Why a sabbatical is a win-win for you and your employer

Posted by & filed under Members.

Thinking about taking unpaid leave to recharge batteries or pursue a personal project? Here’s how to persuade your employer to give you the breathing space you deserve.

Feeling burned out, or a stressful life event, can make you want to give up on everything. Sometimes, however, a couple of months’ break away from work is all that you need to recover.

Look after number one

“Taking a sabbatical is an opportunity for you to step away, reset and reconnect with what’s important,” says Jenn Fenwick, career coach at Rebel Road Coaching.

Accountant Gemma Dunn took two sabbaticals in the five years of working for the same employer. “I took a month off at the end of my first year, and three months off at the end of my third year. The latter was a full escape from my life at home – I camped my way through nine countries in Africa, soaking up the scenery and the wildlife, and the different ways of life.”

The first time round, Gemma had come to resent the company she worked for because of the unsustainable hours she was putting in and the lack of apparent appreciation for putting so much into it.

“I felt like I hadn’t breathed for the entire 12 months, and it was having a knock on effect on my private life and my health – I was rundown and tired.”

At the end of her second year her sister died suddenly and, ten months later, one of her bosses passed away, too.

“I had a realisation that life was too short and went into ‘seize the day’ mode. A bit of a mental health crisis, actually.”

After both sabbaticals she came back feeling refreshed, with renewed passion for the job and better able to manage her time and her workload. “Best thing that could have happened to me,” she says.

Test your skills and gain new ones

Accountant Ruth Hilton also took unpaid leave twice. She volunteered with Accounting for International Development (AfID), a social enterprise that organises volunteering opportunities for accountants with 500+ charities in 50+ countries.

“My first assignment was in 2012 withJohn Paul II Justice and Peace Centre in Uganda, helping them prepare for their first audit. The second was in 2017 with Ruchipo Child Protection Organisation in Malawi where I helped set up financial recording and forecasting processes.”

Ruth says both assignments hugely increased her confidence in her abilities. “When volunteering I was the expert, without a manager to check things with. My second placement also improved my management skills as the people I was working with were not accountants.”

David Busby, Volunteer Services manager at AfID, comments: “What surprises many finance professionals who lend their skills to non-profits is that they get back just as much, if not more. This includes interpersonal and intercultural skills, resilience in the face of the challenges and unpredictability they may face while volunteering, and a confidence boost in the depth and transferability of their financial knowledge. They return to work with this renewed trust in their ability and a greater appreciation for their profession.”

Sabbaticals can be a win-win for all

Your employer may be temporarily inconvenienced while you’re away, but they also have much to gain from your time off.

“You are likely to return to work with fresh enthusiasm, motivation and a head full of new ideas,” says Jenn Fenwick, career coach.

You’ll also put into practice the skills you’ve learnt.

“Volunteering especially is a great test of character in terms of adaptability, patience, leadership and problem-solving – important traits that accountants inject back into their job upon return,” says Busby.

“Working in an environment far removed from a corporate structure also means that volunteers must adapt their approach, which heightens flexibility, strategic thinking and decision-making skills.”

Ruth Hilton employed her improved management skills shortly after returning, when she started managing new apprentices.

Gemma Dunn came back more assertive. “I had had time to reflect on the problem areas and found courage to speak up and suggest new ways of approaching tasks.”

She adds: “Where I had previously felt unappreciated, I felt the exact opposite when I came back: they could have just said no, but they valued me enough to allow me some breathing space. In return, they got my full respect, loyalty and effort.”

Sabbaticals also allow employers to try new talent in new roles.

Fenwick says: “They create the opportunity for others to step in and take the reigns while you’re out of office, adding to their professional development and bringing diversity of thought into the role and the team.”

How to negotiate a sabbatical

“You want to arm yourself with the knowledge of ‘what will make this an easy yes for my manager / boss?’, then present your proposal based on this,” says Fenwick.

Here are her tips on gaining that knowledge:

  • Do your research: have others taken sabbaticals?
  • Have a confidential chat with HR – how would the company feel if you took a sabbatical?
  • Be clear on what you are asking for – how long will you be off?
  • What will the benefits be – for you and for the company?
  • What is the impact of you stepping away for x months? How can you help negate that?
  • Pre-empt the key objections they may have, so you can have a solution up your sleeve – for example, who will cover for you?

Then put your proposal forward well in advance of making any firm plans, says Susy Roberts, founder of people development consultancy Hunter Roberts.

She adds: “Make sure you stress that you don’t want to leave the company, that you will return as someone with more experience in a particular area or areas. Don’t make promises you don’t intend to keep and be honest about what your plans are – if you’re really not planning to come back to work, then a sabbatical is not the right thing to pursue.”

In summary

Getting your boss onboard with the idea of a sabbatical will be easier if you make it clear to them what they stand to gain on your return. It will also help you with planning how to spend your sabbatical time by thinking it through well in advance.

Ultimately, the goal is to recharge, gain some varied experience, and return to your role with renewed enthusiasm.

Further reading on tackling career stress:

Off-payroll working in the private sector

Posted by & filed under Pensions and payroll.

Many years ago payroll was seen as a fairly straightforward job. Every pay period the tax and NI tables were opened, the P11s completed and payslips produced.

Everything was clear, measured, with nothing to worry about except statutory deductions.

Over the years computerised software was developed; then RTI: automatic enrolment followed and then the Employment Allowance and apprenticeship levy introduced.

Now, we can add to that list the Personal Services Company (PSC) and off-payroll working rules. First introduced in the public sector, from April 2020 they will be relevant to the private sector.

Personal Services Companies

For some time there has been a concern by Government that some people who were providing services through this type of company were in fact employees in disguise. Indeed, often an employee would leave employment on a Friday and return to the same position on the following Monday, but through a PSC.

Being employed through a PSC drastically reduces the income tax liability for the employee and NICs for both employer and employee. It allows for a small salary / large dividend payment to be taken and, even though the tax-free dividend allowance has been reduced to £2,000, paying tax on dividends at 7.5%, 32.5% or 38.1% is still more attractive than the rates of tax suffered by employees.

