Related party disclosures for small companies Posted 08/20/2018 by Steve Collings & filed under Financial accounting and reporting. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland outlines the presentation and disclosure requirements for small companies in Section 1A Small Entities and this includes the disclosure requirements for small entities. In comparison to previous UK GAAP, the related party disclosure requirements for small entities are minimal. There are, however, two types of related party transactions applicable to a small company which must be disclosed in respect of: Directors; advances, credit and guarantees; and Related party transactions. Directors’ advances, credit and guarantees Directors’ advances, credit and guarantees are required to be disclosed by virtue of section 413 of the Companies Act 2006. Specifically, section 413 requires details of advances and credits granted by the small entity to its directors and guarantees of any kind entered into by the small entity on behalf of its directors must be shown in the notes to the financial statements. The details required of an advance or credit are: (a) its amount; (b) an indication of the interest rate; (c) its main conditions; (d) any amounts repaid; (e) any amounts written off; and (f) any amounts waived. Monetary amounts are required to be disclosed in respect of items (a), (d), (e) and (f). The details required of a guarantee are: (a) its main terms; (b) the amount of the maximum liability that may be incurred by the small entity; and (c) any amount paid and any liability incurred by the small entity for the purpose of fulfilling the guarantee (including any loss incurred by reason of enforcement of the guarantee). Related party transactions The level of disclosure for related party transactions for a small entity is significantly reduced in comparison to previous UK GAAP (e.g. the FRSSE) and under FRS 102 a small entity must provide particulars of material related party transactions, not concluded under normal market conditions, entered into with: (a) owners holding a participating interest; (b) companies in which the entity has a participating interest; and (c) directors (or members of the entity’s governing body). FRS 102 does not define ‘normal market conditions’ and hence professional judgement would be needed in this area. For example, where a director introduces a loan to the small company and charges a rate of interest below market rate, this would be caught under the related party disclosure rules as the loan is not at market rate and hence has not been concluded under normal market conditions. Therefore, where a related party transaction has not been concluded under normal market conditions, the particulars required to be disclosed are: (a) the amount of such transactions; (b) the nature of the related party relationship; and (c) other information about the transactions necessary for an understanding of the financial position of the small entity. The example above illustrates how the disclosures may look if the company is medium-sized/large, small and micro, hence the larger the company, the more comprehensive the disclosure notes. Directors’ remuneration The requirement to disclose directors’ remuneration and other benefits in the financial statements of a small entity was repealed by SI 2015/980 which transposed the requirements of the EU Accounting Directive into legislation. As many small companies are now applying FRS 102, Section 1A for the first time from December 2016 year-ends onwards, some practitioners have expressed surprised at the absence of the directors’ remuneration disclosure. However, just because it is no longer a legal requirement does not mean that it can be forgotten about entirely! In practice, it is not uncommon for a director-shareholder of a small company to receive a salary equivalent to the PAYE threshold and the balance of his/her remuneration to be paid by way of dividend as quite often there are tax advantages of structuring the director’s remuneration in this way. The question that must be asked for related party disclosure purposes is ‘is this considered normal market conditions?’ If the answer is ‘yes’ then no disclosure is required; if the answer is ‘no’ then disclosure is required. There is no clear-cut answer where this situation is concerned, although it is expected that most small companies will not disclose directors’ remuneration on the basis that the directors consider a salary up to the PAYE limit and the balance in dividends to be normal market conditions. In addition, many automated accounts production software systems appear to be defaulting to non-disclosure, presumably because it is no longer a legal requirement. However, do bear in mind that this may not always be the case and professional judgement is needed. The advice at the present time is to document any conclusions as to whether disclosure has, or has not, been made and why remuneration has been judged to be/not to be concluded under normal market conditions in case such decisions are challenged further down the line.
