Be prepared as HMRC restarts tax investigations Posted 07/26/2021 by Annie Makoff & filed under Coronavirus, Members. HMRC is restarting its investigation processes after Covid-19, so should businesses tackle any issues? HMRC is restarting tax investigations which had been paused while the Government department focused its energy on Covid-19 related measures. The latest research from UHY Hacker Young revealed that HMRC reopened over 100,000 compliance investigations in the first quarter of 2021, a 36 per cent increase from 75,000 compliance investigations in the last quarter of 2020. The number of current investigations has also quadrupled since the second quarter of 2020, the accountancy firm said. While most companies will be subject to routine tax audits from time to time, a proportion could face HMRC tax investigations if there are inaccuracies in their tax returns. In the aftermath of Covid-19 business support measures and huge numbers of related fraud, HMRC is now stepping up efforts to look into wrongdoing. According to HMRC, the following circumstances can trigger an investigation or compliance check: A customer enters incorrect figures on a tax return.A customer makes a large claim for a VAT refund despite low turnover.A customer declares a small amount of tax despite high turnover.A customer has unusually large costs which are unusual for a business in a certain industry. We spoke to several accountants to find out what businesses need to know when it comes to tax investigations and how they can help support clients who may be concerned. Encourage your client to make a full, unprompted disclosure Claire Lea, Director, Prime Accountants Group Businesses have been faced with extremely difficult decisions during the pandemic which required their own re-direction in resources so this may have resulted in errors and omissions being made. However, it is not surprising if HMRC announces routine compliance checks to obtain evidence to back up furlough and other Covid-19 related claims as there has already been a suspected significant amount of fraud. HMRC is also likely to target businesses where returns are consistently filed late or where there are substantial variations from previous returns, which can include large loss claims and cash refunds. Covid-19 may be the reason for the variances, so it is vital for businesses to retain accurate records to produce as evidence if requested to do so by HMRC. Next steps: For businesses who have underpaid tax, we would recommend making a full disclosure as soon as possible or amend the tax return if there is still time. Unprompted disclosures can result in lower penalties. Our advice is to contact their accountant to discuss the most appropriate method of disclosure. A Time to Pay arrangement paid in instalments can also be applied for businesses struggling to pay tax. Verdict: Accountants can support businesses in making a full unprompted disclosure to HMRC for a smaller penalty. Not taking reasonable care with tax returns can lead to penalties Paul Brown, head of tax, WR Partners and UK200 Group Tax panel member HMRC is now ramping up enquiry activity as we return to ‘normal’. An obvious target is Covid-19 support payments. HMRC are actively pursuing those who have made false claims, but they will also look at those who may have claimed legitimately but just got it wrong. Enquiries into Research and Development (R&D) tax relief claims for STEM companies are also becoming more frequent. Some HMRC enquiries will focus on a few points while others result in a full review of a business’s books and records and even the owners’ private affairs. Historically, HMRC reviewed the taxes separately but increasingly they are reviewing all taxes together. Taking reasonable care in filing returns and just getting it wrong means HMRC recovers additional tax and interest but not penalties. Not taking reasonable care will lead to penalties, the amount depending on the severity of the failure. Next steps: If a taxpayer has concerns about their tax affairs, take control: assess and quantify the risk, mitigate it where you can and then disclose to HMRC before they ask you – if something has gone wrong the inspector is likely to be far more lenient if you come clean and not wait to be discovered. Verdict: Not taking reasonable care with tax returns can lead to penalties. Prepare a ‘defence package’ in the event of HMRC enquiry to demonstrate reasonable care Stephanie Hurst, corporate tax manager, MHA Monahans Covid-19 support schemes will be first on the agenda for the HMRC fraud department, especially furlough and the Self-Employed Income Support Scheme (SEISS). Since the start of the pandemic, specifically with furlough, reports suggest that £3.5bn of fraudulent activity has taken place. HMRC are keen to crack down on those businesses who have contributed towards this huge sum. Later down the line, there could also be an increase in investigations into certain types of trading activities. During the pandemic, a lot of e-commerce businesses sprang up from nowhere, and I can imagine this surge of activity will have caught HMRC’s attention. Next steps: There are several steps businesses can take in addressing material misstatement in business’s tax position due to fraud or innocent error: Own up straight away if there is unpaid tax, explain why the errors were made and repay the full amount as soon as possible.Have a secure ‘defence package’ in place in the event of an enquiry: review Covid-19 support calculations, consider your tax position to ensure accuracy and that any furlough claims are valid, to the best of your knowledge.It is important to comply fully with HMRC notices or enquiries. Verdict: Prepare a ‘defence’ package in event of enquiry to show reasonable care has been taken with tax returns and financial statements. Be prepared for HRMC challenge and report any errors to HMRCJohn Cassidy, partner, Tax Resolutions, Crowe HMRC’s recent ramping up of enforcement and investigations activity comes in the wake of the Treasury announcing £100 million worth of funding to HMRC to tackle fraudulent claims and errors, including a 1,250-person task force. Naturally, HMRC wants to recoup as much of that as possible to replenish the nation’s coffers. By mid-June 2021, HMRC received over 28,000 reports from workers over potentially fraudulent claims and over 12,000 fraud investigations have been launched. Key areas of focus will include VAT deferral, furlough scheme and the self-employed equivalent. We have seen many examples of errors from not realising that dealing with emails while on furlough constitutes working, inadvertently claiming for employees who weren’t eligible or calculating the reference pay incorrectly. Innocent errors leading to overclaims are common. Next steps: It is important that employers are prepared for any HMRC challenge and are confident no errors have been made or that errors are identified and reported to HMRC. Not coming forward is automatically deemed to be ‘deliberate and concealed’ behaviour, irrespective of the actual behaviour, meaning that a penalty of up to 100% of the repayable grant can be levied, effectively doubling the payment to HMRC. Verdict: Be prepared for any HMRC challenge and ensure any errors made are reported to HMRC.
