies for tax purposes. It states: 

‘A shareholder lends £100,000 to B Ltd, a UK company, on 1 January 2014. The loan is interest free and is repayable on 1 January 2019. It is assessed the market rate at which the company can borrow is 10% per annum. 

Accounting by B Ltd – year ended 31 December 2014 (applies Old UK GAAP) Dr Cash (balance sheet) £100,000 Cr Loan liability (balance sheet) £100,000. No amounts are recognised to profit or loss in the accounts. No amounts are therefore brought into account for tax. 

Restatement on transition to New UK GAAP
Dr Loan liability (balance sheet) £31,699 Cr Retained earnings (equity) £31,699
The restated value of the loan liability is therefore (as at 1/1/15) £68,301
Accounting by B Ltd - year ended 31 December 2015 (applies New UK GAAP)
Dr Finance expense (P&L) £6,830 Cr Loan liability (balance sheet) £6,830

Tax analysis: A transitional adjustment of £31,699, a credit, being the difference between the £100,000 previously recorded and the new carrying value of £68,301, will be brought into account by B Ltd over 10 years (£3,170 each year). In 2015, B Ltd will bring into account a net debit of £3,660 (finance expense of £6,830 less transitional credit of £3,170).’  

Further examples are available

 

Pension Scheme SORP 2015
In November 2014 the Financial Reports of Pension Schemes: A Statement of Recommended Practice (2015) was issued.

In November 2014 the Financial Reports of Pension Schemes: A Statement of Recommended Practice (2015) was issued. 

This SORP is applied for all pension scheme years commencing on or after 1 January 2015 or earlier if a scheme adopts FRS 102. 

The main changes due to SORP 2015

  1. Annuity policies held by the trustees now need to be reported at the value of the related obligations. Previously these could be included at £nil value. This change applies to both defined benefit and defined contribution schemes.
  2. Under FRS 102 investments need to be shown at fair value and it sets out a fair value hierarchy. This is extended by the SORP (2015) to all scheme investments.
  3. Investment risks now require to be disclosed. The nature and extent of credit and market risks in relation to financial instruments and the risk management practices in relation to these risks need to be disclosed. These disclosures should be made for all scheme investments and put in the context of the trustees’ investment strategy.
  4. The Pension Scheme SORP 2015 recommends disclosure of direct transaction costs by type and by main asset class.
  5. Additional disclosures are to be included in a report alongside the financial statements setting out the value of actuarial liabilities and the assumptions and methods used for the calculation of actuarial liabilities. This can be based on the latest scheme funding valuation. There does not need to be a valuation as at the scheme year end for the purpose of the annual report. However, liabilities covered by annuities will need to be included within the report as mentioned above in point 1.


Obtain the Pension Scheme SORP 2015
while further guidance on these issues is also available

Scottish rate of income tax
HMRC preparing to issue tax codes beginning with an S.

HMRC preparing to issue tax codes beginning with an S. 

The Scottish government will publish its Budget on 16 December 2015. It will include proposals for the Scottish rate of income tax, which would apply from April 2016. 

What is the impact?
Whether or not a person is a Scottish taxpayer is based on where they live and not where they are employed. It is an individual’s responsibility – not an employer’s – to make sure HMRC has details of their main residence. 

In early December HMRC began writing to 2m people who pay tax under PAYE and 600,000 who file a self assessment return. Unfortunately this SA return figure includes many businesses, including those under CIS, which will confirm where they reside in future tax returns. Employees will need to consider their residence and correct any address error. 

Employees will receive a tax code if they are resident in Scotland and the indication is that the code will begin with an S. Employers should only use the ‘S’ prefix when they are in receipt of the tax notification.

Self assessment – statements and payslip
Find out when HMRC will issue paper statements and payslips.

Find out when HMRC will issue paper statements and payslips. 

HMRC will issue a paper statement and a payslip (providing the person has not opted for digital only communications from HMRC) to individuals who file a self assessment return before midnight on 31 December

They will not be issued for returns filed after this date. 

Available payment options are highlighted here

Understanding competition law
CMA launches support to help small businesses understand competition law.

CMA launches support to help small businesses understand competition law. 

