Big data: can it stop a crash? Posted 05/24/2018 by Mark Rowland & filed under Data analytics. Ian Fraser, author of Shredded: Inside RBS, finds out whether the clues to the next crash are hidden in the financial system’s data. Big data brought us the Higgs boson, or ‘God particle’. It’s helping find cures for cancer, and it’s delivering autonomous vehicles. But can it improve auditing and financial services? Could it even prevent future financial crashes? The vast majority of the data that swirls around most financial firms and accountancy practices still goes undocumented, effectively ending up on the financial equivalent of the cutting-room floor. But, thanks to dramatic improvements in computer power, algorithms, black-box thinking, data processing and storage, and blockchain technologies, it is now easier for firms to analyse, interpret, structure and extract value from data that was traditionally ignored. Kara Stein, a commissioner at the US Securities and Exchange Commission (SEC), believes that big data may be the key to preventing future crashes. She told delegates at the 2016 Big Data in Finance Conference that the SEC has embarked on “an unprecedented data effort” that will culminate in the “largest data repository of securities trading activities in history”. She believes this data trove can be used to help ward off future crises. Andrew Lo, professor at the MIT Sloan School of Management, suggests the financial system is becoming so complex, and evolving at such a pace, that new ways of regulating need to be found. For example, perhaps the focus should be on systemic risk rather than individual products and services. Lo advocates an ‘adaptive market hypothesis’ that takes into account human behaviour, to supersede the increasingly discredited ‘efficient market hypothesis’, which posits markets are perfect, as well as “a new, interdisciplinary paradigm for modelling and predicting system-wide risk”. Crisis averted? Audit firms, which blotted their copybook by failing to spot the last crisis, could also play their part in foreseeing the next one by weaving big data into an overhauled audit process. Roshan Ramlukan, EY partner for global digital accounts and former global assurance analytics leader, says: “The audit of the future could look quite different from the audit of today.” Writing on the firm’s website, he added: “Auditors will be able to use larger data sets and analytics to better understand the business, identify key risk areas and deliver enhanced quality and coverage while providing more business value.” In finance, among the most advanced users of big data are hedge funds. One, London based Winton Capital, built its investment approach on delving into obscure data sets, such as wheat prices dating back 1,000 years, with a view to finding ‘buy signals’. “We’re data-hungry,” says chief operating officer Nick Saunders. “Processing data at massive scale underpins everything we do.” Big data and artificial intelligence are seeping into the financial world on a smaller scale, too. Ultimately, they should bring improved insights and decision-making, which should, in turn, lead to better outcomes for consumers. Fact or fiction? However, sceptics worry that, because the real world of stocks and shares is complex and imperfect, trying to present it in a reductionist, synthetic way could be misguided. Atul Shah, professor of accounting and finance at the University of Suffolk, warns that the lack of appropriate skills in the sector, as well as the amount of erroneous data out there, will undermine big data’s potential in the financial world: “There is a lot of fictional data and hype, which constantly distorts facts.” Steve Keen, professor of economics at Kingston University and author of Can We Avoid Another Financial Crisis?, questions whether big data is a panacea or capable of delivering us from future financial peril. He does so primarily because individual banks and financial institutions lack access to rivals’ data, and because their choice of external data sets is subjective. “What you get is an episodic data stream, not a systemic one,” he says. “It might tell you whether one particular lemming is running towards the cliff, but it wouldn’t tell you whether it’s already fallen off, or whether the herd of lemmings behind is advancing with such momentum that it will push the ones near the edge off the cliff anyway.” This article appeared in our Jan/Feb 2018 issue of AT magazine.
