4 things that could reshape the future of audit Posted 01/20/2021 by Neil Johnson & filed under Future of accounting, Members. After three critical reports, the prospect of a new regulator and the break of the Big Four, audit could be on the cusp of meaningful change. Financial auditing is frequently in the news, thanks to a growing list of court cases and fines. Public perception of auditors is low due to failings; while the regulator faces constant criticism. Misgivings are not removed by the fact a handful of firms handle nearly 100% of the FTSE 350’s audit work (as well as a great deal of its non-audit work). There is a mood for change in the air – to overhaul the system, loosen the Big Four’s grip, encourage second-tier firms to grab a slice of the pie, decouple audit firms from their advisory and tax arms, and breathe a new lease of life into the regulator. Three key reports have landed in the last year, providing a catalyst for change: Competition and Market Authority (CMA)’s Report,Brydon Report, andKingsman Review. The Financial Reporting Council (FRC) transformation into the Audit Reporting and Governance Authority (ARGA) could also provide momentum. We spoke to several leading commentators for their views and opinions of the likelihood of change in the UK’s audit sector. They are: Lord Prem Sikka, professor of accounting and finance at University of Sheffield and emeritus professor of accounting at the University of Essex.Emile Woolf FCA, a retired chartered accountant, non-executive director and a well-published audit commentator.Sunil Bhavnani, a technical director at Blick Rothenberg.Philip Shohet, a senior consultant at Foulger Underwood.Chris Biggs FCA, a partner at chartered accountants, Theta Global Advisors. 1 The reports Emile Woolf: “The Big Four audit firms are the creators of their own crisis. They have steadfastly refused to face up to the reality of conflicts of interest. They have totally failed to understand the true meaning of independence in the context of audits. While I firmly believe that public interest enterprise (PIE) audits are crucial for instilling faith in financial reporting, I don’t believe the Big Four will ever grasp the nettle.” Philip Shohet: “There’s a huge opportunity if somebody can actually grasp the nettle to get some really quality reporting done. I think conflicts of interest are less of a problem; it’s what they’re producing as accounts and information and how useful this is. My fear is they’re going to go for relatively simple solutions. There’ll be increased regulation, which will fall to everybody, even the smaller firms, and there’ll be more dependence on the company to produce accurate and absorbing information internally.” Prem Sikka: “None of these reports will really achieve the aim. There will be cosmetic changes, one of which is changing the FRC to ARGA, but that won’t really achieve much. The possibilities of major reforms have disappeared with the Johnson government.” Sunil Bhavnani: “Audit market reform should not be seen as the saviour of future corporate collapses. As Sir Donald Brydon pointed out, businesses fail because of the actions of directors. Audit remains fundamentally backward-looking, although more focus on robust and enhanced work on going concern is the subject of a revised auditing standard effective for December 2020 year ends.” 2 Big Four breakup There are fairly diverse views on breaking up the Big Four’s grip, such as Woolf’s belief that auditing should be entrusted to a public body like the National Audit Office (NAO) or, as he refers to it, the Public Company Audit Office (PCAO). The Big Four would still have an important role, they could be engaged to perform audit work, but their client would be the PCAO, not the individual plc. “While I believe this contains the essence of the solution, I doubt the government has the will or the skill to see it through,” he says. “Ministers are too close to Big Four alumni and don’t understand why audits continuously fail to deliver. Separation of audit and other services is absolutely essential, but in separate entities under totally separate ownership, otherwise it will be just another facade. Audit firms should be engaged by the PCAO to audit – and nothing else.” Tentatively in the pipeline is the operational separation of audit firms, which while not currently legislated for, has been given a deadline of 30 June 2024 by the FRC and firms must have outlined their plans to the FRC by 23 October 2020. It’s underway with a number of firms starting to make changes to their structures. “Operational separation need not be legal separation, but the audit practice must be ring-fenced with measures such as transparent transfer pricing of services from the advisory arm, standalone audit firm financial reporting, and remuneration of the audit partners not exceeding the audit practice’s profits,” Bhavnani says. But this is not a separation enough for some. “You’re either auditors or you’re advisers. You can’t have your cake and eat it. You can’t just compartmentalise your business into audit and advisory,” notes Shohet. So then, just break themselves up, perhaps. Which, given audit forms less than a quarter of Big Four revenue, is not such a stretch of the imagination. “In the not too distant future, they will probably say it’s something they can jettison. Consultancies are more lucrative,” Sikka says. Indeed, Biggs has heard talk of how the lucrative advisory/consultancy sides of the Big Four would actually prefer to be split from audit because they see their brands being dragged down by audit failings in the headlines. “I don’t think it will take a lot to persuade the non-audit side of the business to happily split, because they’ve got probably far more to gain than to lose.” 3 Can the mid-tier break through? The main concern is that there is a vast drop off insize, resources and experience beyond the Big Four, while some of the larger mid-tier firms have also come under the scrutiny of the regulator and the press. Nevertheless, there may be ways challenger firms can penetrate the FTSE audit club. “There will be a natural trickle-down of public interest entity audits to the challenger firms, but