Technical and Insight
SRA accounts rules – significant changes on the way

Plan ahead to ensure you are not caught out by changes to solicitors’ accounts reports in November.


Plan ahead to ensure you are not caught out by changes to solicitors’ accounts reports in November.

 

The SRA guidance is effective from 25 November and the changes are significant.

 

The accountants’ report guidance Planning for and completing an accountant's report, as well as providing guidance to assist reporting accountants prepare for, and complete, the accountants’ reports as required by the SRA Accounts Rules, highlights the statutory obligation on reporting accountants to report matters to SRA.

 

The immediate reporting obligation is unchanged, which is that reporting accountants are under a statutory duty as set out in section 34 of the Solicitors Act 1974 and section 5, schedule 2 of the Administration of Justice Act 1985, to immediately report to SRA:

  • any evidence of theft or fraud in relation to money held by a solicitor or a law firm for a client or any other person or in a client account or an account operated by the solicitor 
  • if they have concerns about whether a solicitor or a law firm is fit and proper to hold money for clients or third parties or operate any such accounts.

 

The SRA is also clear that it expects reporting accountants to report any termination of the accountant's appointment where this is based on the intention to issue a qualified accountant's report.

 

These obligations will be considered later when we look at the solicitors who move in and out of the exemption criteria.

 

The exemption from obtaining an accountant’s report has been extended and the SRA ‘recommend both law firms and their reporting accountants have read it [the Planning for and completing an accountant's report guidance] carefully prior to commencing their programme of work.’

 

The exemption from obtaining an accountant’s report during an accounting period 12.2(b) states that where ‘firms have met the following criteria, they may be exempted from the requirement to obtain an accountant's report: 

  1. small amounts of client money are held (an average of less than or equal to £10,000 as well as a maximum of less than or equal to £250,000) at each reconciliation date; or,
  2. the holding or receipt of money only from the Legal Aid Agency.’

 

The SRA guidance Accountant’s report and the exemption to obtain one contains the following examples of how the exemption works:

 

Example 1

The accounting year for Firm A runs from 1 April 2019 to 31 March 2020. The firm undertakes reconciliations at the end of each calendar month:

 

Reconciliation number

Reconciliation date

Client money balance

 (including all applicable accounts)

1

30/04/2019

£11,214

2

31/05/2019

£7,487

3

30/06/2019

£9,107

4

31/07/2019

£9,255

5

31/08/2019

£11,394

6

30/09/2019

£9,947

7

31/10/2019

£11,959

8

30/11/2019

£10,053

9

31/12/2019

£8,255

10

31/01/2020

£4,681

11

29/02/2020

£11,105

12

31/03/2020

£7,988

 

Average balance

Add together the individual reconciliation totals. Total equals £112,445. Divide total by number of reconciliations to obtain average balance. Average equals £112,445 / 12 = £9,370.

 

Maximum balance

Establish the highest balance from all reconciliations taken. The highest balance from the 12 reconciliations = £11,959.

 

Test against exemption criteria

Is average balance below £10,000? Yes, average balance = £9,370. Is maximum balance below £250,000? Yes, maximum balance = £11,959.

As both criteria are met the firm is exempt from submitting an accountant's report.

 

Example 2

The accounting year for Firm B runs from 1 January 2019 to 31 December 2019. The firm undertakes reconciliations once every four weeks (28 days):

 

Reconciliation number

Reconciliation date

Client money balance

(including all applicable accounts)

1

01/01/2019

£23,172

2

29/01/2019

£124,891

3

26/02/2019

£18,184

4

26/03/2019

£10,634

5

23/04/2019

£2,686

6

21/05/2019

£2,209

7

18/06/2019

£654

8

16/07/2019

£19,277

9

13/08/2019

£7,260

10

10/09/2019

£12,016

11

08/10/2019

£21,391

12

05/11/2019

£4,121

13

03/12/2019

£7,107

14

31/12/2019

£8,347

 

Average balance

Add together the individual reconciliation totals. Total equals £261,949. Divide total by number of reconciliations to obtain average balance. Average equals £261,949 / 14 = £18,711.

 

Maximum balance

Establish the highest balance from all reconciliations taken. The highest balance from the 14 reconciliations = £124,891.

 

Test against exemption criteria

Is average balance below £10,000? No, average balance = £18,711. Is maximum balance below £250,000? Yes, maximum balance = £124,891. 

 

As both criteria have not been met, the exemption does not apply, and an accountant's report must be obtained.

 

Where accountants’ reports are still required, the guidance Planning for and completing an accountant's report continues to state that ‘the reporting accountant need only undertake checks which they feel are proportionate and targeted to the size of firm and nature of the work the firm undertakes’. Firms should look at the guidance as it contains examples of certain checks which they may wish to undertake when producing the accountant’s report. These do require tailoring but provide a very useful work programme. The section is called Key risk areas for checking by the reporting accountants and key risk areas are identified. Under each risk there are sections on general guidance, examples of areas of focus and guidance on risk areas and considerations.

 

The following is taken from the client money in office account risk section and states:

 

Examples of areas of focus (work should be proportionate, not all of these will always be relevant. Accountants should
use their judgement in performing suitable work to check compliance with the Rules)

  • Testing of business account receipts (to assess if receipts include client money).
  • Testing whether client money identified in the business account was transferred in accordance with the rules. 
  • Testing whether client money received was banked in accordance with the rules. 
  • Testing business account to client account transfers to identify number and reasons for such transfers.
  • Testing client bank reconciliation (for example, to assess if reconciling items led to a delay in the banking of client money or to identify unallocated round sum transfers) 
  • Testing business bank reconciliations (for example, to assess if reconciling items led to banking of client money in the business account or to identify unallocated round sum transfers)

 

As highlighted earlier, reporting accountants have statutory duties. The exemption requirements would need to be considered by the solicitor and may or may not be  discussed with the accountant or reporting accountant. The engagement will need to be considered by both the accountant or reporting accountant and solicitor.

 

Considerations will include:

  • the reporting accountant evaluating whether they would wish to remain as a reporting accountant (even where no accountant’s report is due)
  • the solicitor considering appointment of a reporting accountant where they fall in and out of the exemption requirements
  • whether the solicitor requires any assistance on the taking of the exemption
  • the reporting timeframe, as the exemption in theory will only be known after the year end, with the requirement to report within six months of the year end.

You can request a revised reporting accountant's engagement letter and suggested exemption evaluation letter by emailing supportingpractitioners@accaglobal.com with the subject line ‘SRA engagement letter’.

Don’t delay tax credit renewals

If you missed the tax credit renewal deadline make your claim now.


If you missed the tax credit renewal deadline make your claim now.

 

On 1 July 2019 HMRC launched an advertising campaign reminding customers to renew their tax credits by the deadline, which was 31 July. Guidance on how to renew can be found here.

 

The government is gradually introducing Universal Credit (UC), a new benefit which will eventually replace tax credits. It is expected that most existing tax credits claimants will be moved to UC between November 2020 and December 2023. This will follow a pilot involving up to 10,000 people who will be moved between July 2019 and July 2020.

 

If an individual has claimed tax credits and UC during the same tax year, then HMRC will stop their tax credit award with effect from the day before their UC entitlement starts.

 

There are two tax credits that have different qualifying conditions but which can be claimed on the same form.

To be entitled to tax credits, a claim must be made. Without a claim, there can be no entitlement.

 

Working tax credit (WTC) is paid to people working on a low income and it is based on the hours of paid work.  Unpaid work does not count for WTC. To qualify to claim WTC an individual must be aged 16 or over, in qualifying remunerative work (employed or self-employed) and usually living in the UK.

 

The claimant must work a minimum number of hours a week.

 

Do remember that what counts as work can be:

 

Child tax credit (CTC) supports families with children. It is paid in addition to child benefit and the person does not have to be working to be entitled to it.

 

Income thresholds are an important part of the tax credits calculation because if a claimant’s income is above the relevant threshold their tax credits will start to be reduced (referred to as ‘tapering’).

 

WTC only or WTC and CTC claims

The income threshold for WTC only, and combined WTC and CTC claims, is £6,420. One area of confusion is around claims for both WTC and CTC. Claimants often think that the CTC only threshold applies to them because they are not getting any WTC. However, a distinction must be made between a claimant entitled to WTC who doesn’t actually receive any because their income is too high, versus a claimant who doesn’t have any entitlement to WTC. Where a person’s circumstances are such that they qualify for the basic element of WTC, that element along with any other elements of WTC that their circumstances dictate should be included in the calculation and the £6,420 threshold used.

