Technical and Insight
Reforms to protect businesses from fraud

Have your say on proposals to further safeguard businesses from fraud.

Have your say on proposals to further safeguard businesses from fraud.


Companies House Improving the accuracy and usability of data on the register consultation contains a number of reforms including some that you, and ACCA on your behalf, have been highlighting to Companies House.


Companies House states that the proposed reforms will allow it to ‘query and corroborate information before it is entered on the register’ and that it will be ‘easier and quicker to remove inaccurate information from the register.’


In the document, it is acknowledged that “while the number of reports of inaccurate data from third parties remains extremely low, under this extensive scrutiny Companies House is increasingly being alerted to issues on the register. These include:

  • companies filing inaccurate information e.g. audit reports
  • companies set up to trade on the good name of others
  • companies using addresses they are not entitled to use for their registered office
  • companies appointing individuals that have no association with the company’.


It is highlighted that the current powers available result in unnecessary cost and time for complainants and Companies House. The consultation states that ‘it can be difficult to legally remove information from the register even when it is highly suspect.


An increasing number of complaints are being made from third parties about inaccurate information which has been filed on the register by a company (for example, that a company has falsely claimed that their annual accounts had been audited by well-known audit firms and that individuals had been fraudulently appointed), and it is not always possible for Companies House to take effective action.


Section 1095 provides the company in question with the right to object to an application to remove information from its record, and that objection does not have to be evidenced. In such cases, third parties would need to apply to a court to ensure the information is removed, with the attendant cost and inconvenience.’


The proposed change is ‘that where an application to remove information is made by a third party in respect of information filed by a company, that company should have to provide some rationale and evidence to support any objection.’


It is stated that ‘Companies House would also have the power to ask for further evidence, where appropriate. Examples of where this might happen include:

  • where a company files information that represents a significant change from its previous status, such as a significant increase in share capital, this may be queried;
  • where a company claims an exemption from filing full accounts, Companies House might request proof that the company is entitled to the exemption; and
  • where a company uses a registered address, Companies House might seek confirmation of the right to use that address.’


What are the other powers?

The aim of granting increased powers are as a part of:

  • major upgrade of Companies House register aimed at tackling misuse and ensuring its accuracy.
  • reforms, business owners will benefit from new protections from fraud.
  • A new package of measures will boost the reputation of the UK’s business environment and ensure the reliability of the UK’s company register.


The proposals will be underpinned by a major transformation programme to upgrade digital services at Companies House alongside a complete review of its staffing and skills requirement. This package of proposals, if brought forward would be the largest change to our system of setting up and operating companies since the register was created in 1844.


The proposals in full

The package of proposed reforms includes:

  • knowing who is setting up, managing and controlling companies: Those who have a key role in companies will have their identity verified
  • improving the accuracy and usability of data on the register: Companies House will now be able to query and corroborate information before it is entered on the register. This will also mean it is easier and quicker to remove inaccurate information from the register
  • protecting personal information on the register: In a minority of cases the register can be misused to identify personal information, which can then be used for criminal purposes. Under these proposals directors will be given additional rights over their information, for example personal home addresses, while ensuring this information is still available in a transparent manner to public authorities where appropriate
  • improving the detection of possible criminal behaviour: Better information sharing by Companies House, other government bodies and financial institutions will better protect businesses and ensure faster and more sophisticated identification of possible criminal activity – benefitting businesses and consumers.


The consultation is open until 5 August and covers a number of reforms.


Please review and send your comments to with the subject Companies House consultation.

MTD well underway

The latest guidance now the first quarter is well underway.

The latest guidance now the first quarter is well underway.


The first quarter is now well underway, covering 1 April to 30 June.


VAT 700/22: Making Tax Digital for Vat has been updated with guidance on a number of areas added, covering supplier statements, petty cash transactions and charity fundraising events.


It is worthwhile checking through some of the record keeping options and relaxations.


For charities, the following rule has the force of law:


‘Where supplies are made or received during a charity fundraising event run by volunteers you may treat all supplies made as covered by one invoice for the event, and all supplies received as covered by one invoice for the event, for the purposes of the digital record keeping requirements.’


For recording of supplies the following rule has the force of law:


‘Where you need to apportion the output tax due on a mixed rate supply with a single inclusive price you do not have to record these supplies separately. You can record the total value and the total output tax due.’


View further guidance and updates from ACCA


Embrace technology to develop warmer client relationships

A clear message at Accountex was that taking your practice digital offers more opportunities to care for clients.

A clear message at Accountex was that taking your practice digital offers more opportunities to care for clients.


For some time, when accountants have talked about the impact of automation, there has been a degree of fear as well as a degree of excitement. While most are happy to see mundane tasks completed in a fraction of the time by automated or artificially intelligent applications, some are worried about a world in which they no longer know their role.