HMRC estimates that the tax gained through applying the off-payroll working rules to the private sector could be as much as £1.3bn in 2023-24. So, what happens now?

April 2020

From this date, the PSC is required to review the contract between the client and the worker to decide whether, if the PSC did not exist, the relationship between client and worker would be that of employer/employee. If so, then the off-payroll working rules apply.

The rules will apply to all private-sector employers except those who are defined as a small employer. The definition of a small employer is the definition contained in the Companies Act 2006 (CA 2006):

  • annual turnover must be under £10.2 million
  • Statement of Financial Position (Balance Sheet) must be less than £5.1 million
  • employ no more than 50 employees.

This definition is fine for limited companies, but not so easy to determine if an employer is unincorporated and does not produce a Statement of Financial Position. More information on how to deal with this situation is expected.

The CEST

The CEST (Check Employment Status for Tax) is a tool that can be used to check the employment status of the worker. This may have been done previously, but with new guidance due out it will be worth completing again. The three elements that the CEST tool considers are:

Personal service and mutuality of obligation

This element considers who performs the service, whether substitutions can be made and who organises and pays the substitute worker.

Control test

The second element considers who controls the work. Is the worker given a contract and told to ‘get on with it’ or can the worker be directed by a manager? Does the worker work at their own premises, to their own schedule using their own equipment or is the worker integrated into the organisation?

Overall picture

The courts have determined that the decision is made by ‘painting a picture from the accumulation of detail’, so consideration must also be given to such situations as who is exposed to the financial risk – employer or worker?

The CEST will produce a print-out of the decision which, if the information has been input accurately and honestly, HMRC will stand by the result.

Steps to take now

Below are some steps that should be considered now:

  • Is your organisation near, or in the last tax year, was near the ‘small employer’ threshold? How would you find out?
  • Consider processes that will need to be put in place to identify possible off-payroll workers.
  • Set up procedures that enable off-payroll worker information flows from the contract originator to Payroll so that payments can be correctly processed.

Process any payments for workers defined as off-payroll workers through the payroll software, ensuring that only income tax and NICs are deducted as per the regulations.

The FPS (Full Payment Submission) has been amended to include a box to tick for anyone defined as an off-payroll worker.

In Summary

If the employer or client is defined as a ‘small employer’ a huge sigh of relief can be taken – for now.

If however the organisation is defined as medium or large or looks likely to become a medium-sized organisation (as defined by CA2006) in the next financial year then work needs to be done to comply with the new rules.

This is only a brief outline of the new rules. If it is considered that they apply then further reading must be done to ensure compliance. And here we go again!

Further reading:

Could your practice save money using an overseas accountant?

Posted by & filed under Members, Run your business.

More and more accountancy practices are outsourcing part of their accounting or bookkeeping to an overseas third party. But what should smaller practices think about when considering this – and is outsourcing for you?

No longer the preserve of large corporates, smaller companies are now looking at outsourcing as a way of reducing costs and freeing up time to grow the company.

“The main advantage is cost saving,” says Nicola J. Sorrell, MD of Effective Accounting Solutions in Milton Keynes.

“For your small business, the costs of a qualified accountant overseas can be much lower, and because you’re paying for a service, you don’t have to think about holiday pay, sick pay or National Insurance.”

The provider, Sorrell says, will handle all this – “they will take care of HR, looking after staff and employment law.”

The other key advantage is flexibility.

“You might need lots of support in December and January and not elsewhere in the year, for example. As it’s a flexible resource, you don’t have to pay out for it at quieter times.”

This gives you the opportunity to do several things:

  • grow the business with the resources you have
  • move more into advisory or higher-paid areas than basic bookkeeping
  • and increase the flexibility of your own offering.

Further benefits of an accountant overseas

Additionally, consider the benefits for digital-only accountants or start-up businesses.

“Any firm wishing to scale using digital methods might find that outsourcing overseas is a great way to find the required resources, without having to invest at the front-end,” says Rezaul Hoque, Director of Assurance Accountancy in Swansea.

“The accounting subcontractor market in the UK is virtually non-existent and what is available is expensive,” he says. “This might make direct recruitment and training a more attractive option, but then the costs of employment can be so expensive that a cost-conscious or cost-sensitive firm might want to look overseas instead.”

Risks with overseas accountants

Using a third party in this way gives you a series of potential risks to think about however:

  • data security
  • ethical choices
  • and assessing whether outside firms have enough understanding of your clients’ needs.

“All countries are different,” Sorrell advises, “but you need to think about whether your chosen host is complying with the same levels of data protection that we have. What technology are they using – is it secure? Are they confident they won’t have data breaches on that technology?”

Beyond data security, “think about the anti-money laundering regulations that we have here. Do they comply with a similar level of care?”

Within Europe, all of these conditions are likely to be met, and indeed Ireland is increasing as an outsourcing destination of choice. But the advantages of Ireland are mitigated by the fact that cost savings will not be as significant as India, the Philippines or Brazil. 

What will your clients think?

As well as thinking of pros and cons for your practice, you also need to consider what clients will think about the fact that you’re outsourcing.

“Will clients be comfortable with it?” says Sorrell. “I’m not convinced that practices who do this are making their clients fully aware of the fact and that doesn’t sit easily with me. My clients have a personal service either from me or from my team, and I think there is a trust factor there. This is private financial data and if I’m being entrusted with it, clients want to know where it is, and they want to know it’s safe.”

Does this mean that outsourcing becomes more of an ethical issue than is perhaps realised?

“There’s nothing wrong with outsourcing, but if you’re not upfront about the fact you’re doing it, that seems underhanded to me. And you don’t really know whether the staff in the host country are all being looked after as well as you want them to be.”

Moral concerns

Finding the right balance “can be tough,” says Rezaul.

“In India, the Philippines and Bangladesh, a British pound is strong and a relatively modest wage can sustain a family for a month comfortably. The largest challenge for outsourcing countries is that there are large populations and insufficient jobs.”