 

Elements of WTC

WTC is made up of a number of separate components:  

  • basic element - up to £1,960
  • lone parent/couple - up to £2,010
  • 30 hour element - up to £810
  • disability element - up to £3,165
  • severe disability element - up to £1,365 a year usually on top of the disability payment
  • child element (for children born on or after 6 April 2017, this may be limited to two children unless an exception applies) - up to £122.50 (one child)  a week or £210 (two or more children) a week.

 

Tax credits rates for April 2019 can be found here

 

HMRC guidance on 'How do the tax credits work?' can be found here

WTC only

Every claim for WTC will include at least the basic element of WTC (up to £1,960 for 2017/18 and 2018/19). In the case of joint claims, only one basic element is awarded.

If a person is only entitled to WTC and not entitled to any other elements, then there will be a reduction on WTC if their income is above the £6,420 threshold.

 

This means that if the person’s income is less than £6,420, he/she will receive the maximum amount of tax credits.

Elements of CTC

CTC is made up of the following components: 

  • family element (one per family) - £545
  • child element (paid for each child) - £2,690
  • disabled child element (paid in addition to the child element) - £2,950
  • severely disabled child element (paid in addition to the child and disability elements) - £1,190.

 

CTC only claims

Where a claimant (or their partner) has no entitlement to the basic element of WTC, but they are responsible for a child or qualifying young person, the CTC only threshold should be used. For 2019/20 this is £16,105. Above the £16,105 threshold, the maximum tax credits award will be reduced by 41p for every £1 of income.

 

Where a claim includes both WTC and CTC, the WTC is tapered first, followed by the childcare element of WTC, and finally the CTC.

 

Each calculation of tax credits involves a series of steps which, in brief, are:

  1. Determine the number of relevant periods. This is a period during the award period in which the rate of tax credit a person is entitled to remains the same. A relevant period ends with a change of circumstances which changes the amount of tax credits they are entitled to.
  2. Calculate maximum entitlement for each relevant period by adding together the WTC and CTC elements that are applicable to the claimant’s circumstances.
  3. Apportion the income figure and the relevant threshold for each relevant period on a daily basis.
  4. Calculate the ‘excess income’ figure (the amount that the person’s income exceeds the threshold for that relevant period).
  5. Calculate the ‘reduction due to income’ by multiplying the ‘excess income’ figure by the first taper percentage (currently 41%).
  6. Take the Step 5 figure away from the figure in Step 2 to find the tax credits for the relevant period.
  7. Add the amount due for each relevant period to find the entitlement for the tax year.
Finance Bill – help us to help you

How ACCA is representing practitioners with regards to HMRC's off-payroll working/IR35 proposals.


Find out the steps ACCA is taking to represent practitioners with regards to HMRC's off-payroll working/IR35 proposals.

 

The Finance Bill arrived in late July and as expected contained a number of previously announced policies.

 

As you will be aware ACCA is concerned about the off-payroll working/IR35 proposals and HMRC having its preferred creditor status reintroduced. 

 

We have previously and continue to survey members who both hire and act as off-payroll workers to find out how they would change their practices with the off-payroll working new rules.

 

Notably 96% of contractors said they may have to respond by increasing their fees and those engaging them said there would be a ‘reduction in flexibility for the client’ wanting to invest in short-term projects. The IR35 rule changes will require the private sector to implement public sector rules in relation to the contract employment market.

 

ACCA believes a sound UK tax system requires certainty, simplicity and stability. The off-payroll working proposals do not provide these qualities, and the change comes at the worst possible time for the UK.

 

We stated that:

 

‘It provides uncertainty, as employers will effectively be unable to budget or plan for their future actions. The change will result in many large companies having to rewrite complex payroll systems to incorporate the new legislation, and is likely to significantly impact the IT sector and extend further to the multinational companies engaging in their services.

 

‘Workers potentially affected form the bedrock of sound financial, business management, technological and cyber security advice that enables the production of world leading goods and services that set the UK ahead.

 

‘We urge the government to delay introduction of IR35 changes until 2021, to allow a full appraisal of the proposed rules and consider the best way forward.’

 

Also contained within the Bill is a proposal that HMRC preferential creditor status is reinstated. Protecting your taxes in insolvency (see the April issue of Accounting and Business) set out the government’s intention to make HMRC a secondary preferential creditor for certain tax debts paid by employees and customers on the insolvency of a business. It includes deductions made under PAYE (including student loan repayments), NIC (employee contributions only), CIS and VAT that have been deducted and are due to HMRC at the commencement of the insolvency.

 

HMRC has been clear that for ‘all formal insolvencies that commence after 6 April 2020, HMRC will move up the creditor hierarchy for the distribution of assets’ and ‘will become a secondary preferential creditor for the specific taxes paid to a business by employees and customers, and any interest or penalties arising from such debts’ in England, Wales and Scotland. This ‘means HMRC will move ahead of holders of floating charges (mainly financial institutions) and other non-preferential unsecured creditors, but remain below holders of fixed charges (also primarily financial institutions) and higher-ranking preferential creditors.’

 

The impact on SMEs could be considerable.

 

We'd still love to get your views - take our survey now

 

 

The recruitment conundrum

Recruiting new staff can be a real challenge; these top tips could help you.


Recruiting new staff can be a real challenge; these top tips could help you.

 

We have consistently heard from our practices that recruitment and retention are the greatest barriers to growing a practice. Some have had some success in this area and this article shares some tips that may help you. A follow up article will look at tips for retaining those great team members that you’ve worked so hard to recruit.

 

Have a clear marketing message

Nikki and Nigel Adams set up Ad Valorem in 2001. In Nikki’s experience, many practices do not treat themselves as businesses – yet recruitment is a vital part of any business and you need the right people. Absolutely essential for good recruitment is a clear message for potential candidates on where the firm is going.

 

‘Ad Valorem was not getting the right mix of talent that we needed initially. We had to take the time to figure out who we were as a firm. Once we had that clear message developed and communicated to our recruitment consultant, we started getting the right candidates in front of us. Our consultant now knows exactly the sort of person Ad Valorem wants to recruit and contacts me whenever he has identified “an Ad Valorem person” for us to consider.’

 

Profiling can then identify whether that candidate is suitable and also identify the right role in the practice for the candidate. There are many profile systems out there – Nikki uses an online system called Truity which costs £15 per report. The report gives a reasonable idea of the type of work a person will enjoy so you can place the right people in the parts of the business where they will thrive.

 

Alastair Barlow – co-founder of ACCA practice flinder – agrees that a clear marketing message is crucial and has taken their marketing message onto social media. flinder has a dedicated Instagram account and YouTube playlists showcasing ‘life at flinder’ and their unique culture; with MTV Cribs style videos of the office and their annual ski trip, it’s all strategically focused to recruit the right candidates that fit with their values and culture. It helps potential candidates to get a feel for the vibe of the practice to see if it would be a good fit for them.

 

Alastair commented: ‘While recruitment will always be a challenge in the profession, especially when looking to grow at pace, we’ve found opening our doors and showcasing our culture has been transformative; it’s self-selecting before candidates even come on our radar and those that do tend to be the right fit. Overall, this marketing-led approach has really enabled us to continue to grow at pace.’

 

The application process starts with potential candidates sending in a 90-second video of themselves; if potential candidates are put off by that then flinder is unlikely to be the right fit for them.

 

‘At flinder, our culture is super important to us; we live and breathe our values through everything we do. It comes as no surprise that we also assess candidates against our values during the recruitment process to ensure we have a good fit. After the 90 second video clip, the first interview is very much a values and cultural fit interview – clearly technical skills are very important, but as we coach and develop our team in our very specific flinder ways of working cultural fit is actually the greater and more important hurdle and the harder one to develop. We seek evidence through questions focused on each of our values.’

 

As with Ad Valorem, flinder works with a particular recruitment consultant who understands what flinder is about and whether a potential candidate is likely to be suitable well before they see them; this is clearly working for them as they have grown from a team of four to 17 in under 10 months.

 

Their digital marketing associate Jamie Whiffen sums it up: ‘Marketing is simply attracting those you want and repelling those you don’t want. A common mistake is to think it’s better if you cast a wider net – it’s not. Niche marketing is the key.’

 

Unique selling points

Your marketing message should include your unique selling points (USPs). A common USP that smaller practices use relates to the training that a potential recruit would get at the practice.

 

ACCA member Kerry Hopper worked in a practice in the south west of England and recalls how they used their USP to recruit to great effect. ‘The package for a trainee did not offer a huge salary but we found that key to recruitment was how we sold the training that they would get. Trainees work together with the whole team and are not segregated into tax or audit which would happen in the big firms. They’ll develop a wide-ranging skill set and a broader experience across tax, audit, payroll – everything. Plus you’ll get experience of different clients and types of work. These are all things that trainees are not likely to get working for a big practice and we were able to sell that to potential recruits.’

