Technical and Insight
How to become GDPR compliant

Is there a guide for helping my business become GDPR compliant?


Is there a guide for helping my business become GDPR compliant?

 

The General Data Protection Regulation (GDPR) legislation is a daunting regulatory framework which will cause organisations to reconsider the use of personal information for years to come.

 

As we have discussed during a series of our articles which ACCA has published this autumn, the regulation includes many components which should be considered within your organisation. While ACCA has made a number of resources available (see list at the bottom) you may also need to consult with external advisers.

 

Below is our quick reference guide to some aspects for you to consider and some useful external resources.

 

Legal services 

GDPR is a law which includes requirements for compliance and interaction with regulators following an event. We highly recommend your organisation considers the advice of legal counsel to help you to understand the regulations and its specific impact to your business. Legal counsel can help you with everything from contracts to employee awareness.

 

Legal counsel will also be important for you to have at the ready if a data breach occurs. Privacy counsel in particular will be helpful when you are required to communicate with affected people and regulators. 

 

Information Technology 

GDPR focuses on the processing of personal data (including its use and storage). It is important for your internal stakeholders to fully understand the impact of GDPR on the way in which you work with information. In many organisations this involves an information technology and/or security team. While the best internal resources can perform valuable research, the use of outside consultants can be extremely valuable with their view across industries. They can help you to understand best practices within your industry as well as lessons learnt.

 

When security incidents occur, external forensic computer consultants can be valuable for determining what happened and (sometimes more importantly) what did not happen. The report of their findings combined with the advice of legal counsel can be useful for providing effective communication to affected people and regulators. 

 

Insurance brokers 

GDPR comes with a natural view towards liability. Cyber insurance is now a key component to insurance portfolios. We recommend you speak with an experienced cyber insurance broker to better understand your risk to information and the potential impact of GDPR. 

 

When a security incident occurs, cyber insurance is very useful. Cyber insurance pays for the costs associated with managing a security event/data breach. The insurance not only pays, but it helps you to connect with privacy counsel, forensic computer consultants and communications firms at short notice. 

     

Suppliers and service providers 

The GDPR imposes obligations in respect of personal data you process (including where you collect, store and use personal data). It is therefore important to understand which of your suppliers and service providers processes personal data on your behalf and how they are working to be compliant with GDPR. 

 

When considering the security incident response as outlined above, think about your suppliers and service providers. If they have a data breach event, do they have a contractual duty to inform you? If not, they probably should.

 

Overall, there is not a perfect approach for your firm to take – however, the key is to involve primary stakeholders in the conversation, both internal and external, as early as possible.

 

By Max Perkins, Senior Vice President, max.perkins@uk.lockton.com

 

Please note that the purpose of this article is to provide a summary of and our thoughts on the GDPR. It does not contain a full analysis of the law nor does it constitute a legal opinion or advice by Lockton Companies LLP on the law discussed. The contents of this article should not be relied upon and you must take specific legal advice on any matter that relates to this.

Lockton Companies LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of the material contained in this article. No part of this article may be used, reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Lockton Companies LLP.

 

ACCA resources

ACCA and Haines Watts have produced a number of free webinars on GDPR. An overview webinar was held in October and now a series of eight short webinars looks at key elements from the Regulation and affected business functions. We recommend that you listen to the Key Elements webinars first – in particular, the Key Principles webinar.  

 

The webinars are presented by Mike Hughes, Steve Connors and Vincent Mulligan. Mike and Steve are partners at Haines Watts, whilst Vincent is an ACCA member and IT Audit Consultant at Eisteoir Consulting Ltd.

 

You can pick and choose the topics of greatest relevance to you to watch ‘on demand’ – please register for any of these webinars including the overview webinar from October.

 

ACCA and Haines Watts will be developing some case studies in the new year to supplement these webinars.

 

The Information Commissioner’s Office (ICO) also has two GDPR tools

Directors’ loan account – valid entries vital

Why invalid entries can prove costly.


Why invalid entries can prove costly.

 

Directors’ loan account (DLA) adjustments are a constant theme in the accounts of SMEs. Members are often faced with the task of analysing SME transactions and explaining which credits should/should not go to the DLA. This is a particular problem in the tax return season when it comes to declaring/identifying dividends.

 

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

 

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

 

The facts of the case

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

PAYE/NIC on deemed salary:

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

 

Other issues:

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

 

HMRC has updated its directors’ loan account toolkit which provides guidance for agents (including a checklist). ACCA produced an article in the May 2017 edition of In Practice which explains more about this toolkit.

 

 

Finalising clients’ 2016/17 tax returns

Steps to ensure you don’t burn the midnight oil as tax return season swings into life.


Steps to ensure you don’t burn the midnight oil as tax return season swings into life.

 

Before you press the ‘file online’ button and heave a sigh of relief, make sure you review the information on the returns for completeness. Here we summarise common and quirky issues/errors/omissions that many members have spoken to us about this year. We also include a few suggestions for members as a general recap to online help available before finalising accounts/tax returns.

 

Using HMRC agents ITR toolkits

These toolkits provide guidance on areas of error that HMRC frequently sees in returns and set out steps to reduce these. They are designed to:

  • ensure that returns are completed correctly, minimising errors
  • focus on likely errors that HMRC considers key
  • demonstrate reasonable care.

 

The toolkits can be used:

 

•    as a straightforward checklist

•    to complement or check and refresh your existing processes

•    as a training aid for your staff.

 

There are toolkits for all of the main areas of the return such as capital gains, claiming expenses, rental income etc. These can be accessed here.

 

New clients – remember that filing is not possible without a unique tax reference (UTR)

It might be obvious, but a UTR is required to file the return online. If your new client has come from another accountant they will most likely have one. But a start-up may not have registered as self-employed and may have to wait up to ten working days for HMRC to issue a UTR. Ensure they are prepared for this step.

 

Have you checked if your client is claiming child benefit?

Where a client has income over £50,000 there is a specific tax charge (basically a repayment of the benefit).  But remember this includes situtaions where:

  • the client or their partner get Child Benefit
  • someone else gets Child Benefit for a child living with them and they contribute at least an equal amount towards the child’s upkeep
  • It doesn’t matter if the child living with the client or in fact is not their own child.

 

The relevant income is the total taxable income before any personal allowances and less things like Gift Aid.

 

Some tax software includes a ‘nudge’ warning where the income entered exceeds the above but always ensure you confirm the situation if this is the case. Some clients may need to register for a tax return to pay the charge even if they are not self-employed or normally need to fill in a tax return.

 

More details are available here.

 

Is your client’s tax code wrong?

Many clients use the annual tax return to get a tax refund – or make a payment of tax liabilities – because they have multiple sources of income and the tax codes issued do not properly address the correct tax. Where a code is incorrect, the accountant can advise their client to get it corrected directly and not wait for the return to be submitted. Or the accountant can do this for them using the online form found here.

 

Alternatively the client might wish to set up their own personal tax account. The instructions can be found here.

 

Has your client claimed the correct deductions from rental income?

Your clients may have one or more rental properties. The rules regarding what can/can’t be claimed are changing fast so here’s a quick re-cap:

  • Back to basics: the expenses must be wholly and exclusively for the purposes of renting out the property. However, generally where a definite part or proportion of an expense is incurred wholly and exclusively for the purposes of the property business, you can deduct that part or proportion
  • Common types of expenses that can be deducted (if paid by the client) are:
  • finance costs - only the interest part of the mortgage payment can be treated as an expense when working out your rental profit or loss for tax purposes. With a repayment mortgage, the capital repayment part of any payments isn’t an allowable deduction.
  • If the mortgage loan on a buy-to-let property is increased, the interest on the additional loan may be treated as a revenue expense, as long as the additional loan is wholly and exclusively for the purposes of the letting business.  Remember that interest on any additional borrowing above the capital value of the property when it was brought into the letting business isn’t tax deductible.
  • For furnished lets, wear and tear allowance isn’t available for income tax purposes from 6 April 2016. Instead there may be a claim for Replacement Domestic Item relief instead.
  • For future tax returns the rules have changed for the tax deductibility of finance costs.  If the mortgage is for a residential property then the restrictions on interest from April 2017 will apply.