If jobs can be created from the UK, it appears to be a win-win for both countries, Rezaul says. “But is that detrimental to the UK workforce? There’s a balancing act to be done here.”    

Sorrell adds, “I personally think clients should be aware of where their data is and who holds it. Bank statements, what money they earn, NI numbers, private addresses – all this is the kind of information I think clients have a right to know; who has access to the data, and what systems it’s on.”

Additionally, “you want to give your clients great service. Will you know them as well as you should do, if the numbers have been crunched by someone else?”

But as outsourcing increasingly becomes a visible and well-understood element of accounting, it’s worth considering the flexible options it could give you.

“Accountancy is more than just crunching numbers,” concludes Rezaul. “There’s a lot more to be done than can be achieved by someone working remotely, thousands of miles away.”

Outsourcing is also not for everyone, he says, “and it doesn’t fit well into the operational model of the traditional high street firm.”

And yet, “it does have lots of potential to make your life easier,” Sorrell acknowledges. “Particularly if you tend to overwork as I do!”

In summary

  1. Know the advantages. If you’re looking to expand the business without taking on full-time staff; if you want to move into advisory and reduce your bookkeeping services; if you have staff shortages or problems with cash flow; then outsourcing might be for you.  
  2. Choose the host country that most meets your needs. Different locations will offer different benefits. Is the objective to save costs, or increase flexibility at busy times, or grow in new directions? Knowing exactly what you want the outsourcing to do, will help inform your decision.
  3. Know the drawbacks. India and the Philippines are significant hours ahead and there are language barriers; but increasingly, these are being accommodated. Ireland is inside the EU, but more expensive. If the UK leaves the EU as planned, data flows are likely to become an issue.
  4. Bear in mind data security. Research the company you’re planning to use for your outsourcing. Are you confident they have all due diligence in place? Ensure you have a non-disclosure agreement – do all you can to ensure that client data is protected.
  5. Consider your clients. Can you give them the attention to detail needed if the nuts-and-bolts work is being done elsewhere?

Read more about outsourcing and saving money in your business:

Industries on the rise that you should be targeting

Posted by & filed under Members, Run your business.

Give your business a jump-start by working smarter not harder on getting new clients. We identify the latest business trends to get you started.

If you’re self-employed, use a quieter day to re-evaluate who you should be targeting and how. This should be led by your knowledge, skill set and past clients you’ve enjoyed working with.

You should also take into account which industries are on the rise – where business and budgets are likely to be booming.

We’ve looked at Britain’s five largest industries, five industries that are currently growing exponentially, and reveal how you can spot market trends for longer-term business planning.

Britain’s five largest industries

Worldatlas.com states that five of the UK’s largest industries are:

  1. agriculture – encompassing 1.5% of the country’s labour force. In 2010, the UK exported an estimated £14 billion in agricultural products, but earnings are still comparatively low.
  2. forestry – with ideal conditions for tree growing, the UK has about 12,120 square miles of forested land. 70% of these areas are privately owned.
  3. construction – estimated to have contributed £86 million to the country’s economy in 2011, and with around 2.2 million employees. Though the industry has been thrown into turmoil by the Brexit vote.
  4. manufacturing – the UK is ranked as 6th largest manufacturer worldwide based on output value. It generated around £140.5 billion in 2011, and employs 2.6 million people. Car manufacturing leads the way in this industry.
  5. tourism – ranked as the world’s 6th largest tourist destination, with more than 40 million visitors in 2018. Tourists spent around $32 billion in the country in 2017, and the most popular destination in the UK is London.

Food for thought if you’re considering a new industry to target.

Have a look at which of the top five industries are leading the way in your local area for a more targetted approach to getting new clients.

Five industries on the rise

1. Eco-friendly building and travel

Kicked off by David Attenborough and continued by Greta Thunberg, there is huge acceleration in the level of awareness and action to tackle climate change. More people than ever are paying to offset their carbon footprint from flying, looking for plastic alternatives and minimising their waste output. The construction of environmentally sustainable and energy-efficient buildings continues to grow, assisted by government-backed initiatives.  

2. Health

From health apps for better sleep, exercise programmes, digital detoxing and meditation, to nutritious and plant-based foods, the health industry is booming. There has been a 350% rise in veganism from 2006-2016 in the UK. The next generation is drinking less, smoking less and taking care of themselves physically more than ever.

3. Online coaching and consultancy

An interesting one to consider, probably not as a potential client (although, maybe) but more likely as a possible side step for your own business. You can do almost anything online these days and learning is no exception. You can train anyone, anywhere, anything. 

4. Robotics

Amazon spent $775 million in 2012 buying Kiva Systems to automate their warehousing and fulfilment processes with AGVs (automated guided vehicles). Whether you agree with it or not – computer science, AI and robotics will all continue to develop rapidly, changing the way we do business and live our lives.

5. Subscription and sharing models

Subscription services like Dollar Shave Club (razors), Hello Fresh (meals) and Who Gives A Crap (toilet paper) take the hassle out of remembering and buying things for the customer as well as ensuring recurring payments for the companies. Businesses like Uber and Airbnb have grown from the sharing economy which promotes access instead of ownership, removing barriers to products and services that may have been unattainable before and letting people earn cash from their underutilised possessions.

You can even study AAT via subscription now with Eagle Education.

How to spot industries on the rise

Millennials (born 1981-1996) are set to be taken over imminently by Gen Z (born 1997-2015) as the biggest spenders in the marketplace. The things these generations care about and the way they consume are no doubt driving business trends, as is the monumental speed at which technology is developing.

So keep one eye on Generation Z going forward.

On a micro level, see where success is being had locally to you – who are your competitors working with and what businesses can you identify that seem to have large budgets? Where are the gaps and what could be done better?

Keep up to speed with industry reports, watch influencers and attend events. Use networking as an opportunity to learn, not just to sell. Most importantly, listen to your customers and ask them what they want.

