Technical and Insight
IR35 updates – what to tell your clients?

Help your clients prepare NOW for forthcoming changes to IR35.

Help your clients prepare NOW for forthcoming changes to IR35.


From 6 April 2020, the off-payroll working rules are changing for workers providing their services through an intermediary to private sector medium and large-sized organisations. This measure will have effect for contracts entered into, or payments made, on or after 6 April 2020. The private sector includes third sector organisations, such as some charities.


Summary of the key changes from 6 April 2020 are:

  • All public sector authorities and medium and large-sized private sector clients will be responsible for deciding if the rules apply.
  • If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply.
  • As with public sector engagements the worker’s PSC will no longer be permitted to deduct a 5% allowance in relation to engagements with medium and large-sized clients. It will continue to be available for engagements with small organisations.
  • These rules are only applicable from the start of the tax year.
  • The size of the private company can be determined in two ways:

a) Simplified Test: You should do this if you have an annual turnover of more than £10.2 million. If you use the simplified test to determine your size, you must apply the rules from the start of the tax year following the end of the calendar year in which you met the conditions.

b) The Small Companies Regime: The Simplified test cannot be used by a company, a limited liability partnership, an unregistered company and an overseas company. In this case, the size is determined under section 382 of Companies Act 2006 if you meet two or more of the following conditions. You have:

  • an annual turnover of more than £10.2m
  • a balance sheet total of more than £5.1m
  • more than 50 employees.


If you do not meet the conditions on 6 April 2020, your circumstances may later change. If you then meet the conditions for two consecutive years, the date you need to apply the rules will be different. You must apply the rules from the start of the tax year following the end of the filing period for the second financial year in which you met the conditions.


  • Group Companies: There are also rules around connected and associated companies. If the parent of a group is medium or large their subsidiaries will also have to apply the off-payroll working rules.

           Medium or large organisations: Affected private sector clients have to:

  1. Determine the employment status of workers using reasonable care. HMRC has an anonymous tool Check employment status for tax (CEST) which can be used to indicate the workers' status based on contractual terms. This must be done for every contract they have whether with the agency or worker. If there are changes to the engagement during the course of the contract, you should reassess the status.

    Note, HMRC does not consider CEST findings conclusive if it considers at any point that the contractual terms or structures were contrived to achieve a particular determination.   

  2. Once the determination is made, pass this to the worker/agency along with the reasons for it. The determinations have to be shared whether the off-payroll working rules apply or not.

  3. The determinations have to be communicated on or before the contract date or before the work starts.

  4. If the worker disagrees with your determination, then you need to consider the reasons for disagreement. You must provide a response with 45 days of receiving the disagreement. During this time you should continue to apply the rules in line with your original determination.

    * Tell the worker if the determination has not changed.
    * Tell the fee-payer and the worker if the determination has changed.
    * If you do not respond within 45 days, the responsibility for paying tax and National Insurance contributions will become your responsibility.

If the client, agency or any other party in the supply chain fails to pass down the determination they will be considered the fee-payer and therefore assume liability for deducting tax and NI contributions and passing them to HMRC, until the determination is passed on.


Accounting and taxation

Once the contract does fall under off-payroll working rules and the tax, and national insurance is deducted by the organisations, the remaining question is how to account for this income in the books of the intermediary (normally a personal service company of the worker). It would be worth considering whether is it still beneficial to remain as self-employed, weighing all the pros and cons.


ACCA's technical factsheet looking at the accounting and tax treatment of IR35 deductions in the public sector can be followed for these purposes.


Useful links:


Full HMRC guidance

Companies Act 2006 – Small companies regime



VAT and MTD error messages

HMRC has provided a list of error messages which may be encountered when filing an MTD for VAT return.

HMRC has provided a list of error messages which businesses and agents may encounter when attempting to file an MTD for VAT return.

ACCA has published guidance on the most common errors and possible solutions in order to help businesses and agents to identify and fix issues as efficiently as possible.

If anyone has encountered problems other than those given in the guidance or has any suggestions as to how the process can be handled more effectively, please email us at


Tour operators margin scheme

New guidance as to what the selling price should and should not include.

New guidance as to what the selling price should and should not include.


The guidance around the Tour Operators Margin Scheme (VAT Notice 709/5) has been updated, including Paragraph 6.1, which details how to work out the selling price under the Tour Operators Margin Scheme.


It states that the selling price should include:

  • the total VAT-inclusive selling price of all your margin scheme supplies – if you make a charge for payment by credit card this is also part of your total selling price and must be included in this total
  • the total VAT-inclusive selling price of any in-house supplies which you have supplied together with margin scheme supplies
  • amounts received relating to any supplies, packaged with margin scheme supplies which you arrange as an agent, if your commission is not readily identified
  • forfeited deposits and cancellation fees received from customers who cancel bookings where these exceed 20% of the agreed price, when totalled, if you use method 2 to calculate tax points
  • if you sell through an agent, the full amount paid by, or on account of, the customer (even if the agent deducts a commission and you receive only the balance) – if the agent grants a discount to the customer and makes good this discount, your selling price is the amount paid by the customer plus the ‘top up’ amount added by the agent.


The selling price should not include:

  • any refunds made to customers for unsatisfactory service
  • the value of any packages of supplies which do not include any margin scheme supplies – you should account for VAT on these in the normal way
  • amounts collected by you as an agent, if your commission is readily identified
  • any discount you agree with your customer
  • forfeited deposits and cancellation fees received from customers who cancel bookings if you use method 1 to calculate tax points, or you use method 2 and have received 20% or less of the agreed price.
Loan charges – HMRC’s recent communication

HMRC responds to the government’s announcement of an independent review of the loan charge.

HMRC responds to the government’s announcement of an independent review of the loan charge.


HMRC recently issued the following to agents:


‘The government has announced an independent review of the loan charge. HMRC has published guidance which sets out how the review of the loan charge impacts those affected. You can find more information on You may want to make your clients aware that those not settling their disguised remuneration scheme use will still need to complete an additional information return by 3‌0 September‌ 2‌01‌9. The review will report to the government by mid-November 2‌01‌9. HMRC will update the guidance once the government has responded to the review.’


The guidance on states:


If you have already settled your disguised remuneration loan scheme use and paid the amount you owe in full

You are not directly affected by the announcement of the review and there is no change to your tax position at this time.


HMRC will update this guidance setting out details of what the next steps are for you if your potential liability to the loan charge changes as a result of the government response to the review.


If you have settled your disguised remuneration loan scheme use but are paying what you owe in instalments

There is no change to your tax position at this time. You should continue to pay the amounts you have agreed to pay while the review is ongoing.


HMRC will update this guidance setting out details of what the next steps are for you if your potential liability to the loan charge changes as a result of the government response to the review.


If you provided all the required information by 5 April 2019 and are waiting to finalise your settlement with HMRC

You can continue to finalise your settlement with HMRC if you wish to do so. Settling your open enquiries and appeals will allow you certainty in your tax affairs. We want to work with you to finalise your tax affairs and get out of avoidance for good. HMRC recognise that you may want to wait for the government’s response to the review before finalising your settlement.


You do not need to submit the additional information return by 30 September 2019 as HMRC already has the information it needs.


If you choose to settle, HMRC will continue its existing practice of not charging statutory late payment interest from 1 October 2018, or, if later, the month in which you provided the required information to HMRC.


HMRC will update this guidance setting out details of what the next steps are for you if your potential liability to the loan charge changes as a result of the government response to the review.


