Technical and Insight
60 second update: capital gains and chattels

As the tax return deadline approaches, benefit from a refresher on CGT and chattels.


As the tax return deadline approaches, benefit from a refresher on CGT and chattels.

 

Chattels are defined as ‘tangible moveable property’. They include, art, antiques, jewellery, fine wine, racehorses and other collectibles and fall into two groups – wasting and non-wasting.

 

Wasting chattels

A wasting chattel is a chattel with a useful life not exceeding 50 years. Useful life is determined at the date of acquisition, having regard to the purpose for which the chattel was obtained. A chattel which is wasting will be exempt from capital gains tax and any losses on it will not be allowable.

 

So, if a taxpayer buys a racehorse or fine wine and later sells it at a profit, the gain will be exempt from capital gains tax because it is a gain on the sale of a wasting chattel.

 

HMRC regards assets such as clocks and watches, trains, boats and yachts as machinery. Plant and machinery is always treated as having a predictable life of less than 50 years and so will always be a wasting chattel.  As a result, even machinery which is prone to increase in value will be exempt from capital gains tax. 

 

There is one instance when wasting chattels are not exempt from capital gains tax. This is when the wasting chattel is used in trade and capital allowances have been claimed or could have been claimed on them. There would therefore be two potential tax liabilities arising from the sale of business machinery at a gain: the first as a balancing charge, and the second in the form of tax on the chargeable gain. Any tax allowable loss arising on the sale of business plant and machinery is reduced to take account of relief given by capital allowances. 

 

Non-wasting chattels

A non-wasting chattel is tangible movable property with an expected life of more than 50 years. Examples of non-wasting chattels include fine art, antiques and jewellery.

For non-wasting chattels, the following rules apply:

 

Gains on non-wasting chattels when proceeds are lower than £6,000

S262 of Taxation of Chargeable Gains Act 1992 (TCGA) states that a gain accruing on a disposal of an asset which is tangible movable property shall not be a chargeable gain if the amount or value of the consideration for the disposal does not exceed £6,000.

 

Example 1
Karen bought a painting for £1,000 and sold it for £5,900. The gain of £4,900 is exempt from capital gains tax because the disposal proceeds do not exceed £6,000.

 

Losses on non-wasting chattels when proceeds are lower than £6,000 and the cost of the asset was more than £6,000.

 

According to s262(3) of TGCA, the loss accruing on the disposal of an asset is allowed. However, for the purposes of computing the amount of a loss accruing on the disposal, the consideration shall – where less than £6,000 – be deemed to be £6,000.

 

Example 2

Eve bought a painting for £10,000 by a famous Polish painter; two years later she sells it for £3,000 and incurs expenses of £50. The cash loss is £7,050 (being original cost £10,000 less actual proceeds of £3,000 plus cost of sale).

 

However, for CGT purposes, the allowable loss is restricted as gross proceeds are deemed to be £6,000. The allowable loss is therefore £4,050 (being deemed proceeds of £6,000 less cost of sale £50 less cost of painting £10,000).

 

Gains on non-wasting chattels when proceeds are higher than £6,000 (the 5/3rds rule)

If the amount of consideration exceeds £6,000 but the original acquisition cost was less than £6,000, s262(2) of TCGA allows the gain to be capped at 5/3 of the gross proceeds less £6,000.

 

This means that when calculating the gain on the sale of a chattel where proceeds exceed £6,000 but the original cost was less than £6,000 two computations are required: 

  1. calculate the gain in the normal way
  2. calculate the gain using the 5/3 rule.


The lower of these will be the gain.

 

Example 3

Patricia bought a rare Chinese vase for £2,000 and a few years later she sold it for £9,000. She incurred auction expenses of £500.

 

As the proceeds exceed £6,000 but the original acquisition cost was less than £6,000, two computations are required:

  1. 1.    Calculate the capital gain: proceeds of £9,000 less cost of sale £500 less cost of purchase £2,000, equals gain of £6,500.
  2. 2.    Apply the 5/3 rule: 5/3 x (£9,000-£6,000), equals gain of £5,000.

The gain is the lower of two, ie £5,000.

 

Gains on non-wasting asset when the asset was bought and sold for more than £6,000

If an asset is bought and sold for more than £6,000, the gain is calculated in the normal way by taking proceeds less cost.

 

It is worth noting that the normal rules for calculating gains or losses on the disposal of a single chattel may not apply if the taxpayer disposes of a ‘set’ of chattels. A set is a number of chattels that are similar and complementary to each other and are worth more together than separately; for example books by the same author or matching ornaments. If the parts of the set are sold to the same person, or a number of people acting together, then the £6,000 limit applies to all of the set collectively and not to each member of the set individually.

 

You can find more in the HMRC manuals

 

VAT on e-commerce transactions

How the VAT regime applies to digital services.


How the VAT regime applies to digital services.


Last month we looked at VAT in distance selling of goods; now we continue the VAT theme to explore the VAT regime applying to digital services.

 

The core of the VAT regime applying to services is the concept of the place of supply.

 

Place of supply

In simple terms, a place of supply is the place where the supplier or the customer (business or non-business) belongs.

 

Businesses ‘belong’ where they have an established location, place of operation, and permanent human and technical resources used in providing the service.

Consumers ‘belong’ where they have their permanent home.

 

Though in reality where the business or the customer belong may cause debate, for the purposes of this article we only outline the principle in brief and simple terms, as our focus is elsewhere.

 

General rule

Services supplied to businesses

If you supply services across the border to another business, the place of that supply is where a customer belongs. To account for VAT, it is the customer, not the seller, who accounts for VAT using the reverse charge VAT rules.

 

Services supplied to non-business consumers

If you supply services to a non-business consumer, the place of supply is where you as a supplier belong. If the supplier is in the UK, UK VAT is charged on the transactions. 

 

Special rule for digital services for non-business consumers

Digital services supplied electronically to a non-business consumer are treated differently – they are supplied where the consumer belongs.

 

This treatment, in force from April 2015, followed the EU consensus that it is the destination at which the service is consumed which should determine the tax treatment. This meant that the location of the supplier would no longer affect the VAT treatment or distort business competition.

 

The same rule applies to digital sales to non-EU countries.

 

What is a digital service covered by the special rule

To be covered by the special rule, digital services must have the following characteristics: 

  • The service product is purchased and supplied electronically in an automated fashion
  • The product itself is does not involve the delivery of physical goods or the physical presence of the supplier and often requires no or very little human intervention.

 

Some examples of digital services covered are: provision of downloaded files, music, films, books, magazines, online games streamed or downloaded electronically, supply of website design, hosting, remote maintenance of IT systems and software updates, provision of digital advertising.

 

Services provided electronically but not covered by the rules are those which require a simultaneous physical presence and involvement of the provider of the service and are not automated. Examples would include: supply of physical goods following an online order, supply of consultancy and accounting services via email or video, real time live webinars, distance learning using remote tutors.

 

HMRC provides a useful illustration of the above in the below examples:

 

Service

e-service

Electroni-
cally
supplied

Covered by the rules

PDF document manually emailed by seller

Yes

No

No

PDF document automatically emailed by seller’s system

Yes

Yes

Yes

PDF document automatically downloaded from site

Yes

Yes

Yes

Stock photographs available for automatic download

Yes

Yes

Yes

Live webinar

No

No

No

Online course consisting of pre-recorded videos and downloadable PDFs

Yes

Yes

Yes

Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor

Yes

No

No

Individually commissioned content sent in digital form, for example, photographs, reports, medical results

Yes

No

No

Link to online content or download sent by manual email

Yes

Yes

Yes

 

More information can be found here.

 

How to establish where the customer is located

In real life it is often difficult to establish with certainty the location of the customer. 

 

To implement the VAT rules, presumed customer presence is often sufficient and accepted by the VAT authorities. The following circumstances will give rise to a presumption of customer location: 

  • Presumption of location based on the physical location where the digital product is accessed (other than a mobile device), for example a phone box, wi-fi hot spot, internet cafe, computer in a hotel lobby, satellite dish) when the digital product is received. If a Spanish businessman makes a call from a hotel telephone in France, the service is treated as being supplied in France.
  • Presumptions of location when service is received by a consumer on board transport - VAT arises due in the member state of departure.
  • Presumption of location when service is received by a consumer on a mobile device – VAT is due in the country of which the consumer is a resident, not the country in which they received the digital product on their mobile device. If a French resident streams digital content on a mobile device in Germany, VAT will be due in France.