In summary

It pays to stay ahead of the game. Get into the habit of learning about business trends by doing small things often, whether that’s reading a blog or book, going to a conference or taking part in a webinar. Being aware of what’s happening around you will inspire ideas for new clients to target, as well as ways to run your business differently and more efficiently.

Further reading on getting more clients for your business;

How can finance managers develop their employees?

Posted by & filed under Employers.

The benefits of investing in developing employees in their core areas of expertise are obvious, and often essential if they are to retain professional qualifications in spaces such as accountancy.

But while there are many training options to develop such skills, including ongoing professional qualifications, it’s also possible for continuous professional development (CPD) to target other, non-core skills, which can often have a significant impact on individuals’ ability to do their job.

“It can certainly be an added incentive to an employee to be offered training around effective self-management that’s useful for all aspects of life,” says Tim Segaller, a leadership and resilience coach at Enlivened Minds.

“It shows that an employer cares about the overall wellbeing of their workforce. But it’s also of genuine benefit to the organisation, due to the long-term increase in productivity, and therefore also the bottom line.”

Managing conflict

Many elements of non-core CPD will link to the individual’s ability to work effectively as part of a team, or as a manager. David Liddle, CEO of The TCM Group, believes the ability to manage conflict is a vital skill for any manager, but one that is often overlooked.

“Workplace conflict takes up an inordinate amount of management time and is also extremely costly,” he says. “The CBI estimates, for example, that unresolved conflict costs the UK a staggering £33 billion per year.

“The key skills a manager needs are an understanding of why conflict arises and an appreciation of the difference between healthy conflict and dysfunctional disputes,” he adds. “They need to know how to spot the signs early, and how to intervene when conflict is bubbling, so they can nip problems in the bud before they escalate.

They need to be confident with facilitating open and honest dialogue in their teams and able to create cultures where people are not afraid to be themselves and say what needs to be said.”

How to manage time

Supporting employees to make the most of their time is a critical skill both in and out of the workplace. “If they are struggling to create a seamless rhythm between their workload and their other responsibilities, the quality of their work is going to suffer, so employers should support their team to help them create an effective rhythm and refine their time management skills,” says Karen Meager, co-founder of Monkey Puzzle Training.

It’s important, too, that employers remember that not every time management tool they choose to equip their team with will work for everyone so offer a variety of options, she adds.

AAT, meanwhile, runs courses on other softer skills which are part of many jobs, including coping with ethical dilemmas, public speaking and assertiveness. Further talks are available through the AAT branch network

Learning stress management

Helping staff cope with stress is another skill which can be learned through CPD, and can stand them in good stead both inside and out of the workplace. “Given the fast-growing problem of stress and burnout in the workplace – causing the loss of 15.4 million workdays each year – it’s wise for employers to invest in mindfulness-based resilience training for staff at all levels,” says Segaller.

“This can help people to manage their own minds better – to be focused, resilient and emotionally positive – leading to improved wellbeing and productivity.

“A particular aspect of mindfulness-based training that’s relevant here is how it helps people think clearly under pressure so that they can make wise decisions,” he adds. “It’s also about being able to pay attention simultaneously to both the big picture and to fine details, which is essential in the world of finance.”

Future proofing technical skills

Development should also take in new technical skills, even if these aren’t directly related to the day job, to help ensure people are aware of future trends and equipped to cope with any upcoming changes.

“The rise in automation and AI provides an opportunity for employees to be upskilled or trained in different areas that provide more variety,” says Susy Roberts, executive coach and founder of people development consultancy Hunter Roberts. “Upskilling could include developing analytical skills, or training in high-touch customer service – tasks that can’t be replicated by AI.”

Additional extras

Marilyn Devonish, the owner of TranceFormations, says she often helps people learn a range of additional skills, which will help them out in both business and life in general. These include PhotoReading (accelerated learning), creative thinking and emotional intelligence, in addition to some of the other areas already mentioned.

“There are also organisations where employees are provided with an allowance each year to study something not strictly work-related,” she says. “In those instances, I might get people to come to learn about hypnotherapy for calming their mind or a soul plan or archetypal profile reading to understand more about their life purpose and next level career choices.”

Measuring the impact

It can be hard to accurately measure how effective such softer skills are, as they tend to be more generic, says Meager. “But there are many ways in which employers can measure the success of programmes including manager feedback scores for those who have attended programmes, programme feedback on what they have learnt and done differently in their roles, overall team effectiveness around outputs and goals, and whether there is a decrease in related issues such as complaints.”

In the longer-term, employers that invest in such programmes can expect to see higher levels of retention and loyalty. “Similarly, if you are seen to embed different types of learning, and value the contributions of employees into what skills would be beneficial, you will become a much more attractive employer to prospective employees,” she adds.

In summary

Many people would benefit from continuous professional development in areas other than the core technicalities of their job. Some of these are closely aligned to their roles, such as public speaking or leadership training, but others can be wider skills. Examples of this would include managing stress, time management or even learning a new language.

Employers which take the time to identify what areas their staff would benefit from stand to gain not only from more loyal and productive employees but also having a team that is better equipped to do the job, and meet the needs of clients.

Key tips

  • Work with employees to identify which non-core skills they think they would most benefit from
  • Training staff in time management and stress prevention can help ensure they remain mentally well
  • Measure the impact such initiatives have through manager feedback, staff performance in projects and overall effectiveness against targets or other goals

Further reading

The future of learning: AAT subscriptions

Posted by & filed under Students.

This content is brought to you by Eagle.

Eagle has delivered AAT courses for over 15 years and has built a strong reputation with its students. It offers high quality, value for money courses, with its learners at the centre of everything it does.

Eagle has now gone one step further, with an innovative subscription model for its courses. Just like subscribing to a streaming service.

Can you subscribe to an AAT/ACCA course?

Yes. You can now subscribe to every AAT/ACCA course with Eagle. There are subscription models to help you to consume food, media and film. So why not have the same for accountancy training?