 

Disclosures and calculations relating to capital gains

 

Use of reliefs

Ensure that clients are aware of/have claimed relevant capital gains tax reliefs.  There have been a number of changes recently so it’s important to refresh your knowledge on the main reliefs available both for the 2016/17 tax return and for future years. Some of them have some devil in the detail; access full guidance here:

 

Business asset roll over relief

Chattels

Trusts

Gift relief

Principal Private residence relief

Entrepreneurs’ relief

Incorporation relief

 

Allowances and losses

Ensure that the CGT allowance is utilised and also losses brought forward are claimed where applicable.

 

Disclosures

Remember that the capital gains pages need to be completed merely because the client sold or disposed of chargeable assets which were worth more than £44,400.

 

Student loans

Where a client has self-employed income as well as taxed salary income, the student loans repayment is based on both (subject to thresholds). Clients may think that because deductions are taken from their salary this is all that needs to be done. So be careful that the student loans box is completed on the tax return and that the calculations include all relevant income.

 

Charity donations

Clients that make charitable donations may not inform you of these and may be unaware of the available tax relief. Higher rate taxpayers can claim the difference between the rate paid and basic rate on the donation, either:

  • through the self assessment tax return
  • by asking HMRC to amend the tax code.

 

Clients can also claim tax relief on Gift Aid donations made in the current tax year (up to the date of sending the return) if they either:

  • want tax relief before the end of the tax year
  • were higher rate tax in a previous year (but are not now).

 

Taxable benefits

Make sure salaried clients (especially directors) are aware that P11d benefits need to be included on the tax return in most cases. These can easily be left off the tax return as clients assume that because their code has been altered then their disclosure responsibilities are complied with.

 

Transfer of personal allowances

Although not strictly a tax return issue, this is a good opportunity to enquire about the income of your client’s spouse or civil partner. They can transfer £1,100 of their personal allowance to the husband, wife or civil partner. This can reduce their tax by up to £220 every tax year. To benefit as a couple, the transferor needs to earn less than their partner and have an income of £11,000 or less. For more details follow this link to HMRCs guide.

 

ACCA has produced various guides and summaries on the 2016 Budget which affect

 

For further information on 2016/17 tax returns, see ACCA’s guidance issued following the 2016 Budget here.

 

Ten common tax elections and claims

Help clients avoid being caught out.


  1. Main residence nomination s222 (5a) Taxation of Chargeable Gains Act 1992 (TCGA 1992)
    Taxpayers with two or more residences may choose which property is to be treated as their main residence for capital gains tax purposes by lodging an election under TCGA 1992, s222(5). The election must be made within two years of acquiring a second (or subsequent) residence unless there is a delay in occupation, in which case the date of moving into residence is the trigger event. Once an election has been made it can be varied at any time and so even where the facts would suggest that a nomination is not necessary, it is prudent to make one to leave the door open for a variation at a later date.

  2. Claim to reduce income tax payments on account - SA303 
    A claim to reduce tax payments on account can be made by a  taxpayer at any time up to 31 January after the end of the tax year concerned if he believes that his tax liability will be lower than the previous year. The taxpayer must make the claim by notice, giving reasons why the payments on account should be reduced. If a taxpayer deliberately makes a claim to reduce the payment on account for the benefit of obtaining a cash flow advantage when he knows that his tax liability for the year would be higher than the amount paid then HMRC reserves the right to charge a penalty. 

  3. Deed of variation s142  Inheritance Tax Act 1984 (IHTA 1984) and s62 (7) TCGA 1992
    If the variation includes a statement that the parties to the variation intend that the provisions of section 142(1) Inheritance Tax Act 1984 and section 62(6) Taxation of Chargeable Gains Act 1992 are to take effect for inheritance tax, capital gains tax or both, the variation is treated as if the deceased had made it. In other words, the changes are treated as having been made by the deceased and as having taken effect from the date of death. For a variation to take effect for inheritance tax, capital gains tax or both, it must be made within two years after the death, be in writing and signed by all the beneficiaries who would lose out because of it.

  4. Negligible value claim s24 (2) TCGA 1992 
    Under this legislation a taxpayer, who holds an asset which has become of negligible value, may make a claim to be treated as though the asset had been sold and then immediately reacquired for an amount equal to its value. When a negligible value claim is made the taxpayer may wish to specify an earlier time, falling in the two previous tax years, at which to treat the deemed disposal as occurring. The taxpayer has to meet all the necessary conditions for the claim at that earlier time as well as at the time of the claim. The effect of crystallising such a 'paper' loss, without actually selling the asset, can often be useful for reducing income tax, corporation tax or capital gains tax.

  5. Form 17 (Declaration of beneficial interests in joint property and income)
    Income and gains from jointly owned properties are usually taxed equally on spouses (or civil partners) regardless of the actual ownership of the property. Completion and submission of this form specifies a different apportionment for tax purposes (based on actual proportion of ownership), which can be useful where owners are subject to different rates of income tax.

  6. Capital losses set off against income tax s131 ITA 2007
    Under this section a taxpayer may be able to reduce his income tax liability by making a claim to offset losses on disposal of shares acquired by subscription in a qualifying trading company (or following a negligible value claim for such shares), against other income in the current or previous year.

  7. Holdover relief claim s165 TCGA and s260 TCGA
    Hold-over relief is available under s165 TCGA 1992. The gift must be of `business assets'. The transferor and the transferee must claim jointly within five years from transfer. The time limit for claiming gift hold-over relief is five years and 10 months from the end of the tax year of disposal.Hold-over relief is also available under s260 TCGA 1994. where the disposal is a chargeable transfer for Inheritance Tax purposes, but not a potentially exempt transfer. Cases where there is no liability to Inheritance Tax, because the value transferred is within the zero-rate band, qualify for hold-over relief.

  8. Payment of capital gain tax by instalments s281 TCGA 1992
    Where hold-over relief is not available, or only partial relief is available, and the asset is:
    * land and building
    * shares in unquoted companies
    * shares in a quoted company on which the donor had a controlling interest before the gift.

    The taxpayer can make a claim under s281 TCGA 1992 to pay tax in instalments. Also under s280 TCGA 1992. if any of the consideration is payable more than 18 months after the date of the disposal the tax due may be paid in instalments. The period over which the instalments are paid would be agreed with HM Revenue & Customs but cannot exceed the lesser of eight years and the point when all of the consideration is paid. The unpaid instalments carry interest.

  9. Short-life asset election s85-s86 Capital Allowance Act 2001 (CA 2001)
    An asset that is expected to be used in the business for a period of eight years or less, and have a nil or low disposal value, can be elected (under s85-s86 CA 2001) to be treated as a short life asset.  De-pooling these items into a separate short-life asset pool will accelerate the tax relief. 

  10. Election by non-UK domiciled spouse or civil partner to be treated as UK domiciled for Inheritance tax purposes.  IHTA84/s67ZA(3)
    From 6 April 2013, a person can make an election to be treated as UK domiciled for IHT provided that during the period of seven years ending with the date on which the election is made, the person had a spouse or civil partner who was domiciled in the UK. Any transfers between spouses or civil partners made after that date qualify for full spouse or civil partner exemption. HMRC guidance can be accessed here.
Income tax and interest on qualifying loans

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


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

 

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

 

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

 

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

 

Loans that qualify for tax relief are:

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

 

The limit on income tax reliefs restricts the total amount of qualifying loan interest relief and certain other reliefs in each year to the greater of £50,000 and 25% of ‘adjusted total income’.