The psychology of getting your price right Posted 07/26/2021 by Steve Hemsley & filed under Members, Run your business. When it comes to pricing accountancy services the advice sounds quite straightforward: never undercharge or overcharge your customers. Yet things are never quite that simple. Fundamentally pricing should be strategic because it can be the difference between simply surviving as a business and growing significantly by boosting margins and profitability. Business psychologist and coach Rachel Cutler says the traditional way accountants have priced their work could be holding the profession back, especially as they introduce new advisory services. She could be right. After all, timesheets were introduced more than 70 years ago and in a world of cloud technology, the idea of billable time does feel a bit old fashioned. The cloud has reduced overheads and enabled accountants to provide better advice in fewer hours. 5 pricing keys Cutler has this advice when it comes to pricing new services: Be open. Don’t be afraid to admit you don’t know – and start your price comparison research.Be honest about your personal traits. Do you undervalue yourself generally? Mitigate against this and correct any potential to undersell.Don’t be greedy. Just don’t be.Explain. Make sure you can demonstrate to a client, colleague and yourself how and why you came to a price.Review and reflect. If you get stuck remind yourself what took you to this pricing strategy. Think about time, money and your experience. Many accountants can struggle to stand back and look rationally and objectively at their pricing structure. “When it comes to justifying your pricing, you should take an up-close and ugly look at how you got to the point you are at,” said Cutler. “Adding words to a list such as ‘blood’, ‘sweat’, ‘tears’, ‘relationships’ and so on will give you a sense of what you are worth at this point in your career. You should price new services in this context.” More practices are choosing fixed pricing and value pricing models to better engage with clients who are perhaps using new advisory services for the first time. Fixed price models From a psychological perspective, accountants can find it difficult and stressful to shift to a fixed or value-based model. The advice is to start small, perhaps with one area, before introducing it across the portfolio of services. There is an option to offer fixed fees for one-off projects or to have an annual fee. One issue with a value-based approach is that not everyone sees the same value from a specific service. So how do accountants themselves approach the psychology of pricing? Do they need to boost their negotiation skills or are they confident enough to stand by their fee structures? Pricing new services Naz Khaliq is Managing Partner at Dynamix Accountancy in Canterbury. He has introduced many new services in recent years, including helping clients with business plans and business valuations, R&D Tax Credits and assisting them with the Government’s Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). He is currently using a fixed pricing matrix system powered by the Go Proposal tool to price effectively. “Our concept for calculating prices is based on a hybrid approach of how long something will take and the value it holds for a client,” he said. “We do have confidence in our expertise, but it’s also about being able to explain to people the value of what you are doing for them. You need to explain the value in terms of your training, knowledge and experience.” Of course, clients can be quite different in their attitudes to pricing, so accountants need to consider their own target market, the local competition and the economic environment. A traditional cost-plus pricing model for new services might be more than adequate in some communities, although this does not consider how a practice’s competitors are pricing their services. Other clients might prefer to see a menu of services and packages clearly priced with options for add-ons. This flat fee approach can be ideal for services that are regularly repeated. Getting the right structure One person who tries to offer fixed fees as standard is Jasmine Pentecost, founder of JP Accountancy Services in Pulborough. She set up the business last year and admits she underestimated the costs for a handful of clients. She then spoke to a business consultant who helped her identify a pricing structure that accounts for initial set-up and ongoing support. “Having fixed fees can mean that sometimes you get it wrong,” she said. “There is often more work involved during the first few months while you get to know the client. This has been a learning curve for me.” Pentecost tends to base her fees on an hourly rate. She estimates the time a task should take based on her experience with similar size clients in other industries. “As I have only just launched my business, most of my services are a new provision,” she said. “It is important to believe in your expertise because that is what the client values. You need to be confident in yourself and your knowledge to price appropriately.” One service she is particularly proud of is an outsourced finance function. The company handles everything from data entry to year-end accounts and tax returns. She has monthly meetings with clients to discuss trends in the data and the two parties work together to find improvements. “Most clients are happy with my pricing, and with a home-based business I don’t have to build in high overheads into my fee structure,” said Pentecost. “There is the odd client here and there who tries to negotiate a lower price, but I avoid this. I believe it undermines my expertise and experience and it wouldn’t be fair to clients who do pay the quoted fee.” Underlying investment Pricing any new service should take into account the training required and the number of people needed to deliver it. Andrew Bradley, the owner of Kent-based Cantium Accountants, said it is tricky pricing new services and there is always some guesswork involved initially. “I try and estimate the level of staff required to deal with the work and the time involved,” said Bradley. “We tend to trial new services at a lower price to start with until we get a feel for what is involved. We then set the ongoing fee once we have a better idea.” Two new services that the company has had to embrace are claims and advice regarding the Job Retention Scheme (furlough) and dealing and advising on the online capital gains tax reporting for disposals of UK residential property gains. “In the case of these services, clients probably had little idea of what is involved so they are generally okay about our pricing,” he said. “However, we have found more client resistance to our prices over the lockdown period than we did previously. We do occasionally get clients complaining about fees, particularly where they feel they are forced into incurring the fees. For example, contractors forced to use limited companies or to be VAT registered by the businesses they are providing services to.” In any business exchange, the real currency is value, and accountants need to remind themselves of the expertise they offer. As an accountant’s confidence around pricing grows, so will their margins and profits.