Eagle is giving you access to all three levels of AAT and ACCA courses. Financially, it means you won’t need to pay out a lump sum for the course and you will no longer be tied to a 12-month contract. You are also able to cancel at any point.

How much is this new subscription service?

Eagle understands that not everyone can afford such costly course fees and that life can be complex at times. Eagle’s new subscription model is only £45 per month. Not only that, Eagle has discounts available for longer subscription periods. It’s fully flexible. You can choose to cancel any time, with no risk at all and no cancellation fees.

How does this way of learning support a good work-life balance?

You can start and stop whenever you want, without any pressure. You have full access to the content and support, for however long you want. Commitments and priorities can change over time. Eagle aims to make life easier for students with this new model.

How are the courses accessed?

The courses are entirely online/ distance learning-based, so can be studied anytime, anywhere. The courses are fully flexible and can, therefore, fit around other life commitments.

Is there a trial available?

Yes. Eagle offers a one-week free trial to try all of the content that is available. If you like the way it works, you can then subscribe to the service. Currently, no other AAT or ACCA provider can offer this level of flexibility.

What support would you get from Eagle?

You will be assigned a mentor to guide you through your studies. Eagle also has a tutor support team for answering queries. After signing up, you will have a phone induction with your mentor to go over the course and set flexible targets.

Any other new changes?

Eagle will look into launching the service for other qualifications throughout 2020. Eagle always seeks to offer the best value for money without compromising quality. The new subscription model shows that students’ well-being is its main focus.

For more info visit eagle-education.co.uk/ or call 01978 722511

When clients don’t tell you everything…

Posted by & filed under Anti-money laundering, Members, Tax.

When it comes to tax liability, some clients can get slippery… They may think What can I get away with? and try to hide things. But this can land them, and you, in a whole lot of trouble.

“Others think they’re completely above the law and set out to test every aspect of it, but there are also those who are simply ignorant – they hide legitimate expenses because they don’t know they can claim tax relief,” says Andrew Graham, partner at Graham & Co Accountants.

He adds: “On the whole, I believe that even the most honest person may be subject to temptation in extreme circumstances and depending on the size, colour and timing of the carrot.”

Do you suspect a client is holding something back? If so, it’s best to act on your suspicion because that ‘something’ could be serious, with the potential to cause major problems.

Information clients may hide

Paula Travers, owner at Travers Accounting Services, points out some of the typical cases:

  • Income – either withholding a particular income stream or under-recording the income coming in, particularly if they operate a cash business.
  • ‘Wages’ – paying unregistered ’employees’ from company funds. Again, this is more prevalent in cash businesses, and one facilitates the other – unrecorded cash income is used to pay an unregistered ‘employee’. Also, clients may be topping up a registered employee’s wages by only recording a portion of their wages officially, and paying the unofficial part in cash.
  • Personal expenses – disguising personal expenses as business expenses, such as booking a personal trip near a client location and claiming it was a business trip.

Of course, the big one is money laundering. “As a matter of principle we never list cash businesses as low risk in our Money Laundering investigations,” says Graham.

The National Risk Assessment of money laundering actually identified cash-based money laundering as one of the greatest areas of risk in the UK.

Read more on anti-money laundering and AAT’s role in combatting it.

Key takeaway: Be on your guard if the client runs a cash business.

What are the red flags?

Alarm bells should start ringing if the client is evasive or reluctant to provide detailed and consistent information about their business.

“There could be a reluctance to disclose the identity of all beneficial owners, or to provide information, data or documents required to provide the service,” says Helen Barrett, Professional Standards Manager at AAT.

She adds: “This could be either at the start of the engagement or it could be a change in the behaviour of an existing client. While it’s important that you get to know the client and carry out initial due diligence and verification checks, you need to keep monitoring for red flags and suspicious activity on a regular basis.”

It may seem counter-intuitive to building a healthy relationship with your client, but the onus is on you to look out for potential signs of money-laundering. It’s more likely you’ll end up protecting the client from themselves in their attempts to avoid taxes, or simple lack of knowledge.

Graham says he gets suspicious when clients fail to answer simple questions quickly, and when he sees alterations in records.

Alongside this, Travers adds that people often give themselves away in the language they use. “For example, any reference to ‘through the books’ tells me all I need to know.”

Key takeaway: The red flags and suspicious activity are often missed or ignored because of complacency, a lack of scrutiny, and a fear of damaging relationships.

What to do when a client hides something

Graham warns the offending clients, verbally and in writing, that withholding information could lead to sub-prime or incorrect advice being given, and to penalties.

“Also, we give them at least two chances to come clean. Sometimes there are extenuating circumstances and they may need further professional help. Some people are dishonest or withhold information because of family illness, relationship breakdown or gambling problems. Very few clients would come straight out with it and say ‘I’m desperate and trying to help my son clear £20K on his Paddy Power account’, for example.” 

Travers advises clients what corrective action they should take. “If they’re unwilling to accept and act on this advice, I end our working relationship. I’m not prepared to risk my hard won letters for anyone.”

Elaine Clark, Managing Director at online accountancy firm CheapAccounting.co.uk, admits it’s often tricky to separate out those clients who are in a muddle and just need help sorting things out, from those who are just out to gain some sort of illegal tax advantage.

“When questioning and probing them, you need to tread a fine line between remaining neutral and non-confrontational, and following the code of professional ethics.”

She adds: “Depending on what I suspect, I ask some more questions without highlighting what it is that I suspect, to avoid the ‘tipping off’ trap. If after this further research I don’t feel comfortable, I disengage (my career is much more important than someone who wants to bend tax rules) and potentially file a Suspicious Activity Report (SAR).”

It’s an offence to “tip off” a client when you’ve reported them for a SAR. And if you disengage, make sure to send a Letter of Disengagement and do not allude to any suspicions in your reasons for ending the relationship. This can be classed as ‘tipping off’.

Key takeaway: If in doubt, consult with your professional body and, if required, make a disclosure to HMRC and/or other relevant authorities.

When to file a SAR report

Accountancy service providers have a legal obligation to identify money laundering red flags and report any suspicions.

“If at any time you know, suspect or have reasonable grounds for knowing or suspecting that a client is engaged in, or attempting, money laundering or terrorist financing you must submit a SAR to the National Crime Agency as soon as it’s practicable,” says Barrett of AAT.

AAT advises you ask yourself the following:

  1. Do I have knowledge of money laundering activity taking place?
  2. Do I have a suspicion money laundering activity is taking place based on circumstances and information, but without certainty or proof?
  3. Do I have reasonable grounds for knowledge or suspicion, where the facts or circumstances, if viewed objectively, suggest that the likelihood of my client engaging in money laundering or terrorist financing is reasonably high?

Key takeaway: Not acting on suspicions and failing to submit a SAR once you have reasonable grounds to do so is a criminal offence.

In summary

Clark of cheapaccountingco.uk draws a firm line when her suspicions are raised. “The client/accountant relationship is one of trust. If they withhold information, then I may not be the right accountant for them. The same applies if they choose to ignore the advice I offer.”

If you suspect a client is hiding information from you, and maybe feel a bit out of your depth, the safest course of action may be officially disengaging, and doing your duty by filing a SAR.

Further reading on tax fraud and anti-money laundering;

Career profile: Payroll accounting

Posted by & filed under Career profiles, Students.

Ever considered becoming a payroll accountant? Here’s what to expect.

The role of a payroll accountant has become ever more important as a result of changes in legislation around tax and pensions, further increases in business regulation and the growing importance of compliance.

A payroll accountant is responsible for:

  • administering PAYE
  • working out and recording expenditure on wages and salaries
  • overseeing employee pension contributions, sickness, maternity and holiday pay
  • calculating employee perks such as company cars, health insurance and share schemes.
  • ensuring employer and employee NI is correctly calculated
  • arranging payment of employer taxes correctly and on time.

Where can an AAT qualification take you? The choice is yours

An AAT qualification can open so many doors for you in your career, giving you the change to explore roles in any industry you can think of – from fashion and sport to banking or forensic accounting. After all, every business needs someone to look after its finances.

Find out more

What does the role involve?

  • Helping the business understand its liabilities – by understanding payroll obligations a business can better calculate current and future cashflow.
  • Ensuring that employees receive the correct salary on time, minus any tax they need to pay, taking into account pension contributions and student loans.
  • Adjusting pay and administering changes in employee tax codes, for example if someone gets married or takes parental leave, receives a pay rise or becomes a director.
  • Payroll accountants need to report employees’ payments and deductions to HMRC on or before each payday.
  • A payroll account needs to ensure that employer and employee tax is calculated correctly and paid on time in order to avoid fines.

What type of work would I do?

On a day to day basis, a payroll accountant is responsible for recording wages, working out bonuses, calculating and deducting taxes for employees, and calculating employer tax and liabilities.

As part of the process, the payroll accountant will have access to a lot of sensitive salary and bonus data, so it is essential that they understand data protection laws and how to ensure all information is kept completely confidential.

They will also need to keep track of new employees who join the company, and then notify HMRC accordingly. A key responsibility is notifying HMRC if an employee’s circumstances change – for example if they retire, leave the company, or take maternity leave.

At a senior level, you might be involved in implementing a new payroll system.

How much could I earn?

The AAT Salary Survey 2019 provides details of the typical salary an accountant might expect to earn, based on information gathered from AAT members.

For example:

  • Director/Senior Manager might earn an average salary of £43,000
  • Middle Manager £34,000; Junior Manager £28,560
  • Team Leader/Supervisor £27,000
  • Accounts/Finance Officer £25,464
  • Administrator Accounts/Finance Assistant £19,500

What qualifications do I need?

The AAT Bookkeeping qualification is ideal for those wanting to work in payroll.

AAT offers five short bookkeeping qualifications, which each take six to twelve weeks to complete. These qualifications provide training for a huge range of bookkeeping roles and are respected by employers worldwide.

The courses on offer are:

  • Access Award in Bookkeeping (Level 1)
  • Access Award in Accounting Software (Level 1) 
  • Foundation Certificate in Bookkeeping (Level 2)
  • Foundation Award in Accounting Software (Level 2)
  • Advanced Certificate in Bookkeeping (Level 3) -This qualification can be used as a route to professional AAT Bookkeeper status (AATQB).

Key takeaways

Payroll accounting is a very important function within an organisation because:

  • understanding payroll obligations helps a business calculate cashflow and future and current liabilities
  • it protects the company from fines
  • it ensures that employees receive the correct salary, minus any tax they need to pay
  • employer and employee tax must be calculated correctly and paid on time to avoid fines
  • payroll accountants liaise with HMRC and DWP to ensure tax and pension contributions have been correctly calculated
  • it’s important to keep up with legislation to ensure the business is compliant and no penalties are levied.

Case study: the role of a payroll administrator

Jennifer Carline is head of payroll accounting at the Manchester office of top 20 firm UHY Hacker Young. She runs a team of payroll administrators who provide payroll, tax and pension services for external clients.

“You need to be methodical and yet able to work to tight deadlines,” she says.

“I have a team of three administrators working for me and we offer a bureau service for external clients. The administrators run the payroll function for the external clients and the tasks include managing the auto-enrolment process, and corresponding with HMRC and the DWP on behalf of the client.

Double-checking calculations

“They may also be required to check the work of their colleagues, because we don’t just rely on the computer software – it is important to make sure that all the calculations have been done correctly.”

She says that technology does help but you still need the human element and the checks that go with that, so payroll is unlikely to be replaced by fully automated processes any time soon.

While the role does require mathematical skills, it would also appeal to someone who’s well-organised, can work under pressure, and memorise a raft of important legislation.

“You’ll need to be able to carry out salary calculations, check tax and net pay against the computer calculations, and carry out high volumes of work under pressure, as it can often be a time-sensitive environment to work in,” she says.