Making Tax Digital for bookkeepers Posted 05/24/2018 by Mark Blayney Stuart & filed under Bookkeepers, Making Tax Digital. MTD (Making Tax Digital) is the largest overhaul of the tax system the UK has ever seen. The magnitude of the task means that recently, HMRC has seemed to announce that some key parts of the MTD rollout will be slightly delayed. So what are the key impacts for bookkeepers? What should you be saying to your clients at the moment, and how long do you now have to prepare? Do you file for clients or do they file for themselves? “The first key element is to know whether you are filing returns on behalf of a client, or whether clients are filing themselves,” says Brian Palmer, Tax Policy Adviser at AAT and CEO of Tax Policy Advice. “If it’s on behalf, then you will need to set up an agent services account with HMRC .” If you’re just working with the client’s own software (i.e. they are doing the actual filing themselves, “then as long as the client has been registered with HMRC to file MTD-compatible returns you can proceed as planned,” says Palmer. “Just be sure that your client software – or practice software – is MTD-compliant.” Benefits of MTD There has been “a surprising amount of resistance to MTD given that it makes so much sense,” argues Karen Lowen, Director, Dod-dle. “However, no-one likes change and for the smallest traders keeping records digitally can seem very daunting.” Moving to a digital tax system makes sense in many ways, Lowen argues; “firstly, HMRC systems are becoming somewhat antiquated and have had so many add-ons and changes over the years that it’s about time the whole system is overhauled. Also, we’re living in a digital age, whether we like it or not. Look at the rise of smart technology to see how life is changing, with new technology favouring the ‘digitally savvy’.” MTD for VAT MTD VAT has a mandatory deadline of April 2019 “and is already running in private beta.” Lowen’s software Dod-dle “is hoping to join the beta testing soon with its own MTD for VAT products to make it straightforward for the majority of small business owners.” MTD for self-assessment has no mandatory deadline as yet, “but a voluntary scheme will be available prior to any future deadline. Again, Dod-dle will be launching its MTD product once the system is available to the public. We’ve already taken part in initial trials with HMRC with good results.” The key message is that the move towards digital is inevitable, and it makes sense to be prepared What is the bookkeeper’s responsibility? HMRC has publishing a list of software that is MTD-compliant, “but don’t wait and see what they come up with,” Brian Palmer says – “check now that you’re compatible. It’s not HMRC’s responsibility, it’s the bookkeeper’s. Liaise with your software provider to see when they’ll be ready.” “There’s no VAT client software listed yet because no one has done it yet; at the moment, there are just a few listed which are for income tax.” Bridging the gaps For spreadsheets, “it’s likely here that you’ll need bridging software. In effect this will be an API-enabled plug-in module, which will extract data from the nine relevant boxes that are required, and link it to enable it to be filed with HMRC.” Essentially, this is programming that can take data straight from the spreadsheet and ensure it’s in the format that HMRC can read. “The likelihood is that there be standalone solutions that might (for example) charge £10 a time for using it. Or, it might be built into the practice software.” Again, it’s important for bookkeepers to know what software is being used, and clarify whether you’re filing on behalf of the client or whether they are filing themselves. “Be reassured though, that if you’re working on third party software with up-to-date licences, there’s a reasonable chance that it will work.” Start using digital systems Is it true that some sections of MTD are being delayed? Can bookkeepers relax a bit? “The commitment to make MTD compulsory for VAT-registered companies is still happening according to schedule, and will be rolling out next year,” Palmer says. “However, it’s true to say that mandation for the income tax side has been taken off the table for the time being. But, ministers and HMRC assure us that it will be back. The earliest this can happen is now 2020, but realistically it’s likely to be 2021/22.” The key message is that the move towards digital is inevitable, and it makes sense to be prepared. “If you have a serious business then you will want to know what your cash flow is, who owes you, who you owe, what funds you currently have and so on,” says Karen Lowen. “This information will only be available instantly if a digital bookkeeping system is used.” Dod-dle “produces software that avoids accountancy jargon, offers help and advice and has pre-defined nominal ledgers which guide the user to help choose the right category for their expenses or sales.” Start-up businesses should look to use digital systems from the beginning, Lowen argues. “It doesn’t make sense to learn a manual system only to have to retrain again in a few years.” Stay on track As far as bookkeeping is concerned, it’s not – yet – time to panic. “If you’re using one of the main software solution providers, then if it’s client-based you can be confident they will be able to get VAT returns ready and be MTD-compliant,” says Palmer. “The way it will be filed might change, but this will be ‘behind the scenes’, Palmer explains: “you probably won’t notice any difference.” The difference if you haven’t renewed the licence recently. “In that case the software might not be API-enabled because it was designed before that was available. So – you might need to consider either updating the licence to be MTD-compliant or alternatively, go back and ensure you can still export the software. There are many people using old versions – if it doesn’t have a current licence it’s highly unlikely it will work.”
