The manifestos are in, so what do AAT members think? Posted 06/25/2024 by Annie Makoff & filed under Members. Accountants across the UK assess the party manifesto pledges, highlighting the promises that excite and disappoint them. With just over a week to go until polling day, election manifestos from every political UK party have finally been launched and subjected to debate, analysis and criticism from just about every media outlet across the country, not to mention across social media platforms. It’s perhaps fair to say that while some manifestos have appeared cautious or lacking in detail, others have been seemingly full of bold promises. It’s not necessarily a fair comparison, though: parties who are likely to do well in the general election need to be realistic about their manifestos whereas smaller parties have the freedom to make bold promises without ever having to fulfil them. Here are the three main parties’ main pledges: Conservatives Abolition of NI for self-employed. Increase personal tax-free allowance for pensioners. An end to ‘low quality’ university degrees. Lowering immigration. Return of help-to-buy scheme. Labour Freeze VAT, NI and income tax rates. Cut NHS waiting times with 40,000 more appointments a week by paying staff overtime. Recruit 6,500 more teachers and 13,000 more police and community support officers. Create Border Security Command with counter-terror style powers to crack down on people trafficking and gangs. Create a publicly owned clean energy provider, Great British Energy. Liberal Democrats Introduce free personal social care in the community. Create more GP appointments. Ban sewage discharge into rivers and seas. Introduce electoral reform (proportional voting system). Repair UK-EU relationship. Invest in renewable power and home insulation. A few weeks ago, we asked accountants what they wanted to see from the next government. There was a general feeling that support for small businesses and SMEs should be prioritised, as well as tackling tax fraud and overseeing complete overhauls of both Companies House and HMRC. This time, we asked AAT members across the UK to comment on the newly published manifestos, identifying any pledges they felt were particularly encouraging or sensible when it came to business growth and the economy, and highlighting areas they were disappointed by. Here’s what they said. Political parties seem to have forgotten rural communities Samantha Perkin FMAAT, Director, Zamu and Lecturer at Cornwall Business School at Falmouth University Region: South-West England Rural affairs is one of the biggest issues for local businesses and communities in Cornwall, where I’m based. A review of the UK-wide political parties focussing on rural affairs and key topics recommended by Country Land and Business Association (CLA) reveals that: Conservatives Promise to ‘back’ farmers and fisheries to improve food security and support the rural way of life. Promise to increase UK-wide farming budget by £1bn, ensuring it rises above inflation. Retain commitment to protect green belt while also pledging to make planning permission simpler. Labour Promise to support British farmers and champion British farming while protecting the environment. Set targets for half of all food purchased across public sector to be locally produced or certified to higher environmental standards. Pledge to preserve greenbelt sites. Liberal Democrats Will ensure that gigabit broadband is available to every home and business in rural and remote communities. Accelerate the rollout of the new Environmental Land Management schemes, with an extra £1bn/year to support profitable, environmental and sustainable farming. Encourage the use of rural exception sites to expand rural housing. Will ‘make planning work’ for natural environment and ensuring developers ‘pay their fair share’. Reform UK Revitalise British agriculture and guarantee food security to take advantage of Brexit. Promise to increase the farming budget to £3bn. Encourage younger people into farming. Fast-track new housing on brownfield sites and infrastructure projects especially in coastal regeneration areas. Green Party Pledge to encourage farmers to use sustainable, environmentally friendly farming methods to ensure cleaner rivers and healthy soil. CommentaryAgriculture budget: farmers are now transitioning to payment for public goods model but there needs to be secure budget for the transition period and beyond. The CLA say this should be £4bn in England and £1bn in Wales. But according to the Commons Library, the 2022/23 spend on farming support was £2.3bn. By analysing manifestos, no party will hit the CLA target. Planning permission: this is a complex area as all parties want more houses but do not want to affect the countryside. In order to appeal to most voters, they only talk about brownfield and urban regeneration. The political parties seem to have forgotten the importance of rural communities. The strategic need for homes is just focussed on towns and cities while ignoring rural housing. It’s disappointing that again the countryside is a tourist destination, not a place people live and work. Farmers need support to produce good quality food to ensure the growth of the UK economy as everyone wants. Rural businesses are the heartbeat of the countryside and without fair support they will die and our environment with them. Verdict: Political parties seem to have forgotten rural communities. There’s