How to handle a mid-life career change Posted 08/17/2018 by Charlotte Beugge & filed under Career, Students. Many study for their AAT qualifications later in life, after years in a career not related to accountancy or bookkeeping. But what are the challenges and advantages of making an about-turn in your career path late in life? Older and wiser It’s a misconception that middle-aged means you’re stuck in the mud. According to The London School of Business and Finance’s 2015 Careers Report, 43% of workers aged between 45 and 54 are seeking new challenges. Given that changes in State Pension age mean we’re all going to have work longer, then changing direction in your forties, fifties or even later could mean a lengthy second career. But there are challenges to studying and changing career later in life. It’s likely that you will have to combine studying with working – as well as looking after a home and possibly caring for children or older relatives. You might be worried about how you’ll handle studying if the last time you were in formal education was awhile ago. And of course, you may worry about whether you’ve made the right decision. Feel the fear and do it anyway Lesley Warne FMAAT, was in her fifties when she changed career. Today, she runs her own successful accountancy business with more than 65 clients in Ludlow, Shropshire. Lesley, 63, had a long career in the sports sector, working as an aerobics instructor, a badminton coach and running a top gymnastics club. But in 2008 she decided to change career, and went back to college to study for her AAT qualifications. She’d long been interested in accountancy (despite hating maths at school) and there was little chance of career progression in sport. And she really liked the idea of being her own boss. Lesley thrived as a part-time student at Telford College so much that she completed her AAT qualifications in two rather than the usual three years. She had been combining her studies with an office job but once she’d qualified, the college took her on as a part-time lecturer. Lesley taught for two years but then decided to focus on her own business – the long commute to Telford was also a factor. Lesley advises: “If you want something, do it – otherwise you’ll just regret missing the opportunity. My qualifications allow me to be my own boss which I love. Being self-employed gives you the kind of freedom you can never get for working for a boss. I would say to anyone thinking about studying later in life that they should go for it: life is too short to sit around wondering what might have been”. My qualifications allow me to be my own boss which I love. Age advantage Some worry about being too old to study: will they be able to keep up? How will they get on with younger students? Being an older student can be an advantage. After all, you’re making a choice to study – rather than when you are younger when studying can be something you just fall into. And your life experience means you probably know just how to keep several plates spinning at one time. Angela Demoore FMAAT, Subject Lead for Accounting and Finance at West Suffolk College has been both a mature student and has also taught mature students. She said: “The advantages of studying later in life, in my experience, means the student has time to reflect on their career paths; their circumstances currently surrounding them; their experiences to date; their needs, wants, desires and aspirations. For some these will have changed completely. For some these will have continued and evolved further”. Roger Lewis AATQB, is a great example of a single-minded older student. He was 69 when he decided to take his AAT qualifications, following a long career as a mechanical engineer. He wanted to accumulate the skills needed to run his Freemasons’ Lodge finances. “I had an objective from the start” said Lewis. “I wanted to learn several skills including how to do double entry bookkeeping and how to prepare a statement of profit and loss. That was the motivation I needed”. Lewis says the only challenge he found in studying later in life was that not working in a financial environment he didn’t have the option of discussing technical matters with colleagues. And he says that he found he had a tendency to over-analyse – “After a while, you realise that double-entry bookkeeping is what it is: you go with the flow and then you understand it”. A balancing act If you’re planning on taking your AAT qualifications later in life, do make sure you’ve thought about how studying will fit into your life. Demoore now teaches many older students – but she once combined study with caring for two infant children. She advises: “Some students will be able to find organisation through the deemed chaos, and continue with their dreams. Unfortunately some find the need to park studies and consider coming back even later in life – both is OK”. Demoore points out that it can be an idea to test the water first. “As the AAT product offerings are growing there is an increasing number of older students. Short courses are tempting those that want to have an ‘option’ in retirement days where they can support and help out with local volunteer positions. Some are doing courses to keep their brains active. Others are actively seeking career changes”. The importance of upskilling Demoore says that the age of the students in classes is often the first question of many prospective students. “They worry that they will be the oldest in the class and not as ‘quick’ on the uptake as the younger members” she says. “Every year we see students signing up for AAT between 16 and 60+. This is a qualification for everyone, and I believe that the bigger age range, experience range, aptitude range in the class, the better and more pleasurable experience it is for the students. The banter between those coming directly through education, those in work place studying through an apprenticeship, those coming in after a study break and those looking to retrain – they make an amazing cohort of students adding value in each of their own individual ways”. And she adds: “I will always encourage upskilling, however big or small it looks, however life changing, or not that it is. We never know what it around the corner, but there is a world of opportunity for us all, and it is how/if we choose to take advantage of it”. Disclaimer: member designations were correct at the time of going to press in July 2018.