The most common interview mistakes and how you can avoid making them Posted 05/22/2018 by ICS Learn & filed under Interview tips. After the upheaval of the pandemic, face-to-face interviews are making a comeback. It’s no longer the undisputed king of the selection process, with virtual meetings and hybrid models sharing the stage. Yet, the in-person interview is experiencing a resurgence, making its return with some new twists and turns. While you may look like the ideal candidate in your application, it is essential you back this up by making a good impression in person. Here’s our guide to the most common interview mistakes and how to avoid them. Being unprepared Bart Turczynski, expert at the Uptowork career advice website, says the worst mistake is not preparing for standard interview questions such as ‘What do you know about us?’ and ‘Why us?’ “If you go unprepared, you will look like a schoolchild who didn’t do their homework,” he says. Do your research and make sure you know a bit about the company. If you are going for a finance role, read up on the company’s finances and accounts. “You don’t have to spend a whole week doing research,” says Turczynski, “but if you don’t know anything about the business, other than what’s in the job ad, it’s a sign you don’t care about getting the job, you only care about getting a job.” Making a good impression – from start to finish Remember you don’t get a second chance to make a first impression, says career coach Sarah Jones. “Remember that before you open your mouth, your appearance and demeanour carry more weight than your words,” she notes. “I have heard of people doing really well at the interview, then making a flip comment in the elevator such as ‘god that was tough’ and blowing it all at the last minute. It’s all about make a good impression throughout the interview from when you enter the building, to when you leave.” Not following up How many times have you walked out of the door of an interview then heard nothing and left things there? Jones says it’s essential to follow up an interview. “Make sure you follow up with a LinkedIn message or email afterwards. That extra effort can make all the difference,” she says. Looking at it from their perspective Katherine Bryant, founder of The Progress Partnership coaching consultancy, says you need to try looking at things from the other side of the desk. “Speaking from a perspective of ‘why I want this role and why it’s good for me,’ rather than ‘here’s the value I’ll add to your team’ is one of the most common mistakes people make,” she notes. “Yes, they want you to be happy but they need to see how you’ll contribute too.” Not listening properly Make sure you listen properly too and don’t talk over the interviewer, Bryant advises. “Answering the questions you want to answer rather than those actually asked does not bode well for your ability to take guidance or work well in a team.” Not being yourself “Be yourself, everyone else is taken,” as the famous playwright Oscar Wilde once said. Don’t make the mistake of being more professional than personable. “Many people think they have to put the most professional version of themselves forward at interview,” says Dean Connelly, recruitment director of We Are Latte. “They forget that an interview is all about making a human connection and for both parties to assess if they are the right personality and culture fit for each other. Be yourself and be genuine.” Don’t leave it up to the interviewer to ask you all the questions Many line managers and senior finance professionals may have little or no training on interviewing and recruitment. “This could mean they make assumptions based on a candidate’s experience, don’t ask detailed questions or know how to uncover someone’s skill-set,” says Connelly. Asking a few key questions at the end could help showcase your skills and suitability for the role. “Allow the interview to start naturally,” Connelly advises, “then start to ask questions about what they’d like the person in this role to be able to do. This is your chance to show relevant examples of how you fit the role.” Don’t try and blag it Many people make the mistake of thinking they have to be able to do everything the job requires, but if your knowledge of the accountancy software they use is actually quite basic, don’t be afraid to say so. “Be honest and then show them how you are able to pick things up quickly,” Connelly advises. “It shows an interviewer that you have good self-awareness, are realistic and are open to learning.” This article has been brought to you by ICS Learn.
Excel tips – analyse trends using Sparklines Posted 05/22/2018 by Filtered & filed under Excel tips. Excel is packed with tons of useful and powerful features, interesting charts, libraries of formulas and awesome data analysis tools. With such a vast array of functionality it can sometimes be hard to pinpoint features that are easy to use, and quickly add value to your work. What I like to call, quick wins! Let’s explore one of these useful features, Sparklines. Sparklines (Insert > Sparklines) Sparklines are mini-charts contained within a single cell that provide simple visualisation representations of trends across a row of data. Sparklines are ridiculously simple to use and can be extremely insightful particularly on spreadsheets crowded with data. As the saying goes, good things come in small packages and many people are yet to capitalise on the potential of these tiny charts. To create your own Sparklines, select the data range and on the ribbon, click Insert and then select the Sparklines type — Line, Column or Win/Loss. In this example, I have selected Line. The highlighted row will show in the Data Range field. The Location Rangeis the cell where the Sparkline will be displayed. Just click on the cell and Excel will populate this field with the absolute cell reference. Click OK. Hey Presto! You’ve added your first Sparkline! The Sparklines contextual ribbon will appear which provides further options to customise your Sparkline such as marking High and Low Points, changing the Style, changing the Sparkline and Marker Colour. Best of all, if you have many Sparklines to add, you can utilise Excel’s Auto-fill capabilities and just drag the Sparkline down to complete a whole column of mini-charts. Line But wait! What if you decide you would like to see the trend represented in columns instead of lines? No problem! Highlight the Sparklines and click the Column button. Column The third option is Win/Loss. This is useful if you have negative data and want to show an accurate representation of this using columns. These tips were provided by filtered. Read more tips on Excel here Browse the full range of AAT study support resources here
How to improve your well-being at work Posted 05/21/2018 by Georgina Fuller & filed under Career. Presenteeism, a culture where people feel they have to come into work and be ‘seen’ as much as possible (regardless of whether they are ill or not) has more than tripled since 2010, according to a new report by the CIPD (Chartered Institute of Personnel & Development.) The latest CIPD/Simplyhealth Health and Well-being at Work report, published earlier this month, found that 86% of the 1000 respondents had witnessed presenteeism in their organisation over the last 12 months, compared with just 26% in 2010. So, how can employees proactively improve their well-being and productivity at work? Don’t underestimate the importance of a good night’s sleep. Dr Charlotte Elsworth-Edelsten, research fellow at the School of Human & Life Sciences, Canterbury Christ Church University, says sleep is the single most important event in our daily life. “There is increasing evidence to suggest that poor sleep is detrimental not only your physical health, but your cognitive health too. This can have far reaching consequences in terms of you work productivity,” she notes. You should, says Elsworth-Edelsten, be aiming for five 90-minute sleep cycles a night minimum. This will help improve your concentration, decision-making, creativity and social skills. Poor sleep could, however, trigger mood changes, increase stress levels, impulsiveness and make it harder to focus. Stay hydrated and don’t skip breakfast Emma Fowler, director of CHX Performance well-being and performance consultancy, says you can boost your productivity by making a number of small day-to-day changes. “Drink more water and eat a balanced breakfast. If you skip it, you’ll run out of energy by mid-morning,” Fowler notes. “Your brain is made of mainly fat and your speed of neurotransmission (thinking) is dependent upon the axons of nerve cells which are made of protein. Your brain runs on carbohydrate, so try your best to include all three food groups (protein, fat and carbohydrate) in each meal.” Work out what sort of ‘sleeper’ you are and try and tweak your work schedule accordingly Not everyone’s natural clock runs on the same schedule, says Dr Michael J. Breus, a clinical psychologist who specialises in sleep disorders. There are, according to Breus, four different chronotypes of sleepers based on the animal kingdom: the lion, the wolf, the bear and the dolphin. If you can work out which animal you are, it might help you ascertain your most productive time of day is and the best time to schedule in a meeting. The lion, for example, is a morning person and at their best first thing. The wolf, on the other hand, is usually a creative, artistic extrovert who works best alone and during the evening. Wolves need to ensure they get plenty of natural light during the day to stay productive. “The majority of us,” says Elsworth-Edelsten, “are bears who go with the flow, which means we rise with the sun and get sleepy at night time. The dolphin, however, is the classic insomniac (characterised as those who typically have four hours or less sleep a night over a period of over four months) and usually has one eye open at all times.” Don’t over indulge at lunch time If you want to avoid the post-lunch slump you should try and avoid over-indulging at lunch time. Dietitian Rebecca Dent explains: “If we measure how hungry or full we are on a scale of 1-10, we should ideally leave the table and finish eating when we are at the 5 or 6 mark (rather than going for a 10 each time),” says Dent. “You should also wait around 20 minutes for your stomach to tell your brain you’re full before you continue eating.” Make sure you have plenty of healthy snacks to hand Next time you feel a stab of hunger coming on, don’t reach for the communal biscuit tin. Instead, try and ensure you have plenty of healthy snacks – bananas, oat cakes, fruit and nuts, natural cereal bars – on hand to tide you over till lunch time or the end of the day. Get outside Environment is critical to well-being, says Fowler, and being outdoors is key. “Even if you just take a 20-minute walk at lunchtime, it can reset your whole afternoon positively,” she notes. “Walking will break down stress cortisol you’ve accumulated that morning, you’ll receive a welcome dose of UV / vitamin D and serotonin (which you can convert to melatonin later in the day for a better night’s sleep) and, if you go with a friend, these serotonin levels will be even higher.” Cut your caffeine intake in the afternoons It may be tempting to hit the caffeine in a bid to help you stay focused but it’s worth keeping in mind that it has a six hour ‘live,’ meaning that it will only leaving your system up to 12 hours after you ingest it. “If you regularly consume caffeine, we recommend you limit your consumption to pre-lunchtime,” says Elsworth-Edelsten. “Throughout the day a chemical called adenosine builds up in the body and acts like the bodies brakes to unwind. Caffeine stops this from happening which could mean you have problems switching off and getting to sleep later.” This could lead to a continual cycle of poor sleep and poor productivity.
How to become a millennial mentor Posted 05/18/2018 by Georgina Fuller & filed under Career. The days of senior managers (predominantly male and often over the age of 40) imparting their decades of corporate experience on new recruits are coming to an end in many avant-garde organisations and accountancy firms. ‘Reverse mentoring’ where millennials and 20-somethings turn the tables and coach senior-level managers is a growing trend and finance firms, such as KPMG and PwC, are now using reverse mentoring to bridge the generation gap and help Baby Boomers get to grips with Gen Z and Gen Y. Inga Beale, CEO of Lloyds of London, is a case in point. Beale meets regularly with a 19yr old mentor and says it has really helped her to think differently about things, and given her a completely different perspective. How can millennials become a mentor and encourage their company to invest in such a scheme? Sophie Robson, founder of Millennial Matters blog for young people working in financial services, says many companies run ‘be the difference’ days which let employees support a charity/initiative of their choice, which could be a good starting point. “Find out who’s responsible for this in your company – in some companies it might be HR, but others might have their own dedicated outreach/engagement programme,” says Robson. “Speak to them about opportunities they might be able to hook you up with or check out their websites for any useful contacts. For example, the girls’ network, which arranges female mentors for disadvantaged girls.” Mentoring opportunities Many financial services firms also run mentoring programmes, including the London Institute of Banking and Finance and the 30% Club, but overall, mentoring in the accounting sector is, says Robson, quite ad-hoc. Utilising social media could be another effective way of creating opportunities, Robson advises. “Update your preferences on social media. LinkedIn, for instance, gives you the option to list mentoring as an area of interest,” she says. Emily Cosgrove, co-founder of The Conversation Space coaching and mentoring consultancy, says it’s also worth seeing if there are any online chat groups or a community of mentors and mentees that you can join. “You can look outside the organisation to see if there’s anything that might work for you,” she notes. “It’s also worth asking people you respect if they know of any good programmes running. They may already even be mentors themselves.” Make sure, however, that as well as looking externally you also look inside your organisation. “Ask your peers, colleagues and line manager if there’s anything already happening along these lines in your company,” says Cosgrove. Do you have the necessary skills? You also need to consider if you have the right sort of skills to be a young mentor. Being a good, emphatic listener, being able to build a rapport and being authentic are all essential parts of coaching and mentoring. Hayley Smith, owner of Boxed Out PR and young mentor at the Central Research Laboratory, which specialises in Fintech accelerator programmes, says: “You need to be valuable. You will be asked questions that you need to be able to answer, or at least know where to look, so you will need to do your research or have a network that you can refer to.” Sharing skills, experience and information in mentoring both inside and outside your organisation is, says Smith, vital. “I think experience is key when it comes to mentoring and you have to be able to share it (the good and the bad) with colleagues and other mentors.” Start off with some taster sessions It may also be worth asking your manager or HR team if you can run a ‘taster sessions’ to give you an idea of what mentoring might entail, Smith advises. “Taster sessions can give you an idea of what business owners want and it will give you a rough idea of what is required from you and if you are suited to it,” she says. Chloe Walton, mentoring expert and head of strategy & conversations at The Conversation Space, says you also need to ensure you have a decent support network in place and a clear objective. “You need to establish what you want to achieve, the roles and responsibilities and what the needs are between the individuals from the start,” she notes. “For a good mentoring relationship to work, it needs a framework and to be supported, otherwise it just becomes a nice cup of coffee and a chat.”