 

For more information about the limit on income tax reliefs, please see HMRC Helpsheet 204.

Marriage allowance and married couple’s allowance

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


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

 

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

 

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

 

Marriage allowance

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

 

The transferable amount is:

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

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

 

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

 

Conditions for transferor to meet

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


Conditions for transferee to meet

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

 

Taxpayers can backdate their claim to include any tax year since 5 April 2015 that they were eligible for marriage allowance. So while preparing the tax return for 2016-17, taxpayers can claim for 2015-16 marriage allowance transfer if they have not done already so.

 

Election for marriage allowance

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

 

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

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

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

 

Example – 2016/17 tax year

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

 

Husband

Employment income                                                           43,000

Less personal allowance                                                   11,000

 Taxable income                                                                   32,000

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

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

Tax due                                                                                              6,180                         

 

Wife

Husband

Self-employment income                                                               9,000

Less personal allowance                           11,000

Less transferred tax allowance                   1,100

                                                                                                            9,900

Taxable income nil as income lower than Personal Allowance    nil                        

 

Tax saving

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

 

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

 

 

Married couple’s allowance

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

 

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

 

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

 

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

 

Year of marriage

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

 

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

 

Year of death

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

 

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

 

                        Basic married                        Maximum married                              Income

                        couple’s allowance                couple’s allowance                            limit   

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

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

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

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

 

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

 

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

 

Example – 2016/17 tax year

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

 

Net income                                                                                                    33,000

Less personal allowance                                                                              11,000

Taxable income                                                                                             22,000

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

Less married couple’s allowance £5,705 @ 10%                                             570

Tax payable                                                                                                     3,830

 

Workings to calculate £5,705 figure above

Maximum married couple’s allowance                                                            8,355

As income is over income limit of £27,700

Excess of net income over income limit

(£33,000 - £27,700) = £5,300

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

Reduced married couple’s allowance                                                           5,705           

 

You can read HMRC’s guidance on this matter.

 

What is cybersecurity?

The Secret Accountant believes they are not the only one is still confused when it comes to cybersecurity.


The Secret Accountant believes they are not the only one is still confused when it comes to cybersecurity.

 

I do believe this is a huge issue for accountants and the business community going forward especially with the GDPR rules on the horizon.

 

We all rely heavily on technology, storing everyday data such as employee details and client information. Therefore the risks that come with this are growing and require our attention. Whilst the internet is a very powerful and necessary tool these days, it also increases the risks that we face almost every week.

 

When I meet clients and bring the subject of cybersecurity into the conversation I’m met with the reply:

  • ‘we’re not a target’; or
  • ‘we don’t need to worry about security’.

Many clients seem to believe that only large organisation need to worry about cybersecurity – but it is dangerous to think this way. Every organisation is at risk.

 

Which leads nicely to GDPR…

 

As with cybersecurity, clients are only just waking up to the fact this takes effect from May 2018 – not long now. When I tell clients the fines can be 4% of turnover this does get their attention and opens up the dialogue.

 

Now is the time to get familiar with the terms personal data, data controller and data processor. Take a look at the ICO website where there is a great 12 point plan to help you get ready, covering:

  1. awareness
  2. information you hold
  3. individuals rights
  4. communicating privacy information
  5. subject access request
  6. lawful basis for processing data
  7. consent
  8. children
  9. data breaches
  10. data protection by design
  11. data protection offices
  12. international issues.

 

Implementing these steps could have resource issues for both accountants and clients; don’t leave it to the last minute because each one will require effort and focus.

 

ACCA resources

ACCA’s recommended provider for PII – Lockton – has provided a series of articles on GDPR in recent editions of In Practice covering:

 

Introduction to GDPR

Is your firm on track to GDPR compliance?

How to become GDPR compliant

 

Webinars

ACCA has also worked with Haines Watts to develop a series of webinars covering GDPR. The first webinar is a one hour overview webinar with a further 16 short webinars covering industry specific issues, affected business functions, and key elements from the Regulation.

 

Register and watch any of these webinars on demand now.

 

The Secret Accountant is a small practitioner in the heart of the UK.

 

The tax treatment of rental expenses

Factors to consider when calculating rental expenses.


Factors to consider when calculating rental expenses.

 

Generally, when calculating the rental business profits, expenses will be treated as revenue expenditure provided they are incurred wholly and exclusively for the purposes of the business and are not of a capital nature.

 

Capital expenditure cannot be deducted against the rental income if it forms the base cost of the property and is used in the capital gains tax computation. Capital expenditure includes the cost of land and property as well as the costs of any capital improvements.

 

Wear and tear allowance

If the property is let furnished, the landlord is able to claim a wear and tear allowance. This is 10% of the ‘net’ rent and covers plant and machinery that a landlord would normally provide in a furnished accommodation, such as furniture, fridges, carpets and curtains. ‘Net’ rent is the total rent for the year, less any expenses paid by the landlord that would normally be borne by the tenant, for example utility bills.

 

Changes to wear and tear allowance – 1 April 2016 for corporation tax payers and 6 April 2016 for income tax payers

The wear and tear allowance for fully furnished properties will be replaced with a relief that enables all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property. The relief given will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced.

 

Wholly and exclusively - cost of travel to visit the property

Revenue expenses are allowable deduction against rental income only if they are incurred wholly and exclusively for the purpose of letting. Where expenditure has a dual private and business purpose, unless the business element can be clearly distinguished then the whole of the expenditure will be disallowed for tax purposes.

 

While reasonable costs for inspection visits are usually allowable, if the trip is mainly for private purposes and it is not possible to separate this private element from the business portion, then none of the cost is deductible.

 

Legal fees

Solicitors' fees incurred to evict tenants or to recover rental income are treated as incurred wholly and exclusively for the purpose of the rental business and as a result are allowable. Management fees/agents’ fees will be fully tax deductible. If the landlord chooses to advertise his property privately, this cost is also allowable.

 

Redecoration costs

Ordinarily, the cost of redecorating would be an allowable revenue expense. However, if the work is undertaken as part of an improvement, the entire cost is treated as being capital, including the redecoration.

 

Finance cost

Finance interest payable on loans (including incidental cost of financing) used to buy land or property which is used in the rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business regardless of the security given for borrowed funds.  

 

If a property is let for short periods in a tax year, or only part of it is let throughout a tax year (or both), the interest charged on a qualifying loan on that property has to be split between the rental business use and the private or non-business use. The split is done in whatever way produces a fair and reasonable business deduction, taking account of both the proportion of business use and the length of business use. The interest does not have to be split if the landlord is genuinely trying to let the property but it is empty because they have not been able to find a tenant. In this case, the interest will meet the ‘wholly and exclusively’ test.

 

Changes to interest and other finance charges – 6 April 2017
From 6 April 2017, tax relief on interest paid by landlords of residential properties will be restricted gradually (by 1/4 for each tax year) so that from 6 April 2020, interest will not be an allowable expense in computing the profits of the business, but will attract tax relief at 20%. Landlords will be able to obtain relief as follows:

 

                                 Finance cost allowed in full               Finance cost allowed at basic rate

Year to 5 April 2017             100%                                      0%

Year to 5 April 2018             75%                                        25%

Year to 5 April 2019             50%                                        50%

Year to 5 April 2020             25%                                        75%

Year to 5 April 2021             0%                                          100%

 

An example on how the changes will affect a basic and higher rate taxpayer can be found here.

 

Accountancy fees

The cost for preparing rental accounts is an allowable expense; however, the cost of completing the landlord tax return is not allowed as it is a private expense.

 

Pre-letting expenses – capital or revenue?

Guidance on whether repairs are a capital or revenue pre-letting expense.


Guidance on whether repairs are a capital or revenue pre-letting expense.

 

For tax purposes profits from UK land or property are treated as arising from a business. The broad scheme is that rental business profits are computed using the same principles as for trades (ITTOIA 2005, s272). Expenses are allowable if they are incurred ‘wholly and exclusively’ for the rental business.

 

If a property is let at less than the full commercial rent, any expenditure relating to that property will normally have been incurred partly for a philanthropic purpose and will  fail the ‘wholly and exclusively’ test . Although, strictly, no expenditure on such properties is admissible as an expense of the rental business, expenses can be deducted up to the amount of rent derived from that property.

 

Pre-letting expenses

Usually a rental business begins when letting first commences. Allowable revenue expenditure incurred before the rental business begins can be relieved under the ICTA88/s401 or ITTOIA05/s57, provisions for pre-trading expenditure.

 

Relief is only due if the expenditure:

  • is incurred wholly and exclusively for the purposes of the rental business
  • is not capital expenditure
  • is incurred within a period of seven years before the date the rental business is started, and
  • is not otherwise allowable as a deduction for tax purposes, and
  • would have been allowed as a deduction if it had been incurred after the rental business started.

 

Thus, for example, council tax on a property could be allowable under the above rules if it is due before the property is first let, provided the property was acquired solely for the purposes of the rental business. However, the relief is not allowable if the council tax was paid on the taxpayer’s own private residence before the property was let (as it would be the taxpayer’s own expense).

 

Qualifying pre-letting expenditure is treated as incurred on the day on which the taxpayer first carries on their rental business. So, any repairs carried out before the letting starts can still be deducted from the first year’s gross rents.

 

Capital or revenue – two contrasting court cases

Pre-letting expenses have been challenged successfully by HMRC in Law Shipping Co Ltd v CIR12 TC 62. Pre-letting expenses were disallowed on the key point that a ship was bought in a defective state and could not be used until the repairs had been undertaken.

 

This can be contrasted with the expenditure in Odeon Associated Theatres Ltd v Jones 48 TC 257, where the dilapidated state of cinemas was due to the accumulation of repairs in wartime (and just after) when building work was not permitted to be carried out. The courts allowed the deduction. Although both companies purchased assets in poor condition, there were key differences between the two cases:

  • in Law Shipping, the company acquired a ship in poor condition that had to be repaired before they could use it. This was capital expenditure on acquiring a working asset
  • in Odeon, the company was able to operate the cinemas for a number of years before they carried out the repairs. Furthermore, the price paid was not reduced to reflect the state of repair. The expenditure was found to be on repairs and, therefore, allowable.

 

The following factors should be considered:

  1. Whether the purchase price is substantially lower in order to reflect the poor state of the asset. Is there any evidence in, for example, the contract for the sale of the asset or in negotiations leading up to the contract that the purchase price was substantially less because of the dilapidated state of the asset?

  2. Whether the expenditure merely reflects the reduced value of an asset due to normal wear and tear (for example, between normal maintenance cycles).

  3. Whether the asset could be used shortly after acquisition without being repaired.

  4. Whether there is a sound commercial accountancy principle for the expenditure to be charged as revenue or capital. For example, has the asset been improved or just restored to its original state? HMRC does accept that the use of more modern materials or better technology does not by itself constitute capital expenditure (see Business Income Manual at BIM46920 to 25).

  5. Whether abnormally heavy repairs expenditure is incurred on an asset shortly after the change of ownership.
How to help clients access export finance

UKEF exists to ensure that no viable UK export fails for lack of finance or insurance from the private sector.


UK Export Finance (UKEF) exists to ensure that no viable UK export fails for lack of finance or insurance from the private sector.

 

Established in 1919 as the world’s first export credit agency, UK Export Finance (UKEF) exists to ensure that no viable UK export fails for lack of finance or insurance from the private sector. It achieves this through government-backed loans, guarantees and insurance, which could be the key to help your clients maintain and increase sales overseas.

 

As with any business activity, helping your clients find the right finance and insurance is vital to their export success. Sitting within the heart of the Department for International Trade’s export support offering, UKEF provides impartial guidance and assists in securing the right financing for a competitive edge in a firm’s export activity, whether it’s by helping companies:

 

Access working capital

With larger orders, longer lead-in and shipping times and payment often not made until delivery of goods and/or services, access to working capital is a constraint many new and established exporters, and their suppliers, need to manage. UKEF can provide support under its Export Working Capital Scheme, by providing a company’s bank with a guarantee to allow it to make a working capital loan to the company. It can also guarantee bonds through its Bond Support Scheme, allowing banks to issue advance payment, warranty and other contract bonds on behalf of exporters and their suppliers with a substantially decreased cash deposit requirement.   

 

Earlier this year, UKEF announced a partnership with five of the UK’s biggest banks to deliver government-backed financial support more quickly and efficiently. Under the new agreement with Barclays, HSBC, Lloyds Banking Group, RBS/NatWest and Santander, UKEF will be able to streamline the application process, in addition to extending its support to supply chain companies of UK exporters, significantly increasing the number of businesses able to benefit from UKEF-backed trade finance.

 

In the 2017 Autumn Budget, UKEF further expanded the range of support for exporters to include a new guarantee to banks designed to increase liquidity in the supply chain. By providing a guarantee on an invoice discounting facility, this support allows exporters time to pay, while their suppliers gain access to early payment.

 

Manage payment risks

Export insurance is an important way of managing the uncertainties of trading overseas, whether these are risks around non-payment or political infrastructure. Protection against the risk of non-payment affords your client confidence around business continuity despite a buyer becoming bankrupt, their import/goods licence being cancelled or their inability to meet the payment terms of the contract. Similarly, as UK exporters continue to explore new markets, insurance against political risk serves to protect your clients from sudden political and financial sanctions or bank restrictions around currency movements.

 

Export insurance is readily available in most cases from the commercial sector, but for some markets securing the right cover can be a challenge – and that’s where UKEF can provide the cover needed with its Export Insurance Policy. This cover also extends to cover exporters who are unable to uphold the contract for reasons beyond their control, such as the country risk or issues within their supply chain.

 

Offer competitive terms to buyers

UKEF helps exporters win contracts by providing attractive financing for their overseas buyers, either in the form of guarantees on commercial loans or by lending to them directly. This competitive, long-term financing is particularly relevant to buyers in new and emerging markets, but also for larger and longer-term projects where the private sector does not have the capacity to support. Our support in offering competitive financing also includes local currency financing, which in the Autumn Statement 2016 was increased to include 40 pre-approved local companies in which UKEF can offer support, enabling more overseas buyers of UK exports to buy British and pay in their own currency.

 

UKEF was voted the Best ECA 2016 by TXF News readers – it’s a recognition of our innovative approach to supporting exporters, comprehensive product offering and substantial appetite to take on new business. We can support exports for any size of company, across all sectors and our network of export finance managers are located across the UK.

 

If you would like to find out how UKEF can help your customers secure finance and improve their overseas offer, you can contact your closest export finance manager here.

The Scottish rate of tax

A recap on who, what and when, designed to help with 2016/17 self-assessment tax returns.


A recap on who, what and when, designed to help with 2016/17 self-assessment tax returns.

 

When are the changes from?

From 6 April 2016 people who live in Scotland pay a proportion of their income tax to the Scottish government. The Scottish rate of income tax (SRIT), as introduced by the Scotland Act 2012, is charged on those defined as Scottish taxpayers. This is a change from the old system, where all income tax was paid to the UK government to fund spending across the whole of the UK.

 

How does it work?

All the main rates of income tax for Scottish taxpayers are reduced and replaced by the Scottish Rate of Income Tax:

 

Scottish Rate of Income Tax 2016/17

 

Current UK Income tax rates

UK tax rates reduced by 10 percentage points

Scottish rate set by Scottish Parliament for tax year 2016-17

Basic rate 20%

Reduced Basic rate 10%

10%

Higher rate 40%

Reduced Higher rate 30%

Additional rate 45%

Reduced Additional rate 35%

 

The Scottish Rate of Income Tax doesn’t apply to income from:

  • savings such as building society interest
  • dividends.

 

Tax on the above income stays the same for all taxpayers across the UK. Note that the existing UK income tax thresholds and allowances will still apply and will continue to be set by the UK government.

 

While the Scottish Parliament has the power to set the Scottish rate of income tax HMRC continues to be responsible for its collection and management. As such income tax remains part of the existing UK income tax system and is not a devolved tax.

 

What is the definition of a ‘Scottish taxpayer’

The definition of a Scottish taxpayer is quite complicated. It generally focuses on the question of whether the taxpayer has a ‘close connection’ with Scotland or elsewhere in the UK. The existence of that ‘close connection’ will usually be determined by where an individual has his or her place of residence in the course of a tax year.

 

Common misconceptions

None of the following factors will cause an individual to be a Scottish taxpayer if their place of residence is outside of Scotland: 

  • national identity – regarding oneself to be Scottish
  • location of work – working in Scotland
  • location of income source – receiving a pension or salary from a Scottish entity
  • travelling in Scotland – driving a lorry in or frequent work visits to Scotland.

 

Therefore, for the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer. 

 

However, the government acknowledges that there will be complications and so they have released detailed guidance which is available here.

 

There is also more guidance on the issue of a taxpayer who owns homes in both Scotland and the rest of the UK available here.

 

What is the Scottish rate of income tax?

Currently the rate is 10% so apart from the division of the tax between Scotland and the UK, a taxpayer affected by the changes should not pay any more tax overall as the following table illustrates:

 

The table shows the total rate you pay if your personal allowance is £11,000 (2016/17). You don’t get a personal allowance if you pay additional rate tax.

 

UK rate for England, Wales and Northern Ireland

Income band

UK rate paid in Scotland

Scottish rate

Total rate for Scottish taxpayers

Basic rate 20%

£11,001 - £43,000

10%

10%

20%

Higher rate 40%

£43,001 - £150,000

30%

10%

40%

Additional rate 45%

Over £150,000

35%

10%

45%

 

Employers’ responsibilities

It is the responsibility of HMRC to identify employees who will pay the Scottish Rate of Income Tax and decide what tax they pay. Employers and pension providers don’t need to decide this and should only use a Scottish tax code if HMRC tells them to. To ensure that tax payments are as accurate as possible, employers should, however, encourage their employees to contact HMRC when they move address.

 

HMRC should have issued tax codes to employers before April 2016 to identify employees who are Scottish taxpayers. Employers will deduct tax at the appropriate rates, but will not need to change how they report or make payments for income tax to HMRC.

 

Professional fees and subscriptions

Claims by individuals for income tax relief.


Claims by individuals for income tax relief.

 

Tax relief can be claimed on fees or subscriptions paid to approved professional organisations where an individual must have membership to do their job or it’s helpful for their work.

 

The claims are under sections 343 and 344 ITEPA 2003 and in the Employment Income Manual EM 32915 it is stated that a deduction may not be given in respect of:

  • a fee or contribution not included in List 3
  • an annual subscription to a body that has not been approved by the board
  • an entrance fee or a life membership subscription
  • a fee, contribution or subscription borne by the employer, unless the payment by him is treated as earnings.

 

List 3 contains a large number of bodies and is regularly updated with additions and removals.

 

The guidance also states that ‘normally it will be apparent from the nature of the person’s employment whether the fee or contribution is paid as a statutory condition of exercising the employment, or whether membership of the approved body to which the annual subscription is paid is relevant to the employment. Where membership does not seem directly relevant you should consider whether the nature of the duties is such that a deduction is nevertheless allowable.’  

 

It is also stated that ‘Time should not be spent in making enquiries regarding the relevance of a subscription unless membership of the body appears to be quite unrelated to the employment'.

 

An increasing profile for intellectual property/Defining assets you can't see

Now is a good time to address the fundamental issue of intangibles description and definition.


Now is a good time to address the fundamental issue of intangibles description and definition, believes Martin Brassell.

 

If you’re looking for a book to add to your Christmas (or New Year) list, you might find Capitalism without Capital (Haskel and Westlake, Princeton, 2017) an interesting read. Written by two experts who have been intimately acquainted with the challenges of identifying intangible asset investment over many years, and well reviewed in national media, it shines a fresh light on the ‘hidden capital’ we all know companies have, and what it means for the economy.

 

Along the way, the book notes that statutory financial statements don’t generally make a great job of articulating the intangible assets companies create that often drive business value. This is hardly a controversial statement, but neither is it an easy problem to solve. Some of these assets are not readily separable from the entities that have created them; as for the remainder, there are very few asset types for which there can honestly be said to be a transparent, ready market where their value can be realised.

 

It’s therefore encouraging to see that the draft guidelines for the company strategic report, currently being formulated by the Financial Reporting Council, do include a specific reference to intangibles. The latest draft to be released puts it this way:

 

The strategic report should also include information relating to sources of value that have not been recognised in the financial statements and how those sources of value are managed, sustained and developed, for example a highly trained workforce, intellectual property or internally generated intangible assets, as these are relevant to an understanding of the entity’s development, performance, position or impact of its activity.

 

The concept of ‘value sources’ has something in common with the Integrated Reporting (IR) framework, another initiative aimed to address the information gaps that financial statements leave behind. IR sees intellectual capital as one of a number of ‘stocks’ that are transformed by the business’s operations into value.

 

Intangible assets are different

Both the changes to strategic reports and the increasing interest in IR are encouraging developments. However, one of the points made in Capitalism without Capital is that intangible assets are different, and behave differently, from tangible ones. It is difficult to build an inventory of things you can’t see, especially when you don’t have the right language to describe them.

 

For either strategic reports or IR to address the information gap that currently exists in relation to value-producing intangibles, in a way that provides stakeholders and investors with relevant points of comparison between firms, it is by definition necessary to agree what the common types of intangible are, and how they can be described clearly.

 

This point comes into sharp focus when one considers that reporting requirements, initially applied to large and quoted entities, have a habit of trickling down to smaller companies. Recent updates to UK GAAP, specifically the provisions of FRS 102, provide a good example of this. By changing the rules regarding the treatment of goodwill in acquisitions, this has brought small companies broadly into line with the international standards set out in IFRS 3. But despite now having a requirement to find the ‘identifiable intangible assets’ that have been acquired, guidance for accounting professionals on what they should be looking for is quite limited.

 

These identifiable intangibles are not trivial: they can be expected to account for a substantial proportion of the purchase price. Previous research by Deloitte (2007) and KPMG (2010), among others, highlights that when post-purchase accounting is concluded, they regularly account for between one-third and one-half of the amount paid. This is the ‘magic’ that happens when businesses are bought; the capital residing in a company that it couldn’t previously explain suddenly ‘materialises’ on the acquirer’s balance sheet.

 

Impact of FRS 102

As it happens, FRS 102 might also encourage more businesses to capitalise permitted development costs. It replaces the previous SSAP 13 provisions on R&D, which previously covered this aspect. Many technically advanced firms have rather weak balance sheets, and it would not be surprising to see an increasing trend towards amortisation of intangible investment in the future – especially where companies spend a lot on these assets.

 

Whatever the reporting framework chosen, anyone looking at a company will appreciate having better ways to understand where their value really lies. This includes how and why a firm is making investments in assets whose value cannot be shown in its financial statements. Whatever mapping is chosen, it would make sense to make this compatible with the headings recognised in growth accounting (R&D, design, software, branding, training, organisational development and original copyright works).

