Technical and Insight
MTD for VAT – agents’ services accounts

The clock is ticking to sign up.


The clock is ticking to sign up

 

In previous issues of In Practice we have encouraged members to register for the new HMRC Agents Services Account (ASA). Although many of the services that agents routinely provide to their clients are not yet available, the starting point for MTD (for VAT) is getting closer. HMRC has updated its systems (in February 2019) so that ASA now includes actually signing the firm – or their clients – up for MTD (for VAT). Prior to this update, only the VAT pilot was available as a service.

 

Quick recap – who is affected by MTD

With effect from 1 April 2019, if your taxable turnover is above the VAT registration threshold (currently £85,000) you must follow the rules set out in this notice. If your taxable turnover drops below the VAT registration threshold at any point after 1 April 2019 you are still required to continue to keep digital records and send HMRC your VAT Returns using compatible software. This obligation does not apply if you either:

  • deregister from VAT
  • meet other exemption criteria (see paragraph 2.2 of the VAT notice).

 

VAT taxable turnover is the total value of everything you sell that is not exempt from VAT. VAT Notice 700/1: should I be registered for VAT provides more information on the VAT registration threshold and taxable turnover.

 

So now is the time for action

 

This article gives a step by step guide on signing up for ASA and specifically the details relating to MTD for VAT.

No deal Brexit – impact on VAT

HMRC sends letter outlining the impact of a no deal Brexit on VAT.


HMRC sends letter outlining the impact of a no deal Brexit on VAT.

 

You will have noticed that HMRC continues to urge VAT-registered UK businesses which trade exclusively with the EU to be prepared for a no deal Brexit.

 

It has sent a letter to 145,000 VAT-registered affected businesses, explaining changes to customs, excise and VAT procedures in the 'unlikely event' that the UK leaves the EU without a Brexit deal.

 

HMRC's letter contains the following three actions ahead of 'Brexit Day' on 29 March 2019:

  • register for a UK Economic Operator Registration and Identification (EORI) number
  • decide whether a customs agent will be used to make import and/or export declarations, or whether declarations will be made by the business via software
  • contact the organisation responsible for moving goods (for example, the haulage firm) in order to ascertain whether the business will need to supply additional information to complete safety and security declarations, or whether it will need to submit these declarations itself.

 

It is important to note that the letter went to VAT registered businesses. There will be some smaller businesses below the threshold that will not have received the letter but will need to take action.  

 

The guidance Get a UK EORI number to trade within the EU states that it ‘could take three days to get a UK issued EORI number, so you should apply now’. It is also highlighted that ‘It can take longer than three days if there are high volumes’: clearly the ‘apply now’ is the key message for businesses. The application is short, simple and quick for businesses.

 

The original guidance has also been updated during February. These updates:

  • clarify that Northern Ireland businesses should also apply for an Economic Operator Registration and Identification (EORI) number unless they only trade across the Northern Ireland–Ireland land border
  • clarify that you do not need an Economic Operator Registration and Identification (EORI) number if you’ll only import or export services that do not involve moving physical goods.
No deal Brexit: VAT rules on low value goods

Government guidance: VAT rules on low value goods and Brexit.


The following has been reproduced from government guidance.

 

From 29 March 2019, if the United Kingdom (UK) leaves the European Union (EU) without a deal, the import VAT rules will change for goods worth £135 or less that are sold to UK buyers (including businesses and individuals). From this date, sellers outside the UK must pay the import VAT for any parcels sent to UK buyers after 11pm GMT, even if the goods were sold before.

 

These changes will apply if all the following circumstances are met:

  • sellers outside the UK, including in the EU, non-EU and the Channel Islands
  • goods worth £135 or less that are sold to UK buyers, including those worth £15 or less as they will no longer benefit from tax relief
  • goods contained in parcels such as packages, envelopes or other items sent by post, express operator or freight.

 

The existing tax relief on goods worth £15 or less will not be introduced for sellers within the EU and will also be removed for sellers outside the EU, from 11pm GMT on 29 March 2019.

 

From 29 March, you can pay your import VAT on parcels in one of two ways:

  • Register for the UK HM Revenue and Customs (HMRC) new online service to report and pay the import VAT due, or
  • Pay a parcel operator that offers a service to pay import VAT to HMRC on your behalf

 

Action to take now

If you choose to report and pay the import VAT direct to HMRC, you should register for the new online service now, so you are ready to use it when the changes are introduced on 29 March 2019. To get started, you will need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you register. You will also need your business contact details and details of your business accounting periods.

 

To use the online service, you will need to:

 

1. Register for the service

2. Choose an accounting period from those available

3. Keep records of goods worth £135 or less that you have sold to the UK for each accounting period

4. Work out the import VAT due on the goods you have sold to the UK for each accounting period

5. Tell HMRC how much import VAT you owe for each accounting period

6. Pay HMRC the total import VAT due for each accounting period

 

Once registered, you will be given a parcels reference. This reference should be included in documentation accompanying any parcels you send to UK buyers from 29 March 2019.

No deal Brexit – the latest government guidance

Keep up-to-date with the government’s plans for Brexit.


Keep up-to-date with the government’s plans for Brexit.

 

The government has brought together all of its information about Brexit on a dedicated webpage.

 

A no deal scenario is one where the UK leaves the EU and becomes a third country at 11pm GMT on 29 March 2019 without a Withdrawal Agreement and framework for a future relationship in place between the UK and the EU. The UK is therefore preparing for a scenario where there is no UK-EU agreement in place on exit day.

 

The webpage includes all of the draft statutory instruments which will apply in the event of the UK leaving the EU without an agreement.  These cover vital areas such as customs, excise and VAT and include all relevant draft public notices to support the potential regulations.

 

The site has a general overview of the no deal preparations and is then split into industry specific information with guides for other general categories such as import and export.

 

With just a few weeks to go before the scheduled Brexit date, it is vital that you understand exactly what the government intend to do if there is no deal. We recommend you visit this page regularly to keep track of changes and updates before 29 March.

 

The web page can be found here and we recommend that it is visited regularly as there will no doubt be many changes and updates before 29 March.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anti-money laundering policies and procedures

A reminder of the obligations under UK legislation to prevent, recognise and report money laundering.


A reminder on the obligations under UK legislation to prevent, recognise and report money laundering.

 

The latest version of the guidance specifically for accountants and bookkeepers is the Consultative Committee of Accountancy Bodies (CCAB) document entitled Anti-Money Laundering Guidance for the Accountancy Sector. Reference to the JMLSG guidance is also a vital reference document. Its aim is to promulgate good practice in countering money laundering and to give practical assistance in interpreting the UK Money Laundering Regulations.   

 

This includes guidance on the following important areas:

  • responsibility and oversight (including what policies, procedures and controls are required)
  • risk-based approach
  • customer due diligence
  • suspicious activity reporting
  • record keeping
  • training and awareness.

 

Accountants have become familiar with their anti-money laundering obligations since 1993 when the first European-wide regulations were introduced. Various legislation has been passed since then to strengthen the regulations including:

  • Terrorism Act 2000
  • Proceeds of Crime Act 2002
  • Money Laundering Regulations 2007.

 

The 2017 Regulations (introduced in Statutory Instrument 2017 number 692) brought in some additional requirements for accountants such as the following:

Businesses must have systems and controls capable of:

  • assessing the risk associated with a client
  • performing customer due diligence
  • monitoring existing clients
  • keeping appropriate records
  • enabling staff to make an internal Suspicious Activity Report
  • provision of appropriate training for relevant employees
  • assessing the anti-money laundering skills, knowledge, expertise, conduct and integrity of relevant employees
  • establishing effective internal risk management systems and controls
  • defining the responsibilities of relevant senior management.

 

The guidance from CCAB provides details of how to comply with the latest regulations. As this document is 73 pages long, ACCA has produced guidance including specimen policies and procedures which should help member firms comply with the Regulations.

 

These policies and procedures will require to be tailored to the specific circumstances of each accountancy practice. These can also be used as a starting point if the accountancy firm has been asked to draft policies and procedures for a client or clients.

