Technical and Insight
Our latest Brexit guidance

With the date for Brexit now extended beyond 31 October, we summarise the latest guidance for accountants.


With the date for Brexit now extended beyond 31 October, we summarise the latest guidance for accountants.

 

Landlords: right to rent

There will be no changes to the right to rent for EU, EEA and Swiss citizens and their family members living in the UK until 31 December 2020 if the UK leaves the EU without a deal. The current right to rent checks will remain in force.

 

National insurance contributions

The employer bulletin issued by HMRC highlights that ‘In the event the UK leaves the EU without an agreement, there may be changes for UK employers who have people working in the EU, the EEA or Switzerland'.

 

It contains guidance on the required deductions. It is also highlighted that ‘if your employee is a UK or Irish national working in Ireland, their position will not change after Brexit, they are covered under the international agreement signed by the UK and Ireland in February 2019'.

 

VAT MOSS

After Brexit, you will no longer be able to use the UK’s VAT Mini One Stop Shop (MOSS) service to declare sales and pay VAT due in EU member states.

 

For the final return period for the UK’s VAT MOSS system, currently the period ending 31 December 2019 (this date was highlighted by HMRC if Brexit took place on 31 October; it will now be a later date), only sales made before Brexit should be included in the final return.

 

For sales made after Brexit, you’ll need to register for either:

  • VAT MOSS in any EU member state
  • VAT in each EU member state where you sell digital services to consumers.

 

GDPR 

If you are a UK business or organisation that already complies with the GDPR and has no contacts or customers in the EEA, you do not need to do much more to prepare for data protection compliance after Brexit, with the guidance stating that you should ‘make sure you review your privacy information and documentation to identify any minor changes that need to be made after Brexit'.

 

If you are a UK business or organisation that receives personal data from contacts in the EEA, you need to take extra steps to ensure that the data can continue to flow after Brexit. This guidance for small organisations covers:

 

 

Changes to engagement letters issued by practitioners to clients would be within the privacy notice with transfers of personal data outside the EEA replacing EEA with UK.

 

Finally, make sure you look at the government’s Employer Bulletin: Brexit edition

 

 

 

Brexit – reporting aspects to focus on

Highlighting reporting aspects which are likely to require more attention if or when Brexit occurs.


Highlighting reporting aspects which are likely to require more attention if or when Brexit occurs.

 

More reliance on judgement

With little knowledge of how trading with the EU will look after Brexit, accountants may find themselves relying on management judgement more than ever before. It is possible that matters previously considered straightforward may become less obvious and reporting on them will need to be approached with caution.

 

As an accountant, you should highlight those areas in discussions with client management and be prepared to challenge directors' judgements and assumptions, in a way that will result in prudent reporting. This may require you to devote more time to preparing accounts and to achieving balance between optimistic but unsubstantiated assumptions and overcompensating by taking an overly pessimistic view.

 

Going concern

Where clients have predominantly EU based customers, profitability of sales contracts is likely to be affected by customs duties, imposed cross-border fees, the cost of logistical delays, forex losses caused by the weak sterling, to name but a few.

 

Contracts already in place may become onerous, unless they can be renegotiated, as pressure on cash flow increases in the short to medium term, until stability returns.

 

Going concern uncertainties should be highlighted in the accounts as usual (see more below), and the availability of shareholders’ ongoing support or third party funding confirmed in the context of a higher than usual commercial risk.

 

Accountants relying on directors’ representations in relation to availability of financial support should ensure such commitments are relied on only when verified and confirmed.

 

If the negative impact of the adverse trading environment that cannot be mitigated and the margins are insufficient to absorb losses, accounts should be prepared on a breakup basis.

 

Impairment of assets

A deal (or no-deal) Brexit may affect recoverable amounts of assets. If assets’ recoverable values fall below their carrying amount, impairment should be recognised immediately. Inventories and other assets held at cost such as property or certain equity investments are among those affected.

 

Impairment is discussed in section 11.21 (debtors and other financial instruments) and section 27 Impairment of Assets (stock, fixed assets, goodwill, other intangibles) of FRS 102.

 

Inventories

  • inventories must be reviewed for impairment annually, irrespective of whether or not there is an indication of impairment
  • impairment factors to consider: adverse legal post Brexit landscape, increase in costs to sell, higher employment costs, availability of labour supplied by EU workers
  • compare the carrying amount of inventories with the selling price and direct and incremental costs to complete and sell, based on all reliable evidence, on an item by item basis, or, if impracticable, per groups of related items
  • consider knock-on effect on related balances, such as WIP, which may need to be impaired if finished goods need to be impaired.

 

Assets other than inventories

  • assets other than inventories, for example PPE or some equity investments, must be reviewed for impairment if there are any internal or external indications that recoverable values are below carrying amounts
  • recoverable amounts may be the assets’ values in use (the value that a business achieves by holding and using the asset) if higher than the selling price the asset could achieve if disposed of, less costs to sell. For example, commercial property may not be affected despite no-deal Brexit, when it is fully utilised by the business, rather than surplus to requirements 
  • consider impact of impairment on useful lives and depreciation estimates as these may decrease.

 

Reliance on valuations

In a climate of a deal or no-deal Brexit uncertainty, clients should consider utilising professional valuers, rather than relying on directors’ valuations, even though FRS 102 does not mandatorily require professional valuations. Specialist assets or assets for which active market comparables are not freely available may have to be professionally valued irrespective of the impact of Brexit.

 

Provisions

Over-providing based on Brexit uncertainty should be avoided. Any costs expected and associated directly with Brexit should only be provided for if there is a legal or constructive obligation to incur those costs at the balance sheet date.

 

If a client is pushed into restructuring as a result of Brexit, section 21.11C of FRS 102 explains that a constructive obligation to make a provision exists only when detailed plans to restructure have been formulated by the year end and formal announcements have been made to those affected. An intention to restructure at some point in future is insufficient to recognise a provision.

 

Emphasis on disclosures of uncertainties, judgements and estimates

Material judgements and estimates made by directors as a result of uncertainties faced should be disclosed separately.

 

Disclosures of uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern (FRS 102, section 3.9)

 

Disclosure of significant uncertainties affecting the value of recognised assets and liabilities (FRS 102 section 8.7).

 

Where uncertainties result in directors making judgements or estimating values, those should be disclosed in accounting policies. Focus should be on areas of significant risk of a material change to within the next year. Specific amounts at risk of material adjustment should be identified.

 

In some circumstances, it may be necessary to quantify and disclose a range of material outcomes based on underlying estimates. Changes, assumptions and estimates made in the past should be explained. 

 

Significance of disclosure of post-balance sheet events

To capture all material impacts of Brexit, clients should plan to undertake a comprehensive post balance sheet event review.

 

During the review, information may be found after the year end, which provides evidence in relation to:

  • circumstances that existed at the balance sheet date - adjusting post-balance sheet event
  • circumstances that arose after the balance sheet date (for example relevant Brexit terms are formulated after the balance sheet date) – non-adjusting post balance sheet event, which should be disclosed.

 

Requirement of more detailed disclosures

The complexities of no-deal Brexit are likely to require more detailed disclosures, even for small companies applying FRS 102 1A, due to the overall true and fair view requirement included in paragraph 1A.16.

 

A good reference point for the standard of disclosure by small private companies may be FRC’s Reporting by smaller listed and AIM quoted entities 

 

Increased value of a director’s report

Whilst not mandatory for small companies, including a directors’ report in the accounts may provide valuable context and insight into company’s post-Brexit future, including information on its ability to deal with challenges and uncertainties.