mid-tier firms will need to demonstrate to audit committees that they havethe skills and resources to undertake audit work on large and complex businesses. That will require investment,” Bhavnani explains. This concerns Biggs. The mid-tier firms face a catch-22, where none of them are going to invest in hundreds of specialist staff across hundreds of countries unless they’ve got the pipeline, but they can’t get the pipeline until they have the investment. “So it may be best that they start to break in on the sorts of clients and risk profiles they’re absolutely comfortable doing. I think there will still be a population of companies where in the short and medium term it will only be the Big Four that can physically manage them. But hopefully over time, the balance will change.” A good example of a firm playing to its strengths is MHA, suggests Shohet. Connected globally throughthe Baker Tilly international network, it’s an example of a progressive mid-tier firm that understands culture to provide better reporting. “They do a lot of their work under a sector umbrella, for example healthcare or banking. They understand the culture of the sectors, as opposed to viewing clients as just another limited company. If you understand the culture, you’re going to have fewer mistakes, because you’re going well beyond merely looking at accounting standards and ticking boxes.” 4 The (not so) new regulator and possible Public Company Audit Office Woolfe is optimistic: “As the FRC is so badly tainted by failure and scandal, its role will be taken over by ARGA, which should be mandated with a constitution that prohibits membership of Big Four alumni. Its role will be purely supervisory and much smaller than FRC, provided reforms are implemented. Again, if a Public Company Audit Office (PCAO) akin to the NAO is in business as the overarching audit controller, it will be free to appoint the best of the second-tier firms to audit public interest entities (PIEs), and will give them a chance to break into this market.” While not completely behind a public sector-led audit office, Biggs thinks we need a very diverse regulator, that reflects all elements of the audit profession, so that includes ex-auditors, but also more from the side of the shareholders and the companies. “I think you need that wide view. I don’t think you’ll get that if you just make it a public sector oneas well. Because I think you’ve got to have the commercial element, otherwise youcould argue it would become almost like a quasi-public sector kind of thing.” This is a concern for Sikka, who worries the new regulator will lack independence, given Kingman doesn’t specify how to make ARGA responsible to the people. “Are we going to get 50% of stakeholder representation? No idea. Are all its meetings going to be in the open, its minutes publicly available? Don’t know.”
How to Brexit-proof the workforce Posted 01/19/2021 by Calum Fuller & filed under Brexit. Brexit brings with it a new set of requirements for employing staff from EU member states. Following the end of the transition period, it’s important to know what skills you have available to your business and identify where skills gaps might emerge. This can help you prioritise which areas of your operations need to be staffed and find the skills you need. Staff Any business reliant upon EU nationals should encourage EU-national staff to apply for the EU Settlement Scheme, so they can continue to live and work in the UK. Affected staff must submit their application for settled status before 30 June 2021.British businesses will still be able to hire staff from EEA countries after end of the transition period. However, the UK government has introduced a controversial new points-based immigration system from 2021. People who want to live and work in the UK after 1 January 2021 will need to gain 70 points to be eligible to apply for a visa. The first 50 points will be awarded for meeting requirements such as an ability to speak English to an acceptable level and having a job offer from an approved employer. Applicants can earn the remaining 20 points by earning more than a “general salary threshold” of £25,600; having a job offer in a “shortage occupation”; being a “new entrant” to the labour market and holding a relevant PhD.Health-workers can apply for a fast-track visa, while the system also encourages scientists and engineers.International students will be able to stay in the UK for at least two years after graduating. Recruitment As of 1 January 2021, anyone you recruit from outside the UK (excluding Irish citizens) for the Skilled Worker route will need to demonstrate that: They have a job offer from a Home Office licensed sponsor;They speak English;The job offer is at the skill level of RQF3 or above (A level equivalent);They’ll be paid at least £25,600 or the “going rate” for the job offer, whichever is higher. If the job pays less than this – but no less than £20,480 – the applicant may still apply by trading points on specific characteristics against their salary. Intra-company transfers If you want to transfer a worker from a part of your business overseas to work for you in the UK, they can apply for the intra-company transfer route. Applicants will need to be existing workers who will undertake roles that meet the skills and salary thresholds. As of 1 January 2021, workers transferring to the UK will need to: Be sponsored as an intra-company transfer by a licensed sponsor;Have 12 months’ experience working for a business overseas linked by ownership to the UK business they will work for;Be undertaking a role at the required skill level of RQF6 or above (graduate-level equivalent);Be paid at least £41,500 or the role’s “going rate”, whichever is higher. Permission for workers transferred to the UK on the intra-company transfer route is temporary. Workers can be assigned to the UK multiple times, but they cannot stay in the UK for more than five years in any six years. Workers paid over £73,900 do not need to have worked overseas for 12 months and can stay for up to nine years in any 10 years. “People who want to live and work in the UK will need to gain 70 points to be eligible to apply for a visa.”