 

Although it is likely that every accountancy practice operates with anti-money laundering policies and procedures, many firms may find that they need to strengthen these in the following particular areas:

  • perform customer due diligence (CDD) checks on existing clients/customers

 

The new rules require CDD checks to be performed during the lifetime of the relationship with a client/customer and not just at the start of that relationship:

  • assess the risk associated with the work provided to each client. The risks should be categorised into specific areas including ‘client risk’, ‘services risk’ and ‘geographic risk’. This process should be documented
  • all relevant employees should undertake AML training. Records should be maintained showing who has received training, the training received and when training took place. When the role of a relevant employee changes or when there are significant changes to the Regulations, further training may be required
  • although policies and procedures may have been in place, the new rules require these to be adequately recorded and retained. The specimen policies and procedures in the above ACCA link should help to record these to properly comply with the Regulations.

 

 

Part disposal of land and capital gain tax

An overview with examples together with consideration of when a s242 can apply.


An overview with examples together with consideration of when a s242 can apply.

 

The first consideration is: has a disposal occurred? There is no statutory definition of ‘disposal’, so the word must be given its normal meaning. HMRC’s capital gains tax manual CG 10240 defines a disposal as ‘an occasion when a person sells an asset or gives it away. Tax may also be charged if the legislation specifically provides for a transaction to be treated as though it were a disposal.'

 

For capital gains tax purposes, the most common way for a person to dispose of an asset is to sell it to another person. However, a gift or an exchange of assets may also constitute a disposal for capital gains tax purposes. The disposal proceeds will be the actual consideration received unless the disposal is not a ‘bargain at arm’s length’, in which case the disposal is deemed to take place at open market value (TCGA 1992, s17(1)(a)).

 

Part-disposals

TCGA 1992 s21 (2) provides that a taxpayer makes a part-disposal when he sells part of an asset or where he disposes of a right or interest in an asset.

 

To calculate the chargeable gain on a part-disposal, we deduct from the sale proceeds the part of the original cost of the asset by using the fraction:


A/(A+B),

 

Where A is the gross disposal proceeds and B is the value of the part retained.

A part-disposal includes a disposal of a physical part of an asset, eg a ten-acre section of a much larger holding of land. It also includes the disposal of a right or interest in an asset, for example where a lease is granted by the freeholder of land.

 

Please see Capital gain tax and leases.

 

Example:

Paul bought 50 acres of land in 2000 for £100,000. In 2016 he sold 10 acres of the land for £50,000. The value of the remaining land was £350,000.

 

The capital gain on the part-disposal is calculates as follows:

 

Proceeds £50,000
Less: cost £100,000/(£50,000+£350,000) ie £25,000

Capital gain is £25,000

 

The base cost of the remaining area of land is the difference between original cost (£100,000) and the amount used as part-disposal (£25,000), ie £75,000

 

Small part-disposal of land, not chargeable to capital gains

Where the consideration for a part-disposal of land is ‘small’, the taxpayer may claim that a chargeable gain does not arise and instead treat the proceeds as reducing the original cost of the land (TCGA 1992 s242).

 

Conditions of s242 claim:

  1. The proceeds must be less than or equal to 20% of the value of the land at the date of disposal.
  2. The proceeds of all land sales in the year must not exceed £20,000.
  3. The transfer is not between spouses/civil partners, or between companies of the same group.
  4. A claim should be made by 31 January following the tax year of the part-disposal.

 

Effect of s242 claim:

  1. The proceeds received are ignored when considering the capital gains tax for that year; and
  2. The proceeds received reduce the base cost of the land on a future disposal. That means that the taxpayer will have a lower base cost when he sells the rest of the land and a higher capital gain on the subsequent disposal.
VAT on commercial property

An overview of key issues including ‘option to tax’.


An overview of key issues including ‘option to tax’.

 

The sale or lease of a commercial property can be standard rated, zero rated, exempt or even outside the scope of VAT depending on its nature.

 

Commercial properties can be used for various purposes such as:

  • to use in the business for operating activities
  • lease and capital appreciation
  • to develop and sell.

 

Exempt supplies means that neither a landlord (purchaser) nor a tenant (occupier) would have to pay VAT. It may include:

  • all leases, assignments, surrenders, reverse surrenders or licences to occupy any interest in land or buildings
  • sales of freehold commercial property or civil engineering works more than three years old or sales, leases or licences of all residential or charitable property.

 

Standard-rated supplies of land include:

  • sales of freehold or commercial land or a building or civil engineering work that in either case is less than three years old from the date of completion or is incomplete. In order to recover VAT charged on the acquisition, it is most likely that the buyer would elect to charge VAT on rents and on a future sale of the property (unless it qualifies as a TOGC)
  • grants of miscellaneous interests in or rights over land or interests in land which are specified in the VAT legislation, including car parks, fishing rights, caravan pitches.

 

Zero-rated supplies of land only include residential or charitable land and it applies only in certain circumstances. The supply of land will be zero-rated if it is the first grant of a major interest (that is, a freehold or a lease for longer than 21 years) of residential or charitable land that is either:

  • newly constructed
  • converted from commercial to residential
  • renovated after being empty for 10 years
  • a listed building that has been substantially reconstructed.

 

What is Option to Tax (OTT)?

‘Option to Tax’ means an election to charge VAT ie making an exempt supply a taxable supply. When as an owner or developer you are choosing to opt to tax the land and building, then you must charge standard-rate VAT on the sale or lease of your property. You are able to recover the VAT incurred on the purchase or development of the land or on professional services associated with the sale. If a property is subject to option to tax, the purchaser of such property has to apply for OTT themselves; otherwise they will not be able to claim the VAT.

 

If you decide to opt to tax the property, then you must notify HMRC of your intentions in writing within 30 days of this decision. Additionally this decision must be taken before any exempt supplies are made in respect of the property. HMRC permission would be required for any previously made exempt supplies in respect of a particular property or piece of land, if you wish to elect to charge VAT on future supplies in relation to that land/building. Relevant forms to apply for option to tax can be found on HMRC’s website.

 

Once notified to HMRC, Option to Tax lasts for 20 years and is largely regarded as irrevocable. It is very important to make a long-term right decision for this. If the market sector is likely to include significant numbers of buyers who themselves cannot recover VAT as they make exempt supplies then electing to charge VAT can have a negative impact on the ability to sell or lease a property.

 

Building for own use in the business

If VAT is incurred on the purchase of land or property which is being entirely used for making a taxable supply then the full amount of VAT can be recovered. However, if the property is used for making mixed supplies, ie taxable and exempt, then there could be a restriction and capital good scheme may be used to maximise the recoverable amount. The percentage of taxable use has to be monitored for any claw backs. Full details can be found in VAT Notice 706/2.

 

Transfer of a going concern

If the property being sold is capable of being run as a property rental business, and the buyer intends to carry on the same type of business, this commercial property transaction may then be classed as a Transfer of Going Concern (TOGC).

 

A TOGC is outside of the scope of VAT, and so no VAT will be payable. If the land and building would be standard rated (due to an existing option to tax election by the seller) for TOGC relief, the buyer must notify HMRC of his decision to opt to tax before the date of the transfer.

 

Useful links:

HMRC manual guidance

HMRC VAT notice 742

MTD for VAT – exemptions and deferrals

The starting line is only a few weeks away but do all of your clients need to be involved on 1 April?


The starting line is only a few weeks away but do all of your clients need to be involved on 1 April?

 

MTD for VAT seems to have been in the pipeline for a long time now and most members will be only too aware of the basic rules.

 

From April 2019, most VAT-registered businesses with a taxable turnover above £85,000 must follow the rules for Making Tax Digital for VAT. This means:

  • keeping digital VAT records
  • signing up for Making Tax Digital for VAT
  • using software compatible with Making Tax Digital to submit VAT returns.

 

However, there are many reasons why some businesses may not be able to comply with the rules and so it is worth recapping and discussing the exemptions that are available. There is also a deferred starting date for some businesses which are deemed to be ‘more complex’. See below for more details.

 

Exemptions from MTD for VAT

The main exemptions are contained in VAT notice 700/22 ‘Making Tax Digital’  - original source is the VAT Regulations amendments  These affect people and businesses that are known as digitally excluded. The exemptions are:

  • your business is run entirely by practising members of a religious society whose beliefs are incompatible with the requirements of the regulations (for example, those religious beliefs prevent them from using computers)
  • it is not reasonably practicable for you to use digital tools to keep your business records or submit your returns, for reasons of age, disability, remoteness of location or for any other reason
  • you are subject to an insolvency procedure.

Points to note:

  • clearly the above criteria are rather subjective and ACCA has asked HMRC for clarification, particularly the second point
  • where a business thinks that it is exempt, HMRC expects it to contact the VAT Helpline to discuss alternative arrangements.The VAT notice also states that HMRC needs to be ‘satisfied’ that the business complies with the above to get exemption. So it appears that in the first instance the affected business will need to get past the helpline. However, it would appear that even if the HMRC helpline does not agree with the business, this does not prevent the business from applying in writing to HMRC.

 

Starting date deferred to 1 October 2019

Certain businesses and organisations will have a deferred MTD for VAT start date of 1 October 2019. This applies where the organisation:

  • is part of a VAT group or VAT Division
  • is based overseas
  • is a trust
  • is a not for profit organisation that is not set up as a company
  • submits annual returns
  • is a local authority
  • is a public corporation
  • uses the VAT GIANT service.

 

12 month extension for digital links

For the first year of mandation, businesses will not be required to have digital links between software programs. The VAT notice above confirms that the ‘soft landing’ regime for the first 12 months will also apply to the deferred period.

 

So organisations with a VAT period starting on or after 1 October 2019 will have until the first VAT return period starting on or after 1 October 2020 to put digital links in place.

 

Further information

ACCA has produced a range of free practitioner webinars that are available on demand and these include MTD with this webinar covering:

  • MTD for VAT from April 2019
  • what are digital records?
  • what are we uploading?
  • how do practitioners make this work?
  • which software is best?
  • making the most of this opportunity!

 

ACCA has partnered with Bloomsbury Professional Publishing to provide members with free practical guidance on MTD VAT implementation in MTD Tracker

 

This free member digital resource, hosted on the Bloomsbury Professional online platform, has been available since October. It provides guidance on the operation of MTD in plain English and brings together a coherent interpretation of:

  • primary law
  • regulations
  • HMRC non-statutory guidance
  • memorandum with software producers
  • government policy papers
  • guidance provided directly to professional bodies by HMRC and HM Treasury (where permission is given for publication)
  • public evidence given to Parliament.

 

The content uses a question-and-answer format with questions from accountancy practitioners.

The impact on audit of EU exit

Advice for auditors on the impact of the UK exiting the EU.


The Financial Reporting Council (FRC) and Department for Business, Energy and Industrial Strategy (BEIS) have prepared letters for auditors and accountants with information in the event of a no-deal Brexit.

Football club scores decisive victory over HMRC

HMRC has lost a challenge on national minimum wage enforcement. 


HMRC has lost a challenge on national minimum wage enforcement. 

 

We have recently seen a new chapter of the national minimum wage enforcement, with fines imposed on large retail and restaurant chains for NMW breaches. It is the intricacies of the national minimum wages regime that are once again under review following a case involving Middlesbrough Football Club vs. HMRC.

 

In a Tribunal case concluded earlier this month, Middlesbrough FC challenged HMRC’s claim that the value of the football season tickets offered to employees must be deducted from the employees’ pay and be taken into account when arriving at the amount of hourly wage. The tribunal disagreed with HMRC.

 

The key factors in favour of Middlesbrough FC were:

  • a deduction was made at request of employees and for their own benefit (they could spread the cost of the season ticket over the course of the year rather than pay for it in one lump sum)
  • employees were not compelled to buy a season ticket
  • watching football was not a requirement of the job.

 

Although the ruling is likely to provide some reassurance to employers, it is hoped that the recently announced consultation will result in further amendments to the NMW legislation, which in its current form may sometimes paint a confusing picture.

 

The legal basis for NMW is provided in the National Minimum Wage Act 1998  and the Employment Act 2008 .

 

Who NMW applies to

NMW provisions apply to workers and employees. Per section 54 of the 1998 Act, workers and employees are individuals working or training (as an apprentice), under a contract of employment or any other contract (express or implied, in writing or oral). Individuals on a work experience placement or internship may be protected under the NMW legislation if they have a relevant contract. However, government training schemes, work experience as part of a course and volunteering are outside the NMW provisions.

 

NMW provisions apply equally to salaried individuals. In this case the monthly pay is divided by the average number of hours worked in a month to calculate the hourly rate.

 

How NMW is calculated

The national minimum wage (including the national living wage) is calculated as an average hourly wage in a relevant reference period. A reference period is the interval period at which a worker or employee is paid, for example if a worker is paid weekly, the reference period will normally be one week. The reference period cannot be longer than one month.

Any shortfall between the actual rate paid and the legislated minimum rate creates arrears, which must take into account the time that has elapsed since the underpayment. If the current rate of minimum wage is higher than the rate that applied at the time of the underpayment, the arrears are calculated by reference to the rate currently in force by reference to the age the worker was when they were entitled to NMW. For example, an individual who qualified for NMW five years ago as a 17 year old would be entitled to the current NMW applicable for a 17 year old if the arrears were settled today.

 

Illustration of arrears calculation

An employer paid a 30 year old worker £200 for a 40 hour working week in 2012. In February 2018 the employer realises that the worker was underpaid at the time.

Relevant NMW  rates are: 

  • 2012  – £6.19
  • 2019 – £8.21

 

Arrears are the higher of:

  • the underpayment, ie the difference between the amount the employer should have paid at the time and the amount actually paid
  • the amount calculated using the arrears formula taking into account the time the length of time that has elapsed since the underpayment.


Step 1
: Multiply the correct rate during the underpayment reference period by the hours worked: £6.19 x 40 = £247.60

 

Step 2: Take away the amount you paid the worker from the amount they should have been paid in step 1: £247.60 - £200 = £47.60 underpayment

 

Step 3: Divide the underpayment by the minimum wage rate which applied at the time of the underpayment and multiply by the December 2010 minimum wage rate: (£47.60÷ £6.19) x £8.21 = £63.13.

 

The worker is entitled to arrears of £63.13

 

NMW calculator is available.


Which amounts count towards wages?

Amounts which count towards wages include bonuses, other monetary incentives and employment related expenses paid by employee and not reimbursed by employer. Amounts which do not count towards wages are:

  • loans
  • advances of wages
  • pension payments
  • lump sums on retirement
  • redundancy payments
  • rewards under staff suggestions schemes
  • reimbursed employment related expenses incurred by employee
  • tips, gratuities, service charges and cover charges
  • additional pay as a result of ad hoc overtime, weekend, bank holiday or night shift work
  • work allowances, for example for work in unsocial hours or in a particular geographical area

 

Further guidance is provided by HMRC .


How NMW is enforced

Enforcement of national minimum wage is carried out by HMRC. In most cases, a civil investigation is carried out for non-compliance, although criminal investigation is possible for persistent non-compliance, refusal to cooperate and in case of wider public interest cases.

 

During an investigation HMRC can enforce access to relevant information, including removal from employer’s premises of physical files and documents (employers, agents and advisers should be issued receipts), removal of a copy of electronically available information in a relevant format (original digital documents cannot be removed) or meetings with employees.

 

HMRC has discretion to decide to what extent and which enforcement measures are used, if at all, although typically all or a combination of the following will apply:

  • issue of Notice of Underpayment for arrears in relation to some or all employees, including former employees
  • naming the employer publicly
  • imposing financial penalties
    • of up to 200% of arrears of the total underpayment  for all of the workers specified in an notice, relating to pay reference periods commencing on or after 1 April 2016 (periods before this date were subject to lower penalties). This is subject to a cap of maximum £20,000 per worker
    • reduced by 50% if  the unpaid wages and the penalty are paid in full within 14 days
  • instruction to self-correct
  • issue of Notice of Underpayment if employer does not self-correct and naming the employer again
  • issue of Replacement Notice in case of a new discovery in relation to an employee subject to the original notice.

 

Detailed information on the national minimum wage can be found in HMRC’s  National Minimum Wage Manual.

Housekeeping after the January madness

With the January tax returns rush complete, what do we do now?


With the January tax returns rush complete, what do we do now?

 

February is the month where you take some time off to rejuvenate and reinvest your energy into the future. While it is quiet, important tasks can be done which were previously at the bottom of your list.

 

A good starting point is tidying up your clients’ information and looking at your practice management. Go through your list of clients and then:

  • terminate services on the practice management for clients you have ceased to act for
  • ensure that HMRC authorisations are removed for these clients
  • double-check they have moved their registered office if they were otherwise using your registered office services
  • all records are returned and there are no unnecessary ones clogging up the storeroom
  • ensure all engagement letters and consent forms for current clients are up to date and relevant
  • check you are charging enough for the services you provide - very important
  • consider sacking clients who were unappreciative of your advice and were a real hassle for the little money they pay
  • make sure all paperwork received from signed tax returns in the last few weeks is filed correctly
  • undertake your KYC internal money laundering procedures audit for your clients if not already done in the last 12 months.