a distinct lack of concrete policies across all three main party manifestos Stephen Leonard FCCA ACA MAAT, Partner, Winders Chartered Accountants Region: North West England Conservative, Labour and Liberal Democrats manifestos say income taxes and VAT rates will not increase which will give some certainty to both employees and the self-employed. Sadly, there’s no mention in any of the three main manifestos of increasing the personal allowances or income tax band thresholds which are leading to more people paying tax at higher levels due to ‘fiscal drag’. I would have liked to have seen some bold moves in this area – it would have had an immediate impact on the net income of everyone including pensioners. Conservatives have however pledged to abolish Class 4 NICs for the self-employed which would be a significant saving for sole traders and partners. No other party is matching this. No party has mentioned tax on dividends which is how many small business owners get remunerated via limited companies. This is disappointing as many were left out of the COVID support packages. Business rates are a huge burden to many businesses and all parties mention this but offer different solutions. Labour says it will abolish Business Rates and replace them with ‘something fairer’, Conservatives are pledging a £4.3bn support package for small businesses and the Liberal Democrats say they will scrap business rates and bring in a Commercial Landowner Levy. In truth, all are disappointing as none seem to give any details of how they will replace rates and the significant revenue it raises. Overall, there is a distinct lack of concrete policies or ideas across all manifestos and I’m underwhelmed by all the main party offerings, especially as small business and self-employed are the lifeblood of the economy. Verdict: I’m underwhelmed by the manifestos as there is a distinct lack of concrete policies and offerings. The main thing is what isn’t included in manifestos Ben Rose MAAT, Partner, Martin Seitler & Co Region: North West England Tax-wise, I think there’s a distinct lack of excitement in most party manifestos other than the Reform UK manifesto. At a time when people are feeling the squeeze, I’d have expected all the main parties to offer a policy which would put more money into people’s pockets. Reform UK offers a personal allowance increase as well as an increase in the higher rate threshold to £70k which essentially means far few people will be higher-rate taxpayers. They also pledge to increase the VAT registration threshold to £120k which is a welcome move. I am by no means a Reform UK supporter, but based solely on the tax/economy aspects of their manifesto I wouldn’t vote for anyone else! The Conservatives meanwhile are offering to reduce NI, with the long-term plan to abolish it completely. Labour appears to be alienating the more wealthy: a 20% VAT on private school fees will have a massive consequence for many communities. Overall, I think the main thing to note is what isn’t included in the three main party manifestos: there’s no major tax reform and no major wow factor. Verdict: There’s no wow factor from the three main parties, but Reform UK offer significant tax cuts. Labour’s pledge to address workplace inequalities is welcome Lucy Cohen MAAT, Co-Founder and CEO, Mazuma Accountants Region: Wales Labour is placing equality at the core of their mission, saying they are aiming to ensure fair compensation and better conditions for women in the workforce. Their goal is to ‘make work pay’ by addressing wage disparities and improving workplace standards. Strengthening rights to equal pay and addressing menopause issues is a welcome move. After all, menopause will essentially affect half of the population during their lives including it in workplace planning is vital! Pledging to fix corporation tax for the entire term of parliament is also a great shout: businesses love certainty and knowing the tax rate won’t sneak up is certainly helpful for small businesses. The Conservatives however, have the hardest job for women here: after 14 years of leadership, female wellbeing in the UK is falling faster than in the EU, and less than 2% of VC funding is going to female-led UK businesses. They claim they’re focused on supporting female entrepreneurship through initiatives like the Invest in Women Task Force and the Lilac Review along with aiming to secure £250m Invest In Women Fund. But let’s face it: it’s a relatively small amount, especially in a manifesto which pledges over £8bn in potholes. There are also questions about their approach to closing the gender pay gap, which doesn’t seem to be covered. The Lib Dems pledge to make Statutory Sick Pay available to more than one million low-income workers, most of whom are women. This move aims to provide greater financial security for women in the workforce – certainly a welcome shift in my eyes to see a party focussing their efforts on policies that disproportionately affect women. Verdict: Labour’s pledge to fix gender pay disparities and workplace inequalities is a welcome addition. Scottish Lib Dems were only party to look at SSP Pamela Dillon FMAAT, Owner, Dillon Bookkeeping Region: Scotland Scottish Labour’s proposal to increase access for young people to apprenticeships could be an improvement if they reinstate funding in Scotland for AAT apprenticeships – it was withdrawn last year. Their move to ‘take action’ on late payments