The Competition and Markets Authority (CMA) has launched a suite of materials, including eight animated films and a quiz, to help small businesses understand competition law and how it affects them.

Why management liability insurance matters
Many businesses underestimate the threat posed by management liability issues.

Many businesses underestimate the threat posed by management liability issues. 

At Lockton, we are acutely aware that it is never our place to tell our clients how to run their businesses or how to spend their money. However, we strive always to act as trusted advisers and remember that it is our primary role to advise clients as to the risks presented and how to mitigate and/or transfer these risks. Often, purchasing an insurance policy is the best solution and then it is our role to ensure that we can design the right programme and negotiate the right deals for our clients. 

An area where we are often engaged in debate with clients is in respect of the personal liabilities that management face in their capacity as directors and officers. It may surprise you to know that the liability of an individual director or indeed a manager or supervisor is unlimited if pursued personally for exposures that emanate from their business life. Furthermore a company’s limited liability status does not protect or limit their liability in this regard. 

Individuals (directors/officers/partners/members) can be pursued for a variety of actions most commonly arising from allegations relevant to: 

  • breach of health & safety policy
  • financial mismanagement
  • employment law.


We must stress that actions can arise from any allegation no matter how spurious and as employment law is a procedure dominated environment, it is possible for a claim to succeed due to the business falling foul of procedure and believing that they have essentially done nothing wrong. 

Despite the relatively low cost of management liability insurances – such as directors and officers liability and employment practices liability – it is staggering how often we speak with clients and management teams where this has not been arranged or indeed thoroughly explained. 

A common challenge we encounter when we cite claims examples or potential scenarios that could lead to allegations and subsequent litigation is ‘that won’t happen to us’ and then the explanation goes on to reference many years of trading, no history of any disputes, loyal staff who feel part of the ‘business family’ and so on. However, we need to remember that it is a very different world today than in years gone by, litigation is far more commonplace and legal advice and the ability to initiate proceedings are far easier to access. 

The statistic that highlights this best is that according to the Department for Communities and Local Government there were 17,152 non-residential fires in the UK for 2013-14, whereas according to statistics published by the Ministry of Justice, the number of employment tribunals for the same period topped 20,000. It would be inconceivable for a business to fail to insure its buildings and assets against fire; however, management teams are frequently omitting to protect themselves against litigation from employment disputes. 

In an age of ever-increasing legal costs and frequency of litigation the risk to a business’s P&L is significant. The average award for unfair dismissal and discrimination (various forms) is almost £12,000 and the legal costs, which can be significant, are in addition to this. It is our belief that businesses and individuals are either naive to the exposure or are taking unnecessary risk. 

Abigail Breary – assistant vice president, Lockton Companies LLP 

Abigail joins Lockton Bristol bringing expertise in directors and ofcers and prospectus liability. Abigail was previously employed by an international broker based in the City of London as an account executive managing a portfolio of international clients and brings over five years’ industry experience. 

Many of the claim examples mentioned above may also be subject to the company reimbursement as permitted by the articles/memorandum of association. Statistics as published by Ministry of Justice and Department for Communities and Local Government.

Accounting for the invisible – intangible gold
Intangibles are the gold of the 21st century with estimates suggesting that 80% of a listed company’s share price is no longer supported by the presence of tangible assets on its balance sheet.

Intangibles are the gold of the 21st century with estimates suggesting that 80% of a listed company’s share price is no longer supported by the presence of tangible assets on its balance sheet. 

This is not a new problem but it is an evolving finance conundrum for accountants and those seeking to leverage finance against these assets. With Financial Reporting Standard 102 (FRS 102) coming into effect from the end of 2015 (where a company’s accounting year is the calendar year) and April 2016 (where it is the fiscal year) it is about to get a whole lot more important for SMEs who will now follow substantially the same rules as multinationals. 

It’s therefore a good time to brush up on the identification and valuation of this category of assets, which is responsible for driving the majority of value in most companies. The main changes fall under two headings. 

Buying or ‘merging’ companies
Currently, when two companies are combined, either merger accounting (adding the two existing balance-sheets together) or acquisition accounting (placing a fair value on all acquired company’s assets) might be permissible. FRS 102 states acquisition accounting must be used in nearly all cases (bar group reorganisations). 