LGBT rights in the workplace: why employer support is vital Posted 05/17/2018 by Nicola Smith & filed under Career, Employers, Students, Uncategorized. For Alessio Pagliano, an IT expert from Turin, Italy, opting to study AAT advanced and professional diploma was life changing. Although Pagliano, 39, loved his IT-focussed roles at insurance multinational, Aviva Plc, where he had been working since moving to the UK in 2005, he often felt that his next career step was eluding him because of his lack of finance background. Knowing your worth “I always had that feeling of not really being able to be as effective as I possibly could. I had loads of IT qualifications, but I wanted something else that could help me get a promotion, because regardless of this sort of achievement, I could never get the promotion that I thought I deserved,” he said. In the end, studying for AAT qualifications turned out to be the gamechanger he needed, allowing him to combine his IT expertise with newly acquired financial proficiency in a promoted role as an Anaplan model builder. “The promotion is amazing for me because I tried for 13 years and I didn’t get it, and now having all this extra knowledge and experience, working as part of a really strong performing team that is actually delivering stuff, has been the best move that I ever made,” he said. New role, new responsibilities In his new role as Anaplan Model builder/analyst, he applies technical knowledge supported by newly acquired financial and management accounting skills converting business requirements into models that give great insight for the business to make key decisions. “Anaplan is a disruptive and very flexible technology that is basically enabling developers or accountants to create planning, budgeting and forecasting applications across the entire business. It could be in finance, it could be in sales, it could be in HR, or anything that requires planning and reporting,” he explained. This kind of progression seemed beyond Pagliano’s grasp just a few years ago, until his quest for deeper financial knowledge brought him to AAT, which he decided was perfect for someone with no prior accounting experience. “I thought this would be the ideal place to start because it’s starting from scratch,” he said. How studying increased his confidence With the full financial and logistical support of his employer, Pagliano powered through both advanced and professional diplomas. “It immediately boosted my knowledge, experience and confidence,” he said. Armed with his new skills, Pagliano applied for an internal finance transformation project as a mini-secondment. “I liked it and they liked me. They made an offer and I moved into a new role,” he said. His new role brings him into contact with senior stakeholders, finance business partners and accountants. “I think that sort of knowledge and confidence that I acquired from AAT enabled me to understand and also advise, because studying AAT in 2016 I was also at times up to date with the most recent information,” he said. The importance of a work/life balance Pagliano admits that success at work is one of the big motivational factors in his life. “Being able to go to the office feeling appreciated, that I can make a difference and a contribution working with the team is quite important for me,” he said. “But at the same time it’s also about being able to have the right balance between work and personal life,” he said. His current job requires long hours during the week, but, in return, he has every second Friday free. Lack of LGBT rights Pagliano uses the time to visit his family in Italy or travel with his husband of two years, Rob. Moving to the UK in his twenties was also transformational on a personal level, he explained, as it allowed him to be fully open about his sexuality. “Although my family and friends in Italy knew, I never felt comfortable in coming out in the work environment because I knew that it would have been massively counterproductive. There is still quite a lot of homophobia. Perhaps it’s manageable, but the rights aren’t there,” he said. So if the rights aren’t there in the first place, it’s a much more complex issue and you never know who you are going to deal with. Coming out in Italy you can put yourself in a massive risk situation, which I never felt comfortable with,” he said. By contrast, in the UK, Pagliano found that Aviva was a “gay friendly employer” where he immediately felt comfortable. “I slowly came out at Aviva, and everything has been absolutely brilliant. I can be me in and outside of the office, which obviously makes a huge difference, and not everyone would seriously appreciate it,” he said. “It’s something that unless you are in the situation it is a bit different and difficult to realise the importance of it.” Employer support Aviva allowed him not only to be himself, but they were actively involved in promoting the rights of the LGBT community, he said. “They support both Pride and they’re really big on Corporate Social Responsibility. LGBT and minorities support is something that they are really focussing on,” Pagliano pointed out. “Knowing that I can go for example to the London or the Norwich Pride parade myself, wearing an Aviva T-shirt and meeting colleagues, it’s so nice,” he said. “And I can go back to the office and talk about it. When people ask ‘what have you done last weekend?’, I feel comfortable in saying that I went to the pub with my husband without lying or saying I just went out.” Riding high on his recent successes, Pagliano only has one joking complaint – that his thunder is sometimes stolen by his husband’s intriguing background as a nuclear submarine coxswain. “When you go out and meet new people, and they ask ‘what do you do?’ I say I work in finance and IT, and he says ‘I was in the Cold War and the Falklands and I was driving a nuclear-powered submarine’. How do you compete with that?” he laughed.