If you are not settling your disguised remuneration scheme use

You will still need to complete an additional information return by 30 September 2019. If you fail to do so HMRC reserves the right to charge penalties. You can find further information about the additional information.


Accounts true and fair view and no-deal Brexit

Areas of accounts that are likely to be affected for companies reporting under FRS 102 and FRS 102 1A.

Areas of accounts that are likely to be affected for companies reporting under FRS 102 and FRS 102 1A.


ACCA members need to consider how reported numbers and disclosures in accounts will change in case of a no-deal Brexit. This article considers areas of accounts that are likely to be affected for companies reporting under FRS 102 and FRS 102 1A. The guide does not consider issues specific to group companies.


More reliance on judgement

With little knowledge of how trading with the EU will look after a no-deal Brexit, accountants may find themselves relying on management judgement more than ever before. It is possible that matters previously considered straightforward may become less obvious and reporting on them will need to be approached with caution. Practitioners should highlight those areas in discussions with management and be prepared to challenge directors' judgements and assumptions, in a way that will result in prudent reporting. This may require practitioners to devote more time to prepare true and fair accounts and to achieve balance between optimistic but unsubstantiated assumptions and overcompensating by taking an overly pessimistic view.


Going concern

Where clients have predominantly EU based customers, profitability of sales contracts is likely to be affected by customs duties, imposed cross border fees, the cost of logistical delays, forex losses caused by the weak sterling, to name a few. Contracts already in place may become onerous, unless they can be renegotiated, as pressure on cash flow increases in the short to medium term, until stability returns.


Going concern uncertainties should be highlighted in the accounts as usual (see more below), and the availability of shareholders’ ongoing support or third party funding confirmed in the context of a higher than usual commercial risk. Practitioners relying on directors' representations in relation to availability of financial support should ensure such commitments are relied on only when verified and confirmed.


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


Impairment of assets

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


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



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


Assets other than inventories

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


Reliance on valuations

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



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


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


Emphasis on disclosures of uncertainties, judgements and estimates

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

  • disclosure of uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern (FRS 102, section 3.9)
  • disclosure of significant uncertainties affecting the value of recognised assets and liabilities (FRS 102 section 8.7).


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


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


Significance of disclosure of post-balance sheet events

To capture all material impacts of Brexit, clients should plan to undertake a comprehensive post balance sheet event review. During the review, information may be found after the year end, which provides evidence in relation to:

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


Requirement of more detailed disclosures

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


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


Increased value of directors' report

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

Late, non-payment and credit risk

We need your help to combat customer credit risks and support you and the businesses you represent.

We need your help to combat customer credit risks and support you and the businesses you represent.


Late, delayed and non-payment is an unnecessary cost for businesses and can ultimately mean a business ceases to exist.


We have been lobbying and engaged with government, businesses and partners over a number of years on the important business issue. We need your help to combat customer credit risks and support you and the businesses you represent.


ACCA and the Chartered Institute of Credit Management have partnered up to survey members on their risk assessment of new customers. The results will help shape recommendations to government on reforming late payment regulation and SME risk assessment.


Please have your say and get involved now


Enhancing the credibility of your independent charity examination reports

Ten simple things that must not be forgotten.

Ten simple things that must not be forgotten.


The Charity Commission regularly examines charities registered in the UK as part of its quality control review and to ensure that public money is used for the purposes it is collected for.


In addition to its own enquiries, the Commission also relies on independently examined reports. Here we have ten simple steps which ACCA members can take to help themselves in enhancing the credibility of their independent examiner’s reports:

  1. Before taking any engagements, inspect all the forming documents of the charity to ascertain whether it requires an audit or not.  It is commonly misunderstood that a small charity never requires an audit. The charity must be eligible to have an independent examination. Charity law requires those charities with a gross income of more than £25,000 to have some form of external scrutiny of their accounts.
  2. Issue an engagement letter, detailing all the terms and conditions, scope, GDPR and privacy policies.  ACCA have updated engagement letters which can be obtained by emailing
  3. Make sure that you are eligible to carry out the work. An independent examiner is defined in law as 'an independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts'. Being an ACCA general practitioner you are able to carry out the work if you have the necessary skills.

Additionally, ACCA members without practising certificate are allowed to do the independent examination so long as they meet all the conditions for ‘honorary work’ as specified below in ACCA's rulebook:


The activities set out in regulation 4(1)(b) shall not constitute public practice where all of the following conditions are satisfied:


(a) no fee or other benefit is receivable in consideration for the work performed; and

(b) the gross income of the entity for the year prior to the year in question does not exceed £250,000; and

(c) the member does not hold himself out, or allow himself to be held out, as being in public practice.


  1. Ensure that you understand the operation of the charity and its purposes. Identify the internal control maintained by the charity and what accounting records are kept for all the transactions.
  2. Make note of all the related parties, control and business partners and how the conflict of interest is handled, if there is any, and address them appropriately. Ensure that where accruals accounts are prepared that a related party note is added even where no related party transactions have been identified.
  3. You must be fully aware of your statutory reporting requirements to UK charity regulators for ‘Matters of Material Significance’ as highlighted in Charity Commission guidance CC32. Follow the ‘Directions’ in CC32.
  4. You must consider the relevance of all the assumptions, judgements and estimates made by the trustees of the charity while forming your own opinion.
  5. Understand the difference between ‘must’, ‘should’ and ‘may’ as highlighted in the Charity Commission directions and guidance. You need to ensure that your report is fully compliant with these directions and good guidance is followed throughout the examination process.
  6. Ensure that the charity accounts are fully adhering to The Charities SORP.  The Charities SORP is a Statement of Recommended Practice which sets out how charities should prepare their annual accounts and report on their finances. The SORP is an interpretation of the underlying financial reporting standards and generally accepted accounting practice.
  7. After the examination is completed, you need to provide trustees your report which is compliant with 2008 regulations. Some of the examples can be found within CC32 guidance.


Also see the article on Charity reporting: a warning for auditors, independent examiners and trustees and Independent examinations of Charity Accounts 


Charity reporting: a warning for auditors, independent examiners and trustees

New benchmark amongst resources designed to drive up the quality of charity reporting.

New benchmark amongst resources designed to drive up the quality of charity reporting.


A study by the Charity Commission highlighted that only half the accounts filed by charities met the requirements set by the Charity Commission.


It is very clear from the report, and also from our engagement with the Charity Commission, that failings in charity accounts need to be identified and reported on.


The Commission expects those scrutinising charity accounts to make use of its benchmark and also that trustees and those interested in charity accounts are aware of it.


The benchmark, which applies now, comprises 15 criteria, nine of which apply irrespective of whether the external scrutiny is of receipts and payments or accruals accounts. The other six criteria apply only to the external scrutiny of accruals accounts.


Criteria that apply to the external scrutiny of receipts and payments and accruals accounts:


Trustees’ annual report

For registered charities, there is a trustees’ annual report or, if a company, a combined trustees’ annual report and directors’ report

External scrutiny report

There is an independent examination report or audit report

There is an audit report if an audit is required by the charity’s size

The external scrutiny report is worded correctly with reference made to the correct legislation

The accounts

There is a receipts and payments account or a statement of financial activities

There is a statement of assets and liabilities or a balance sheet

The accounts are internally consistent, ie the closing funds balance within the receipts and payments accounts or statement of financial activities is consistent with the statement of assets and liabilities or balance sheet

The accounts add up correctly

Unrestricted and restricted funds are clearly identified


Criteria that apply to the external scrutiny of accruals accounts only:


The accounts

The accounts have been prepared on an accruals basis, if required by the charity’s size or because it is a company

The accounting policies note states that the accounts have been prepared under the correct Charities SORP

The notes disclose all of the required related party transactions as required by the Charities SORP

The statement of financial activities either incorporates an income and expenditure account or there is a separate income and expenditure account, if the charity is a company

Consolidated accounts have been prepared if applicable and required by the charity’s size

There is a cash flow statement, if required by the charity’s size


It is highlighted in the report that accounts reviewed by an auditor met the benchmark more frequently than those reviewed by an independent examiner.