Also, acquisition accounting rules are being updated. Any excess paid over and above the fair value of the fixed assets and liabilities can no longer simply be characterised as ‘goodwill’. Instead, it needs to be broken down into goodwill and identifiable intangible assets, in a very similar manner to IFRS 3 (with some minor wording differences). 

This means that the sources of intangible value that have never previously appeared on an acquired company’s balance-sheet will need to be identified and quantified.

The useful life of intangible assets and 'goodwill'
FRS 102 preserves the option, previously available under SSAP 13 (which it replaces), of either amortising qualifying development costs of new products and services over a suitable period, or expensing these costs during the year in which they are incurred. 

However, UK GAAP currently permits ‘goodwill’ to have an indefinite life, as long as the value is tested annually for impairment. Under FRS 102, the concept of an indefinite life falls away and a lifespan has to be specified for amortisation purposes. 

If an asset’s lifespan cannot be determined reliably, a ‘default’ figure of five years must be used. This is much shorter than existing UK GAAP, under which it would have been customary to amortise some assets over a much longer period (up to 20 years). 

Combine these changes with the reduced role of ‘hard’ assets, which are increasingly outstripped by spending on intangibles, and the number of businesses looking to reflect their real investment profile on their balance-sheet looks set to rise. 

In line with this ACCA has been piloting some work to understand the impact intangibles are having on innovation within SMEs. The initial study was conducted in Malaysia; the outcomes of the UK study will be available shortly. 

For more information on this project please contact Rosalind Goates

Dividend waivers and settlement legislation
Dividend waivers can be an effective tool in tax planning – if executed correctly.

Dividend waivers can be an effective tool in tax planning – if executed correctly. 

A dividend is a payment from a limited company’s profits to its shareholders. The amount each shareholder receives will depend on the percentage they own in the company. When a shareholder does not wish to receive a dividend, this can be effected by the execution of a dividend waiver. The use of such waivers can be an effective tool in tax planning. Unless a dividend waiver is executed in the right way, HMRC is likely to use anti-avoidance legislation to attack the scheme. 

Settlement legislation can apply where a company with few shareholders declares a dividend when one or more of the shareholders have waived their right to a dividend in circumstances where other shareholders may benefit. HMRC can argue that the person making the waiver has indirectly provided funds for an ‘arrangement’ or ‘settlement’ by giving up a sum to which he or she is, or may become, entitled. 

If a dividend waiver is successfully challenged by HMRC, the result is that those individuals are taxed based on the total paid dividend apportioned according to shareholdings, effectively ignoring the waivers. 

When is the settlement legislation likely to apply?

  1. If the profit is insufficient to allow the same rate of dividend to be paid on all issued share capital.
  2. There has been a succession of waivers over several years where the total dividends payable in the absence of the waivers exceed accumulated realised profits.
  3. The same rate would not have been paid on all the shares in the absence of the waiver.
  4. The non-waiving shareholder would pay less tax on the dividend than the waiving shareholder.


Where the person benefiting under the arrangement is not a spouse, civil partner or minor child, the settlement legislation will not apply unless there are arrangements under which the money will be paid, or used to benefit the settlor. 

How to avoid the distribution being challenged

  1. Deed of waiver should be formally executed, and signed by shareholders who would otherwise be entitled to receive the share income. The deed should be dated, witnessed and lodged with the company.
  2. The dividend waiver must be executed before the right to the dividend arises. Interim dividends must be waived before payment; final dividend should be waived before the shareholders approve the final dividend.
  3. Dividends paid to a spouse should be paid into their own separate bank account (as opposed to the couple’s joint account).
  4. It is always better if there is a commercial reason for the dividend to be waived –such as enabling the company to retain funds for a specific purpose.
  5. It is unwise to use dividend waivers too frequently. A habit of waiving dividends will increase the risk of questioning from HMRC.
  6. Never backdate board minutes and dividend vouchers, as the documents will be legally void and can constitute a criminal offence.


Dividend waiver example 

Waiver of dividend 
I, (Insert name) of (insert address), the registered holder of (insert number of shares and class) of (insert name of the company), hereby waive all rights to payment of the interim/final (delete as applicable) dividend of (£insert amount) per share declared by the Company and its directors on (insert date) in respect of the year ended ([insert company year-end date). 