The accountants speaking in ACCA’s theatre at Accountex – Europe’s largest accountancy and finance conference and expo – took a different view. Delegates repeatedly heard that there was nothing to fear from automation, and that in fact, they have a more hands-on role to play than ever before.


More time with your clients

Xero’s Neil Sheehan opened proceedings with a look at the digital practice journey. He explained that Xero’s research shows that firms which fully embrace the cloud actually have more staff, better client retention and higher revenue. This is because automating simple tasks means that accountants can spend more time listening to their clients.


This was a theme revisited by Andrew Van De Beek of Australia’s Illumin8. He argued that clients don’t want an accountant – they want a person, someone who understands their business, their goals and their concerns. He described Illumin8’s vision as helping clients to spend time on what matters to them most.


Sharon Pocock of Kinder Pocock echoed these sentiments in her session on advisory: ‘The best thing you can do for your clients is listen,’ she said, describing how technology not only makes many tasks quicker but also allows you more touch points with your clients.


Specialist people doing specialist work

Many of the speakers also touched on the challenge technology poses to recruiting and retaining good accountants. The days of starting out performing painstaking and tedious tasks are over. Technology takes care of that. So, accounting firms are, in many ways, having to re-think how and who they recruit, and how they keep hold of them.


Advalorem, a UK-based practice, described its three-stage approach:

  • test personalities
  • get your most experienced accountants to sit alongside your most technology-savvy team members
  • give your new recruits responsibility early.


Personality testing also helps them to place the right people in the parts of the business where they will thrive. Andrew Van De Beek also pointed out that personality testing – whether formal (as at Advalorem) or more informal, like part of his company’s approach (taking the interviewee out to lunch with the team) allows you to test whether potential new recruits are ‘culturally on the bus’ – that they understand what kind of business you want to be.


Sitting your experienced employees alongside your new, tech-savvy, recruits has two effects, according to Advalorem’s Nikki Adams. First, your new recruits learn complex client-focused skills from the oldest hands in the business and second, your experienced employees get to see how digital natives integrate technology into their working day and, crucially, they can ask questions.


This has a better effect than sending your more experienced and less tech-savvy team members on training days. But pairing up typically younger and newer team members with other, long-standing staff has another effect – it helps to bridge the generation gap and means that both sides can appreciate the skills and approach of the other.


Giving early responsibility to new hires is, according to Advalorem’s newly-qualified Alex Black, key. Black described how the new generation of recruits tends to want to take more ownership of their projects and be more entrepreneurial. Advalorem has found that putting their ‘millennials’ in front of clients early is a good way of motivating and developing them – and thus holding on to them. For staff at every level, said Adams, it is about recognising and utilising their particular experience. Both Adams and Black spoke enthusiastically about their ‘millennial club’ – a group of younger staff members that drive digital change in the business.


Making the transition

But many of the speakers pointed out that no matter how proactive the tech-savvy and no matter how willing the less tech-competent among your staff are, taking an entire practice digital is not easy.


Xero’s Neil Sheehan talked the audience through how to make the process as painless as possible. His first piece of advice was to be honest and recognise that accountancy as a profession has often been resistant to change. But the single most important thing that practices going digital can do, said Sheehan, was to ‘understand the processes behind caring for your clients’. This means that firms can make the most out of their technology.


As Nigel Adams of Advalorem pointed out, ‘technology is only an enabler’. Taking your processes digital is only one step towards becoming a fully digital practice. The hard work is in understanding that clients now expect accountants to do and be more. ‘What’s falling away is high prices for low value work,’ said Adams.


Accounting firms need a vision of how they’re going to care for their clients. And as Andrew Van De Beek pointed out, care leads to referrals.


Don’t throw everything into technology

But focusing everything on technology has its dangers. Illumin8’s Andrew Van De Beek argued that firms who throw themselves head-first into applying technology to everything they do will only grow their revenue and not their profit. ‘Randomly implementing technology is not sustainable,’ he said. Businesses should conduct a careful review of what technology is available to them, how it might fit into their business and what its purpose is.


Practice Ignition’s Trent Mclaren advised that firms look to implement technology in five key areas:


  • automation of simple tasks
  • real time reporting
  • workflow planning
  • instant messaging
  • video conferencing.


Technology, said Mclaren, isn’t just about doing the job better and more efficiently. It’s also about quality of life.


Special offers for ACCA members

Many of the exhibitors at Accountex have special offers for our practitioners. Browse current offers now.


AIA – a reminder

A reminder about the increase in AIA to £1m.

