Technical and Insight
AML: policies and procedures

Every accountancy firm must have policies and procedures for managing its money laundering and terrorist financing (MLTF) risks.

Every accountancy firm must have policies and procedures for managing its money laundering and terrorist financing (MLTF) risks.


This ensures a focus of resources on the areas of greatest risk.


As per the MLR 2017, an AML firm-wide risk assessment must be conducted and documented. The firm-wide risk assessment must be considered when creating or updating a firm’s policies and procedures.


ACCA has created a Firm-wide risk assessment factsheet to help practitioners. The support includes:


  1. Role of Money Laundering Reporting Office (MLRO)
  2. Firm-wide risk assessment
  3. AML policies and procedures
  4. Customer due diligence (CDD)
  5. Sample check of CDD files
  6. Client risk assessment
  7. Suspicious activity report
  8. AML training
  9. Sanction screening
  10. Control assurance
  11. Record-keeping
  12. MLRO summary



Coronavirus and risk disclosures

FRC issues guidance on the possible effects of the coronavirus.

FRC issues guidance on the possible effects of the coronavirus.


The Financial Reporting Council (FRC) has warned companies and auditors that legally required business disclosures of risk are subject to change rapidly as the effects of the coronavirus outbreak mutate.


Companies have been advised to scrutinise their year-end accounts, especially those which either have close trade links with China or have a presence in the area.


The FRC highlighted that the extent of the risk and the likelihood of realisation is also contingent on the specific business circumstances of companies, and that where steps can be taken to mitigate the risk posed by the virus, the said risk should also be qualified.


PWC has a useful reminder for businesses in its article Should coronavirus be accounted for as an adjusting or non-adjusting event?


The conclusion is that the ‘subsequent spread of the virus and its identification as a new coronavirus does not provide additional evidence about the situation that existed at 31 December 2019, and it is therefore a non-adjusting event'.


It then highlights that businesses would still need to consider expected credit losses under:

  • IFRS 9, ‘Financial instruments’
  • the impairment of tangible and intangible assets under IAS 36, ‘Impairment of non-financial assets’
  • the net realisable value of inventory under IAS 2, ‘Inventories’
  • deferred tax assets in accordance with IAS 12, ‘Income taxes’
  • any asset or liability measured at fair value and also the entity's ability to continue as a going concern.
IR35 myth buster

With IR35 such a hot topic, delve into our FAQs to help your clients!

With IR35 such a hot topic, delve into our FAQs to help your clients!


From 6 April 2020, the off-payroll working rules will be extended to medium and large organisations in all sectors.


The organisation receiving an individual’s services will be responsible for determining whether the off-payroll rules apply. If so, the fee-payer will be responsible for tax deductions and national insurance contributions through PAYE.


According to a recent webinar by HMRC, the following questions were answered by HMRC to provide more clarity on off-payroll rules:

  1. Who is the fee-payer?
  2. When do off-payroll rules apply to the private sector?
  3. What is the exact definition of a PSC and how do we determine whether a sub-contractor is a PSC or a genuine trading company?
  4. How does the contractor invoice if still trading through the intermediary ie Personal Service Company (PSC)?
  5. Whose details are used when processing payroll for off-payroll deductions - is it the intermediary or the worker?
  6. Why is the 'CEST' tool not reliable – if it is the option provided by HMRC, its use should be 'conclusive'?
  7. How often should the fee-payer process the FPS (full payment submission) if payments are made to contractors weekly but the fee-payer processes monthly payroll otherwise? Is there any concession available for more frequent payments to contractors?
  8. How often should you be running the CEST tool?
  9. Does an 'appeal' against a determination need to be decided on the basis of the facts at the date of the original determination or the date of the appeal?
  10. How to determine the size of the company?
  11. Will HMRC be investigating employees who were previously outside IR35 and then find themselves within IR35 at a later period?
  12. Do I have to provide a Status Determination Status outcome to PSCs who provide infrequent services such as plumbing or decorating, for example?
  13. Where do we stand with consultants who currently live (and work carried out) outside of the UK, but the invoice for payment (made in their local currency) is made to the UK? Would we need to assess these consultants like consultants based in the UK?
  14. Do these rules affect 'Auto Enrolment' and holiday pay?
  15. What information must be provided to the worker for status determination and what is the deadline to process SDS?
  16. How will the IR35 rules affect franchises? Would the whole franchise be caught by IR35 or is it on an individual franchisee basis?
  17. What happens if the contractor's already working through an umbrella that state they are already PAYE? What is the hirer’s obligation in this instance?
  18. Does it apply to the Construction Industry when the contractor recruits smaller subcontractors?
  19. If the client organisation is overseas (within the EU), does this fall within the scope of IR35 rules?
  20. If a consultant provides services to a company and the company determines the consultant is an off payroll worker, should the company deduct the tax at a standard rate or is it still up to consultant to pay the taxes?
  21. How to determine a Non-Executive Director’s status who provides services via their limited company? Do the rules apply to them?
  22. In the case of RALC Consulting Ltd v HMRC, HMRC argued at tribunal that CEST result was irrelevant to determining IR35. Are companies at risk of HMRC arguing the same if they rely on CEST?
  23. How do the affected organisations prepare for off-payroll rules changes?


Download the answers to these questions now


Useful resources:

ACCA webinar- The extension of IR35 to the private sector

HMRC Employment Status Manual


Strengthening employment rights for casual workers

Ensure clients are aware of changes covering statements of ‘written particulars’.

Ensure clients are aware of changes covering statements of ‘written particulars’.


Following the publication of the government’s Good Work Plan, and in order to improve the lot of casual workers in particular, the entitlement to a statement of ‘written particulars’ will now include workers as well as employees.


Importantly, from 6 April 2020 the right to a statement of written particulars becomes a day-one right, rather than after the current two months.


The information to be included in the written statement from day one is also being expanded. For all new joiners on or after 6 April 2020 the statement should also include:

  • how long a job is expected to last, or the end date of a fixed-term contract
  • how much notice the employer and worker are required to give to terminate the agreement
  • details of eligibility for sick leave and pay
  • details of other types of paid leave eg maternity and paternity leave
  • the duration and conditions of any probationary period
  • all remuneration (not just pay), eg vouchers, lunch and health insurance
  • the normal working hours; the days of the week the worker is required to work; and whether such hours or days may be variable, and, if so, how they vary or how that variation is to be determined
  • any training entitlement provided by the employer; any part of that training that the employer requires the worker to complete; and any other training that the employer requires the worker to complete and for which the employer will not bear the cost.


Employers will need to draft new statements and contracts in order to ensure that this information is provided, and look at induction procedures to make sure the correct documentation is delivered to all employees and workers on or before their first day of work.


A proforma schedule has been included within ACCA’s updated Employment Law Factsheets which includes:

  • the contract of employment
  • the standard statement of terms and conditions
  • working time
  • age discrimination
  • dealing with sickness
  • managing performance
  • disciplinary, dismissal and grievance procedures
  • unlawful discrimination
  • redundancy
  • settlement offers
  • family-friendly rights
  • employment status: workers.




Company loans: nine things to know

Get closer to the intricacies of company loans.

Get closer to the intricacies of company loans.


  1. Can I lend money to my company?

Most small companies start their trading activities by advancing funds via an informal ‘director’s loan’ that in most cases is repaid as soon as the business starts making money.

However, the loan does not have to be in the form of a cash advancement – it can take other forms. For example, if the directors pay for goods or services on behalf of the company, any dividend declared and not paid, or salaries payment not yet taken, this also represents a loan and must be recorded in the director’s loan account.


Repaying the loan would have no impact on the tax liability of a company or the director.


  1. Should a formal loan agreement be drawn up?

It is not mandatory to have a written loan agreement in place, but it is always advisable to formally document a loan arrangement. The agreement should include the interest rate (or range of rates) and repayment date (or range of dates).


  1. Can I charge interest on the loan made to my company?

The director can agree to make the loan without interest or can agree an interest rate with the company. The interest charged can be at any rate but if it exceeds ‘the arm’s length’ rate, there is a danger that the excess may be taxed as earnings for the director, not as interest.

What is ‘arm’s length’ is determined by reference to the commercial interest rate charged by a third-party lender taking into account the size and term of the loan as well as the risk profile of the company.


  1. Is the interest paid by the company an allowable business expense?

Interest charged by the company on a loan is an allowable business expense for the company, but please see question 9.


  1. Does the company have to deduct tax and pay interest net to the individual?

If the loan term lasts for longer than a year, the company must deduct basic rate tax from payments of ‘yearly interest’ made to an individual. Short interest payable on loans in place for a period of less than 12 months is generally outside the scope of the rules.


Companies must account for income tax on a quarterly basis, using a CT61 quarterly return, based on amounts paid and received in the particular quarter.


The quarter ends are based on the normal calendar year, ie 31 March, 30 June, 30 September and 31 December. However, if a company’s year end is different from any of these, the balance sheet date is deemed to be a quarter-end, so there will be five return periods.


  1. Can the company pay the interest gross?

Companies are exempt from the requirement to deduct tax at source on types of interest that fall within any relevant exemption / relief. The main instances where companies can make payments of interest gross are:

  • payments of interest to another UK company
  • payments of ‘short’ interest payable on loans in place for a period of less than 12 months
  • distributions from open-ended investment companies (OEICs), authorised unit trusts (AUTs) or investment trust companies (ITCs)
  • payments of interest on peer-to-peer loans.


  1. What if I have borrowed the money to lend to my company?

A person that borrowed money in order to lend to the company is entitled to relief for the interest paid on that loan provided that:

  • the individual works for the company and owns some of the ordinary shares (the full-time working condition), or
  • they hold at least 5% of the share capital, taking into account shareholdings of ‘associates’ (the material interest condition) and the loan is a ‘qualifying loan’.


A loan taken out by an individual to invest in a company is a qualifying loan if it is:

  • used to acquire ordinary shares in a ‘close company’ that is not a ‘close investment-holding company’
  • lent to such a company and used wholly and exclusively for the purposes of the business
  • used to repay another qualifying loan.


  1. What are the personal tax implications on the interest received?

The interest received on the loan given to the company counts as personal income for the director and must be reported on the director's self assessment tax return and taxed accordingly. If the company has retained tax (on the ‘yearly interest paid’) credit would be given in the usual way.


  1. Can I invest the spare cash in order to receive interest?

Using the company as a savings account has tax implications for the company, such as:

  • the interest paid on that loan won’t be tax deductible for the company if the funds provided by the director aren’t used for the purposes of the company’s trade
  • entrepreneur’s relief and/or hold over relief might not be available if a company holds high cash balances on deposits that are not ear-marked for specific business projects, and may be considered not to be trading.
Inaccurate pension auto-enrolment claims

The Pensions Regulator explains why advisers and accountants aren’t off the hook for inaccurate auto-enrolment claims.

The Pensions Regulator explains why advisers and accountants aren’t off the hook for inaccurate auto-enrolment claims.


The following is from the Compliance and enforcement quarterly bulletin October to December 2019 from the Pensions Regulator. 


The Regulator has highlighted that since the start of automatic enrolment a total of 179,801 compliance notices, 105,556 fixed penalty notices, 32,157 escalating penalty notices and 55,266 unpaid contribution notices have been issued.


The Regulator has also highlighted the following:


Last month we successfully prosecuted a third accountant for deliberately lying about completing automatic enrolment duties on behalf of an employer, and he incurred fines and costs of £5,000 for the offence (see case study below). Although the employer is legally responsible for completing their duties, knowingly providing false information to us is a crime by whoever completes the declaration, and advisers who lie to us will be found out.


Having third party advisers who are competent and knowledgeable about all aspects of AE is vitally important, given that 30% of new employers are seeking external help with some or all of their AE duties as part of their day to day financial administration.


To make sure all advisers are up to speed with the basics, we’re running a webinar just for them on 30 March, which they can sign up to here.


With the evolution of automatic enrolment, advisers may have clients who are going through re-enrolment as well as new employers who have never been through the ‘staged’ approach, so it’s a good opportunity for them to brush up on their knowledge and avoid compliance issues down the line.


Case study

This Cambridge-based former accountant was working for an employer with 17 members of staff. The company came to our attention as part of our compliance validation checks after it failed to declare compliance on time, and received a fixed penalty notice (FPN), and subsequently an escalating penalty notice (EPN). The EPN had accrued to £4,500 when the employer declared compliance, claiming that 10 employees had been automatically enrolled and two were not eligible.


We discovered the declaration was false when the pension scheme contacted us to say that the employer’s account had been cancelled, and that no employees had been enrolled. After serving the employer with an inspection notice we discovered that there were indeed eligible staff. We also discovered that the accountant had been struck off the Chartered Institute for Management Accountants’ register in 2018.


The employer claimed that the accountant had reassured him that AE was in hand, but when we challenged this he enrolled the relevant staff and backdated contributions. The accountant admitted to falsifying the information on the declaration, claiming that he had misunderstood the questions on the declaration of compliance, was overwhelmed with work and had intended to re-submit the correct information when he had more time. We prosecuted the accountant for giving us false and misleading information – he pleaded guilty in court and was penalised nearly £5,000.


Message to advisers

Whether you are too busy or simply don’t understand what you need to do, don’t give us false information. We have all the information you need on our website, so ignorance is no excuse. We are still carrying out these data-led inspections throughout the country, so we’ll find out if you’ve lied to us and you may end up being prosecuted.


Employee number disclosures – what’s mandatory?

Key questions accountants ask about the requirement to disclose the average number of employees in a company’s financial statements.

Key questions accountants ask about the requirement to disclose the average number of employees in a company’s financial statements.


Is there a statutory requirement to disclose the number of employees?

The requirement to disclose the average number of employees comes from Companies Act 2006 (s 411), which states:

(1)The notes to a company’s annual accounts must disclose the average number of persons employed by the company in the financial year.

(1A) In the case of a company not subject to the small companies regime, the notes to the company’s accounts must also disclose the average number of persons within each category of persons so employed.


The disclosure requirement is also highlighted in:

  1. Financial Reporting Standard (FRS) 102, paragraph 1AC.33 of which states: 

The notes to a small entity’s financial statements must disclose the average number of persons employed by the small entity in the reporting period.’


  1. FRS 105 The FRS applicable to the Micro-entities Regime, paragraph 6.2(b) of which states:

‘The notes to the financial statements of a micro-entity in the UK shall be presented at the foot of the statement of financial position and shall include information about: … (b) employee numbers as required by section 411 of the Act (see paragraph 6A.2 of Appendix A to this section);

6A.2 The notes to a micro-entity’s financial statements must disclose the average number of persons employed by the micro-entity in the financial year’


How do you calculate the average number of employees?
The calculation of the average number of employees is in Section 382(6) of the Companies Act 2006, which states:

‘The number of employees means the average number of persons employed by the company in the year, determined as follows—

(a) find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),

(b) add together the monthly totals, and

(c) divide by the number of months in the financial year.

For the purpose of this calculation, if an employee leaves during the month you assume that they have worked for the whole of that month.’


Who should be included in the calculation?

Section 382(6)(a) refers to ‘persons employed under contracts of service’. However, a ‘contract of service’ is not defined in the Act. We therefore need to look at the distinction between contract of service and contract for service, based on the legislation and/or case law.


Whether or not an individual is working under a contract of service (either express or implied, whether oral or in writing) will be determined based on the agreement between the individual (employee) and the employing party (employer). The contract starts as soon as the employee starts work and provides the employee with entitlements to certain statutory rights, such as statutory redundancy payments and statutory maternity pay and the right not to be unfairly dismissed.


This can be contrasted with a contract for services, where the relationship between the parties is not that of employer and employee.


It is appropriate to include all employees, but exclude any casual workers as such workers would not be considered to be employees.


Should the directors be included in the calculation?

For company law purposes, directors are not automatically employees of a company. The definition of director (s 250) also includes shadow directors (s 251).

Section 250 states:  
In the Companies Acts “director” includes any person occupying the position of director, by whatever name called.’

Section 251 states:
In the Companies Acts “shadow director”, in relation to a company, means a person in accordance with whose directions or instructions the directors of the company are accustomed to act.’


In conclusion, according to the Companies Act directors hold an office and are known as officers of the company. However, there is no reason why an officer of the company cannot also have a contract of service with the company and if this is the case, the directors should be included in the calculation.


The usual position is that an executive director will usually have a contract of service with the company, and so would be included in the calculation.


Non-executive directors are not generally employed under a contract of service and as a result they should not be included.


Should seconded employees be included in the calculation?
Where a company is a member of a group and directors/employees from another group member perform services for the company (‘seconded’ directors/employees), these would not be included in the calculation because their contract of employment is with another company.


Should part-time employees be included in the calculation?

Section 382(6) requires disclosure of the average number of employees and it makes no reference whether there are full-time or part-time employees, so in this respect it would include both.



Regardless of the accounting standard that an entity wishes to adopt, ‘the average number of employees’ disclosure is a mandatory disclosure and cannot be filleted out of the accounts for filing purposes.


The disclosure itself informs the user of the accounts as to how many employees, on average, the business has employed during the reporting period.


New guidance on audit, according and corporate reporting

Why ACCA believes FRC and BEIS guidance on audit, accounting and corporate reporting during the Transition Period is essential reading.

Why ACCA believes FRC and BEIS guidance on audit, accounting and corporate reporting during the Transition Period is essential reading.


Accountants and auditors are being advised by ACCA to familiarise themselves with new guidance from the Financial Reporting Council (FRC) and BEIS about audit, accounting, and corporate reporting standards now that the UK has left the EU and is in a transition period (TP).


The FRC has issued two letters – one for accountants and the other for auditors and firms –explaining that during the TP there is no change to the UK’s accounting, corporate reporting and audit frameworks.


Maggie McGhee, executive director, governance at ACCA says: ‘This guidance is a timely reminder for accountants and auditors of how things stand during this TP.


‘These are essential reading, and something with which we all need to familiarise ourselves. We know that our members are seeking clarity and regular updates, so we hope this is the start of a pattern of proactive comms that informs the wider profession about developments as the TP progresses.’


The links to the letters are here:

  • Information for accountants is available here.
  • Information for auditors is available here.


Tribunal’s timely decision in battle with Dixons

High street retailer Dixons lost a bid to reclaim £1.8m of overpaid VAT for one simple reason…

High street retailer Dixons lost a bid to reclaim £1.8m of overpaid VAT for one simple reason…


In Dixons Retail Plc v HMRC [2019] the high street retailer lost a First Tier Tribunal appeal for the right to reclaim £1.8m of overpaid VAT on dishonoured cheques - because the claim was made out of time.


The question in the appeal was whether Dixons was entitled to reclaim £1.8m of overpaid VAT on cheques which had been dishonoured in the period 5/12/1996 to 6/2/2003. Dixons had discovered the error in 2011 and made a claim to recover the overpaid VAT.


The claim made was under s.80 VATA 1994 and as a result was subject to the four-year cap. Dixons appealed to the FTT but the appeal was withdrawn following HMRC’s win in a similar case involving Leeds City Council.


Dixons then made the adjustment on its January 2018 return on the grounds that its VAT retail scheme contained no time limit by which adjustments should be made. HMRC refused to accept the adjustment on the basis that it was out of time and subject to the four-year cap.


Both parties accepted that:

  • the UK allows retailers to have simplified schemes in order to account for VAT
  • Dixons bespoke retail scheme agreement (BRSA) provided that the calculation of VAT was to exclude the value of cheques which had been tendered in payment for supplies which were then dishonoured.

However, the FTT rejected Dixons’ argument that the BRSA has no implied time limits. In its interpretation it stated:

  • In any event, Dixons’ BRSA did not say ‘may’ but actually required an adjustment to be made. An adjustment for dishonoured cheques was clearly required to be made immediately. It logically follows that if a taxpayer made the adjustment it was obliged to make at the time it was supposed to make it, there could be no implication into a retail scheme that there was permission to make the adjustment at a later stage.


Because Dixons had failed to adjust its VAT calculation at the time the cheque was dishonoured, the correct recourse was to make a claim under s80. As Dixon’s claim was made outside the four-year time limit, its claim was time barred.


Better ways to resolve client disputes

Have you considered the opportunities to train as a provider of Alternative Dispute Resolution?

Have you considered the opportunities to train as a provider of Alternative Dispute Resolution?


Today many businesses are demanding and seeking alternatives to the adversarial processes of dispute resolution which are certainly expensive and where, too often, the process itself militates against resolution.


Legal, technical and cost issues have come to dominate disputes – driving the nirvana of resolution further away, with some cases taking years to be resolved.


In a search for better solutions, many are turning to different forms of Alternative Dispute Resolution[1] (ADR) as a preferred mechanism. What could this mean for accountants and their clients?


A growing market

CEDR – one of the leading ADR providers – regularly surveys the market and in its most recent report noted civil and commercial mediation was growing at a rate of 10% per annum[2]. Organisations are also taking control of ADR processes. This includes contractual clauses which manage a dispute by setting out a managerial escalation process or alternatively a process of appointment of a mediator or arbitrator.


There is also judicial support for ADR, driven by factors including 1) a desire to manage cases to resolution (not trial) and 2) resolution via ADR saves on limited course resources. This is evident in case law such as the July 2019 case of Ohpen[3] and the August 2019 Court of Appeal case Lomax[4], which concluded that a party could not object to a Judicial Early Neutral Evaluation[5] of the merits of a case.


Opportunities for accountants

There is a growing client demand for ADR around not only commercial disputes but also other areas of civil law, most notably family and work-place – where ADR and primarily mediation is more solidly entrenched as part of the dispute resolution process.


Don’t assume that ADR is only for lawyers – there are a number of opportunities for the accountancy profession.


When advising a client, consider whether an ADR clause should be included in a commercial contract and – where a client is in dispute already – whether any contractual ADR processes have been followed. Contractual ADR, and indeed early referral to mediation in the absence of contractual terms, will in the case of a difficult dispute often lead to a quicker and less costly resolution for the client.


Where a dispute arises from a different interpretation of a technical issue, parties should consider whether that issue can be resolved by an ‘expert determination’.


There will be many such specialist issues which fall within the technical competence and skillset of ACCA members. Similarly these same skills would apply in those instances where parties are seeking an ‘early neutral evaluation’ of a dispute and would be especially valuable before proceedings are issued.


More broadly the commercial perspective gained by advising clients on business issues and the ability to bring to bear the ‘art of accountancy’ to offer solutions will lend itself to the role of mediator: the neutral intermediary jointly appointed by the parties in dispute to resolve the issues that divide them.


Space in the market

There is undoubtedly a space in this growing market for accountancy-led ADR, particularly at the lower end (typically described as disputes under £100k by value). This is not a regulated marketplace and if you feel acquiring such skills could strengthen the services you can provide to clients – or other accountants – then do consider taking the first steps towards training as a mediator.


For more information about mediation (and details of training organisations) visit:


Terry Renouf –


Terry is a solicitor who spent 30 years in private practice for one of the leading litigation businesses in the UK. After roles as managing and senior partner he retrained as a mediator. Terry is a CEDR panel mediator, a Civil Mediation Council registered mediator and is currently also on the organising Committee of the National Mediation Awards 2020.


Terry may be contacted at or on 07543 RENOUF.

[1] There are a number of different ADR mechanisms. ACCA has prepared this helpful Guidance Note 

[2] CEDR’s Ninth Report is expected in July 2020

[4] Lomax v Lomax is an interesting case as there has been considerable discussion whether (i) ADR processes are effective where they are mandatory and (ii) whether compulsion is in breach of a party's right to a trial.

[5] Judicial Early Neutral Evaluation or “JENE” is a non-binding indication by a judge of the strengths and weaknesses and likely outcome of a case. It will, of necessity, take place only once proceedings are issued. Commentators therefore query whether “Early” is an accurate definition.

A stock market hypothesis

Delve into this fascinating hypothesis – then tell us what YOU think!

Delve into this fascinating hypothesis – then tell us what YOU think!


The following is the precis of a book presenting a new stock market hypothesis from PR Mason FCCA. He very much welcomes views and comments on the hypothesis from ACCA members (see details at the end). 



A stock market enables the buying and selling of shares and is sometimes referred to as a stock exchange. A company placing some of its shares on a stock market can be referred to as floating the stock. The intrinsic value and market value are equal at this point. The moment a share is placed and begins to be traded, its value becomes disconnected from the ongoing day to day operational intrinsic value of the company. Its market value no longer represents or equals the intrinsic value.


Each scenario uses, as an example, a company intrinsically valued at £100, represented by 40 shares in the company that sell at £2.50 each.


Scenario 1: Impact of stock market size increases and decreases.


Scenario 1.1 - Market size £0 to £100.


Let us start our scenarios, assuming there is only 1 person (person A) in the market, who is only prepared to bring £100, and only 1 company exists. (Market size £100)


Person A buys 40 shares in a company at £2.50 when placed on the stock market. The company banks £100.


A’s shares are technically worthless unless there is someone else in the marketplace willing to buy them. There is no one else in the market. A is holding an uncrystallised loss of £100. The company takes the £100 and uses it to create intrinsic value. Unless the company buys back the shares or is wound up (liquidated), A will not receive the £100 cash back from the company in exchange for the 40 shares. Both are unlikely events. The shares are technically worthless. Unless new money enters the market equal to twice the placement proceeds a capital loss may be incurred.


Scenario 1.2 - Market size increase £0 to £200.


We next increase the marketplace to 2 people (A & B). Each is prepared to bring £100 into the market and only 1 company exists. (Market size £200)


Person A buys 40 shares in a company at £2.50 when placed on the stock market. The company banks £100.


A’s shares are technically worthless unless there is someone else in the marketplace willing to buy them. Enter B, with £100 who is looking to buy shares. If A is willing to sell, then B can use all her £100 and pay £2.50 each for some or all of A’s shares. If A is rational she will not sell for less than the buying price of £2.50. A is rational and sells all 40 shares and these transfer to B. A receives £100 from B and B has 40 shares with a market value of £2.50 worth £100. The £200 brought into the market is held by the company and A. It is not possible to make a capital gain from the sale of a share unless B brings more than £100 into the market. After the sale to B the scenario appears:


Company receives £100

A £100 Cash

B £100 Shares

(Market size £200)


Proposition 1 - Unless new money enters the market greater than twice the placement proceeds it is not possible to make a capital gain


Scenario 1.3 - Market size reduction £200 to £120.


A buys 40 shares in a company at £2.50 when placed on the stock market. The company banks £100. 2 persons in the market, both brought in £100 but one needs to exit the market, and only 1 company exists.


If A needs money and is prepared to act irrationally she may sell the shares at a loss. If she sells for £2 (having paid £2.50) then B pays £80 for the 40 shares. In this case A will make a capital loss, in order that she may take her cash out of the market. It can be reasonably assumed that she would not sell to make a loss if she was going to stay in the market. The capital loss incurred can be described as crystallised, it is a loss of real cash.


Company receives £100

A £20 Capital loss

B £20 Cash in market, £80 Shares

(Market size £120)


(A - Cash £80 withdrawn from the market)


Who has the missing £20 cash? There is no missing cash: the company has £100, A £80 and B £20. There is however missing capital – the loss of £20. Where has this gone?


We can assume the value of the firm (its ongoing operations, profitability etc) are unlikely to have changed today and is still £100. However, the market value of the company is now reflected as 40 shares at £2 = £80. This demonstrates the crucial uncoupling of the intrinsic value of the company (£100) with the shares that prior to placement reflected intrinsic value (40 x £2.50 = £100), and the market distortion that now values the company at £80. Logically it is not worth £20 less. The irrational decision of A to sell cannot result in the intrinsic value of the company reducing by £20.


So, we can see that if money is taken out of the market a capital loss may crystallise. This is a capital loss to the shareholder and not to the company. A capital loss is the result of a reduction in share price.


Proposition 2 - When an investor requires a cash withdrawal they will be more likely to be willing to incur a capital loss


Proposition 3 - If money is taken out of the market a capital loss may crystallise


We can continue, generating scenarios and the following propositions:



  • Proposition 1 - Unless new money enters the market greater than twice the placement proceeds it is not possible to make a capital gain.

  • Proposition 2 - When an investor requires a cash withdrawal they will be more likely to be willing to incur a capital loss.
  • Proposition 3 - If money is taken out of the market a capital loss may crystallise.
  • Proposition 4 - When an investor holds cash (or shares) they will be unlikely to be willing to incur a capital loss. 
  • Proposition 5 - When there is surplus cash in the market there is potential for a capital gain as demand generates share price rises.
  • Proposition 6 - When there is no longer surplus cash in the market, market size after placement (cash available) will equal twice the cost of the initial placement of the shares plus the total net accumulated capital gain (crystallised and uncrystallised). 
  • Proposition 7 - The total accumulated net capital gain is equal to the net movements of all capital gains and losses. 
  • Proposition 8 - When there is a shortage of cash in the market there is potential for a capital loss as share prices fall.


Hypothesis: The net cash inflow to a stock market is equivalent to twice the initial placement cash paid plus the total net accumulated capital gains and losses from the purchase and sale of shares.



Contention. The stock market does not create wealth per se. Once the initial provision of capital (placement of shares in return for cash) to companies is complete, the trading of their shares on the market simply re-distributes capital around among shareholders. In the long run the secondary market, where shares are bought and sold, logically must be neutral and the cash brought to this market will eventually leave it. No net economic growth will have been generated.


If the hypothesis is valid the implications are profound, reducing a stock market to a neutral betting arena in the long term and nullifies any perceived benefit on the economic welfare of a country of a share trading stock market to zero.



*A Most Unpopular Novel Hypothesis

ISBN 978-1-912728-14-5 PR Mason FCCA


Feedback from practitioners and academics with an interest in capital markets, and in particular the stock market, invalidating the hypothesis, alongside reaction to this precis, are welcomed these will be sent to the author by ACCA.


Please send your thoughts via email to with the title ‘A Most Unpopular Novel Hypothesis’.



Base your digital marketing strategy on data, not guesswork

How Google Analytics can pay dividends for you.

How Google Analytics can pay dividends for you. Read on - or watch this video instead.


No accountancy practice wants to throw away its marketing budget on activity that isn’t delivering results. Fortunately, Google Analytics means it’s easier than ever to make smart decisions about digital marketing based on hard facts, not hunches.


Analytics, launched in 2005, is a free tool that allows website owners to track traffic, how users interact with content and a whole slew of performance indicators.


To use it, you’ll need (a) a Google Analytics account; (b) a unique Google Analytics tracking code; and (c) a bit of behind-the-scenes setup to get it embedded on your website. Your website host should be able to help with this, and might even help you get your dashboard calibrated, as PracticeWeb does with its clients.


Making the very most of Analytics requires a relatively sophisticated understanding of its deeper settings but even out of the box it can provide information that could fundamentally change your digital marketing strategy.


I’m going to focus on three easy-to-read sections of the Google Analytics dashboard in this article, and what they can mean for your approach to marketing.


First, Audience, starting with the overview tab. This gives an instant readout on the number of visitors to your site; whether they’re the visitors you’re after; and whether they’re engaging with the content you provide.


How can you use this to refine your marketing strategy?

Well, if your traffic is lower than expected, that means you might want to focus on getting found in web searches via SEO or pay-per-click advertising, or boosting your social media activity.


Equally, if traffic numbers look good but the bounce rate is high (people aren’t going anywhere else on the site) and/or dwell time is low (say, less than a minute), your content is the problem. In other words, even if you’re being successful in luring people to the website, you’re failing to meet their needs when they arrive.


In that case, you either need to change your content to better meet the needs of your target customers, or think again about whether you’re targeting and reaching the right people. Conveniently, as they say, there’s an app for that.


Beyond the overview, the next most eye-opening sections are demographics and location. Knowing whether you’re getting enough traffic is important but it’s not just a volume game – you need to be sure you’re attracting the right types of clients.


If you’re hoping to appeal primarily to younger women in the North West of England but your visitors are mostly older men from the South East, it might be the nudge you need to think about rebranding, redesigning your website or reviewing your content strategy.


It might also suggest that you need to recentre your search engine marketing (SEM) strategy around local keywords to boost traffic from the right towns, cities and regions. Location data could also support knowing where to run targeted location-based social media ads, or indicate where to run offline events.


All of this really just scratches the surface of what Google Analytics can do. If you want to explore further, I’d advise you to make the Acquisition and Behaviour tabs your next stops.


The former can tell you which sources are sending traffic your way and, perhaps more importantly, which aren’t, so you can stop wasting time, money and effort on them.


The latter will give you insight into how people behave once they’re on your website. If, say, blog posts about VAT perform especially well in terms of visits, bounce rate and dwell time, write more of them. And if nobody is visiting your ‘contact us’ or service description pages, work on calls to action (CTAs) across the website, in marketing emails and so on.


In general, the benefit of acquiring and interrogating website data is a clearer sense of what good looks like – you want all the indicators to be improving with time, clearly – and where to focus your efforts.


And remember, optimising marketing performance takes time. Adopt a test-and-learn approach, one change at a time, and play the long game.


If you want to know how to get the most out of analytics and improve your marketing, why not get in touch.


Mike Crook – Managing Director, PracticeWeb


ATOL reporting and revised engagement

Which changes to ATOL reporting take effect this month?

Which changes to ATOL reporting take effect this month?


The ATOL Reporting Accountants' Scheme has been developed by the CAA in order to help improve the standard of ATOL reporting and to provide assurance that financial information which is submitted on behalf of ATOL holders is accurate.


The scheme is designed to ensure that designated accountants of participating bodies, including ACCA accountants, are sufficiently knowledgeable about both the industry and specific requirements of ATOL to provide the required assurance needed by the CAA.


For all ATOL reports from February 2020 the guidance, Appendix A ‘Requirements for ATOL Reporting Accountants’ (formerly known as Guidance Note 10), has been amended.


This includes revisions to work procedures, to guidance on what constitutes an ATOL sale and new prescribed Engagement Letter wording. Reporting Accountants need to issue a revised Engagement Letter and also amend work procedures for all clients. Find out more now



AML and ‘money service businesses’

Do your clients handle money? Check their authorisations now.

Do your clients handle money? Check their authorisations now.


It is important if you are advising businesses which handle money that they have the correct authorisation.


A practitioner advising money service businesses would issue a SARs report if that business wasn’t registered with HMRC.


‘Money service business' is the term used to describe the following activities:

  • acting as a currency exchange office (a bureau de change)
  • transmitting money or any representation of money by any means (money remittance)
  • cashing cheques payable to your customer (third party cheque cashing).


Download this clear guidance for businesses to follow.

WATCH: Industry leaders share their top tips for successful practices

Two industry leaders sharing their top tips to help your practice be more successful in 2020.

Two industry leaders share their top tips to help your practice be more successful in 2020:


  • Will Farnell from Farnell Clarke urges you to constantly think about your firm’s vision and values and communicate this with clients.

  • App Advisory Plus’s Rohan ask and understand clients’ software requirements before going on to talk to them about the best apps for them.



Will FarnellWill Farnell on values and vision

























Rohan from App Advisory Plus

Get set for Budget 2020

We will publish our Budget Summary and guides to key changes and tax rates on the evening of 11 March.

Budget 2020 – 11 March

Will this year’s Budget contain a number of significant announcements such as one on the future of entrepreneurs' relief?


Budget updates

We will publish our popular Budget Summary and guides to key changes and tax rates following the Budget. Unfamiliar with this? Take a look at this previous offering.




Spring 2020 series of webinars for practitioners

From IR35 to benefits in kind and business funding, our spring series of free webinars is vital viewing.

Our popular spring series of free technical webinars for practitioners is now well underway!



IR35 – the extension of IR35 to the private sector Available on demand

Speaker: Louise Dunford, LD Consultancy Limited


Reliefs and claims for personal taxation Available on demand

Speaker: Paul Soper, tax lecturer and consultant


Getting the most out of cloud accounting and app stacks for your firm and your clients 12 March (12:30)

Speaker: Matt Flanagan, Co-Founder of Appacus


The first Budget of a new era 13 March (12:30)

Speaker: Paul Soper, tax lecturer and consultant


Benefits in Kind update 18 March (12:30)

Speaker: Dr Ros Martin, consultant and lecturer



Register for any or all of these sessions using this link.



Webinar on business funding - Friday 6 March (12:30)


Join us for a free webinar on business funding and how to help your clients whilst remaining compliant.


50% of businesses need funding. With over 360 SME lenders in the UK, business owners are increasingly requiring support from their accountant to navigate the financial landscape. But as their accountant, how can you make sure you best serve your client and remain compliant? Many accountants assume that there are areas of work that they cannot engage in.


We will dispel some of these myths and highlight the opportunities available in this area when Glenn Collins (Head of Technical Advisory, ACCA UK) and Paul Surtees (CEO and co-founder, Capitalise) will explore:

  • how funding can deepen your client relationship
  • simple steps to remain compliant whilst helping your clients
  • how funding can support the growth of your practice.


Register now to join the webinar live or listen to it later on demand.



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.



Enter the Accounting Excellence Awards 2020

The Accounting Excellence Awards are back to showcase the best of the accounting and finance profession.

The Accounting Excellence Awards are back to showcase the very best the accounting and finance profession has to offer.


AccountingWEB’s prestigious accounting and finance awards are now open for entries. The awards, which are accepting submissions until the end of March, recognise the UK firms and individuals who are innovating, driving success and inspiring the profession to even greater heights.


The awards, now in their 10th year, are continuing the long-standing partnership between the ACCA and AccountingWEB. And ACCA members have had a huge amount of success previously, with ACCA firms or members winning six awards in 2019.


Three new categories have been launched for 2020 to reflect the contribution and achievements of bookkeepers, sole practitioners, and pioneering digital firms. The awards will also continue to salute the achievements of large, medium and small firms who can demonstrate the impact they are making across a number of key areas including bottom-line growth, client success and employee development.


Last year’s popular ‘Investing in People’ award returns for a second year. This was a new award in 2019, recognising the importance the profession has placed on employee engagement, wellbeing and learning and development.


Firm awards

  • Bookkeeping Firm of the Year
  • Client Service Award
  • Digital Firm of the Year
  • Fast-track Firm of the Year
  • Innovative Firm of the Year
  • Investing in People Award
  • Large Firm of the Year
  • Medium Firm of the Year
  • New Firm of the Year
  • Small Firm of the Year
  • Specialist Team of the Year
  • Sole Practitioner of the Year
  • Software Innovation of the Year
  • Practice Pioneer of the Year


Entries will be judged by a panel comprising experts from within the accounting, finance, business and L&D profession, with finalists announced at the end of May. The winning firms will be announced at an awards ceremony taking place at The Brewery in London on 10 September.


To read about last year’s winners and what winning an Accounting Excellence award meant for them, visit


If your firm has what it takes to win this year, enter at before 31 March.


If you’re stimulated to enter, but not sure where to start, take a look at ACCA’s guidance on entering awards to help kick-start the process.



Adding value to your practice

Why not consider expanding your firm’s services?

Why not consider expanding your firm’s services?


ACCA practitioners can add value to their firms by offering additional services such as:

  • alternative dispute resolution
  • expert witness
  • probate
  • research & development.


A new resource on ACCA’s website provides practical information on these areas of service as well as outlining the training required and guidance available.


Take a look to see whether these services might benefit YOUR clients.