 

Entrepreneurs’ relief – the importance of trading activities even when suspended

A must read case for entrepreneurs’ relief.


A must read case for entrepreneurs’ relief.

 

Entrepreneurs’ relief (ER) reduces the rate of capital gains tax (CGT) on disposals of certain business assets from 20% to 10%.

 

The recent first-tier tribunal case of Potter [2019] UKFTT 0554 (TC) re-emphasises the importance of ‘trading activities’, but it also clarifies that a company can diminish or temporarily suspend its trading activities without being treated as ceasing to trade. It also addresses the issue of when an investment activity leads to the loss of ER.

 

Facts of the case
Mr and Mrs Potter were shareholders in a company called Gatebright Ltd which had traded as a broker on the London Metal Exchange. Mr Potter dealt with trading, and Mrs Potter dealt with the administration of the business.

Gatebright was a successful business and had built up reserves of over £1m when the financial crash happened in 2008/09. In order to safeguard the reserves, Gatebright invested £800,000 of the company cash reserves in a six year investment bond which matured in November 2015. The bond paid interest of £35,000 a year and it appears that this was distributed by way of dividend. The remaining funds, approximately £200,000, were retained as working capital.

 

As a result of the crash, the volume of trade declined dramatically and the last invoice issued by Gatebright was in March 2009.

 

From 2009 until June 2014, Mr Potter suffered some ill-health and other domestic misfortune which meant that he was unable to work and so the trading activities diminished or were temporarily suspended. However, having been in the business for 30 years, Mr Potter had many contacts among banks and clients and he stayed in touch with them with a view to starting new negotiations. Evidence was produced demonstrating that the company was actively seeking trading income right up to June 2014.

 

The company went into voluntary liquidation in June 2015. ER was claimed but denied by HMRC on grounds that the company ceased trading in 2009, more than three years before the 2015 disposal date.

 

A key requirement for the availability of ER in a share disposal is that the company is a trading company or a holding company of a trading group throughout the qualifying period.

 

In order to meet the trading company requirement, a company’s activities must not include non-trading activities to a significant extent. Although ‘significant’ is not defined in the legislation, HMRC’s manual looks at ‘indicators’ or ‘factors’ that might be useful in establishing whether there is substantial overall non-trading activity. This is traditionally taken to be 20% and this figure is included in HMRC’s guidance. The guidance is, of course, just that. It is not legislation.

The tribunal observed that the legislation focuses on ‘activities’, in other words ‘what is the company actually doing?’

 

The tribunal concluded that, although Gatebright was not actually carrying on any trade after it issued its last invoice in 2009, it was considered to be ‘preparing to carry on its old trade once the economic environment permitted it’. The expenditure and the time spent by the officers/employees of the company on non-trading activities were nil. Once Gatebright put the money into the bonds it did not, and could not, do anything else in relation to them until they matured. There were no investment activities.

 

While the asset and income position of the company were factors against trading activities, the expenses incurred, and time spent by the directors/employees, were factors pointing to trading activities.

 

Conclusion
Potter supports the view that a trading company may be able to make a substantial long-term passive investment without fear of losing its ER trading company status.

 

It also highlights the importance of actions taken with the judge stating in reference to a period of suspended trade 'it does not seem to me that a company would stop and start being a trading company in a period simply because trading activities are temporarily suspended for some reason. Carried to a logical extreme, if this is wrong, a company would cease to be a trading company every weekend and become one again every Monday morning. If, overall, the company is carrying out trading activities during a period but there are temporary gaps in the activities, in my view it can be said that the company is a trading company “throughout” the period.’

 

60 second update: what you need to know about directors’ duties

ALL directors are jointly responsible for a company and the duties towards it – regardless of their involvement.


A reminder that ALL directors are jointly responsible for a company and the duties towards it – regardless of their level of involvement.

 

Many small companies registered with Companies House started as a one-director company and remained so until the demise of either the director or the company itself.

 

In many cases directors have no understanding as to what being a director actually entails or what the consequences are of getting it wrong. Many directors look upon the company as being an extension of their self employment.

 

The main point is that the company is a separate legal entity. It has its own rights and can take its own actions, sometimes against its own directors.

 

One of the points to consider when starting a new business and choosing the trading medium is the appointment of directors, and the duties placed on them.

 

Appointment of a director

Companies Act 2006 Part 10 Chapter 1 defines the rule governing the appointment of a company director. The requirements state that a person of at least 16 years of age may become a company director.

 

Persons who are currently disqualified from being a company officer or those who are undischarged bankrupts are prohibited from being company directors.

 

It is only possible to appoint a corporate director if there is at least one other director that is a natural person.

 

Apart from the disqualification and bankruptcy provisions, in reality, Companies House will accept nominations for any persons the shareholders of a given company deem fit to act in that capacity.

 

Directors’ duties

There are three main elements to the directors’ duties:

  • Fiduciary duty: is a legal obligation from one party to act in the best interests of the other party. The courts have always regarded directors as being ‘fiduciaries’ and as a result the directors are required to act in good faith, in the best interests of the company and must not abuse the trust and confidence placed in them
  • Duty of skill and care: a director of a company must exercise reasonable care, skill and diligence. So directors with particular skills are expected to bring those skills for the benefit of the company
  • Statutory duties: are duties imposed by Companies Act as well as other relevant legislation. The Act ‘codifies’ long established common law principles by spelling them out in section 170-177. Duties stated in the act include:

    * duty to act within the company’s powers
    * duty to promote the success of the company
    * duty to exercise independent judgements
    * duty of skill, care and diligence
    * duty to avoid conflicts of interest
    * duty not to accept benefits from third parties and duties to declare interest in a proposed transaction or arrangements
    * the directors have other duties in areas such as health and safety, bribery law, employment law and tax, etc.

 

Implication of the breach of duty

The following are some of the implications arising from a breach of duty:

 

Requirement to return any property wrongly taken from the company or to pay damages
Where the directors are held to be in breach, they can be required to return any property wrongly taken from the company or to pay damages to the company.

Under the Companies Act, any shareholder has the right to apply for permission to bring proceedings against a director in respect of any alleged negligence, breach of duty or breach of trust. The court will consider if the applicant was acting in good faith, whether the shareholders had authorised or ratified the breach being complained of and whether the conduct of the director concerned was consistent with the requirements set up in the Companies Act.

 

Directors' personal liability in respect of debts and losses of their company

Under a limited number of circumstances directors can be made personally liable for debts which they allow their company to run up. Some of the circumstances in which a director can be held personally liable are: wrongful trading, acting in breach of disqualification orders, involvement with phoenix companies, making deceitful declarations to creditors of the company regarding the settlement of debts.

 

Disqualification and removal of directors

1. Under the provisions of the Companies Act 2006 (s168) a company may by ordinary resolution at a meeting remove a director before the expiration of his period of office.

 

2.  Section 18 of Model articles provides that the office of a director shall be vacated if:

  • he ceases to be a director by virtue of any provision of the Act or he becomes prohibited by law from being a director
  • he becomes bankrupt or makes any arrangement or composition with his creditors generally
  • he resigns his office by notice to the company
  • a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months.

 

 3. A court may make a disqualification order under the Company Directors Disqualification Act 1986 (CDDA 1986)

 

CDDA 1986

Examples of conduct which may lead to disqualification include:

  • continuing to trade to the detriment of creditors at a time when the company was insolvent
  • failure to keep proper accounting records
  • failure to prepare and file accounts or make returns to Companies House
  • failure to submit tax returns or pay over to the Crown tax or other money due
  • failure to co-operate with the insolvency practitioner.