Although qualified examiners performed better, only 44% of accounts submitted by qualified examiners met the benchmark. Just 18% of unqualified examiners met the benchmark. Clearly auditors, independent examiners and trustees will need to ensure that the report and findings are acted upon.


View our guide to the benchmark

We have reproduced the benchmark in a guide for members. If you are a trustee, please give to your examiner or auditor. If you are an auditor or independent examiner, please share with the charity’s trustees.


The benchmark highlights the high-level areas and includes the following: ‘The notes disclose all of the required related party transactions as required by the Charities SORP’.


The report highlights this, stating that: ‘Failings included incomplete reporting of related party transactions; of 77 cases in which these were not properly disclosed, although in all likelihood an oversight, none were reported to the Commission by auditors or independent examiners. This raises additional concerns that the failure by trustees to manage conflicts of interest is also being under-reported.’


It is important to remember that charity reporting requirements are different from those under company reporting preparation. The related party reporting requirement for a charity requires a statement on related parties even where no related party transactions exist.


Support from ACCA

As you will note in the report, ACCA is working with the Charity Commission on supporting our members, whether they are volunteering as trustees or working as practitioners, and ensuring that they are equipped and supported in understanding charity filing and scrutiny requirements.


Please take a look at ACCA’s charity conference while other educational materials are also available to view.


How to prepare for an AML compliance review

Watch our free webinar for top tips on preparing for an AML review.

ACCA regularly conducts anti money laundering (AML) review of regulated practices. Watch our free webinar for top tips on preparing for a review.


ACCA is a supervisory authority under Schedule 3 to the Money Laundering Regulations 2017 (MLR17).


Whether you are in public practice or otherwise engaged in providing accountancy, or trust and company services, by law you have to be registered with either:

  • ACCA (which is a Professional Body Supervisor for AML)
  • or another professional supervisory body (if you are a dual member)
  • or with HMRC for the purposes of supervision of your anti-money laundering compliance.


ACCA’s AML supervisory team is responsible for conducting AML compliance reviews of our supervised firms. Reviews will be conducted either remotely as a desk based review or on-site. On site reviews typically last for one day but if a firm is large, two days may be required to fully conduct the review and assess all the required controls.


Watch our webinar Anti-money laundering: registering for supervision for guidance on what to expect from an AML compliance review. It covers:

  • whether your business falls under the supervisory regime
  • if you MUST register for AML supervision
  • who you should register with
  • what are the key requirements in the Money Laundering Regulations (MLRs) 2017
  • what to expect from an AML supervisory visit.
Taxation of shares transferred to a director or employee

Understanding how to account for employee securities and shares.

Understanding how to account for employee securities and shares.


Shares in companies are commonly used by employers to remunerate directors and employees. These are sometimes transferred under a formal plan which may have written rules which specify when and how many shares will be transferred and sometimes the shares or options are transferred as ‘one-off’ awards.


Where employees receive shares or other securities from their employer as a reward for their employment, then the money’s worth of the shares less any payment made by the employee will normally be taxed as earnings.


All shares and securities acquired in connection with an employment come within the scope of the employment-related securities regime. The rules also extend to rights or opportunities to acquire securities, and to benefits in connection with shares and securities that are not otherwise chargeable to tax.


They cover cases where the securities, or rights to acquire securities, are provided by an entity other than the employer, and where the securities are not directly received by the employee.


The HMRC manuals have information at the following:

The art of staff retention

A look at the many factors which come into play for practices who consistently retain their employees.

A look at the many factors which come into play for practices who consistently retain their employees.


In part 1 of this article, successful ACCA practitioners spoke about the different ways they recruit staff.


Now, part 2 looks at four different aspects to retaining that great team member who you’ve worked so hard to recruit. This article is aimed primarily at retaining talent under the age of 30 but would be relevant to the retention of any staff member.



This is an obvious – perhaps mandatory – retention tool these days. Employees expect a work life balance and expect to be trusted to manage their time while getting their work done. Some flexibility with start and finish times is the absolute minimum – and the option to work from home occasionally will be very attractive – but take it further and it will be one of the strongest retention tools.


At the beginning of 2019, Norfolk-based Farnell Clarke implemented a new way of flexible work that focused on output of work rather than input of time. Their team members can work six-hour days, with total flexibility of when, where and how they work. Team members also have unlimited holiday but are expected to provide an exceptional level of service to clients. The thinking behind this ethos is that this will give team members the work life balance they need to be more productive and efficient when their mind and body are in work mode.


Farnell Clarke founder Will Farnell explains further: ‘With millennials making up over 50% of our workforce, and a further 17% of the team belonging to Generation Z, we’re keen to further develop our attractive modern workplace for today’s generation. Our aim as always is to continue to attract the best staff, and of course retain our fantastic team. This change has been two years in the making so it’s not something we’ve taken on lightly, but we’re really excited to offer this to our team. We are confident that we have the right people, processes and technology in place to make this a success for both our staff and our clients.’


Farnell Clarke also has an office pub that opens every Friday from 4pm but that’s another article for another day.


Long before Farnell Clarke took the flexible working concept to the extreme, Gateshead-based McCready Page decided to do away with timesheets and introduced a system of flexi time in 2003. There are some ground rules by necessity and team members still need to keep track of their hours but they can work any time they want – evenings and weekends included.


According to partner Rob Page, this was a game changer for the practice. ‘In reality, most people’s lives outside of work align with the standard working day anyway so team members tend to keep similar hours and it does not cause issues for the practice. It takes the pressure off lateness because you can’t be late! The option to be able to accrue some hours to use when you need time off for something personal is a great retention tool.’


A positive workplace culture

A practice’s culture is the environment that surrounds every team member all the time. It embodies the values, beliefs, leadership and attitude of the practice. Without a positive workplace culture, you cannot hope to retain team members for long.


However, an open and honest culture will reap retention benefits and enhance your reputation in the recruitment world. Being a flexible fair boss is particularly important in a small practice and could give you an edge over larger practices.


Many ACCA practitioners have mentioned that a positive enjoyable atmosphere in the office helps with retention. Some had worked in practices that were ruled by fear when they were juniors and those experiences meant they wanted something different when they became partners.


Not only will an open and honest environment help with retention, it can also mean that team members are more likely to come clean if a mistake has been made rather than trying to bury it.


Michaela Johns – an ACCA partner in Southampton-based HWB Accountants – found another beneficial side effect of their positive workplace environment. ‘A team member wanted to make the move to industry and gave us plenty of notice which allowed us to make plans for recruiting a replacement. We then helped place the staff member with a client which was a win-win for everybody – we developed a stronger connection with the client and the client got a great staff member. And it was all possible because our culture encourages openness.’



Giving responsibility early on – done carefully so as not to impact on the client relationship – will help team members feel valued. It will give them a greater sense of ownership and a development path that they can understand and work towards. A client portfolio of different sectors and different sizes will also give team members the variety to develop them and keep them interested.


Even trainees can be given their own small portfolio of clients (for bookkeeping, accounts & payroll) which would make them feel valued even though they would still have to be supervised by a manager.