Transcend the screen to be successful Posted 01/19/2021 by Calum Fuller & filed under Career, Members. Unable to meet clients and colleagues, and facing a tight job market, AT asked experts how AAT members can become indispensable in their existing roles or prepare for a new one while home-working. Coronavirus has had a huge impact on accountants. Many are facing a range of new demands, including increased workloads, new and unfamiliar tasks – such as helping access emergency coronavirus funding or managing furlough – and working remotely, which has removed much of their usual interaction with colleagues and those they share ideas with. For many, there is also less access to traditional learning resources and materials, as companies strive to handle what they see as more pressing issues instead, especially when it comes to soft skills. These are crucial, but less technical, skills, including communication and emotional intelligence. However, it’s important accounting technicians stay as relevant and valuable as possible – whether they are looking to demonstrate their ongoing value within their existing businesses, or find a new role in a tightened job market. In short, lockdown has made it much more difficult for accountants to show their value in their roles, more difficult to take on new responsibilities and more difficult to meet the requirements for new jobs. With this in mind, AT sought expert advice from recruiters, HR professionals and accounting careers advisers on how AAT members can get ahead in this environment and make themselves excel through practical tips and advice. Common threads For AAT members facing these scenarios, there are some common steps that can be taken to help remain relevant and overcome short-term hurdles. In particular, members should bear in mind that keeping abreast of CPD and similar personal development endeavours helps maintain learning and performance, but it must be done in the round, rather than being purely technical. “It keeps the cogs turning,” explains Carol McLachlan, chartered accountant and founder of career coaching consultancy theaccountantscoach.com.“It has to be rounded and it has to be continuing professional education in its broadest sense. It needs to cover things like problem-solving in a virtual environment, for example.” Similarly, she adds, it’s key for accountants to avoid the trap of treating virtual and in-person working as binary opposites. “There are shades of grey, where you would do things exactly the same online as you would in the office,” McLachlan says. “Equally, you shouldn’t assume that everything translates to the other environment as well. That’s one of the toughest things at the moment, because there’s not a lot of empirical research on the best ways to go about things.” Getting ahead in your current job For those who are continuing in their current roles, there are still opportunities to develop and improve, McLachlan notes. “It’s vital to be patient and not to make knee-jerk decisions,” she explains, advising that members maintain a “current CV” that is used as a working document rather than in preparation for a career move. “Think beyond the technical tasks you can do,” she says.“With any accounting qualification, the technical skills are taken for granted, it’s what you can do with those skills.” To that end, McLachlan advises accountants to start a working document “to capture all those transferrable opportunities and experiences”. “It’s better to operate from a place of safety and invest in your personal development to really broaden and boost your knowledge. Leverage your current job and get the most out of the opportunity you have at the moment by doing a skills audit and figuring out where you have skills gaps. Similarly, you can try out some other things. If you are taking a risk and trying to adopt new skills, it’s actually better to do that in the security of a current job, rather than over-stretching for a new one.” As finance teams, like other departments, shrink, some more senior-level skills are now required in more junior roles.It’s something Natasha Kearslake, director at HR consultancy Organic P&O Solutions has noted, particularly around communication: “[Accountants] can’t be passive. The challenge is getting information that they need out of people that they can’t readily observe.” Practical steps you can take Create a working document of your skills, expertise and experiences to help focus on your role.Set up regular calls with your line manager to establish clear lines of communication to gain all the information you need.Take advantage of the security in your role to try new skills. The Change Curve The Change Curve helps to explain the impact of change, both on individuals and organisations, and provides a useful template to the experience many members have had, or are having, as a result of the pandemic. By predicting the likely responses to change, you can accelerate development and provide yourself and your colleagues with timely help and support. As defined by Elisabeth Kubler-Ross, the Change Curve recognises four stages in our reactions to change: People’s first responses are often shock and denial, so it’s vital to keep fully informed about what’s going on.Anger and fear often come next. At this stage, handle all the emotions involved with sensitivity and care.People gradually accept their new situation, but they’ll still need time to get used to it.The final stage is total acceptance and integration with your current work or situation. Taking on new responsibilities The most obvious impact of coronavirus on jobs for many accountants has been assuming new and additional responsibilities in their work. This can be sudden and put greater demand, not just on time and resources, but on skills, too. “It’s very much about understanding where their expertise sits and where it doesn’t,” explains Kearslake. “As accountants have had to navigate through this period of change, what they’ve