for small businesses is welcome, although there are no details on how they would do this. Scottish Conservatives meanwhile say they’ll fund another 100,000 apprenticeships by curbing low-quality degrees, but there is no mention of how they decide which degrees are ‘low quality’. They propose alleviating the pinch points on the main road from Gretna to Stranraer road which will help with goods transport between Scotland and Ireland. Scottish Liberal Democrats however have detailed promises for zero-hour contracts such as 20% higher minimum wage when there’s normal demand to compensate for instability and the right to request a fixed-hour contract after 12 months. They also pledge to make shared parental leave a day-one right. They also pledge to fix the Statutory Sickness Pay (SSP). However, if they plan to extend it to all workers/part-timers from day 1 of absence, they need to look at reimbursing small employers as they don’t benefit from the full £5k employment allowance. Smaller employers like myself cannot afford to pay out up to 26 weeks SSP with no reimbursement. I wish the other parties would look at the SSP system as it is a worry for small employers. Scottish National Party (SNP) want to scrap zero-hour contracts and fire/rehire policies as well as improve maternity pay and increase shared parental leave from 52 to 64 weeks. They pledge to set maternity pay at 100% for 12 weeks. SNP also pledged tax cuts for retrofit building work and want to see lower VAT rates for hospitality while encouraging cleaner vehicle usage. Verdict: Scottish Lib Dems were the only party to look at Statutory Sickness Pay scheme which is a worry for many small employers.
The key skills employers must cultivate to be fit for the future Posted 06/24/2024 by AAT Comment & filed under Apprenticeships, Employers. How to evolve the skills and knowledge your business needs to be successful, according to the market. AAT’s employer team works with employers across regions, industries and practices in the UK. They consult with hundreds of employers every year and continuously collect insight on market trends to help employers make informed and evidence-based decisions. Here we dive into what they’re hearing from the market. Four headline themes These are the key themes impacting accountancy and finance as a whole, which are affecting the skillset that finance professionals must have: technology communication ethics sustainability. Technology At the moment, you can’t get away from AI and automation in everyday life, from self-checkout scanners at supermarkets to chatbots on websites. Businesses are looking to harness technology and embrace new working methods to become more efficient, better serve their customers, and get an edge over their competition. This is creating a need for accounting and finance professionals to adapt and embrace new technologies and ways of working – but that can only happen if they understand the technology. Businesses appreciate that AI and Automation are evolving their skills needs, as it’s important for accounting and finance professions to be able to mix old with new. For example, proficiency in tools like Microsoft Excel is needed, as they closely align with data analytics and understanding data visualisation through tools such as Power BI. And whilst AI is enabling businesses to collect more data than ever before, people are still required to scrutinise and verify it, which make having a questioning mindset and professional scepticism important. There are lots of buzzwords floating around, but there’s not yet consensus on how to use technology or a clearly defined skills gap which can then be bridged. But there are some key skills which we keep hearing about: determination, drive and passion – in other words, behaviours communication, critical thinking and adaptability – which AAT refers to as power skills technology, AI and digital literacy – or technical skills. Businesses need to be aware it’s not just the technical skills that are changing for accounting and finance professionals; it’s everything. Communication Another message being heard loud and clear is the importance of communication. It’s not just about being technically gifted and capable of crunching the numbers anymore. Businesses, clients and stakeholders are looking for guidance. They are leaning on their accounting and finance professionals to provide sound advice and insight based on the data available to them. As a result, accountants are stepping up and influencing the decision-making process for businesses. Professionals need to develop adaptive communication to have better and clearer conversations with non-financial colleagues and stakeholders. To do so, they should avoid business jargon. Financial comprehension At the same time, there’s the need for non-financial staff to gain a better understanding of basic finance terminology. According to AAT’s research, nearly half (45%) of finance workers have witnessed “serious errors” in their workplace due to misunderstandings around basic financial terminology. Lack of confidence and understanding among non-finance employees really emphasises the importance of accounting professionals being able to support others. It also shows the value of continuing professional development. Indeed, there’s high demand for top-ups and short courses to help employees and businesses stay up-to-date and adapt to the changing landscape. When it comes to those specifically in