Matthew Taylor – a partner in Manchester-based James Scott – sees the benefits of apprenticeships in that vein. ‘With cloud accounting, apprentices can be developed to do everything for one client – rather than several staff all doing different aspects of accounts, management accounts and corporation tax for the same client.’


Many team members will enjoy speaking to clients and feeling that they are making a contribution rather than just putting together a set of accounts. Taking team members along to client visits can help them to appreciate their role within the practice and develop that sense of buy-in.


ACCA partner Viraj Mehta at London-based accountants Bourner Bullock has found a particularly enjoyable way to bring team members and clients together. Every quarter they have a social event that brings the team together with clients and other professionals such as lawyers.


‘Clients like meeting the team and team members feel part of the bigger picture. We also have team-only social events and our tradition of going for a pub lunch every Friday is much loved.’


It is part of a proactive approach to retention that the practice invests in.



There is no avoiding the issue of salary when it comes to retention. This will vary from practice to practice with too many variables to take into account. Geography will make a difference – in central London, bonuses and salary increases will have to be made with each exam that a team member passes because that is the widespread practice across firms in central London.  


Find out what is expected in your neck of the woods – consider using any local recruitment agency contacts you have to advise you on the current market rate. If you ensure that you pay the going rate then at least your team members will not leave for monetary reasons.


Pat Delbridge – member engagement manager, ACCA UK

DRC for buildings and construction services

FAQs about the domestic reverse charge and get advice on the practical application of the new VAT regime.

Browse our FAQs about the domestic reverse charge and get advice on the practical application of the new VAT regime.


The start of the VAT domestic reverse charge for the building and construction services has been delayed for one year and is now scheduled to start on 1 October 2020.


It still means that the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier. It will apply to individuals or businesses registered for VAT in the UK. The reverse charge will affect supplies of building and construction services that need to be reported under CIS at the standard or reduced rates.  


It will alter VAT returns, invoicing and debtor requirements for both contractors and subcontractors. These businesses now have a further year to prepare, including amending contracts, considering the impact on cashflow and considering how they will deal with the different ways of working.


The guidance states that:

  • ‘if you’re a contractor you’ll also need to review all your contracts with sub-contractors, to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers if it will.
  • if you’re a sub-contractor you’ll also need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.’


The following are some of the most frequently asked questions in relation to DRC to assist you with the practical application of the new VAT regime.


Does the DRC apply to every provider of construction services?

No. Broadly, DRC applies to VAT registered traders providing construction services to VAT registered entities who provide an onward supply of these services.


DRC will not apply where:

  • services are supplied to end user, such as property owner, developer or main contractor, that sells a newly completed building to a customer
  • recipient makes onward supplies to a connected company
  • supplier and recipient are landlord and tenant and vice versa
  • supplies are zero rated.


What is meant by ‘onward supply’ of construction services?

If a project for an end client is delivered through a chain of subcontractor transactions, no VAT will be charged by any of the subcontractors in the chain until the final stage where a service is supplied to a main contractor, an end client or a developer (end user).


For example, subcontractor 1 is engaged by subcontractor 2 to dig building foundations. Supplier 2 carries out insulation and reinforcement work on the excavated ground for supplier 3. Supplier 3 receives reinforced insulated foundations to continue construction further. Construction services are provided onwards by contractor 1 to contractor 2 and then contractor 3. No VAT will be charged by subcontractor 1, 2 and 3, until further down the line the service is provided to the main contractor responsible to deliver the finished construction project.


Does DRC apply to all construction services?

DRC applies to the same services as those that are currently covered by the Construction Industry Scheme.


In general terms, how does DRC work?

Subcontractor 1 providing construction services to Subcontractor 2 does not charge VAT on its invoice.


Subcontractor 2 entity ‘charges itself’ output VAT and recovers it as input tax on the same return – the input and output VAT cancel out, with NIL impact on subcontractor 2 VAT position.


What should a correct DRC invoice show?

Where DRC applies, the invoice raised should state how much VAT is due under the reverse charge, or the rate of VAT if the VAT amount cannot be shown.


VAT should not be included in the amount charged to the customer.


The invoice should make it clear that the domestic reverse charge applies and that the customer is required to account for the VAT. Suggested wording: ‘Reverse charge VATA 1994 section 55A applies’.


I carried out a refurbishment of a client’s company offices. Do I need to charge VAT, or do I fall under DRC and therefore not charge VAT?

As the company is an end user (it will operate from the offices) DRC does not apply and VAT must be charged.


We provide construction workers for construction projects. Do our services fall under DRC?

No, supply of staff does not constitute the supply of construction services.


As a construction business, are we obliged to verify whether our client is an end user and therefore DRC does not apply?

Where customer status not clear, the supplier of construction services should ask the customer if they are an end user or intermediary supplier and keep a record of the answer. It is the responsibility of the customer to make the supplier aware that they are an end user.


In the absence of confirmation from the customer that they are an end user, the supplier will need to assume reverse charge rules will apply.


How strict will HMRC be in policing the application of DRC and penalising for non-compliance?

HMRC envisage a light-touch approach for the first six months after DRC comes in, if it is evident that the taxpayer acted in in good faith and tried to comply with legislation. However, HMRC expects to assess for errors where businesses take advantage of the scheme by not applying it correctly, for example where it is evident that an end user incorrectly failed to issue a confirmation to generate a cash flow advantage. Penalties for DRC breaches have not yet been formally confirmed.


How should an error be corrected?

If no written confirmation from a customer has been obtained, and DRC is applied incorrectly, the customer should notify the supplier that it is an end user and request a corrected invoice.


If a supplier charges VAT where DRC should apply, there is a liability on the supplier for the incorrectly charged VAT, while at the same time the customer will not be able to recover the VAT, as it had been charged incorrectly.


We have ceased to be an end user half-way during the contract and will now provide construction services outwards. What is the correct process to handle this change from the DRC perspective when we are invoiced by our subcontractor?

As a customer ceasing to be an end user, you should notify the supplier. The new VAT treatment will apply from the point the customer’s circumstances changed.

If the change happened during an invoice period where there would be one invoice including reverse charge rules and one following normal VAT rules, your supplier can opt to change to the new treatment for the entire invoice period or wait until the next invoice period before changing to the new treatment.


Currently there is no guidance from HMRC on what would happen in a reverse situation where a customer becomes an end user half-way through the contract.


Does DRC affect VAT recovery for a trader who will no longer charge output VAT, but incurs input VAT?

No. The recovery of input VAT is not affected. However, where as a result of DRC applying you will find yourself in a VAT repayment position, HMRC recommends a switch to monthly returns.


How will DRC affect the flat rate scheme?

It is likely that the flat rate scheme will no longer be beneficial to a supplier of construction services on flat rate.


How will the new rules DRC affect me as a subcontractor?

Cash flow

Not being able to charge VAT on an onward supply of construction services will remove the positive cash flow advantage. If you are a small or medium construction company operating below the main contractor and on low margins, your available working capital buffer may significantly decrease as the upfront funding equal to as much as 20% of your revenue for up to four months is removed. 


Commercial sensitivity

For main contractors, DRC will result in potentially sensitive disclosure of being at the end of the supply chain. This may affect the negotiation position.


Administrative burden

DRC will force a review of supplies made to and received from VAT registered contractors to establish whether these will be subject to a reverse charge from October 2020.


Traders will need to adapt accounting systems to process reverse charge supplies and to make ongoing checks at a later stage to ensure that supplies and purchases are correctly treated.

Disengagement checklist for corporate clients

Be clear on what happens when you disengage from a client.