done is start to go into the softer side.” That, explains McLachlan, is crucial in taking the major step of communicating regularly and proactively with colleagues, and feeling comfortable in asking for help. “There needs to be a lot of touch-points and creation of that trust so you can ask questions, but by the same token, I’ve come across a lot of people who feel isolated,” she says. “That’s what you reallyhave to overcome.” Practical steps you can take Be proactive in your communicationwith colleagues and clients, particularly where they are relevant to your new responsibilities.Approach a senior colleague whocan act as a mentor in order to helpyour development.Get clarity on what your new responsiblities entail to ensure youare able to deliver on them. Finding a new job While the job market has tightened over the last 12 months, the profile of candidates sought has also changed. Specialist recruiter Robert Half has observed high demand for candidates with the financial modelling, data analysis and forecasting experience required to help guide business strategy. It has also noted a significant increase in demand for technically-savvy candidates with soft skills to help businesses rebuild. “Over the past few years, accountants have had to be more outgoing and commercial,” explains recruitment consultant Tom Wood of Morgan McKinley. That’s become more important since the pandemic hit, as it’s even harder to build client relationships as an accountant when there’s no face-to-face interaction.” He warns, too, that accounting firms “are being more picky”, partly, he says, “because they know they can be”, but also because it’s harder for them to provide training to new hires. “They need to be even more trusting that someone knows what they’re talking about,” Wood says, noting that one-on-one feedback and training are more readily available in the office than remotely. “Particularly in the current market, not only do you have to be good in-person, you have to be as technically strong as you can, because it’s more difficult [for employers] to onboard someone when you can’t physically meet them.” A key part of overcoming this for candidates is ensuring their softer skills are strong and making the most of CPD programmes, Wood says. “It’s difficult to repurpose or retrain technical skills,” he explains. “The softer skills help and are even more important at the moment. I get the sense that a lot of accountants don’t utilise all the training and CPD open to them. There’s an awful lot that the accounting bodies are doing to make sure their students and members have access to up-to-date information. “I’d urge accountants looking for work to do everything they can to make sure they’re technically up-to-date and improving their soft skills. When it comes to an interview, if a candidate says, ‘I’ve been doing CPD through AAT’, it shows that not only are you up-to-date, but you’ve got a good attitude to better yourself.” Kearslake seconds Wood’s assessment. “Emotional intelligence, communication skills, managing workloads well and organisation all become of greater importance,” she says. “These were all desirable traits previously, but they have now become essential.” Practical steps you can take Ensure you are up-to-date both technically and in soft skills by taking CPD courses through AAT.Recommended reading: No Hard Feelings: Emotions at Work and How They Help Us Succeed, by Liz Fosslien and Mollie West Duffy.
Infographic: exciting new resources to develop your career Posted 01/19/2021 by AAT Comment & filed under Career, Members.
Exciting new CPD opportunities coming soon with AAT Posted 01/19/2021 by AAT Comment & filed under CPD, Members. With home working and distributed work forces continuing to be popular, AAT has been working on some exciting new digital CPD for 2021. Management Accounting Fundamentals in Action – video series A series of talks on key management accounting principles – budgeting, cash flow, financial analysis and report writing. The talks will centre around a specific case study to illustrate the skills and techniques in a cohesive way. Available in February Getting started: Finance Business Partnering in a Digital Age – video series A series of talks exploring the role of a finance business partner and the necessity to adopt a digital mindset, including: Introduction to Finance Business Partnering Adding value as a Finance Business Partner Addressing common challenges faced by Finance Business PartnersIntroduction to digital finance Linking digital capabilities with finance business partnering Practicalities of getting started with digital Available in February AAT Learning pathway: Financial Reporting The AAT Financial Reporting learning pathway offers a structured and comprehensive sequence of learning materials that will ensure you have the updated knowledge to prepare and produce financial statements and accounts that are compliant with the Financial Reporting Standards. The syllabus includes: Investment propertyProperty, plant and equipmentIntangible assets other than goodwillLeasesProvisions and contingenciesGovernment grantsImpairment of assetsIncome taxEvents after the end of the reporting periodMicro-entities reporting under FRS 105 Available to AAT Licensed members in February as a pilot group AAT Learning pathway: Finance Business Partnering The AAT Finance Business Partnering pathway will provide a comprehensive understanding of what finance business partnering is and how you can adopt a FBP approach that will ultimately help influence decision making and strategy. The syllabus includes: Introduction to Finance Business PartneringConnect and collaborateCommunicating financial informationClear on strategyCommercial acumenChange agent and challenging the status quoDigital finance business partneringCuriosity, creative and can do attitudeCalm, confident and in-controlCompetent finance professional Available to FMAAT members in February as a pilot group.