 

Apprenticeships

Many practices have started going down the apprenticeship route, seeing it as the future of the profession – from a training point of view it is cheaper than taking a graduate. It also offers the ability to mould a recruit to the practice’s culture rather than bring in someone who has more formed ideas about how a practice should run – the ‘grow your own’ concept.

 

There have been some bumps along the road for those using the apprenticeship route – administration by providers was patchy when apprenticeships were in their infancy but is improving. Employers must commit to 20% of each week being given over to the apprentice to study which needs to be factored into project management, but the benefits are significant.

 

Agencies, local sixth form colleges, advertising on student forums, referrals and tuition providers are all sources of apprentices. More and more young people are looking to go straight from school to work so that they do not saddle themselves with university debts, so the pool of recruits is growing.

 

Age is only a number

There are a number of great reasons why practices should consider recruiting older team members. A small practice may only be able to offer a limited career path and not on-going opportunity and progression - which could make retention of young aspirational trainees difficult. A mature candidate may be less interested in career progression and value staying with a practice that is flexible with its work practices to fit in with personal commitments such as parenting or elder care.

 

Including older candidates will expand your potential pool for recruitment – this could be particularly important in more rural areas where the lure of jobs in big towns or cities can severely restrict your recruitment pool.

 

A more mature candidate will still require training but some practices have found it easier to train such candidates because their life experiences have already provided grounding in the working world. They are also likely to be more experienced in exercising judgement.

 

One final benefit is that you may find that some clients will relate more easily to an older team member.

 

Tasters

If you want to ‘try before you buy’ then there are some ways to see if a potential candidate would be a good long-term recruit. These opportunities are not as common as they once were but include work experience from schools, summer placements from schools or universities, and placement year candidates from universities.

 

Edinburgh is a university town and Mark Edwards – partner in ACCA practice Mitchell Edwards – is constantly inundated with applications from university students keen to get some experience. ‘If after the first summer they’re good enough to be invited back for the second summer then you can start thinking about offering them a permanent position when they graduate. Those that have shown real interest have come in over Christmas as well. Occasionally they come in a day a week during term time – it’s better than bar work and the hours are more sociable. But the structure needs to be there. It is very labour intensive to do a summer placement – it needs to be decent work or else it is a waste of everybody’s time but that requires commitment from the whole practice.’

 

The next article in this series will look at tips for retaining those great team members that you have worked so hard to recruit.

 

Pat Delbridge - ACCA

 

Brexit planning advice and guidance

Advice from ACCA and the Dept for Transport, DVLA, and the Dept for Digital, Culture, Media and Sport.


Do check ACCA’s website for Brexit planning advice and guidance. We will be updating the site with content including material from government such as:

 

  • Department for Digital, Culture, Media and Sport (DCMS) has issued new guidance on what to expect on day one of a 'no deal' scenario if you’re a creative business, small arts organisation or sports organisation that currently travels only to the EU, such as: 
    • touring professional choir  
    • touring chamber orchestra  
    • touring string quartet  
    • small touring ballet company  
    • small touring theatre company  
    • school football team  
    • amateur sports team  
    • pop or rock band 

      Check what you need to do  

 

Crossing the line: are you an accountant or a de facto director?

What can we learn from the Popely case?


What can we learn from the Popely case?

 

Looking after your client’s affairs often requires taking on a much more involved role than that focused solely on straightforward compliance tasks. Acting as a trusted adviser is likely to influence a client’s strategic business decisions and mean that they might formally appoint you a director of their company, or ask you to take a role of a shadow director. However, you may also notice your role gradually transforming into areas of merit typical of a company officer, without being officially appointed.

 

Becoming a director in your client’s business is likely to be onerous and is prohibited for audit clients. This article considers risks and vulnerabilities for ACCA members who act as shadow or de facto directors.

 

Companies Act 2006 states that a company is required to have at least one director. Whether or not someone is a statutory director is a matter of public record and typically to become a director you would be appointed.

 

However, it is possible to be a director in law, without being officially nominated. If, based on facts, it is proven that you have assumed the role of a director, wholly or to a degree and irrespectively of your intention or belief, you may be deemed a de facto director.

 

The distinction between an adviser and a de facto director may often be a blurred one, and a thorough analysis of your client relationship is necessary to identify whether your role is still that of a professional accountant and adviser, or you assumed the role of a director.  

 

A recently concluded, 20-year long case John Anthony Popely (2) Andrew Popely v (1) Ronald Anthony Popely (2) Cosmos Trust Ltd (3) Casterbridge Properties Ltd (2019) 13 June 2019 brought to light the often disputed questions:

 

  1. When will an individual, due to their authority, qualification and skills, be deemed a director, despite not being registered as such at Companies House?
  2. How do you assess whether your duties and any alleged wrongful acts are carried out in the capacity of a director, or an external accountant?

 

In Popely and others vs. Popely and others, various family members with interests in multiple family companies in the leisure sector operating in the UK and Cyprus argued over their respective shares of the companies.

 

The dispute resulted in a claim brought by a younger brother against an older brother (Ronald) relating to three payments totalling over £4m, alleged to have been affected by Ronald, for his own and his family benefit, made from a family company Castlebridge Ltd, which was owned 70% / 30% by Ronald’s and his father’s trusts. It was alleged the payments were fraudulent and in breach of the older brother’s fiduciary duty to Castlebridge as a de facto director. 

 

It was clear that Ronald took important decisions in relation to Castlebridge, including:

  • nomination of a corporate director
  • executing purchasing and selling transactions on behalf of Castlebridge, affecting various payments
  • transferring shares between Castlebridge and other family companies, hereby changing corporate structures
  • issuing instructions to company formation agents to incorporate or wind up various family companies and transfer shares between Castlebridge and other family companies.

 

Based on the facts of this and similar cases, the judges established the following facts relating to the concept of de facto and shadow director:

 

De facto director

  • the modern concept of de facto director derived from the 19th century principle that a person whose appointment as a director was defective, but who acted as if properly appointed, could not rely on the invalidity of his appointment to escape his responsibilities as a director
  • a de facto director is someone who assumes the status of director and is part of a governance structure of a company, as presented and perceived by the company and third parties
  • there is no definitive one-size-fits-all test for a de facto director
  • specific tests should aim to establish precisely whether individuals' acts in a relevant business context were directorial in nature; it is not sufficient to assess someone broadly as a ‘directing mind’ in a general way
  • to establish if the acts were directorial and not routine in nature, it is necessary to establish whether only a director could carry out those acts:
    • could the acts or decisions be made by someone in another capacity? If so, the individual will not be a de facto director
    • for example, in some companies authorising payments must only be done by a director; in other, often larger organisations, authorising a payment may be functional and operational in nature
  • acts outside of the period when an individual was said to have been de facto director may cast light on whether someone was a de facto director in the relevant period
  • establishing that a person is involved in the management of the company and exercising a degree of influence will not be sufficient on its own for that person to be deemed a director, unless there is no one else otherwise involved in the management of the company
  • it is the cumulative effect of undertaken actions and decisions made which matters, although a single act may lead to a liability in exceptional circumstances.  

 

Whilst the concepts of de facto and shadow director share some common ground based on their influence exercised in the business, they are separate, different in nature and often mutually exclusive.

 

Shadow director

  • shadow director is defined in section 251 of CA 2006 as a person in accordance with whose directions or instructions the directors are accustomed to act
  • the scope of a shadow director’s activities does not have to extend to the whole company but can be centred on specific business aspects. Someone may be a de facto and shadow director at the same time, in relation to different business matters

 

Liability of de facto vs. shadow directors

Director liability in the case of de facto and shadow directors has different bases:

  • the liability of a de facto director is a matter of interpretation of common law – the fiduciary duty to act in the best interest of the company will apply if indeed the individual is deemed to have acted as de facto director
  • the liability of a shadow director is a matter of enacted legislation, not of judicial interpretation with the fiduciary duty at the centre of that interpretation. If your role involves instructing nominated directors where they rely on your expertise, you are likely to be considered a shadow director, and become statutorily liable to meet the legal obligations of a director, in accordance with the Companies Act 2006 and in line with Company Directors Disqualification Act and Insolvency Act with regards to wrongful or fraudulent trading.

 

You may not be able to avoid liability for actions deemed to be directorial in nature even if you show in good faith that you thought you were not acting as a director.