Top 5 webinars for members in practice Posted 07/21/2021 by Hannah Dolan & filed under Members. Here we’ve handpicked 5 webinars for accountants in practice from the AAT Future Finance Online conference which ran from 8-11 June. All webinars are free to watch on-demand and are exclusively for AAT members. 1. Digital tools showcase with Dext In this showcase, find out how Dext makes practices like yours more productive and through live demos, learn simple ways to combat your pain points and free up your team to spend more time adding value. Register to watch 2. Expert panel debate – the anatomy of a modern finance professional In this session, our expert panel will discuss the new challenges facing the modern finance professional, what tools they’ll need to stay competitive and what opportunities exist to take them from number- cruncher to empowered decision- making influencer. Register to watch 3. Technical top-up: an accountant’s guide to payroll in 2021 It’s safe to say that this year has presented a number of challenges for finance professionals in payroll and with influences such as Brexit, tech advancements and legislation changes it’s likely that there are still many hurdles ahead. Register to watch 4. Confidence and decision making Duncan Brodie, Managing Director at Goals and Achievements and Andi Lonnen, International trainer at the Finance Training Academy talked through the steps that AAT members could take to become better decision-makers. Register to watch 5. Myth-busting: what is financial planning? In this session, James Freshney and Jack Silk of Mattioli Woods plc will take you through the intricacies of financial planning and what it means by sharing their own experiences and client case studies. Register to watch
Why accountancy employers need to find a purpose Posted 07/20/2021 by Christian Koch & filed under Members, Sustainable Business. More employees expect their firm will make a difference in the world – here’s how firms are responding When managers wrap up job interviews with the inevitable, “so, is there anything you’d like to ask us?”, they usually expect the candidate to shuffle awkwardly in their seat before blurting out innocuous questions about future promotions or the benefits programme. Not so today, says Sue Bonney, KPMG’s Vice-Chair and UK head of environmental, social and governance (ESG). “Often, the first questions they’ll ask us are challenging questions about purpose or which clients we will or won’t work with, such as oil companies,” she notes. “It shows they really want to understand what we’re doing about such things.” It also signifies that “purpose” and ESG are more than just buzzwords bandied around on corporate websites – both talent and investors alike are using them as a yardstick to gauge which companies to work with. New opportunities It’s predicted an extra two million “green-collar” jobs could be created by the UK setting its target to reach net-zero carbon emissions by 2050. Many of these jobs could be in ESG reporting. In 10 years’ time, accountants could be just as likely to be measuring the amount of greenhouse gases a company emits, or how many tonnes of plastics it uses, as they would compiling monetary-based reports. “The more companies have to report on non-financial data, the more they’ll have to assure or audit it, putting it as a mainstream part of their reporting,” says Bonney. “Data is at the heart of this, which is good for accountants.” She also notes working in such purpose-led areas is rewarding: “Being part of a bigger narrative helping people assess whether organisations are doing what they say they do [in terms of ESG] makes your work more satisfying. “Accountants need to factor in ESG,” she says. “If you want to be relevant to your clients, you need to appreciate these issues.” Connection Of course, this is a key part of the appeal for businesses to pursue a purpose-led agenda – it woos talent. Today, job seekers – especially Generation Z – are demanding employers incorporate values and ethics as part of their business model (see, for example, the 77% of Generation Z who told one 2018 Deloitte survey it’s important to work for an organisation whose values align with their own). By ignoring the ideals of this generation, companies could risk shutting themselves off to smart future employees. Adopting a more inclusive approach towards recruitment not only chimes with the 83% of Generation Z who said a company’s commitment to diversity is important when choosing an employer – it boosts business too. By hiring neurodiverse people (those with autism, ADHD, dyspraxia or dyslexia) to work at KPMG, Bonney notes: “Being thoughtful about what people can bring to the rich tapestry is important… It’s not just because it’s the right thing to do, it actually makes good business sense.” Case-study: good deeds baked into the business model Embedding purpose within an organisation can boost company culture, says Keith Lesser, chief executive at London-based firm, Vegan Accountants. “For many companies, staff retention is tough,” he says. “However, we have four vegan staff at Vegan Accountants and I know they enjoy working with vegan clients and love our brand’s vision. When staff have those values, it makes you [as leader] excited about the future.” That mission is not only to encourage veganism, but to build good deeds into the natural course of doing business, which Lesser does using automated software. For example, for every invoice raised, the firm promises to plant a tree. For every new client, it will donate pyjamas for children in emergency care. However, Lesser points out, having an overarching ethical mission isn’t enough – potential recruits will still need to cut it as an accountant and know what to do when presented with a tax return. “While you want people who’ve got fantastic ethics, you can’t have people who aren’t on top of their game,” he says. “We still hire people who consume animal products, as it’s arguably more important to focus on quality – without that we wouldn’t have a business. Plus, they could become the vegans of tomorrow.” Walking the