 

March year-end

Next on your list should be to start planning your March year-end company accounts. Depending on the services you provide to your clients, major clients often require punctual advice for their big capital spends for AIA claims, bonuses for their executives, R&D claims and pension contributions etc. You need to start arranging dates in your diary to see these clients so there is sufficient time to implement these decisions before the year end.

 

Individual tax planning

A similar planning exercise can then be undertaken looking at individual tax planning. For high earner individual clients, check whether they should put extra money into their personal pension accounts to avoid paying higher taxes and to minimise the loss of their personal allowances. This could also be utilised for clients receiving child benefits, to reduce their child benefit tax charge. Independent financial advice should be pursued before making any financial commitments.

 

For joint rental properties owned by civil partners or a husband and wife, see if they need advice in order to make some elections to transfer a larger share of their property to the other half to maximise the family tax savings; however, legal advice should be sought before any elections are made.

 

Policies and procedures

Look to ensure your policies and procedures reflect what you are doing. ACCA has a number of policies and procedures to support our practitioners including for AML and data protection.

 

Also consider how you can make your firm stand out for clients, potential clients, recruits and those you may wish to influence. Remember you can take and use articles in In Practice, you can utilise ACCA guides and also much of the other support material in your firm. You could enter an award. You may wish to join the Practitioner Linked In group.

 

MTD for VAT

Last but not least, Making Tax Digital for VAT (MTDfV) is coming for the period beginning 1 April 2019 for VAT registered businesses where their turnover is more than £85,000 for twelve months ending on 31 March 2019. Ensure:

  • you register your practice with HMRC for Agents Services Account (ASA)
  • once you have received your new HMRC gateway login details, you need to start registering your affected clients for MTDfV (this does not mean you have to apply for a separate 64-8 authorisation if you already have one in place that should suffice)
  • that the software you are using for your clients’ VAT returns is MTD compliant and ready for this new tax journey.

 

Full HMRC guidance can be seen in VAT notice 700/22.

 

Exclusive guidance on MTD from ACCA for members can be requested from advisory@accaglobal.com

 

 

HMRC fails to have its cake and eat it

HMRC loses £300k ‘chocolate brownie’ VAT case.


HMRC loses £300k ‘chocolate brownie’ VAT case.

 

In Pulsin’s Ltd  v HMRC (TC06909) (28 December 2018) the first-tier tribunal allowed the company’s appeal against HMRCʼs decision that zero-rating did not apply to its supplies of ‘raw choc brownies’. The tribunal was critical of the complexity of the VAT legislation surrounding food. Clearly the long running disputes on zero and standard rated products will continue.

 

The dispute began in 2016 when Pulsin’s Ltd said that it had wrongly been paying VAT on the products for four years. HMRC stated that the product was not zero-rated on the basis that it did not display enough characteristics of a cake, and insisted that the correct classification is confectionery.

 

Legislation

VAT Act 1994 Schedule 8, Group 1 zero-rates ‘Food of a kind used for human consumption’.

 

The zero-rating of food is complicated as the provision under Group 1 provides for a wide general description (qualifying for zero-rating), subject to excepted items (which must therefore be standard-rated), with exclusions and overriding items to those exceptions (which then re-qualify to be zero-rated).

 

Excepted item 2 excludes from zero-rating ‘Confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some products similar in taste or appearance’. Note 5 then provides ‘for the purposes of item 2 of the excepted items “confectionery” includes chocolates, sweets and biscuits; drained glace or crystallised fruits; and any item of sweetened prepared food which is normally eaten with the fingers’.

 

The legislation seeks to zero-rate foods which are nutritional, but standard-rate foods which may be regarded as luxuries. The borderline between what is standard-rated as confectionery and what is zero-rated as a cake is unclear.

 

If a product has the characteristics of two statutory categories (eg cake and confectionery), then it should be placed in that category for which it has sufficient characteristics to qualify. The test is a matter of ‘informed impression’ as to:

  • ingredients
  • process of manufacture
  • unpackaged appearance (including size)
  • taste and texture
  • circumstances of consumption (including time, place and manner of consumption)
  • packaging
  • marketing
  • shelf life
  • name/description
  • ‘how it behaves’ after it is removed from packaging.

 

The tribunal examined a number of other products and concluded that while the ingredients used are not the same as a traditional sponge cake, they are consistent with the ingredients of a cake.

 

The process of manufacture, unpacked appearance, taste and texture were consistent with a conclusion that the product was a cake.

 

While the marketing reinforced that it may be eaten as a snack, the tribunal considered that cakes, too, are frequently eaten as snacks.

 

The judge concluded ‘put alongside a slice of traditional Victoria sponge, a French Fancie and a vanilla slice or chocolate éclair the products may look out of place. However, put alongside a plate of brownies, or, for instance, at a cricket or sporting tea where it is more likely that bought and individually wrapped cakes will be served on a plate the products would absolutely not stand out as unusual.’

 

The tribunal formed the view that the product showed enough characteristics of a cake and was therefore eligible to be zero-rated.

 

 

Cyber risks: accountancy firms exposure

How can your practice defend itself against a possible cyber incident?


How can your practice defend itself against a possible cyber incident?

 

It is becoming increasingly common to hear mention of the names of professional services firms in the press in connection with a cyber breach incident. Cyber attacks have become a fact of life, highlighting the ever-evolving challenges that all professional services firms need to meet.

 

Preserving confidentiality is a core professional duty, and a failure to do so can lead to a number of exposures. Professional services firms, including accountants and auditors, are often viewed as good targets for hackers, due to the wealth of sensitive confidential data they hold and because firms can be perceived to have less sophisticated data security than clients in, for example, the financial services and healthcare sectors.

 

A cyber breach can occur due to a number of factors - for example: an employee opening a dubious attachment to an email or responding with passwords or other security information to a phishing attack, the introduction of malware via a third party supplier's system, or the failure to keep software up to date leaving vulnerabilities in the system open to exploitation. It can be more difficult for smaller firms to protect themselves from attack, as they do not have the same resources to invest in cyber-security defences and training as do larger organisations.

 

The UK has not yet had anything like the claims exposure from cyber events that has been seen in the US. However, that may change following implementation of the General Data Protection Regulation (GDPR) in May last year.

 

How are firms exposed?

 

First party losses

The aftermath of a cyber breach is unpredictable and depends on the nature and extent of the breach, the information compromised and the effectiveness of containment and recovery. A firm may incur first party costs/losses in connection with any or all of the following:

  • business interruption
  • ransom payments
  • reputational harm
  • technical and forensic investigations
  • security and other IT improvements and repairs
  • client notifications
  • loss of intellectual property
  • public relations advice
  • legal fees.

 

At their worst, cyber breaches can have catastrophic consequences for the subject of the attack. It is often reputational damage which can have the most significant impact, as a loss of trust from clients (whether justified or not) can be disastrous if widespread.

 

In addition firms may find themselves subject to claims from third parties and regulatory action.

 

Malpractice claims

Clients may make claims against professional firms which are unwittingly caught up in cyber frauds. The most common examples we have seen have been claims by clients against law firms. A number have been subject to so-called ‘Friday afternoon frauds’, where a fraudster dupes the firm into sending its client’s money to the fraudster (often through falsified email communications). Claims arising from these events usually take the form of a claim for breach of trust, and can be very difficult to defend.

 

Claims of this sort usually relate to the professional firm paying client money to a fraudster. However, it may also be possible for a client to sue for negligence in other circumstances. For instance, it might be possible to make out a claim if a professional firm’s IT security were to be unreasonably weak and that allowed hackers to send the client falsified bank details, purportedly from the professional firm, leading to the client unknowingly paying its money to fraudsters.

 

Privacy liability

If a cyber-attack results in a loss or disclosure of data, claims may be made by the owners and/or subjects of the data. For example, claims might be sought for compensation under the data protection legislation; there may be breach of confidence claims, breach of contract claims – for example breach of an express or implied term that data would be stored securely - or negligence claims for the failure to take reasonable security precautions.