 

Lessons from the case

The Popely claim ultimately failed due to unreliability of witnesses and evidence deficiencies. The judge closed the case, concluding:

  • not all payments made from Castlebridge were directorial in nature
  • those which were, were caused by Ronald influencing the corporate director representative, in the capacity of a shadow director, not de facto director
  • the governance structure of Castlebridge was not investigated and could provide no evidence whether actions by Ronald were directorial in nature
  • if payments were made by a shadow director, they could not have been made in breach of fiduciary duty of a de facto director
  • payments were not fraudulent as no dishonesty was involved.

 

Take away points

If you are a shadow or de facto director, you will be responsible for acting in the best interest of the company and/or a wide spectrum of stakeholders, such as shareholders, employees, creditors and authorities, depending on circumstances (in the course of trading, administration, liquidation). This applies particularly if you are the only qualified accountant and hence a professional of sufficient authority and seniority to influence the board.

 

If you are acting as an accountant and doubts arise whether or not your influence over the client company makes you a de facto director, reputational issues may arise as to why a formal appointment has been avoided.

 

Sanctions are likely to apply if you are found liable for administrative failings or otherwise unfit for company management. Your ACCA membership is likely to be affected if you are deemed a director and subsequently become disqualified.

 

A formal appointment – or putting in place procedures ensuring you only act on instructions of the board – may help manage the risk, if your intention is not to be a shadow director or a de facto director.

 

Simple ways to reduce inheritance tax (IHT)

Six top tips to share with clients.


Six top tips to share with clients.

 

IHT is a tax on the value of the estate at death but also on chargeable transfers made with various reliefs available. When discussing matters with clients, care is required both during the lifetime and after death. Consider using these six tips.

 

Be clear on the assets in an estate – some are exempt from inheritance tax

For example, Mr A has net assets of £1m when he dies on 30 June 2019. If all these assets are subject to inheritance tax then the inheritance tax due will be as follows:                                                  £

 

Value of estate at date of death of Mr A                           1,000,000

Less exempt amount                                                             325,000

Value of estate subject to IHT                                              675,000  

Tax due at 40%                                                                      270,000

 

However, if included in the estate of Mr A, there are some exempt assets which would not be included in the value of the estate when IHT was calculated. For example Mr A has exempt assets of £200,000 and other assets of £800,000 when he dies on 30 June 2019.

 

                                                                                                    £

Value of estate at date of death of Mr A                           1,000,000

Less exempt assets                                                                200,000

                                                                                                  800,000

Less exempt amount                                                             325,000

Value of estate subject to IHT                                              475,000  

Tax due at 40%                                                                     190,000

 

Therefore, by holding these exempt assets the inheritance tax payable has been reduced by £80,000. For assets to qualify for this exemption two conditions need to be satisfied:

  • the exemption only applies for certain types of assets
  • these assets need to be held for a minimum period before date of death.

 

Some of these exempt assets are as follows:

  • shares quoted on the Alternative Investment Market (min period: two years)
  • shares in other unquoted trading companies (min period: two years)
  • agricultural land farmed by the owner (min period: two years)
  • agricultural land if let under a farm business tenancy (min period: seven years).

 

Consider options that are available for gifts, for example equity release

The home owner may take out a commercially available equity release loan and make a cash gift which would be treated as a potentially exempt transfer. The loan does not have to be with an external commercial organisation - if there is a wealthy family member, it may be that the loan could be arranged with that person, provided the borrower has not previously made substantial gifts to him or her. The potentially exempt transfer would become exempt if the transferor survives seven years and the loan would be a liability which reduces the value of the estate of the transferor.

 

Make pension contributions to a qualifying non-UK pension scheme

A qualifying non-UK pension scheme (QNUPS) is an overseas pension scheme. The main features of a QNUPS are as follows:

  • contributions into the scheme do not attract tax relief
  • there is no maximum level of contributions, although HMRC may see large contributions as tax avoidance if they affected the individual’s standard of living
  • the member can make withdrawals during his/her lifetime (although these withdrawals would be taxable in the UK as normal pension income) with the remaining balance being passed to their chosen heirs on the member’s death
  • income and gains made by the QNUPS would be subject to tax in the local country where the QNUPS is located
  • the funds in a QNUPS will not be subject to UK inheritance tax unless there is evidence of deliberate tax avoidance
  • QNUPS need to meet the conditions in Statutory Instrument 2010/0051 (The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010).

 

This type of discussion should be held with an independent pension adviser.

 

Consider property transfer options

If children live with their parents – and where this is likely to continue for some time – the parents would gift a share of the property to the children. For capital gains this would be a gift to connected parties and so would be deemed to occur at market value for capital gains tax purposes; it may be exempt if covered by the private residence relief of the parents. The children’s acquisition cost would be deemed as the market value at the date of transfer. For inheritance tax purposes this would be a potentially exempt transfer made by the parents.

 

It would give rise to the potential reservation of benefits provisions, which would occur if the parents receive any benefits, other than a negligible one, which is provided by or at the expense of the children connected with the gift. The risk of reservation of benefits provisions can be minimised if the children do not bear more than a fair share of the running costs of the home (for example the parents could continue to meet all the running costs. The risks can also be reduced by not giving too large a share of the home to the children: to this end an equal ownership by all involved may be advisable.

 

Utilise and make sure you consider all claims

Where land or buildings in a deceased person’s estate is sold within three years (sometimes within four years) after death a claim (on Form 38) may be made for the sale value to be substituted for the value on death. Various conditions are required for this relief to be available as explained in Inheritance Tax Act 1984 sections 190 to 198. The claim should be made not more than four years from the date of death.

 

Consider Self-Investment Pension Plan (SIPP) options

Funds held in a Self-Investment Pension Plan (SIPP) on the death of the member may be transferred to the ‘nominated beneficiaries’. The member should complete an ‘expression of wish’ form for each pension plan stating to whom they wish the benefit to be paid. The pension plan trustees will usually follow the instructions unless there are exceptional circumstances. An expression of wish form guides the scheme administrators/trustees to exercise at their discretion the stated wishes in the way that the policyholder would have wished. They refer to the most recent form when making a decision.

 

If a policyholder dies before the age of 75, either before or after they start to withdraw benefits, the funds held in the SIPP can be transferred to any nominated beneficiary tax free (before April 2015 this was only possible before the member started to make withdrawals).

 

If death occurs after the age of 75 – either before or after they start to withdraw benefits – beneficiaries will be taxed at their marginal rate of tax if funds are taken as a lump sum or income (although it can be transferred to their own SIPP instead).

 

Irrespective of whether the policyholder dies before or after the age of 75, the funds in the pension plan will not form part of the estate for inheritance tax purposes therefore there should be no inheritance tax to pay on the funds in the SIPP.

 

Reliefs available

And finally don’t forget that reliefs are also available when paying IHT. Where payment of IHT is due look at the payment options that may be available. Payment of inheritance tax by instalments is possible if an IHT liability arises on the transfer of land and buildings; this applies to any kind of land and property wherever it is situated.

 

An election in writing to the board of HMRC may be made to pay the tax due by ten equal yearly instalments where the first instalment is payable on the due date on which the whole tax would otherwise be due. Where the transfer is on death, the first instalment is due six months after the end of the month in which death occurs, even if the personal representatives must otherwise pay tax before that date.

 

Get more on IHT

In our free series of webinars for practitioners, Paul Soper highlights IHT planning options that cover aspects of IHT planning such as business/agricultural relief, gifts, will variations and other areas. Listen to this webinar now

 

IHT simplification proposals

How could these impact your clients?


How could these impact your clients?

 

[NB. Read this article in conjunction with this article on IHT simple planning options]

 

The Office of Tax Simplification (OTS) has presented a report to Parliament pursuant to section 186(4) (b) of Finance Act 2016 for simplifying the design of Inheritance Tax (IHT). Within this report, the OTS has outlined 11 recommendations to provide clarity and consistency among various other taxes. These are summarised as below:

 

Sr No.

Current rules

Proposed rules

1

Annual gift exemption and gifts in consideration of marriage or civil partnership

Replace with personal gifts allowance and consider the level of this allowance

2

Seven year period for lifetime gifts

Reduce to five year period for lifetime gifts and abolition of taper relief

3

Need to take account of gifts made outside of the seven-year period (14-year rule)

Remove the 14-year rule

4

Complicated rules on liability for the payment of tax on lifetime gifts to individuals and the allocation of the nil rate band

Exploring options for the simplification of these rules

5

‘Capital gains uplift’ allows the person inheriting an asset at its market value on the date of death, rather than the amount originally paid for it.