Disguised Remuneration – a bomb set to explode Posted 08/16/2018 by David Nunn & filed under Tax. Next month sees a critical milestone in HMRC’s efforts to crack down on Disguised Remuneration (DR)– often referred to as Contractor Loan Schemes. Those affected have until 30 September to register their interest in a settlement scheme to avoid loan charges, which will otherwise be levied from 5 April 2019. The subject is one of five topics covered in this month’s podcast by AAT’s Tax expert Brian Palmer. AAT members can listen to all these updates and access handy transcripts here. Disguised Remuneration schemes explained In general DR schemes involve the use of loans to reduce the tax that employees or contractors pay on their income. Typically, an employer makes payments to an offshore third-party, such as an employee benefit trust (EBT). The individual is then paid a small salary – say, up to their personal allowance – and the balance made up with the loan. The loan is not treated as part of the individual’s taxable income so, other than a benefit-in-kind charge, it is essentially ‘tax-free’. In theory, the loan is never written off or repayable. HMRC’s loan charge Legislation was passed in 2011 to tackle disguised remuneration, but it was not fully effective. So last year HMRC ramped up its efforts. Under the Finance (No 2) Act 2017, HMRC introduced a DR loan charge, payable through PAYE and NIC. This will arise on the 5 April 2019 if a loan has not been repaid on or before that date and a settlement agreed with HMRC. Time to settle HMRC is advising DR employers and participants to withdraw from the arrangements and settle their tax affairs before they are issued with a Followers Notice (FN). FNs force taxpayers to amend their tax returns where they have been involved with a failed tax avoidance arrangement (TAA). HMRC opened a settlement scheme in November 2017 to encourage those who have used schemes to settle before the loan charge comes in. This settlement opportunity does not offer any special terms, because HMRC is of the view that it has all the “ammunition it needs”. Those interested in a reaching a settlement with HMRC have until 30 September to apply, otherwise the department warns it might not be possible to reach a settlement before the loan charge arises. Who is affected? There will inevitably be a significant number of companies with employees who received loans from an Employee Benefit Trust (EBT), or similar structure. They (the employees) need to consider repaying such loans before April 2019 (or otherwise reach a settlement with HMRC in respect of such an arrangement) to avoid a disguised remuneration charge. AAT bookkeepers and accountants may find, through no fault or action of their own, they have clients who are exposed to DR schemes. For example, some years ago, a boutique provider of DR schemes may have approached their client(s), directly, or individuals may have received a loan from such a scheme as part of a past employment remuneration package. Who will be affected? All parties to involved in the use of a devices, such as EBTs, through which a loan was made, as part of the delivery of a remuneration package, need to consider their position. Settlements entered into early with HMRC benefit from a transitional rule where investment growth from EBT funds is not subject to PAYE and NIC, however this relief was withdrawn from 1 April 2017. Time to get things in order Anyone potentially caught by the legislation will need to take advice and check whether they meet the conditions for providing the information. The information required will depend on whether the entitiy affected is a contractor, employer or an employee more detail of what is required can be found on GOV.UK Where possible, individuals should also send their tax calculation for each year and the liability should be agreed and paid (or a payment arrangement put in place) by 5 April 2019. Brian Palmer’s tax matters podcast offers more further insight into Disguised Remuneration.
Why you should care about online learning Posted 08/15/2018 by Kaplan & filed under Career, Students. From shopping to banking to watching TV, we live in an era where everything has moved online, and education is no different. The number of students taking online courses only continues to grow as more options become available. With students citing flexibility as one of the key benefits to online learning methods, and people working longer hours, it’s not surprising that the need for flexible study has increased. However, we’ve now surpassed the early novelty of flexibility and convenience as drivers for studying online and stepped into a new world debate of classroom vs online studying. Whilst the two study methods have been placed in opposing corners, the truth is, neither is perfect. We sat down with Stuart Pedley-Smith, Head of Learning at Kaplan, to explore why online learning isn’t ‘new’, how it has been designed at Kaplan and ask what type of student it is best suited to. Firstly, it’s not new This notion that online learning is ‘new’ is a thing of the past. The ‘bite-size’ or ‘Youtube-style’ video learning has been part of Kaplan’s OnDemand study method for nearly two years – and the results speak for themselves. It has produced some of the highest pass rates for the qualifications it has been rolled out on and the enrolment numbers are increasing every month. These results have led to award-worthy recognition this year: a PQ Award for “Online College of the Year”, and “Best use of e-learning” at the AAT awards. Stuart Pedley-Smith, said: “It’s important students appreciate that putting something online doesn’t make it good, there is a lot of poor online content out there. What makes a good online course is how it’s designed.” It’s driven by data It’s a common misconception that online learning is a second-class substitute for classroom study. In fact, most online learning programmes have been created from a ‘student-first’ model. Stuart explains: “When teaching in a classroom, the experience itself teaches you what students understand and what they don’t. However, the problem that we’ve got is that it’s momentary.” With an online learning platform, like Kaplan’s OnDemand, we can gather statistical information on what