What bookkeepers should know about director’s national insurance contributions Posted 05/16/2018 by Julie Hodgskin & filed under Bookkeepers, Pensions and payroll. Director’s NICs can be problematic for many payrollers as the methods used are different from those of other employees and can often seem problematic. Here the aim is to demystify the process and ensure that the correct amounts are paid to HMRC. Director’s national insurance contributions (NICs) are, unlike employees, calculated cumulatively using the ‘annual earnings’ method. This is because, historically, payment amounts and frequency of payments made to directors could be made in such a way that NICs could be avoided. This manipulation can no longer be done, but the method is still used to calculate the deductions. Unfortunately, many employers do not apply the method correctly, and, knowing this, HMRC inspectors often focus on this area during a compliance review. Definition of a director For NI purposes the term ‘director’ covers any person performing the function of, or acting in, the capacity of a director. This term includes people such as the company secretary as follows: A member of a board, where the company is managed by a board A single person, where the company is managed by an individual Any person in accordance with whose instructions someone in the above categories is accustomed to act. Note that there are some exclusions and more details can be sought from HMRC or other professional advisors. Methodology For directors appointed before or on the start of a tax year have an annual earnings period for the whole year. This is whether they remain a director for the whole year or not. The method used is the same as far any non-standard earnings period. In calculating the NIC liability the standard tables can be used, or the liability worked out using the exact percentage method. Below is the method using the table method Table method Using the tables downloadable from GOV.UK Divide the total earning to date by 12 if using the average monthly earning to date (or 52 if using the weekly tables) Look up the average monthly earnings in the relevant table Multiply the figures by 12. This gives the total NIC due to date Deduct any NICs already paid in the tax year to date The remainder is the amount of NIC due for the current period. Exact percentage method This method can be used without the tables above, as long as the current annual NIC limits and thresholds are known. Using the annual limits and thresholds, LEL, PT and UEL Compare the total earnings to date with the annual limits and thresholds Apply the appropriate percentage as shown Deduct any NICs already paid in the tax year Deduct any NICs already paid in the tax year to date The remainder is the amount of NIC due for the current period. Alternative arrangements With the above methods the deductions for NICs are not spread evenly. Some directors can find themselves paying no NICs during the early part of the tax year, while paying NICs on all their earnings later during the year. Other directors may find that they high NIC liabilities from the outset. One way around this problem, and one that is acceptable to HMRC, is to treat the directors who are paid regularly, typically monthly, as salaried employees. Calculate the NICs due on the monthly earnings for months one – 11 At month 12 recalculate the NICs at the end of the tax year using the total earnings and the annual limits and thresholds. Compare the amount to the NICs already paid during the year before paying month 12 so that amount paid in month 12 can, if required, be adjusted for any differences. Avoid mistakes to prevent a HMRC visit It is hoped that this quick outline of the methods to use for calculating director’s NICs is helpful in avoiding any mistakes, and minimise any unfortunate consequences resulting from an HMRC compliance visit. If a visit from HMRC inspectors is due, just keep calm and check the calculations.
People are drowning in ISAs – why we need simplicity Posted 05/16/2018 by Mark Farrar & filed under AAT news. I’ve recently been trying to help my children get onto the housing ladder. They were all looking at ISAs to help them save a deposit, and they’ve all decided on different options. Which ISA suits your needs? One of my children decided to go for the Help to Buy ISA, which gives people saving for a first home a 25% boost to their savings when they buy a property worth up to £250,000 (or up to £450,000 in London). This ISA is due to be rolled into the Lifetime ISA, or LISA, which my other child went for. A girlfriend of a third member of the family decided to wait for new LISA providers to come in. None did. Watching the younger generation grapple with their savings in various ways was eye-opening. They spent a lot of time weighing up options and trying to understand what each one would mean for their plans. None felt satisfied they’d made the right choice for them. ISAs have certainly been tinkered with since they were introduced. Most changes have been made with the best intentions, but they’ve caused so much unnecessary confusion. ISAs were specifically designed for over-18s, for example, but we now have a Junior ISA. Over-16s can now open both a Junior and a normal adult cash ISA. The confusion surrounding ISAs There are now eight different kinds of ISA, each with their own strengths and weaknesses. It’s a lot to weigh up; I’ve worked in the banking sector in senior finance roles, and even I get confused by them. No wonder the UK’s savings ratio is actually going down at the moment – an £18bn reduction. We ran a working group of key industry figures to discuss ISAs and how they could be improved. The group agreed that there was a real need for the government to look to the long term and seek to simplify the situation. The phrase ‘everything ISA’ was used at that meeting to describe a wrapper into which existing ISA products could be folded, allowing people to monitor their savings within a single portal, complementing the different stages and journeys that they are undertaking in their lives. It was all quite timely. Once made public, our recommendations really struck a chord with many people. I wrote to the Chancellor, imploring him to consider taking action. I expect he has a lot on his plate at the moment, not least Brexit, but it will be interesting to see what his response is. Read AAT’s review of the ISA regime here. This article first appeared in our May/June 2018 issue of AT magazine.