Be clear on what happens when you disengage from a client.


Being clear on what happens on disengagement when you choose to resign as an accountant or a client chooses to move to a new accountant is important as it clarifies responsibilities from the outset.  The following can be used as a checklist or included within firms' policies and it summarises the main actions you need to take:


Send a disengagement letter

For details of specific terms to do with disengagement, refer to relevant parts of your engagement letter.


An example of a disengagement letter wording can be found in appendix D of Engagement letters for tax practitioners on page 148.


If your resignation is linked to a client’s suspicious activity, reporting or tax irregularities or fraud, the circumstances in which you disengage, such as timing and reasons mentioned in the engagement letter, should not tip the client off.


Return to a client all records of which they are the legal owner 

Records provided to you, based on which you prepared reports for the client, including accounts, tax returns or other reports (for example invoices, bank statements, till records, cash books), must be returned. The ACCA Rulebook 2019 page 332 states:


320.13 Once a new accountant has been appointed, or on otherwise ceasing to hold office, the former accountant shall ensure that all books and papers belonging to his/her former client which are in the former accountant’s possession are promptly transferred, whether the new accountant or the client has requested them or not, except where the former accountant claims to exercise a lien or other security over them in respect of unpaid fees.


While the above section makes a general reference to a right of lien, past legal cases concluded that in matters concerning companies, right of lien is unenforceable, and this is the general view held by the profession. It may be necessary to seek legal advice to establish if right of lien can be exercised in your specific case.


Where there are records and reports that you prepared for the client as part of the engagement – that have not been given to the client already – then directors of companies have a duty to prepare financial accounts and keep relevant company records. Whether they prepare such records themselves or engage an external accountant to prepare them, such records belong to the company. Examples of records that a company is a legal owner of include financial accounts, nominal ledgers, schedules of debtors and creditors, fixed asset register, payroll records, tax records, and other records the client asked the accountant to prepare.


View this further information relating to ‘legal ownership of, and rights of access to, books, files, working papers and other documents’.


The format in which records prepared by the accountant should be passed to the client is not defined. Records can be passed in electronic or paper form.


Where records are held by a third party, please consider this guidance.


Respond to a clearance request from the new accountant

In order to follow ACCA rules and guidelines, you are required to:

  • request the client’s consent to disclose all relevant information to the new accountant
  • if the client does not give you consent to disclose all relevant information to the new accountant, you should state in your response to the clearance request that there may be other relevant information, but you are unable to disclose it
  • respond to the clearance request within a reasonable time. Reasonable time is not defined; however, your response should be  sufficiently prompt to ensure continuity of the client’s affairs
  • transfer to the new accountant at least the last set of approved accounts and a detailed trial balance. This requirement applies even if the client owes you fees (ACCA Rulebook 2019, section 320.15, page 332)
  • there is no obligation on you to transfer to the new accountant any additional records. Transfer of additional records is at your discretion and you may charge a fee for it (section 320.17 of ACCA Rulebook 2019).


When responding to requests, practitioners providing clearance may wish to consider using the following: ‘In so far as our legislative and ethical responsibilities allow us to reply, we are not aware of any professional reason why you should not accept…’


Keep your own client file

Ensure you keep your own client file (electronic or paper) stored for at least seven years under normal circumstances, to comply with record retention provisions as well as possible future subject access requests in connection with any personal information you hold.


Correct run off cover

If you are resigning as a result of selling your business, or retirement, ensure you have the correct run off cover in place for six years after you cease acting for the client.


If you require any support, please contact ACCA at


Deed of variation

How beneficiaries can vary the outcome of a will.

How beneficiaries can vary the outcome of a will.


When to consider

A deed of variation (also known as a deed of family arrangement) may be appropriate to consider either when there is a will or when someone dies intestate (without a will).


If the beneficiaries (or at least one beneficiary) wants to redirect a bequest in the will (or an entitlement under the intestacy laws) either in part or in whole to another person or people then that beneficiary (or beneficiaries) can complete a deed of variation. The deed of variation can only affect the bequests which relate to the beneficiaries which are a party to the deed of variation.


The following is a list of some of the usual reasons why a deed of variation may be used:

  • to save tax. Sometimes the last will of the deceased was written many years previously and the current tax regime may be quite different from when that will was written. Similarly the deceased may not have considered tax saving options which could have been made at the time of writing the will
  • the last will may have unintentionally excluded someone who the beneficiaries believe should have been included. Similarly someone may have been excluded and the beneficiaries consider that a legitimate claim could be made and a deed of variation may avoid costly court claims
  • the will may have a defect in some way or was wrongly worded and the beneficiaries consider the intention of the deceased may have been different from the legal wording in the will
  • financial imbalances may have occurred between the date the last will was written and the date of death which a deed of variation can rectify.


An important matter to consider in relation to jointly held property is whether there is a ‘joint tenancy’ or a ‘tenancy in common’.


Joint tenancy is a type of ownership where each person owns the whole of the property. As a joint tenant, you cannot leave part of the property to someone else in a will. If a joint tenant dies, the property automatically passes to the other owner(s). A deed of variation would not be appropriate to try to vary an interest held as a joint tenant.


Tenancy in common (or ‘joint owners’ in Scotland) is when different people own a separate share of the property. Tenants in common can leave their share in the property to whoever they want to in their will. This bequest can be varied using a deed of variation.


Legal effect

The effect of a deed of variation is as if the terms of the will had been re-written and the bequests as at the date of death change in accordance with the deed of variation. Similarly if there is no will, the redirection will also be treated as having been made at the date of death of the deceased.


Inheritance tax is calculated taking account of the variation. For capital gains tax purposes the beneficiaries, after taking account of the variation, are treated as acquiring the assets with a value as at the date of death and not their value when distributed to the beneficiaries.


How to prepare

The following conditions need to be complied with for a valid deed of variation:

  1. the variation must be in writing
  2. the document is normally a formal deed, but does not have to be
  3. the variation must be made within two years of the date of death
  4. the beneficiary redirecting the bequest must sign the document
  5. the document must state which part of the estate is being varied and who is to benefit from the variation
  6. if the deed of variation is to be effective for inheritance tax and capital gains tax then it should refer to section 142 of the Inheritance Tax Act 1984 and section 62 of the Taxation of Chargeable Gains Act 1992 as amended by Finance Act 2002, section 120 and/or section 52
  7. only adult (over 18 years of age) beneficiaries can vary their entitlement to a deceased person’s estate
  8. if the variations result in further inheritance tax being payable, the personal representatives must sign the deed of variation as well as the beneficiaries.


Where to send them or submit them when complete

The deed of variation should be sent to the personal representatives (known as an executor if there is a will and as an administrator if there is no will).


If the deed of variation results in additional inheritance tax payable then the personal representative must notify HMRC within six months of the date of the variation and send them a copy of the document.


How to prepare a deed

Signing as a deed requires those very words and the signature of the person or persons making the deed. The signature should be on the document in the space provided. The name of the signatory would normally be printed or otherwise make clear who has signed the document. The signature should be in ink or some other indelible medium.


The signature should be witnessed (which means the witness’s name and address should be written and the witness’s signature near this information).


The witness is not a party to the document. The purpose of the witness is to verify at a later date, if necessary, that the person who signed was the person named. The witness should see that person sign the document and then sign the document as the witness. Printing the witness’s name and address is to facilitate finding that witness at a later date if necessary.


For a deed to be validly executed it needs to be ‘delivered’. This is usually achieved by having clear wording in the document setting out that the deed will be delivered on the date appearing at the head of the document.