walk Of course, as more and more big businesses trumpet their zero-carbon offices or mental health campaigns, there will be suspicions of green-washing, woke-washing, pink-washing or even corona-washing. The words “dignity”, “honesty” and “respect” crop up on the values section of company websites with alarming regularity. However, there are various ethical standards and certificates that larger businesses can work towards, such as the B Corp benchmark, that signify to customers and clients that there is substance to companies’ claims. These standards are equally important for smaller practices. Case-study: becoming a B Corp Warren Munson, the founder of Inspire Accountants, is exploring gaining the B Corp recognition for his practice. “It’s also about leading by example,” he says. In qualifying for the B Corp benchmark, businesses conduct a self-assessment of their progress. Those scoring above 80 points qualify for the benchmark, while those falling below can see where they need to improve. “It gives us focus,” says Munson. “We’re strong in community involvement and treating our team members well, but there are other areas such as sustainability that we can improve before the next step.” There’s a commercial aspect to undertaking this process, too, says Munson. It shows clients, prospective clients and potential recruits that the firm is serious about its purpose. “If we can say ‘this is where we are and this is what we believe in’, there is going to be a resonance with both clients and potential employees.” Making change with purpose However, many smaller practices may argue that they have more pressing concerns than “purpose”, such as cash flow and keeping their own business afloat. Vegan Accountants’ Lesser suggests making incremental changes. “You don’t need to be purpose-driven overnight – you can just make small, baby steps,” he says. “Can you be ethical in maybe 5% or 10% of what you do? Just start somewhere and work from there… Only 5% of my overall clients are vegan – I wouldn’t be able to pay my mortgage if I refused to work with 95% of my clients just because they eat meat.” Sometimes, change can come from within. Bonney talks about a young KPMG employee who was inspired to create a carbon-tracking tool after questioning why staff were regularly flying to Dublin. Her carbon-tracking tool was piloted by KPMG just before the pandemic struck, which found it halved the footprint. But placing ethics front and centre is not without its challenges. It can be akin to walking a high wire – with the occasional fall from grace. Earlier this year, Emmanuel Faber was ousted as CEO of French food group Danone after announcing plans to build a more sustainable company. In 2018, Sacha Romanovitch, the first female boss of a major accounting firm, resigned from Grant Thornton after 28 years at the firm. She had made moves to cap her own salary and introduced a profit-sharing scheme for staff, but her departure came after an anonymous internal memo (which claimed to speak for 15 partners) surfaced accusing her of “misdirecting” the firm and having “no focus on profitability”.
CBILS guarantors could face repayment debt Posted 07/19/2021 by Annie Makoff & filed under Members, Road to Recovery. Business owners who have become personal guarantors could be liable for 20% of the debt. Here’s how accountants should be helping them. Business owners who have listed themselves as personal guarantors on loans under the Coronavirus Business Interruption Loan Scheme (CBILS) will find lenders coming to them first for loan repayments if the business defaults on a loan of over £250,000. This means that despite the 20% limit on loan repayments, businesses owners still face significant losses. According to a recent Freedom of Information request made by Purbeck Personal Guarantee Insurance, the average loan backed by a personal guarantee reached over £750,000. In theory, the business owner as a personal guarantor could therefore be liable for around £150,000. Watch technical top-up webinar Take this opportunity to catch up on all the latest payroll developments and gain expert insight to overcome this year’s payroll challenges and stay compliant with changing legislation. Register to watch The CBILS provided businesses with up to £5 million in financial support during the Covid-19 pandemic through various options, including term loans, overdrafts and asset finance. The scheme operates under a government-backed guarantee for loan repayments, paying 80% of any losses. In addition: The Government makes Business Interruption Payments to cover interest plus additional lender charges for the first 12 months.For loans of £250,000 and over, a personal guarantee is required.Recovery repayments are capped at 20% for the personal guarantor. How then should accountants be supporting their clients in preparing for the eventuality of business difficulties and having to personally repay 20% of the loan? Identify best-case and worst-case scenarios to head off potential risks Todd Davison, chartered accountant and MD, Purbeck Personal Guarantee Insurance When CBILS was first introduced, there were originally no restrictions on requirements for personal guarantees, but following a backlash, the scheme was changed, and the £250,000 threshold was introduced. We ran a survey during 2019 where we asked 500 SME directors to identify risks associated with personal guarantees – only 39% could accurately identify those risks, so there appears to be a huge misconception about what a personal guarantee means and the risks involved. Yet, it’s no surprise that many business owners became the personal guarantor: to have a finance offer on the table after the difficulties of the past 18 months has been a lifeline for businesses. However, businesses have not fully recovered from the impact of the pandemic, especially many hospitality and leisure businesses that have only just reopened, so there’s going to be a squeeze, especially with other government support schemes tapering off. So in broad terms, businesses may be unable to face these headwinds and end up in difficulties. The