Last minute GDPR compliance checklist for accountants and bookkeepers Posted 05/15/2018 by Julie Hodgskin & filed under Bookkeepers, GDPR. The compliance date for GDPR is fast approaching. In an ideal world all processes would have been recorded, and all notifications written. However, this is not an ideal world, and though training may have been completed, and notes made, action towards compliance may yet need to be done. Before going any further, just a note on staff involvement. All staff will need to be trained and informed of the processes and procedures, so why not involve them from the start? Their input will make the task easier for the Data Controller and/or senior manager, and they will ‘buy into’ the processes more readily, since they were involved at their inception. So here’s a quick round-up of what needs to be done before May 25. Personal data policy Inevitably payrollers, agents and licensed accountants and bookkeepers will have client, contractor and employee personal data. This is needed to process pay or process tax and national insurance liabilities. However, what is not needed to process pay and self-assessment, but is sometimes captured, is the special category data. Special category data This type of data used to be called ‘sensitive’ data and includes such information as ethnicity, race, political affiliations, religion, trade union membership, genetics, biometrics (where used for ID purposes), health, sex life or sexual orientation. If any of his information is captured by the system, then it is necessary to analyse whether there is a need for the data. If there is not, delete the data and shred the files immediately. Personal data shared with third parties If any data has been shared with any third parties then not only do you need to confirm that the organisation is GDPR compliant, but also, any amendments made to the personal data held within the organisation must be communicated to the third party. Actions to take now Audit personal data held. Document process for updating personal data. Document process for informing third parties of personal data amendments. The process could be written or be in flowchart form. However, it does need to be documented. Personal data storage policy Identify where the personal data is held, whether electronically or in hard copy form. If the data is held remotely, for example, in the cloud, then assurances about privacy must be sought from the cloud owner. These must include processes and safeguards being in place to protect the personal data from any data breaches. Similarly, if the data is held in-house safeguards must be in place. It may be that all personal data such as client information is held on a removable hard drive or on an internet-disabled computer. Whatever means are used, restrict access to the device by physical and electronic means. Another area of concern is whether it is possible to copy personal data onto a moveable storage device, for example a USB stick or downloaded onto a laptop. Again, physical and electronic methods should be used to minimise any data breach. If the data is held in hard copy, that is, paper based, then again safeguards must be in place. First, ask whether there needs to be hard copies? If so, is the data secure? Can it be locked and protected against unwanted access? Whatever the method used it must ensure the safety of all personal data stored. Actions to take now Audit storage facilities for personal data, identifying the areas where it would be possible for someone to gain unauthorised access to the data. Restrict access to the personal data by encryption, password protected or physically limiting access to the device. Document the procedures for gaining, updating and transferring personal data within the organisation, and to third parties. Personal data retained policy GDPR states that personal data should be kept for ‘no longer than is necessary for the purpose you obtained it for’. As payrollers, agents and licensed accountants and bookkeepers we have a legal obligation to hold data for a minimum requirement, but beyond that, what is necessary? How is ‘necessary’ defined? The easiest way to decide is probably to comply with the legal requirements, but, if data is held for longer, document the reasons why. Actions to take now Document any reasons why personal data is retained for longer than is legally required. Personal data transmission policy Payrollers, agents and licensed accountants and bookkeepers regularly send personal data via electronic means. Some software programs have encrypted communication channels built into them, but others do not. Basic Payroll Tools (BPT) for example does not produce payslips, therefore these must be created and transmitted to the employee by the payroller. To protect the data in these and similar circumstances Password protect the document using a non-formulaic (random) password. Send the document to one of the employee’s email addresses while sending the password to another email address held by the employee (perhaps payslip to the work email address and the password to the private email address). It may be incumbent on the employee to open an email address just for this use. Actions to take now Document the above policy. Personal data deletion policy Personal data should be deleted as soon as possible. Both hard and electronic copies should be shredded. ‘Binning’ or deleting documents and files is no longer enough. Actions to take now Document the policy on personal data held in paper and electronic format. Investigate and possibly invest in electronic file shredder software. Communicate with your clients immediately Write to clients outlining the organisation’s policies regarding the collection, retention, storage and deletion of personal data. Longer term actions Monitor compliance with the policies. Regularly train staff. Keep reviewing the policies to make sure that they are still relevant and suitable. A quick mention about anonymisation and pseudonymisation. Though there may be little use for anonymised data (permanent deletion of any personal data), pseudonymised data is more useful – as long as the encryption key is kept separate from the data. This is an alternative way of holding and transferring personal data while adhering to GDPR. AAT Comment has a dedicated GDPR page offering updates and guidance.