 

Regulatory exposures

Regulatory action following a cyber event might relate to a failure to protect confidential information or a failure to notify affected individuals in compliance with laws or regulations.

 

ACCA – confidentiality is one of the key principles of the ACCA code. Whilst it is the case that even the strongest and most sophisticated of systems and controls employed to prevent cyber attacks will not be water-tight, it may be that a breach following a failure to take even the most basic steps to secure client information might constitute misconduct and therefore render members liable to disciplinary proceedings. Other regulators have taken disciplinary action, including imposing fines, for failing to take reasonable steps in relation to preventing breaches.

 

Information Commissioner’s Office (ICO) – one of the key principles of the GDPR in the context of cyber security is Article 5f which states that the firm must have appropriate security measures in place to protect personal data. We have seen fines imposed by the ICO for security failures by professionals.

 

The role of insurance

Professional indemnity insurance may provide some insurance cover in the event of a cyber breach. However, there may be significant gaps in the cover provided in relation to a number of the exposures outlined above. In particular, a standalone PII policy will not usually provide cover for first party losses, such as the cost to the firm of identifying and fixing the security issue.

 

In contrast, cyber liability policies have a built in response protocol in order to respond quickly and effectively to a data breach. This is usually led by a breach response coordinator, who will organise the forensic response, instructing third party suppliers (such as PR firms and credit monitoring services), considering notification obligations to regulators and individuals (if appropriate) and dealing with subsequent third party claims.

 

The cover provided under cyber policies is typically split into three main parts: (1) first party losses; (2) breach response costs; and (3) third party losses. Crucially, cyber policies typically provide cover for the following:

  • crisis management costs such as forensic and IT specialists
  • reputation advice services
  • specialist legal advice
  • the cost of notifying regulatory bodies and affected individuals
  • the cost of providing account and credit monitoring to affected individuals
  • sums paid in response to cyber extortion
  • data and computer program restoration costs
  • business interruption losses
  • fines and penalties for breach of data protection regulatory breaches (or at least to the extent that insurability is not prohibited by the regulator or by law)
  • privacy, network and media liabilities, including those not necessarily arising from malpractice.

 

Cyber policies also often have a lower self-insured retention or deductible than may be found in a PII policy.

 

However, there are some important exclusions under cyber policies. Reputational damage is not covered. Cover is typically limited to the management of reputational issues but not for the actual harm. Cyber policies also usually operate to restore systems but not to improve them, which may not be of use if a serious vulnerability has been exposed.

 

Policies also typically exclude the following:

  • replacement/repair of physical items eg laptops, failed servers
  • dishonest and improper conduct
  • bodily injury and property damage
  • trade secrets: cyber policies generally exclude the value of the data to the insured.

 

Therefore, if commercially sensitive data is released into the public domain, the financial consequences for the insured (which may be severe) are unlikely to be insured.

 

Ever-changing landscape

The cybersecurity landscape is constantly changing and is increasingly sophisticated. In addition, changes in the way firms work, such as agile working, impact upon the risks that firms face in keeping data confidential. Set against changes to data protection regulation and threats of litigation, there is an increased need for firms to assess their cyber risk and consider holding standalone cyber insurance as part of a firm policy to detect, prevent and respond to cyber events.

 

Examples of cyber incidents

  • External fraudsters used the accountant’s HMRC agent login details to divert tax refunds that were due to be paid into clients’ own bank accounts. Although it was not the accountant’s system that had been compromised, they still had to undergo security checks to ensure that there was no internal breach. Additionally they also had to inspect their client HMRC records to ascertain which clients had been affected.
  • After an employee clicked on an attachment to an email, the accountant’s server was infected with the Zepto virus, which caused much of their data to become encrypted. They then received a ransomware email demanding £2,500 in bitcoin currency to de-encrypt - which they chose not to pay. They immediately contacted their IT consultant who was able to recover most data and get the system up and running but this took nearly a week.
  • A client’s system was hacked and the fraudsters sent emails to the client’s accountants (purportedly from the client) asking them to transfer funds and make payments on their behalf. The accountant complied with the requests, as this was their usual practice previously agreed with the client. The accountant became suspicious by a request for a larger than usual amount, contacted the client and the fraud was brought to light. The client held the accountant responsible even though it was the client's system that had been breached.

 

Ian Peacock – partner, Clyde & Co LLP on behalf of Lockton Companies LLP

 

If you have any questions or would like to discuss cyber insurance, please contact Roselin Ali or Catherine Davis, Lockton Companies LLP

 

0117 9065057 | ACCAaccountants@uk.lockton.com

Managing and mitigating risks of money laundering

A reminder to focus on enhanced customer due diligence.


A reminder to focus on enhanced customer due diligence.

 

In accordance with regulation 33 of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, a relevant person must apply enhanced customer due diligence measures and enhanced ongoing monitoring, in addition to the customer due diligence measures, in order to manage and mitigate the risks of money laundering or terrorist financing.

 

It is therefore vital to have a process for identifying when enhanced due diligence is required and then the measures that are required to be put in place.

 

A. Situations when enhanced due diligence is required:

1. When the customer is not physically present at the time of identification checks.

2. When entered into a business relationship with a ‘politically exposed person’.

 

‘Politically exposed person’ (PEP) is a term describing someone who has been entrusted with a prominent public function. A PEP presents a higher risk for potential involvement in bribery and corruption, by virtue of their position and the influence that they may hold.

Typically, a PEP can be either a foreign or domestic individual such as senior politician, senior government, judicial or military official, senior executive of state owned corporations, or important political party official.

Requirements for a PEP apply to family members or close associates, any individual publicly known or known by the financial institution to be a close personal or professional associate.

 

3. When entered into a transaction with a person from a high-risk third country.

A high-risk third country is one identified by the European Commission as having strategic deficiencies in their national anti-money laundering and counter financing of terrorism regime. HM Treasury maintains lists of financial sanctions imposed in the UK by country, administration or terrorist group.

 

What is prohibited under each financial sanction depends on the financial sanction regulation. Regulations are imposed by the:

  • United Nations Security Council – the UK is a member so automatically imposes all financial sanctions created by the UN
  • European Union – as a member of the EU, the UK imposes all financial sanctions created by the EU
  • UK government – a small number of financial sanctions are created by the UK government.


Jurisdictions that are subject to sanctions can be found here.

 

4. In any other situation where there is a higher risk of money laundering.

 

For example:

  • In cases where the client has provided false or stolen identification documentation or information
  • In cases where the client has entered into transactions that are complex and unusually large
  • In cases where the client has entered in an unusual pattern of transactions, and the transactions have no apparent economic or legal purpose
  • In any other case which by its nature can present a higher risk of money laundering or terrorist financing, such as :
    a) the client is a business that is cash intensive;
    b) the corporate structure of the client is unusual or excessively complex given the nature of its business;
    c) the client’s product, service, transaction or delivery channel are high risk. For example, the product involves private banking or the product or transaction is one which might favour anonymity.

 

B. Measures to undertake/consider

  1. The enhanced due diligence measures when dealing with customers who are not physically present and other higher risk situations include:
  • obtaining additional independent, reliable information to establish the customer’s identity
  • applying extra measures to check documents supplied by a credit or financial institution
  • making sure that the first payment is made from an account that was opened with a credit institution in the customer’s name
  • finding out where funds have come from and what is the purpose of the transaction.

  1. The enhanced due diligence measures when dealing with a Politically Exposed Person are:
  • making sure that only senior management gives approval for a new business relationship
  • taking adequate measures to establish where the person’s wealth and the funds involved in the business relationship come from
  • carrying out stricter on-going monitoring of the business relationship.

  1. Other enhanced due diligence measures include:
  • as far as reasonably possible, examining the background and purpose of the transaction
  • increasing the degree and nature of monitoring of the business relationship in which the transaction is made to determine whether that transaction or that relationship appear to be suspicious
  • taking additional measures to understand better the background, ownership and financial situation of the customer, and other parties to the transaction
  • taking further steps to be satisfied that the transaction is consistent with the purpose and intended nature of the business relationship.

 

Welsh rates of income tax (WRIT)

Guidance on the new Welsh rates of income tax (WRIT).


The Welsh rates of income tax (WRIT) will come into effect from 6 April 2019.

 

The following has been extracted from HMRC guidance for employers and employees.

 

HMRC will tell employers which tax code is appropriate to apply to an employee in advance of the introduction of the Welsh rates of income tax.

 

Tax codes for Welsh taxpayers will be prefixed with a ‘C’. If an employee has been identified as a Welsh taxpayer it will be because they:

  • are resident in the UK for tax purposes
  • have had a main place of residence in Wales for more of the year than in any other part of the UK.

 

If an individual is a UK taxpayer and their main place of residence is in Wales, they’ll be a Welsh taxpayer.

 

However, if an individual cannot identify one place in either Wales, the rest of the UK (England/Northern Ireland), or Scotland as their main place of residence they’ll need to determine where they’ve spent the most days; if this is Wales they’ll be a Welsh taxpayer.

 

Employers need to use payroll software or operate a set of tax tables to perform a tax calculation for those employees who are Welsh taxpayers. There’ll be no change to reporting or how payments for income tax are made to HMRC other than to apply the appropriate Welsh tax code to Welsh employees for all pay frequencies. Personal allowances will remain the same as in the rest of the UK. Tax bands will remain the same as in England and Northern Ireland.

 

The factsheets are available here:

 

We have requested Welsh language versions.

HMRC casts a spell over Harry Potter actor’s tax return

Wizardry couldn’t help Rupert Grint win a recent tax appeal.


Wizardry couldn’t help Rupert Grint win a recent tax appeal.

 

In a recent income tax tribunal HMRC showed its powers were powerful enough to overcome an appeal by Rupert Grint (the actor who played Ron Weasley in the Harry Potter films) against an earlier decision (2016) of the first-tier tribunal. This decision had also dismissed a previous challenge to amendments made to his tax returns for the years ended 2010 and 2011.

 

The tribunal focused on the concept of what a basis period was for income tax purposes.  In the 2009/10 tax year when it was known that a new higher rate of tax would come into effect the following year, Rupert changed his accounting date from 31 July to 5 April to advance his tax liability on eight months’ worth of profit into the 2009/10 year. Because of the new higher rate of tax in the following tax year, this would be to his advantage.

 

The case is genuinely interesting because of its detailed considerations of accounting periods and the relationship with basis periods. A further factor was the existence of different sets of accounts covering different periods. 

 

One area explored worthy of a further read is the basis periods and comment on the legislation and Parliament’s intent. The conclusion reached was ‘With some reluctance therefore, we will determine this appeal by resolving the grounds of appeal as put forward by Mr Grint and argued by the parties'. Two key extracts reproduced below preceding the conclusion are:

 

‘An alternative reading of the statutory provisions

At the start of the hearing of the appeal we raised with Mr Soares, appearing for Mr Grint, an alternative reading of section 216 and 217 which appeared to us more likely to reflect what Parliament had intended to achieve, if not what it had in fact achieved, by the provisions as drafted. That was that the “18 month test” was imposed to restrict to 18 months the length of the basis period that could arise on a change of accounting date by operation of section 216(3).

 

‘We saw the difficulties in construing section 217(3) as achieving this. The conditions for satisfying the 18 month test in subsection (3) do not refer to the “basis period” but to the “period of account”. That term is defined in section 989 ITA not by reference to the period brought into tax but by reference to the accounts drawn up by the business ending on the “accounting date”. Further, although the description of the 18 month test in subsection (3) explains when the period of 18 months ends, unhelpfully it does not say when the period begins. One might expect it to refer back to section 216(3) so as to set the start date for the 18 month period in section 217(3) as being the date “immediately after the end of the basis period for the previous tax year” referred to in section 216(3). That would mean that Mr Grint would fail the 18 month test not because he drew up the Long Accounts but because he was trying to have a basis period for the tax year 2009/10 which ran from 1 August 2008 to 5 April 2010, longer than 18 months.’

 

Intellectual property after Brexit

BEIS has issued guidance for businesses called Intellectual Property after Brexit.  


BEIS has issued guidance for businesses called Intellectual Property after Brexit.  

 

The guidance states that the IP after Brexit will affect your business if you:

  • ‘currently own IP, such as copyright, patents, designs and trade marks
  • are involved in the secondary trading of IP-protected goods between the UK and EEA markets
  • operate or rely on cross-border services involving copyright-protected content in the UK and EU’.

 

The guidance call for action is that your business needs to:

  1. Understand the changes and prepare for them now. The guidance IP and Brexit – the facts is available to help you.
  2. Be aware of the timings. There are some actions that you may need to take now in order to prepare for leaving the EU without a deal. IP and Brexit – the facts can help you to understand whether you need to take any immediate action depending on your individual circumstances.
  3. Stay updated. Some of these requirements may change depending on the terms upon which the UK leaves the EU. Revisit this page or sign up to email alerts on the signposted pages to stay up to date.
ACCA changes honorary reporting rules

Greater flexibility introduced around honorary reporting.


Greater flexibility introduced around honorary reporting.

 

ACCA has made changes to the honorary reporting rules to enable members to undertake accountancy, tax and other honorary work for those (subject to certain conditions) for friends, family and charitable organisations with a higher income without the need to obtain a practising certificate. These conditions were amended from 1 January 2019 and are explained below.

 

Certain activities, when carried on by an ACCA member in the UK, require that individual to hold an ACCA Practising Certificate. These activities are in paragraph 4(1)(b) of the Global Practising Regulations which are as follows:

 

‘Signing or producing any accounts or report or certificate or tax return concerning any person’s financial affairs, whether an individual sole-trader, an unincorporated body or a firm, in circumstances where reliance is likely to be placed on such accounts or report or certificate or tax return by any other person (the “third party”), or doing any other thing which may lead the third party to believe that the accounts or report or certificate or tax return concerning the financial affairs of such a person have been prepared, approved or reviewed by the practitioner.’

 

Exemption for honorary work

From 1 January 2019 paragraph 4(5) of the Global Practising Regulations says;

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.

 

The changes to the rules have resulted in the change or removal of the following which were in the previous regulation 4(1)(b). It stated that activity  shall not constitute public practice where all of the following conditions are satisfied:

  1. the accounts are of an entity which does not require the appointment of an auditor; and
  2. no fee is payable or other material benefit receivable in respect of the work performed; and
  3. the gross income of the entity for the year prior to the year in question does not exceed £100,000; and
  4. the aggregate of such gross income with such gross income of any other entity in respect of which the member has relied upon this regulation 4(4) in the calendar year in question does not exceed £200,000; and
  5. any third parties are made aware that the activity has been carried out by an Honorary Reporting Accountant; and
  6. the member does not hold himself out, or allow himself to be held out, as a sole proprietor, partner or director of a firm, or designated member or member of a limited liability partnership, where public practice is carried on.

In summary the changes to the ‘honorary work’ exemption are as follows:

  1. The exemption now has the heading ‘honorary work’ whereas previously it was ‘honorary reports’.
  2. Previously there was a requirement that the honorary activities exemption would not apply if the work was being done for an entity which was required to have an auditor. Now an ACCA member without holding a practising certificate can undertake honorary work for an entity and that entity can appoint an auditor. Obviously that ACCA member who does not hold a practising certificate cannot be the auditor.
  3. The gross income limit for the entity has increased from £100,000 to £250,000.

This would apply to all entities such as charities, companies, limited liability partnerships, other partnerships, sole traders, salaried individuals and any other entity.

  1. Previously there was a requirement that the aggregate of the gross income of all the entities in respect of which the member undertook honorary work should not exceed £200,000 in the calendar year in question. Now there is no such requirement, which means that a member could for example undertake honorary work for a number of entities on condition that the gross income of each one does not exceed £250,000.
  2. Previously there was a requirement that ‘any third parties are made aware that the activity has been carried out by an Honorary Reporting Accountant’. This would be achieved, for example, by the member signing an Accountants’ Report as an ‘Honorary Reporting Accountant’. This is no longer a requirement, although the member may still sign a report in this way if they choose to do so.
  3. Previously there was a requirement within the Honorary Reporting Exemption which said ‘the member does not hold himself out, or allow himself to be held out, as a sole proprietor, partner or director of a firm, or designated member or member of a limited liability partnership, where public practice is carried on’.

Although this has been removed from the Honorary Work Exemption, there is no practical change as regulation 4(1)(c) still says that a practising certificate is required if ‘holding oneself out, or allowing oneself to be held out, as a sole proprietor, partner or director of a firm, or designated member or member of a limited liability partnership, where public practice is carried on’.

  1. Previously there was a requirement that ‘no fee is payable or other material benefit receivable in respect of the work performed’. The new rules do not contain the word ‘material’. This clarifies the rules as previously members could argue that although they received a benefit from undertaking the work they considered that benefit to be not material. Now no benefits can be received in consideration for the work performed.

 

ACCA members in the UK who hold an ACCA practising certificate are supervised by ACCA under the Anti-Money Laundering (AML) Regulations.

 

ACCA members and students who undertake regulated work such as basic book-keeping (which falls outside the meaning of public practice) and do not hold a practising certificate need to register with HM Revenue and Customs or another regulatory body for the purposes of the AML Regulations.

 

ACCA members undertaking work which falls within the ‘honorary work’ exemption are not required to register with HM Revenue and Customs or another regulatory body. This is because no fee or other benefit is receivable for the work performed.

 

Members undertaking this work may wish to consider if they would require any insurance cover.

 

Further information on Honorary Reporting Rules is available here.

 

Changes to the capital gains tax on disposals of UK land and property

Be aware of CGT when disposing of land and property.


Be aware of CGT when disposing of land and property.

 

Return and Payment of Capital Gains Tax within 30 days following the completion day for UK land (including buildings) when there is a charge to capital gains tax.

 

The provisions are contained in Schedule 2 of Finance Act 2019 which received Royal Assent on 12 February 2019; some of the main points in Schedule 2 are as follows:

  1. These changes to capital gains tax apply to the following (subject to some limited exclusions). Schedule 2 Part 1 1(1) states the schedule applies to:
  1. 'Any direct or indirect disposal of UK land which meets the non-residence condition (whether or not a gain accrues) and which is made on or after 6 April 2019, and
  2. Any other direct disposal of UK land on which a residential property gain accrues and which is made on or after 6 April 2020.

but this Schedule does not apply to excluded disposals.

(2) A disposal is an excluded disposal if—

(a) it is a disposal on which, as a result of any of the no gain/no loss provisions, neither a gain nor a loss accrues,

(b) it is the grant of a lease for no premium to a person not connected with the grantor under a bargain made at arm’s length,

(c) it is a disposal made by a charity, or

(d) it is a disposal of any pension scheme investments.'

  1. If a disposal is made to which this schedule applies then the person must complete a return in respect of that disposal and submit it to HMRC within 30 days following the completion date. There are exemptions available if the person is not liable to pay an amount on account for this disposal or if the person has already delivered their ordinary self-assessment tax return and included the disposal on that return.

  2. Capital gains tax losses can be used to reduce the capital gains tax payable if the loss occurred before the completion date for the property concerned.

  3. Capital gains tax is payable for this disposal by the filing date for the return (which is within 30 days of the date of completion of the sale of the property).

  4. Schedule 2 of the Finance Act 2019 also deals with the following matters:
  1. making amendments to a return;
  2. HMRC making enquiries into these returns;
  3. amendments of returns during enquiry;
  4. HMRC determinations in relation to these returns;
  5. discovery assessments;
  6. penalties for late filing and payment together with interest on late payments.

 

Letting relief

In the Budget on 29 October 2018 the Chancellor announced the following change to ‘letting relief’ which affects buy to let properties which are subject to capital gains tax:

  • ‘To better target private residence relief at owner occupiers, from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. The final period exemption will also be reduced from 18 months to nine months. The government will consult on these changes. There will be no changes to the 36 months final period exemption to disabled people or those in a care home.’

 

The government is still consulting on this matter and has not yet issued draft legislation.

 

NEWS
What to expect this month? Watch our video highlights


Impact on MTD for manufacturing, retail, professionals and hospitality

Watch our new webinars highlighting how MTD will impact on four key SME areas.


In partnership with Barclays, ACCA has created a series of bite-size 30 minute webinars that explore how Making Tax Digital (MTD) will impact on four sectors:

  • manufacturing
  • retail
  • professionals
  • hospitality.

These webinars provide an overview of the impact of MTD on SMEs in each of these sectors and highlight to practitioners the issues that their SME clients in those sectors will face. Each webinar is introduced by Andy Simpson (head of specialist client solutions, Barclays Business Banking) before Jason Piper (senior manager – tax and business law, ACCA) takes over to go through the practical aspects of getting ready for MTD.

 

You can register for any of these webinars now

MTDfV bridging software practical guide

ACCA and QuickBooks are launching new bridging software.


With the Making Tax Digital deadline only few weeks away ACCA and QuickBooks are working together to support firms with their final preparations.

 

One of the solutions for a number of clients will be bridging software both explaining its uses and offering a step by step guide to submission. To do this, QuickBooks is creating resources for ACCA members around their bridging software solution and how it allows your spreadsheet clients or small businesses with complex VAT to comply with MTD without changing their current record-keeping method.

 

The two videos will cover: 

  • What is bridging software? Which of my clients are best suited for bridging?
  • Step-by-step demonstration (from setting up a client to submitting to HMRC) of QuickBooks’ bridging solution

 

These resources will be available on Monday 4 March 2019. Visit our website to find out more.

Incentivising SMEs to switch to a challenger bank

Could your practice and its clients benefit from Royal Bank of Scotland/NatWest's new incentivised switching scheme?


Could your practice and its clients benefit from Royal Bank of Scotland /NatWest's new incentivised switching scheme?

 

From this week 200,000 Royal Bank of Scotland and NatWest customers will have a unique opportunity to choose from a range of exclusive offers to switch their business current account to a selection of ‘challenger’ banks.

 

The Business Banking Switch scheme launches today (25 February) and is part of RBS’ commitment to boost competition in UK business banking following support it received from UK government during the financial crisis.

 

It gives eligible customers - who were due to transfer to Williams & Glyn with a company turnover below £25m - the choice to switch their account(s) and take advantage of exclusive offers that will be available.

 

As accountants you may be uniquely positioned to help these customers decide whether switching their account is right for their business.

 

You can find out more by visiting the dedicated websites:

 

Royal Bank of Scotland

 

 

NatWest

Top tip for March: your employee culture
 

WATCH: In our 'top tip for March' Will Farnell explains how his practice is radically shaking up its employee culture.


Will Farnell (founder and director of Farnell Clarke) has radically shaken up the culture within his practice. Watch as he explains why...

 

 

Will Top Tip for March

Ease security concerns with free IRIS OpenSpace storage

Do you need to exchange sensitive and confidential information with clients?


Do you need to exchange sensitive and confidential information with clients?

 

Thanks to our Memorandum of Understanding with IRIS Software Group, you can create an IRIS OpenSpace account with 1GB of free storage, enabling you to securely upload, store and approve documents.

 

The offer comes as practices grapple with GDPR processes while looking to improve collaboration and communication with clients. IRIS OpenSpace allows you to securely share a draft set of accounts, a tax return or a financial statement with your client, and clients can send bank statements, payslips and electronically approve documents.

 

It is quick and easy to create an IRIS OpenSpace account

 

IRIS OpenSpace is fully integrated with the IRIS Accountancy Suite & IRIS Payroll Solutions.

 

 

End of tax year series of free webinars for practitioners

Register now for any of our five free webinars (each worth 1 CPD unit).


It's not too late to watch any of our 'end of tax year' series of free webinars!

 

The series covers:

 

Key changes to entrepreneurs' relief Available on demand

Speaker: Dr Ros Martin, consultant and lecturer

 

Making Tax Digital Available on demand

Speaker: Dean Wootten, Wootten Consultants Limited

 

Audits of charities and independent examinations update Available on demand

Speaker: Don Bawtree, Business Assurance Partner, BDO

 

Risk and mitigation for the accountant – some key lessons from 2018 Available on demand

Speaker: Louise Dunford, LD Consultancy Limited

 

Inheritance tax planning 26 February (12:30)

Speaker: Paul Soper FCCA, tax lecturer and consultant

 

Register for any or all of these webinars now. Each webinar counts for one unit of verifiable CPD where it is relevant to the work that you do.

 

We also hosted a webinar to help you Avoid the pitfalls on SRA reporting, covering the SRA's future policy reforms, new accounts rules (including guidance and implementation), key client money risks that are a priority (such as banking facilities, investment fraud), and quality of accountant's reports.

 

The 2018 practitioner webinar series is still available on demand

 

Your first choice for CPD

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


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

 

SATURDAY CPD CONFERENCES FOR PRACTITIONERS

Find full details in the dedicated flyer

 

Saturday CPD conference one

Glasgow, 02 March

London, 09 March

Sheffield, 16 March

Swansea, 30 March

London, 06 April

Birmingham, 13 April

 

Saturday CPD conference two

London, 27 April

Bristol, 11 May

Swansea, 18 May

Glasgow, 01 June

London, 08 June

Birmingham, 15 June

Manchester, 22 June

Sheffield, 29 June

London, 06 July

 

Saturday CPD conference three

London, 28 September

Glasgow, 05 October

Birmingham, 12 October

Bristol, 19 October

Swansea, 02 November

London, 09 November

Manchester, 16 November

Sheffield, 30 November

London, 07 December

 

 

AUTUMN UPDATE FOR PRACTITIONERS

 

Accounting and auditing conference

02 November, London

 

Taxation conference

14 December, London

 

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

 

Fees:

1 conference                        159 GBP

2 conferences                      147 GBP per conference/delegate

3 or more conferences        133 GBP per conference/delegate

 

Internal Audit Conference – Collaborative Independence

16 May, Birmingham

 

ONE DAY COURSES

 

General tax update for accountants

London, 1 March

London, 31 May

Leeds, 8 October

Birmingham, 11 October

Bristol, 18 October

Newcastle, 6 November

Cardiff, 26 November

Norwich, 28 November

Bournemouth, 3 December

London, 11 December

 

Accounting standards update

Newcastle, 9 October

Nottingham, 10 October

Bournemouth, 15 October

Cardiff, 17 October

Norwich, 29 October

Leeds, 7 November

Bristol, 27 November

London, 12 December

 

Fee: £226 per person

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

 

SAVE THE DATE:

Residential Conference for Practitioners

21-23 November, Chester

News and tools for you

An invitation to join us at Accountex 2019, continue to benefit from special offers from Xero and their app partners and view our practical guide to apprenticeships.


Join us at Accountex 2019!

App partners - special offers for ACCA members

Demonstrate your excellence in Xero

ACCA’s practical guide to apprenticeships

Certification in Mergers and Acquisitions from IMAA

 

 

Join us at Accountex 2019!

We’re excited to be returning to Accountex at London’s ExCel on 1-2 MAY 2019. Our ever-popular lecture theatre is growing in size and we’ve got some exciting plans for our stand. Register for your FREE ticket here for what always proves to be one of the highlights of the accounting year.

 

 

App partners - special offers for ACCA members

Our members continue to benefit from a number of special offers provided by the app partners who joined Xero in attend our ‘future proof your practice’ roadshows last autumn. Check out these offers now: 

  • Practice Ignition is offering your first two months free. Simply get ten proposals signed within your first two months and they won’t bill you a penny for this period. Sign up today and contact alice@practiceignition.com  who will apply the ACCA Exclusive code for you

  • Float will give every ACCA accountant who signs up for Float a free account for their practice and 20% off their first three months subscription to Float’s partner programme. Visit https://try.floatapp.com/acca-offer/

  • Xero will give any ACCA accountant that signs up its partner programme 50% off Xero for three months on their first five Business Edition subscriptions – valid until 30 June 2019. Sign up to the partner programme at www.xero.com/partners and when you're signed up, add clients using the promo code ACCAXERO.

 

Demonstrate your excellence in Xero

Does your practice use Xero? Thanks to the Memorandum of Understanding we signed with Xero in August, your firm can now benefit from free access to Xero Advisor Certification. Completing the Xero Certification Equivalency Course is a great step towards gaining an extremely solid understanding of all things cloud accounting and of Xero. It’s also great for employability because demand for these skills has never been greater, both at bookkeeping and accounting practices and at more than 300,000 subscribers across the UK. Access this benefit now (use promo code ACCAX12m).

 

 

ACCA’s practical guide to apprenticeships

From funding and contracts to off-the-job training and further study, this is what you need to know about apprenticeships. They represent a highly cost-effective way for you to recruit and develop ambitious new talent to help you realise your business ambitions. Apprenticeships also have the added benefits of being able to offer high quality training, on-the-job experience and local employment opportunities. Apprenticeships can be complex so we have developed this guide that includes all the practicalities you need to consider if you are interested in taking advantage of the government’s funding to grow your own talent. 

 

 

Certification in Mergers and Acquisitions from IMAA

Based on IMAA’s best practice frameworks and the body of knowledge for mergers and acquisitions, there are three distinct M&A certificate programs and designations.

 

Serving on committees

Have you considered giving something back to the profession? We are recruiting members to sit on our regulatory and disciplinary committees.


Have you considered giving something back to the profession? We are recruiting members to sit on our regulatory and disciplinary committees.

 

A professional body exists to support its members and ensure they are respected and trusted. Integral to that trust is a robust regulatory process that includes independent adjudication. So when ACCA receives a complaint against a member, or a member or firm is considered to have fallen short of the required standard, the regulatory processes that ensue are of the utmost importance.

 

ACCA investigates complaints, monitors the performance of practising firms and, where appropriate, arranges for hearings to take place. But regulatory decisions and findings must be made independently of the ACCA executive – by regulatory and disciplinary committees. For example, decisions to restrict members’ authorisation to practise are made by an Admissions and Licensing Committee; findings of misconduct are made by a Disciplinary Committee.

 

Committees are drawn from a panel; panel members are also eligible to sit on the Appeal Committee, Health Committee and Interim Orders Committee. Committees must comprise at least three people, and require a lay majority (ie at least two members of the committee are non-accountants). But an accountant is also required to sit on the committee to provide relevant expertise. In certain cases, expertise in a particular area of practice (such as audit) is needed.

 

Of course, ACCA must ensure it has the right people on the panel at any point in time. This is the responsibility of ACCA’s Appointments Board – a board of independent decision-makers (all lay people) that has the power to appoint and remove panel members and that appraises their performance. Each panel member is initially on a contract of up to five years (which may be renewed up to a total of 10 years).

 

Required qualities

Committee members come from a variety of backgrounds, and those who are accountants work in various different sectors. But they share a commitment to maintaining professional standards and understand what it means to make regulatory decisions in the public interest. All panel members are bound by a code of conduct, which makes clear the importance of principles such as integrity and objectivity.

 

Panel members eligible to sit on ACCA committees are expected to do so approximately 12 to 15 times a year – sufficient to maintain competence but not so frequently that it interferes with other responsibilities. They are also expected to attend occasional meetings and training sessions.

 

The rewards

Fees and expenses are paid for attending hearings and meetings. In addition, committee members say they gain a great deal from the role. ‘To judge on people’s future careers is no small responsibility,’ says one panel member. ‘We have to make a judgement in the best interests of the profession while giving due regard to the public interest. This is what I have enjoyed the most – a sense of real ownership and responsibility in promoting fairness.’

 

Opportunities coming up

In April, ACCA will embark on a recruitment exercise, which will include a number of committee chairmen and accountant committee members. Find out more now. You can also browse information on our website about committees and hearings.

 

Tamara Etzmuss-Noble – operations manager, ACCA’s Standards department

How – and why – your practice can be an award winner!

Our new guidance looks at the benefits of entering awards – and how to create a strong entry.


Our new guidance looks at the benefits of entering awards – and how to create a strong entry.

 

In recent years we have seen our members and their firms carry off a number of awards. There’s no greater feeling than being recognised by your peers – the benefits include a boost to employee morale and recognition amongst your clients.

 

Our new guidance will help individuals and firms create a strong award entry and covers:

  • the attributes of a good awards entry
  • how to maximise the impact of entering an award
  • different awards firms may wish to enter
  • how to counter any ‘naysayers’ in your firm
  • explanations, tips from award judges and common mistakes to avoid.

 

Our guidance will also allow you to help clients who wish to enter awards.

 

Our practical guidance includes a video commentary and advice from well-known accountancy futurist, influencer and speaker Mark Lee, who is a judge for many accountancy awards.

 

When you are considering your firm’s priorities for 2019, why not consider entering one of the following:

  • Accounting Excellence Awards
  • British Accountancy Awards
  • Barclays Entrepreneurs’ Awards
  • British Small Business Awards
  • CICM British Credit Awards
  • Queens Awards (covering innovation, international trade, sustainable development and promoting opportunity through social mobility)
  • Tolley’s Taxation Awards
  • IRIS Customer Awards
  • Xero Awards.