is working and build on it.” Which leads us onto… It’s evidence based Kaplan’s OnDemand study method has been designed using evidence based learning. What this means is that our team of expert ‘instructional designers’ work with our classroom tutors to create an online learning platform that is based on data gathered from real students. “It means rather than giving guidance based only on experience, which is still hugely important, we can give guidance based on evidence.” Stuart said. It’s for the motivated It’s no secret that online learning is most suited to those who want to study at their own pace. Some of the benefits of online learning include flexibility, you can study whenever, wherever you want, it’s self-paced, meaning you can study at your own pace, quickly when something is easy and slowly for the more tricky areas – making it a truly personalised learning experience. That being said, it doesn’t come without its negatives, which include procrastination and isolation. A student who puts things off and doesn’t like studying alone, would be more suited to a method which allows for constant discipline and structure – like you’d get in the classroom. Stuart said: “Take getting fit as an example, some people will have a personal trainer who meets them at the gym at 6am, whereas others don’t need that discipline and will motivated to workout themselves.” Students come in different shapes and sizes We are all neurologically the same. It’s how we process, perceive and store information which makes us learn differently. When you’re trying to find out which study method is best for you, think about what type of learner you are. Where do like to study? In a group, on your own, do you prefer to learn in the morning rather than in the evening, and are you good at sticking to a timetable. Stuart said: “Science tells us that if you can tailor the learning to the individual then the individual will learn better.” Interested in studying with a learning method that has won several awards and has exceptional pass rates? Sign up for the free demo now or find out more here.
4 ways to give yourself the best chance of being hired Posted 08/15/2018 by Jude Obi & filed under Career. Trying to get a new job can be a daunting experience, especially if you are looking for your first ever one. It’s hard to know what you need to do, and what employers are looking for. Worry not, AAT has conducted research with 1000 UK employers to find out what they look for when they are taking on new members of staff. We’ve used their answers to bring you this list of four things you can do to make sure you have the best chance of being successful in your job hunt. 1.Get the right experience Having experience is how you show that you know how to do all the tasks related to a job. Employers want a new member of staff who is going to be able to do everything they need as quickly as possible; if they see you’ve got experience of doing a similar job they can be more assured that you will be capable of carrying out relevant tasks. Experience was one of the things employers said was most important to them. In fact, more employers told us that they would prefer to see experience from an apprenticeship than a relevant degree qualification on a person’s CV. Those employers who said they would prefer to see experience from a relevant apprenticeship said they prefer it because it proves that you have demonstrated your skills in a practical setting, and also that it means that you have a better understanding of the world of work. So, if you’re just starting out in your career, or thinking about changing careers, consider whether an apprenticeship route might be more valuable for your future to help you get that important experience. 2. Make sure your CV is correct Before you even get through the door to the interview stage, you will have to get through the initial application stage. For many jobs this often involves submitting a CV. Therefore, you need to make sure yours looks as good as possible. The presentation points on your CV the employers told us are most vital are that it has a clear layout, is no more than two pages long, uses an appropriate font and font size (no Comic Sans), uses clear language, and has correct spelling. Making mistakes on your CV can be easy to do, but hard to spot. One of the best ways to make sure you have as few errors as possible is to ask someone else to proof-read it for you. There are also guides on CV writing that can help you. 3. Develop the skills and attributes employers are looking for Employers will also look to see what personal attributes you have. Amongst the ones they told us are most important are interpersonal skills – how well you get on with people, how well you present yourself – are you dressed appropriately for the office or any meetings you may have? Being punctual is also crucial. If you are late for the interview without a good reason, you could spoil your chances of getting the job at the first hurdle. 4. Watch out for your social media presence A large amount of the world’s population now uses social media. It’s a fun diversion and a useful communication tool. However, it is essential to make sure that you are using it in the right way. Almost half of the employers we talked to said that they look at prospective employees’ social media profile when deciding when to hire them. 69% of those who check social media said they have decided not to hire someone because they didn’t like the look of their social media presence. Getting through the job application process, but then not getting hired because of something you’ve posted on your social media in the past, could be an annoying way to lose out on a job which you might otherwise be perfect for. Follow the advice from these four points, and the thoughts from the employers we spoke to, and you should be able to make more progress to getting yourself the job you want. As a bonus, we’ve also created this quiz to help give you a better idea of whether your CV is as good as possible. Quiz by AAT
How do you decide who to hire? Posted 08/14/2018 by Jude Obi & filed under Run your business. Taking on new staff is one of the most important things to get right when you’re a manager or run a business. It’s essential for the long-term success of your company that you make the right hiring decisions and bring in someone who will suit your organisation. AAT took the opportunity to speak with 1000 employers to uncover the key things they look for when they are hiring, to ensure they get the right staff. Is the person a good fit? Firstly, we asked what the single most important factor is to employers when hiring a new employee. The top answer was how the person would fit into the company culture. This is of vital importance because people need to be the right fit in an organisation, get on with their colleagues, and be able to work well with them. If someone does not fit with the company culture this could lead to problems between members of staff and affect morale and performance. Can the person do the job? Second on the list is how much experience an individual has. When hiring, if someone has performed the same role, or a similar one in the past, it will make it more likely they will be able to carry out the job for you now and do the tasks you need. Almost half of the employers we spoke to (49%) told us they prefer to see this experience come from a relevant apprenticeship or previous position, compared to 24 per cent who told us they’d prefer to see a relevant degree. Of those who said they prefer to see experience from an apprenticeship or previous position, 71 per cent say they prefer it because it means that an individual has demonstrated their skills in a practical setting; they have experience of doing the job they are applying for, where they may not if they have just have a degree. Looking presentable in person and online Other factors the employers specified are that the candidate looks presentable; if a client arrives at an interview not looking their best, it may make you wonder about whether they will be presentable in the office, or when meeting with clients. Also, being punctual is important, as you want an employee who is going to be at work on time every day, and early signs of a lack of punctuality may make you worry that it could be an ongoing problem. Candidates will need to get their profile right on social media if they see your role as the one that they aspire to. 49 per cent of employers who we talked to said they have looked at a candidate’s social media profile to help judge whether they might be a good employee. Any questionable conduct can be an indication that an individual may not be someone you want to hire. Of those employers who said they had checked social media, more than two thirds said they had decided not to hire an applicant because of their online conduct. Have you made the right decision? Getting a recruitment decision wrong could mean you have to go through the hiring process again, which can be expensive and time consuming. However, recruiting a new member of staff can benefit you immensely and give you a valued now member of your team. Make sure you consider all the factors to ensure you get the right person for your organisation.
How to fit your studies around your job Posted 08/10/2018 by Clare Evans & filed under Career, Students. Working and studying at the same time is demanding. Here’s how to manage your time effectively. Know how you spend your time effectively. First, look at how you currently spend your time. If you don’t know, log everything you do from the moment you wake up until you go to sleep. Do this for a few days. Plan, plan, plan Plan ahead so you know how much you need to do each day and each week. This will prevent anything becoming urgent, so you can avoid last-minute cramming and studying late into the night, which will only add to your stress levels. Plan your study time as follows: • What’s required? How many units, books, assignments and assessments are involved? • What are your deadlines, and assignment and assessment dates? • Write down any key dates. Create an outline of what you need to study over a given time. You may be able to complete one or more units in a week, or you may take several weeks to complete one unit. Make more time Free up more time in your working day for study. This is easier than you think. Get up earlier and gain an extra hour at the start of the day. Set aside 30 minutes at lunch Sneak in one to two hours in the evening, instead of watching TV or spending time on social media. Read and review your notes at quieter points in the day. Leaving work on time can also make a big difference to the amount of time you have for studying. Does work allow you to take study time? If so, make the most of it and plan that study time well. Prioritise at work Prioritise your tasks, and only work on what’s important or really is part of your responsibilities. Avoid reacting to every email, call or new task. Manage them aongside your other priorities, so you don’t take on too much. Create good boundaries to the start and end of your day, and know when to say no. Become study-efficient You can take more in if you study in short bursts. Try the following for each study session: decide what you’re going to study (based on your plan), preview the work for the session, and work for 20 to 25 minutes. Review what you’ve just studied, and then take a five-minute break. Repeat that work-break sequence for one to two hours, and then take a longer break. Review what you’ve studied at the end of the day to help you remember it better. At the end of the week, review what you’ve studied that week. The more you review, the more you’ll remember. Mind maps are an effective way to take notes during your studies. Use one or two sheets for each unit. They create a colourful image of the study material and are easier to read and review than pages of notes. Write down the key points on postcards. Use these to test and review the material in those quiet moments during the day, or on your daily commute. Stop studying (sometimes) Ensure you take time out from studying. Take a break between finishing work and starting your studies, and plan in time for exercise and socialising. Do something totally unrelated to numbers at least once a day. Read more on studying AAT; The key to success in synoptics Understanding your assessment questions Study tips: The best way to work through your AAT assessment This article appeared in our summer 2018 issue of 20 magazine.