early-career roles, the market is telling us that individuals are less able to identify their own skills gaps. And when employees are aware of them, they are often too reserved to ask for support. We’ve seen a number of employers addressing this early on by investing in courses on professionalism, dealing with difficult conversations and preparing for the workplace, as well as adding more resources for pastoral care to help people speak up. Ethics As more companies are using AI and automation processes to improve efficiency, business needs to understand how to use the technology ethically, how to uphold high professional standards and what the impact is if businesses neglect to do so. Early adopter organisations are feeding back that they’ve needed to set clear, defined boundaries and guidance to ensure technology is used with integrity. The common message seems to be that the physical workplace is a core environment for staff to learn by osmosis and develop high ethical standards. Flexible working has limited opportunities to learn from others, especially those in early career positions, as there are fewer people in the office to learn from. Sustainability Carbon footprints and sustainable practices are coming under heavy scrutiny, with legislation encouraging ESG (environmental social and governance) activities coming into force. The general expectation is that this responsibility lies with finance and accounting professionals. That means accountants are taking on a huge role. Their activities range from evaluating the environmental impact of integrating new technology into a business, to analysing the carbon footprint of organisations in their supply chain, and carrying out ESG reporting. Professionals therefore need to understand the environmental impacts of various practices to support building responsible business. Finance professionals also need to be able to communicate these risks, threats and opportunities to relevant stakeholders. And when it comes to the societal side, we’re seeing more focus on employers investing in social mobility, equal and fair pay and sustainable initiatives, both to meet ESG goals and to attract the right talent to their organisation. How are employers reacting to these changes? We see further investment from employers in continuous learning for finance and accounting professionals, at all levels in their careers. The main driver behind this is changes in technology. While organisations are still using high-quality qualifications to deliver technical knowledge, they are also looking to keep their teams equipped to tackle real-world problems by filling skills gaps with bitesize learning. Employers are also being more agile in their response to problems. Gen Z are typically viewed as digital natives, with a better ability to adapt to technological changes, allowing them to learn about these on the job. Employers are therefore prioritising support and bite-sized learning about technology amongst older generations. They’re also investing in apprenticeships. That’s because apprenticeships provide more opportunity for employers to shape a well-rounded professional with technical knowledge, as well as competency and power skills. Apprenticeships are helping employers broaden their pool of future talent, too. We’ve seen an increased focus in recent years on recruiting from different backgrounds to increase diversity of thought and experience. Employers aren’t only looking to bring new talent into the business, though. They’re also increasingly looking for opportunities to upskill current staff members through professional qualifications and apprenticeships in order to raise their organisations’ competency benchmarks. How apprenticeships are helping Apprentices work and learn at the same time, developing their technical knowledge alongside their power skills to demonstrate their competence. Apprenticeships are designed in consultation with employers of all sizes and sectors across the profession to ensure the standards developed mirror the skills needed by employers. They are intended to fulfil the business needs of the future. Apprenticeships address skills gaps, develop employer-benchmarked competence, support DEI goals and aid succession planning and retention. Accounting apprenticeships cover broad areas: knowledge – essentially the professional qualification (for example AAT) skills – fundamental to business, such as communication, leadership, teamwork and collaboration behaviours – ethics and integrity, professional judgement and scepticism, proactivity and embracing change. Competency framework As the role of accountants changes, focus on skills and competency is growing. Finance professionals are adapting to becoming digitally led, providing insight on data and understanding sustainable growth and ethics. As such, AAT is putting together a competency framework, to define the required competencies and indicate training needs in the profession. We’re also championing the skills, knowledge and behaviours accountants show. Our competency framework will provide a holistic approach to professionalism, capturing the essential knowledge, skills and behaviours professionals already have, and will need in future. It will enable accountants to self-assess their skills to plan their career, and support continuous learning in the key areas identified above. Finally, it will help employers understand the need for adaptable communication from finance professionals, and training for non-finance professionals.