If the deed contains wording that it is executed and delivered on the date appearing at the head of the document, then a date should be inserted that is on or after the date that the last signatory signed. If the deed does not contain such wording, the absence of a date will not necessarily affect its validity, which usually takes effect from the date of delivery.


For further information visit these four related articles:


Probate and its hidden dangers

When administering an estate can result in a financial loss.

When administering an estate can result in a financial loss.


A personal representative of an estate has various responsibilities. If the will names the person or entity who is to deal with the estate that person or entity is referred to as the executor. If there is no will the person or entity who deals with the estate is referred to as the administrator.


One of the responsibilities of the administrator is to establish who the beneficiaries are and to distribute the estate to those beneficiaries. Taking on the role of the administrator can prove expensive as demonstrated by the following example.


Mr Jones was contacted by a firm of ‘heir hunters’ who informed him that he might be entitled to receive an inheritance from a distant relative. To find out the details of the inheritance Mr Jones agreed to sign the legal contract supplied by the heir hunters and to pay their fees. In this case Mr Jones appeared to be the sole beneficiary and he agreed to be the administrator.


The value of the estate turned out to be £80,000 and the heir hunters' fees were 25% plus VAT (£80,000 x 25% being £20,000 plus £4,000 VAT) being £24,000 which meant that Mr Jones received a net amount of £56,000 after paying the heir hunters' fees.


Some months later Mr Jones was contacted and informed that there were other relatives of the deceased who were still alive and they had a preferential claim on the estate. These other relatives were entitled to receive the estate value of £80,000 and Mr Jones was left out of pocket to the value of £24,000.


With hindsight, Mr Jones could have taken out missing beneficiary indemnity insurance. This is usually obtained by making a one-off premium payment from the estate.

Get to grips with PRR

Private residence relief when property is transferred between spouses.

Private residence relief when property is transferred between spouses.


If a residence is transferred between spouses or between civil partners, the period of ownership of the transferee begins at the start of the period of ownership of the transferor.


If a residence is transferred between spouses or between civil partners, who are living together, whether by sale or by gift, the period of ownership of the transferee is treated by TCGA 1992 s222(7)(a) as beginning at the beginning of the period of ownership of the transferor. This also applies where the residence is transferred from one to the other on death.


This provision only applies for the purpose of computing private residence relief. It has no effect on the computation of the gain which arises on any disposal by the transferee spouse or by the transferee civil partner.


The following conditions must be fulfilled:

  • the spouse or the civil partners must be living together and the residence must be their only or main residence at the date of the transfer. If the residence passes from one to the other on the death of either of them they must have been living together and the residence must have been their only or main residence before the death of the transferring spouse or civil partner
  • the extended period of ownership is subject to the limit of TCGA 1992 s223(7) for the purpose of computing the relief due on any subsequent disposal.


In some situations the extended ownership period will not be to the advantage of the transferee.


Example 1

Ann and Andrew were a married couple and lived together in a house which Ann purchased in March 1990, although for the first five years of her ownership the house was rented to tenants. When Ann died the house passed to Andrew, who continued to occupy it as his only residence until he sold it.


If Andrew was able to account for the period he owned the house, then private residence relief would be available for this whole period. However, he needs to consider the ‘extended ownership period’ from March 1990 to the date he sold the house. During this extended ownership period the house was rented to tenants which means that the private residence relief will be restricted.


Example 2

Bob and Brenda each owned a house when they married on 1 March 1995. After they married they nominated Brenda’s house to be their main residence as from 1 March 1995. Brenda originally purchased the house on 1 September 1990.


Brenda died on 1 February 2015 and her house was transferred to Bob at a probate value of £400,000. Bob moved out of the house on 1 February 2015 and moved into his other house which he still owned and this other house became his main residence. The former main residence remained empty until it was sold on 1 January 2019 for £380,000.


Bob’s loss on the sale of the house is as follows:


Sale proceeds                                 £380,000

Less cost (probate value)               £400,000

Loss                                                 £20,000


As private residence relief is available on the property only part of the loss will be an allowable loss. Bob would take over his wife’s period of ownership of the property.


Period of ownership 01.09.90 to 01.01.19 = 339 months.

Period of only or main residence 01.03.95 to 01.12.15 = 238 months

Final period allowed                                                = 18 months


The loss is restricted by £20,000 x (238 + 18)/321 = £15,103

The allowable loss is reduced to £4,897.


The above is explained in HMRC capital gains:


The legislation which deals with ‘private residence relief; often referred to as ‘principal private residence’ relief (or PPR relief) is Taxation of Chargeable Gains Act 1992 sections 222 to 226. In particular section 222(7) states the following in relation to the period of ownership when there is a transfer between spouses:


In this section and sections 222 to 226, ‘the period of ownership’ where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies, and in the case of an individual living with his spouse or civil partner:


(a) if the one disposes of, or of his or her interest in, the dwelling-house or part of a dwelling-house which is their only or main residence to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and

(b) if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.

Student loan repayments – a refresher

Guidance for students from the EU, England or Wales who studied in the UK.

Guidance for England and Wales domiciled students who studied in the UK and EU students who studied in England or Wales.

For taxpayers who took out student loans to fund courses in England and Wales starting on or after August 1998, the repayments of the loan depend on which plan the person is on and their weekly or monthly income.


The amount is collected via payroll (if the person is employed) or tax return (if the person is self-employed) based on a percentage of total income above the earning threshold. The amount collected by HMRC is then paid to the Student Loans Company.

Student loans are categorised as follows:

  • Plan 1 loans (or pre-2012 loans)
  • Plan 2 loans or post-2012 loans
  • Postgraduate Masters loans (PGL).


Plan 1 loans (or pre-2012 loans)

  • student loans for maintenance and tuition taken out for Higher Education courses by students who started a course in annual year  2011/12 or earlier (including in August 2012) and:
  • completed or withdrew from the course before 1 September 2012; or continued on the same course after 1 September 2012 (without a change to their mode of study); or
  • transferred course on or after 1 September 2012 (without a change of mode of study).


The repayments begin on 6 April following graduation (or 6 April following the date the individual leaves / finishes the course if s/he does not graduate). The repayments are only collected where the individual has total income which exceeds the repayment threshold for the tax year:

Tax year

Repayment threshold

















2011/12 and prior tax years



The interest rate on Plan 1 loans is charged at either the Retail Price Index or the Bank of England base rate plus 1%, whichever is lower. Interest rates can be found here. Interest is added each month from the day of the first payment until the loan has been repaid in full or cancelled.

Plan 2 loans (or post-2012 loans)

  • student loans for maintenance and tuition taken out for Higher Education and Further Education courses that started on or after 1 September 2012 (excluding Postgraduate Loans); or
  • started before 1 September 2012 and transferred course with a change of mode of study on or after 1 September 2012. In this case, any loans taken out after the student changes study mode are subject to Plan 2 repayment terms.


Those who started studying between 1 September 2012 and August 2015 did not have to start repaying the loan until 6 April 2016, even if the individual dropped out of the course early. Where the course began on or after 1 September 2015, the repayments begin on 6 April following graduation (or 6 April following the date the individual leaves / finishes the course if s/he does not graduate).

Tax year

Repayment threshold





2016/17 and 2017/18



Whilst studying, the interest on Plan 2 loans is charged at a fixed rate being inflation (currently 2.4%) plus 3%. After leaving the course, the interest rate varies depending on the level of the individual’s income on a year-by-year basis.