 

In circumstances other than the above as well as when a payment provider is used by the supplier, suppliers of e-services must obtain one of the following pieces of information to confirm the location of the customer: 

  • the billing address of the customer
  • the Internet Protocol (IP) address
  • bank details such as the location of the bank account used for payment or the billing address of the customer held by that bank
  • the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored on the Subscriber Identity Module (SIM) card used by the customer
  • telephone number with the state code of the customer’s fixed land line
  • notification advice from the payment provider containing the 2-digit country code of the customer's member state of residence as listed in the payment provider’s records.

 

VAT reporting

Two options are available to account for VAT in respective countries: 

  • Register for VAT in each country and submit VAT returns (except when services are exempt in that country). There is no registration threshold.
  • Register for UK MOSS (see below).


It can be easily seen how either of the above may be equally challenging to a digital service provider.

 

What is MOSS and how it works

VAT MOSS (Mini One Stop Shop) enables digital service suppliers to avoid VAT registration in the country of each consumer. Instead one quarterly VAT MOSS return is submitted in one EU country. If you register for MOSS in the UK, the return is submitted to HMRC. HMRC ensures relevant parts of the MOSS return data are sent to individual countries where sales were generated.

 

To register for MOSS, a business needs to be VAT registered first.

 

Two separate VAT MOSS schemes operate for businesses based in the EU and those based outside of EU.

 

Businesses must register for VAT MOSS by the 10th day of the month after your first digital service sale. It is possible to deregister from MOSS as long as HMRC are notified 15 days before the end of the last quarter.

 

Only output VAT is declared on VAT MOSS return. Input VAT in connection with digital services provided needs to be reclaimed on the standard VAT return.

Guidance on how to complete a VAT MOSS return can be found on the HMRC website

 

Inheritance tax and how to reduce it

There are a number of steps that clients need to understand to ensure that they receive HMRC allowances.


There are a number of steps that clients need to understand to ensure that they receive HMRC allowances.

 

Inheritance tax is charged at 40% on the value of the deceased estate which exceeds the threshold, currently £325,000. If the deceased left his/her home to children or grandchildren in his/her will then the threshold can be increased using the main residence nil rate band – which is currently £100,000 – to £425,000.

 

For married couples or civil partnerships, any unused threshold can be added to the surviving spouse/partner to be available on their death (so their threshold can be as much as £850,000).

 

Steps that can be taken before death to reduce inheritance tax

  • give assets away which will reduce the estate's value on the date of death
  • write a will which leaves assets to charity
  • hold assets which obtain exceptions from inheritance tax
  • take out life insurance. 

Assets can also be given away which will reduce the estate’s value on the date of death. Lifetime transfers of assets fall into three general categories: 

  • transfers which are exempt from inheritance tax
  • transfers which are potentially exempt transfers
  • chargeable transfers, which are any other transfers of value. 

Exempt transfers

(i)  Transfers of value between spouses or civil partners are exempt from inheritance tax. There is a restriction if the transferor is domiciled in the UK but the transferor’s spouse or civil partner is not so domiciled. This ‘domiciliary gift limit’ is £325,000.

(ii)  Annual exemption of £3,000

Transfers of value during the lifetime of a person up to a total of £3,000 per fiscal year are exempt from inheritance tax. If the gifts (if any) fall short of the above limit, the shortfall is carried forward to the following year and added to the allowance for that year. If the gift(s) exceed the limit, the excess must:

  • if the gifts were made on different days, be attributed, so far as possible, to a later rather than an earlier transfer; and
  • if the gifts were made on the same day, be attributed to them in proportion to the values transferred by them.

(iii)  Small gifts to same person (no more than £250)

Transfers of value during the lifetime of a person up to a total of £250 per fiscal year to any one person are exempt from inheritance tax. This exemption is in addition to the annual exemption of £3,000 referred to above. It applies to any number of gifts up to £250 to separate persons but cannot be used to cover part of a larger gift.

(iv)  Gifts in consideration of marriage or civil partnership

Gifts in consideration of any one marriage or civil partnership by any one transferor are exempt from inheritance tax on the value transferred without tax up to the following limits:

  • £5,000 by a parent of either party to the marriage or civil partnership
  • £2,500 by one party to the marriage or civil partnership to the other or by a grandparent or remoter ancestor
  • £1,000 in any other case.

Any excess of gifts over the above limits is attributed in proportion to the values transferred.

(v)  Normal expenditure out of income

A transfer of value during lifetime is exempt if, or to the extent that, it is shown:

  • that it was made as part of the normal (i.e. typical or habitual) expenditure of the transferor; and
  • that (taking one year with another) it was made out of his income; and
  • that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living.

 

Write a will which leaves assets to charity

Gifts to charities are generally exempt from inheritance tax.

 

For deaths on or after 6 April 2012 inheritance tax is charged on the net chargeable value of an estate at a rate of 36% where 10% or more of that estate has been left to charity. These provisions will apply equally to charitable legacies made by will or by an instrument of variation.

 

Example

The estate of Henry who died on 31 July 2017 was valued at £440,000 comprising cash. He leaves a legacy of £15,000 to the Red Cross and the residue of £425,000 less inheritance tax passes to his children. The inheritance tax payable will be:

                                                                              £

Value of the estate                                      440,000

Less exempt gift to charity                            15,000

                                                                    425,000

Less nil band                                               325,000

Chargeable value of the estate                   100,000

 

As the gift to charity of £15,000 exceeds 10% of the net chargeable value of the estate, then inheritance tax payable will be £100,000 at 36% being £36,000.

 

Some assets are exempt from inheritance tax

The following assets qualify for business property relief:

 

(a)  Unincorporated business

(b)  Unquoted securities which either by themselves or with other such securities or unquoted shares gave the transferor control.

(c)  Any unquoted shares in a company not listed on a recognised stock exchange but including those traded in the USM or the AIM or Offex markets.

(d)  Shares or securities giving control of a ‘quoted’ company.

(e)  Land, buildings, machinery or plant held either

(i)    by a partner and used for the purposes of a business conducted by the partnership or

(ii)  by a controlling shareholder and used by that company for the purposes of its business or

(iii) by the trustees of a settlement and used for the purposes of a business carried on by a life tenant of the settlement.


Items (a), (b) and (c) above are eligible for 100% business property relief whereas items (d) and (e) above are eligible for 50% relief.


The following conditions need to be satisfied to obtain business property relief for the above assets:

(i)  the business, whether unincorporated or incorporated into a company in respect of the value of which relief is claimed, is a qualifying business; and

(ii)  the asset must be relevant business property and

(iii)  the asset must have been owned for a minimum period.


The property must have been owned by the transferor for a minimum period of two years immediately preceding the transfer; or


It replaced other property which qualified (apart from the two year period) immediately before the replacement and both properties together (or all properties if other qualifying property had been previously replaced directly or indirectly) were owned by the transferor for at least two years out of the five years immediately preceding the transfer.

 

Take out life insurance

This option does not reduce the amount of inheritance tax payable. However, it does mean that the insurance company will pay out cash on death of the person. That cash can then be used to pay the inheritance tax. Care should be taken to ensure that the insurance pay-out does not go to the estate which would make the estate bigger and therefore make the inheritance tax liability bigger.

 

Group loss relief – all change

HMRC has announced a consultation on changes to company group relief.


HMRC has announced a consultation on changes to company group relief.

 

The aim of the draft legislation is to simplify the arrangements for claiming and surrendering group relief for carried-forward losses. For some groups this may mean being able to access losses and use them to their advantage around the group when this would previously have been denied to them.

 

The current position with group losses

The rules at Part 5 of CTA 2010 concern group relief and allow companies to surrender corporation tax losses to other companies in their group. Losses can only be surrendered in the year in which they arise. This has been a long established position.

 

What is being proposed?

The proposed new rules at Part 5A of CTA 2010 (introduced by Finance (No. 2) Act 2017) concern group relief for carried-forward losses. They allow companies to surrender carried-forward corporation tax losses to other companies in their group. This means the loss can no longer only be surrendered to other group companies in the year in which it arises.

 

Points to note

The simplified arrangements entered into after these regulations come into force can only be used for claims and surrenders of group relief for carried-forward losses for accounting periods beginning on or after 1 April 2017.

 

The amendments provide that the application to use simplified arrangements must specify whether it covers group relief, group relief for carried-forward losses or both and provides for a different form of specimen statement to be provided if the application encompasses group relief for carried-forward losses.

 

Full details of the draft legislation and how to respond can be found here. The consultation closes on 13 November 2017.