Exploring the new data landscape after Brexit Posted 01/19/2021 by AAT Comment & filed under Brexit. Data flows between the UK, the EU and the wider world are changing as a result of Brexit. Here’s what you need to know. After adjusting to and coming to terms with GDPR requirements over the last two years, the landscape in data is changing once again. GDPR restricts transfers of personal data from the EU to countries outside the EEA (third countries), unless the transfer is covered by an adequacy decision, an appropriate safeguard or an exception. As of 1 January 2021, the UK is considered a third country. The European Commission has the power to determine whether a third country has an adequate level of data protection. A cliff-edge has been avoided, though, as the UK’s trade deal with the EU includes a six-month extension to the existing data arrangements, meaning data can flow freely between the UK and EU. This allows time for a decision to be made. Brexit Webinar: VAT for imports and exports This webinar will bring you up to speed on the significant changes to the movement of goods from Great Britain to the EU, how goods are reported, and the conditions for zero-rate goods exports, plus the Northern Ireland protocol. Register Adequacy As an EU member, the UK was signed up to GDPR and regarded as having sound data protection rules. But, in December 2018, the European Commission warned that if the UK leaves without adequacy being granted, measures will have to be put in place to ensure data can be exported from the EU to the UK. Data flows For a practice mainly dealing with UK clients, then the changes made to comply with GDPR in 2018 still hold. GDPR (i.e. the EU regulation) was incorporated in the UK’s Data Protection Act 2018, so the same mechanisms regulating data remain. If you have clients in the EU, however, be aware that data flowing from the UK to the EU is different to data coming from the other direction. The EU has agreed that the status quo with data transfer will apply for six months while it reaches a decision over UK adequacy. If adequacy is refused it would mean inserting Standard Contractual Clauses (SCCs) into contracts with those supplying your data. These clauses must follow wording approved by the European Commission and the ICO provides template contracts you can use. It’s not just Europe If you have data flows between the US and the UK, you also need to be aware of this. Prior to Brexit, companies could send data to the US because the EU and the US had an agreement. The UK is no longer part of that agreement, but the World Trade Organisation has said that the UK has always been on top of data protection. Rather than leave the UK in limbo, it has asked US companies to amend their policies – from “data flow to and from Europe” to “data flow to and from the UK”. The ICO’s six steps to take Continue to comply – apply GDPR standards and follow current ICO guidance. Look at data flows – identify where you transfer data from the UK to any other country, not just the EU. Look at data into the UK – identify where you receive data into the UK from the EEA. Consider GDPR safeguards to ensure data continues to flow. If you operate across Europe – review your structure, processing operations and data flows to assess how Brexit will affect data protection. Ensure documentation is up to date – review privacy information for compliance. Make key employees aware of ongoing issues. Brexit – webinar resources Brexit Webinar: VAT for imports and exports The EU VAT e-commerce package (Sponsored by SAGE 11/12) Brexit Webinar: VAT for imports and exports HMRC customs and borders help webinars An Exporters Guide to Brexit Customs and VAT post the transitional period
What are the Rules of Origin and why are they a problem? Posted 01/19/2021 by Mark Rowland & filed under Brexit. UK goods will be hit with tariffs by the EU – unless they meet the Rules of Origin requirements. The term ‘Rules of Origin’ has been mentioned in conjunction with many stories about post-Brexit complexity in recent weeks. Major retailers such as Marks And Spencer, John Lewis and TK Maxx have had supply issues in Northern Ireland. The latter two companies have suspended deliveries to Northern Ireland while they try to solve the problem. Other businesses have changed their logistics processes to circumvent any considerable costs. “I just shifted all my Republic of Ireland clients from my UK office, which is traditionally the Support Centre to direct deliveries from the Netherlands, because of the complications of going through Northern Ireland at the moment,” says one FD of a manufacturing company with offices in the UK and Europe. Brexit – webinar resources Brexit Webinar: VAT for imports and exports The EU VAT e-commerce package (Sponsored by SAGE 11/12) Brexit Webinar: VAT for imports and exports HMRC customs and borders help webinars An Exporters Guide to Brexit Customs and VAT post the transitional period The new rules Under the Trade and Co-operation Agreement (TCA) between the UK and the EU, UK-made goods that are exported to the EU are tariff-free, and vice versa. Exports should operate, from a tariff perspective at least, the same way as they did before the transition period ended. Where complications arise is in the definition of ‘UK-made’. Many manufacturers and retailers source elements of their products from outside of the EU. Those components must be significantly altered in the manufacturing process in order to remove any potential tariffs they may incur. This is a particular issue for clothing manufacturers, food retailers and car manufacturers, which will often source a number of materials and components to make products. “If those goods originate from outside