Annual income

Interest rate

£25,725 or less

RPI (currently 2.4%)

£25,725 to £46,305

RPI (currently 2.4%), plus up to 3%

Over £46,305

RPI (currently 2.4%), plus 3%



Postgraduate Masters loans (PGL)

  • student loans for a contribution to costs taken out for eligible Postgraduate Masters courses that started on or after 1 August 2016
  • no repayments needed to be made in respect of a Master's loan until 6 April 2019, even if the Master's course ended earlier. After that date, the repayments begin on 6 April after the graduate leaves the course (whether or not it is completed). The repayments are only collected where the individual has total income which exceeds the repayment threshold for the tax year
  • currently the threshold for Masters loans is £21,000.



Each plan has a threshold for weekly or monthly income. The percentage is:

  • 9% of the amount earned over the threshold for Plans 1 and 2
  • 6% of the amount earned over the threshold for the Postgraduate Loan.


If a person has a Plan 1 or 2 loan and a Postgraduate Loan, the percentage is 15% of the amount earned over the threshold.


Compensation in commercial property transactions

Guidance on the VAT aspects to consider.

Guidance on the VAT aspects to consider.


In its true meaning, a compensation is not a payment for a supply of goods or services, therefore VAT does not apply. The commercial reality is often different than the labels attached to payments, and the VAT position changes accordingly.


The guidance below is a basic view of how certain payments are generally treated.


Payments generally treated as compensation: outside of scope

  • compensation by tenant for landlord’s legal fees to extend the lease – tenant exercises the right to extend already granted in the lease
  • statutory compensation (under the Landlord and Tenant Act, or Agricultural Tenancies Act) on termination of a lease
  • dilapidation payments by tenant to the extent they genuinely reflect failure to observe covenants to maintain the property. This treatment is likely to apply only once lease expires and tenant is technically in breach of the repair covenant
  • mesne profits awarded against tenant who fails to vacate property – usually in a court order for possession of property against the tenant
  • penalty charges in a car park is seen as payments for a breach of contract or trespass and hence outside of scope
  • compensation awarded by the court or agreed in an out of court settlement.


Payments for supply: subject to VAT

  • compensation by tenant for landlord’s legal fees to extend the lease – tenant did not have a right to extend already granted in the original lease, and so acquires a new right that the landlord may grant or refuse
  • payment under a Tomlin order – treated as consideration for the surrender of the lease
  • dilapidation payments incurred before lease expires
  • overpayments by customers who do not have the correct change are additional consideration for the use of car parking facilities and subject to VAT
  • compensation by tenant to dispose of an onerous lease is treated as a supply by landlord to tenant under the lease and subject to VAT
  • tenant agrees to take the obligation of the vendor in carrying out land decontamination is treated as a supply by tenant and is subject to VAT. In most cases an obligation to decontaminate is acquired with the land and will result in a discount offered to the buyer, rather than result in an actual payment
  • compensation awarded by the court or agreed in an out of court settlement, where this is in relation to a dispute over an earlier supply
  • receipt of non-refundable deposit to secure a hotel or holiday accommodation.
Professional indemnity market hardens

Are you finding it harder to obtain PII cover? We look at why the market is hardening.

Are you finding it harder to obtain PII cover? We look at why the market is hardening.


Recent editions of In Practice have seen articles by Lockton about the shift in the Professional Indemnity Insurance (PII) market that is seeing premiums rising and some accountants finding it more difficult to obtain PII for their practices. To find out more about the situation, Pat Delbridge (member engagement manager at ACCA) spoke to Catherine Davis (ACCA relationship manager at Lockton).


Pat: Is it only the accountancy sector being affected by the hardening of the PII market?


Catherine: Whilst other sectors have been affected by the hard market conditions for some time, they have not only been seeing premium increases but also finding it difficult to obtain appropriate or compliant cover for some activities. Many insurers have reduced their market capacity and are offering lower limits of indemnity. The number of insurers in the excess layer market has also reduced and premiums have increased significantly.


Independent Financial Advisers (IFAs) have been affected by market capacity, there are now less than half a dozen insurers willing to provide terms. Many IFAs have seen increases of up to 150% over the past few years. DBTs (Defined Benefit Pension Transfers) are an issue attracting an increased rate and often limited cover. It’s worth mentioning that IFAs’ cover has been underwritten on an aggregate limit for a number of years (and not any one claim).


Solicitors have generally seen a 10% to 20% increase over the last year or so. However, a number of insurers have now withdrawn from the market.


Surveyors have generally seen a 5-10% premium rate increase, but those undertaking mortgage valuation work or been involved where ‘cladding’ has been used will have seen higher increases.


In the design & construct sector, insurers are offering lower limits of indemnity, often on an aggregate basis. Again, cladding exposure is an issue.


Accountants are generally seeing a 5-10% increase; however, we have experienced increases of up to 300% where there have been claims and higher risk activities such as tax mitigation advice or corporate finance. Some insurers are offering lower limits of indemnity.


Pat: How is Lockton looking after ACCA practices in this current climate?


Catherine: We are reviewing each case individually and using our expertise and experience to make sure that adequate cover is maintained at a realistic premium where possible.


Pat: Is there anything that practices can do to minimise premium increases?


Catherine: Start the renewal process early – complete and return your proposal form well in advance so if there are any issues there will be enough time to resolve them or seek alternatives. Do not fall into the trap of treating the PII proposal form as a quick tick-box exercise. While policy application forms should be concise and clear, they must be filled in comprehensively. It sounds obvious but where there is space to provide more detail, it should always be included.


Examples include submitting a full commentary on tax schemes and for financial services firms in particular, sharing chapter and verse on how pension and investment services are conducted. In addition, if a firm undertakes overseas activities, the extent of these should be detailed.


If there are notable developments in the business, providing the full context of these is important. For example, if the largest single fee received from any one client increases from £25,000 to £100,000 in a single year, therefore incurring higher risk, it is important for the underwriter to understand if this is a one-off or the norm. If this is the new normal, then there is a need to articulate how this might affect business going forward.


Insurers need to understand the core business fundamentals but also the ‘softer facts’ like details on risk management practices and corporate governance protocols. Being proactive with detail is key in this new environment.


Letters of engagement – these are important as they form the basis of your contract with your client and therefore need to be in place and up to date. Make sure letters of engagement cover the scope of work agreed and are updated regularly to include any new areas of work. Limit your liability to an agreed and reasonable level. Often policyholders use their limit of indemnity as a maximum cap.


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

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


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


Activities that will attract a higher premium rate include or require additional information: 

  • corporate finance work
  • overseas work
  • tax mitigation
  • financial services, Investment advice or pension advice
  • mergers, acquisitions and disposals
  • insolvency.


Types of client that may attract a higher premium rate or require additional information: 

  • professional sports people
  • well-known people in the entertainment industry
  • PLCs, banks, financial institutions, insurance companies, Lloyds syndicates, pension schemes, large trusts.


Claims and high risk activities

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


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


Pat: We are hearing of some policies being offered in the market with surprisingly low premiums which might be due to reduced cover. What should practitioners look out for in terms of watered-down or missing clauses?


Catherine: It is not only important to look at what is missing from the cover offered but also to review the basis of the cover offered.


Ideally, your limit of indemnity should be ANY ONE CLAIM with defence costs in addition. Be mindful that some providers may offer cover that is in the aggregate or defence costs inclusive.


The policy excess usually applies to each and every claim excluding defence costs – look out for policies that apply the excess to defence costs or on an each and every claimant basis.


Make sure the policy is ‘civil liability’ wording, and not a ‘negligence’ only wording - check the insuring clause or ‘what is covered’ section of the policy wording (or ask your broker to do this for you). You must have a civil liability wording to comply with ACCA regulations.