 

 

 

 

The cost of getting the wrong structure: entrepreneurs’ relief

Recent tribunal case outcome was dependent on the share capital and ownership conditions.


A recent first tier tribunal decision concerned entrepreneurs’ relief and whether redeemable shares with no right to a dividend impacted the relief available.

 

The case outcome was dependent on the share capital and ownership conditions not being met. The judgement highlighted that different rights would have resulted in the shareholders being eligible for entrepreneurs’ relief!

 

In The Commissioners for HM Revenue and Customs v Michael and Elizabeth McQuillan: [2017] UKUT 0344 (TCC) the First Tier Tribunal findings that previously favoured the taxpayer were overturned with HMRC’s appeal succeeding.

 

Because of a loan being converted to redeemable shares the share-holding was:

 

Shareholder number of ordinary shares

Mr McQuillan 33

Mrs McQuillan 33

 

Number of redeemable shares

Mr Pennick 15,000

Mrs Pennick 15,000

 

The judgement explains that ‘In their self assessment returns for the tax year 2009-10, Mr and Mrs McQuillan claimed entrepreneurs’ relief in respect of their disposals of their ordinary shares in Streat [their company]. That claim was refused by HMRC, on the basis that neither Mr or Mrs McQuillan had, throughout the period of one year ending with the date of the share sale, held at least 5% of the ordinary share capital of Streat. That conclusion followed from the view of HMRC that the 30,000 redeemable shares were part of the “ordinary share capital” of Streat.'

 

The FTT stated that there was an 'alternative structure under which those shares would have carried a fixed dividend of a purely nominal amount (the FTT postulated a de minimis yearly dividend of 1/15,000th of a £ per share) to demonstrate that in the latter case it would have been clear that the redeemable shares would have given the holder a right to a dividend at a fixed rate. If that had been the structure chosen, the 30,000 redeemable 20 shares would not have fallen within the definition of “ordinary share capital” in s 989 ITA, Mr and Mrs McQuillan would have owned more than 5% of the ordinary share capital of Streat, Streat would have qualified as their personal company for the purposes of s 169S(3) and they would both have been entitled to entrepreneurs’ relief. The FTT considered that it was 'difficult to see why the redeemable shares in the present case should be treated any differently when the only difference is that instead of bearing a purely nominal fixed dividend, they bear a zero dividend'.

 

Interestingly, in the summary it is made clear that s989 ITA 'is apt to produce results which appear unfair'. In reaching their conclusion sympathy was expressed for the taxpayer. It was stated in the judgement that there 'will be deserving cases that fail to qualify for relief, and non-deserving ones that do qualify. Such a definition may enable those who are well-advised to fall within its terms, whilst leaving a trap for the unwary. There is certainly a case for the legislation to be reviewed to address what may understandably be perceived as unfairness in particular cases, of which this is one. That will, however, be a matter for Parliament if it determines that such a change should be made.’

 

You can find other relevant decisions on gov.uk 

Benefits in kind – new rules following the abolition of dispensation

Are you fully aware of the new exemptions for certain benefits in kind?


Are you fully aware of the new exemptions for certain benefits in kind?

 

Exemptions replace dispensations

From 2016/17 dispensation rules exempting employers from reporting certain benefits in kind on P11D have been abolished and replaced by exemptions. Any dispensations previously granted by HMRC ceased to be valid after 6 April 2016.

 

Exemptions operate in a way similar to that of dispensations – certain expenses incurred by employees personally, wholly, exclusively and necessarily in the performance of the duties of the employment, and refunded by employers, do not need to be reported on P11D.

 

HMRC has indicated that it expects 'almost all' expenses and benefits in kind that were covered by a dispensation to be covered by the new exemption.

 

The most frequent examples include UK and international travel (except where IR35 and working through an intermediary company applies), subsistence, professional fees and subscriptions and costs incurred by entertainers in respect of fees paid to their agents for finding them work.

 

Rules for expenses only partially incurred as part of the performance of employment duties and for the purposes of business do not change and those will need to be put through payroll in full. Employees will need to claim tax deduction from HMRC on the part that is exempt via self-assessment. For example, the reimbursement of home broadband costs incurred by an employee regularly working from home does not meet ‘the wholly, exclusively and necessarily’ test because it is a reimbursement of a personal cost and should therefore be reported on form P11D and/or included in payroll.

 

Those reimbursed business expenses an employee incurs which normally would qualify for a tax and NI exempt treatment, in instances where the employee has been reimbursed by accepting value from the employer which is subject to salary sacrifice, are not covered by the exemptions rules. Such expenses are reportable on P11D and are be taxed on the employee at that point, unless the employee claims tax relief. For example, this would apply when there is a formal agreement between the employee and the employer that business travel is included in the salary sacrifice arrangement, or the employee’s salary levels vary, depending on the amount of travel and subsistence costs incurred and refunded.

 

How the exemptions rules work

For an exemption to apply, expenses need to be reimbursed in one of three ways and are subject to a checking system being put in place.

 

1. At approved HMRC's benchmarked scale rates - without needing the prior approval of HMRC

Included are:

 

Mileage

  • Applies to mileage of privately owned cars, vans, motor bikes and bicycles, but rates differ
  • Applies to self-employed and employees / directors 

Car

  • First 10k miles – 45p per mile is tax and NIC free. Higher rates will attract income tax and national insurance.
  • Further mileage over 10k miles – 25p per mile is tax and NIC free. Higher rates attract income tax, but national insurance is payable only if the refunded rate exceeds 45p.
  • Reimbursement by the employer of less than 45p / 25p will attract tax relief, as income subject to tax throughout the tax year has not been reduced by the amount of mileage expense covered by the employee and not refunded by the employer. This is similar to any other business expenses incurred by an employee and not refunded. Claim up to £2.5k can be made via the individual’s self-assessment, online or by filling in form P87. Claims exceeding £2.5k can only be made via self-assessment tax return. More information can be found here .

Passenger payment

  • applies where an employee carries another employer in the car or vam
  • 5p per mile is tax and NIC free.
  • The passenger has to be a fellow employee – therefore the allowance does not apply to subcontractors, clients and business partners of other entities
  • There is no relief if less than 5p per mile has been refunded

 

Motorcycles – 24p per mile is tax and NIC free, irrespective of mileage

 

Bicycles – 20p per mile is tax and NIC free, irrespective of mileage

Company car fuel rates

  • Applies when an employee pays for fuel for business travel in a company car
  • Excess refunded is subject to income tax and national insurance
  • Current rates apply from 1 June 2017

 

Engine size

Petrol - amount per mile

LPG - amount per mile

1400cc or less

11p

7p

1401cc to 2000cc

14p

9p

Over 2000cc

21p

14p

 

Engine size

Diesel - amount per mile

1600cc or less

9 pence

1601cc to 2000cc

11 pence

Over 2000cc

13 pence

 

Subsistence

  • Previous daily rates (£5 breakfast rate and one meal rate, £10 two meal rate and late evening rate) are no longer valid after 5 April 2016
  • Reimbursed amounts need to be per receipts or per bespoke rates agreed with HMRC
  • Included are daytime expenditure on meals, overnight incidental expenses in the UK and daily and incidental expenses for work duties undertaken abroad

Homeworking rates

  • Up to £4 per week without receipt or proof
  • Higher amounts will require notice of approval (see below) from HMRC

 

Fixed sum allowances for certain trades and professions

 

2.    At  bespoke rates – after agreeing them with HMRC and obtaining an approval notice

  • Scale rates need to be agreed in advance
  • Approval is issued by HMRC following a review of calculation submitted, which needs to show a reasonable estimate of expenses, based on a sample of expenses actually incurred before the approval was issued
  • Available for 5 years from the date stated on the approval notice but can be revoked if HMRC have a reason to do so
  • Approval can be obtained by submitting a Bespoke scale rate application form online
  • Employees incurring more than the bespoke rate refunded can make a tax relief claim, supplying supporting evidence.

 

Transitional rules cover those bespoke rates previously agreed with HMRC on or after April 2011. The agreed rates will be valid for five years since the agreement date.

 

Industry scale rates previously available without prior approval now need to be agreed with HMRC. For example subsistence rates for lorry drivers applicable to employees (not available to self-employed) of £34.90 per night or £26.20 per night for drivers of a vehicle with a sleeper cab, from 6 April 2016 require HMRC’s approval.

3.    Actual amounts incurred by the employee per evidence presented (ie receipts)

 

Checking system

In order to achieve a tax and NIC exempt treatment of business expenses reimbursed, and incurred in one of the three ways described above, the employer must have a demonstrable checking system in place as of 2016/17. The aim of the checking system is to show that: 

  • the employee actually incurred the expense
  • the expenses are deductible for the employer – have been incurred wholly and exclusively for the purposes of the employer’s business
  • the amounts claimed do not include disallowable items
  • amounts claimed are reasonable and not excessive
  • a compliance officer other than the employee is responsible for monitoring
  • the checks involve specific activities and are carried out at such a regularity so as to ensure their effectiveness, in proportion to the size and complexity of the workforce and the business
  • employers inform and remind employees of the need to  retain appropriate evidence for expenses such as receipts.

 

How to implement the checking system

HMRC’s EIM30275 shows basic checking models applicable to various business sizes. Although businesses do not need to follow those specific models and can have their own, following a selected model will ensure compliance with the new requirements.

 

Large employers, more than 1000 employees

Employees travel regularly

Bespoke or benchmark rates paid

Small employers, fewer than 100 employees

Employees travel regularly

Benchmark rates paid

Micro businesses, 1 employee

 


Benchmark rates paid

  • Random check of 10% of all expenses
  • Carried out for a duration of one month
  • Carried out every six months

 

  • Random check of 10% of all expenses

 

 

  • Claims authorised
  • Claims vouched to employee diaries, work schedules and time sheets
  • Review of receipts carried out to show that circumstances applying when bespoke rates were agreed have not changed or to demonstrate that employees have in fact travelled if  benchmark rates are paid
  • Claims authorised
  • Receipts reviewed and retained for a period of 12 months from the date of expenditure

 

  • Diary and time sheets maintained
  • Receipts retained
  • Sample of expenses subject to monthly checks by an independent third party

 

 

While complying with the checking system requirement may seem like another administrative burden, in practice basing the system on sampling proportionate to the number of employees and size of business means that large companies are likely to have resources to carry out the checks, and small businesses will most likely have to only need to carry out the checks when circumstances change, as the duration and frequency of checks is not defined.

 

The application of the exemption rules by one-man businesses may pose most difficulties, if the exact model was to be followed and the checking of expenses was to be carried out by ‘an independent third party’. It seems that as the models are exemplary and not mandatory, nominating ‘an independent third party’ is unlikely to be implemented for practical and confidentiality reasons.

 

Finally

It seems the easiest way to continue to benefit from the exemption to report certain benefits in kind on P11D, apart from the retention of receipts alone, especially for smaller businesses, is to have a formal written expense policy in place. In practice, a lot of businesses are likely to continue what they have always done, though in a more formal manner.

 

Having a written policy in place which can be shown as evidence to HMRC, following specific procedures, using formal expense claim forms, ensuring employees are fully aware of when they are eligible to make claims, as well as nominating an individual authorised to execute the checks, are the main requirements employers need to be aware of.  

Is your firm on track to GDPR compliance?

Taking a proactive and forward-looking approach to GDPR will reap the benefits.


Taking a proactive and forward-looking approach to GDPR will reap the benefits.

 

GDPR implementation will require a comprehensive plan to ensure that the impact the regulation has on a firm is fully assessed, understood and mitigated. With the regulation becoming effective in less than a year (on 25 May 2018), firms need to start the compliance implementation process as soon as possible. It is important to recall that a lack of compliance with the GDPR can expose firms to significantly tougher fines than the current fines imposed for breach of the Data Protection Act.

 

The following are some key points to consider when planning for GDPR: 

  1. Board level buy-in
    All firms should make key decision makers and executives aware of the new Regulation and its potential impact. From there, decisions can be made by the firm to move forward with confirming or implementing controls and procedures related to compliance with GDPR.

    This may include determining and documenting whether it is mandatory for the firm to appoint a Data Protection Officer (DPO). If the firm determines a DPO not to be mandatory, the firm may want to consider voluntarily appointing a DPO. Alternatively the firm may assign a designated person responsibility for data protection compliance and deciding where they will sit in the firm’s structure.

    The firm should consider whether to conduct Data Protection Impact Assessments (DPIA), effectively a data protection risk assessment. DPIAs are mandatory where the envisaged processing activity is likely to result in a high risk to the rights and freedoms of natural persons, and they must be completed prior to carrying out the processing activity. The DPIA process is also recommended by the ICO to all firms handling data and can help in the early identification of problems potentially reducing the risks of fines being imposed, the risk of damage to reputation, and costs that may be associated with remedying a breach of the GDPR.

  2. Information analysis
    Firms should consider conducting an information audit to establish what personal data it holds, what it is used for, where it came from, who it is shared with, and how it is stored and transferred. This may help determine whether the firm is a controller, processor or both and what contracts are or should be in place, including what changes need to be made to existing contracts. Furthermore, reviewing existing data-related policies and other documents is important. This includes the process of identifying and documenting the changes which need to be made to existing policies and documents. This will help towards the path of complying with the obligations set out in the GDPR.

  3. Individuals rights
    The firm’s policies and procedures should be checked to ensure that all individuals’ rights are covered, such as ‘right to be forgotten’ and ‘right to erasure’ and that individuals' data can be provided to them in a commonly used format. This should be reviewed across all data collection formats such as the internet, call centres and paper. Similarly, how consent to collect is sought, obtained and recorded should also be reviewed and necessary changes made. Data subject access requests should also be considered with respect to the new timetables and how additional information will be provided.

  4. Communication and data breaches
    Privacy policies, procedures and documentation should be reviewed and updated to ensure they are GDPR compliant. Data breach detection, reporting and investigation should also be planned for and thoroughly tested, with robust incident management processes in place.

    As outlined above, there is much work for firms to do prior to the commencement of the GDPR. This regulation will elevate data processes and protection to board level for on-going attention and review, with high penalties for those who fail to prepare and comply. With data becoming ever more important to businesses and companies, the issue of protecting it is only going to increase, meaning those who take a proactive and forward-looking approach will reap the benefits.

 

Max Perkins – senior vice president, Lockton

max.perkins@uk.lockton.com

 

 

Data security remains an important aspect under this regulation. We specialise in a range of services including data breach response, information security and reputational harm recovery. To find out more: www.locktoninternational.com.

 

Please note that the purpose of this article is to provide a summary of and our thoughts on aspects of the General Data Protection Regulation. It does not contain a full analysis of the law nor does it constitute a legal opinion or advice by Lockton Companies LLP on the law discussed. The contents of this article should not be relied upon and you must take specific legal advice on any matter that relates to this. Lockton Companies LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of the material contained in this article. No part of this article may be used, reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Lockton Companies LLP.

 

 

Find out more – listen to ACCA's on demand GDPR webinar
ACCA recently hosted a webinar providing an overview of the demands of GDPR. You can access this by registering here and watching this webinar when convenient. Feedback from this webinar is being used to build a series of sector-specific webinars on the GDPR. Once this series of follow-up webinars had been developed, its availability will be promoted to all members.

No LEI, no trade

Ensure clients register before 3 January to avoid being caught out when MiFID II becomes law.


Ensure clients register before 3 January to avoid being caught out when MiFID II becomes law.

 

New EU rules (MiFID II/MIFIR) take effect on 3 January 2018. Investment firms are required to obtain Legal Entity Identifiers (LEIs) from their clients before providing services. The investment firms need to report the trades and reference the LEI. This means that without an LEI there would be no trade. 

 

The new rules apply from 3 January 2018 when MiFID II becomes effective in the UK and Europe. When an investment firm trades financial products, it has to tell the FCA the details of those trades so the FCA can use the information to monitor the functioning of the financial markets and investigate possible market abuse.

 

This reporting regime is called transaction reporting and it is set under the Markets in Financial Instruments Regulation (MiFiR). The details include information about the financial product (eg shares, bonds…), the transaction itself (eg where and when the trade took place) and those persons involved, including the client (where one exists).

 

Legal entities and individuals acting in a business capacity who are clients or counterparties of FCA regulated investment firms (such as the clients of ACCA members – eg charities, trusts) that have to report transactions must have a LEI if they wish to trade from 3 January 2018.

 

For example a charity with an investment portfolio may have internal or external investment managers. To trade they would need an LEI. It could be the case that their external investment managers have applied for an LEI or it’s possible that they will need to apply directly. Checks should be made as from 3 January - put simply, no LEI, no trade.

 

Authorised professional firms which provide investment services in an incidental manner in the course of their professional activity do not themselves require an LEI in respect of services performed on behalf of their clients. Therefore, any ACCA members that fall into this category will not need to apply for an LEI.