 

Difficult to finance

Lastly, Capitalism without Capital also points out that as well as being hard to recognise, intangible investment is also difficult to finance. The Autumn 2017 Budget included a commitment to look at finding ways to address this, particularly for IP-rich companies with good growth prospects. However, if companies aren’t equipped to explain what assets they own, lenders will find it difficult to respond to them. For many reasons, therefore, now would be a good time to address the fundamental issue of intangibles description and definition.

 

 

Martin Brassell FRSA is CEO of Inngot (www.inngot.com). He is co-author of two ACCA reports: Innovation, intangibles and Integrated Reporting (2015) and Accounting for innovation (2016). His recent report (with Dr Jackie Maguire) for the UK Intellectual Property Office on IP valuation has just been published as Hidden Value. Martin is also co-author of Economic Approaches to Intellectual Property (Oxford University Press, 2016).

 

Principal Private Residence Relief (PPR) and off-plan home purchases

Why buying an off-plan property means purchasing a property which is not yet completed.


Why buying an off-plan property means purchasing a property which is not yet completed.

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

 

Let’s look at the facts of the case to establish why this is so relevant.


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

 

The question was whether the period of ownership for PPR purposes began with a contract to acquire or when the property had been physically and legally completed and the purchaser had the right to occupy.

 

The case considered the provisions of s222 and s28 of TCGA 1992:

 

  • s222 TCGA 1992 provides for relief from a capital gains tax charge if the property is the main residence of an individual throughout the period of ownership. Partial relief is given if the property has been the main residence for part of the period
  • s28 TCGA 1992 provides that a person is deemed to have disposed of and acquired an asset when a contract is made and not, if different, the time at which the asset is conveyed or transferred.

 

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

 

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

 

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

 

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

 

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

 

Conclusion

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

 

Rent-a-room relief nearly doubles

Rent-a-room relief increased to £7,500.


Rent-a-room relief increased to £7,500.

 

From 6 April 2016 the level of rent-a-room relief increased from £4,250 to £7,500 per year.

 

How does the scheme work?

The rent-a-room scheme is a relief which provides that the rent received by an individual from a lodger (up to a prescribed limit) can be exempt from income tax.

This limit is halved if another person is also entitled to the income. For example, where a husband and wife own the property jointly the limit is reduced to £3,750 (£2,125 prior to 2016/17) each.

 

What are the options?

If gross receipts from letting are more than the rent-a-room limit of £7,500 (or £3,750, the individual has the following two options:

 

  • Pay tax on the actual profit (rental income less expenses)
  • Pay tax on gross receipts over the rent-a-room limit – that is, your gross receipts minus £7,500 (or £3,750). If this method is used you are not allowed to deduct any expenses.

 

HMRC will automatically use the first option but if you want to pay tax using the second option you need to tell HMRC by 31 January following the end of the tax year.

 

If you pay tax using second option, this automatically stops if your rental income drops below the £7,500 (or £3,750) limit.

 

Gross receipts include rental income (before expenses) and any amounts received for meals, goods and services, such as cleaning or laundry.

 

Qualifying conditions

Rent-a-room is aimed at individuals who let furnished residential accommodation in their own homes. The scheme cannot be applied to rooms let as an office or otherwise for business purposes.

 

Separate residence

The question that is likely to arise is whether some part of a house, for example a basement flat, is part of the taxpayer’s residence or is a separate residence. Where an individual lets furnished accommodation in a self-contained flat in the individual’s only or main residence he or she is eligible for rent-a-room relief provided the division of the residence into a self-contained unit is only temporary.

 

Whether such a division is temporary is a question of fact. Factors that will need to be considered are:

  • would structural alterations be necessary to undo the division?
  • how long has the residence been divided?
  • how long is the division intended to continue?
  • could possession of the flat be obtained separate from the property as a whole?
  • is the flat separately supplied and metered for mains services?
  • does the flat have its own unique postal address?
  • does it have its own separate entry?
  • would a mortgage lender be prepared to lend on the security of the separate flat?

 

The decision will be made on a case by case basis; photographs and personal inspection of the premises might be necessary.

 

Taxpayer moves home during the year

The rent-a-room rules apply to the total gross furnished letting receipts for the tax year from the taxpayer’s own home. If they move home, and lettings in both their old and new home qualify for rent-a-room relief during the same year, they must add together the rents from both to find the total receipts.

 

If a taxpayer lets their home in the UK while they live abroad, they will not normally be within rent-a-room. This is because the let property will not usually be a residence of theirs at any time during the basis period for the letting.

 

Individual moves leaving lodger

If the individual with a lodger moves to a new home leaving the old home unsold and the lodger in occupation, rent from the letting may continue to qualify for rent-a-room relief until the end of the basis period during which the qualifying individual moved.

 

Losses

The rent-a-room calculation cannot produce a loss. But where there is an actual loss from letting within rent-a-room, the taxpayer will be able to elect for the profit or loss to be calculated under normal business income principles (second option).

 

If there are losses brought forward they are set against the taxable profit from the rent-a-room letting, whichever way it has been calculated.

 

Rent a room relief and principal private residence (PPR) relief

When the owner comes to sell his property, the amount of PPR relief will not be affected by taking a lodger.

 

Payment options for self assessment bills changing

From Friday, there will be one less route to payment.


From Friday, there will be one less route to payment.

 

Self assessment tax liabilities can be paid by various methods including:

  • by debit or credit card online
  • transfers from your bank account by Faster Payments, CHAPS or BACS
  • at your bank or building society branch, under some circumstances
  • via direct debit
  • via a budget payment plan
  • by cheque through the post
  • through your tax code.

 

From Friday 15 December 2017 taxpayers will not be able to pay their self-assessment tax bills at the Post Office

 

 

How to reduce tax return errors

HMRC’s free checklists help agents reduce tax return errors.


HMRC’s free checklists help agents reduce tax return errors

 

HMRC has around 20 Agent Toolkits available for agents to download and use. These free toolkits help avoid common errors which HMRC sees in tax returns filed by agents. Each toolkit is reviewed and updated regularly to make sure they reflect any changes arising from the relevant Finance Acts and other issues. The most recently updated toolkits are:

 

Each toolkit has a checklist which the agent can download and fill in to support the tax return completion process. This will help to identify the key issues to address with links to further online guidance and information on each area.

 

Here’s an example checklist covering directors’ loan accounts:

 

 

HMRC acknowledges that agents and advisers play an important role in helping their clients to get their tax returns right. These toolkits are designed to help reduce errors, demonstrate reasonable care and file timely and accurate tax returns.

 

For more information on how HMRC sees penalties and reasonable care follow this link to HMRCs ‘Penalties – an overview for agents and advisers’ here

 

Have a look at the full list of toolkits. HMRC tells us that the most popular is on property rental.

 

HMRC would like to hear about your experience of using the toolkits to help develop and prioritise future changes and improvements. Send HMRC your feedback here.

 

 

 

IR35 changes and the public sector

Public sector organisations who engage workers through a PSC face major changes under IR 35.


From April 2017, public sector organisations that engage workers through intermediaries, such as a personal service company (PSC), are required to ensure that IR35 is correctly implemented.

 

Prior to 6 April 2017 this responsibility largely fell on the individual’s personal service company or agency. This is a major change that will alter the future of PSCs. The tax and NI saving advantages enjoyed by PSCs and public sector bodies have been abolished.

 

Public sector bodies decide whether any contracts they enter into with PSCs or agencies are subject to IR35. Even the existing contracts entered on or before 6 April 2017 fell in the category for payments made after this date. HMRC Employment Status Service tool is being widely used to identify the nature of the engagement.