Removal of ‘Capital gains uplift’ provision to promote passing on assets to the next generation during the lifetime

6

  • Generous business and agricultural property relief (BPR/APR) for trading and farming assets.
  • Complicated indirect non-controlling shareholdings in trading companies where BPR were identified.
  • IHT treatment of furnished holiday lets is not consistent with Income Tax and Capital Gains Tax.
  • Consider setting BPR at a lower level than that for the gift holdover relief or entrepreneurs’ relief.
  • Review the treatment of indirect non-controlling holdings in trading companies; and
  • Consider aligning FHL inheritance tax treatment of FHL with income tax and capital gain tax.

7

Inconsistent IHT treatment of corporate trading group of LLP and limited company as their holding vehicle for BPR purposes

Review the treatment to remove this inconsistency for the purpose of the BPR trading requirement

8

Eligibility of farmhouses for agricultural property relief (APR) in sensitive cases, such as where a farmer needs to leave the farmhouse for medical treatment or to go into care.

Review of the current approach for the eligibility of farmhouses for APR in sensitive cases

9

Valuation of a business or farm is required for BPR or APR relief.

A clarity is required for the valuation - whether this needs to be a formal valuation or an estimate

10

Death benefit payments from term life insurance are IHT free if written in trust.

Consider the death benefit payments are IHT free without the need of life insurance being written in trust

11

Pre-owned assets tax rules (POAT) and other IHT anti-avoidance rules to protect the revenue

Review whether POAT rules are functioning as intended and whether they are still necessary.

 

Example:

The following example elaborates the tax impact of ‘capital gain uplift’ abolishment should this proposal get implemented (please do remember that this a proposal):

 

Mr A is deceased on 15 May 2020, leaving a house (buy to let) worth £250k to his wife, Mrs B. Mr A purchased this house for £50,000 in 1998. As the asset is exempted or relieved from inheritance tax due to the spouse exemption, no inheritance tax is due on the death of Mr A.

 

With the current IHT rules, Mrs B acquires the house at the market value £250k; whereas under the proposed rules, she will be inheriting the house at the historic base cost of Mr A, ie £50,000.

 

Assuming Mrs B decides to sell the house on 15 March 2021, her capital gain calculation may look as shown below (assuming she is a higher rate taxpayer):

 

 

Current rules

Proposed rules

Net sale proceeds (say)

£260,000.00

£260,000.00

Less: Cost

(£250,000.00)

 (£50,000.00)

Capital Gain

£10,000.00

£210,000.00

Less: Annual Exemption (say)

(£12,000.00)

(£12,000.00)

Net Capital Gain

£0.00

 £198,000.00

 

 

 

Capital Gain Tax payable (£198,000 x 28%)

£0.00

  £55,440.00

 

Full details can be accessed on OTS IHT review- second report

Principal private residence relief

The Finance Bill 2019/20 contains new rules on PPR relief.


The Finance Bill 2019/20 contains new rules on PPR relief.

 

PPR relief is amended for disposals (exchange of contracts) on or after 6 April 2020. In summary, ensure your staff and clients are aware of the following:

  • PPR entitlement will be restricted during the final period of ownership to a period of deemed occupancy of nine months, reduced from 18, ending with property disposal
  • letting relief is restricted to periods of shared occupancy of the owner with the tenant. The bill does not define what constitutes ‘letting’, but refers to 'sharing with someone who does not have interest in the property'. It does not mention whether payment of rent is a necessary condition
  • in case of multiple properties held, the usual time limit to make a nomination to determine which property is the main residence is within two years of the last time the selection of your homes changes; the Bill extends the two year rule and allows a late nomination, in very limited circumstances: where all but one of your homes is of negligible market value (ESC D21 will be enacted as part of legislation from 6 April 2020 and removed). Negligible market value has not been defined in the Bill
  • where on or after 6 April 2020, a property is transferred to a spouse or civil partner, the property’s history (such as purchase cost, type of occupation, use etc.) is transferred with the dwelling to the receiving spouse / civil partner. This applies to any residence, whether main or not
  • where a main residence is transferred to a spouse or civil partner, the receiving spouse or civil partner 'inherits' the qualifying letting period, of their spouse (the transferring spouse had to share the residence at the time of their occupation with a tenant) 
  • members of the armed forces receive an armed forces accommodation allowance to help pay for the accommodation they choose to live in. They will be eligible for job related accommodation relief on their main home
  • a time delay of up to two years between the acquisition and the occupation of a self-built or purchased main residence will not affect the owner’s entitlement to PPR. This is conditional on no one else using the property as a residence during the delay period (ESC 49 will be enacted and withdrawn from 6 April 2020).
Pensions’ auto enrolment – important reminder

Are your clients clear they must re-enrol employees every three years?


Are your clients clear they must re-enrol employees every three years?

 

The Pension Regulator is reminding SMEs that re-enrolment must be carried out every three years and it is a two-stage process.

 

First, employers must check whether they have any staff to re-enrol and ensure those who are eligible are put back into a pension scheme. They must then complete and submit their re-declaration of compliance.

 

The Regulator states that the ‘majority of employers will not have staff to re-enrol, however they must still complete their re-declaration of compliance to confirm they have checked whether they need to re-enrol any of their staff, even if none were re-enrolled. This is a legal requirement and failure to both assess and re-enrol eligible staff and make a declaration could result in a fine.’

 

The Regulator has launched a new re-enrolment tool, to support SMEs around the re-enrolment dates. It asks a few basic questions before taking users through to a list of duties.

 

For example:

 

Write to staff that you have put back into your pension scheme

Use our example letter template to write to staff to tell them that you’ve put them back into your pension scheme.

 

Do this within six weeks of the third anniversary of your staging date.

 

Avoiding own goals on transfer fees

An assessment of VAT treatment on football club transfer fees.


An assessment of VAT treatment on football club transfer fees.

 

As the new season approaches clubs of all sizes often encounter transfer fees and onward transfer fees. Questions could arise for members acting as clubs’ treasurers or accountants specialising in serving this sector: for example how these fees would be seen from a VAT perspective especially with an added complication of fees for a footballer’s further onward sale charged by the original purchaser.

 

Scenario

A football club sells a player to another professional club for £50,000 plus VAT. The terms of the transaction are that if the player is resold onwards by the professional club for a profit, the original club would receive 20% of the profit made on the onward sale.

 

The player is sold on by the professional club for £500k, making the professional club a £450k profit. The original club would be entitled to 20% of £450,000.

 

Does the onward sale represent a supply for the original club on which the club should charge VAT or is the onward sale outside of scope for VAT? Is the profit share on the onward sale a further consideration in the original sale, for example a contingent part of consideration?

 

The scenario described in the article was juxtaposed with a similar point made in relation to an onward sale of a painting, where the original sale was subject to VAT, but the subsequent onward sale was not, according to European law relating to royalties.

 

The key consideration is whether or not an expectation was created and linked the transactions to a specific agreement for the supply of a specific good or service:

 

Painting transaction - CJEU case of European Commission v Republic of Austria (Case C-51/18)

  • in this case, the onward sale of the artwork has not been explicitly agreed and was not expected
  • the basis of the VAT treatment was European law relating to royalties, where the artist is entitled to a share of future sale proceeds
  • a contract does not arise between parties or to define the terms; those arise as a result of enacted laws
  • the artist does not have to participate in the resale transaction even indirectly, in order to be entitled to a share of onward royalties
  • payment for the first and the onward sale is for ‘share in the "economic success" of his work’ and not for the painting as goods
  • royalties linked to the onward sale are therefore deemed outside of scope.

 

Player transfer fee transaction

  • in this case, the original purchase would have not gone through unless further consideration in relation to the onward sale is agreed at the point of the original sale
  • the basis for the transaction is a contract specifically agreed between parties
  • there is no statute which, irrespectively of any contract, would entitle the original seller to a share of future transfer proceeds
  • there is therefore a direct link between the parties to the contract, in relation to the original and the onward sale
  • the transaction is within standard rated VAT.

 

Other related VAT guidance you may be interested in:

Ruling against HMRC policy on partial closure notices

Individual wins battle with HMRC over a partial closure notice around overseas income and domicile.


Individual wins battle with HMRC over a partial closure notice around overseas income and domicile.

 

The First-tier Tribunal has held, in Embiricos v HMRC [2019] UKFTT 236 (TC) (9 April 2019), that a partial closure notice which was introduced in 2017 could be issued under section 28A of the Taxes Management Act 1970 without specifying the amount of tax due. A partial closure notice allows other aspects of the enquiry to continue.