 

However, clients of ACCA practitioners such as corporate entities, public bodies, councils, charities and trusts will need an LEI from 3 January 2018 when transacting with investment firms. If they don’t have an LEI, they will not be able to trade financial instruments, including shares, bonds and collective investment schemes with their financial service provider.  

 

Speak to your investment manager to see if you need an LEI or if they have applied on your behalf.

 

How to obtain a LEI

A Local Operating Unit (LOU) which is accredited by the Global LEI Foundation is responsible for the issuance and administration of an LEI. For example in the UK there is the London Stock Exchange (LSE)

 

An LOU may charge a fee for the allocation of an LEI; the precise fee is at the discretion of the LOU. The LSE charges £115 + VAT for issuing an LEI and a further annual charge of £70 + VAT for each renewal.

 

In regards to the cost of the LEI, it should be noted that if you are a client not subject to MiFIR transaction reporting obligations, once you have obtained a LEI, there is no transaction reporting regulatory obligation to renew your LEI.

 

Furthermore, other LOUs in different countries accredited by the Global LEI Foundation can be used to obtain an LEI.

 

Further information

 

Rental income for 2016/17 tax returns

HMRC sets out key areas in its updated rental income tool kit.


HMRC sets out key areas in its updated rental income tool kit.

 

HMRC updated its rental income tool kit on 1 September and for many members this is just in time for the 2016/17 tax return season.

 

The toolkits from HMRC provide guidance on areas of error that HMRC frequently sees in returns and set out the steps that you can take to reduce those errors. They are designed to help tax agents and their clients to: 

  • ensure that returns are completed correctly, minimising errors
  • focus on the areas of possible error that HMRC considers key
  • demonstrate reasonable care.


HMRC explains these errors in terms of what it sees as the key ‘risk areas’ for ‘property rental’. 

 

Before setting these out, the toolkit mentions a number of issues which are worth some discussion: 

  • A person can act in different legal capacities. For example, a person could be the owner of a let property, be a shareholder of a company that lets property, be a member of a partnership that lets property, or a trustee of a trust that holds let property. Letting in each of these capacities represents a separate rental business. A loss on one rental business cannot be set against a profit on another.
  • Are rental profits from a trade? An often asked question and HMRC has the following to say:
  • Profits from UK land or property are treated, for tax purposes, as arising from a business. While the rental business profits are computed using the same principles as for trades they are not trade profits and are subject to a different set of rules.
  • Conversely, there may be occasions when a person is carrying on a trade of providing services in addition to letting a property. There are also certain letting activities that can amount to a trade. This is a complicated area and probably leads to more issues and queries than any other element of this subject. HMRC has provided detailed guidance which can be found here:

 

Separate property surplus to requirements of the trade
Expenses of let properties held as trading stock
Tied premises
Caravan sites
Hotels and guest houses
Letting property and providing additional services
Case law
Whole activity a trade
Whole activity part of a rental business
Separate trade in addition to rental business
Are the services normally provided by a landlord?

 

Perceived risk areas

The broad categories are: 

  • Record keeping - keeping accurate and up-to-date records is essential. Poorly kept records can mean that information provided is not accurate and complete (including property disposals)
  • Property income receipts - all income (except capital receipts arising from an interest in land) is part of the rental business. Even a casual or one-off letting is treated as arising from a property rental business. As with any other business, property income can include payments in kind as well as cash receipts.
  • Deductions and expenses - rental business expenses must be incurred wholly and exclusively for business purposes and not be of a capital nature.
    Difficulties may arise where: 
  • The cost has a dual purpose, partly private and partly business. A deduction can only be made for the business part where a definite part or proportion satisfies the wholly and exclusively test.
  • There are differences between revenue and capital expenditure. Capital expenses are generally not deductible in computing rental business profits. However, for more detailed guidance on capital expenses please follow this link to HMRC guidance and here for information on repairs and renewals.
  • Allowances such as rent a room relief - Income is treated as tax free up to a certain amount, unless an election is made otherwise. When gross income exceeds that amount there is a choice between paying tax on the actual profit or on the gross receipts less the tax free amount. For more details follow this link.


The toolkit contains useful checklists for agents and clients to ensure they have considered all matters. These are tailored to address the main risk areas. In addition there is a section which gives detailed guidance on each risk area along with suggested mitigation and further explanations.

 

The full toolkit is available here

 

Making Tax Digital – next steps

Practitioners urged to respond to HMRC’s consultation.


Practitioners urged to respond to HMRC’s consultation.

 

In the September issue of In Practice we highlighted that HMRC has published another suite of Making Tax Digital requirements (including on VAT changes). The series of legislative requirements will put quarterly reporting into tax legislation.

 

You can comment on these until noon on 10 November and we urge you to take the opportunity to do so.

 

Here, we share some relevant extracts from the consultation documents:

 

'Quarterly updates
7.—(1) A relevant entity must provide to HMRC update information for a business, as specified

in an update notice, in respect of each period of 3 months (“a quarterly period”).

(2) “Quarterly update” means the provision of information required by paragraph (1).

(3) Each quarterly update must be provided by no later than the quarterly deadline.

(4) “Quarterly deadline” means the date which is one month after the end of the quarterly period to which the quarterly update relates.”

 

HMRC’s explanation of the changes is that 'it introduces the requirement for businesses to keep digital records and provide quarterly updates. As well as reducing the amount of tax lost through errors in record keeping, MTDfB will give businesses a clearer view of their tax position in-year. Businesses will use software to maintain the digital records of transactions and, as a result of providing updates more regularly, will receive tailored digital prompts and nudges to improve compliance. In turn, this will help businesses understand the support that the government provides through the tax system.'

 

They then comment that the legislative changes will only be on a voluntary basis and:

  • 'Businesses will not be mandated to use the MTD system until April 2019 and then only to meet their VAT obligations. This will apply to businesses with turnover above the VAT threshold. Businesses with turnover below the VAT threshold will not be required to use the system but can choose to do so benefiting from a streamlined, digital experience, to include for Income Tax.
  • HMRC will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread
  • All businesses will have one month after the end of their quarterly period to provide their update to HMRC.'

 

The MTD VAT overview highlights the start date of April 2019 and that all VAT records must be kept digitally from this date. This includes the obvious purchases and sales but also adjustments. Only the flat rate scheme and the retail schemes are mentioned with reference to specific requirements. Businesses such as those in groups, those under margin schemes (eg motor dealers), those under the tour operators margin scheme and those subject to partial exemption may be concerned over software availability as the regulations state the following: 

'The regulations will provide that a business is in scope for MTD must use functional compatible software to meet the new requirements.

 

Functional compatible software means a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software must include: 

  • keeping records in a digital form as required by the regulations
  • preserving digital records in a digital form as required by the regulations
  • creating a VAT return from the digital records held in functional compatible software and providing HMRC with this information digitally
  • providing HMRC with VAT data on a voluntary basis
  • receiving information from HMRC via the API platform in relation to a relevant entity’s compliance with obligations under the regulations.'


As you will see from the above the detail has been kept out of the few clauses in the Finance Bill September 2017. These clauses are in Part 4, Administration, avoidance and enforcement, Reporting and record-keeping (Clause 60 Digital reporting and record-keeping for income tax etc, Clause 61 Digital reporting and record-keeping for income tax etc: further amendments and Clause 62 Digital reporting and record-keeping for VAT).

 

Go online to view the following: 


Please send your comments to HMRC but also to ACCA at advisory@accaglobal.com

 

Podcast – MTD: where are we now?

ACCA’s Jason Piper joins AccountingWeb to dissect the latest news around Making Tax Digital. Listen now

HMRC launches new Trusts Registration Service

Online service for trustees replaces the 41G (Trust) paper form.


Online service for trustees replaces the 41G (Trust) paper form.

 

The Trust Registration Service (TRS) is finally available to agents filing on behalf of trustees.

 

The new service provides a single online service for trusts to comply with their registration obligations in a central electronic register.

 

The new service allows agents, acting on behalf of trustees, to register trusts and complex estates online and to provide information on the beneficial owners of those trusts or complex estates. It replaces the 41G (Trust) paper form, which was withdrawn at the end of April 2017.

 

HMRC has said that ‘as part of this online process, agents will be taken through the steps to create an agent services account before they can register on behalf of trustees’.

 

HMRC has said that ‘In this first year of TRS, to allow sufficient time to complete the registration of a trust or complex estate for SA and provide beneficial ownership information, there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017.