Date: (insert date

Signed by: (insert signature)

Witnessed by: (insert name, address and signature of witness

NEWS
Technical Advisory Service – Christmas opening hours
Details of when you can obtain technical advice over the festive period.

Details of when you can obtain technical advice over the festive period. 

ACCA is moving to new premises over the festive period. This will result in the Technical Advisory Service being closed from Wednesday 23 December until it re-opens on Tuesday 5 January. 

From 5 January you can continue to receive free technical advice by calling 020 7059 5920. 

Queries submitted via email during the period the Service is closed will be answered from 5 January onwards.

Our new postal address will be:

ACCA
The Adelphi
1-11 John Adam Street
London
WC2N 6AU.

Submitting your CPD declaration
Watch our 15 minute video guide to CPD and how to submit your annual declaration.
Join our 15 min session on CPD; exploring what it is, how it benefits you and guidance on submitting your declaration.

2016 UK/Irish practising certificate renewals
Renew your practising certificate (and/or insolvency licence) online now.

Renew your practising certificate (and/or insolvency licence) online now.  

Have you submitted your 2016 practising certificate and/or insolvency licence renewal yet? If you haven't, please login to your myACCA account now and follow the instructions to renew.  Read the guidance on our website to find out more. 

This is the easiest and most effective way of providing your renewal and payment information securely, ensuring that you remain authorised to undertake public practice work from 1 January 2016. Alternatively, you can submit your renewal online and select the ‘invoice’ option and ACCA will send you an invoice for the fee. Please ensure your payment is submitted no later than 31 December 2015. 

If you are in partnership (or a co-director of an incorporated practice) and your firm has held an ACCA auditing certificate in 2015, the nominated contact partner/director can submit the 2016 firm’s auditing certificate renewal online by logging into myACCA using the firm’s ACCA reference number and firm’s passcode. 

Please follow this same process if your firm registered through ACCA in 2015 to undertake exempt regulated activities in the UK, or has held a firm’s investment business certificate (Ireland) in 2015.

Late renewal penalty
If you do not submit your renewal or pay your invoice by 31 December 2015 there will be a late renewal submission penalty fee of £65. You may also become liable to disciplinary action. 

If you require a new passcode or have forgotten your username, you can follow the instructions and submit a request via the login page of myACCA

Do not leave your renewal until the last minute - submit yours online now

If you require any assistance with your renewals please contact Authorisation via email or 0141 534 4175.

CPD
2016 Saturday CPD conferences for practitioners
Popular Saturday CPD Conferences programme returns in February. Book now.

Popular Saturday CPD Conferences programme returns in February.  

CONFERENCE ONE         

  • VAT update
  • Essential law update for practitioners
  • NIC, PAYE, P11Ds and benefits refresher and planning
  • Specialist accounting

                                                                 

CONFERENCE TWO

  • Property taxes
  • Know your rights with HMRC
  • Finance Bill/Act 2016
  • Inheritance tax and pensions

                                                                 

CONFERENCE THREE

  • Tax planning for the owner-managed business
  • Accounting standards update

Please Note: The remaining two sessions have been left open to deal with issues arising during 2016.

 

Kaplan IFRS webinars
These live and on-demand webinars address the challenges of optimising the timing of revenue recognition and dealing with off-balance sheet items.

These live and on-demand webinars offer an engaging and interactive approach to addressing the challenges of optimising the timing of revenue recognition and dealing with off-balance sheet items. 

How can these webinars benefit you? 

  • learn interactively from the comfort of your own home without having to travel
  • brush up your skills and refresh your knowledge in these essential areas
  • the 3 for 2 offer will provide substantial savings for you
  • contribute towards your annual CPD requirement.


Find out more and register to attend

Online learning packs from BPP
These 5, 10 and 15 course packs from BPP have been specifically designed for practitioners.

These 5, 10 and 15 course packs from BPP have been specifically designed for practitioners. 

Covering a range of topics including project management, law & regulation, IFRS, international VAT and much more – this selection of courses will develop the skills needed to carry out your day-to-day job as well as enhance your employability for the future.