Awareness of legislation is key

“You’ll also need a strong awareness of current legislation in terms of tax, payroll and pensions. It’s said that you have to have 174 pieces of payroll legislation in your head, 338 if you count all statutory instruments and hundreds of pieces of case law.

“There may be legislation that applies to a case that doesn’t crop up very often, so you need to be aware of that possibility and know how to research and access information which isn’t always obvious.”

In summary

Payroll accounting requires keen attention to detail and excellent communication skills, as well as mathematical ability and strong organisational skills.

It’s a fast-moving, challenging role which would suit someone who is able to:

  • work under time pressure
  • prioritise tasks
  • use technology effectively
  • handle confidential information and data on a daily basis.

Payroll accounting is an essential part of a business – employees definitely notice if they’re not paid on time, and HMRC needs to be notified on the correct dates – so there’s a lot of responsibility.

Read more on careers available with AAT qualifications here;

How the Brexit deal would affect VAT and trade

Posted by & filed under Brexit.

Towards the end of last week Prime Minister Boris Johnson was confident that a deal was on. He was clear, all that was needed was for Parliament to sit on Saturday for the first time in 37 years, and he sounded confident that he had the cross-party backing he required.

However enter former Tory, now Independent, Sir Oliver Letwin’s MP cross party motion to “withhold approval” until legislation implementing Brexit has been passed. 

It was close – with the government losing by just 16 votes, 322 to 306. 

Under the terms of the ‘Benn Act’ the Prime Minister was left with no option but to send a letter to Brussels requesting a three-month Brexit delay to 31st January 2020,  by 2300 the same evening, which he duly did.

However, not only did Boris submit the Benn Act letter. Albeit unsigned and noting it was from Parliament. He also, sent a second longer, signed letter stating that he believes a further delay to Brexit would be costly to both the UK and to the EU.

Where are we now?

Although there remains a strong possibility that the EU will accept the UK’s request for a further extension, the UK’s Prime Minister is adamant that Britain will leave the EU at the end of the month.

While an orderly 31st October Brexit is by no means certain, those in business, accountants and bookkeepers should look at the UK government and HMRC’s Brexit web-based support service, as it will help all those with a business interest to plan or provide added-value help and advice to your employers or clients.

With all the focus being on a no-deal Brexit it’s easy to forget that a deal is entirely possible and that we should all be planning for the eventuality at the same time as for a no-deal.

‘Getting ready for Brexit’ is the government’s website landing page for all things Brexit. While it has been updated to acknowledge ‘A Brexit deal has been agreed in principle with the EU’ it also recognises that ‘both the UK and the EU need to approve and sign the withdrawal agreement.’

What are the key elements of the deal?

The new protocol thrashed out last week replaces the controversial Irish backstop plan in Theresa May’s deal. Although much of the rest of that deal will remain. 

Here are some of the key new aspects to the proposed EU withdrawal agreement:

Customs 

Ultimately, the whole of the UK is destined to leave the EU customs union. Leaving it free to enter into trade deals with other countries in the future.

There will, however, be a legal customs border between Northern Ireland and the Republic of Ireland (which stays in the EU). But, in practice the customs border will be between Great Britain and the island of Ireland. With goods being checked at “points of entry” in Northern Ireland. 

Import duty will not automatically have to be paid on goods coming into Northern Ireland from Great Britain. Although, where something is “at risk” of then being transported into the Republic of Ireland (which remains part of the EU customs union) duty will be paid.

What is considered ‘at risk’ is to be decided by a joint committee made up of UK and EU representatives.

Regulations on goods

When it comes to the regulation of goods, Northern Ireland will be required to comply with the EU single market rules, rather than those of the UK.

This removes the need for product standard and safety checks on goods at the Irish border. Although, it will add to the checks between the rest of the UK. As the UK mainland will not be obligated to stick to the single market rules.

Enforcement

Enforcement will be carried out by UK officials at “points of entry into” Northern Ireland. With EU officials having a right to be present and possibly able to overrule UK officials.

Norther Ireland, has a right to an opinion

With Northern Ireland standing apart from the rest of the UK when it comes to customs and other EU rules, the deal gives its Assembly a vote on these provisions.

That said the NI Assembly will not vote until January 2025, at the earliest. Four years after the end of the transition period, due to run until the end of 2020.

If the Assembly votes against the provisions they would lose force two years later during which time the “joint committee” would make recommendations to the UK and EU on “necessary measures”. 

If the Assembly accepts the continuation of the provisions by a simple majority, they will then apply for another four years. However, if the deal gains “cross-community support” they could apply for a further eight years, or until a new agreement on the future relationship is reached if that comes sooner.

If the Assembly is still not sitting at that point the UK government has said it will make alternative arrangements for the vote.

VAT 

Another interesting feature of the revised agreement is that EU law on Value Added Tax will continue to apply in Northern Ireland as far as goods are concerned, but not services.

This could lead to the curious scenario whereby Northern Ireland could have different VAT rates to the rest of the UK. Something that currently would not be entertained under existing EU law.

For example, if the UK decided to reduce the general rate of VAT on welfare items, such as smoking cessation products or air source heating pumps to, say, 2.5% Northern Ireland would still have to keep it at 5%. As the latter percentage is the EU minimum.

It also means that Northern Ireland may get the same VAT rates on certain goods as the Republic of Ireland, to stop there being an unfair advantage on either side of the border.

What’s left from the May deal?

Much of Mrs May’s original Brexit deal will remain. Some of the key areas are:

Transition

The transition, the period of time during which all of the current rules stay the same allowing the UK and the EU to negotiate their future relationship, is due to last until the end of December 2020.

The UK will need to abide by EU rules and pay into the EU budget but will lose membership of its institutions.

The transition can be extended, but only for a period of one or two years. Both the UK and EU must agree to any extension.

Rights of the citizen

UK citizens in the EU, and EU citizens in the UK, will retain their residency and social security rights after Brexit.

The current freedom-of-movement rules remain unchanged throughout the period-of-transition. With anyone who is resident in the same EU country for five years allowed to apply for permanent residence.