 

For both UK and non-UK express trusts which are either already registered for SA or do not require SA registration, but incur a liability to relevant UK taxes, the trustees are required to provide beneficial ownership information about the trust, using the TRS, by 31 January following the end of tax year. This means, if the trustees of a UK or non-UK express trust incurred a liability to any of the relevant UK taxes in tax year 2016-17, in relation to trust income or assets, then the trustees or their agent need to register that trust on TRS by no later than 31 January 2018.’

 

Additional information is available at: 

 

Drive to ensure good governance in pension schemes

The Pensions Regulator has launched a campaign to protect workplace pension savers by driving up the standards of governance across pension schemes.


The Pensions Regulator has launched a campaign to protect workplace pension savers by driving up the standards of governance across pension schemes.

 

21st century trusteeship – Raising the Standards of Governance is part of TPR’s commitment to support schemes by being clearer and more directive. It outlines how people involved in running schemes can meet expected standards and what action TPR will take if they don’t improve. It’s also part of our commitment to be clearer, quicker and tougher.

 

As part of this campaign we have sent out the first set of targeted emails to trustees, scheme managers, advisers and employers. These direct people to dedicated pages on our website where we breakdown the fundamentals of governance into key themes, clearly outlining how pension schemes should be run.

 

The theme topics include: 

  • the importance of good governance
  • clear roles and responsibilities
  • clear purpose and strategy
  • competence and integrity
  • upskilling and training
  • managing advisers and providers
  • managing conflicts of interest
  • managing risk
  • meetings and decision-making
  • value for members.


Our campaign is in response to a discussion paper we published last year on 21st century trusteeship and governance, which started an open debate on how we could raise standards among trustees and improve the way that schemes are managed.

 

Research which we undertook highlighted that while some trustees are doing a good job, many boards – particularly in small and medium schemes – have failed to act on TPR’s codes and guidance to meet standards of good governance. This is disappointing. Good governance is the bedrock of a well-run pension scheme and there is a clear link between good governance and good fund performance.

 

In our role as the regulator of workplace pensions the problems we see include: 

  • trustees and scheme managers lacking in skills and knowledge
  • risks being managed inadequately
  • ineffective management of conflicts of interests and decision-making.

 

Good governance is about having a motivated, knowledgeable, engaged and skilled board of trustees with the right structures and processes in place so trustees can make effective, timely decisions and manage risk.

 

It’s important to emphasise that we’re not asking the people running pensions schemes to do more work or meet new, higher standards. There are no new laws, guidance or codes. But what we are doing is being clearer about what standards need to be met and clearly signposting to resources and tools which can help.

 

We have a popular and free trustee toolkit which clearly sets out the essentials of running a pension scheme and we will be linking our 21st Century Trusteeship campaign to this where we can. We will highlight existing guidance and the sections of our codes which we expect people to meet.

 

We’re also creating new resources to try and make managing governance easier. They include a downloadable guide for trustees to take to their quarterly meetings which will help to steer effective discussions.

 

If schemes don’t meet the standards we expect we will continue to take enforcement action. If you don’t submit a scheme return or a chair’s statement then we will look to issue a fine. If you submit a return and it’s not complete or up to scratch we may also take enforcement action.

 

Fear of enforcement shouldn’t be the one and only motivation for trustees to get this right. They’re responsible for protecting the benefits to workplace savers so it’s important that they spend time and resources on governance. In the long run it will save time, save money and make a scheme more efficient. It all helps to minimise risk and maximise opportunities for a scheme and its members.

 

Anyone involved in running pension schemes will already have received the first email – please don’t ignore it. Open it, read it and follow the links. This is all designed to help you. Keep coming back to our website which is updated regularly.

 

Get the basics right first: make sure we have up-to-date information about your scheme, pay the scheme levy and complete your scheme return on time. Running a pension scheme can be complex and challenging, but good governance can help you to overcome these challenges and deliver good member outcomes.

 

Anthony Raymond – acting executive director for regulatory policy, The Pensions Regulator

 

Problems continue with self-assessment calculator

Advice while HMRC fixes calculator.


Advice while HMRC fixes calculator.

 

HMRC is working to resolve a number of issues with its self-assessment calculator with version 7 of the exclusion list recently updated. This is to reflect fixes made, new issues resulting from those fixes and updated guidance.

 

We had previously highlighted  the preferred exclusion 60 capital gains workaround for taxpayers who are required to fill in the capital gains section, but where there is no overall gain or loss - which is to enter the following on the SA return: 

  • both ‘Gains in the year, before losses’ (box 6) and ‘Losses in the year’ (box 7) on the Capital Gains section it is permissible for the software to support the entry‎ of £0.01 in 'Losses in the year' (box 7)
  • both ‘Gains in the year, before losses’ (box 17) and ‘Losses in the year’ (box 19) on the Capital Gains section it is permissible for the software to support the entry‎ of £0.01 in “Losses in the year' (box 19)
  • both ‘Gains in the year, before losses’ (box 26) and ‘Losses in the year’ (box 27) on the Capital Gains section it is permissible for the software to support the entry‎ of £0.01 in ‘Losses in the year’ (box 27)
  • both ‘Gains in the year, before losses’ (box 34) and ‘Losses in the year’ (box 35) on the Capital Gains section it is permissible for the software to support the entry‎ of £0.01 in ‘Losses in the year’ (box 35).

 

The workaround should result in no additional tax due as £0.01 will be regarded as zero in the tax calculation. HMRC has approved the workaround and notified software developers.

 

HMRC has announced it has successfully implemented exclusions 48 to 56 and 58 and 59. It has said it will put in place automated correction for both returns filed electronically and by paper.

 

Although HMRC would prefer online filing, for some of the software issues highlighted in Self-Assessment Individual Exclusions for online filing - 2016/17, taxpayers have the option to revert to paper filing up to 31 January. A reasonable excuse claim should accompany the paper return when relying on this.

You can find the latest version of the exclusions on HMRC’s website

Talking points with HMRC

HMRC's regular ‘Talking Points’ audio meetings provide a convenient way of receiving information and guidance on tax and other business areas.


HMRC's regular ‘Talking Points’ audio meetings provide a convenient way of receiving information and guidance on tax and other business areas.

 

Over the next few weeks you can listen in and send questions on the following areas: 

 

Fr‌id‌ay 2‌7 Oc‌to‌be‌r (1‌1:00 - 12:00)

  • Intellectual Property Office (IPO), a basic introduction to trade marks: In this meeting the IPO will give a brief overview on intellectual property, focusing on trade marks. It will provide guidance on how to search for trade marks, UK filing, international routes and costs.

We‌dn‌esd‌ay 1 No‌ve‌mb‌er (12:00 - 13:00)


           The Patent Box post 2016: In this meeting we will be talking through the new rules, including the qualifying criteria, the records that need to be kept and the computation.

 

Th‌ur‌sd‌ay 2 No‌ve‌mb‌er (12:00 - 13:00)

  • Company tax returns online – get it right first time and avoid the most common errors: This will cover the common reasons for rejection of company tax returns and how to avoid late filing penalties.

Th‌ur‌sd‌ay 9 No‌ve‌mb‌er (1‌1:00 - 12:15)

 

  • Income from property; minimising the risk for individuals: Dealing specifically with expenses and deductions, allowances and reliefs, including repairs, the relief for the replacement of domestic items and the restrictions to income tax relief for finance costs.

   

You can also listen to meetings that have taken place in the past. These include: 

  • two step verification
  • VAT and motoring expenses
  • trusts
  • tax codes
  • submission of SA returns affected by exclusion
  • simple assessment
  • residence
  • HMRC’s experience of the transformation to UK GAAP
  • cybersecurity. 


You can find the full list on gov.uk.

 

NEWS
ACCA's AGM - your vote matters

Voting is now open in the 112th AGM of ACCA.


Voting is now open in the 112th Annual General Meeting of ACCA.

We hope you will take the time to participate by electing members to your Council and voting on the resolutions before the AGM. There are 46 members standing for election to Council and 13 special business resolutions to vote on. Online voting closes at 13:00 on 23 November 2017.

For more information about the AGM and how to vote visit our website. Alternatively, refer to the email you received on Thursday 12 October from onlinevoting@electoralreform.co.uk which contains a personal message from your President, Brian McEnery.

2018 UK/Irish practising certificate renewals

You can renew your practising certificate online now. 


The 2018 renewal process is now underway. Members who hold practising certificates valid in the UK or Ireland can renew them online now.  