 

Disqualification proceedings are handled by the courts or the insolvency service. In some cases the director could also face criminal charges, fines, or made personally liable for the company’s debts.

 

The effect of a disqualification

 Unless the individual has permission from the courts it prevents him from:

  • being a director of a company
  • acting as receiver of a company's property
  • directly or indirectly being concerned or taking part in the promotion, formation or management of a company
  • being a member of or being concerned or taking part in the promotion, formation or management of a limited liability partnership.

 

If a person contravenes the order, he is committing a criminal offence that makes him liable to a fine or a prison sentence of up to two years.

 

The Act applies not only to a person who has been formally appointed as a director but also to those people who have carried out the functions of a director and to shadow directors. A shadow director is a person in accordance with whose directions or instructions the directors of the company are accustomed to act. In order to be classified as a shadow director the person must effectively control the running of the company.

 

Conclusion

Setting up a company is now a cheap and easy process but there are governance laws that need to be understood. As the regulatory environment has become more and more onerous a newly appointed director needs to understand the full extent of the legislation and how it impacts on his responsibilities. It is important that any director – whether of a big or small company – is familiar and complies with his duties.

 

In particular in small companies where family members are appointed just to make up numbers, they must ensure that they are aware that they cannot simply sit back and have no involvement in the company.

 

All directors are jointly responsible for the company and the duties towards it. Ignorance is no defence and the consequences can be severe both for the company and personally.

 

Don’t forget the state pension!

A handy guide to help clients review their state pension provision.


A handy guide to help clients review their state pension provision.

 

An overhaul in April 2016 replaced the old two-tier system with a flat-rate state pension, which is now (in 2019/20) £168.60 per week. However, the amount a person is entitled to depends on their National Insurance (NI) record.

 

NI record factors that would influence the amount of state pension received are:

 

‘Starting amount’

If you have already built up NI contributions under the pre-2016 system, you’ll be given a ‘starting amount’. This is the higher of:

  • the amount under the pre-2016 system including basic and additional pension
  • the amount due if the new state pension had been in place at the start of working life.

 

If the 'starting amount' is more than the full amount of the new state pension, any amount over that level will be protected and paid on top of the full amount when you start to claim the new state pension.

 

If the starting amount is less than the full amount of the new state pension, you may be able to build up a higher level of new state pension through contributions and credits you make between 6 April 2016 and when you reach pension age.

 

So, your state pension amount will be the higher starting amount figure plus the value of any qualifying years you add from 6 April 2016 onwards, up to the full rate of the new state pension.

 

The tool available on the state pension service website will calculate this for you.

 

‘Contracted out’ scheme

If you were in a ‘contracted out’ personal or workplace pension, it would have paid NI contributions at a lower rate because some of the NI contributions were paid towards the private pension.


When working out the ‘starting amount’ for the state pension, a deduction will be made from both calculations, to take into account the lower NIC made because of the ‘contracting out’ arrangement.

 

NI contribution made only after 6 April 2016

If you made no NI contributions before 6 April 2016, your state pension is calculated entirely under new state pension rules. This is more likely to be relevant for those born after the year 2000 or those who became resident in the UK after 2015. The position would be as follows:

  • 35 years or more of NI contributions: you will get the full amount
  • between 10 and 34 years of contributions: you will receive a proportion of the pension
  • under 10 years of NI contributions: you are not usually eligible for the new state pension.

 

Find out about more about state pension eligibility, claims and payments here.

 

Deferring state pension

If a person reaches state pension age and defers taking it out, it could mean that they receive extra state pension when they start claiming.

 

The state pension increases by 1% for every nine weeks deferred, or around 5.8% for each full year. This may not apply if the person receives certain benefits.

 

Find out more about deferring your pension here.

 

If you have gaps in your NI record

If you have gaps in your record and want to boost your state pension, you could make voluntary NI contributions.

You can only pay for gaps in your NI records from the past six years. Payments for gaps more than six years ago are sometimes possible depending on your age.

 

Voluntary NI contributions are a popular option, with people paying £119.3m in voluntary contributions in the last year, compared with just £12.8m in 2016/17 – a nine-fold increase in just two years.

 

But it is important to be careful about paying voluntary NIC because in some cases paying extra NICs will not always increase your pension.

 

You may wish to recommend your clients speak to DWP Future Pension Centres to understand their state pension before they make voluntary National Insurance contributions.

Solicitors’ Accounts Reports – significant changes coming

The new SRA reporting regime begins next month and the changes are significant.


The new SRA reporting regime begins next month and the changes are significant.

 

The new Solicitors’ Accounts Reports (SRA) reporting regime is effective from 25 November and the changes are significant. The SRA have brought its revised guidance into one area and has supplemented its rules with a Q&A to assist its firms.

 

The changes mean that any reporting accountant should ensure that they re-check the definition of clients’ money and exemptions available. The definition of client money in 2.1 and 2.2 states: ‘“Client money” is money held or received by you:

 

  • relating to regulated services delivered by you to a client
  • on behalf of a third party in relation to regulated services delivered by you (such as money held as agent, stakeholder or held to the sender’s order)
  • as a trustee or as the holder of a specified office or appointment, such as donee of a power of attorney, Court of Protection deputy or trustee of an occupational pension scheme
  • in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the same.

 

In circumstances where the only client money you hold or receive falls within rule 2.1(d) above, and:

  • any money held for disbursements relates to costs or expenses incurred by you on behalf of your client and for which you are liable
  • you do not for any other reason maintain a client account
  • you are not required to hold this money in a client account if you have informed your client in advance of where and how the money will be held.’

 

In 2.3 it states the exemptions as being that ‘you ensure that client money is paid promptly into a client account unless:

  • in relation to money falling within 2.1(c), to do so would conflict with your obligations under rules or regulations relating to your specified office or appointment
  • the client money represents payments received from the Legal Aid Agency for your costs
  • you agree in the individual circumstances an alternative arrangement in writing with the client, or the third party, for whom the money is held.’

 

The alternative arrangement Third Party Managed Accounts continue to be promoted and the SRA guidance has been updated.

 

A revised schedule of services that applies for reports from 25 November 2019 has been made available. Request your copy by sending an email to supportingpractitioners@accaglobal.com

 

How to save IHT on a property portfolio

We examine legislation which allows you to save money when making inheritance tax provision on properties.


We examine legislation which allows you to save money when making inheritance tax provision on properties.

 

It is a well-known saying that ‘inheritance tax is a tax that you choose to pay’. This is because you elect not to take any action while you are able to, meaning 40% of your taxed money makes its way to HMRC when you die.

 

It is important that the taxpayer takes actions at the appropriate time, including to start to plan early in life before it is too late. One size does not fit all, what can be appropriate for one may not be for others, so individual expert advice must be sought before taking any decision.

 

The decision rests on various elements, for example:

  • whether you are married
  • how big the properties portfolio is
  • how much income you require for your future financial needs
  • any existing health issues which may risk your life in the next seven years.

 

Here we discuss available legislative provisions which may be used to help you in deciding ‘what to do with the properties’ to save tax.

 

Spouse/civil partner exemption

If you are more likely to die before your spouse, keep hold of all the assets until death. Then you should leave your residual estate to the surviving spouse. Your surviving spouse acquires these properties at the market value; hence they can start making lifetime gifts to children without incurring any capital gain tax. Lifetime gifts work on the seven year survival clock.

 

If your spouse is in bad health, you can transfer your property portfolio as an outright gift to your spouse without triggering any settlement rules, capital gains, stamp duty and inheritance tax. Your spouse must leave all assets to you in the will to acquire at the market value upon death. HMRC manual TSEM4205

 

Incorporation relief

If your property portfolio is big enough to qualify as a ‘business’, consider incorporation relief.