Awards profile: “I became a practice manager while still studying” Posted 08/09/2018 by Mark Rowland & filed under Inspiring stories, Students. Brandon Yeadon MAAT did all sorts of jobs before he became an accountant. One was running a bike shop – he invested in the business, which was in trouble, and turned it around with the help of an accountant, Kate Watson FMAAT. She could see he had an instinct for finance, and asked if he’d considered accountancy. So Yeadon replied to an AAT advert in the Metro and spoke to a representative, who turned out to be very persuasive. His mind made up, Yeadon started the AAT Diploma in Accounting. When is the right time to start your own practice? He kept in touch with Watson. One day, out of the blue, she asked whether he wanted to take over her practice – she was moving to Granada and could no longer manage it. Yeadon, who is naturally risk-averse, wasn’t sold on the idea. Could he really take on a business while still so green? “I said: ‘Look, I am still a student. I haven’t got the tools or knowledge. I need practice.’ We made an agreement that, if I was going to do it, I would go and work with her and learn how to run the practice,” he recalls. He also started working at another firm to gain extra experience. When he got his licence to practise, he bought the goodwill (the client base) from Watson. He also inherited a member of staff, and Watson helped him with the practice’s work for a few months. Using your life experience It would have been easy to continue running the practice as it had been run before, but Yeadon’s instinct was to change things up: “Kate is a great accountant, but that’s all she’s ever done. So, having actually been a business owner who knows how difficult it is with cash flow and so on – that has allowed me to move things on.” Yeadon’s focus is currently on technology updates, management accounting and advisory services, as well as “generally being a counsellor to people”. “I’m trying to make it a more organic, touchy-feely kind of practice, where people feel like they’re invested in themselves. You’ve got to make them feel like they’re the most important clients. We’ve taken on a lot of new clients and they’re paying better fees,” he says. Celebrating your achievements Qualifying and taking over a practice has been a lot of hard work, but Yeadon is immensely proud of his achievements, for which he won ‘Rising Star of the Year’ at the AAT Professional Member Awards 2018. “I’m getting back to normal after all the excitement of the Conference and Awards. It was a lot to take in. It all felt very surreal.” “My friends think I’ve headed off with Elon Musk to Mars, but I love what I’m doing. I like the challenge of it.” This article first appeared in our July/August 2018 issue of AT magazine.
Pensions tax relief – are things about to change? Posted 08/07/2018 by Mark Blayney Stuart & filed under Financial accounting and reporting. To many analysts’ surprise, Philip Hammond did not reduce pensions tax relief (PTR) in the last Budget. Yet this particular investment incentive is directly in the firing line for the future. Former Pensions Minister Steve Webb was convinced that PTR would be reduced at the end of last year, telling the Chartered Institute for Securities and Investment’s annual financial planning conference that Hammond needed “to raise all the money he hasn’t raised, plus the economy is slowing, plus the spending pressure.” Webb, who is now a financial advisor with Royal London, said “[Hammond is] unlikely to raise the headline rates of income tax, national insurance or VAT, so where’s he going to look for money? Tax relief on pensions.” Currently, you can claim tax relief on the income you put into pensions credited at the rate you pay income tax – albeit with both annual and lifetime limits. However, the cost to the Treasury of retirement savings incentives now stands at £38.6bn. With Webb’s observations in mind, pension tax breaks for the wealthier saver are a likely, if politically sensitive, target. Should we expect this to be looked at again come this November? The answer is yes – but possibly no, as we will see. Last month, DWP spokesperson Baroness Buscombe said the Government would “examine the process for payment of pensions tax relief.” This was aimed at addressing the sense that pension tax relief is skewed in favour of