Europe, they come into the UK and have been shipped to a central distribution place in Germany, they’re now subject to a tariff between the UK and the EU because the goods don’t carry the right certificate of origin,” says the FD of the manufacturing company. “In six months’ time, we will have found a new norm. The problem is that the new norm is likely to meet, in my opinion, a slow erosion of the manufacturing base in the UK.” How it affects your business/clients You will have heard a lot about how this affects large retailers and manufacturers, but that doesn’t mean it won’t affect smaller businesses. Smaller retailers selling specialist products online should look at the origin of the materials they use to make their products – and their shipping journeys – to ensure they will not be subject to tariffs. Where those businesses use manufacturers outside of the EU, those costs may double. If, for example, a clothes retailer has products made in Indonesia and shipped to the EU via the UK, they would be subject to tariffs coming into the UK and then out to the EU. Even businesses with customers wholly inside the UK may get caught by this when shipping to Northern Ireland; under the Northern Ireland protocol, the country remains in the Single Market. Beyond small manufacturers and retailers, your clients may find themselves incurring higher costs when buying equipment, depending on their origins. More paperwork To avoid these additional costs, companies need a Certificate of Origin to prove that their product has been manufactured in the UK or the EU. Businesses can self-certify their products, but this can be a complicated, timely and costly process, and adds to the additional paperwork required to ship goods between Great Britain, the EU and Northern Ireland. This paperwork, says the manufacturing FD, is the big issue. “Tariffs aren’t my biggest issue. It’s the costs around paperwork that are the biggest problem. All the major shipping companies and freight forwarders such as FedEx, UPS and DHL, have applied a minimum Brexit surcharge to everything going in and out of the UK. It’s like the old fuel surcharge introduced back in the 1970s when they had the fuel crisis.” ‘Wholly obtained’ versus ‘sufficiently worked or processed’ Life is easier if you can prove that the materials in your products were ‘wholly obtained’ in the UK. According to gov.uk, this includes: mineral products extracted or taken from its soil or from its seabedlive animals born and raised thereproducts obtained by hunting or fishing conducted thereproducts produced there exclusively from the products that are wholly obtained. If goods don’t meet that definition, they count as UK-made if they have been ‘sufficiently worked or processed’: “If two or more countries are involved in the production, the goods are deemed to have originated in the country or territory where they were last substantially worked or processed.” There are three rules to help determine if the goods meet the definition of ‘sufficiently worked or processed: Added value: There is no simple answer to what constitutes added value, but essentially, the additional value must meet a defined percentage of the finished good: ‘Manufacture in which the value of all the materials used does not exceed [X]% of the ex-work price of the product’.The change of tariff classification: In some cases, your goods cannot have the same tariff classification as any of the originating materials used to manufacture it. If that’s the case, you need to compare the tariff classification of all the originating materials used and the end-product to ensure that it is not subject to tariffs.Manufacture from certain products or specific processes: For some goods, non-originating materials may be used in the manufacturing process. Certain processes may also need to have taken place to get originating status. You could be eligible to import materials in an early state of production, such as fibres used to create yarn, but the same won’t apply if, say, processed fabrics from those fibres were used to produce the same product. Top resources for members Making the most of membership Join our free webinar today to maximise your AAT membership and utilise all we have to help you thrive in 2021. Brexit Webinar: VAT for imports and exports Learn about the changes to the movement of goods from Great Britain to the EU, reporting, and zero-rating conditions. Important things to do when preparing for a career move This 60 minute webinar will provide high-quality information on creating a CV that will really open doors. The EU VAT e-commerce package This webinar looks at the VAT MOSS, the coming VAT e-commerce package, and the IOSS scheme for imports. The Self Assessment tax return (2019/20) This e-learning course empowers small business owners to tackle their annual tax return with confidence.
“2021 will be a better year” – Mark Farrar, CEO of AAT Posted 01/13/2021 by AAT Comment & filed under Members. Top resources for members Making the most of membership Join our free webinar today to maximise your AAT membership and utilise all we have to help you thrive in 2021. Brexit Webinar: VAT for imports and exports Learn about the changes to the movement of goods from Great Britain to the EU, reporting, and zero-rating conditions. Important things to do when preparing for a career move This 60 minute webinar will provide high-quality information on creating a CV that will really open doors. The EU VAT e-commerce package This webinar looks at the VAT MOSS, the coming VAT e-commerce package, and the IOSS scheme for imports. The Self Assessment tax return (2019/20) This e-learning course empowers small business owners to tackle their annual tax return with confidence.
How accountants can help the show go on for Arts and Culture Posted 01/13/2021 by Mark Rowland & filed under Members, Road to Recovery. There is some funding for ailing arts and culture businesses, but for the most part, the sector is struggling to survive. Arts businesses will struggle if restrictions extend far into 2021.Theatre Tax Relief and Credits can soften the blow for theatre, opera and ballet companies.Government Arts funding is running out, but businesses still need support.The loss of travel and tourism impacts heavily on the sector – Brexit could exacerbate this.Some companies are restructuring to become social enterprises or community interest companies. Top resources for members Making the most of membership Join our free webinar today to maximise your AAT membership and utilise all we have to help you thrive in 2021. Brexit Webinar: VAT for imports and exports Learn about the changes to the movement of goods from Great Britain to the EU, reporting, and zero-rating conditions. Important things to do when preparing for a career move This 60 minute webinar will provide high-quality information on creating a CV that will really open doors. The EU VAT e-commerce package This webinar looks at the VAT MOSS, the coming VAT e-commerce package, and the IOSS scheme for imports. The Self Assessment tax return (2019/20) This e-learning course empowers small business owners to tackle their annual tax return with confidence. Specialist arts practice Moose has been offering pro bono services to its clients to help them to adapt and survive the pandemic. “We are taking on the role of Financial Director with a few clients to dive into their businesses and best support and advise where we can,” says co-founder and client director Barry Cumberlidge. “At times, we are more of a psychologist than an accountant but that’s fine by us. We all need to stick together and help one another during these troubling times.” As with many sectors, the Coronavirus Job Retention Scheme (CJRS) and Business Bounce-back Loan Scheme (BBLS) have been lifelines for struggling arts and culture businesses. However, the strain that businesses are experiencing cannot last much longer. “Another six months of this is going to be hard. R&D tax reliefs and Theatre Tax Relief are definitely worth looking into and can help unlock monies from past years.” Theatre Tax Relief Companies involved in certain forms of live performance are eligible to receive Theatre Tax Relief, which could prove to be a saviour for many production companies. To be eligible to apply, the company must put on a play, musical, opera or other dramatic piece where performances are live and “the performers give their performances wholly or mainly through the playing of roles”. It also applies to ballets. At least a high proportion of performances must be to paying members of the public or for educational purposes, and at least 25% of core expenditure is on goods or services provided from within the European Economic Area (it’s not clear if or how this might change post-Brexit transition period). Companies must also be actively involved in planning, decision making and contract negotiation, and pay for the rights, goods and services necessary to put on the production. Companies can either claim an additional deduction to reduce profits or increase a loss to reduce the amount of Corporation Tax they need to pay. If the company makes a loss, some or all of the loss can be surrendered for a Theatre Tax Credit, the standard rate being 20%. If the production is touring – performing in six or more premises or with at least 14 performances in two or more venues – you can surrender losses at 25%. Additional deductions will be the lower of 80% of total core expenditure or the amount of core expenditure on goods or services provided from the EEA. This is a great option for theatre companies, but it only serves a narrow band of businesses within a varied sector. Funding options Partway through the lockdown, submitting to pressure from sector lobbyists and public petitions, the Government made £1.57bn of funding available for theatres, independent cinemas, music venues, museums and art galleries. The bulk, £1.15bn, was allocated to a support pot for English cultural organisations. £188m was split between Northern Ireland, Scotland and Wales, and the rest went towards cultural infrastructure and national cultural institutions. While this funding was welcomed by the sector, critics said that it wasn’t enough. That seems to be the case at least in some areas – Cumberlidge says that Arts Council funding has become extremely difficult to get hold of. “One client cited that he was having more success with European countries.” Travel restrictions and the impacts of Brexit Much of the arts and culture world relies on physical locations to provide their goods and services. Many elements of the sector rely on travel and tourism, which have hit the rocks as a result of Covid-19. This is likely to be exacerbated by Brexit. “[Brexit will affect] tourism and the lack of government funding,” says Cumberlidge. “We’ve almost seen the impact of Brexit already.” There will be import and export issues and complications around VAT when it comes to the movement of art, explains Keith Graham, a partner at Haines Watts. “There is also a clear concerted effort by some other world art centres, such as New York and particularly Paris in Europe, to wrest reputation and standing away from the UK. And we cannot forget the new European led Anti-money laundering Directive (AMLD5) which is particularly targeting the art market and imposing new procedures and obligations on dealers and even, it seems, artists themselves.” Digital sales Businesses that can work through digital platforms have fared a little better than others. However, sometimes it has been effective from a brand-raising, rather than a revenue-generating, perspective says Cumberlidge. “The revenue model associated with digital is not mature enough to capitalise on this, and many companies are suffering financially, even though they are busier than ever on paper.” While there has been a quite spectacular growth in online selling in the art world, many art buyers still want to ‘try before they buy’, explains Graham. “With no exhibitions and an inability for buyers, particularly those from overseas, to risk travel, the market has been devastated.” Art businesses that have given up on physical premises, using ‘pop-up’ venues on an ad hoc basis and harnessing the power of social media, have benefited most, he says. Those with expensive leases and work that does not easily lend itself to online sales are struggling. Long term opportunities Graham is not particularly optimistic about the prospects for the arts; the challenges of overseas markets, the high cost of leases in city centres, and competition from digitally savvy businesses will push some businesses to the brink. There will be opportunities for many others, however. “There is no doubt that with the death of retail strongly-predicted and the low cost of entry for those who do want to work online, the market will change. That too, could have an effect on prices. In summary, I think we have to wait and see the full impact.” Cumberlidge is seeing a trend for commercial businesses to restart as social enterprises or community interest companies, which is opening up options. “Alongside this, private individuals are trying to find ways to fund the grassroots of arts and culture. The market is solving the problem of the central Government.”