 

Once the relationship is deemed to be caught out by IR35 then:

  • the public sector engager or agency is treated as the employer for tax and National Insurance purposes
  • the amount paid to the worker's intermediary for their services is regarded as employment income or of earnings for NIC purposes of that worker
  • the public sector engager or the agency is liable for Employer's NIC and must deduct tax and NIC from any payments made to the intermediary in respect of the services to the worker
  • the public sector engager or the agency is reporting such payments under Real Time Information (RTI)
  • the public sector engager or the agency treats all engagements by default position within the scope of IR35.

 

Reduction of payment on account:

When completing 2016-17 tax returns discuss with clients if they are being paid net of deductions since 6 April 2017. As a reminder every individual has to make two payments on account every year unless:

  • the last self-assessment tax bill was less than £1,000 (excluding capital gains or student loans)
  • 80% of all the tax has already been paid, for example through the tax code

 

Each payment is half your previous year’s tax bill. Payments are due by midnight on 31 January and 31 July.

 

Payments on account don’t include anything you owe for capital gains or student loans (if you’re self-employed) - you’ll pay those in your ‘balancing payment’.

Payment on accounts can be reduced by:

  • logging in to your online account and clicking ‘Reduce payments on account’
  • sending form SA303 to your tax office.

 

Averaging profits for farmers

Farmers and market gardeners in the UK may obtain relief by averaging the profits of consecutive years.


 Farmers and market gardeners in the UK may obtain relief by averaging the profits of consecutive years.

The rules relating to the averaging profits of farmers and creative artists are in Income Tax (Trading and Other Income) Act 2005 (ITOIA 2005), Part 2 Chapter 16 s221 to s225.

These averaging rules were originally introduced because it was felt that farmers were suffering from a high effective rate of income taxation, mainly because of fluctuations in profits caused by the weather and increasing influence of world market prices.  Averaging may help farmers who pay tax at the basic rate one year and higher rate the next, or farmers who are liable to tax in one year but are not liable in the next year.

 

Farming is defined in Income Tax Act 2007 s996 as being the occupation of land wholly or mainly for the purposes of husbandry but excluding any market gardening.

 

Averaging can be claimed where the difference between the profits for the two years is 30% or between 25% and 30% (marginal relief). It can’t be claimed where profit differences are below 25%. 


They are claimed in the tax return for: 

 

You can see more on the return rules including worked examples and a look at the rules relating to the averaging profits of farmers on our technical advisory webpages 

 

Averaging options for 2016-17 tax returns:

 

Finance Act 2016 extends the ability for profit averaging to five years and removes the marginal relief:

  1. two year averaging
  2. five year averaging
  3. no averaging at all

 

The ‘volatility condition’ has to be met to qualify for averaging provision:

 

  • For two year averaging, the current year and prior year’s profits must not be within 75% of one another, ie the difference between the profits for the two years must be more than 25% of the profits of the year with the better result.
  • For five year averaging, the average of the previous four years’ profits and the fifth year’s profits must not be within 75% of one another, ie the difference between the profits for 2016 to 2017 and the average of the profits for the four previous tax years must be more than 25% of the profits of the higher figure. This condition is also satisfied if any one of these years has nil profits or a loss. Those losses will then receive tax relief under the normal loss relief rules.

 

An averaging claim must be made on or before the first anniversary of the normal self-assessment filing date for the last of the tax years to which the claim relates.

 

Generally averaging is NOT permitted in the following circumstances: 

  • in the year of commencement or cessation of trade
  • for other streams of income for farmers such as letting of property, income from leisure activities or income generated from renewable energy etc
  • farming on a contract basis
  • when using cash accounting
  • partners who joined or left during the averaging period
  • no marginal relief is available after 1 April 2016
  • companies, including corporate partners
  • other bodies which are subject to corporation tax.

 

Losses

Most losses can be claimed against other income, but there are special rules which restrict the ability to claim if the farm is not commercial or if there was a run of losses (worked out before capital allowances) of more than five tax years.

 

Find more information in HMRC helpsheet 224

An increasing profile for intellectual property

Now is a good time to address the fundamental issue of intangibles description and definition.


Now is a good time to address the fundamental issue of intangibles description and definition, believes Martin Brassell.

 

If you’re looking for a book to add to your Christmas (or New Year) list, you might find Capitalism without Capital (Haskel and Westlake, Princeton, 2017) an interesting read. Written by two experts who have been intimately acquainted with the challenges of identifying intangible asset investment over many years, and well reviewed in national media, it shines a fresh light on the ‘hidden capital’ we all know companies have, and what it means for the economy.

 

Along the way, the book notes that statutory financial statements don’t generally make a great job of articulating the intangible assets companies create that often drive business value. This is hardly a controversial statement, but neither is it an easy problem to solve. Some of these assets are not readily separable from the entities that have created them; as for the remainder, there are very few asset types for which there can honestly be said to be a transparent, ready market where their value can be realised.

 

It’s therefore encouraging to see that the draft guidelines for the company strategic report, currently being formulated by the Financial Reporting Council, do include a specific reference to intangibles. The latest draft to be released puts it this way:

 

The strategic report should also include information relating to sources of value that have not been recognised in the financial statements and how those sources of value are managed, sustained and developed, for example a highly trained workforce, intellectual property or internally generated intangible assets, as these are relevant to an understanding of the entity’s development, performance, position or impact of its activity.

 

The concept of ‘value sources’ has something in common with the Integrated Reporting (IR) framework, another initiative aimed to address the information gaps that financial statements leave behind. IR sees intellectual capital as one of a number of ‘stocks’ that are transformed by the business’s operations into value.

 

Intangible assets are different

Both the changes to strategic reports and the increasing interest in IR are encouraging developments. However, one of the points made in Capitalism without Capital is that intangible assets are different, and behave differently, from tangible ones. It is difficult to build an inventory of things you can’t see, especially when you don’t have the right language to describe them.

 

For either strategic reports or IR to address the information gap that currently exists in relation to value-producing intangibles, in a way that provides stakeholders and investors with relevant points of comparison between firms, it is by definition necessary to agree what the common types of intangible are, and how they can be described clearly.

 

This point comes into sharp focus when one considers that reporting requirements, initially applied to large and quoted entities, have a habit of trickling down to smaller companies. Recent updates to UK GAAP, specifically the provisions of FRS 102, provide a good example of this. By changing the rules regarding the treatment of goodwill in acquisitions, this has brought small companies broadly into line with the international standards set out in IFRS 3. But despite now having a requirement to find the ‘identifiable intangible assets’ that have been acquired, guidance for accounting professionals on what they should be looking for is quite limited.

 

These identifiable intangibles are not trivial: they can be expected to account for a substantial proportion of the purchase price. Previous research by Deloitte (2007) and KPMG (2010), among others, highlights that when post-purchase accounting is concluded, they regularly account for between one-third and one-half of the amount paid. This is the ‘magic’ that happens when businesses are bought; the capital residing in a company that it couldn’t previously explain suddenly ‘materialises’ on the acquirer’s balance sheet.

 

Impact of FRS 102

As it happens, FRS 102 might also encourage more businesses to capitalise permitted development costs. It replaces the previous SSAP 13 provisions on R&D, which previously covered this aspect. Many technically advanced firms have rather weak balance sheets, and it would not be surprising to see an increasing trend towards amortisation of intangible investment in the future – especially where companies spend a lot on these assets.

 

Whatever the reporting framework chosen, anyone looking at a company will appreciate having better ways to understand where their value really lies. This includes how and why a firm is making investments in assets whose value cannot be shown in its financial statements. Whatever mapping is chosen, it would make sense to make this compatible with the headings recognised in growth accounting (R&D, design, software, branding, training, organisational development and original copyright works).

 

Difficult to finance

Lastly, Capitalism without Capital also points out that as well as being hard to recognise, intangible investment is also difficult to finance. The Autumn 2017 Budget included a commitment to look at finding ways to address this, particularly for IP-rich companies with good growth prospects. However, if companies aren’t equipped to explain what assets they own, lenders will find it difficult to respond to them. For many reasons, then, now would be a good time to address the fundamental issue of intangibles description and definition.