higher-paid workers. Quoted in the Daily Telegraph, pension firm AJ Bell said that as a result of the Prime Minister’s £20bn funding promise to the NHS, savings investments like PTR will be “caught in the crossfire.” From the point of view of the saver, minded to be prudent and prepare for their retirement, this is unfortunate news. What should affected individuals do? For those reliant on PTR, it is worth calculating how much you stand to lose against expectations were it to be reduced to a flat-rate system of 25 or 30%; it would also seem advisable to pay in as much as possible now, according to Nathan Long, a senior pensions analyst at Hargreaves Lansdown, and “make hay while the sun shines.” PTR has already been eroded over the past few years, with a series of cuts including a reduction of the lifetime allowance to £1 million (from £1.8 million) in 2012. Similarly, the annual allowance was £255,000 in 2011 but is now £40,000. “Pensions should be long-term business,” says Steve Webb, and the number of cuts “undermines confidence in the system.” Future generations More widely, it is likely that extensive pension reform will, eventually, take place. Office of National Statistics figures indicate that the UK population in 2016 was at its largest ever (65.6 million) and projected to reach 74 million by 2039. “Improvements in healthcare and lifestyles leads to an ageing population; in 2016 in the UK, 18% of people were aged 65 and over and 2.4% were aged 85 and over,” the ONS data shows. “This has led to planned increases in National Insurance contributions – which were swiftly u-turned in 2017,” says Lucy Cohen, Commercial Director, Mazuma Accountants. “It’s also led to a series of increases in retirement age – and uncertainty about what we’ll actually receive when we get there.” Cohen sees today’s pension scenario as something of a time bomb, especially for younger workers. “We have an ageing population. Put simply there are more old people per young person who is working than there has ever been – and this is a trend that is set to continue.” Specifically talking about state pensions, Cohen points out that “it’s the working generation that funds the retired generation – each working generation pays for the generation above them. What happens when the retired generation’s economic needs start to outstrip the resources provided by the working generation?” We end up with the current problem, Cohen observes, of the Government wanting to address pensions but struggling politically. “Pension providers and employers need to consult in a serious way to educate millennials about the need for a private pension plan,” Cohen says. This needs to be combined “with other retirement finance options if they are to have any chance of allowing future generations to stop working and have any form of retirement.” Ministerial uncertainty George Osborne considered major pensions reforms when he was Chancellor in 2015, but backed away from doing so; arguably, the current Government’s reduced majority means it is in a less powerful position to do more than tinker with the system. “MPs have no idea how to resolve the ongoing changes to pensions relief,” argues Ian Hunt, Legal Consultant at East Devon Law. “There has been a huge push to urge people to take on pensions – whether that’s workplace pensions or private ones. The combined effects of people living longer, changing demographics and fewer full-time employees means that pensions can’t cope.” By around 2030, Hunt says, there will be more people aged over 65 than there are under 16. Those workers of the future will not be able to contribute enough to keep the state pension buoyant. “So there’s pressure to address the gap – but penalising those who have saved by reducing incentives to do the very thing they are encouraging – this does not seem the way ahead. It’s a dilemma.” Looking further ahead, it might be reckoned that as the baby boomer generation declines, so the imbalance in pension requirements will also decline. But the incoming workforce is not making up the difference. “The proportion of children in the UK population has declined from over 24.5% in 1976 to 18.9% in 2016,” according to the ONS. “This proportion is projected to decline even further in future years.” Regardless of how PTR is addressed, the pensions time bomb is not going to go away any time soon.
Protecting your business from cyber attacks Posted 08/06/2018 by Nick Martindale & filed under Run your business. Businesses have long been aware of the dangers they face from fraudulent activity, but until recently many have been guilty of underestimating the threat posed from cyber-attacks. But the Bank of England’s recent systemic risk survey suggest this may be changing; 62 per cent of firms in the financial services sector now perceive this as a threat, making it the second most common concern, behind UK political risk, and level with geopolitical concerns. Cyber attacks in the accounting sector The hack on Deloitte, which came to light in September 2017 and exposed emails from hundreds of clients including the United Nations and four US government departments, as well as a similar incident with financial services firm Equifax, has illustrated just how dangerous this can be. The problem is not confined to large players, though. Research by Beaming suggests 62 per cent of UK accountancy practices fell victim to some form of cybercrime in 2017, with the total cost to the sector more than £300 million. Accountancy firms face a number of risks which can could have serious implications, either financial or reputational, or both. “The greatest threat to any modern business using the internet and email is that the personal or sensitive data it holds is corrupted, held to ransom or stolen,” says Sarah Adams, a cyber insurance expert at PolicyBee. “An accountancy firm is an attractive target because the returns are potentially greater. The chance to access innumerable accounts and harvest personal details from just one place is too great a temptation to ignore.” Hacking is a major risk One of the major risks comes from hacking, says Harry Chenevix-Trench, operations manager at Blackstone Consultancy. “Those parts of network security that require the most human intervention tend to be the weakest points,” he says. “This does not merely mean a weak password; it can also mean an employee clicking on a malware-infected link in an email or accidentally using a USB stick containing malicious code that creates a ‘back door’ into the company network.” This is a particular threat in the accountancy space, says Liviu Arsene, senior e-threat analyst at Bitdefender. “Accountants that work with a lot of companies often receive emails with attachments pertaining to various documents, each email stressing its urgency,” he says. “It’s precisely that sense of urgency and routine that cybercriminals usually exploit to get victims to execute attachments or click on malicious URLs.” Phishing attacks, where employees are duped into handing over passwords or other important information, are also becoming more common, and sophisticated. “Cybercriminals have realised that by targeting one financial account with lots of money in it they can make more money more quickly, so they have developed what is known as the business email compromise attack,” says Daniel Brody, product leader, fraud protection, at Cyxtera. “In this kind of attack, the cybercriminal pretends to be an executive or financial professional within an organisation to trick another employee into handing over money or sensitive information.” Tips to protect your business There are a number of steps firms can take to reduce the chances of being caught up in a hacking, ransom or denial-of-service attack. Sean Newman, director at Corero Network Security, says the best starting point is to ensure that all software, from computer operating systems to specific accounting packages, is checked regularly for new patches, and that these are applied when available. “If accounting practices offer their services directly online, then there is also the risk of falling foul of DDoS [distributed denial of service] attacks, including those increasingly used for extortion purposes,” he adds. “Ensuring that real-time DDoS protection is employed, either directly or by using a service provider which can offer protection as an additional service, can prevent the likelihood of this.” A robust password policy is also essential. “As a minimum, passwords should be complex and changed on a regular basis,” warns Mitesh Patel, managing director of Fifosys. “It is often easily possible for an attacker to find the first part of a user’s details from a company website or LinkedIn, and then concentrate on hacking the password.” Companies should also consider multi-factor authentication, he adds, to cut off any transactions should passwords be compromised. Steps also need to be taken to target phishing attacks. Staff education is a good starting point, but cannot be entirely relied on, says Fraser Kyne, EMEA chief technology officer at Bromium. “Asking people to be careful is like asking people not to drink alcohol and to get regular exercise,” he says. “Everyone knows that they should do it, but that doesn’t mean that they always will. And, unfortunately, it only takes a single mistake by a single user, and all the good work can be undone.” Alongside this, it’s important to have a monitoring system in place to highlight phishing emails that come from similar domains, perhaps with just one letter or number different to the real address, says Brody. “This way, they are found before anyone can be tricked into clicking on them and handing over information,” he says. Simon Heath, director at The Final Step, says effective backup is also important – something he does through Datto – as this can avoid the need to pay a ransom even if the business succumbs to a ransomware attack. “Ideally you want a solution that can recover from a range of different scenarios,” he says. “It might be the MD deleting a folder accidentally just before a meeting, all the way up to head office burning down.” As well as ensuring their own systems are secure, accountants also have a role to play in advising clients. “As auditors, accountants are often keenly aware of how technology can affect the reporting of financial information, and cybercrime is no exception,” says Brody. “Additionally, the scrutiny that accountants place on clients during audits can also reveal previously undiscovered cyber-attacks. Indeed, some accountants have already expanded their service offerings to include cybersecurity consulting because it is so aligned with making sure financial information is properly recorded.” Recent developments in finance and accounting also have the potential to make cybersecurity even more of an issue. John Gordineer, director of product at SonicWall, points to the growing use of the cloud; something that was also highlighted by the Bank of England. “As more applications move to the cloud, security must also transform to provide modern protection,” he says. “Simply identifying which cloud apps are being used is step one, and it’s then a case of establishing policies to eliminate insecure shadow IT apps from the organisation.” Open banking is also likely to lead to more reliance on the cloud, with financial information being shared by third parties. The introduction of GDPR, which can see firms caught up in data breaches fined as much as 4 per cent of their global turnover or €20 million, will also force accountancy firms to take this more seriously, if they are not doing so already. “For accountants, the responsibilities go way beyond compliance,” says Sonia Blizzard, managing director of Beaming. “The most significant risk is that those who can’t be trusted to keep their clients’ data safe will soon find they don’t have any clients to protect.”