Public practice (SMP) 5 course pack

Public practice (SMP) 10 course pack

Public practice (SMP) 20 course pack

 

How to communicate effectively – recorded webinar
How to choose and use appropriate communication methods to achieve your individual and organisational goals.

Alongside technical expertise, communication is the key skill that influences an accountant's professional success. In a world where texts, emails and tweets are often sent without a second thought, the importance of a considered and effective approach to communication has never been greater. 

Join ACCA and accountingcpd.net for a free 60-minute recorded webinar where award-winning writer, lecturer and researcher Anna Faherty demonstrates how to choose and use appropriate communication methods to achieve your individual and organisational goals. 

Find out more and register

 

 

CAREERS
Recruit a new member of staff - for free
Our jobs website ACCA Careers has been completely revamped - and we are now offering you two free recruitment adverts.

We are pleased to announce the launch of our newly designed ACCA Careers website. It has enhanced features and benefits, giving you access to the largest and fastest-growing global job board for aspiring and experienced ACCA finance professionals. 

Recruit for your firm
We are offering members two free job placements per year on ACCA Careers (with a significant discount on further adverts). If you are considering adding a new member of staff to your practice, take advantage of our offer now. It is a simple two step process:


Both forms should be returned via email to jobboardsales@accaglobal.com and we will then be in touch to process your request.


Find a new role for yourself
Alternatively, you may want to move to a new role yourself. Boost your career by creating your unique account. Once you have access, complete your account profile and upload your CV – this will make your profile more searchable for recruiters and employers, as well as supporting your career aspirations. 

Help shape our ‘tax return reminder’ special issue
January issue will focus on tax return reminders. What should we cover?

January issue will focus on tax return reminders. What should we cover? 

The January issue of In Practice will have a ‘tax return reminder’ theme – which proved incredibly popular last year – and will be published early in the new year. It will include quick links, updated guidance, relevant sections of the tax legislation and worked examples on ‘tax return issues’. 

If you would like to see any areas covered please email your request to supportingpractitioners@accaglobal.com using the subject line ‘Tax return reminder’.

Changes to the ACCA Rulebook for 2016
Changes to the Rulebook arise largely from policy decisions, legislative and lead regulator requirements, or changes to the IESBA Code which must be replicated in the ACCA Code.

Changes to the Rulebook arise largely from policy decisions, legislative and lead regulator requirements, or changes to the IESBA Code which must be replicated in the ACCA Code. 

The regulations

Consent orders
A significant change to the regulations concerns the introduction of consent orders. On occasions, the procedures of ACCA and other professional bodies determine that the issues being investigated are not sufficiently serious to warrant being dealt with by a disciplinary committee. 

The changes to the regulations allow for the future use of consent orders, which, in suitable circumstances, provide a more nuanced set of outcomes to investigations. The regulations most affected are the Complaints and Disciplinary Regulations and the Regulatory Board and Committee Regulations.

Audit qualification
An amendment to the Rulebook was made in 2015 in respect of the period within which a student is required to complete the ACCA qualification examinations in order to achieve ACCA membership. Previously, this was ten years, and related to all examination papers – at both the Fundamentals and the Professional level. The change means that students registering for the ACCA Qualification on or after 1 January 2016 will be required to pass all the Professional level papers within a period of seven years. 

Further changes have been made to Annexes 1, 2, 3 and 4 in respect of those members wishing to go on to apply for the audit qualification. These changes: 

  • restrict the time period for completion of the Professional Level to five years
  • restrict the time period for completion of the Fundamentals Level to five years, such that the period for completing both Levels remains within ten years
  • ensure that the qualification is not obtained on the basis of exemptions based on qualifications gained more than five years prior to claiming the exemption
  • provide clarity in respect of the specific tax and law papers that must be passed in each jurisdiction
  • achieve simplification and greater consistency by improved drafting.


Notice period
Amendments have been made to the notice provisions contained within the Complaints and Disciplinary Regulations and the Authorisation Regulations so that ACCA gives the relevant person 28 days’ notice of a hearing (previously 42 days). In turn the relevant person will then have to submit their documentation/information 14 days before a hearing (previously 21 days). 

These amendments will enable ACCA to have greater flexibility in relation to listing, while at the same time ensuring that the relevant person still has a reasonable period of notice of the hearing in which to prepare. The changes provide greater consistency between the Complaints and Disciplinary Regulations and the Authorisation Regulations. 