Other cover that may be missing in budget policies may include:

  • defence costs for disciplinary or regulatory investigations
  • mitigation of loss clause where insurers will pay certain costs in the likelihood of preventing a larger claim
  • awards by Ombudsman cover
  • data protection defence costs
  • fidelity/fraud or dishonesty cover is often not covered or may be limited or on an aggregate basis
  • helplines (many insurers offer these for confidential claims advice), tax advice, counselling, employment, business law etc
  • commercial legal protection cover for disputes involving injury, property damage, fee recovery, contract disputes.


Pat: Do you think that this hardening of the PI market is going to ease in the short term?


Catherine: The hard market hit other professions before accountants and those other professions have taken the initial increase and have seen year on year increases of about 5% since. Therefore, we do not see this as a temporary blip for accountants, although we may see rates stabilise whilst insurers reassess profitability.



If you have any questions please contact Catherine Davis – ACCA relationship manager on 0117 906 5057 or 


Lockton is ACCA’s recommended broker for professional indemnity insurance

Land transaction taxes in Wales

Key elements to remember in updated technical guidance.

Key elements to remember in updated technical guidance.


The technical guidance covering land transaction taxes in Wales, including alternative property finance relief, has been updated. It is important to remember some of the basic conditions on the second property rules that apply for a residential dwelling, which includes dwellings both in Wales and elsewhere in the world where the chargeable consideration given for that major interest is £40,000 or more.


Key elements to remember are:

  • a dwelling for the purposes of the higher rates will include holiday homes and properties let as furnished holiday lettings (including those that have restricted occupation which prevent the dwelling from being occupied all year round, and properties such as holiday park lodges)
  • the garden or grounds and any buildings on the garden or grounds are part of the dwelling, to the extent they are considered to be residential property for the purposes of LTTA, and the consideration given for these will also be liable to the higher rates
  • if non-residential land is owned on which the taxpayer is seeking, or has obtained, planning permission to convert to residential, that major interest in the land is not treated as an interest in a dwelling until construction or adaptation actually commences. The seeking or obtaining of planning permission falls short of the process of construction or adaptation for use as a dwelling. However, in the event that such a property was sold once construction or adaptation has commenced, if the other conditions for LTT higher rates to apply to the transaction are present, the acquisition by the buyer would be liable to the LTT higher rates.


You can view the specific guidance now and listen to more on property taxes in the UK in our practitioner webinar series.


The value of professional accountants

Our friends at Practice Web have shared SME research with ACCA which shows how 78% of SMEs look for an accountant who is qualified.

WATCH their video or READ their summary now.




Our friends at Practice Web have shared SME research with ACCA which shows how 78% of SMEs look for an accountant who is qualified.


This is what they say:


PracticeWeb is an agency that specialises in digital marketing for accountants and this year we’ve been focusing on one important question: what can accountancy firms do to stand out in a crowded market?


To gain insight into what small and medium-sized businesses really value in an accountant, we interviewed a select number of operators and owners of SMEs and surveyed a hundred more.


It turns out that some things accountants might take for granted really are important to clients and so worth shouting about.


For example, when we put a list of desirable characteristics in front of our survey group and asked subjects to choose which mattered most, 52% said professionalism was either important or very important.


Of course everybody thinks they’re professional, even unprofessional people, but this is about proving it.


Or, to flip that, it means making sure nothing you do or say signals that you might be unprofessional – stock imagery of babies in business suits on your homepage, for example, or inappropriate jokes on your Facebook account.


The second most important was honesty at 47% – a surprisingly low number given the nature of the work, perhaps.


Again, responding to this might be as much about demonstrating honesty as making sure there’s nothing about your business that suggests the opposite.


In terms of digital marketing, that means avoiding pages designed to lure traffic from web searches but which don’t actually deliver on their promise. If you have a page titled ‘Accountants for opticians’, for example, the content shouldn’t be a generic blurb about your firm, or users will feel hoodwinked and click away in anger.


Displaying customer reviews and testimonials can go a long way to convincing potential clients of both your professionalism and honesty, with the added weight that comes with third-party endorsement.


That need for an external stamp of approval perhaps also explains the value placed on membership of professional accounting bodies: 78% of respondents said this was important to some degree, with 50% saying it was very important.


One person we spoke to in the interview phase of the research project expressed the reasoning pithily: ‘There are a lot of cowboys out there.’


Membership, proudly declared and displayed front and centre, gets you through the initial sift with anyone looking for a new accountant and eager to narrow the field.


Another important quality is knowledge of specific industries: 71% of respondents told us it is important or very important that their accountant knows their sector.


The takeaway here might be that, tempting as it can be to pitch your firm as an all-rounder for fear of losing out on business, there is a risk of coming across as ‘master of none’ and losing out on even more.


Whichever sectors you decide to target, and however many, it’s vital to make sure you can back up your claims to expertise when a potential client bites and starts to interrogate you in that initial phone call or meeting.


Your website should also feature meaningful, substantial content, proving your experience and knowledge rather than merely declaring it.


Something many will be relieved to hear is that there’s a relatively low expectation of accountants to demonstrate dynamism or forward-thinking. Only 5% and 9% of respondents respectively selected those as important qualities.


New entrants to the market have carved out a niche by embodying these values but it’s not what every client wants and won’t work for every firm.


One interesting detail emerges if we dig a little deeper, though: those who were seeking dynamism tended to have higher turnovers, above £1m per year. That’s worth thinking about if you’re after those big fish.


Finally, it’s remarkable just how loyal clients tend to be. More than 60% of respondents had been with their current accountant for more than five years and a full 40% had stuck with the same firm for more than nine.


In other words, if you can get their attention, explain why your firm is better than the next and get them signed up, the potential lifetime value of each client is enormous.


You can read the full report, with information on attitudes to price, customer service, cloud software and more, at AccountingWeb and PracticeWeb


You can also find out more on how to request the ACCA logo, along with guidelines on how to use it.

Have you booked on our start, grow, merge or sell roadshows?

ACCA has partnered with Practice Ignition to deliver a roadshow to six locations around the UK.

ACCA has partnered with Practice Ignition to deliver a roadshow to six locations around the UK and attending will help you connect and create a master plan for your firm.


ACCA and Practice Ignition Roadshows - short promo



This event series is inspired by Guy Pearson's true story of starting, growing, scaling and exiting his own accounting firm, Interactive Accounting. From £0 to over £2m in fees within four years. Guy is seen as one of the original pioneers as a global digital accountant.


Themes for the day include but are not limited to:

  • starting your firm from £0 to £100k
  • growing from £100k to £1m
  • the journey from £1 to £4m
  • understanding how mergers and the sale of your firm work
  • the role and introduction of advisory to your service offering
  • scaling your processes, staff training
  • marketing your firm, running events, building a website
  • pricing your fees
  • technology stacks and how they evolve
  • creating a culture and attracting top talent.


Find out more and book your place now!

Practising Certificate 2020 renewals – important information

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

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


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


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


HMRC annual report and accounts: reader feedback

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

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


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


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


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


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

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


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

Free technical webinars for practitioners

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

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


What’s new in FRS 102? Available on demand

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


VAT & Duties Available on demand

Speaker: Gwen Ryder, independent consultant


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

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


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

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


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

Speaker: Dean Wootten, Wootten Consultants Limited


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

Speaker: Dean Wootten, Wootten Consultants Limited


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

Speaker: Louise Dunford, LD Consultancy Limited



Register now for any or all of these sessions


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


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