 

TCGA92/S162 (1) refers to the transfer of a ‘business’ rather than a ‘trade’. ‘Business’ is not defined for the purposes of TCGA 1992 so the word must be given its normal meaning. It is not easy to draw the line, and each case must be judged on its own merit. In the following circumstances, relief can be available:

  • if the property is let on commercial terms and the activity carried out in connection with the letting is at a level typical of business, rather than a passive holding of investments. Elizabeth Moyne Ramsey v HMRC [2013] UKUT 266 
  • consideration is wholly or partly in shares (if partly, incorporation relief is available only on the proportion of the gain attributable to the share consideration). The assumption by the company of some or all debt outstanding, such as mortgages or loans to do with the letting business, is not taken to be cash consideration, so does not restrict the application of incorporation relief (statutory concession D32)
  • the business is transferred as a going concern.

 

Incorporation relief reduces the base cost of its shares for capital gains tax purposes with the amount of the gain relieved on incorporation, hence defers the capital gains tax liability until the company is sold. If the company shares are never sold, capital gains tax will be deferred indefinitely. 

 

Part 3 Schedule 15 FA2003 allows the company to claim stamp duty land transaction (SDLT) exemption if the property business is transferred by the partnership. In other cases, the company may be able to claim the multiple dwelling reliefs (MDR) on the residential properties incorporation.

 

This ACCA webinar addresses other teething problems of incorporation.

 

Trusts

One of the ways of ring-fencing assets is to transfer properties to a trust up to the value of inheritance tax nil rate band (IHTNRB) for the benefit of the children.

 

The settlor should be able to claim the holdover relief (s260 TCGA1992) as the transfer is a ‘chargeable transfer’ within the meaning of IHTA 1984. As a married couple, they can double the amount of the settled property by making these properties joint properties before transferring them into the trust. The IHT NRB allowance is revived every seven years, so the couple is able to put extra assets in the trust later if required.

 

A transfer into a trust is a gratuitous gift (so there is no chargeable consideration), therefore the transaction does not attract any stamp duty.

 

Trusts come with an on-going implication of filing returns, ten year anniversary payment and exit charges.

 

Sell and invest

The rental property market is getting harder and harder due to the changes in the legislation. A typical example would be where the spouses are within the basic rate band, and selling properties each year to claim the capital gains annual exemption (2019/20- £12,000 each) with any excess at 18% CGT. Though many other issues and taxes would also impact on any decision.

 

For an existing business, these funds can be invested to grow the size of your business and enhance the value of your estate. Business assets are eligible for ‘business asset property relief’ from IHT charge, subject to conditions. HMRC manual guidance can be found here.

 

 

Useful links

Watch this special ACCA webinar on IHT planning.

Doing business in a foreign country

Let’s explore the risks and benefits of investing or expanding outside of the UK.


Let’s explore the risks and benefits of investing or expanding outside of the UK.

 

When considering business options it is important to look at the options, opportunities and any constraints. This will inevitably include:

  • the type of entity (typically an agency, partnership/joint venture or a legal permanent establishment)
  • how profits and cash will be repatriated
  • legal requirements including IP protection
  • employment rights
  • tax and grant requirements
  • any opportunities. 

 

Below is a short overview of a few of the areas to consider for enterprises intending to start or expand a business in a foreign country. It is always advisable to thoroughly investigate a proposed business before investing any money. It is also important to keep plans small and manageable, and work within a tight budget before embarking on a grand scheme.

 

Let’s take a closer look at some matters to consider before deciding to do business abroad.

 

Cost and time of registering and running the business in foreign country

Incorporating a company might take longer and be more expensive than in the UK. Expert legal advice might be necessary to register the business and also to ensure that the business is legal and tax compliant at all times. It is also important to ensure that contracts are clearly defined before making an investment, because if the business becomes involved in a legal dispute it can take years to resolve.

 

Access to grants or tax breaks

A range of grants and incentives is available for new businesses in many countries, particularly in rural and deprived areas. Grants may include European Union subsidies, central government grants, regional development grants, redeployment grants, and grants from provincial authorities and local communities. Grants may include assistance to buy buildings and equipment, research and technological assistance, subsidies for job creation, low-interest loans and tax incentives. The access to grants and tax breaks might be an important factor in deciding in which country to invest.

 

Local law, government grants and Bribery Act

In seeking tenders for publicly funded contracts, governments often permit or require those tendering for the contract to offer, in addition to the principal tender, some kind of additional investment in the local economy or benefit to the local community. Such arrangements could in certain circumstances amount to a financial or other ‘advantage’ to a public official and be  subject to the Bribery Act. To avoid being caught by the Bribery Act the business has to ensure that relevant ‘written law’ permits or requires the official to be influenced by such arrangements.

 

Business may also wish to review how it protects its intellectual assets within the jurisdiction.

 

Employment, local law and employment taxes

The cost of hiring employees abroad must be taken into account before starting a business. In addition to salaries, the business may need to consider the cost of social security contributions, bonuses, paid annual leave and public holidays, sickness, and maternity leave, etc. Businesses that create jobs are usually welcomed, particularly in areas with high unemployment, but a business licence may be conditional on the employment of a number of local citizens. The business might need to take into account any local labour laws and employees' rights.

 

Company residency for tax purposes

A company is UK resident for tax purposes if it is registered in the UK or is registered offshore but has its central management and control exercised in the UK.

 

A UK resident company is subject to UK tax on its worldwide income and gains (unless otherwise provided in a particular double tax treaty) whilst a non-resident company is only liable on its UK source income.

 

There is no legislation defining central management and control and it has therefore been left to the courts to decide what it means. In De Beers Consolidated Mines Ltd v Howe (1906) it was decided that 'a company resides where its real business is carried on and this can be determined from where its central management and control abides'.

 

It must be noted that shareholders have the collective power to ensure the affairs of the company are conducted in accordance with their wishes, but the board of directors approve and implement decisions. HMRC Statement of Practice SP1/90 explains that case law attaches importance to the place where the company’s board of directors meet, but the location of central management and control is wholly a question of fact so there cannot be a single conclusive test.

 

Withholding, unilateral and underlying tax

The UK tax system allows unilateral tax relief under which the foreign tax suffered is allowed as a credit against the UK corporation tax liability on the foreign income.

 

The maximum relief that a company may deduct is limited to the UK tax on the foreign income.

 

To ensure that the tax is paid, many countries impose a tax charge on certain payments which is withheld at source. This is called withholding tax and unilateral relief is always available for this.

 

If the UK company controls at least 10% of the voting power of a foreign company – and if foreign tax was paid on the profits out of which a distribution of dividend has been made – then the underlying tax relief and unilateral relief is available.

 

Double taxation treaty

Double taxation treaties are design to protect against the risk of double taxation where the same income is taxable in two states. The UK has the largest network of treaties covering over 100 countries. The UK seeks to encourage and maintain an international consensus on cross-border economic activity and to promote international trade. Copies of double taxation conventions can be found on the HMRC website.

 

Transfer pricing issues

Transactions between connected parties should be carried out at an arm’s length. The arm's length principle is endorsed by the OECD and enjoys general international agreement.

 

But the business should not underestimate the complexities of applying the arm's length principle in practice. Because of the closeness of the relationship between the parties there can be genuine difficulties in determining what arm's length terms would have been – especially where it is not possible to find wholly comparable transactions between unconnected parties.

 

Conclusion

The idea of developing business outside the UK can seem like a natural progression in growing an existing business; others might make the global expansion a part of their business plan. Whatever the reason, it makes sense to fully explore the risks and benefits and the decision to invest or expand in a foreign country should not be taken lightly.

Charity SORP – related party disclosure

Summarising the requirements for disclosure of related party transactions.


Summarising the requirements for disclosure of related party transactions.

 

The charity SORP states that if ‘there have been no related party transactions in the reporting period that require disclosure, this SORP requires that this fact must be stated'.

 

Where a related party transaction is identified, a ‘reporting charity must not state that related party transactions were made at open market value or on terms equivalent to those that prevail in arm’s length transactions unless such terms can be substantiated'.

 

However, the following must be disclosed:

  • ‘the description of a relationship between the parties (including the interest of the related party or parties in the transaction)
  • a description of the transaction(s)
  • the amounts involved
  • outstanding balances with related parties at the reporting date and any provisions for doubtful debts
  • any amounts written off from such balances during the reporting period
  • the terms and conditions, including any security and the nature of the consideration to be provided in settlement; and details of any guarantees given or received
  • any other elements of the transactions which are necessary for the understanding of the accounts; and
  • …. the disclosure of the name(s) of the transacting related party or parties.’

 

It is also stated that the required disclosure ‘may be given in total for similar transactions and type of related party except where disclosure of an individual transaction or connected transactions:

  • is necessary for an understanding of the impact of the transactions on the accounts of the charity; or is required by law.’
Challenges of capital allowances

Establishing the primary function of an asset can be hugely important.


Establishing the primary function of an asset can be hugely important.

 

The distinction between plant and building is an important one from a tax perspective. When made incorrectly, it will have a significant tax cost in either lost or incorrectly claimed capital allowances.

 

The basic approach to arrive at a correct classification is to consider the primary and predominant function of the asset – is it mainly a place within which the business is carried out (building) or ‘a tool’ with which the business carries out its activities (plant)?

 

These questions should be asked in the context of the specific activity the business carries out, since the same asset may be plant in one business but premises in another.

 

The meaning of the word ‘plant’ can be very broad. Boundaries on its meaning are imposed by ss 22 and 23 of the Capital Allowances Act 2001 – a prescriptive piece of legislation assigning specific assets to lists (see below)  where capital allowances apply or are denied. Despite this, a correct classification of assets as plant or otherwise remains a challenging area, with HMRC favouring and often being criticised for limitative interpretations.

 

Assets with a storage function appear to be particularly challenging, as they often have the characteristics of both a plant (capital allowances apply) and a structure (capital allowances do not apply).

 

In Cheshire Cavity Storage 1 Ltd and EDF Energy (Gas Storage Hole House) Ltd (TC7301), the first tribunal dealt with the classification of a storage asset of that nature.

 

The companies involved have been in the business of operating gas storage facilities. Over the years the companies carried out multi-million pound preparation work of the underground gas storage reservoirs to make them suitable for gas storage, as well as built and installed a pipe network and machinery needed for the transport of gas for distribution. Whilst the cost of pipework, dehydration equipment and control mechanisms qualified for capital allowances as plant, the work done to the storage cavities themselves was a contentious matter.

 

The tribunal considered what the main business was – the companies were in the business of storing gas and not in the business of processing or distributing gas, despite processing and distribution being part of their business.

 

Factors such as location of the reservoir as part of land (installed underground) was not enough to consider it as premises. The fact that the cavities were central to the business was not a determining factor for either a plant or a building classification.

 

The matter central to FTT’s ruling was the main function of the gas cavities and the following observations were made in relation to function:

  • the gas storage cavities could not be described as pumps, although they were capable of performing this function as a substitute for pumps; this function, however, was incidental to manner of their construction, and not the reason they were constructed that way
  • the main function was to store gas and preserve it in a suitable condition and therefore more than just a tank. The judges took into account the degree to which the asset performed that function as being central to the argument. It was indicated that ‘a plant-like function does not necessarily make premises plant in circumstances where the premises also function as premises’. To decide which function was primary as opposed to secondary the judges took into account the purpose for which the gas cavities were created, as well as the degree to which they performed that function. Some past cases were drawn on:
    • the water tower in Margrett v The Lowestoft Water and Gas Company (1935) 19 TC 481 was used to store water, but its purpose was to increase pressure
    • the silo in the case of Schofield [1975] STC 353 was used to store grain, but had the purpose of discharging the grain at speed, for the business was one of distribution not storage.

 

In Cheshire Cavity Storage 1 Ltd and EDF Energy the purpose of the cavities was to store gas, so as to profit from price fluctuations.

 

The tribunal examined the legislation to see if any of any of the exemptions would apply, but found that they did not. Let’s take a closer look at why.

 

Primary function: storage, rather than extraction

Undertakings for extraction, production, processing or distribution of gas do qualify for capital allowances – this is one of the exemptions from the normal restrictions of capital allowances which s 22 imposes on structures (list B, item 7(b) at s 22). However, here, the ‘significant and predominant’ function of the cavities was the premises-like function of shelter and containment, rather than ‘extraction, production, processing or distribution of gas’.

 

Alteration of land for the purposes of installing plant or machinery

‘Alteration of land for the purposes of installing plant or machinery’ does qualify for capital allowances. However, here, whilst the land was being altered, this was to create a gas storage, rather than install it (to install something it has to already exist).  Again, this exemption did not apply.

 

S23, List C, only applies to specific assets listed there

The tribunal agreed with HMRC that list C which provides a complete list of assets, and should not be applied to other assets by functional analogy. It confirmed that it is not possible to argue that another asset is included in list C (and therefore capital allowances apply to it) because it has the same function as one that is specifically included in list C.

 

Here, the tribunal determined that the cavities were not tanks (which are included at item 28 of list C), therefore, it was not possible to argue that the cavities were exempted from statutory restriction by analogy to such tanks.

 

Final points

The case was borderline between qualifying or not for capital allowances. It will be interesting to see if the companies appeal and whether further light will be shed on this notoriously grey area.

 

Further guidance

  • s 22 CAA 2001 (List B) – structures and buildings not qualifying for capital allowances
  • s 23 CAA 2001 (List C) – plant qualifying for capital allowances, subject to restrictions

 

For changes to the capital allowances regime applying to industrial buildings and structures, view these previous In Practice articles:

 

 

Limiting liability to non-audit clients

A checklist of points to consider.


A checklist of points to consider.

 

Like many other providers of goods or services, professional accountancy firms often seek to limit their potential liability to their clients by including limitations or exclusions of liability in their engagement letters.

 

This is good risk management practice – as long as it is done carefully and effectively. Not everyone is aware of the extent to which they are able to restrict or exclude liability – and the danger is, get it wrong, and you may have any unreasonable contractual provisions struck out leaving you with unrestricted liability.

 

Moreover the recent Consumer Rights Act has also introduced new restrictions on ‘consumer’ contracts (ie to those other than with sophisticated commercial or corporate clients).

 

You should ensure your terms of engagement meet the requirements of this recent legislation. As such we recommend that you consider the important matters below to check whether your client engagement letters are working properly for you:

 

Terms to be fair and reasonable

A limitation or exclusion clause may be regarded as being unenforceable if it is not fair and reasonable. What is fair and reasonable will depend on all the circumstances. The Consumer Rights Act (s57) requires that you do not limit your liability below the value of your fees for a particular matter. This is a good benchmark to use as a minimum standard for all client engagements.

 

Exclusion of liability

Firms cannot seek to exclude liability entirely to the client. A more common approach is to limit a firm’s liability in the engagement letter to a fixed amount (often described as a ‘cap’ on liability). A cap set at a higher level is more likely to be enforceable and to protect the firm than a very low cap, and should be proportionate to the nature of the transaction and potential client loss (in some cases, the loss may well be capable of being higher than a multiple of the fees you charge).

 

Negotiating limitations or exclusions of liability

When negotiating limitations or exclusions, firms need to balance the importance of limiting liability against the risk of any limitation or exclusion being held to be unfair or unreasonable. In deciding what negotiating position to adopt, firms should take into account the nature of the client, the appointment and remit and the overall commercial risk analysis. In the case Dennard vs Price Waterhouse the court accepted that a relatively low limit of liability was reasonable given that the clients were experienced business people who were aware of their ability to shop around.

 

Cap(s) on liability

A cap on liability that has been discussed and negotiated is likely to be regarded as more reasonable than a non-negotiated cap. Where a cap on liability is accepted without discussion, it is not necessary for firms to try to insist upon negotiation by clients, but where possible, the client should be given sufficient time to consider the matter and/or take legal advice. It should be made clear whether the cap is an aggregate limit on liability, or applies separately to each breach or each claim. It may be appropriate for the cap to reflect the wording of any aggregation provision in the firm’s professional indemnity insurance.

 

Documenting negotiations

It is good practice to document any negotiations concerning engagement terms and to keep a record of them on the relevant file. In particular, it is worthwhile recording any concessions made by the firm, for example, any upward adjustment to a limitation amount that was initially proposed. In the recent case Halsall & others v Champion Consulting & others the fact that the engagement terms had been negotiated enabled the accountants to demonstrate that their limitation of liability was reasonable.

 

The engagement letter

Any limitation of liability agreed with the client should be set out clearly in the engagement letter. Where a firm’s engagement letter comprises the firm’s standard terms, together with a covering letter, it would be sensible to draw attention to the cap on liability by referring to it in the covering letter.

 

Drafting the limitation of liability clause

Firms should consider taking their own legal advice on the drafting of any clause in the engagement letter that purports to limit liability. The following points of principle may assist firms:

  • a limitation or exclusion clause should be drafted to capture any basis upon which a claim might be made, including breach of contract and negligence
  • if a formula is to be used for determining a limitation of liability, the basis for calculation should be made clear
  • avoid using a formula that may appear to be inherently arbitrary because, for example, it does not take account of the nature of the client or the engagement
  • avoid seeking to exclude or limit liability for loss that cannot legally be excluded or limited, such as liability arising from a firm’s fraud or from FCA regulated activity
  • set out terms containing limitations or exclusions in separate parts of the engagement letter so that any provisions that are subsequently considered to be unreasonable may be removed without affecting the enforceability or sense of the wording that remains
  • avoid using a wording that is broader than the law will allow. For example, the clause could specify that an exclusion or limitation will apply to the fullest extent that the law will permit and/or state that liability for a firm’s fraud is not excluded or limited
  • don’t forget that clarifying the identity of your client and the precise work that you are doing for the client can be every bit as important as the liability cap itself.

 

Exclude liability for certain types of loss

It may be appropriate to seek to exclude liability for certain types of loss altogether.

 

Common examples are:

  • restriction or exclusion of certain types of liability that are also excluded under the firm’s professional indemnity policy, provided this is not inconsistent with the duties for which the firm is being engaged
  • exclusion of liability for indirect or consequential loss and/or loss of profits. Some firms may feel that the possibility of indirect or consequential loss presents a risk that cannot be managed because it might be of an unforeseeable catastrophic nature. An exclusion of liability for such loss can be controversial and clear language is needed to exclude such losses
  • exclusion of liability arising from use of defective or deficient information provided by the client. Note that such an exclusion will be unlikely to be deemed fair or reasonable where the scope of work requires the accuracy or completeness of the information to be checked by the firm
  • exclusion of joint and several liabilities. These clauses are also referred to as ‘proportionate liability’, ‘net liability’ or ‘net contribution’ clauses. The objective of such a clause is to limit the firm’s liability to its proportionate share of the blame for loss incurred by the client, so that the firm is not liable for the loss and damage caused by others, such as other professional advisers or employees of the client, even where those others are unable to pay or are not a party to the dispute
  • exclusion of advice or services provided by third party advisers or specialists. The purpose of such a clause is to make it clear that your firm is not responsible for advice provided by others especially where you may have introduced your clients for specialist or a specific piece of advice. This can be particularly important in relation to tax scheme advice.

 

This article has been prepared for Lockton by Ian Peacock, Partner Clyde & Co LLP

 

For further information

ACCA has a suite of template engagement letters and factsheets which are available to members. More information can be found here.  

 

To discuss your own client engagement processes or another risk related matter in more detail, contact Catherine Davis - ACCA Relationship Manager on 0117 906 5057 or ACCAaccountants@uk.lockton.com

 

www.locktonaccountants.co.uk

 

Government consultation on the UK’s immigration system

Help shape the government’s future plans for immigration.


Help shape the government’s future plans for immigration.

 

Earlier this year the government commissioned the Migration Advisory Committee (MAC) to advise on the future immigration system including salary thresholds and skilled worker status in the UK.

 

The MAC’s feedback to government will influence the salary threshold that employers will need to meet to hire international workers and the occupations that are highlighted as ‘skilled’ and will receive some exceptions. As part of this the government is considering moving to a form of the Australian ‘points based system’ which prioritises applicants for jobs based on their characteristics, such as education, language skills and work experience.

 

ACCA will also be responding on behalf of members and our employer networks to ensure the sector is consulted throughout this process and is able to make representations for manageable salary thresholds and points based priorities.

 

You can also respond directly by completing this survey which is mostly multiple choice answers, and should take around 4-5 minutes to complete. Your responses will remain anonymous and will be submitted in aggregate with others.

 

In order to report back in time to meet the government’s EU exit timelines, the MAC has set a short turnaround for this evidence. Therefore, where possible responses should be returned by 31 October.

 

MTD – VAT return letters wrong

HMRC is aware that some 'VAT notice of assessment of tax' letters were recently issued in error.


HMRC is aware that some 'VAT notice of assessment of tax' letters recently sent to Making Tax Digital customers were issued in error.

 

If the business has already submitted the VAT return in question and paid the tax due/received its repayment, it can ignore this letter.

 

HMRC has said: ‘Customers can check their position using their “HMRC online services” and agents can check this on their behalf by using the “Manage your client’s details” service. We apologise for any inconvenience this may have caused and are in the process of adding this to our live service issue page.’

Content must have purpose

Accountancy firms need to avoid producing content for the sake of it – always ask, what is this for?


Accountancy firms need to avoid producing content for the sake of it – always ask, what is this for?

 

Watch this short PracticeWeb video on why 'content for accountants must have a purpose' – either before or after reading this article – which was recorded especially for ACCA members and complements this article.

 

Producing content – articles, blog posts, video, eBooks, or whatever – represents a significant investment of time, money and energy. If it lacks purpose, it’s just another distraction from core business.

 

And, worse: thin, valueless, half-hearted content can seriously damage your firm’s reputation and prospects in the long run.

 

We’ve all encountered those dusty, neglected company blogs, with a handful of ancient posts that lack depth, relevance or credibility. It’s fluff. Mere ballast.

 

Often, this type of blog is the result of expired enthusiasm for what was, in around 2008, the internet’s hottest trend. Blogs were simple to set up, easy to update without technical expertise and felt fun and spontaneous. They were a refreshing (and refreshingly cheap) alternative to traditional paid advertising or marketing.

 

When corporate blogs worked – when team members or managers turned out to have a knack for blogging – they did indeed bring websites to life.

They boosted search engine rankings, too, and gave marketing managers something to post about on social media other than the company sports day or quiz night.

 

But too often, they didn’t work. Knocking out a quick blog post once a week seemed as if it ought to be quick and easy, but proved otherwise. It’s easy for keeping the blog up to date to feel like a nice-to-have when there’s billable client work that needs doing right now.

 

So there they sit, those ghost blogs, silently reproaching the firms that set them up, and suggesting to passing trade that the practice might have gone out of business or run out of steam.

 

But blogging isn’t dead, despite persistent rumour. It’s just that the idea of blogging as a cheap, easy answer to the challenge of corporate communications is over. They’re one option among many and require commitment and skill.

 

What are the other options? Podcasts, eBooks, interactive games, infographics, apps, social media, and more.

 

Even video is no longer the sole preserve of deep-pocketed multinationals. Most of us carry around in our pockets, in the form of our smartphones, a camera and editing suite that would have knocked Alfred Hitchcock’s socks off.

 

Sure, the results might not always be aesthetically perfect but, in the age of Instagram Stories and Facebook Live, consumers are not only increasingly comfortable with informal video but actually read it as more authentic.

 

For those more comfortable expressing themselves verbally than in writing, this is a blessing. After all, even if you need two takes, a five-minute video might take only fifteen minutes to put together.

 

It’s important that the purposes you want your content to serve – your content objectives – dictate its form.

 

Most accountancy firms have generating leads as their primary goal which, in practice, probably means getting people to visit your website. In that context, on-page text – blog posts and web pages – still comes out on top.

 

For the purposes of search engine optimisation (SEO), words are what count: your content needs to reflect the words and phrases that users are typing into Google and provide what they expect and need when they click through.

 

If your site is already performing well in terms of SEO, though, you might want your content to serve a different purpose. For example, expressing a brand personality that sets you apart from the competition.

 

What do you want your content to reveal about you and your practice?

(And please don’t say ‘that we’re professional but also friendly, and deliver a tailored service’ – that’s pretty much a given and has also become an awful cliche.)

 

Think about how your content can demonstrate, say, your commitment to the region where you operate, or that you’re experts in a particular industry, or fun to work with. In short, whatever sets you apart from your competitors.

 

Another common basis for content objectives is engagement with existing clients. In this case, you might want each item – blog posts, videos, whatever – to provide an opportunity to message those clients, to reinforce the wisdom of their decision to choose your firm, and encourage them to get in touch about additional services.

 

Ultimately, a focus on the purpose of your content is about return on investment. Defining content objectives, and producing only content that works hard for your firm, is the best way to achieve that.

NEWS
WATCH: Our latest top tip from successful accountants
 

Steve Collings FCCA explains how his practice embeds itself in its local community and the benefits this brings.


Steve Collings FCCA, director at LWA Ltd, explains how his practice embeds itself in its local community (including a partnership with Warrington Wolves rugby league club) and the benefits this brings.

 

If you missed it last month, also take a look at our article which provides excellent advice on how you can demonstrate the value of being a qualified professional accountant.

 

Steve Collings - top tip for October

 

 

 

 

 

My miraculous journey with ACCA
 

Award-winning Kamlesh Rajput shares his remarkable story.


Award-winning Kamlesh Rajput shares his remarkable story.

 

Wednesday 25 September was a memorable night, when Sterling Finance won the Small Firm Graduate and Non-Graduate Programme of The Year category at the British Accountancy Awards 2019.

 

The feeling was incredible and the emotions overwhelming, especially when one of the judges, Michael Kreeft, CFO of BMW UK, told us that ‘Sterling Finance deserves the award for its remarkable focus on employee education, training and development'.

 

It was truly a dream come true for a small ACCA accounting practitioner from Ashton under Lyne in Tameside, Greater Manchester to receive national recognition. It was also a surprise for my son Adarsh – also an ACCA member – who joined me on stage to receive the award.

 

ACCA has taken me on a life-changing journey. I was born in Baroda city, in India’s Gujarat state, to a poor family: my father was an auto rickshaw (‘tuk-tuk’) driver. I completed my master’s degree by streetlight, hoping to one day have my own desk, chair and table lamp. In 1986, I migrated to the UK to marry my fiancée Rashmi with my head full of fantasies about career and life. Despite my master’s degree, I couldn't get a proper job to earn enough to support my family. I struggled for 10 years to get into a finance and accounting career. Like any migrant to the UK, I dreamt about a better life and a good career. After 10 years' hard work, my dream and fantasies were shattered. There was no way forward.

 

In 1997, my boss, Dr Ian Kennedy of WM Engineering Limited – a visionary individual who believed in education – suggested that I should study for the ACCA qualification. This was the only door open for study as other professional qualifications had several barriers. The course, subjects and style of examination were very robust and undoubtedly demanding; I failed a few times, learning that there is no shortcut to the ACCA qualification. I had to learn, live, preach and practise the ethics and values of being a true accountant with confidence, competence and care.

 

Dr Kennedy paid my fees and I worked like mad to prove my worth when the only tool I had was the knowledge I gained during my ACCA course. I joined the company as an administrator and by the time I gained the ACCA qualification, I was CFO of this multinational organisation with operations in the UK, US, Germany, Australia and the Middle East. This additional recognition, respect and reward were only possible after gaining the ACCA qualification.

 

As a board member, I became not only an accountant but also the business and strategic adviser to the organisation, and my CPD kept my knowledge up-to-date and razor sharp. My ACCA status allowed me to express opinions with confidence and objectivity in board meetings, especially when I had to give different views on business, strategic and operational matters. I felt like the boy from the film Slumdog Millionaire, becoming a true professional with the ability to impact business minds.

 

In 2002 I started my practice, Sterling Finance (UK). My vision is based on ACCA’s ethical values, advising business owners to pay tax fairly but save tax legally by efficient business operations. I believe that tax savings are not a privilege of elite and rich individuals. Every small business can save tax legally through good record-keeping and being honest with their accountant. In my experience, small businesses often become victim of non-qualified accountants because they select services based on price, not values.

 

To me, ACCA is more than a qualification. It is a process and a belief for making a difference and impact on the entrepreneurial journey. My ACCA qualification cost was a gift from my previous employer and it is my duty to pass this on to my employees. For many years we have been an ACCA Approved Employer at Gold level. We inspire our employees to practise and preach ACCA values. ACCA’s values have inspired me to encourage all my staff to study for the qualification, and we provide full support for their personal and professional development. We invest in emotional wellbeing and care for our staff’s mental health, engaging external business and personal coaches as consultants, and in 2018, Sterling Finance received a Pride of Tameside award for investing in apprentices. Yes, our training budget is disproportionately high and may not make commercial sense but we believe that our employees are our assets and our dream is to grow future partners for the firm.

 

Thanks to my ACCA qualification, I have also become an external examiner at the universities of Salford and Wales, and a governor at Ashton Sixth Form College, and in 2005 served as president of ACCA Manchester’s Members’ Panel. I am also a non-executive director of a start-up fintech company, which is now one of the fastest growing software firms in the UK.

 

I truly believe that, as an accountant, I am privileged to earn the trust of my clients, who share their confidential information and seek objective advice in order to make an impact on their business and personal financial position.

 

When I was 10 years old I was watching a Bollywood movie and saw a Mercedes car. I dreamt that one day I could have this car. I was 40 years old when I passed my ACCA qualification and Dr Kennedy gave me my first brand-new Mercedes. ‘Thank you’ is insufficient to express my gratitude to ACCA for taking me on this miraculous journey.