30 June year ends will benefit from the full 100% relief of £1m for the financial year starting 1 July 2019.


As a reminder, AIA was temporarily increased to £1,000,000 from 1 January 2019 for two years. Transitional rules apply where years fall outside the two-year window, so for December year ends these transitional rules had no real impact.


For June year ends the transitional rules would have the following impact on the maximum allowance that a business can claim:


Year end 30 June 2019

£1m x 6/12 plus original allowance £200,000 x 6/12 = £600,000


Year end 30 June 2020


Year end 30 June 2021

£1m x 6/12 plus reversion back to the original allowance £200,000 x 6/12 = £600,000

Payment services authentication

Are your clients preparing for an extra layer of authentication for online payments?

Are your clients preparing for an extra layer of authentication for online payments?


In September, Strong Customer Authentication (or SCA) will have significant implications on how all businesses handle online transactions in the European Economic Area (EEA), where both payer and payee are in the region.


SCA, part of the PSD2 changes, requires an extra layer of authentication for online payments. It requires the use of two independent sources of validation by selecting a combination of two out of the three categories (two-factor authentication):

  • something you know (e.g. PIN)
  • something you have (e.g. card/phone)
  • something you are (e.g. fingerprint).


Many businesses will need to consider how they operate and advisers will need to consider how the change could impact their clients. The good news is that a number of exemptions exist, as outlined in this useful summary.


These exemptions includes that ‘when the transaction is initiated by a legal person (e.g. a business) rather than a consumer, and it is processed through a secured dedicated payment protocol, the Commission is satisfied that it does not require separate authentication, provided alternative controls are sufficiently secure.’


Certain transactions are also exempted, such as recurring payments and purchases under €30. But even some of the low-value transactions may be challenged, for example if the combined value of several unchallenged transactions goes above €100. Businesses may also need to consider if they should point out to customers that they can ‘whitelist’ businesses with their card issuer. This will mean that they would not need to authenticate themselves for future purchases.


However, much depends on how card providers set up their systems and the options available.


We will provide further updates over the coming months.

Tax free childcare

Scheme could reduce childcare costs by up to £2,000 per child per year.

Scheme could reduce childcare costs by up to £2,000 per child per year.

Childcare vouchers (and directly-contracted childcare) were withdrawn for brand new applicants from 4 October 2018.


Those who had not already signed up for childcare vouchers previously must have applied for the vouchers and received their first voucher by their last payday before 4 October 2018, in order to continue receiving vouchers.


The tax free childcare scheme is meant to replace the directly contracted childcare and childcare vouchers that were previously offered by employers.

Tax free childcare is not an employer scheme. It is a government scheme that is available to working parents, including self-employed, with children under 12 years old (or under 17 if disabled). The scheme is available in England, Scotland, Wales and Northern Ireland.

The scheme operates directly between the government, parents, and childcare providers via an online account.

If individuals already have a Government Gateway account, they can sign in on the first page. If not, a Government Gateway account can be created by following this link.

How the scheme operates.
For every 80p the parent(s) pays into the Childcare Account, the government will contribute 20p, up to a maximum amount of £2,000 per child per year (and £4,000 per child per year for a disabled child).

Parents must use this on registered childcare including childminders, nurseries, breakfast and holiday clubs, as long as the childcare provider is signed up to the scheme.


Individual parents/guardians or pairs of parents must:

  • be in work (including sick leave or annual leave). If not currently working, an individual parent might still be eligible provided their partner is working and the individual is receiving Incapacity Benefit, Severe Disablement Allowance, Carer's Allowance or Employment and Support Allowance.
  • be earning at least national minimum wage for 16 hours a week (over the next three months). For self-employed who are not expecting to make enough profit in the next three months, they can use an average of how much they expect to make over the current tax year. A self-employed individual will be exempt from meeting the minimum earnings level in their first 12 months of their self-employment.   

  • Not be in receipt of any tax credits, universal credits or employer supported childcare.
  • (when an individual claimant) they should not have an adjusted net income of over £100,000 a year (where the claim is made as a couple, one or both of the claimants should not have income of over £100,000).

If a couple are separate and have joint responsibilities for the child, they should decide which of them apply for the childcare account.


Children will be covered by the scheme up until the last day of the week in which the 1st September following their 11th birthday falls. If they are disabled, this is extended to the last day of the week in which the 1st September following their 16th birthday falls.

Adopted children are eligible, but not foster children.

Please note that if an employer pays directly into a tax free childcare account, the amount will be subject to income tax and Class 1 NIC via payroll.

Top tips on recovering VAT if you build your own home

A look at the VAT DIY scheme for self-builders.

A look at the VAT DIY scheme for self-builders.


If you purchase a newly built property from a developer you will not be charged VAT, as the supply is zero rated. Zero rating the construction of a newly build property allows the developer to recover input VAT whilst the purchaser does not incur the VAT cost.


However if you choose to self-build your home, you do not have the benefit of reclaiming VAT in the same way as VAT registered developers do. In this case, VAT DIY scheme enables self-builders to reclaim VAT on specific expenditure and benefit from VAT savings in the same way a property developer do.


When considering VAT claims under this scheme, it is important to remember:


Not all self-built projects qualify

Projects qualifying for DIY VAT scheme must be newly constructed from ground up, converted from a non-residential use, or residential properties brought into use after 10 years of non-occupation. Make sure you understand HMRC’s definitions of ‘new residential dwelling’ and ‘qualifying conversion’ as this will need to be reflected in the planning application to support the VAT claim. In addition, only properties capable of a separate disposal qualify.  For example a ‘granny annex’ which cannot be sold separately, will not qualify.


Who is to live in the property

The property must be for self-occupation, or for a relative to live in. Tenanted properties do not qualify.


You can use contractors

Even though the scheme is called ‘DIY’, you are able to hire contractors to build the home for you.


What can you claim

Broadly, you can reclaim VAT on building materials used in the construction of your home and those fittings which are routinely incorporated into the building of a relevant description, for example air conditioning, doors, extractor fans, curtain poles.


The definition of what is ordinarily installed into what building has recently been challenged in a tribunal case concerning VAT on electric blinds for a sustainable eco-home. Look below for a summary of this case.


You cannot recover VAT charged on professional services, such as architects’ fees.


Recovering VAT at correct rates

You cannot recover VAT charged at incorrect rates, so be clear on whether the VAT applicable on relevant purchases should be at 20%, 5% or 0%. VAT incorrectly charged by a contractor, for example charged at 20% where the reduced rate should have been applied, means you will need to recover the difference from the contractor, as HMRC will not allow a reclaim. This is particularly important in a climate of uncertainly when some contractors might go out of business.


What’s best for your cash flow

Whilst the scheme allows you to recover correctly incurred VAT, pressure on cash flow may mean you might be better off requesting that the materials are purchased by the contractor and included in the cost of construction service. In this way, standard rated materials become zero rated. 


Don’t be late when submitting the claim

The claim form must be submitted within three months of construction completion, as evidenced by the issue date of a certificate completion, or the date when the home became inhabited, if earlier. The claim form can be found here . Original invoices must be sent with the claim, so posting recorded delivery is advisable.


Electric blinds in eco-homes – can you reclaim VAT under the DIY scheme?

In Cosham v HMRC [2019] UKFTT 0119 (TC), the tribunal considered whether VAT on electric blinds fitted in a self-built eco home can be reclaimed.


In the planning application, the building was described as sustainable home that reflects what is now a well-established market sector.


The legislation, s35 VATA 1994, Note 22 states that building materials in relation to any description of building are goods of a description ordinarily incorporated in a building of that description.


The taxpayer claimed:

  • electric blinds are building materials ordinarily incorporated in buildings meeting the description of an eco-home
  • the correct comparator should be other sustainable homes and not a traditional house.


HMRC claimed:

  • the purpose and use of the building is relevant when deciding what constitutes a building of certain description (defined by size) and not the quality of the build
  • therefore the correct comparator should be an ordinary 4 bedroomed house
  • electrical blinds are an electrical appliance  as they require electricity [electrical appliances are excluded from VAT DIY scheme and VAT cannot be reclaimed].


The ruling

  • the tribunal agreed with HMRC that the test should be based on the use of the building, but ‘use’ should not be restricted to size
  • other defining features should be considered when establishing typical use of the building to define building’s type – for example, type of occupants and type of design
  • sustainable builds and eco homes should be recognised as a distinct category of buildings due to their specific design features

It was relevant to determine what materials are ordinarily fitted into an eco-home, rather than any four bedroomed house. Unfortunately the taxpayer failed to provide evidence that electric blinds are ordinarily fitted into eco-homes and lost.


What does it mean for you

As building methods and technologies advance, HMRC’s DIY VAT scheme guidance is becoming outdated, therefore cases such as Cosham v HMRC should be referred to, when seeking more relevant guidance.


Had the tax payer demonstrated that electric blinds are standard feature of a sustainable home, they may have succeeded!


In similar circumstances, a relevant proof of what is ordinarily fitted in a relevant building could be provided in the form of trade journals, opinion forming professional bodies (RICS) and independent advisers.

Client due diligence on cash received and paid

HMRC has updated its guidance for high value dealers and other businesses it authorises.

HMRC has updated its guidance for high value dealers and other businesses it authorises.


HMRC has updated its guidance for high value dealers and other businesses it authorises, highlighting that customer due diligence checks must be carried out before making or receiving payments in the course of business transactions.


These checks must include verification that UK customers/suppliers are registered with HMRC as high-value dealers (paragraph 4.8).


In 4.8 the sanction for non-compliance is clear; it is highlighted that if ‘they are not registered as a high value dealer you should not continue with that high value cash payment. You should consider reporting this activity to the National Crime Agency NCA) via a Suspicious Activity Report (SAR). Failure to do this may result in sanctions being applied to your business, including the possibility of withdrawing your HVD status and your details being published on GOV.UK.’


Obviously, those advising these businesses need to consider these rules.

The tax cost of extracting a property from a company

Extracting a property from a company back into private beneficial ownership may be a costly affair.

Extracting a property from a company back into private beneficial ownership may be a costly affair.


Buying an investment property via a limited company is commonly used to mitigate the impact of s24 finance cost restriction affecting landlords of residential buy-to-lets.


But what happens when you realise this strategy no longer suits you, for example, you decide to gift one of the properties to your child or to live in it yourself. In these and similar circumstances, company ownership becomes unviable.


Extracting a property from a company back into private beneficial ownership may be a costly affair. Tax costs arise both for the selling company and for the purchasing connected party.


Transfer for no consideration

Tax cost for the company

For corporation tax purposes, a taxable capital gain will arise on the company as a difference between the market value of the property at the date of transfer and the cost it was purchased for, adjusted for indexation up to December 2017.


The company will be making a distribution in kind. There are specific rules concerning the legality of such a distribution, determined by the availability of distributable reserves. You can find out more in our guide on this topic in our In Practice August 2018 edition .


Tax cost for the director / shareholder

No SDLT will arise if the property is obtained as of distribution in specie, declared in the form of the asset, where no debt is created. For income tax purposes, the distribution in kind will be taxed at the standard dividend rates.



The following examples from Tolleys have been repurposed for this article – tax rates as at 2018-19. Figures are for illustrative purposes only.



Property market value






Gain chargeable on company


Corporation tax at 19%


Distribution to shareholder


Tax at additional dividend rate 38.1%


Total tax cost (79,800+247,650)



Purchase for a consideration

The company may agree to pay the director a bonus covering the cost of the property and associated costs. The grossed up amount will be subject to PAYE and employee and employer NIC, with corporation tax relief on these costs.

If the company lends money to the director to finance the purchase, the amount amounting to the market value of the property may result in an overdrawn director’s loan account and trigger s455 tax.


Anti-avoidance rules introduced in March 2013 mean that this tax cost will apply even if the proprietor repays the loan before the nine months expire, but extracts those funds again shortly afterwards.


The company will pay corporation tax on the gain being the difference between the market value and cost, less indexation.


Unless market rate of interest is paid on the loan, a benefit in kind with employer NIC will arise on the amount of interest, at 13.8%.


SLDT will arise on the amount of the market value of consideration.



The following examples from Tolleys have been repurposed for this article – tax rates as at 2018-19.


In this example, the property extracted is commercial – non-residential stamp duty rates have been used to identify the amount of gross bonus required to fund the transfer. Residential property stamp duty rates would be used in the calculation if the property as residential. Figures are for illustrative purposes only.


Corporation tax on gain


Property market value






Gain chargeable on company


Corporation tax at 19%



Bonus paid to director


Bonus required  (purchase cost and stamp duty)


Gross bonus


Tax and employees NIC



Tax cost to the company

Gross bonus


Employer’s NIC at 13.8%


Corporation tax relief at 19%


Corporation tax on gain


Proceeds from sale received


Net cash cost to the company



Total net cash cost to the company is £570,200 in case of a transfer for a consideration, compared to the total tax cost of £327,450, if the transfer is carried out as a distribution in specie.


Practical considerations

Apart from cash flow considerations for the business and its director-shareholder, administrative changes are likely to be necessary to complete the process, for example:

  • title deeds may need to be changed and filed at the Land Registry
  • mortgage provider may need to be notified
  • if the property becomes the director’s main residence following the transfer, nominating it as PPR and notifying HMRC may simplify any PPR claim in future.
Probate fees on the rise?

The mooted significant increase in probate fees has yet to materialise.

The mooted significant increase in probate fees has yet to materialise.


The significant increase in probate fees, at the time of writing, has still not progressed. As a reminder probate registries won’t normally accept an application for probate until HMRC has confirmed that it has processed the inheritance tax account.


However, while the process for introducing the new fee structure is ongoing, probate registries will accept applications for probate before the account has been processed by HMRC. The application must include a note to say that the appropriate inheritance tax forms will follow shortly.


Find the non-contentious probate fee increase SI online


Law breaking employers targeted

The Pensions Regulator launches new campaign.

The Pensions Regulator launches new campaign.