Don’t let a good mistake go to waste Posted 06/17/2024 by Annie Makoff & filed under Members, Students. Errors in a field as high-stakes as finance can feel career-ending. Here are some accountants and bookkeepers who made them work. As every accountant and bookkeeper knows, accuracy is paramount when it comes to company accounts and finances. A seemingly small mistake can quickly escalate into something bigger further down the line, potentially leading to inaccurate statements and forecasts. Speaking of mistakes, did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch on-demand It’s therefore important to admit to mistakes as soon as they happen so they can be rectified with minimal damage. But it’s also important to see them as learning opportunities, too, not just to ensure the same mistake isn’t made again, but to improve and develop. Even if a mistake at work feels mortifying or frustrating at the time, it’s possible to reframe it – once the error has been addressed – and see it as a valuable experience, whether it was a mistake made with accounts, or a career mistake, such as working with a toxic company. So with this in mind, we spoke to a few accountants and bookkeepers about the mistakes they’ve made in the past and how they ensured they didn’t go to waste. I returned to a company I used to like but it became toxic Andy Murray MAAT AATQB, Finance Manager I once returned to a company I used to enjoy working for, but it turned out to be a huge mistake. I took the role because it was a step up in responsibility and it seemed a great career move. But I was taking over an existing employee’s role who was then given less responsibility in order to reduce their stress levels. They were extremely disgruntled about this and made my life extremely difficult. I found out later that this colleague had been causing issues with other colleagues for years, but management had failed to address their behaviour. Unfortunately, it quickly became a bullying situation and I ended up having to take sick leave due to stress, despite other colleagues being so warm and friendly. I filed a grievance with HR and the chief executive but nothing was done. I left the role after just nine months. After the experience, I swore I would never let it happen to me again. I saw a counsellor and a life coach and their help made me see things in a different light: it had not been my fault and it had been a poorly managed company that allowed this behaviour to continue unaddressed. I am now much more assertive in the workplace and I address things as soon as there’s an issue. Unfortunately, a similar situation with an unpleasant colleague did happen again during an interim contract, but this time I was firm with my approach and made it clear I wasn’t putting up with their behaviour. I continually shut down any aggressive conversations and refused to engage. All this has given me the confidence to deal with toxic behaviour – I now have the skills and resilience to deal with it. Verdict: Dealing with bullying behaviour after I returned to a company I had previously enjoyed working for has given me the skills and assertiveness to deal with similar situations should they happen again. Failing accountancy exams taught me the difference between confidence and arrogance Emily Coltman FCA, Chief Accountant, FreeAgent The biggest mistake I made in my career was failing two of my ACA exams through lack of preparation fuelled by over-confidence. Those were the first professional exams where I’d been allowed to take texts into the exam so I didn’t prepare enough – I figured I’d have the texts there to help. I’d been a straight-A student in school and have a degree from the University of Cambridge, yet I somehow managed to come unstuck when it came to getting my accountancy qualifications. I was gobsmacked that I’d failed and absolutely gutted. I decided I was never going to do any more exams ever again! Later, I calmed down and decided I wasn’t going to let failing two exams by a few marks stop me. I eventually retook the exams and passed both of them – I finally had the magic letters after my name! Looking back 20 years later, I actually think that failing those exams has made me a much better accountant than if I’d passed first time. It taught me that accounting is really difficult. There’s a huge amount to learn and it’s always better to check and check again if you’re not 100% sure of your facts. The UK’s tax system is four times as long as the complete works of Shakespeare, so nobody will ever know it all by heart. You have to constantly look back and double-check information to make sure you’re learning and interpreting it correctly. It also taught me the difference between confidence and arrogance – a crucial skill when you’re explaining all things finance and tax to non-accountants. And finally, it taught me how important it is to learn from failure so you come back stronger and more determined. Verdict: Failing exams taught me the difference between confidence and arrogance, and also how important it is to learn from failure. I took a job because of the good location but there were unethical practices AAT member, management accountant, public sector organisation I went from a good job in the public sector to work for a manufacturing company because it was nearer to where my family and I were planning to live. It turned out to be a mistake. There seemed to be unscrupulous goings on in the company which were financially benefiting a particular employee. Management turned a blind eye because they felt sorry for this employee and their personal situation. I felt really uncomfortable with this practice of course and did voice my concerns when I left the company but I don’t know if anything was done. Eventually, an ideal opportunity arose in a nearby public sector role so I applied and got the job. Although it was a mistake to take on the role at the manufacturing company, I did actually end up learning a lot about payroll. The company paid me to attend a payroll course in London which I found really beneficial and still remember a lot from it. Verdict: I worked for a company because of the location but their unethical practices made me uncomfortable – I did end up learning a lot about payroll though! Speaking of mistakes, did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch on-demand
Choosing the right payroll software Posted 06/17/2024 by Fresh Pay & filed under Pensions and payroll. This content is brought to you by FreshPay. A comprehensive guide for accountants and payroll professionals Choosing the right payroll software may not sound like the most thrilling task, but trust us, it’s the key to achieving efficiency, accuracy and compliance with payroll processes, not to mention the secret sauce to transforming your payroll service into a profitable venture. Picture this: you’re the hero of your organisation, armed with the ultimate payroll software that’s like a trusty sidekick, always there to save the day. But with so many options out there, how do you find the perfect match for your needs? Fear not, intrepid accountants and payroll professionals, for we’ve created this comprehensive guide to help you navigate the exciting realm of payroll software selection. But before we explore the nitty-gritty, here’s a challenge for you: as you peruse this guide, ask yourself a simple question – does your existing software offer these features? Key features and considerations to keep in mind when selecting payroll software Fully cloud-based and all-device compatibility One of the most significant advancements in payroll software is the shift to cloud-based solutions. Cloud-based payroll software offers unparalleled flexibility and accessibility, allowing users to access payroll data from anywhere, at any time, and on any device, including Macs. This ensures that payroll professionals can perform their duties efficiently, whether they are in the office, at home, or on the go. Flexible pricing structure When evaluating payroll software options, it’s essential to consider the pricing structure and the length of contract. Look for software that is priced by the employer with no subscription tie-ins. This ensures that you only pay for the features and services you need, without being locked into long-term contracts or commitments. Automated calculations Payroll processing involves a myriad of calculations, including those for mid-period starters and leavers, mid-period pay rises, and unpaid leave. The ideal payroll software should automate these calculations, eliminating the risk of errors and ensuring compliance with relevant regulations and legislation. One-click automation Time is of the essence in payroll processing, which is why automation is key. Look for payroll software that offers one-click automation for tasks such as sending payslips, HMRC returns, and pension contributions. This streamlines the payroll process, saving time and reducing the likelihood of errors. Full integrations with accounting software and payment systems For optimal efficiency and accuracy, payroll software should seamlessly integrate with accounting software and payment systems, ensuring that all payroll data is properly synchronised. This includes information sent over to the software like the Employers NIC Allowance, setting both tracking categories for Xero integrations, and customising payroll journal references in QBO. Such integration eliminates the need for manual data entry, significantly reducing the risk of discrepancies and streamlining your workflow. Employee and Employer Portals Employee and employer portals are invaluable tools for enhancing communication and collaboration within an organisation. Choose payroll software that includes built-in portals, allowing employees to access their pay information, and communicate with payroll administrators. Similarly, employer portals should enable payroll professionals to amend data and approve payrolls, send messages, and access relevant payroll data. Automatic Director Pay Select payroll software that offers automatic director pay functionality, allowing you to set it up once and let the software handle the rest. This ensures a streamlined, accurate, and compliant payroll process for your directors, significantly enhancing the overall efficiency of your payroll operations. Unlimited user permissions Look for software that offers unlimited user permissions, with variable access levels to ensure data security and compliance. This setup allows junior staff to make necessary payroll amendments, while senior personnel can lock the payroll before submission for approval. Additionally, it ensures that certain payrolls remain confidential and inaccessible to specific team members. 9. CIS and P11D compliance If your business operates in industries subject to Construction Industry Scheme (CIS) regulations or requires the submission of P11D forms for employee benefits, ensure that your payroll software includes these features as standard, with no additional cost. This ensures compliance with relevant regulations and reduces the administrative burden associated with these processes. 10. Bureau workflow dashboard For payroll professionals managing multiple clients, a bureau workflow dashboard is indispensable. Opt for payroll software that includes a bureau workflow dashboard, allowing you to easily manage and track payroll tasks across multiple clients, ensuring efficiency and accuracy as well as enabling you to effectively manage your team and the volume of work assigned to them, optimising overall productivity. Choosing the right payroll software Choosing the right payroll software is crucial for accountants and payroll professionals tasked with managing payroll processes. By considering key features such as cloud-based accessibility, automation capabilities, integration with other systems, and compliance with regulations, you can select payroll software that meets your organisation’s needs and facilitates efficient and accurate payroll processing. So, does your payroll software offer all these features? If not, look no further – FreshPay offers ALL of them. With FreshPay, you can streamline your payroll operations and drive success. Book a demo or register for a free trial For more information about FreshPay, book a demo or register for a free trial here: https://linktr.ee/FreshPay?inf_contact_key=f2d44165d5bb58244c3ad2a91ab8c2fc Sign up by the end of this month and receive 50% off the first 3 months. Quote: AAT50 This content is brought to you by FreshPay.
Enabling social mobility is an economic necessity Posted 06/11/2024 by AAT Comment & filed under Apprenticeships, Members, Social mobility. This general election, social mobility should be on the agenda. Post-Covid, accountancy is facing an even greater challenge in opening up opportunities – blocking one route to easing the skills gap. A report on social mobility from the Institute of Fiscal Studies, (IFS) published late last year came to a stark conclusion: “It may be harder now than at any point in over half a century to move up if you are born in a position of disadvantage,” said David Sturrock, a senior research economist at the IFS. Did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch now A steady decline But what exactly is social mobility? Laura Jane Rawlings of Youth Employment UK gives a basic definition: “We define social mobility as the chance of free school meal students moving into the next social strata above them”. Other measures are available – PwC uses parental occupation as its marker, for instance – but there is broad agreement that those from a disadvantaged background are finding it harder now to move up the ladder than in the past. The IFS report found the number of factors that both create and compound social inequality were growing: from greater inherited wealth to the growing gap in house prices. As a result, “[Mobility] has been in decline for the last 20 years – and we’re not seeing enough policy or system change to make any real difference to those young people,” says Rawlings. And, she says, coupled with the anxiety around the economy, “there’s a paralysis around young people making choices – they feel immobilised by all this”. Some of the remedies for this malaise are well known, others less so. Most observers agree that reforms to skills policy must form a central plank of any effective plan to increase mobility. And the cornerstone of skills policy in the past decade has been apprenticeships. That’s an approach the previous AAT President Christina Earls endorsed. “Sometimes, socioeconomic background impedes high academic recognition. I really do recommend apprenticeships to potential students as a great way to find a career, whatever their academic record from school. There they can learn technical knowledge whilst developing the right skills and behaviours and at the same time earn whilst they learn. It also enables them to feel they’re giving value to their employers from day one.” As the election looms in the UK, once again apprenticeships – their design, adoption, funding structure and completion rates – are back on the agenda, as the parties compete to offer a compelling vision for greater social mobility. And they should have a receptive audience: social mobility thinktank The Sutton Trust recently published research that found that, “The British public want fairer opportunities – with 93% saying it is important to make sure every young person has equal opportunities regardless of their background, and 87% saying it’s important to level the playing field.” Accounting for accountancy As someone who trained via an apprenticeship and had to support themselves while training, Lucy Cohen FMAAT agrees things need to change. “I’d like to see firms make efforts to reach out to people who maybe otherwise wouldn’t have considered accountancy as a career,” she says, pointing to a continued perception gap around the profession that isn’t as welcoming to those from different backgrounds. “Before I did my apprenticeship with AAT, I had no idea that you could train to be an accountant without going to university or working for a big practice. It was by chance that I found that out, and it was life-changing.” Cohen now runs her own practice, and employs apprentices as a matter of course. