Technical and Insight
When unincorporated businesses can apply FRS 105
FRS 105 can be applied by unincorporated businesses who meet the size criteria.

FRS 105 can be applied by unincorporated businesses who meet the size criteria. 

Although FRS 105 states that it’s only applicable to companies, qualifying partnerships (as defined in Partnerships (Accounts) Regulations 2008) and limited liability partnerships who choose to apply the micro-entities regime, HMRC has stated, in FRS 105 tax implications – overview that it will generally accept calculations of profit for unincorporated businesses prepared under FRS 105 if they meet the size criteria to apply FRS 105.


This document is aimed at businesses paying corporation tax or income tax. It considers the tax treatment for differences HMRC sees as existing between FRSSE and FRS105. It also highlights the transitional rules and re-emphasises the difference between a change in accounting policy and rate adjustments.


The usual rules are highlighted when changing from one valid basis on which the profits of a trade are calculated to another valid basis and accounting for these adjustments in the current year. BIM34130 states:


‘S231 Income Tax (Trading and Other Income) Act 2005, S182 Corporation Tax Act 2009

In what follows, the accounts for the period before the change are referred to as the "old accounts" and the accounts for the period following the date of change are referred to as the "new accounts".


The amount of the adjustment is calculated by:

Adding together

  • receipts which would have been included in the old accounts if they had been computed on the new basis but were not brought into the old accounts on the old basis,
  • expenses which had been deducted in the old accounts, but which on the new basis would be deducted in accounts after the change of basis,
  • the amount by which the opening stock or work-in-progress in the new accounts exceeds the closing stock or work-in-progress of the old accounts,
  • depreciation that has not been added back in the tax computations for the old accounts.

Then deducting

  • receipts which had been included in the old accounts on the old basis, but would not be included in accounts after the change of basis on the new basis,
  • expenses which had not been deducted in the old accounts, but which on the new basis would have been deducted in accounts before the change of basis and, if the old basis had continued, would have been deducted in future accounts,
  • the amount by which the opening stock or work-in-progress in the new accounts is less than the closing stock or work-in-progress of the old accounts.

Any of the amounts deducted in this computation cannot be deducted again in computing the profits of the trade.’


This adjustment will occur when the transition requirements of FRS 105 in section 28 apply. It requires that the balance sheet is ‘presented in respect of the accounting transition date: 

  • recognises all assets and liabilities whose recognition is required by FRS 105
  • doesn’t recognise assets and liabilities if FRS 105 doesn’t permit such recognition
  • reclassifies assets, liabilities and components of equity to ensure presentation is consistent with FRS 105
  • measures all recognised assets and liabilities in accordance with FRS 105.’

The guidance also looks at the adjustments that may give rise to a change as well as areas where a specified treatment is required, even where this has always existed.


The prime example of the latter is the treatment of holiday pay accrual. Here the guidance does acknowledge that the treatment hasn’t changed but that it is an area that is worthwhile re-highlighting. It simply references Part 20 Chapter 1 CTA 2009 (for Corporation Tax) and sections 36 to 37 ITTOIA (for Income Tax), both of which allow for a deduction if the accrued amount is paid/used within nine months of the year end.

Directors’ loan account – valid entries are vital
Failing to record directors’ loans can prove costly.

Failing to record directors’ loans can prove costly. 

Directors’ loan account (DLA) adjustments are a constant theme in the accounts of SMEs. Practitioners are often faced with the task of analysing SME transactions and explaining which credits should/should not go to the DLA.


Often the directors/shareholders adopt an informal approach and are rather keen to process entries which benefit them but often do not understand the implications. The directors of SMEs, mainly due to the size of the business, necessarily tend to concentrate on day to day activities and pay less attention to accounting and tax matters. 


This often results in HMRC and the client having conflicting views. An example of their interest in this subject is the recent first tier tribunal victory for HMRC where an appeal against PAYE/NIC was dismissed. This is a case which demonstrates that HMRC is looking at the entries in DLAs and that it can/will assess tax when it sees it as applicable.


Case summary

The appellant company is an SME which their own accountant described at the tribunal as ‘the appellant is a small business and is conducted very informally between the shareholder directors’. (Does this ring any bells for members?)


One of the directors had loaned the company a substantial amount of money a few years ago. This was on an informal basis and so it was not clear whether there was a loan agreement or if the loan was interest bearing.


The tribunal heard that it had been ‘agreed’ that on 30 September annually his loan account was to be credited with an annual salary of £16,000. By 30 September 2013 eight such sums had been so credited. HMRC carried out an employer’s record inspection and was told that: 

  • the director was paid £16,000 at the end of each trading year but that the amount was credited to the loan account
  • no payments had in fact been made to him and accordingly, it was the appellant’s understanding that no PAYE or NICs were due by in respect of the sums credited.


The tribunal heard that on 2 January 2014 the appellant’s representative confirmed that the sums credited to the DLA had been voted upon but as they had not been paid it was proposed that in the 2013 corporation tax accounts all sums credited (£128,000) would be reversed by way of prior year adjustment (PYA). That adjustment was included in the 2013 accounts and provided to HMRC on 30 June 2014.


The appellant also told the tribunal that the entries were made ‘for good housekeeping reasons, and were accrued by way of an ‘aide memoir’. It was claimed that the PYA undertaken in the 2013 annual accounts was simply to reverse out the accrual which was never really intended.

HMRC took the view that the annual sums had been accrued and any attempt to reverse the accrual by PYA or otherwise was ineffective and that the PAYE and NICs remained due. The company appealed against this.


The outcome of the tribunal was that PAYE/NIC was due on the entries and that it was not possible to avoid them by a prior year adjustment. The appeal by the company was dismissed.


Clearly the directors of this SME were not aware of the potential dangers that an ‘informal’ approach to their records might bring. 


The points arising during the tribunal are very interesting and are useful to members when advising clients on similar issues:


PAYE/NIC on deemed salary:

  • any salary, wages or fees obtained by an employee (or director) if it is in money or money's worth, that constitutes an emolument of the employment, is chargeable to income tax
  • the amount received by an employee (or office holder) will be taken to be the sum net of tax and the PAYE and NIC obligations will sit on top of the sum retained by the employee
  • the provisions of section 8 Social Security Contributions (Transfer of Functions) Act 1999 and regulation 80 Income Tax (Pay As You Earn) Regulations 2003 provide HMRC with the power to collect PAYE tax and NICs where it appears to them that there has been under-payment by an employer.


Other issues:

  • by reference to the provisions of the Companies Act 2006 (sections 393 and 454) HMRC contended that the accounts had been prepared on a true and fair view and that any attempt by the appellant to restate the accounts by way of the prior year adjustment was incorrect
  • there was limited evidence available to the tribunal
  • the entries credited to the loan account indicated the director was content for the cash to be continued to be used in the business and had he chosen to do so he could have called in the loan or otherwise enforced the debt he was owed by the company
  • the PYA did not appear to have been done properly and in any case although the director sought to absolve the company of its liability to him, he cannot absolve it of its liability to HMRC
  • if the appellant had wanted to escape the charge to income tax under PAYE and the charge to NICs he needed to have indicated that he did not consider the annual fees payable to him in advance of each trading year end, before the vote for accruals in his favour and before the entries in the company.


Further information

HMRC has updated its directors’ loan account toolkit which provides guidance for agents (including a checklist).


ACCA produced an article in the May 2017 edition of In Practice which explains more about this toolkit.


Married couple’s allowance and marriage allowance
Rules around the allowance, what happens on year of eligibility and on death.

Rules around the allowance, what happens on year of eligibility and on death.


Taxpayers living in the UK are entitled to a personal allowance and – if married or in a civil partnership – may also be able to claim marriage allowance or married couple's allowance too.


Below we examine rules regarding the allowance, what happens on year of eligibility and on death.


Married couple’s allowance

Married couple’s allowance is available to any married couple where at least one spouse was born before 6 April 1935. Entitlement to married couple’s allowance is extended to same-sex couples who are civil partners under the Civil Partnership Act 2004 if at least one partner was born before 6 April 1935. Unlike the age-related personal allowance the age reference to 1935 does not normally change from tax year to tax year.


For marriages before 5 December 2005, the husband’s income is used to work out married couple’s allowance. For marriage and civil partnerships after this date, it’s the income of the highest earner.


Married couple’s allowance applies as a reduction in the claimant’s income tax liability. The reduction is 10% of the amount of the allowance. This tax reduction (like other tax reductions) is restricted to the extent that it would otherwise exceed the individual’s remaining tax liability after making all prior reductions.


The couple should be living together during the tax year. It is possible that when an elderly taxpayer moves into a care home the couple may become separated for tax purposes and the married couple’s allowance may no longer be available.


Year of marriage

Where the marriage or civil partnership is entered into during the tax year (and in that year the person had not previously been entitled to the married couple’s allowance), the allowance is reduced by one-twelfth for each ‘fiscal month’ of the tax year ending before the date of the marriage or civil partnership.


For example, if marriage occurred on 3 October 2017, there would be five fiscal months (five months from 6 April 2017 to 5 September 2017) up to 3 October 2017. The reduction in the allowance is computed after applying any necessary restriction by reference to the income limit.


Year of death

Where either the husband or wife – or either civil partner – dies in a tax year then married couple’s allowance is available as if the marriage or civil partnership had continued until the end of that tax year. There is no reduction in the married couple’s allowance in the year of death.


The ‘higher married couple’s allowance’ and ‘income limits’ are as follows:


                        Basic married                        Maximum married                              Income

                        couple’s allowance                couple’s allowance                            limit   

2017/18                      £3,260                                    £8,445                                    £28,000

2016/17                      £3,220                                    £8,355                                    £27,700

2015/16                      £3,220                                    £8,355                                    £27,700

2014/15                      £3,140                                    £8,165                                    £27,000


The ‘higher married couple’s allowance’ is available where the claimant or his wife is at any time in the tax year aged 75 or over, or would have been but for his or her death in that year. In recent years this would apply as if one of the spouses was born on 5 April 1935 that person would be 80 years old on 5 April 2015.


Where the claimant’s adjusted net income exceeds the income limit, the maximum allowance is reduced by one-half of the excess, except that it cannot be reduced to less than the basic married couple’s allowance (ie the married couple’s allowance is reduced by £1 for every £2 of income over this limit).


Example – 2016/17 tax year

Mr A is a married man, born on 1 February 1934. He has a net income of £33,000 for 2016/17 and no dividend income or savings income. He and his wife were married before 5 December 2005 and they were living together for the 2016/17 tax year.


Net income                                                                                                    33,000

Less Personal Allowance                                                                              11,000

Taxable income                                                                                             22,000

Tax payable at 20% on £22,000                                                                      4,400

Less Married Couple’s Allowance £5,705 @ 10%                                             570

Tax payable                                                                                                     3,830


Workings to calculate £5,705 figure above

Maximum married couple’s allowance                                                            8,355

As income is over Income Limit of £27,700

Excess of Net Income over Income Limit

(£33,000 - £27,700) = £5,300

Maximum allowance reduced by half of excess £5,300/2                             2,650

Reduced Married Couple’s Allowance                                                           5,705           


You can read HMRC’s guidance on this matter.


Marriage allowance

Marriage allowance was introduced from 2015/16. Subject to certain conditions an individual may transfer part of his/her personal allowance to a spouse or civil partner.


The transferable amount is:

(a)  For the tax year 2015-16 is £1,060 and

(b)  For the tax year 2016-17 and subsequent tax years is 10% of the amount of the personal allowance for the tax year to which the reduction relates. If the transferable amount so calculated would not be a multiple of £10 it is rounded up to the nearest amount which is a multiple of £10.


Relief is given to the transferee spouse/partner by means of a reduction in what would otherwise be the transferee’s income tax liability equal to tax at the basic rate for the year on the transferred amount.


Conditions for transferor to meet

  1. The transferor is married to, or in a civil partnership with, the same person when the election is made and for at least part of the tax year in question
  2. The transferor is entitled to the personal allowance for the year
  3. The transferor would not be liable to income tax at the higher or additional rate or the dividend upper or additional rate (assuming that the marriage allowance election was successful)
  4. For transferors who are non-UK residents they need to be eligible for a personal allowance.

Conditions for transferee to meet

  1. The transferee is married to, or in a civil partnership with, a person who has made a marriage allowance election which is in force for the tax year in question
  2. The transferee is not liable for that year to income tax at the higher or additional rate or the dividend upper or additional rate
  3. The transferee is UK resident for the year or, if non-UK resident, is eligible for personal allowances
  4. Neither the transferee nor the transferee’s spouse or civil partner makes a claim to married couple’s allowance for the year.


Election for Marriage Allowance

The election must be made by the transferor no later than four years after the end of the tax year to which it relates. Provided the transferor conditions are met the election, once made, continues for each subsequent tax year unless:


(a)  It is made after the end of the tax year to which it relates, in which case it has effect for that one year only; or

(b)  It is withdrawn by notice given by the individual by whom it was made; or

(c)  The transferor’s spouse or civil partner does not obtain a tax reduction in respect of a tax year for which an election is in force, in which case it ceases to have effect for subsequent tax years, although the person can make further elections.


Example – 2016/17 tax year

A married woman receives taxable income of £9,000 in 2016/17 from self -employment and she has no other taxable income. Her husband has employment income of £43,000 and no other taxable income. They are not eligible for married couple’s allowance. The wife has elected for ‘marriage allowance’ to transfer part of her personal allowance to her husband.



Employment income                                                           43,000

Less personal allowance                                                   11,000

 Taxable income                                                                   32,000

Tax due          £32,000 @ 20%                                            6,400

Less transferable tax allowance £1,100 @ 20%                                       220

Tax due                                                                                              6,180                         




Self-employment income                                                               9,000

Less personal allowance                           11,000

Less transferred tax allowance                   1,100


Taxable income nil as income lower than Personal Allowance    nil                        


Tax Saving

If personal allowance was not transferred then husband would pay tax of (£32,000 at 20%) £6,400. Therefore the couple have saved £220 in tax by transferring part of the wife’s personal allowance.


You can read HMRC’s further guidance on this matter.

Principal Private Residence Relief (PRR) and off-plan home purchases
When the signing of a contract does not result in ownership!

When the signing of a contract does not result in ownership! 

The recent case of Desmond Higgins v HMRC shows that confusion can still exist.  

In Desmond Higgins v HMRC [2017] TC 05724 the period of ownership of an off-plan apartment was found to have started, for PPR purposes, only once the property had been physically and legally completed and the purchaser had a right to occupy it.


The facts of the case:

Mr Higgins entered into a contract for the purchase of an apartment (not yet in existence) in October 2006. The construction was not finished until December 2009. Although Mr Higgins had rights to access at that time, he did not have a right to occupy until 5 January 2010 when the sale was completed. Two years later, he sold the property.

The question was whether the period of ownership for PPR purposes began with a contract to acquire or when the property had been physically and legally completed and the purchaser had the right to occupy. The case considered the provisions of s222 and s28 of TCGA 1992: 

  • S222 TCGA 1992 provides for relief from a capital gains tax charge if the property is the main residence of an individual throughout the period of ownership. Partial relief is given if the property has been the main residence for part of the period. 
  • S28 TCGA 1992 provides that a person is deemed to have disposed of and acquired an asset when a contract is made and not, if different, the time at which the asset is conveyed or transferred.

HMRC outlined that the period of ownership for PPR purposes should be determined by the contract date, and not the date when the individual can first physically occupy a dwelling. In HMRC’s view the period of ownership in this case commenced at the date the contract to acquire the lease on the apartment was signed in October 2006, and not 5 January 2010 when Mr Higgins took up residence.


HMRC considered that relief from CGT should only be available during the period of occupation as a residence. Increases in value before occupation should not be covered by PPR.


Having considered all the arguments, the tribunal confirmed that PPR could be claimed against the whole of the capital gain arising on the sale of the apartment for the following reasons: 

  • the ‘period of ownership’ of a dwelling house will begin on the date when the purchase of the dwelling house has been physically and legally completed and the purchaser has the right to occupy
  • it also mentioned (although ESC D49 was not in point in this case, since the delay in occupation had been well over two years) that the terms of that concession show the absurdity of using s28 to determine the period of ownership for the purposes of s 222 and s 223
  • when considering the legislation purposively and applied to the facts, Mr Higgins was entitled to PPR relief. He took up occupation as soon as he was legally and physically able to do so and the fact that there was so much delay before he could do so was no fault of his. He then remained resident there until he completed the sale of the apartment
  • TCGA 1992, s28, identifies the acquisition and disposal of a chargeable asset but it does not directly determine the meaning of ‘period of ownership’ of a dwelling house in the context of the availability of the PPR. If the draftsman wanted to say that section 28 determined period of ownership, then it would have been easy to make that change when it was introduced into statute
  • to say that the period of ownership begins when the contract to acquire is entered into but the individual has no right to occupy until a later date would be perverse in the context of eligibility to PPR on sale.

The tribunal did not accept HMRC’s argument that Mr Higgins had ownership of the apartment from the date of the contract, as this was not possible given that the apartment did not exist at that time. The period of ownership for PPR purposes began when Mr Higgins had a legal and equitable interest in the lease and a legal right to occupy the apartment, which was 5 January 2010. As the apartment had then been used as the main residence until its sale in January 2012, PPR was due on the whole gain.



This decision will be of interest to those involved with off-plan property purchases where delays occur before the buyer takes up residence. The tribunal took a purposive and pragmatic view in relation to the facts, dismissing HMRC’s technical argument in relation to TCGA 1992, s28 which in this case worked in favour of the taxpayer.


Don’t ignore automatic enrolment duties – it’s the law
All practices and their clients have pension duties. Ignore them at your peril.

All practices and their clients have pension duties. Ignore them at your peril. 

To date, more than 8.5m people have been automatically enrolled in a workplace pension by nearly 800,000 employers.

The Pensions Regulator (TPR) recently published its annual commentary and analysis report, which shows that more than 70% of all new businesses will have staff they need to put into a workplace pension. This means the majority of new employers will have full automatic enrolment duties and will need to set up a pension for their staff.

The estimates demonstrate how automatic enrolment has reversed and will continue to reverse the decline in workplace saving. In 2012, 55% of staff were saving into a workplace pension and by 2016 that figure had increased to 78%.

In addition, a recent Mori poll commissioned by DWP also showed 83% of staff are pleased they are saving into a workplace pension and a similar number welcome an increase in contributions. 

Start-up businesses 
From October 2017, anyone thinking of taking on staff for the first time should start planning for their automatic enrolment responsibilities. As soon as they take on staff they will have workplace pension duties.  

Planning for automatic enrolment should be carried out alongside all the other tasks associated with running a business – for example setting up PAYE.

If an employer has eligible staff to put into a pension scheme, they will need to identify a provider and they should leave plenty of time to do this. They should also ensure their chosen payroll solution is compatible with their scheme so that staff receive the pensions they are entitled to on time.

Within five months of taking on staff, employers must complete a declaration of compliance to tell TPR what they have done to meet their duties.  

Employers and their advisers should be aware that meeting their duties late, or failing to set up a scheme as soon as they employ eligible staff, will not save them money.  This is because contributions will need to be backdated to the date they first employed staff.  


On-going duties
Automatic enrolment is not a one off-task – employers also have on-going duties. This means they must continue to assess staff and keep records.


Every three years, staff who initially opted out must be automatically enrolled back into a workplace pension. They must then complete a re-declaration of compliance within five months of the anniversary of their staging date. Between now and the end of the year, 12,000 employers are due to complete their re-declaration of compliance.


Research shows that 96% of employers surveyed said they were confident they are successfully meeting their on-going duties. They also said that automatic enrolment was easier than they expected.


Increases in contributions
By law, on 6 April 2018, all employers are required to increase their contributions into their staff's automatic enrolment pension to at least 2%. Staff contributions will also increase so that their contributions make up the shortfall needed to bring the total minimum contribution up to 5%.


Contribution levels will rise again on 6 April 2019, with employers paying a minimum of 3% towards the pension, and the total minimum contribution reaching 8% - with staff making up the 5% difference.


The table below shows the minimum contributions employers who set up a defined contribution scheme for automatic enrolment must pay, and the date when they must increase. This is calculated based on earnings between £5,824 to £43,000 per year (£486 to £3,583 per month, or £112 to £827 per week), and includes certain elements of pay.


Date effective

Employer minimum contribution

Staff contribution

Total minimum contribution

Until 5 April 2018




6 April 2018 to 5 April 2019




6 April 2019 onwards





Compliance and enforcement
While compliance with the law remains high, a small minority of employers fail to meet their duties. TPR will take action to ensure staff receive the pensions they are entitled to.


Our quarterly compliance and enforcement bulletin shows where we have used our powers, and the rolling list of employers who have paid an escalating penalty notice but remain non-compliant. The list features both small and multinational companies, with county court judgements secured by TPR for fines up to £52,500.


TPR will consider taking additional enforcement action against employers who remain non-compliant, including prosecution in appropriate cases in accordance with TPR’s published prosecution policy.


For information and guidance on what employers need to do to meet their duties, and by when, visit


Darren Ryder – director of automatic enrolment, The Pensions Regulator


Navigating the maze of online selling – VAT on distance sales
Selling online? Avoid innocent VAT mistakes and penalties by understanding the basic rules.

Selling online? Avoid innocent VAT mistakes and penalties by understanding the basic rules.


What is distance selling?

Distance selling applies when a VAT registered business based in the EU sells goods (not services) to a non-VAT registered customer (non-taxable person). The non-taxable person can be an individual, a charity or a small business not registered for VAT.


Distance selling VAT rules apply when goods are sold or bought without a simultaneous physical presence of a seller and customer at the same location at the time of the transaction – the customer buys delivered goods.


Distance selling VAT rules do not apply to sales to or from a non-EU country, for example where a UK company sells goods to a consumer in India, or a company in China sells to a consumer in the UK, where different rules apply.


VAT rules (distance selling)

Distance sales made by a supplier based in one EU country to a non-taxable person in another EU country are subject to VAT in the country of the seller, until the total annual value of such sales exceeds the VAT registration threshold of the country to which the sales are made. When this happens, there is a mandatory requirement to register for VAT in the country of the customer, unless an earlier, voluntary registration has been made.


This means that the place of supply in relation to distance selling changes: until annual distance selling thresholds in the respective countries are exceeded (see below), the place of supply is the country of the seller. When the seller becomes liable to register for VAT in the country of the customer, either due to the thresholds being exceeded or due to a decision to voluntarily register, the place of supply becomes the EU country where the customer is located.


From this point all further sales are subject to VAT in the country of the customer. If voluntary registration is withdrawn (see below re when this may apply), the place of supply reverts back to the country of the supplier.


Distance selling registration thresholds

The VAT registration thresholds for distance sellers vary between EU countries and are between €35k and €100k, expressed in respective local currencies. The thresholds apply to annual sales made during the calendar year (from January to December). If the threshold is not exceeded from January to December, the calculation of distance sales re-starts each January. It is not applied on a rolling, cumulative basis.


The following are examples of some of the distance selling thresholds:


EU country

Threshold for distance selling

United Kingdom











PLN 160,000

Czech Republic

CZK 1,140,000


The annual threshold does not apply if sales are subject to customs duty. Such sales are not subject to any thresholds.


Distance selling from other EU countries to UK customers

A seller based in an EU country, making sales to customers in the UK, is subject to VAT rules in their EU country only, for as long as such sales do not exceed £70k in that calendar year (the distance selling VAT threshold for the UK). When the sales value exceeds £70k, a UK VAT registration is mandatory and VAT needs to be charged and paid to HMRC. The UK VAT registration is effective from the day on which the EU business becomes liable to register.


Notification requirements applying to EU sellers are: 

  • notify HMRC within 30 days of the date on which the business became liable to register, either due to thresholds being exceeded or a decision to register voluntarily
  • if an EU business is already registered for VAT in the UK (not due to distance selling), any distance sales generated subsequently to the original registration already in place need to be reported on the UK VAT return, even if the UK distance selling threshold (£70k) has not been exceeded.

Reporting requirements:

  • UK VAT return
    Box 1 – output VAT
    Box 6 – value of the supply
  • EC sales list: no requirement to report
  • UK intrastat: include the VAT exclusive amount on the arrivals intrastat declaration.


Withdrawal of UK VAT registration:

An EU seller can withdraw a UK VAT registration once:

  • it is clear that sales in the relevant calendar year have not exceeded £70k
  • HMRC are satisfied that such sales will not exceed the threshold in the following year
  • sales are not subject to excise duty.



A German VAT registered business sells goods solely on Amazon. From January to December 2015, the total value of sales to consumers in the UK amounts to £65k. In 2016 total sales to UK consumers amount to £85k, with £70k of this value exceeded on 1 July 2016. In 2017 the total value of sales falls to below the registration threshold.


The company does not have to register for VAT in the UK in 2016 as thresholds are not exceeded, unless the registration is voluntary. In 2017 the registration threshold is exceeded and the company should register effective from 1 July 2016 (the company has 1 month to do the registration). As in 2017 the total value of sales is below the threshold, the seller can withdraw the registration as of 1 January 2018.


Distance selling from the UK to other EU countries

Distance sales by a UK business to non-VAT registered customers based in other EU countries are subject to UK VAT until the value of such sales exceeds those countries’ annual distance selling thresholds (see above), or the UK business registers for VAT in other EU countries voluntarily.


Notification requirements applying to UK sellers are: 

  • in case of a mandatory VAT registration, notify the tax authorities of the EU country where VAT registration is to be made within 30 days of becoming liable to register
  • if a voluntary VAT registration in another EU country is opted for, the UK business must:
    • notify HMRC and the other EU country’s tax authorities, at least 30 days prior to the first supply to be reported in the other EU country’s VAT return
    • within 30 days of the first supply after the option to voluntarily opt for the VAT registration in the other EU country, provide HMRC with a proof that the business informed the other country’s tax authorities.

Reporting requirements:

  • UK VAT return (Box 6 – value of the supply)
  • EC sales list – no requirement to report
  • Intrastat: VAT exclusive amount to be included in a dispatches declaration
  • relevant EU country VAT return:
    • the UK seller can deal with the other EU country’s tax authorities directly or can consider appointing a tax representative in the relevant EU country where registration is required.


Withdrawal of VAT registration

A voluntary option to account for VAT in another EU country can be withdrawn following a written notice to HMRC. The withdrawal can be made: 

  • no earlier than two full calendar years after the first sale, made following the option to voluntary register (as long as this is 30 days after a notification of the withdrawal has been received by HMRC) and
  • no later than 30 days prior to the date of the first intended supply after the withdrawal



From January to June, a UK business made €70k sales to VAT registered businesses in Germany and €132k sales to non-VAT registered German consumers, of which €100k (VAT registration threshold) was made from January to May.


The UK company ignores sales to German VAT registered businesses for the purposes of German VAT registration when assessing the distance selling VAT registration threshold. Until May (when the registration threshold is reached) the company has no requirement to register for VAT in Germany, although it can do that voluntarily. If it does, the UK business will charge a lower 19% VAT rate applicable in Germany on its sales to German customers, instead of the UK 20% rate it would need to charge if it continued without German VAT registration until it is mandatory to register.


If the company does not register for German VAT voluntarily, it will report all German sales made and the corresponding UK output VAT in the UK VAT return as normal – in box 1 and box 6.


When the company registers for German VAT, it will only report net German sales on the UK VAT return (box 6) and no corresponding UK VAT. In addition it will submit a German VAT return, per requirements of the German tax regime, including the German Output VAT within the German VAT return.



Late registration penalties are generally a percentage based on the VAT amount that should have been remitted to the tax authorities. The ways in which penalties are calculated differ by member state. In the UK, penalties are calculated on the basis of the length of time which has passed since you should have first registered for VAT, and range from 5% to 15% of the VAT due.   


Sellers using Amazon and eBay marketplaces have the legal responsibility to comply with UK or the relevant country’s VAT law. Until recently Amazon and eBay did not enforce VAT compliance; however, non-compliant sellers were likely to be delisted from Amazon until they met the compliance requirements. It is anticipated, however, that the measures taken by online sales platforms will become stricter as HMRC tries to tackle VAT evasion (please see below).


Overseas traders

While this article deals with distance selling VAT rules, applying strictly within the EU, it is important to understand that had the sales been made to or from overseas (non-EU countries) the VAT regime would be different.


Traders based in non-EU countries selling online directly to consumers in the UK, rather than via a fulfilment centre, do not add UK VAT on the sales invoice. Instead import VAT applies and is payable by the UK consumer at the point the goods enter the UK for the goods to be released.


If, however, an overseas trader brings goods to the UK to store them at a local fulfilment centre, in addition to the import VAT payable at the point the goods enter the UK, normal VAT needs to be charged at the point of sale to the UK consumer. No VAT registration thresholds apply to sellers based outside the EU. Overseas traders need to register for UK VAT immediately, and submit VAT returns, paying over any VAT due to HMRC. The import VAT suffered is recoverable.


In April 2017 HMRC published ‘Investigation into overseas sellers failing to charge VAT on online sales’, which highlights concerns over overseas traders not complying with the above rules and lists measures HMRC plans to take to tackle VAT fraud.

In September 2016 the following measures were introduced in the legislation to address VAT evasion: 

  • online marketplaces may be held jointly and severally liable for future undeclared VAT of online sellers, once HMRC had spotted cases of non-compliances and reported the seller to the online marketplaces
  • gave HMRC the power to impose on companies from outside the EU that engage in online sales in the UK, a requirement to appoint a UK based VAT representative
  • imposed new regulations on fulfilment houses, with effect from April 2018.


Distance selling vs other types of the online marketplace sales: VAT differences

Finally, the following examples may help illustrate how distance selling VAT rules compare against other online market place initiated sales.


1)    Your business sells goods to private consumers (not VAT registered), is established in the UK and it:


Stores goods in the UK and sells to UK consumers

Register for VAT when such sales reach £85k or earlier if registration is voluntary

Stores goods in the UK and sells to EU consumers

Distance selling VAT rules apply for registration and VAT obligations in the EU county of the customer – see above

Stores goods in an EU country to be sold to that EU country consumers

Moving goods triggers immediate VAT registration requirements in the country where goods are moved to.  VAT thresholds for registration do not apply.


2)    Your business is established in an EU country (other than UK) and it:

Stores goods in that EU country and sells to UK customers

Distance selling VAT rules apply.

Register for VAT when such sales reach £70k or earlier if registration is voluntary

Stores goods in the UK to be sold to UK consumers.

Moving goods triggers immediate VAT registration requirements in the UK.  VAT thresholds for registration do not apply.


3)    Your business is established outside of EU/UK and it:

Sells online directly from overseas to UK or EU

You may need to register for VAT in the overseas territory sales are made from. Import VAT will be payable once goods reach the destination country.

Stores goods in the UK (to be sold to UK customers).