role of accountants has been and will continue to be absolutely crucial in supporting businesses, ensuring they are in good financial standing, with healthy cash flow management and providing support on business finance applications. Next steps: Accountants should raise awareness of the risk implications for personal guarantors, research alternative finance options, and prepare forecasts and stress testing. Business owners who are personal guarantors should look at worst-case and best-case scenarios and identify what actions the business can take to head off potential risks. Verdict: Identify best-case and worst-case scenarios to help prepare for potential risks. Focus on strategy and performance – and work with the lender Phil Mills, head of food and drink, Old Mill As the Government presses ahead with plans to return to normal much uncertainty remains. This is as true for businesses as it is for individuals and many business owners have spent the past twelve months battling to survive rather than making strategic plans. Those that have focussed on understanding their financial performance and cash flows will have seen this coming. For others, it will be a surprise. Where this is the case, it is invariably better to confront any challenges rather than bury them and hope that they go away. Next steps: Ensure you fully understand your business’ financial health and work closely with your lender. Things may not be as tough as you believe and, irrespective of that, you can look to the future with more certainty. Verdict: Focus on financial performance and strategy and work closely with lender to head off any potential issues later on. Seek expert advice as early as possible Dave Riley, corporate finance partner, Crowe UK A number of clients already had existing personal guarantees in place for existing lending, but most high street lenders do not take additional personal guarantees for CBILS, and were not permitted to take the matrimonial home as support. In addition, any personal guarantees are restricted to a maximum of 20% of the shortfall after the assets of the company had been realised. However, we would not recommend business owners acting as personal guarantors. In the rare situations where personal guarantees are being called in (possibly as part of the existing pre CBILS exposure) then all efforts should be taken to maximise the realisations from the insolvent estate. If the personal guarantee is then crystallised, the directors will have personal choices to make in terms of how to settle the liability and should work with the lender to agree an affordable repayment plan. Next steps: We would advise businesses to seek early advice if there were a likelihood of the business facing financial difficulty and possibly failing. Directors need to be aware of their fiduciary duties in such a situation and expert advice is needed to navigate the situation. Verdict: Seek expert advice early if there’s possibility of financial difficulties and ensure directors are aware of fiduciary duties. Talk to lender about refinancing if there are unsettled loan amounts Paul Barnes, chartered accountant and MD, MAP Many CBILS applications were just below the £250,000 threshold to avoid the personal guarantee issue, as this was a primary risk concern of most applicants. However, when facing the uncertainty of lockdown in those sectors greatest affected, there were business owners who simply took as much as they could get. This may have been born of necessity, or a more risky view that business would return to previous levels long before the loan matured, or was interest bearing. Personal guarantees are what they say on the tin and should not be given lightly. Next steps: Businesses who now find themselves in the position of the lender seeking recovery of unsettled loan amounts through owners or directors as the personal guarantor, should talk with the lender to discuss possible solutions. These may include refinancing the loan on different commercial terms to CBILS and could be over a longer-term or potentially asset-based, depending upon your business. Verdict: Speak to the lender to discuss alternative options such as refinancing on different commercial terms. 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How Personal Learning Accounts and AAT could change lives Posted 07/19/2021 by Christian Koch & filed under Career, Employers. Personal learning accounts (PLAs) allow those on a low income to study AAT for no cost at all. They’re currently being trialled in Wales, but could their success catch on in the rest of the UK? Personal learning accounts (PLAs) are government-funded schemes that allow people to study for flexible courses fitted around their family and work responsibilities. They could bring new opportunities to adults in lower-income jobs, as well as those who are at risk of redundancy or who have been placed on furlough during the pandemic. PLA courses offer people within these groups a chance to learn new skills, acquire qualifications, and possibly change occupations before finding themselves in a career culdesac. PLAs have been trialled in Wales since 2019, and they could be adopted more widely depending on the results. Here’s how they work. Why have PLAs been introduced? PLAs could reverse the decline in adult learning, which has been happening for some years. According to a report into lifelong learning published by the House of Commons Education Select Committee last year, participation in adult education has plunged to its lowest level in 23 years. Amanda Williams is AAT and project management programme leader at Grŵp Llandrillo Menai (an umbrella organisation overseeing three colleges in North Wales), where she teaches students who are currently benefiting from PLAs. She notes that PLAs can “open up opportunities for people” in areas such as North Wales where “job opportunities are more limited, and there aren’t many higher-paid jobs.” The financial relief that PLAs provide is incalculable for many people, says Williams. “To study AAT Level 2, you need to pay around £1,000 for membership and books. When this is already paid for by the Government, a PLA can be a big help.” Which AAT courses are available? When PLAs launched in 2019, they were initially available in areas such as digital, construction, engineering and health, which are also sectors that have faced recruitment issues and skills gaps in recent years. With Covid-19 hitting the Welsh jobs sector, the Government launched a £40 million skills and jobs fund in summer 2020. This included an expansion of the PLA programme, which saw some colleges launch AAT courses. It’s meant that those eligible for a PLA (see eligibility criteria below) can study a range of AAT courses such as a Level 2 Foundation Certificate in Bookkeeping or a Level 4 Professional Diploma in Accounting (check with individual colleges and training providers to find out what courses are available). The AAT cachet goes a long way with companies looking to recruit, says Williams. “If students put AAT on their CV, employers recognise it and start to be responsive – even if they’re still studying,” she notes. However, Williams adds a note of caution: if students start a course, they’ll need to work at it. “Sometimes people think all you need to do for some courses is watch a video,” she says. “But AAT is a challenging course and needs commitment. After all, Level 2 involves taking five exams… It is a fantastic opportunity, but it all depends on hard work.” How have PLAs helped people? Several AAT learners/students have benefited from accessing a PLA course at Grŵp Llandrillo Menai colleges. Here are some of the success stories: Urszula goes from waitressing to a life-changing career Urszula* is a single mother from eastern Europe who was working as a waitress in a hotel when she applied for her PLA. She started studying AAT Level 2 in early-2021, often learning online at the kitchen table while home-schooling her children. By June, Urszula had secured a full-time job at a local accounting practice, which also allows her to study AAT one day a week. She’s about to start a Level 3 course. As Williams says, “It’s really turned her life around. Urszula has not only landed a job but a career too.” Olivia is now able to afford AAT fees Olivia* had previously enquired about studying AAT before Covid-19 but couldn’t afford the fees. However, thanks to the PLA programme, she’s now studying AAT Level 2. She’s also got a job at an engineering firm, which grants her one day a week to study. To ensure AAT PLA students can begin a new career, colleges notify them about any job opportunities. Some jobs recently shared by Grŵp Llandrillo Menai colleges include a trainee accountant working in payroll, an accounting job at a translation company and jobs at the NHS. PLA programmes can also help people who have been furloughed or at risk of redundancy. Also, if they are made redundant while studying a PLA course, the Government will pay for the remainder of the course. * All names have been changed. Who is eligible to apply for a PLA? At the moment, PLAs are only available in Wales, where anybody who wants to receive financial help to study courses must: live in Wales, andbe over 19-years-old. They must also meet at least one of the following criteria: be employed (or self-employed) earning under the median income (£26,000). Or be one of the following: a furloughed workera worker on a zero-hour contractagency staffat risk of being made redundantin employment but working in a sector that’s been negatively affected by the economy, such as hospitality. People can’t apply if they’re unemployed or in full-time education. How do PLAs work on a practical level? The application process in Wales is relatively straightforward. Candidates can either apply through official organisations such as Careers Wales, Working Wales, or by contacting colleges and training providers directly. A careers adviser from the college/training provider will follow up with an informal interview (usually conducted virtually). There may also be a pre-admission assessment, but people don’t need any accounting skills, qualifications or industry knowledge to apply (unless it’s AAT Levels 3 or higher, of course). The 2021/22 AAT courses will usually run from September 2021-June 2022 and can be delivered in a classroom environment or online classes. However, the important part to remember is that PLAs are flexible: colleges will try to plan dates and learning times around the individual’s family and work commitments. How does the funding work? Does the money arrive directly in the student’s bank account? No. Studying a PLA course doesn’t mean that the student will receive the money themselves. The Welsh Government are funding 100% of the courses of PLA students, but they will transfer this sum directly to the college. PLA students will need to pay for their travel to and from the college, while funding isn’t available for childcare either. How successful have PLAs been in Wales? Although the AAT PLA courses have only been operating for just over six months, colleges and training providers are quick to enthuse about them. Says Williams: “Our evening courses usually recruit around 8-10 people, but thanks to PLAs, we’ve now got 25. This has meant I’ve been able to hire another teacher… PLAs are a great funding stream that opens up opportunities for those that really need it. When it’s the right person on the right course, it’s absolutely brilliant, because [once they’re employed] these people can contribute so much.” More info Candidates can apply for a PLA through Careers Wales, Working Wales, or by contacting colleges and training providers directly. List of colleges below: Bridgend CollegeCardiff and Vale CollegeColeg CambriaColeg CeredigionColeg GwentGrŵp Llandrillo MenaiColeg Sir GârColeg y CymoeddGower College SwanseaThe College Merthyr TydfilNeath Port Talbot (NPTC) group of collegesPembrokeshire CollegeSt David’s Catholic College