How to renew online
For individuals
To renew online, simply log into your myACCA account – you will need your ACCA membership number and passcode to access this service.  If you do not have your passcode you can request help  

For firms
Firms’ renewals can also be submitted online. If you are the nominated contact partner/director you can renew by logging into myACCA using your firm’s ACCA reference number and passcode. This will be different from your own passcode. If you do not have your firm’s passcode you can request help  

How to pay
Submitting online is the easiest and most effective way of providing your renewal and payment information securely, and ensuring you hold a valid certificate from 1 January 2018. You can provide your credit/debit card details when completing your online renewal or you can select the ‘invoice’ option and we will send you an invoice for the fee once your renewal has been fully processed. Please ensure your payment is submitted no later than 31 December 2017. 

If you fail to submit your renewal, or pay an invoice raised in respect of a renewal, by 31 December 2017, you will be subject to a late renewal submission penalty fee of £65.00 in addition to the standard renewal fee and may become liable to disciplinary action.

Please don’t leave your renewal until the last minute – you can submit online now.

Further information
Before submitting your renewal online please read the guidance on our website.

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

Starting a practice?
Our new hub contains a wealth of information to help!

Our new hub contains a wealth of information to help!

 

ACCA has launched a new hub for UK members wishing to start their own practice. It is aimed at members who have already obtained a practising certificate (or are in the process of applying for one).

 

Content on this hub is divided into 11 areas including: 

  • the structure of a practice
  • the physical practice
  • IT considerations
  • what to charge
  • building up a client list
  • recruiting and training staff
  • registering with government agencies and public bodies
  • regulatory matters that those setting up a practice need to be aware of.

 

The content is written in a practical down-to-earth manner. In some sections, there is advice from our Secret Accountant – an ACCA member practising in the heart of England.

 

You can also watch a series of webinars on demand covering key considerations in starting a practice and handling complaints amongst others.

Join your colleagues and help make a difference

Find out why many practitioners support two tax charities.


Many tax practitioners support the two tax advice charities, TaxAid and Tax Help for Older People. Brian Palmer explains why.

 

As tax practitioners, we are only too aware that tax can be challenging for our clients – and that not only the better off have tax problems. Happily, most people can seek advice from practitioners, who steer them carefully through the maze to resolve their problems.

 

Some people are not so lucky. They have serious tax problems but can’t afford the professional advice essential to help them through. Often, they are vulnerable for other reasons as well. John’s story is a good example.

 

John has had behavioural and mental health issues since childhood and lives at home, supported by his family. It was John’s mother who approached TaxAid. She was very worried about John; although he had never worked or claimed benefits, he kept receiving ‘brown envelopes’. At her insistence, he finally opened them to reveal a tax debt of £15,000 and a threat of bankruptcy action. It turned out that some years previously John had registered a partnership with a friend. This never came to anything but the tax debt included determinations and late filing penalties.

 

TaxAid was able to get the tax returns and late filing penalties withdrawn. The charity also made a claim for special relief to displace the determinations, ultimately obtaining agreement from HMRC to cancel the debt. Much to his mother’s relief, this had a positive and significant impact on John’s behaviour and helped to keep him on track with a successful drug rehabilitation programme.

 

John’s situation is quite common in that tax debt catches up with people when they are trying to get their lives back on track. Others get caught up as a result of serious illness, family issues and bereavement, homelessness or business failure. Often, the problem hasn’t started with tax. But the resulting tax problem can become critical and overwhelming if they can’t obtain professional advice.

 

This is where TaxAid, and its sister charity Tax Help for Older People, come in. They were both founded by tax practitioners and many practitioners support their work today, either through donations or through volunteering.

 

The two charities specialise in helping vulnerable people, like Luke, who need tax advice but can’t afford to pay for it. They give advice and where it is needed act for the client. The help they give makes a huge difference, is frequently life changing and gets people back on their feet.

 

Julie Cameron is a tax practitioner who has seen a number of their cases first hand and says ‘Sitting in on client interviews made a deep impression on me. I gained first hand insight into how badly vulnerable people can suffer because of tax issues when they cannot get professional help – and I saw the special skills the charities bring to the particular tax problems their clients face; and the fantastic job they do working with vulnerable people.’

 

Demand for help from the two tax advice charities already outstrips their resources and it is growing. This is why they launched their Bridge the Gap appeal to the tax profession.

 

Will you join the many practitioners who already support this campaign – and so provide the tax profession’s safety net?

 

Donate now – and help deliver this essential service

Join our many supporters in the tax profession by making a donation now, or donate by standing order.

 

A regular donation is particularly helpful; £8.50 a month enables us to support two people in crisis with their tax

 

Brian Palmer – a tax practitioner and policy adviser

 

 

Meet our award winners!

 ACCA members and firms were well represented amongst the winners at two recent awards ceremonies.


ACCA members and firms were well represented amongst the winners at both the British Accountancy Awards and Practice Excellence Awards this autumn.

 

British Accountancy Awards

The following ACCA firms and/or members carried off awards at the British Accountancy Awards, during a glittering ceremony held at the London Hilton Park Lane on 13 October: 

  • New practice of the year: Soaring Falcon
  • Independent firm of the year (Greater London): The Accountancy Cloud
  • Independent firm of the year (South West England): Inspire
  • Independent firm of the year (South East England): DNS Accountants 
  • Independent firm of the year (East England): Nordens
  • Project of the year (small): SRK Accounting
  • International firm of the year: Grant Thornton
  • Outstanding community engagement and contribution: Price Bailey

 

Practice Excellence Awards

The successes continued at the Practice Excellence Awards, held the following week at The Brewery in London, where the following ACCA firms and/or members were recognised as the best in their fields: 

  • Small practice of the year: Evans & Partners
  • Large practice of the year: Bishop Fleming
  • Specialist firm of the year: Fitzgerald & Law LLP
  • Innovative firm of the year: Crunch
  • New firm of the year: The Accountancy Cloud
  • Client service firm of the year: Kinder Pocock
  • 2017 practice excellence pioneer: inniAccounts.

We offer our congratulations to all of our firms!

 

 

Pictured below is Jack Bridge and Alex Falcon from Soaring Falcon, awarded 'new practice of the year' at the British Accountancy Awards. 

 

 

CPD
Webinar: top 10 Budget takeaways

Register now for free Budget webinar.


The Chancellor of the Exchequer will present his Autumn Budget to Parliament on 22 November – join us the next morning for a free webinar.

 

Your Top 10 Takeaways from the Budget will provide an overview of the biggest announcements contained in the Autumn Budget and be presented by Jason Piper (Senior Manager - Taxation & Business Law, ACCA) and Yen-Pei Chen (Manager – Corporate reporting & Tax, ACCA).

 

This one-hour webinar will start at 12:30 – register now

 

This will complement the analysis we will provide via a special Budget issue of In Practice. Look out for it landing in your inbox.

Podcast – MTD: where are we now?

ACCA's Jason Piper discusses the state of play on MTD.


ACCA’s Jason Piper joins AccountingWeb to dissect the latest news around Making Tax Digital. Listen now

2017 CPD courses across the UK

Complete your 2017 CPD units with one of our courses, or get a massive 21 units at our Residential Conference.


Residential Conference for Practitioners

16-18 November 2017

Queens Hotel, Leeds

CPD units: 21

Fee: £739.

 

MODULAR TRAINING PROGRAMME – NEW FOR THE AUTUMN

 

Capital gains tax & inheritance tax

18 December, London

 

HMRC compliance checks, tax investigations and enquiries & property taxes

20 December, London

 

Employment tax & tax for the self-employed

21 December, London

      

Fee:

£220 per day/per delegate

Multiple discount: book one person on all three events or three or more people on any three events and pay £600 in total (a saving of £60!)

 

ACCA INVESTIGATION SEMINAR – NEW FOR THE AUTUMN

 

Complaints: How to avoid and manage them

23 November, London

Fee: £99 per person

      

SATURDAY CPD CONFERENCES FOR PRACTITIONERS 2017

These conferences consist of four sessions which makes it a cost-effective way of staying informed of the latest technical issues. Click on 'Saturday CPD Conference Three' to book your next conference(s) now.

               

Saturday CPD Conference Three

  • 30 September - Glasgow
  • 14 October - Bristol
  • 21 October - Birmingham
  • 28 October - Swansea
  • 4 November - Manchester
  • 25 November - Sheffield
  • 2 December - London

                 

AUTUMN UPDATE FOR PRACTITIONERS

                 

Autumn Update for Practitioners: Accounting and Auditing Conference

4 November, London

                 

Autumn Update for Practitioners: Taxation Conference

9 December, London

 

View full details on the Autumn Update Flyer

 

Fees:

1 conference                 £155

2 conferences               £143 per conference/delegate

3 or more conferences   £129 per conference/delegate

               

Discounts apply to any number of delegates from one firm. To qualify the bookings must be made together. Please note the prices quoted are per person, per conference. For flexibility, delegates booking two or more conferences can mix and match from the Saturday CPD Conferences and the Autumn Update Conferences.