Publicity provisions
Throughout the disciplinary and regulatory regulations the publicity provisions have been further clarified to remove any requirement for the Committee to determine whether to name the relevant person. This will bring ACCA in line with other regulators, adheres to current case law and the principles of open justice, and further enables hearings to run more efficiently. 

Open hearings
The provisions relating to open hearings in both the Complaints and Disciplinary Regulations and Appeal Regulations have been amended in order to narrow the circumstances within which it would be appropriate to hold a hearing in private. These changes reflect the widely accepted approach of ‘open justice’. 

Membership regulations
Apart from minor consequential changes to these regulations arising out of the introduction of consent orders and the Consent Orders Committee, the changes to the Membership Regulations and its Appendices concern changes to the practical experience requirement in order to become an ACCA member (Appendix 2) or a Certified Accounting Technician (Appendix 4). 

These changes are effective from 1 January 2016. They reflect the changing roles of accountants, and the different skills sought by employers. The changes also seek to remove unnecessary barriers to conversion, as there is currently considered to be excessive focus on recording and reflecting on experiences, rather than the verification of competence through evidence. 

Global practising regulations
In addition to the changes made to the annexes in respect of the audit qualification (explained above), the following changes are proposed: 

  • to improve the drafting throughout, to reduce repetition and redundant text and improve consistency (for example, by referring to ACCA as ‘the Association’)
  • to make clear that the exclusion of bookkeeping services from the meaning of ‘public practice’ is for the purpose of the Global Practising Regulations only, and so bookkeeping would be considered to be public practice for the purpose of the Code of Ethics and Conduct
  • to make clear, in Annex 2, that insolvency practice falls within the meaning of ‘public practice’, and to define ‘insolvency practitioner’ appropriately.


Regulatory board and committee regulations
As explained above, the changes to these regulations have arisen due to the intended introduction of consent orders. Specifically, changes to the Regulatory Board and Committee Regulations set out the establishment, constitution and powers of the Consent Orders Committee. They also explain the impact of being a member of a Consent Orders Committee on a panel member’s eligibility to sit on substantive hearings or on a health committee. 

Authorisation regulations
In addition to the changes concerning the publicity and notice provisions, the authorisation regulations have been amended to allow the Admissions and Licensing Committee to reconstitute itself as an Interim Orders Committee, specifically for the purpose of deciding whether to vary or revoke an existing interim order, as well as to make an order. This provides consistency with the drafting in the Complaints and Disciplinary Regulations. 

Complaints and disciplinary regulations
In addition to the significant changes made in respect of consent orders, and the changes already described in respect of publicity and notice periods, the changes correct some minor drafting errors in respect of the responsibilities of various parties under the case management provisions, and clarify the procedure for the amendment of allegations. Additionally, an amendment has been made to address a difficulty that has arisen when ACCA is applying to withdraw some (but not all) of the allegations against a relevant person. 

The changes also include a power for the chairman alone to be able to consider an application to amend the allegations in advance of a final disciplinary hearing. This is to avoid applications (where a change to the allegations is sought) taking up valuable hearing time. Drafting errors have also been amended in relation to admissions at hearings and the procedure at hearings.  Finally, a paragraph has been removed in respect of the consideration of orders, in order to simplify the regulations. 

Interim orders
The changes to these regulations include an express provision (similar to the one in the Complaints and Disciplinary Regulations) to enable an Interim Orders Committee to proceed in the absence of the relevant person where appropriate notice has been given. The drafting of the provision relating to hearings being held in private has also been simplified. 

Code of ethics and conduct
The changes to the Code of Ethics and Conduct have come about largely as a consequence of changes to independence requirements within the Code of Ethics for Professional Accountants (‘the IESBA Code’). In accordance with its IFAC membership obligations, ACCA is required to replicate these changes within its own Code.

However, further changes have been made within a section of the Code that is specific to ACCA members. The changes to the internal complaints-handling procedures (within section B9) are required in order to meet the requirements of ACCA’s authorisation as an Alternative Dispute Resolution body.

ACCA Rulebook can be viewed on ACCA’s website at www.accaglobal.com/rulebook.