How to sell Making Tax Digital to small businesses Posted 07/15/2021 by Gill Wadsworth & filed under Making Tax Digital, Members. Government is ready with sanctions, but what can accountants do to encourage small businesses to embrace Making Tax Digital (MTD)? One hundred thousand businesses that should already be complying with the Making Tax Digital (MTD) rules are yet to do so. While this means 90% of organisations are on the right side of the new regime, these stragglers face fines of £400, and HMRC is wasting no time to remind them of their obligations. The tougher approach from the Government is designed to let businesses know that MTD is not going away, but this stringent stance needs to be accompanied by a concerted effort from accountants to convince their clients of the benefits of getting on board. Making Tax Digital for Income Tax webinar Hear from HMRC on how you can prepare for MTD. Get insights straight from HMRC and software experts Sage, on how you can prepare for MTD for income tax and the requirements for digital links. Register now And get on board they must. The second wave of MTD is coming, which means From April next year, it applies to VAT for businesses with less than £85,000; from April 2023, it applies to income tax; and from 2026, MTD for corporation tax is expected to be mandatory. Beyond Big Brother Jesse Norman MP, financial secretary to the Treasury, told attendees at April’s HMRC stakeholder conference: “We want this tax system that we are developing to be as user-friendly as possible, and we want the transition to be as smooth as possible.” But there is disquiet among businesses that the benefits of MTD are weighted in the Treasury’s favour. Daren Moore, Group Commercial Director at Tax Assist, speaks on behalf of many smaller firms: “In a lot of people’s eyes, MTD creates another load of red tape. There is a ‘Big Brother’ feeling from smaller businesses that are worried about that level of involvement from HMRC.” However, financial secretary Norman says businesses that embrace IT tend to enjoy improved productivity and efficiency, which he says ‘would be a very important goal’. Norman adds: “[MTD has the] potential to provide other benefits for businesses in normal times. That might be better record keeping, it might be greater support for productivity improvements, it might be lower error rates, it might be prompts to their own business management practices.” While the arrival of MTD is inevitable, for businesses struggling to comply, there is some potential hope. Norman concluded his stakeholder speech by reassuring business that he is ‘very much still in listening mode on this issue’. However, now is the time for accountants to persuade clients that MTD cannot be ignored. Carrot or stick There are two approaches accountants can take in convincing clients to get on board with MTD: carrot or stick. The stick, says Jamie Ratcliffe, indirect tax leader at EY, is quite clear; businesses will face fines if they fail to comply. Ratcliffe says: “If you do not submit using the approved software, you could immediately receive an administration fine.” But that is not all. The second stick lies in HMRC’s financial punishment for errors. Ratcliffe continues: “If you submit a VAT return and there is an error in it, HMRC can apply a penalty, and these are applicable if you haven’t taken reasonable care.” And it will be a challenge to claim that a business is doing all it can if it has refused to embrace the MTD regime. Ratcliffe says: “Mistakes happen, but if you haven’t followed the digital journey, it is difficult to argue you have taken reasonable care.” Meanwhile, the MTD carrots are plentiful and should make it easier for businesses to understand why they are being forced to go digital. Ratcliffe returns to the frequency of mistakes and points out that HMRC makes them too. “Mistakes can happen both ways,” he says. “You can underpay tax, but you can [also] overpay it. Going digital could reduce overpayments which means better management of cash flow. From a governance control perspective, you should feel more confident in everything that you have submitted.” So long spreadsheets Any business convinced that spreadsheets are digital enough is in for a shock since Ratcliffe says this approach to record-keeping is flawed. He says: “HMRC went on record saying that trying to transition to MTD with a spreadsheet isn’t going to give you all the benefit of the digital process, and it is not future proof your business going forward.” He adds that it will be difficult to capture the benefits of MTD using spreadsheets and suggests looking at more comprehensive digital solutions. For accountants battling with clients who are either less willing or less tech-savvy, Moore notes that there are affordable digital offerings for all businesses. Still, professionals should be sympathetic to differing needs. “You need to understand what MTD means to them, and it will mean different things to different businesses depending on their size and scale. And there is always a risk of ‘head in the sand’ with any change,” he says. Moore suggests that the sooner accountants help their clients get on board with the MTD, the better they will adapt and the more they will get from digital capability. He says: “My advice would be to address [MTD] now. The next phase for income tax is two years away, but if you update your business processes and deal with it now when MTD is implemented, it will feel more natural and comfortable.” As Financial Secretary Norman says, MTD is about making life easier for everyone, not just the HMRC’s bean counters. There is still time to convince clients of the ways in which digital processes can benefit them, but the sooner they start, the smoother it will be. Making Tax Digital for Income Tax webinar Hear from HMRC on how you can prepare for MTD. Get insights straight from HMRC and software experts Sage, on how you can prepare for MTD for income tax and the requirements for digital links. Register now MTD Timeline April 2022. VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax Digital rules for their first return starting on or after April 2022.April 2023. Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.2026? The Government plans a pilot for MTD for Corporation Tax, but it will mandate its usage before 2026 at the earliest.