               

PRACTICE WORKSHOPS

Guide to practical audit compliance for partners and managers

29-30 November, London

12-13 December, Manchester

               

Fee:

£495

Book your place on this event up to two calendar months before the start date and pay the discounted price of £445, per person.

               

ONE-DAY COURSES

 

Accounting standards - getting it right in the face of continuing changes and challenges

1 November, Bristol

21 November, Edinburgh                       

22 November, Leeds                             

23 November, Nottingham                     

28 November, Aberdeen

30 November, Norwich

5 December, Cardiff                             

7 December, Bournemouth                    

19 December, London

               

General tax update for accountants

31 October, Norwich

2 November, Cardiff

13 December, London                           

               

 

UK tax and Isle of Man tax update

12 December - Douglas, Isle of Man

 

Fee:

£219

Book your place up to three calendar months before the course start date and pay the discounted price of £198, per course.   

 

   

CAREERS
Complaints – and how to handle them

Complaints are a commercial reality; what matters is how you respond.


Complaints are a commercial reality; what matters is how you respond.

 

Historically, complaints against businesses were by and large private and confidential. However, the digital revolution and the rise of social media has meant corporate communications have changed forever, including a rise in direct and sometimes very public feedback from customers.

 

This has serious implications for the reputations of businesses, which need to consider how to manage risk arising from negative reviews or complaints.

 

As the profession embraces this new digital landscape, accountants, too, need to consider how they can protect their interests and those of the wider profession, through complaint prevention and complaint handling.

 

ACCA is urging professional accountants to implement internal-complaints handling procedures. In fact, members in public practice in the UK and Ireland are required to have such procedures in place to handle client complaints.

 

Where complaints cannot be resolved internally they are often referred to ACCA.

 

So what can ACCA members do to avoid complaints or handle them to achieve a positive outcome? Here are some key areas for consideration: 

  • Engagement letters – ensure they are up to date and signed, and are clear about the services agreed and what significant exclusions apply. It is an ACCA requirement that every client is issued with engagement letters and a copy of each, signed by the client, is retained on file.
  • The rights and obligations of parties – ensure that clients are aware of their legal obligations, such as director’s duties under the Companies Act.
  • Documentation – ensure all client relationship documentation is retained. Including working papers and records of communications.

 

These points are also considered by ACCA when it receives a complaint.

 

But complaints can arise despite the best efforts of all involved. How you handle the complaint may determine whether or not you can achieve a successful outcome.

ACCA deals with complaints through three distinct departments: 

  • assessment
  • investigation
  • adjudication.

 

Complaints are assessed and allocated either for conciliation or investigation. Serious issues identified through investigation are referred to disciplinary hearings and managed by adjudication.

 

ACCA’s unique in-house conciliation service combines alternate dispute resolution (ADR) with ACCA’s regulatory and disciplinary duties. This collaboration is unique in the regulation of the accountancy profession.

 

The conciliation service specialises in resolving disputes through negotiation and conciliation, attempting to achieve an amicable outcome. It is often a far quicker and more cost effective way of dealing with complaints.

 

Professional accountants can draw on complaint handling techniques used by conciliation and investigations. These are proven to be an effective way of preventing unnecessary escalation of a complaint to a regulatory body. 

 

Here are some techniques that you can adopt when dealing with complaints: 

  • Don’t take it personally – complaints are part of professional life. Detaching yourself can be difficult, but generally people are angry at the situation rather than you - they just may not realise it.
  • Active listening – there is a big difference between listening and actively listening. People rarely feel that they are truly being listened to, not just professionally, but in life in general. It’s vital that anyone submitting a complaint feels that they are being listened to and that their complaint is understood.
  • Never interrupt – during the complaints process there will be a time when you want to advance your position and do so without interruption – so you need to stand by that principle yourself. Interrupting is certain to frustrate the process and escalate the matter.
  • Do not summarise – summarising can trivialise information that may be very important to the person complaining, and it creates an opportunity to miss something. Do, however, feed back what you have heard from the person, using terms and language that they have used. Confirm your understanding of what you have heard is correct; if it isn’t, check again.
  • Know your triggers – setting off triggers will provoke a defence reaction; defensive reactions inhibit rational thought and behaviour, leading to misunderstanding. Triggers are subjective. One person may be triggered by rudeness, another by politeness. Sometimes an acknowledgement of the trigger is enough to prevent a downward spiral into conflict. In some cases, a quick and simple apology may be merited. Triggers are to some extent unavoidable – an understanding that they exist can help to avoid difficulties.

 

Complaints are a commercial reality, and there is no shame in getting them, but a great deal more damage can be done to reputations if handled poorly.

 

The above is just the tip of the iceberg. Handling complaints successfully is a challenge for any organisation or individual, having the potential to drain business resources and ultimately impact negatively on profit. Handled well, a complaint can provide an opportunity to strengthen client relationships and professional reputations.

 

Remaining neutral, taking a practical approach, and trying to understand both sides of a dispute will help retain control over the complaint before it is escalated to a regulatory body.

 

Alexander Dunlop & Scott Prince, Senior Investigation Officers

 

 

A more detailed webinar by Alexander Dunlop on how to handle complaints is available from ACCA – watch it at your convenience by registering here

 

Did you know…?

  • ACCA receives an average of 750 complaints per year
  • Complaints to ACCA are received from clients, accountants, individuals in a professional capacity, other departments of ACCA such as Authorisations and Monitoring, other regulatory bodies, prosecuting authorities, the police
  • ACCA has received complaints about members from psychics, wizards, celebrities and journalists, and involving high-profile multimillion pound disputes
  • Commercial, legal and employment disputes are rejected due to jurisdictional issues
  • 15% of complaints accepted by ACCA are resolved through conciliation
  • 75% referred for investigation, of which around 20% result in disciplinary action.

 

Engagement letters

Build better client relationships with our engagement letters product.


In August we contacted everyone who has purchased the ACCA Engagement Letter suite with amendments to incorporate Money Laundering Regulation changes. The changes were to the: 

  • terms and conditions
  • letter to prospective client and timetable
  • anti-money laundering policy.


Our email highlighted that the terms and conditions change can be shared with clients as part of a full set of revised terms or in an email informing clients of the change.

 

The terms and conditions change inserts new wording, replacing the paragraphs on Money Laundering Regulations 2007 with the Money Laundering Regulations 2017 paragraphs.  These will be further updated to reflect further final changes to the current CCAB draft guidance and any changes to ACCA rules.

 

The Engagement Letters also contain a number of proforma client policies that practitioners can amend.

 

ACCA will email future engagement letter changes to users and will publish notifications online, in AB magazine and here in In Practice when changes occur to documents in the suite. 

 

ACCA’s application to regulate probate activities

A progress report on ACCA’s application to the Legal Services Board.


A progress report on ACCA’s application to the Legal Services Board.

 

In August 2017, ACCA invited members in practice, consumers in the legal services market, and other interested parties to comment on its draft application to gain approval of new regulatory arrangements for probate activities.

 

The external consultation was launched on 29 August 2017, and was open until 9 October 2017. We invited comments specifically from members in practice in the UK, other approved regulators, the Legal Services Consumer Panel, the Competition and Markets Authority and the Lord Chief Justice.

 

We received 24 responses to the public consultation from ACCA members in practice. The Competition and Markets Authority declined to provide a formal response, but advised ACCA that it had considered the draft application and provided some comment to the Legal Services Board (LSB). The Legal Services Consumer Panel and the Lord Chief Justice did not provide formal responses, and no comments were received from other approved regulators.

 

The members that responded to the consultation were strongly supportive of ACCA’s application to gain approval of our regulatory arrangements for probate activities. Some raised specific queries relating to their eligibility for probate authorisation. As these queries were specific to those respondents, they have not impacted on the final application.

 

ACCA submitted its final application to introduce approved regulator regulatory arrangements for probate activities to the LSB on 23 October 2017. 

 

We will keep members informed of developments as we explore opportunities for members to provide a broader range of services that meet the regulatory objectives of the Legal Services Act 2007.

 

For further updates, please visit the Legal Services section of ACCA’s website.