 

 

Martin Brassell FRSA is CEO of Inngot. He is co-author of two ACCA reports: Innovation, intangibles and Integrated Reporting (2015) and Accounting for innovation (2016). His recent report (with Dr Jackie Maguire) for the UK Intellectual Property Office on IP valuation has just been published as Hidden Value. Martin is also co-author of Economic Approaches to Intellectual Property (Oxford University Press, 2016).

 

HMRC's agent update and 'talking points'

Look out for HMRC's latest update, expected later this week, and watch some digital 'talking point' meetings.


HMRC's next Agent Update - number 63 - is expected to be published later this week. Look out for updates on a number of areas, including self assessment.

 

You may also benefit from watching the following digital meetings:

 

Business Expenses for the Self-Employed:

Provides guidance on what is and isn’t classed as an allowable business expense, and will include motoring and premises costs. 

Tu‌esd‌ay 12 De‌ce‌mb‌er - midday to 1p‌m                    Register now

 


Capital allowances and vehicles: 

These meetings mainly cover the special rules for cars.

We‌dn‌esd‌ay 1‌3 De‌ce‌mb‌er - 1‌1a‌m to m‌id‌da‌y            Register now

We‌dn‌esd‌ay 1‌3 De‌ce‌mb‌er - 1p‌m to 2p‌m                   Register now

 


Negligible Value Claims and Share Loss Relief:

Looking at certain conditions that must be met for your clients to claim that an asset has become of negligible value. Also an overview of share loss relief.

Fr‌id‌ay 15 De‌ce‌mb‌er - 11a‌m to midday                     Register now 

 


Trade Losses: 

Looking at the different ways trade losses may be relieved.

Tu‌esd‌ay 19 De‌ce‌mb‌er - 1‌1a‌m to midday                 Register now

NEWS
2018 UK/Irish practising certificate renewals

You can renew your practising certificate online now. 


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

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

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

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

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

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

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

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

Children’s charity seeks trustees

Lightyear Foundation seeks volunteers.


Lightyear Foundation breaks down barriers to science education so that all children can explore, get excited by and gain a deeper understanding of science.

 

The charity’s flagship project is Sensory Science, an immersive, sensory experience breaking down the barriers to science participation for children with physical and/or learning disabilities:

  • Tier I – a fun exploration to help children learn life-skills (such as choice making or coping with unexpected outcomes) through workshops led by a scientist and drama professional
  • Tier II – breaking down the barriers to science as a career for all (as well as disabled children, we also work with those from lower socioeconomic groups or children facing other life challenges).

 

The charity is recruiting for new trustees – and ACCA’s members could be well qualified to help. The charity’s board meets four times a year via phone conference or meetings in central London.

 

If you feel you could make a difference, please send your CV and cover letter to Katie@lightyearfoundation.org before 1 February 2018.

 

CPD
2017 CPD - last chance courses

Complete your 2017 CPD with one of our courses.


MODULAR TRAINING PROGRAMME 

 

Employment tax & tax for the self-employed

21 December, London

      

Fee:

£220 per day/per delegate

 

              

ONE-DAY COURSES

 

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

19 December, London

               

Fee:

£219 per delegate

 

   

Accountex Summit North 2018

Big named speakers confirmed.


Big named speakers confirmed at Accountex Summit North 2018!

 

In just under four months nearly 1,000 accountancy professionals from across the north of England will be attending the first ever Accountex Summit North. Taking place on 6 March 2018, at Manchester Central, this new industry-defining conference and exhibition will play host to a full line-up of CPD accredited keynotes, seminars, panel sessions and interactive workshops.

 

The main auditorium will feature keynote sessions from Glenn Collins, head of technical advisory, ACCA who will host a panel debate on the Changing Face of Accountancy Practices and Gordon Gilchrist and Ian Fletcher from 2020 Innovation speaking about how to become the Firm of the Future.

 

Innovation and the latest products from leading accountancy suppliers
The event will also feature an innovative exhibition area, where leading suppliers will showcase accountancy products and services from cloud computing to financial software, recruitment and training to branding and PR. Companies already signed up include Sage, Intuit, Xero, IRIS, OCREX, FreeAgent, FUTRLI, Rollpay Bureau, Premier Capital, Reciept Bank, Octopus Blue, Enterprise Tax Consultants, Spotcap, Compleat Software and many more…

 

Three dedicated break-out theatres
In addition to keynote sessions, there will be three dedicated break-out theatres covering the latest trends and hot topics in more interactive sessions for visitors. Topics will include making tax digital, technology, cloud, pensions, pricing, plus every other subject relevant to the modern accountant. 

 

Speakers already include Ed Molyneux, CEO and Founder of FreeAgent, speaking about the Rise of the Robots: Accountancy at the Crossroads, Mark Wickersham talking about Effective Pricing and a session presented by My Firms App. View the full programme line-up now.

 

Who attends?
Accountex Summit North
is free to attend and expected to attract around 1,000 accountancy professionals. Places at all keynotes and seminars will be allocated on a first come, first served basis – tickets can be pre-ordered for free when registering.

 

A FREE delegate place includes:

  • keynote speaker programme – taking place in the main auditorium, the programme will feature high profile speakers offering the latest industry insights
  • 100 top suppliers in the networking & break out area – who are helping to change the future of your industry
  • three dedicated break out theatres – covering the latest trends and hot topics for more interactive sessions
  • eight hours of CPD accreditation
  • complimentary refreshments – all refreshments and a light lunch will be included free of charge.

 

Visit the Accountex North 2018 website now for more information or to apply for your FREE place.

 

CAREERS
FRS105 for micro entities

What do you think about FRS105?


FRS105 for micro entities – what do you think?

 

As a major change in the accounting and reporting of the smallest businesses, ACCA would like to understand practitioners’ views of it. You may have completed the first accounts using it in the last few months, or you may have decided it is not for you.

 

Please take our short survey now to share your thoughts.

Practices must offer the whole package to attract young talent

ACCA research examines aspirations of young finance professionals in practice.


ACCA has released its latest Generation Next report ‘Managing Talent in Small and Medium Practices (SMPs)’. The research takes a closer look at the aspirations of younger finance professionals working in SMPs and builds on ACCA’s Generation Next survey, which polled close to 19,000 professionals under the age of 36.

 

Ben Baruch, Head of ACCA’s SME Policy, said: ‘This research places new pressures on SMPs to rethink how they attract, develop, and retain young talent. On-the-job training and mentoring are seen as the most effective learning activities. If employers are to retain the best and brightest, they must look to develop effective talent management strategies that are suited for a generation with ambition.’

Apprenticeships such as ACCA’s Professional Accountant Apprenticeship (Level 7) can help smaller businesses compete with larger employers by offering a high-quality qualification, as well as career progression which is really important for young professionals as evidenced by ACCA’s research. These fully funded apprenticeships offer a new way to attract young talent into the practice profession, allowing SMPs to offer more structured career paths for younger professionals in the early stages of their career, eventually aiding with retention.    

 

The government has recently confirmed the funding band for the Professional Accountant Apprenticeship. This apprenticeship is the funded gateway to ACCA chartered certified status and is also the only accountancy pathway with the options of a BSc Hons in Applied Accounting and an MSc in Professional Accountancy. Employers can access a maximum of £21,000 to train a Level 7 apprentice.

ACCA is hosting a live webinar with training provider BPP this Thursday 23 November at 12.30pm. This is an opportunity for you to learn more about the new apprenticeship.

 

If you would like to find out more about ACCA’s apprenticeship offers you can email apprenticeships@accaglobal.com or visit its website for more information.