In the coming weeks, The Pensions Regulator (TPR) will be targeting its new wave of compliance checks at employers across the UK who are suspected to be non-compliant with their automatic enrolment duties.


Employers are being warned that if they are breaking the law, they may be inspected which could lead to financial penalty or court action. TPR’s Director of Automatic Enrolment, Darren Ryder, says: ‘We know that most employers are doing the right thing for their staff, however, there are a small minority who persistently ignore their responsibilities. They can expect a knock at the door from us and enforcement action.’


The inspections started in Edinburgh and will continue over the summer across the UK, as part of an on-going nationwide enforcement campaign to ensure that employers are meeting their workplace pension responsibilities correctly.


It’s important that you know exactly what your clients need to do to meet their ongoing duties, and that their records are kept up to date.


TPR has information and guidance on your on-going duties to help you.


It’s not personal – HMRC wins entrepreneurs’ relief case

The qualifying conditions for entrepreneurs’ relief continue to evolve.

The qualifying conditions for entrepreneurs’ relief continue to evolve.


The qualifying conditions for entrepreneurs’ relief continue to evolve and March 2019 saw the conclusion of another tribunal challenge in a related case.


One of the qualifying conditions for entrepreneurs’ relief is that the disposed shares must be shares of a personal company, where the shareholder and employee holds at least 5% of share capital and voting power. 


P Hunt v HMRC [2019] UKFTT 210 (26 March 2019) centred on the definition of that share capital means in this case. 


Mr Hunt held different number of two classes of shares of differing nominal value in Foviance Group Ltd, as follows:



No of shares

Nominal value per share

Issued share capital

E shares




B shares




Total held by Mr Hunt




Total issued by company




% of company




% of votes





Mr Hunt sold the shares and claimed ER. HMRC challenged his claim and raised a CGT assessment for £199k.


The Taxpayer appealed based on the fact that a multi-factorial test should be applied to consider whether the number of shares vested sufficient ownership rights from a commercial economic point of view including rights to vote, rights to receive dividends, and rights to receive capital on a winding up. 


The FTT based its judgement on the exact wording in legislation, which mentions ‘issued share capital’ rather than ‘issued shares’.


It added that both in TCGA 1992 and the Companies Act 2006, share capital is divided into shares each of which has a fixed nominal value. The 5% test therefore refers to 5% of the total nominal value of a company’s share capital.


Tribunal found that:

  • The multi-factorial test should be rejected, noting that the ER legislation is highly prescriptive
  • For ER, ‘ordinary share capital’ means all the company's issued share capital (however described), other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company's profits.
  • Further narrowed down the definition of ‘issued share capital’ following that in  McGarry J in Canada Safeway v IRC [1972] 1 All ER 666 to the nominal value of share capital, stating that ‘the test of nominal value is simple, workable and, above all, related to the words share capital’.


The appeal was dismissed.


Other available resources

More information on entrepreneurs’ relief, the changes it has undergone and their impacts is available here:


In Practice - Update on entrepreneurs’ relief changes

CPD Online Entrepreneurs Relief 


A useful webinar on this topic is available on demand on our website: Changes to Entrepreneurs' Relief Webinar.


The fight against fraud

How to prevent, spot and survive fraud.

How to prevent, spot and survive fraud.


Fraud-related claims are on the rise. Whether this is due to employees acting fraudulently, an accountant or auditor failing to identify fraudulent transactions, or as a result of social engineering, it is clear that fraudulent behaviour can have a significant impact on a firm’s reputation, its bottom line and its ability to find professional indemnity insurance.


Digital ease

Online banking is an everyday part of the digital age we live in and its rise has made fraud easier than ever to commit. In many cases transactions can be processed without authorisation. This represents a significant departure from the days when payments were made largely by cheque or via a countersigned, multi-staged process.


In addition to this, social engineering has become ever more prevalent, with professional firms regularly falling victim to fraudsters who impersonate the directors or clients of a firm to request the unlawful transfer of funds.


Behaviours such as these have led to an increase in both the number and size of fraud-related claims. Below we examine two such cases that have recently been notified under a professional indemnity policy and look at the ways in which each case could have been prevented or identified earlier.


Example one: the bookkeeper

In this example, various firms were defrauded of £600,000 by a bookkeeper submitting false invoices to clients and overstating VAT.


These invoices were falsified by amounts as little as £500, meaning they went undetected for many years until one client appointed a new accountancy firm which was unable to reconcile the VAT payments. This prompted a claim against the insured under their professional indemnity policy and, after a lengthy enquiry into the accountant’s files, it was found that several other clients had also been affected.


It transpired that the invoices were paid into the bank accounts of various family members of the bookkeeper who then went on to purchase new cars and put deposits down on properties.


Example two: the finance director

On this occasion, nearly £700,000 was defrauded from a high profile client over the course of two years as a result of a senior member of the firm being able to transfer funds from the client’s bank account into their own.


The funds were stolen in small increments of up to £10,000, meaning that the fraudulent activity went unnoticed for two years. The money was being used to fund the individual’s gambling habit.


As the above examples demonstrate, fraud can be committed at any level of the business and in such a way this it is not instantly identifiable. By reviewing your processes or making changes to the way you handle money, you may be able to prevent fraud from occurring or spot it much earlier on.


Dual authorisation

One of the key ways in which you can do this is to introduce dual authorisation for transactions above a certain limit. Many professional indemnity insurers already require this as a condition of their policy and it is likely that others will follow suit, as it introduces a second level of authentication before funds can be transferred. While the limit varies from insurer to insurer, it often applies to transactions over £10,000. However, this is likely to be reduced given the frequency and size of fraud claims being experienced by insurers.


Be alert to changing behaviour

While the reasons for fraud vary greatly, for example, dislike of an employer or financial difficulties at home, changes in behaviour often follow.


An individual engaging in fraudulent activity may avoid taking holidays even if these are due and may similarly insist upon coming to work while sick to avoid any oversight of their work. While care must be taken to avoid unfair accusations in such cases, sudden shifts in behaviour are best addressed in the interests of both protecting a practice from fraud and ensuring general employee wellbeing.


Impact on professional indemnity insurance

An unfortunate consequence of fraud is that accountants may struggle to find compliant, or indeed any, professional indemnity insurance. This can be an extremely stressful time for accountants and can make the process of trying to secure insurance very lengthy. Where insurance can be obtained there can be a significant increase in premium and excess. These increases can be drastic, with premiums in the above examples having risen by as much as 550%. 


If you have any questions, please contact Roselin Ali or Catherine Davis, Lockton Companies LLP


0117 9065057



What to expect this month? Watch our video highlights

Top tips for June

WATCH: In our 'top tip for June' Peter Jarman explains why he believes you should always make the client fit the firm.

In our 'top tip for June' Peter Jarman explains why he believes you should always make the client fit the firm.



Peter Jarman Top Tip


The key takeaways from Accountex

ACCA's theatre at Accountex was incredibly popular. Find out why.

This year Accountex was attended by over 9000 people and it seemed like many of them visited ACCA's stand and theatre!


Our programme of speakers proved incredibly popular - view the key takeaways from across all sessions now


A clear message at Accountex was that taking your practice digital offers more opportunities to care for clients. Checkout our detailed summary elsewhere in this issue.

We need to hear from you: HMRC’s intermediaries’ legislation

Complete our survey to help inform our consultations with government.

Complete our survey to help inform our consultations with government.


HMRC is reforming the intermediaries’ legislation which could mean workers providing their services through an intermediary such as a private limited company might be required to pay the same income tax and national insurance as they would if they were an employee of their client. The status of the contractor will depend on the contract and working practices with the client.


This reform could mean private sector businesses assume responsibility for determining the employment status of an off-payroll worker. The status would have to be decided and communicated to the worker before the contract can start.


Only large businesses will be required to do this for their contractors ie those for which two of the following apply: more than 50 employees; annual turnover of more than £10.2m; or assets worth more than £5.1m.


Responsibility for communicating and enforcing status determinations is likely to be passed down the supply chain so even if the reform does not apply directly to you, your supply chains might be affected. For practitioners working through intermediaries there may be a direct impact on contracts with larger clients.


We need to hear from you to inform our conversations with government. This survey should take no longer than three minutes to complete. All responses are anonymous and will ensure your voice is heard.


Get cost effective probate training

ACCA has teamed up with Kaplan Altior to offer great value training and assessment for probate.

ACCA is pleased to be able to offer you the opportunity to become authorised to undertake non-contentious probate work.


Many of our practitioners have told us they would welcome the addition of this service and a number have already added it to their portfolio.


Working closely with Kaplan Altior we've put together a tailored solution for ACCA members who hold a practising certificate, which is particularly cost effective at just £550 (+VAT) per person for the online training and £215 (+VAT) per person for assessment.


This online training is split into six bite-sized sessions, which reduces time spent away from work. It includes a comprehensive bundle of course materials delivered alongside a digital copy and all session recordings can be revisited. There is a 95% pass rate on the assessment.


Spaces are filling up fast - register now for the training and assessment on the following dates:

  • Training: 6 x 2-hour sessions (10am-12pm) 4 June, 6 June, 11 June, 13 June, 18 June, 20 June
  • Assessment: 1 July 2019.