Moving goods triggers immediate VAT registration requirements in the UK.  VAT thresholds for registration do not apply. Import VAT and customs duty will need to be paid in most cases. Import VAT is normally recoverable provided the seller will comply with the VAT registration requirements in the country where the goods are declared to the customs authorities.



Introduction to GDPR
Important aspects of the GDPR and items you and your clients will need to consider.

Important aspects of the GDPR and items you and your clients will need to consider.


The European Union’s (EU) General Data Protection Regulation (GDPR,  the Regulation) is the new EU data protection legislation that will replace the current Data Protection Directive, and the Data Protection Act 1998 (DPA) in the UK. The GDPR comes into effect on 25 May 2018 and the UK government has confirmed that the UK’s decision to leave the EU will not affect the implementation of the GDPR.


The Regulation has a broad territorial scope and is not limited to organisations located in the EU. It places obligations on controllers and processors that are either established within the EU, or located outside the EU where they offer goods and services to individuals in the EU or monitor the behaviour of individuals in EU. The GDPR may also apply to controllers and processors outside of the EU where an EU member state's law applies by virtue of public international law, for example a diplomatic mission.


The GDPR definitions of a controller and processor are similar to those offered in the DPA. A controller is a natural or legal person, public authority, agency or other body that alone or jointly with others determines the purposes and means of the processing of personal data. A processor on the other hand is a natural or legal person, public authority, agency or other body that processes personal data on behalf of the controller.


Affected data controllers and data processors should assess their operations and policies concerning data usage and its protection to ensure they are GDPR compliant.


GDPR affects all processor and controller organisations that process personal data. GDPR broadens the scope of the definition of personal data, which, for example, now expressly includes online identifiers such as IP addresses.


The GDPR imposes additional obligations and restrictions for the processing of special categories of personal data. Those categorised include personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, genetic data, biometric data, data concerning health or data concerning a person’s sex life or sexual orientation.


The GDPR significantly increases organisations’ financial risk exposure by imposing far tougher monetary sanctions for a breach of the Regulation. The following is a review of the two-tiered scheme. 

  • Tier 1 breaches – being the most serious breaches, can result in fines of up to €20m or 4% of the organisation’s total worldwide annual turnover in the preceding financial year (whichever is greater)
  • Tier 2 breaches – being lesser breaches, can result in fines of up to €10m or 2% of the organisation’s total worldwide annual turnover in the preceding financial year (whichever is greater).


In an article published on 28 April 2017 by the NCC Group, a cybersecurity consulting firm, it estimated that if GDPR had been enacted in 2016, total fines from the UK's Information Commissioners Office (ICO) could have totalled £69m rather than an actual £880,500. While GDPR is not just about financial penalties, such fines should make its implementation a board-level issue.


Below are some other key changes the GDPR will be implementing:


1. Data Breach Notification – Controllers are required to notify the appropriate supervisory authority (in the UK this will be the Information Commissioner’s Office) of data breaches without undue delay and within 72 hours (if feasible) of learning about the breach, unless the breach is unlikely to result in risk to the rights and freedoms of individuals. Controllers are also required to notify the data subject of the breach without undue delay if the breach is likely to result in a high risk to the rights and freedoms of individuals.

  • Notification must describe the nature of the data breach, the categories and the approximate number of data subjects and personal data records concerned, the contact information to the organisation’s data protection officer, the likely consequences of the breach and the measures the Controller has taken or proposes to take to address and mitigate the breach.
  • Processors are required to notify the controller of a data breach without undue delay after becoming aware of the breach.


2. Data Protection Officers (DPO) – Any controller or processor that is (i) a public authority or body (except for courts acting in their judicial capacity), or (ii) whose core activities consist of processing operations that require regular and systematic monitoring of data subjects on a large scale, or processing on a large scale of special categories of data and personal data relating to criminal convictions and offences, will need to appoint a DPO. As well as setting out when you need to designate a DPO, the GDPR also details the tasks and responsibilities of a DPO.


3. Greater rights for data subjects – The GDPR seeks to protect and strengthen the rights of data subjects with a number of its provisions, accompanied with stricter enforcement. Several of the data subject rights under the Regulation will be of a greater administrative burden to organisations, and organisations may need to implement new processes and systems. The new and enhanced rights afforded to individuals under the GDPR include the right 'to erasure' or 'to be forgotten', the right 'to restrict processing', the right 'to data portability', the right 'to object and automated individual decision-making' and enhanced data subject access requests.

The broader rights available to a data subject means it is likely that organisations will receive a wider range of data subject requests. In particular, under the Regulation organisations will be required to notify third parties of any rectification, erasure or restriction requested by the data subject unless that proves impossible or involves disproportionate effort. For organisations who disclose large amounts of data to third parties, this may be particularly burdensome.


Many changes required by the GDPR will take time to implement, including new or revised policies and procedures, employee training, and in some cases technology updates.


The Information Commissioner’s Office (ICO) will enforce the regulation in the UK and their website has useful information and guidance on GDPR.

Data security remains an important aspect under this regulation. Lockton specialises in a range of services including data breach response, information security and reputational harm recovery. Visit their website to find out more:

Peter Erceg – Senior Vice President, Global Cyber & Technology, Lockton Companies LLP



Please note that the purpose of this article is to provide a summary of and our thoughts on the law. It does not contain a full analysis of the law nor does it constitute an opinion 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 during ACCA's GDPR webinar
ACCA is hosting a webinar which will provide an overview of the demands of GDPR on Monday 16 October at 18:00. Register your place now to attend live or watch on demand afterwards.


All change for charity audits
Practice Note 11 is about to alter significantly. What you need to know.

Practice Note 11 is about to alter significantly. What you need to know. 


In May the Financial Reporting Council  issued a paper on proposed revisions to Practice Note 11: The audit of charities in the United Kingdom. This invitation to comment is now closed but the proposals significantly alter the existing PN11 and the FRC’s aim is to reflect the: 

  • updated regulatory landscape generally
  • implementation of FRS 102 / the new FRS 102 SORP
  • implementation of revised ISAs (UK) in 2016.


The FRC emphasis that charities have been the subject of extensive press, public and parliamentary interest of late, and this revision of the Practice Note seeks to incorporate lessons learned, particularly with respect to going concern and the auditor’s responsibility to report to charity regulators.


Some of the main proposed changes relevant to members are:


  • Reporting matters of material significance to charity regulators: This material has been updated to reflect the well reported collapse of the children’s charity Kids Company. The committee which investigated the collapse published a document entitled ‘The collapse of Kids Company: lessons for charity trustees, professional firms, the Charity Commission, and Whitehall’

    This document includes various comments on the role of the accountancy and legal firms involved with the charity. Section 156 of the Charities Act 2011 places a duty on the auditors of both a non-company charity and a company charity to report matters of ‘material significance’ to the Commission.

    The report noted that the auditors did not notify the Charity Commission about the charity’s failure to address its precarious funding situation – which ultimately led to the charity’s folding, the loss of significant charitable funds and the collapse in the support framework of a large number of vulnerable people. 
  • Legislative and regulatory framework: this section has been updated to reflect changes across the different jurisdictions in the United Kingdom. In addition, Appendix 1 (now Appendix 2) – Charity accounting and audit regulations in the United Kingdom has also been amended and updated to incorporate the material in Appendix 6 – Legislative background to auditor’s reports on charities’ financial statements. 
  • A new appendix has been inserted into the PN (new Appendix 1 – Conditions and events that may indicate risks of material misstatement) which sets out conditions and events which may give rise to a risk of material misstatement specific to charities. 
  • Materiality: the section on ISA (UK) 320 has been updated to provide further guidance about judgements about materiality and both the size and nature of misstatements. 
  • Going concern: the section on ISA (UK) 570 has been expanded and updated to provide more guidance to auditors. 
  • Other information: the section on ISA (UK) 720 has been updated to provide guidance on how the revised standard applies to the trustees’ report.


There is also a proposal to delete quite a few sections of the existing PN which are now deemed to either not have charity specific content or are no longer required: 

  • Standards: ISA (UK) 200; ISA (UK) 300; ISA (UK) 505; ISA (UK) 520
  • Summary financial information and summarised financial statements
  • Appendix 2 – Publications
  • Appendix 3 – Example paragraphs for insertion into an engagement letter
  • Appendix 4 – Illustrative example statements of trustees’ responsibilities
  • Appendix 5 – The duty of the auditor to report matters of material significance to CCEW and OSCR
  • Appendix 6 – Legislative background to auditor’s reports on charities’ financial statements
  • Appendix 7 – Definitions; Appendix 8 – Some significant topics relevant to audits of charities.


This streamlining has resulted in a reduction in pages from 149 to 71. The specific aim is increase the focus of the guidance on matters specific to the audit of charities and avoid duplicating material that can be found elsewhere.


The proposed changes help to ensure that the Practice Note will continue to support the delivery of high quality audit for charities. Subject to stakeholder comments, the FRC will issue a final version of the revised Practice Note later in 2017.

How much can you trust your oldest clients?
The Secret Accountant shares a valuable lesson in client management.

The Secret Accountant shares a valuable lesson in client management.


I would like to relay a salutary true tale of how even the most longstanding – seemingly trustworthy – clients can take advantage of the business relationship that we build up over years.


We had been preparing VAT returns for a self-employed client for many years, and each quarter the records were very similar. Until one quarter when my colleague preparing the VAT return brought to me (in my capacity as MLRO) a purchase invoice that seemed slightly ‘dodgy’, in that it looked somewhat ‘home-made’, and not like other invoices we had received from the same supplier previously. 


It was for a large amount so I called the client – he explained it was prepared by the husband of a husband/wife partnership; they had split up and so the non-computer-literate husband was doing his best with the invoicing, which the wife had been dealing with this previously. Sounded convincing, and it all checked out on the VIES website, the detail was all there, and so we put it through. 


In the next quarter my colleague is again with me, and there were a couple of similar purchase invoices – both high value, but all correct as far as technical content concerned. However, one was from a local company I knew, and it is a substantial company; the invoice was not compatible with theirs so suspicions were aroused.


Having made an SAR report, it was unsurprisingly not long before a VAT visit was scheduled, which was perfunctory, but followed shortly after by a call from HMRC to the client requesting all the records for the past four years. Having possession of these records, things went quiet for a few weeks, and the next I heard was a call from a stern HMRC official notifying me that the client was subject to a criminal investigation for VAT fraud, and potentially may be facing imprisonment.


Said official requested to come and interview me as he wanted to know our level of involvement and what we had contributed to the matter. Several sleepless nights passed and the interview came. Apparently, there were in fact many false purchase invoices, all produced on his home computer, claiming VAT of many thousands of pounds. Payments to cover them had been made to himself. Thankfully the officer accepted that we had done what we could to seek explanations and could see we were not complicit in all of this. Huge sigh of relief. The only comeback was the officer wanted me to make a statement to support their criminal prosecution of the client.


We instantly resigned from acting, and my next worry was whether the criminal prosecution would be in the press and would our name be related to it – no matter how innocently we had acted, would other clients reading the story accept that in full, or would we lose reputation? In the event there has been nothing in the press, no fall out for us, and we have heard nothing more so hopefully it is now history.  


The point is that I don’t consider myself naïve but in this case felt duped by a client I have known well, got along with, and trusted for a lot of years. This could have caused us much damage so please bear the above in mind if you have any doubts about the bona fides of even the best and most long-standing client – you just never know! 


The Secret Accountant practices in the heart of England.

Independent examination – new guidance
New CC32 and accompanying checklist CC32a will apply to all independent examinations from December.

New CC32 and accompanying checklist CC32a will apply to all independent examinations signed after 1 December 2017. 

They can also be applied now. 

Some of the changes are: 

  • a shortened section on independent examination at a glance
  • a greater use of headings to break up the text within each direction
  • direction 2 new criteria for an examiner providing other services
  • direction 5 a clarification about correcting accounting records
  • direction 9 includes a specific reference to the reserves policy
  • direction 13 includes a definition of a ‘qualified’ examiner’s report
  • a new section 4 based on group accounts
  • a revised section 6 on reporting relevant matters
  • revised examiner’s reports reflecting in-house legal advice and feedback from CCNI and OSCR.

As stated direction 5 has been clarified regarding correcting accounting records. It states ‘5.6 If the examiner identifies and remedies defects, errors and omissions in the accounting records during their examination then the trustees must agree to any amendments to the accounting records. The examiner should consider what amendments have been needed when making their report.’


The recommended checklist for examiners asks the following question requiring an answer and working paper reference: ‘If corrections made or records created during the examination, the trustee approval for these has been sought and obtained.’


The guidance also reminds examiners that ‘all registered charities must disclose their reserves policy in the trustees’ annual report or the trustees’ reason(s) for not having one.’


It states that the ‘examiner must check whether the trustees have considered the financial circumstances of the charity at the end of the reporting period and, if the accounts are prepared on an accruals basis, check whether the trustees have made an assessment of the charity’s position as a going concern when approving the accounts.’


The recommended checklist for examiners asks the following questions, all requiring an answer and working paper reference: 

  • Asked the trustees whether they expect the charity to be able to settle outstanding invoices, bills and commitments as and when they fall due
  • Asked the trustees about the reserves policy and the adequacy of the level of reserves held

View the CC32 and CC32a now.

Charities under scrutiny – trustees and auditors
Charity reporting is under scrutiny, especially the obligations placed on trustees and auditors.

Charity reporting is under scrutiny, especially the obligations placed on trustees and auditors.


These include: 

  • the recent review by the Charity Commission of 97 charities showed that 45 were not compliant with the SORP and that trustees were under scrutiny
  • the Charity Governance Code placing obligations on trustees to make sure they have appropriate policies in place
  • the requirement for auditors to report to the appropriate charity regulator when they have given a modified audit opinion.


The accounts monitoring review by the Charity Commission into a number of charities who received modified audit opinions from auditors showed a lack of evidence from the accounting records in 50 charities while 45 were not compliant with the SORP.


The most common reason for non-compliance was incorrect valuation of their property or investment assets. The Commission has stated that when analysing with trustees the reasons for non-compliance it found that ‘the trustees of several of the charities that had not complied with the SORP stated they did not consider that obtaining professional property or pension liability valuations was a good use of charitable funds'.


The view of the Commission is clear and it states that it ‘does not consider this to be an acceptable reason for the charities’ non-compliance'.


ACCA’s Charity Finance Conference takes place on 10 October and opens with a session on good governance. The Charity Governance Code issued in the summer has been laid out with recommendations for larger and smaller charities, making use by both easier.


One of the most talked about recommendations is that larger charities will have an external evaluation of the board’s effectiveness every three years. The Code recommendation states:


‘The board reviews its own performance and that of individual trustees, including the chair. This happens every year, with an external evaluation every three years. Such evaluation typically considers the board’s balance of skills, experience and knowledge, its diversity in the widest sense, how the board works together and other factors relevant to its effectiveness.’


Certain recommendations apply to both smaller and larger charities, for example the ‘apply or explain principle’ where a trustee has served over nine years. For both the recommendation is:


‘Trustees are appointed for an agreed length of time, subject to any applicable constitutional or statutory provisions relating to election and re-election. If a trustee has served for more than nine years, their reappointment is

  • subject to a particularly rigorous review and takes into account the need for progressive refreshing of the board
  • explained in the trustees’ annual report.’


Auditors (and independent examiners) are also under scrutiny with the charity regulators agreeing on UK-wide matters that must be reported to them. The three UK charity regulators require auditors to report: 

  • if an auditor has concerns regarding a charity’s accounts and issues a modified audit opinion report or qualified independent examiner’s report
  • where an auditor has concerns that conflicts of interests or related party transactions  have not been properly managed or declared.