Government must go further in tax avoidance clampdown Posted 07/15/2021 by Phil Hall & filed under AAT news. There is much to be commended in the range of proposals to clampdown on tax avoidance being considered by government, but some could go further and faster. Among the plans under consideration by the government is an “additional” penalty for UK-based enablers of assisting offshore promoters of tax avoidance. This sounds great in principle, but in reality it does no more than reflect the amount of the total fees earned by all those involved in the development and sale of that tax avoidance scheme. A genuinely “additional” penalty would be a sum that is in addition to all fees earned by those involved. AAT has suggested considering an additional 25% penalty charge to act as a serious deterrent to many of those involved in the facilitating of offshore promoters’ activities. Get AAT Future Finance sessions on-demand All sessions from AAT Future Finance 2021 are streaming now and available free of charge to members. Go the link below to register and watch immediately. Watch Disqualified directors AAT absolutely agrees that any company’s significant breach of the anti-avoidance rules warrants consideration for disqualification of the company’s directors. The consultation document highlighted that the current period of disqualification for directors of insolvent companies ranges between two and 15 years depending on the seriousness of the offence. The period of disqualification is entirely at the discretion of the courts, which use a case from the 1990s, the Sevenoaks Court of Appeal case, as guidance to determine which bracket the conduct fits into. This means there will be a disqualification for between two and five years for misconduct of a less serious nature, six to 10 years for more serious conduct, and 10 to 15 for the most serious misconduct involving fraud or dishonesty, such as inducing members of the public to invest fraudulent schemes. While these periods appear reasonable, in practice this guidance rarely appears to be followed, which seriously undermines this sanction. In 2019, a £5.9m tax fraud resulted in an eight-year prison sentence but only a nine-year disqualification as a director. This effectively means a disqualification period of one year after the offender’s sentence is served. There are dozens of similar examples, which leads AAT to conclude that the current approach to disqualification is far from desirable and can in no way be relied upon. Alternatives could be considered. For instance, fixed periods could be imposed depending on the level of tax avoidance. For smaller sums (less than £100,000) one to five years, reasonably large sums (£100,000-£1m) six to 10 years and very large sums (more than £1m) 10 to 15 years. Whatever is ultimately decided upon, it’s clear that the courts require more than frequently ignored case law guidance. Joint liability All taxpayers are legally responsible for their own tax affairs, including users of tax avoidance schemes. However, AAT has repeatedly suggested that this situation be altered to ensure joint liability. Surely, one of the best ways to tackle promoters of tax avoidance schemes, and to stop schemes at their source, would be to impose joint liability – as happens in Canada and various other countries. This would not only better reflect the reality of many tax advice situations, it would discourage promoters of such schemes who recognise that the likelihood of incurring costs is low because the taxpayer, not the promoter, is currently liable. Earlier this year, HMRC proposed introducing joint liability in relation to unregulated tax advisers (a position that AAT supports), but why not do so across the board? Joint liability would act as a significant deterrent for promoters while continuing to deter many individual taxpayers. “The current approach to disqualification is far from desirable and can in no way be relied upon.” Reading this article will count towards your CPD record.
Top 5 webinars for accountants in industry Posted 07/15/2021 by Hannah Dolan & filed under Members. Here we’ve handpicked 5 webinars for accountants in industry from the AAT Future Finance Online conference which ran from 8-11 June. All webinars are free to watch on-demand and are exclusively for AAT members. 1. Confidence and decision making Duncan Brodie, Managing Director at Goals and Achievements and Andi Lonnen, International trainer at the Finance Training Academy talked through the steps that AAT members could take to become better decision-makers. Register to watch 2. What’s the future for accountants in the tech revolution Essential for every accountant who plans to be working in the profession in ten years’ time, this session provides crucial steps in identifying how to future-proof your career. During this session we’ll also discuss: ‘big data’ and why it has surpassed oil as humanity’s most valuable assethow Artificial, machine learning and big data analytics are being used within the accountancy profession. Register to watch 3. Expert panel debate – the anatomy of a modern finance professional In this session, our expert panel will discuss the new challenges facing the modern finance professional, what tools they’ll need to stay competitive and what opportunities exist to take them from number- cruncher to empowered decision- making influencer. Register to watch 4. The Construction Industry Scheme – a tax refresher During this session, speaker Tim Palmer will provide detailed insights on how the Construction Industry Tax Scheme works in practice and, using practical case studies, deliver a full review of the tax responsibilities and roles of both the contractor and subcontractor. Register to watch 5. Digital tools showcase with Dext In this showcase, find out how Dext makes practices like yours more productive and through live demos, learn simple ways to combat your pain points and free up your team to spend more time adding value. Register to watch
AAT supports new guide to sustainability reporting Posted 07/15/2021 by David Nunn & filed under Members, Sustainable Business. Business reporting requirements are changing as momentum builds for more reporting of environmental and social issues, alongside financial performance. Environmental, Social and Governance (ESG) analysis is now the dominant factor shaping the development of the corporate reporting scene – and finance professionals need to be aware of what is coming next. Already there 614 sustainability reporting requirements across 84 countries. And this will only increase. Webinar: finance teams and sustainable business In this AAT Future Finance session, Adam Williamson, AAT Head of Responsible Business, explains the role of finance in improving business sustainability, especially in light of increased regulation over business reporting. Watch Organisations are increasingly reliant on the knowledge, skills and processes of accountants to meet corporate reporting demands. To help finance professionals stay on top of changes, A4S (Accounting for Sustainability) has published an introduction to the changing corporate reporting landscape. The guide – produced with the support of AAT and other accounting bodies – walks readers through the changing corporate reporting landscape, including: key developmentshow sustainability reporting impacts the accountant’s role now and in the future, andsignposting to further information. The guide focuses on globally recognised sustainability standard setters and framework providers, whose standards are widely adopted by companies, investors, regulators, and other stakeholders. Adam Williamson, AAT Head of Responsible Business and Policy, comments: “Sustainability reporting is no longer on the fringes of economic activity, but increasingly a mandatory part of doing business. The availability of meaningful data for regulators, investors and a growing range of stakeholders is vital, and AAT is delighted to have contributed to this publication which will help our members and their businesses chart their way through what can be complex territory.” You can download the guide by going to: https://www.accountingforsustainability.org/reporting