The comprehensive training will cover all the key aspects of probate, including: validity of wills; intestacy; analysis of a will; inheritance tax; obtaining a grant; oaths; IHT forms; duties/powers of PRs; administration of the estate; completing the administration; and estate accounts.


Free support
You can obtain free factsheets about probate by emailing, including in the subject line 'probate factsheets'.


You can also listen to a recorded webinar, Understanding the probate process in the UK


ACCA's probate registration procedures include links to forms and FAQs.

2019 British Accountancy Awards - enter by 31 May

Get expert advice from ACCA and Mark Lee and then submit your entry to the British Accountancy Awards. 

Do you want to stand out from the crowd, motivate your employees and generate great publicity?


Then considering submitting your entry to the British Accountancy Awards 2019 before the deadline of 31 May! There are a variety of categories, including those which recognise the best independent firms across the UK as well as individual awards for the best partner and rising star of the year. View the categories and how to enter now


To help you prepare your entry, take a look at the guidance we have created and watch this video where Mark Lee shares his top five tips for creating a successful entry.

Your first choice for CPD

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

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



Find full details in the dedicated flyer


Saturday CPD conference two

Glasgow, 01 June

London, 08 June

Birmingham, 15 June

Manchester, 22 June

Sheffield, 29 June

London, 06 July


Saturday CPD conference three

London, 28 September

Glasgow, 05 October

Birmingham, 12 October

Bristol, 19 October

Swansea, 02 November

London, 09 November

Manchester, 16 November

Sheffield, 30 November

London, 07 December





Accounting and auditing conference

02 November, London


Taxation conference

14 December, London


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



1 conference                        £159 

2 conferences                      £147 per conference/delegate

3 or more conferences        £133 per conference/delegate




Guide to practical audit compliance for partners and managers

1-2 October, London

13-14 November, Manchester

17-18 December, London


CPD: 14 units

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


Practical guide to ISQC 1 for partners and managers

4 December, London


CPD: 7 Units

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


Internal Audit Conference – Collaborative Independence

16 May, Birmingham




General tax update for accountants

London, 31 May

Leeds, 8 October

Birmingham, 11 October

Bristol, 18 October

Newcastle, 6 November

Cardiff, 26 November

Norwich, 28 November

Bournemouth, 3 December

London, 11 December


Accounting standards update

Newcastle, 9 October

Nottingham, 10 October

Bournemouth, 15 October

Cardiff, 17 October

Norwich, 29 October

Leeds, 7 November

Bristol, 27 November

London, 12 December


Fee: £226 per person

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



Residential Conference for Practitioners

21-23 November, Chester



Channel Island conference

12-14 June, Radisson Blu Waterfront Hotel, Jersey

CPD: 21 units


Browse the Channel Islands Conference 2019 brochure now for full details of the programme and to select the sessions that are right for you.




VAT update

21 May, Douglas


Offshore tax planning

11 June, Douglas


Acting for high net worth Individuals

9 July, Douglas


Anti-money laundering and fraud update

12 September, Douglas


Managing and developing a profitable practice

15 October, Douglas


Business tax planning

19 November, Douglas


Accounting and auditing refresher

5 December, Douglas


Timings: 4–7pm

CPD: 3 units



1–4 seminars £78 per seminar

5–13 seminars £61 per seminar/delegate

14 or more seminars £57 per seminar/delegate




Accounting standards update

30 October


UK and IOM tax update

10 December


CPD: 7 units


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

Great news regarding apprenticeships funding

The government has unveiled changes which mean apprenticeships are now even better value.

The government has implemented new apprenticeship funding policy changes. This means that apprenticeships are even better value and can save you even more money.


What you need to know as a small business

  • The government now pays 95% of apprenticeship training costs. This means you only have to invest 5% of the apprenticeship training cost. And with our Accounting Technician Level 4 apprenticeship band now at £8000, you would only have to pay £400 to train a Technician. Or £1050 to train a Professional Accountant with our Level 7 apprenticeship.
  • You can also receive a funding transfer from a big levy-paying business to facilitate your apprenticeship training needs. A big business can now transfer up to 25% of their annual apprenticeship funds straight to you.


So if you’re one of the businesses that tell us they're finding recruitment difficult and training costs are escalating, and that it’s hard to find the right people with the right skills, apprenticeships are a simple and effective solution for you. They are an easy and low-cost way for you to recruit fresh talent and upskill your existing employees. Apprenticeships are so flexible and cost effective - more and more businesses are switching onto what is essentially free training to fill your skills gap.

So why not boost your talent and your business with our funded apprenticeships? Browse our apprenticeship materials on LinkedIn for easy access to learn more.


Alternatively don't hesitate to give us a call by clicking here and we’d be delighted to talk to you about what the funding changes means and how apprenticeships can benefit your business. world of apprenticeships.