The guidance issued by the regulators includes checklists but also warnings. The regulators are clear that the guidance applies to auditors and independent examiners of charity accounts, and that it is designed to highlight their legal responsibility to report significant matters in accordance with the applicable law.


They cite the laws as section 67 of the Charities Act (Northern Ireland) 2008, sections 156 and 159 of the Charities Act 2011, and section 46 of the Charities and Trustee Investment (Scotland) Act 2005.

HMRC launches a growth support service
HMRC has launched a support service for businesses with turnover of £10m+ or 20+ employees.

HMRC has launched a support service for businesses with a UK turnover above £10m or at least 20 employees.


It highlights that the business ‘may be able’ to get a dedicated specialist to help the business or their agent with tax for a specific period of time if the business is a growing mid-sized business (UK turnover above £10m or at least 20 employees).


It states that the ‘Growth Support Service will appoint a dedicated tax specialist to work with you (or your agent) and help you: 

  • understand any new tax issues and reporting requirements
  • get your tax right before you file your return
  • consider reporting and governance risks caused by the growth of your business
  • access any financial incentives and reliefs you may be eligible for
  • access other HMRC specialists, services and guidance that are relevant to you.’


It has said that the Service will be available if the business is experiencing the following: 

  • Significant increase in turnover
    Turnover increased by 20% or more in the last 12 months, where this increase is at least £1m
  • Mergers and acquisitions – growth-related
    Combining with, or buying, companies or other business organisations, or their operating units, resulting in growth of the business
  • Group reorganisation – growth-related
    Reordering or changing the composition of a group of companies for the purpose of business growth (excludes insolvency)
  • Listing on stock market
    Initial and subsequent offerings of shares on any stock exchange for public purchase
  • Significant introduction of capital
    Introducing capital that increases the balance sheet total by more than 20% where that capital is at least £1m
  • Notifying HMRC and submitting a Senior Accounting Officer (SAO) certificate for the first time
    First time notification of meeting Senior Accounting Officer (SAO) conditions and completion of the first SAO certificate
  • Making quarterly instalment payments for the first time
    Paying corporation tax by quarterly instalments for the first time because profits are above the ‘upper limit’
  • Entering VAT Payments on Account (POA) regime
    Making VAT Payments on Account for the first time, because in any period of 12 months or less you have a total liability of more than £2.3m
  • Exporting goods or services for the first time
    Selling goods or services from the UK to another country for the first time
  • Establishing a presence in a new territory
    Setting up a business operation in a new country.

More information

Get help with tax as a growing mid-sized business


Get help with a tax issue as a mid-sized business


Please let us know if you or your clients use the service and what they think of it by emailing us at


The latest guidance on making tax digital for business
HMRC has published a new suite of MTDfb reforms.

HMRC has published a new suite of MTDfb reforms.


Three are on the legislative reforms that will put quarterly reporting into tax legislation and one sets out the MTDfb VAT changes. You can comment on these until noon on 10 November. 


The following extracts are from the consultation documents and clearly set out HMRC’s position regarding quarterly reporting:


‘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 are 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.’


It then comments 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 benefitting 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 MTDfb 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 are in Part 4, Administration, avoidance and enforcement, Reporting and record-keeping and are clauses 60 Digital reporting and record-keeping for income tax etc, 61 Digital reporting and record-keeping for income tax etc: further amendments and 62 Digital reporting and record-keeping for VAT.


Also see the explanatory notes and the four MTD documents issued by HMRC. 

Probate: consultation and free guidance
Register now to receive our revised probate factsheets.

Register now to receive our revised probate factsheets.


ACCA has been an approved regulator for the reserved legal activity of probate in England and Wales since 2009. As part of the process to authorise members and firms to undertake probate work, practitioners were emailed in August requesting that they respond to a consultation on the draft application that would be submitted to the Legal Services Board (LSB).


This is part of the process of gaining approval from the LSB for ACCA. As highlighted in the email, the draft application provides a comprehensive overview of the regulatory framework and processes, including aspects relevant to probate activities. It explains how ACCA will authorise individuals and firms to carry out probate work, and the regulatory and disciplinary procedures necessary to meet the requirements of the Legal Services Act 2007 and the LSB. The consultation closes for comments at 17:00 on 9 October.


The consultation states that ACCA will consider all feedback received by the comment deadline above. ACCA aims to submit the final application to introduce approved regulator regulatory arrangements for probate activities to the LSB in the autumn.


Probate factsheets

After the consultation has closed ACCA will help practitioners by updating our probate factsheets. This suite starts with ‘What to do when someone dies’ which begins with taking instructions, announcing the death, organising the funeral and conducting the initial interview to ascertain the type of probate applicable.


The various types of probate are explained in detail. The legal consequences are explained and the possible pitfalls pointed out. There is a complete set of model working papers and a glossary of legal terms in the appendix.

Other factsheets will look at administration of estates, taxation, calculations, forms required and distributions to beneficiaries. 


The probate factsheets will be available – free of charge – on request to practitioners. Simply email to register your interest in receiving these. Please include your membership number, firm and ‘probate factsheets’ in the subject line.


Members undertaking work in a personal capacity can obtain extracts from the factsheets and should include your name, membership number and ‘probate factsheets extracts’ in the subject line. 

When audit thresholds can be confusing
Last year's change to the audit thresholds for limited companies can be confusing.

The audit thresholds for limited companies changed from 1 January 2016 – and can be confusing for companies.


The statutory instrument implementing the 2013 EU Accounting Directive effective in the UK from 1 January 2016 has changed the audit thresholds for limited companies.



Companies are exempt from audit as per Companies Act 2006 section 477 if they qualify as small companies under section 382-384, unless they are members of a group or are charities and hence are required to follow the different charity audit thresholds.


A company is small if it meets two out of three of the following criteria for two consecutive years:


'Old' limits (for periods beginning before 1 January 2016)

'New' limits (for periods beginning on or after 1 January 2016) (NET)

'New' limits (for periods beginning on or after 1 January 2016) (Gross)





Total assets




Number of employees





Once a company size is established, it has to meet or cease to meet only when the limits are exceeded for two consecutive years. The audit exemption does not apply if the company is ineligible. A company must have an audit if at any time in the financial year it has been: 

  • a public company (unless it’s dormant)
  • a subsidiary company within a group which is not small
  • an authorised insurance company or carrying out insurance market activity
  • involved in banking or issuing e-money
  • a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
  • a corporate body and its shares have been traded on a regulated market in a European state.


Please bear in mind that the ineligible rules only refer to the financial year for which the accounts relate.


As these revised limits apply to accounting periods starting on or after 1 January 2016, to be exempt from a statutory audit the company must meet the new limits for this year and the previous year.



A group has to meet the above limits as a whole to be able to exempt from an audit. If the group does not qualify as a small group then an audit will be required for each group member. However, there is an exemption for subsidiaries under section 479A to 479C if they meet certain criteria and if the parent company provides a guarantee in respect of all actual outstanding liabilities and all contingent liabilities at the end of the financial year.


Does ‘PLC’ in a group make it ineligible?

Not really, but it depends. Under the old rules a PLC in the group would make the entire group ineligible but under the new rules a PLC will only make that company and group ineligible if the PLC is also a traded company (eg listed on LSE).


Another benefit is that a group with an AIM listed PLC company will not make the group ineligible, and this was not available under the old rules. So having a ‘vanity PLC’ in the group will no longer, on its own, prevent other group companies preparing accounts under the small regime and claiming small audit exemptions.


Although small companies are exempt from an audit under the criteria but they may still undertake an audit for various other reasons eg: 

  • the company’s lender requires an audit
  • a grant provider requires an audit
  • directors or shareholders may request an audit assurance
  • the company constitution may require it
  • to support future sale or public offering of the business.


Charity thresholds

The audit threshold for all charities is different from non-charitable entities. There are different thresholds for Scottish charities and other UK charities for periods ending on or after 31 March 2015 as detailed below:



'New' limits (for periods ending on or after 31March 2015) (SCOTLAND)

'New' limits (for periods ending on or after 31 March 2015) (OTHER UK CHARITIES)

'New' limits (for periods ending on or after 31 March 2015) (NORTHERN IRELAND)

Gross Income








Gross assets and Gross Income

<£3.26m and £250K

<£3.26m and £250K

<£3.26m and £250K


Any charity that fulfils the above criteria can choose to opt out of a full audit. However, most are required to obtain an alternative assurance service as per their governing documents. Broadly speaking, an independent examination is needed if gross income is between £25,000 and £1m (£500,000 in Scotland). Where the charity is not required to have an audit but gross income exceeds £250,000, an independent examiner must qualify by being a member of an approved professional organisation (see page 73) specified under the Charities Act.


Charity commission guidance in relation to charity reporting and accounting can be found here.


Co-operatives and community benefit societies

The Statutory Instrument containing the new audit limit thresholds is expected to come into force from 1 April 2018. This would see an increase in the audit thresholds for Co-operatives and Community Benefit Societies to the same thresholds that exist for companies. The change in the draft SI is that section 84(1) of the Co-operative and Community Benefit Societies Act 2014 would be amended as follows: in paragraph (a), for ‘£2,800,000’ substitute ‘£5,100,000’; in paragraph (b), for ‘£5,600,000’ substitute ‘£10,200,000’.


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.

Shaping your ACCA - you speak, we listen
Focus group findings to be revealed in 13 October webinar.

ACCA recently completed a series of sector-specific focus groups across the UK for members working in public practice, the corporate sector, financial services and internal audit. Nearly 200 members attended 24 meetings in 12 different locations, providing insight into their working lives and what their ACCA membership means to them.

In a webinar on 11 July, John Williams, Head of ACCA UK, and Kevin Reed, former editor of Accountancy Age, provided an overview of the findings of those meetings.

Join us for a follow up webinar on 13 October when John and Kevin will examine what ACCA can do in response to this valuable member feedback to better support all members.

Register for both of these webinars now

A series of reports on these focus groups is available at

Practice Excellence Week
Exclusive offer for ACCA members.

ACCA is delighted to be able to offer our practitioners two great opportunities to benefit during Practice Excellence Week, which runs from 16-20 October.


Practice Excellence Conference 2017

Members can benefit from a 50% discount on tickets for you and your colleagues. Join us on Thursday 19 October for an interactive full day event designed to help those who want to grow their businesses. Reasons to attend include: 

  • award-winning advice on practice growth from an expert panel
  • workshops on understanding your market, attracting new business and creating a digital approach
  • discussions and showcases on how to use the right tools, the right way.

ACCA’s head of technical advisory Glenn Collins will be hosting an afternoon session focusing on ‘A digital first approach to building your practice’ when he will be joined by Alex Falcon Huerta FCCA (Founder & CEO of Soaring Falcon Accountancy) and Trusha Lakhani FCCA (Owner, Great Business Matters Ltd).


Other great speakers you can hear from include: 

  • Heather Townsend – author of Go-To Expert
  • Carl Reader – author, The Start-up Coach
  • David Sloly – founding partner, HarveyDavid
  • Alex Davis – business development, UK QuickBooks.


Book your place now and empower your practice by using the code "ACCA17M3MR" at checkout, where your 50% discount will be applied to the standard price of £249.


If you have any questions about Practice Excellence Week, please contact us at



Practice Excellence Live

Can’t attend the conference on 19 October? This series of interactive online seminars is designed to help you tackle the business challenges you're facing right now.


Nine sessions will focus on five of the biggest issues facing practitioners today: technology; digital marketing; tax; leadership and making tax digital.


Monday 16 October: Making Tax Digital

Supported by Digita Thomson Reuters


10:00 - Making tax digital – what you WILL need to do for April 2018

14:00 - Making tax digital and data security – what you need to know about GDPR


Tuesday 17 October: Tax

Supported by FreeAgent


10:00 - The biggest tax issues facing small business

14:00 - VAT's life


Wednesday 18 October: Digital Track

Supported by Xero


10AM - The digital accountant: What sets the leaders apart

2PM - Future of practice: What 2018 will bring for accountants


Friday 20 October: Digital Marketing

Supported by: QuickBooks


14:00 - The five pillars of effective marketing


Monday 23 October: Leadership

Supported by: Sage


10:00 - The habits of Practice Excellence

14:00 - How to make changes that stick


Find out more about the sessions and register to attend now; it’s completely free!

High quality CPD courses
Complete your 2017 CPD requirements.



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



£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!)




Complaints: How to avoid and manage them

23 November, London

Fee: £99 per person



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: Accounting and Auditing Conference

4 November, London


Autumn Update for Practitioners: Taxation Conference

9 December, London


View full details on the Autumn Update Flyer



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.



Guide to practical audit compliance for partners and managers

29-30 November, London

12-13 December, Manchester




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




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

4 October, Bournemouth                        

17 October, Edinburgh              

18 October, Bristol                                

19 October, Leeds

20 October, Birmingham                        

26 October, Aberdeen

31 October, Norwich

2 November, Cardiff

13 December, London                           



UK tax and Isle of Man tax update

12 December - Douglas, Isle of Man




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


Residential Conference for Practitioners

16-18 November 2017

Queens Hotel, Leeds

CPD units: 21

Fee: £739.


Engagement letters – updates
The latest amendments to 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. 


Apprenticeships – a modern alternative
There are many reasons why your practice could benefit from hiring an apprentice.

There are many reasons why your practice could benefit from hiring an apprentice.


Apprenticeships are set to play an increasingly important role in addressing the UK’s skills shortage, upskilling staff and lessening the pressure to attract new talent to enter employment directly rather than following university education.


Why consider apprenticeships?

Our apprenticeships can help feed your talent pipeline, and bring millennials into the workplaces that tend to be more digitally savvy, thereby supporting the existing workforce.


Our Generation Next research has shown us that to retain talent, businesses and organisations should think about providing flexible opportunities to learn new skills and, if possible, clear paths for progression. Apprenticeships offer that flexibility.


Since launching ACCA’s Level 4 Accounting Technician apprenticeship, we’re advising employers large and small to invest in apprenticeship programmes.


Apprenticeships make hiring simpler and cheaper. They’re not just for new hires, as there’s no upper age limit they can also be used to train and develop current staff. This can help with staff retention and, with ACCA Pathways, drive the acquisition of highly skilled accountants, up to chartered certified status.


They’ll be taught the optimal combination of professional competencies: a collection of technical knowledge, skills and abilities, combined with interpersonal behaviours and qualities so they can add value for their employers by becoming forward-thinking accountants


Many smaller practices and businesses are likely to be outside of the apprenticeship levy payments – but you will be able to benefit from government co-investment of up to 90% as a way to grow the team and business without the high costs of training – providing you with new opportunities to develop new and existing talent with skills tailored to your business needs.


Following the successful launch of the ACCA Level 4 Accounting Technician Apprenticeship, the government has recently approved the Level 7 Professional Accountant standard and assessment plan. We are pleased to confirm the ACCA qualification meets the standards set.


Once the funding band has been agreed by the government, we will be able to announce a date to take registrations for the ACCA Level 7 Professional Accountant Apprenticeship.


Our Level 7 will be the only accountancy pathway with the option of a BSc (Hons) in Applied Accounting and an embedded MSc in Professional Accountancy, and will prove to be a popular choice with parents, careers advisors and prospective apprentices. 


Further information

Visit our website to find out more, download our handy guide How can I recruit an apprentice, or email to request a call-back from one of our team who can discuss your requirements around apprenticeships in more detail.