Money

The UK will still have to settle its financial obligations to the EU. The amount owed was recently estimated to be £33bn. With previous estimates putting it as high as £39bn.

The biggest part of the “divorce bill” will be the UK contributions to the 2019 and 2020 EU budgets. As the UK has already delayed its EU exit, some of that money has been paid as part of the UK’s normal membership contributions already.

The Office for Budget Responsibility predicts that around three-quarters will be paid by 2022. With some relatively small payments continuing until the 2060s.

Future UK/EU relationship

This is addressed in the political declaration. The current text, is not legally binding and has been revised by UK/EU negotiators.

The declaration states that both sides will work towards a Free Trade Agreement (FTA). With a high-level meeting set to take place in June 2020 to take stock of progress towards this goal. 

It also contains a new paragraph on the so-called “level playing field”. Which concerns the degree to which the UK will agree to stick closely to EU regulations in the future.

While specific references to a “level playing field” does not appear in the legally binding withdrawal agreement, the revised declaration states that the UK and the EU should “uphold the common high standards… in the areas of state aid, competition, social and employment standards, environment, climate change, and relevant tax matters.”

Keep up to date with the latest updates on Brexit here: How accountants and businesses should prepare for Britain leaving the EU

Hiring for the first time?

Posted by & filed under Members, Run your business.

Taking on your first member of staff can seem like a minefield, but it doesn’t have to be. Here’s how to comply with your new legal responsibilities and reporting obligations.

“It’s really best to get it right from the start, instead of letting things slide and planning to sort them out later,” says Liz Sebag-Montefiore, Director of HR consultancy 10Eighty.

So have a read through our guide to get off to a flying start with your new hire, and increase your chances of smooth sailing later on.

Fair recruitment process

First of all, you must make sure you recruit staff fairly – it’s against the law to discriminate against anyone.

Start with the wording in your job advert. There are a lot of things you might think are ok, but actually aren’t. For example, you can’t say you’re not equipped for staff with a disability. This is essentially you saying ‘people with disabilities need not apply’, and is likely irrelevant to the job being advertised.

Phrases like ‘recent graduate’ are also out of bounds. Similarly, insisting on a ‘young, dynamic’ candidate would also rule out older people. It’s best to stick to the actual requirements of the job.

When interviewing, steer clear of asking candidates if they have, or plan to have, children. Even if you’re just making conversation, this is private information that should not be used in the decision-making process. Remind yourself of the other “protected characteristics” ahead of the interview.

You cannot reject someone just because they have a foreign-sounding name, or refuse to employ a person with a spent criminal conviction to their name.

Beware of unconscious bias, too. “Removing names, gender and any other personal details from job applications should guarantee that your shortlist is fair in this respect,” says Alan Price, HR expert at Peninsula.

Key tips:

  • Seek professional advice so you don’t fall foul of discrimination laws.
  • Maintain records explaining why you chose one candidate over another.
  • Remember that applicants can request to see the interview notes.

Right to work in the UK

You have a legal obligation to check that your proposed new staff member can legally work in the UK.

“Don’t accept excuses, unauthorised documents or copied documents,” Sebag-Montefiore, HR consultancy Director, says. “Also, remember to retain copies of all the original documents you check.”

Key tips:

Contract of employment

Your chosen candidate will be in your employment as soon as they accept your offer of a job, whether the offer is in writing or not.

“However, bear in mind they have a right to receive a written contract once they reach one month’s continuous employment, and from 6th April 2020 this will be their right from day one,” says Price.

He adds: “Failing to provide a contract, or providing a contract without all the required information, will leave you open to tribunal claims.”

You can check what to include in a contract here.

“You may choose to offer the employee enhanced entitlements when it comes to their pay or annual leave. Otherwise, they mustn’t receive any less than the statutory minimum,” Price says.

Also, your new employee has some rights that are normally implied (but not spelled out) in their contract. For example, they are entitled to a safe and healthy working environment, and a reasonable degree of privacy. The latter means that any monitoring of their phone calls, email and internet use must be reasonable and overt.

Sebag-Montefiore confirms: “You can’t ask your employees to sign away their rights in an employment contract.”

Key tips:

  • If you use a free employment contract template, double-check that it complies with current legislation. Otherwise, obtain one through a HR firm.
  • Get Employers’ Liability insurance as soon as you become an employer, should anything happen to your employee at work. You can be fined £2,500 every day you are not properly insured.

PAYE and payroll

You need to register as an employer with HMRC before you start paying your new employee – you can do this up to four weeks before.

“This has to be done whether you’re self-employed or running a limited company,” says Zoe Whitman, owner of bookkeeping practice But the Books.

“Once you’re registered, you’ll need to run monthly payroll to calculate your employee’s salary and the correct deductions, pay them, issue a payslip and make a monthly return to HMRC (called a Full Payment Submission) on or before payday. You’ll also need to pay any PAYE and National Insurance deductions to HMRC by their deadline the following month.”

Read more on setting up payroll for the first time.

Key tips:

Workplace pension

Assuming your new employee is aged between 22 and the State Pension age, and that they will earn at least £10,000 a year, you’ll need to set up and enrol them in a workplace pension scheme.

You’ll need to pay at least 3% of their “qualifying earnings” into the scheme. Under most schemes, it’s their total earnings between £6,032 and £46,350 a year before tax. The employee will usually pay a minimum of 5%.

“Confirmation of these deductions should be listed on the individual’s pay statement,” says Price.

He adds: “The employee may choose to opt-out, but this isn’t permanent and they will need to be re-enrolled every three years, at which point they will be able to opt-out again if they wish.” 

Key tips:

Training your staff

Finally, if you intend to support your new employee with AAT training and membership, order an employer info pack and join AAT’s free accredited employer scheme.

Read more on the benefits of becoming an AAT accredited employer.

In summary

Taking on your first employee is exciting – it means you’re doing well and are taking steps to grow your business to the next level. Just ensure that you understand and comply with all the legal bits, and seek expert advice if in doubt.

Further reading on running your business as a new employer;