 

Kamlesh Rajput FCCA, Sterling Finance

 

 

Adarsh and Kamlesh Rajput with comedian Sean Lock, who hosted the event

Free technical webinars for practitioners

Register for any of our free technical webinars for practitioners in a specially-expanded autumn programme.


ACCA UK is currently running its autumn series of free technical webinars for practitioners through to November 2019. This expanded series features seven webinars:

 

What’s new in FRS 102? Available on demand

Speaker: Steve Collings, audit and technical partner at Leavitt Walmsley Associates Ltd

 

VAT & duties Available on demand

Speaker: Gwen Ryder, independent consultant

 

The 20 most common errors when dealing with VAT and property Available on demand

Speaker: Robert Warne, Partner and Head of VAT at Crowe UK LLP

 

Stamp Duty Land Tax (SDLT) Available on demand

Speakers: Rachel Pearce (MHA Carpenter Box) and Dominic Carter (MHA Larking Gowen)

 

Topical issues with residential property portfolios Available on demand

Speaker: Dean Wootten, Wootten Consultants Limited

 

Where are we with Making Tax Digital? 30 October (12:30)

Speaker: Dean Wootten, Wootten Consultants Limited

 

The extension of IR35 to the private sector 29 November (12:30)

Speaker: Louise Dunford, LD Consultancy Limited

 

 

Register now for any or all of these sessions

 

If you are unable to join us for the live webinars then you will be able to watch them on demand at your convenience.

 

Each webinar will count for one unit of verifiable CPD where it is relevant to the work that you do.

 

 

You may also be interested in the series of practitioner webinars we held earlier this year which are now available on demand:

  • Key changes to entrepreneur’s relief
  • Making Tax Digital
  • Audits of charities and independent examinations update
  • Risk and mitigation for the accountant – some key lessons from 2018
  • Inheritance tax planning.

 

Register now for any or all of these earlier webinars.

 

Practising Certificate 2020 renewals – important information

A reminder to ensure the details ACCA holds about you online are up-to-date.


A reminder to ensure the details ACCA holds about you online are up-to-date.

 

Simply login to your myACCA account now to ensure we hold the correct email address and other details for you, as well as review your communication preferences.

 

Practising certificate (PC) holders will receive an email next month inviting you to renew your practising certificate, and/or any firm’s certificates held, through your myACCA account by Friday 29 November 2019. 

 

ACCA is committed to making renewals as efficient as possible and will no longer be issuing paper renewal forms or hard copy certificates. All practising certificates will now be issued electronically and sent to you by email. 

 

HMRC annual report and accounts: reader feedback

Take a short survey to help HMRC improve the quality of information it provides.


Take a short survey to help HMRC improve the quality of information it provides.

 

HMRC’s Annual Report and Accounts 2018-19 was published on 18 July 2019.

 

HMRC wants to ensure that, as a publication, the report continues to serve its purpose effectively – providing customers and stakeholders with the information they need and expect, and presenting it in the most useful and accessible way.

 

To help do this, HMRC is running a short online ready survey, which is open until Friday 1 November 2019.

 

Please take a few minutes to complete the survey so HMRC can better understand:

  • who is or is not reading our annual report, and why
  • how useful readers find it
  • what readers like and dislike about the report’s content and format
  • how readers would prefer to receive this information in future.

 

HMRC will use this insight to inform plans for the content and delivery of future annual reports.

Accountants invited to receive free digital tech training and advice

Northumbria University and Sage are welcoming accountants to take part in free digital skills training.


Northumbria University and Sage are welcoming accountants to take part in a free training and advice course in digital skills. The training will arm accountants with better knowledge of digital technology that can drive SME productivity, and in turn economic growth.

 

There remains a significant challenge in the UK economy to help more SMEs embrace the digital tools needed for them to be successful. Sage research shows that UK SMEs lost 5.6% of their business time to admin, a productivity loss of £40bn in the last 12 months alone, an increase of 0.9% compared to the year before.

 

SMEs are still burdened by paper-based admin and currently spend an average of 120 days a year on admin. However 50% of UK businesses currently use, or intend to use technology for admin functions by 2022, meaning greater commitment is required to remove the obstacles that prevent companies from accessing digital tools and skills. As a trusted advisor to SMEs, accountants are perfectly placed to help drive SME digital adoption, and this government-backed project will be a trial to demonstrate this unique relationship.

 

Academics from Northumbria’s Newcastle Business School will work from October 2019 with experts at Sage over the next 12 months to undertake the trial, which will include 400 accountants and their SME clients across England. The training which will be delivered face-to-face in several city locations for four hours will arm accountants with better digital skills in app advisory, business data analytics, CRM and include free materials to share with their clients.

 

Claire Bennison, Head of ACCA UK concludes: ‘We’re pleased to be partnering with Northumbria University and Sage as the end results should offer valuable insights on how SMEs can be better supported for national and international success. Accountants are a crucial business partner to SMEs, helping them to grow their business and better understand the environment in which they operate, which is increasingly reliant on digital technologies. This project is surely a win-win for all involved.’

 

Dr Matt Sutherland, Senior Lecturer at Northumbria’s Newcastle Business School, believes receiving the funding is significant. He said: ‘Together with Sage we were one of only six applications from over 170 to be successful. It reflects the quality of the University’s research and the leading position Sage holds in the accountancy software market – and it represents an exciting opportunity for accountants and accountancy firms to work with us on a high-profile project. Deploying digital technologies can boost productivity considerably, but many SMEs are failing to harness the potential and are being held back. As trusted advisors to SMEs, accountants could be powerful advocators for digitisation, and through this trial and evaluation we will be able to demonstrate just how effective this could be. ‘Newcastle Business School already has record of successful collaboration with Sage, and we are confident this latest project will open up further opportunities to deepen the partnership even further.’

 

Sabby Gill, MD for Sage UK & Ireland said: ‘As small businesses scale up, hire more staff and contribute further to the economy, even greater value can be unlocked by digitising business admin. The technology that currently has the highest productivity and value-add to businesses is now increasingly cloud and service based. As the role of the accountant continues to expand, we envisage the training will help accountants strengthen their counsel to clients and demonstrate the opportunities that digital technologies bring.’

 

This is a limited opportunity and is on a first come first served basis. All accountants must include five SME clients as part of the trial.

 

You can find out more information on the project and register at the Northumbria University website

 

The benefits of entering awards – and how to create a strong entry

Start planning your efforts for recognition in 2020 – now!


Start planning your efforts for recognition in 2020 – now!

 

In recent years, we have seen our members and their firms carry off a number of awards. There’s no greater feeling than being recognised by your peers – the benefits include a boost to employee morale and recognition amongst your clients.

 

Our guidance will help individuals and firms create a strong award entry and covers:

  • the attributes of a good awards entry
  • how to maximise the impact of entering an award
  • different awards firms may wish to enter
  • how to counter any ‘naysayers’ in your firm
  • explanations, tips from award judges and common mistakes to avoid.

 

Our guidance also allows you to help clients who wish to enter awards.

 

When you are considering your firm’s priorities for 2020, there’s no shortage of awards which could recognise the excellence of your firm, or that of your clients, including the following:

  • Accounting Excellence Awards
  • British Accountancy Awards
  • Women in Accountancy and Finance Awards
  • Barclays Entrepreneurs’ Awards
  • British Small Business Awards
  • CICM British Credit Awards
  • IRIS Customer Awards
  • Xero Awards
  • Queen's Awards (covering innovation, international trade, sustainable development and promoting opportunity through social mobility).

Whichever award(s) you enter, we wish you the very best of luck!

 

If you are a winner, we'd love to feature you in a future issue, as we have with Kamlesh Rajput FCCA this month.