 

Mr Embiricos, originally from Greece, lived in the UK for many years. In March 2017 he moved to Monaco. HMRC opened an enquiry into Mr Embiricos’s tax returns for the years ended 5 April 2015 and 5 April 2016 in relation to his non-UK domicile status.

 

As a result of the enquiries, HMRC concluded that Mr Embiricos was domiciled in the UK for the years under enquiry.

 

Mr Embiricos did not accept that it was necessary or appropriate for HMRC to have the details of his overseas income and gains before the question of his domicile was determined. He therefore applied to the Tribunal for a direction requiring HMRC to issue a partial closure notice, and separately appealed against the information notice on the basis that the information was not reasonably required until his domicile status had been confirmed.

 

HMRC believed that the closure notice could not be issued until they quantified the amount of tax due if they were correct about Mr Embiricos’s domicile status. HMRC argued that the tax enquiry should look at both items together, and that the domicile status and tax due were indivisibly linked.

 

The First-tier Tribunal compelled HMRC to issue the partial closure notice as they did not show reasonable grounds for not issuing the notice.

 

As a result, Mr Embiricos was able to have his domicile status determined first, avoiding (or postponing) the time and effort in establishing the value of his unremitted foreign income and gains.

 

VAT reverse charge on building and construction services

Now is the time to prepare your CIS registered clients for this change.


Now is the time to prepare your CIS registered clients for this change.

 

VAT reverse charge comes into effect on 1 October 2019. It is major change to the way VAT is collected in the building and construction industry. From this date the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier. It will only apply to individuals or businesses, who are not consumers, registered for VAT in the UK.

 

Actions to take

  1. use HMRC’s flowchart to determine whether it is applicable to your business or not
  2. once established which VAT rule applies to your client, you may advise your client how it impacts their business and what steps to take
  3. as the liability of paying VAT will be moved from supplier of the services to the customer, some of the clients may end up being repayment traders. It may help them to go on the monthly returns instead of quarterly returns to speed up their VAT refund for cash flow improvement.

 

HMRC guidance highlights ‘the best time to move to monthly returns will depend on the business and whether they want to have monthly returns from October, or to delay a little to offset some of the VAT they owe to HMRC on periods spanning 1 October.

 

For example, if a customer submits a quarterly return up to 30 September 2019 and requests a change to monthly returns on 14 November 2019, October will be a monthly return and the return periods from then on will be monthly.

 

If the request is made in December 2019, October and November would be a two month return with monthly returns from then on.

 

  1. reverse charge supplies are not to be accounted for under the Flat Rate Scheme. Therefore, users of the scheme will have to consider if it is still beneficial to them when VAT is not being paid to them on some or all of the invoices they issue. Flat Rate Scheme users who receive reverse charge supplies will have to account for the VAT due to HMRC
  2. the Cash Accounting Scheme cannot be used for the supply of services that are subject to the reverse charge. You can still use the Cash Accounting Scheme for supplies that are not within the reverse charge. However, you’ll have to use cash accounting for your purchases so you may find that the Cash Accounting Scheme no longer helps your cash flow. If this is the case, you can withdraw from the scheme.

 

ACCA published an article in June 2019 which provides further related guidance.

 

PII – factors to consider in the hardening market

How to present your firm in the best light to secure cover at an affordable price.


How to present your firm in the best light to secure cover at an affordable price.

 

We have previously reviewed the shift in the Professional Indemnity Insurance (PII) market, looking at why premiums are rising and why some accountants are finding it more difficult to obtain PII for their practices. Here, we look at navigating the hardening market and how you can present your firm in the best light to secure cover at an affordable price.

 

If you undertake activities that insurers consider higher risk, such as corporate finance, tax mitigation or overseas work, or if you have had a claim made against you or your firm, insurers will require more information at your next renewal. A fully completed proposal form and additional information relating to these matters will need to be supplied and ideally should be sent to your broker well in advance of your renewal date.

 

Your proposal form

This is your presentation to insurers and is a reflection of the quality of your firm. A fully completed, neat and legible form will always make a good first impression.

 

When completing the form, include your firm’s brochure or give details of your website or online presence. The form can be lengthy and ask for a lot of detailed information; nowadays forms are often tailored to ask for additional information only where a certain question or activity triggers this. However, you have a legal duty to provide insurers with all material information that could affect your insurance; therefore, you must include any material facts, positive or negative, even if a specific question does not appear on the form.

 

In addition to the proposal form, what other details can you give to insurers?

 

Letters of engagement

These are important as they form the basis of your contract with your client and therefore need to be in place and up to date. Make sure letters of engagement cover the scope of work agreed and are updated regularly to include any new areas of work.

 

Limit your liability to an agreed and reasonable level. Often policyholders use their limit of indemnity as a maximum cap.

 

Operational procedures

Increasingly now, insurers are asking about the firm’s operational procedures, checks and supervision. This is to ensure that there is adequate risk management in place to reduce the likelihood of any errors, omissions or fraud. Factors insurers will be interested in include:

  • your management structure/hierarchy explaining how staff are supervised and how quality control is exercised.
  • do you obtain references when employing staff? Is there a documented training programme in place and is CPD recorded?
  • do you operate an accessible diary system to ensure that deadlines are met?
  • do you have a compliance officer who regularly audits your files?
  • does your firm handle client money and how often do you check your cashbooks and bank accounts? Are these independently reviewed and reconciled against bank statements?
  • is there a dual sign off procedure in place for financial transactions?
  • is there a business interruption plan in place?

 

Evidence of a well-run, efficient practice will only be to your advantage.

 

Claims and high risk activities

If there have been claims or circumstances notified, insurers will want to know the cause and outcome. It is possible to improve the situation by letting insurers know what subsequent actions you have taken to prevent a reoccurrence, for example have you had your files independently audited or reviewed to ensure there are no further matters of a similar nature, or  have you put additional checks and procedures in place.

 

With higher risk activities insurers will be interested in the qualifications and experience of the individual carrying out this work and whether independent specialist advice is sought. A CV can also be helpful.

 

Fraud

We are seeing more firms affected by fraudulent behaviour on the part of their employees and have been asked what indications can identify or signal this. From our experience, we find that the reasons for fraud vary greatly, for example dislike of an employer, gambling habit or financial difficulties at home.

 

An individual engaging in fraudulent activity may:

  • avoid taking holidays even if these are due and may insist upon coming to work while sick to avoid any oversight of their work
  • prefer to work on their own and work outside of normal hours 
  • show a reluctance for other employees to assist them
  • have unusually close relationships with clients or suppliers
  • have sole authority to make or receive payments from clients. Often there will be multiple transactions and variable amounts relating to a single client
  • have more than one key position or area of responsibility within the company
  • exhibit a change in lifestyle or suddenly seem a lot better off, make large purchases or have known debt problems or gambling habits.

 

While care must be taken to avoid unfair accusations, sudden shifts in behaviour are best addressed in the interests of both protecting the practice from fraud and ensuring general employee wellbeing.

 

Employers must be vigilant to identify any of the above and underwriters are interested in any policies and procedures in place. Whatever your situation, a good, strong, clear presentation to insurers is key to obtaining comprehensive and value for money PII cover.

 

If you have any questions please contact Catherine Davis - ACCA Relationship Manager on 0117 906 5057 or ACCAaccountants@uk.lockton.com 

 

Lockton is ACCA’s recommended broker for professional indemnity insurance

 

Taking the global economy’s pulse

ACCA and IMA’s latest joint survey still points to a weakening global economy.


ACCA and IMA’s latest joint survey still points to a weakening global economy.

 

Our GECS global confidence index in Q2 fell back slightly, after the bounce in Q1. But confidence remains above the record low reached at the end of 2018. The message from GECS is still one of weakening global growth through the second half of the year, but with a very low risk of recession.

 

The good news is that reduced inflation concerns, also picked up in the latest GECS, give central banks, notably the US Federal Reserve, the policy bandwidth to ease monetary policy.

 

US confidence falls

Confidence in the US fell sharply in the quarter to the lowest level in eight years, hit by the resurgence of trade tensions as tariffs were increased to 25% on a range of Chinese imports. Meanwhile, the orders index fell back too, but not so dramatically and is consistent with annualised GDP growth of around 1.5% through the second half of the year. US interest rates will almost certainly be cut in coming months and this will help sustain growth.

 

Trade wars undermining confidence in China

The GECS China series points to a weak picture with falls in confidence and orders in the quarter. Increased tariffs imposed by the US will have a negative influence on exports and growth in the second half. Already in Q2 GDP growth had slowed to an annual rate of 6.2%, close to the weakest since 1990. Domestic demand is also soft – the GECS capital expenditure index fell back in Q2.

 

UK outlook hampered by Brexit uncertainty

Confidence in the UK mirrored the global pattern, falling back from Q1 but not down to the levels of late last year. The message from the GECS continues to be moderate growth, restrained by stagnant business investment spending held back by Brexit uncertainty.

 

Western Europe holding steady

In Western Europe as a whole, confidence held steady in the quarter, although orders slipped to a three-year low. The euro area economy is faltering, with Germany’s export-driven growth model spluttering in the wake of slowing external demand, especially from China.

 

A mixed picture in Middle East and South Asia

In other regions, the Middle East suffered a dip in confidence, probably reflecting volatile oil prices. Slowing demand for oil as the global economy loses momentum is likely to be a significant factor in the oil market in coming quarters. Meanwhile, confidence in South Asia held up, although both India and Pakistan are facing slowing economic growth of differing severity.

 

Emerging markets to benefit from lower US interest rates

For emerging markets (EMs), generally the big positive factor is the shift in US monetary policy stance towards easing. Lower US interest rates will reduce capital outflows, which contributed to pressure on EMs last year. The offset to this is that weaker growth in developed economies will reduce demand for EM exports.

 

Explore the full survey now

 

HMRC Talking Point webinars

Register now for HMRC's free Talking Point webinars during August.


The following HMRC Talking point webinars are taking place during August:

 

Making Tax Digital – your Agent Services Account: This webinar will provide the latest information, including the new Agent Services Account and signing clients up to Making Tax Digital.

These are on 14 and 29 August

Choose your date and time

 


Income from Property Part 1: During this webinar we will be looking at restricting finance cost relief and the cash basis eligibility and computational rules.

Friday 9 August – midday to 1pm  

 


Income from Property Part 2: This webinar looks at some of the main expenses and deductions, allowances and reliefs.

Friday 9 August – 2pm to 3pm 

 


VAT Flat Rate Scheme: This webinar covers:

  • what the Flat Rate Scheme is
  • limited cost business and how to check if this applies to you
  • how to keep VAT records
  • how to fill in the VAT Return.

Thursday 22 August – midday to 1pm    

 


Statutory Sick Pay – what needs to be considered when an employee is sick: This webinar will include:

  • the qualifying conditions
  • what happens when an employee is not entitled to Statutory Sick Pay
  • how to pay Statutory Sick Pay.

Thursday 22 August – 2pm to 3pm

 

NEWS
WATCH: Our top tips from successful accountants
 

Catch up now on our series of videos sharing bite-sized business tips from leading FCCAs.


Recent issues have seen some of our leading FCCAs share bite-sized business tips in short videos – designed to inspire you and help improve your practice.

 

Set aside a few minutes to catch up on any you have missed – pick from the full list below. Look out for new top tips coming in the autumn and winter.

 

In February, Nigel and Nikki Adams revealed their top tips for running a successful business in 2019

 

In March, Will Farnell explained how his practice is radically shaking up its employee culture

 

In April, Yogesh Patel explained why he believes we should all focus on intrinsic motivators

 

In May, three of our Passionate Practitioners explained their secrets behind running a successful practice

 

In June, Peter Jarman explained why he believes you should always make the client fit the firm

 

In July, Alastair Barlow shared insights into how his firm understands and uses data to benefit client relationships

 

 

 

Xerocon London2019 - get your exclusive discounted ticket now!

Save 30% when you register for Xerocon London 2019.


Tickets are now available for Xerocon London 2019 – a truly unmissable event for accountants and bookkeepers across the UK, Europe, Middle East and Africa. 

Grab your two-day pass and join us on 13-14 November 2019 at ExCeL London where you’ll:

  • Get inspired by world-class keynote speakers 
  • Hear from Xero leadership and be the first to hear about key product developments
  • Meet and learn from dozens of technology partners 
  • Celebrate the industry’s leading practices at the Xero Awards
  • Mix and mingle with new and old friends and party in style at the infamous Xerocon party!

 

Limited offer for ACCA members: Get 30% off your tickets

 

Use the promo code ACCA30 at checkout and get 30% off your full price Xerocon London 2019 ticket for £245 (reduced from £350). 

 

This offer is available until 31 August and cannot be used in conjunction with any other offer. 

 

Come and meet with us on our stand. Claim CPD if this event is relevant to you too!

 

If you are an ACCA member who has purchased a ticket at full price as part of our partnership, Xero will arrange a partial discount. Just email xerocon.london@xero.com

British Accountancy Awards: ACCA connections

We're recognising the many ACCA firms and individuals who have been shortlisted at this year's awards!


Congratulations to the following firms who have been short-listed across various categories at the British Accountancy Awards 2019:

  • Ad Valorem
  • Ashton Shaw
  • Farnell Clarke
  • Flinder
  • Fuse Accountants
  • Hoffman and Cohen
  • Major’s Accounts and Co Ltd
  • Makesworth Accountants
  • Steele Financial Ltd
  • Williamson and Croft
  • Woods Squared
  • Phebys Ltd
  • Sterling Finance (UK) Ltd
  • Prohal Chartered Certified Accountants

 

Meanwhile, Alexander Black and Emily Churchill are nominated for Rising star of the year, Nathan Keely, Nigel Adams, Sarah Van Ristell and Warren Munson for Partner of the year and Ciaran O'Donnell for CFO/Finance Director of the year.

 

The very best of luck to everyone and we hope we are celebrating some successes on 25 September!

 

 

 

Volunteering changes lives

Highlighting how practitioners can make a real difference via volunteering.


Highlighting how practitioners can make a real difference via volunteering.

 

We know that many of our practitioners undertake voluntary work. Gary Millner – CEO of Tax Help for Older People and TaxAid – highlights some of the excellent work these charities undertake. We firmly encourage you to consider getting involved as a volunteer.

 

Have you ever thought of volunteering using your professional tax skills? Over 35 ACCA members volunteer for TaxAid and Tax Help for Older People, two tax charities which provide tax advice to people on low incomes – people who are in crisis with their tax, and with nowhere else to turn.

 

Who do they help?

Receiving an unexpected tax bill is a nightmare for anyone, but if you can’t afford professional advice because you’re on a very low income, where do you go? The people who the tax charities see have nowhere else to turn. Let’s meet George.

 

George is 96 and a widower. He was distressed and confused when he came to Tax Help for Older People – he had a tax bill of £2,500 and couldn’t understand how it had arisen. The case was passed to a local volunteer who visited George and found that he had been given the married couples allowance for several years after his wife had died and he was no longer eligible for the allowance. On looking further, he found that HMRC had been told of the death of his wife at the correct time, but HMRC had not used the information that had been correctly and timeously provided. Therefore an ESC A19 claim was submitted and HMRC accepted it had not made proper use of the information at the right time. The assessments and penalties were cancelled and George was enormously relieved.

 

Advice changes lives

Tax Help for Older People and its sister charity TaxAid helped 21,000 people last year – people like George who desperately needed tax advice but couldn’t afford to pay for it. They provide advice, where needed acting for the client, and put people back on their feet. In effect they provide the profession’s safety net for vulnerable people in crisis with their tax.

 

Tax Help for Older People assists the over 60s; TaxAid focuses on working age people. The two charities work closely together.

 

Both help their clients by using a mixture of permanent staff and volunteers. Helping people like George can be very rewarding – our clients are almost always in great distress when they find us and many are in crisis. The help we give makes a huge difference, resolving the tax issue and allowing them to get on with their lives.

 

Volunteering opportunities

There are three types of volunteering opportunities:

  • volunteers for Tax Help for Older People are spread around the country. They help mainly retired people, through face-to-face interviews either in the client’s home or at an Age Concern office or similar. The work load varies depending on local need
  • TaxAid volunteers may meet clients for interviews in their London office. Volunteers usually do a minimum of seven hours a month
  • alternatively, TaxAid volunteers work on TaxAid’s telephone helpline, acting as the client’s first point of contact and trying to either solve their problem or arrange for follow up action. These volunteers usually do a minimum of two three-hour sessions a month.

 

All volunteers need to have two years’ practical experience. The charities provide training – both in the specialised tax knowledge needed and in handling vulnerable clients - and periodic updates.

 

Case studies – could these be you?