What happens to my accountancy qualification after Brexit? Posted 01/12/2021 by Mark Rowland & filed under Brexit, Members. Mutual recognition of professional qualifications with the EU is at an end, so what next? When the Brexit transition period ended on 1 January 2021, trading with the EU switched to the rules outlined in the Free Trade Agreement announced on Christmas Eve last year. The focus of that deal was the movement of goods across borders, but not services. The automatic mutual recognition of professional qualifications was not included in the agreement. What does this mean for your right to work in the EU? The short answer is that it depends on what sort of work you’re doing, and the country you’re looking to work in. There are still some grey areas that will become clearer as time goes on, but here are the key points you need to know. Brexit – webinar resources Brexit Webinar: VAT for imports and exports The EU VAT e-commerce package (Sponsored by SAGE 11/12) Brexit Webinar: VAT for imports and exports HMRC customs and borders help webinars An Exporters Guide to Brexit Customs and VAT post the transitional period If you’re in industry, it shouldn’t make a difference Speaking to a finance professional working for a manufacturing company based in the Netherlands, it seems that for accountants in industry, the lack of mutual recognition is not really a problem: “They didn’t hire me for my qualifications, so they’re irrelevant,” he says. If you want to work in industry in Europe, your experience is more important. If you’re based in the UK and providing services to EU companies, it’s more complicated The provisions for services trade between the UK and the EU are lacking at the moment. “While services provisions have been included, they do not go much beyond existing EU practice, and notable barriers will limit the scope of many services providers to trade between the EU and the UK,” says EY’s Brexit strategy and trade leader Sally Jones. This is where the end of the mutual recognition of professional qualifications can become a barrier. There are also “significant carve outs’ from the EU regarding the extent to which it commits to allowing UK service providers to access their EU customers.” This could have an impact on UK firms and practices that serve EU-based clients. Country-specific rules The requirements for six nations are outlined in the agreement. Austria: Capital interests and voting rights of qualified foreign accountants and bookkeepers in an Austrian enterprise may not exceed 25%. The service supplier must have an office or professional seat in the EEA. France: Establishment or residency in the country is required to provide accounting and bookkeeping services. Those services can be provided to most companies, bar except SNC (Société en nom collectif) and SCS (Société en commandite simple). Specific conditions apply to the following company types: SEL (sociétés d’exercice libéral), AGC (Association de gestion et comptabilité) and SPE (Société pluriprofessionnelle d’exercice). Italy: You need to be resident or have your business domicile to enrol on the Italian professional register, which you must do if you’re to offer accounting and bookkeeping services. Portugal: Like in Italy, residence or business domicile in Portugal is required for enrolment in the professional register by the Chamber of Certified Accountants (Ordem dos Contabilistas Certificados), which is necessary for the provision of accounting services. This only applies if there is reciprocal treatment for Portuguese nationals. Cyprus: Access is restricted to natural persons. Authorisation is required, subject to an economic needs test. Main criteria: the employment situation in the sub-sector. Professional associations (partnerships) between natural persons are permitted. Slovenia: Establishment in the European Union is required in order to provide accounting and bookkeeping services. Audit will be affected, but not as badly as you might think Audit, being a heavily regulated area, will be affected by the transition period ending. This is unlikely to affect most AAT members, though some may be working within audit teams. UK auditors that want to practice in other EU nations must meet the specific requirements of individual countries. That varies wildly – some require residency in that country, while others require individuals to qualify in that country. Others go much further – for example, Slovakia, enterprises need at least 60% of capital interests or voting rights reserved to Slovak nationals to become authorised to carry out audits. This will likely affect audit partners and firms more than junior auditors, however. Recognition of professional qualifications While the mutual recognition of professional qualifications is not in the agreement, the deal confirms that 14 EU member states will recognise professional qualifications for accountants and bookkeepers without any restrictions. A further 13 will impose an “economic needs” test. If you’re providing tax advice, the provisions are similar. The UK will also continue to recognise EU qualifications in accounting bookkeeping and tax advice services without imposing any reservations or tests. The trade agreement provides an overall mechanism to move forward with mutual recognition of qualifications. The Joint Partnership Council, a body established to settle disputes and resolve detailed issues, is expected to set up a sub-committee to tackle qualifications. AAT’s CEO, Mark Farrar, commented: “We have yet to clarify the process by which we could develop automatic recognition of AAT qualifications in other countries.” “But it is hopeful that there will be a pathway to securing further understanding on the services sector and mutuality of professional qualifications.”