  • Sheila Heron of Quantum Accountancy Services Ltd is an ACCA member who says: ‘I really enjoy volunteering with Tax Help for Older People. I have visited the clients in their homes and also at the local Age Concern offices. They tend to be quite vulnerable and are always very worried about their tax. After looking through their paperwork I can usually see the problem and identify the best way to solve it. This puts their minds at rest and generally the issue can be sorted quickly. Those I have helped have always been very grateful and I find being able to help vulnerable people in this way is very rewarding.’
  • David McCauley, now retired, was a member of ACCA and has been a Tax Help volunteer since 2008. As well as helping with clients, he also helps in arranging events such as the Over-55s roadshows, where people can be alerted to the help available. He says: ‘Over the years, I have helped many clients, including widows suddenly having to cope with a tax system they often find very difficult. It’s given me a lot of satisfaction to help resolve their problems and bring relief to their worries. I’ve recently dealt with several worldwide disclosure clients and this has caused a lot of anxieties which we are alleviating. It’s important to highlight the stalwart support of Head Office, both personal and technical, which enables us to operate as true professionals.’

 

Get involved!

If this article has inspired you to find out more, it’s simple:

 

They will be delighted to hear from you!

 

Buying and selling your practice

Whatever stage you are at in your journey we want to support you.


Whatever stage you are at in your journey we want to support you.

 

As a reminder, if you are currently looking to grow – or dispose of – your practice, help is at hand.

 

Take a moment to browse our guidance on buying a practice and also selling a practice. We have also published articles in In Practice looking at Why digital is changing the value of all practices and An alternative to MTD – selling your practice.

 

Previously in In Practice we have listed ACCA firms who are looking to acquire practices to support their growth plans. If you would like to be included, email us at supportingpractitioners@accaglobal.com (please ensure you include your ACCA membership and firm details).

 

Summer CPD and training

ACCA's Professional Courses provide the widest range of CPD events tailored to the needs of practitioners.


All Professional Courses events are open to both ACCA members and non-members. Please feel free to share details of the events below with your colleagues.

 

SATURDAY CPD CONFERENCES FOR PRACTITIONERS

Find full details in the dedicated flyer

 

Saturday CPD conference three

London, 28 September (fully booked)

Glasgow, 05 October

Birmingham, 12 October

Bristol, 19 October

Swansea, 02 November

London, 09 November

Manchester, 16 November

Sheffield, 30 November

London, 07 December

 

 

AUTUMN UPDATE FOR PRACTITIONERS

 

Accounting and auditing conference

02 November, London

 

Taxation conference

14 December, London

 

CPD: 7 CPD units per conference, or attend three to gain 21 units.

 

Fees:

1 conference                        £159 

2 conferences                      £147 per conference/delegate

3 or more conferences        £133 per conference/delegate

 

PRACTICE WORKSHOPS

 

Guide to practical audit compliance for partners and managers

1-2 October, London

13-14 November, Manchester

17-18 December, London

 

CPD: 14 units

Fee: £510. Book your place up to 60 days before the start date of the workshop and pay the discounted fee of £459 per person.

 

Practical guide to ISQC 1 for partners and managers

4 December, London

 

CPD: 7 units

Fee: £298. Book your place up to 60 days before the start date of the workshop and pay the discounted fee of £277 per person.

 

 

ONE DAY COURSES

 

General tax update for accountants

Leeds, 8 October

Birmingham, 11 October

Bristol, 18 October

Newcastle, 6 November

Cardiff, 26 November

Norwich, 28 November

Bournemouth, 3 December

London, 11 December

 

Accounting standards update

Newcastle, 9 October

Nottingham, 10 October

Bournemouth, 15 October

Cardiff, 17 October

Norwich, 29 October

Leeds, 7 November

Bristol, 27 November

London, 12 December

 

Fee: £226 per person

Book up to three calendar months before the start date and pay just £205 per person.

 

 

Residential conference for practitioners

21-23 November, Chester
CPD units: 21
Fee: Book your place by 22 August and pay the discounted price of £699 per person. Please note: bookings made after this date will be charged at the full price of £744 per person.

 

 

 

ISLE OF MAN SEMINARS FOR PRACTITIONERS

 

 

Anti-money laundering and fraud update

12 September, Douglas

 

Managing and developing a profitable practice

15 October, Douglas

 

Business tax planning

19 November, Douglas

 

Accounting and auditing refresher

5 December, Douglas

 

Timings: 4–7pm

CPD: 3 units

 

Fees:

1–4 seminars £78 per seminar

5–13 seminars £61 per seminar/delegate

14 or more seminars £57 per seminar/delegate

 

ISLE OF MAN ONE DAY COURSES

 

Accounting standards update

30 October

 

UK and IOM tax update

10 December

 

CPD: 7 units

Fee: Book your place on this event up to 90 days before the start date and pay the discounted price of £205 per person. Bookings made after this date will be charged at the full price of £226 per person.

 

CPD WEBINARS IN PARTNERSHIP WITH 2020 INNOVATION
ACCA members receive a 50% discount with code 19ACCA*50 on 2020 webinars and can book these separately or as a block booking using our discounted ‘Subscription Packages’. Notes, slides and webinar recordings are made available where applicable to all registered participants.

 

Visit the dedicated 2020 Innovation/ACCA webpage

Get up to speed with practical advice

Get brilliant advice and tips from industry thought leaders at Accountex Summit North


Get up to speed with practical advice and tips from industry thought leaders at Accountex Summit North.

 

Taking place on 10 September at Manchester Central, the FREE conference will play host to an inspiring programme of CPD accredited keynotes, seminars, panel sessions and interactive workshops. And give you the opportunity to meet teams and demo products from leading accountancy software suppliers.

 

Why come to Accountex Summit North? ​​​​​

  • demo tools and tech
  • free training
  • make connections
  • grow your professional network
  • latest industry insight
  • gain 8 CPD hours just for attending.

 

Space is limited so register here today to apply for your place.

Professional Accountancy 2019

Register for your free ticket to this leading show next month.


Register for your free ticket to this leading show next month.

 

Professional Accounting 2019 will take place at Birmingham’s NEC from 18-19 September. It is free to attend and is anticipated to attract approximately 5,000 decision-makers working within private practice and all sectors of business and industry from across the whole of the UK.

 

The event will feature the leading suppliers to the sector and an education programme delivered by the profession’s thought leaders.

 

ACCA is delighted to be hosting a stage, featuring the following line-up of topics and speakers talking about the future of accountancy on the first day of the event:

  • The Passionate Practitioner: Developing the digitalised small and medium practice – Clive Webb, Senior Insights Manger, ACCA 
  • Strategy and planning for the future – Daniel Crowther, Director, Thorne Widgery
  • Capability development: the power of people – Nikki Adams, Director, Ad Valorem
  • Maintain and grow: the pioneering practice – Amanda Watts, Owner, Twenty Two Agency
  • Machine Learning: More science than fiction – Narayanan Vaidyanathan, Head of Business Insights, ACCA.

 

The ACCA team will be on our exhibition stand throughout the event to answer any questions and help you get the most out of your membership. 

 

Register here for your free ticket to ACCA’s Future of Accountancy Theatre.

 

 

 

Free webinars for practitioners

Register now for our autumn series of free technical webinars!


Register now - and get automatic reminders the day before - for our autumn series of free technical webinars for practitioners.

 

Choose from the following seven webinars:

 

What’s new in FRS 102? 2 September (12:30)

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

 

VAT & Duties, 10 September (12:30)

Speaker: Gwen Ryder, independent consultant

 

The 20 most common errors when dealing with VAT and property, 20 September (12:30)

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

 

Stamp Duty Land Tax (SDLT) 9 October (12:30)

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

 

Topical issues with residential property portfolios, 18 October (12:30)

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 for any or all of these sessions now.

 

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.

Know your cyber and fraud risks

ACCA - in partnership with Barclays - has produced a new webinar on knowing your cyber and fraud risks.


ACCA - in partnership with Barclays - has produced a new webinar on knowing your cyber and fraud risks.

 

Find out the essentials in just 30 minutes from this free webinar

 

Cyber crime and fraud is a threat to businesses of any size and cyber criminals often take advantage of human error so it’s important that every member of your team and your clients know how to protect themselves and the business from cyber attacks.

 

This 30 minute webinar will cover:

  • why does cybercrime matter? A Barclays survey published last year reported that 44% of businesses suffered losses due to cybercrime, with an average of £35,000 lost. 95% of losses are attributable to human error. Cybercrime cost 50,000 jobs. Find out how cybercrime could affect your business and what the risks are
  • preventing social engineering: many cyber criminals begin their attacks with social engineering – learn how to spot this type of fraud, so you can stop attacks before they start
  • common cyber threat: from trojans to treading carefully with public Wi-Fi, get clued up on the most common kinds of attacks
  • helping protect you and your business: find out the best ways to stay safe online, such as using malware protection and managing who needs access to what.

 

Register here for this free webinar.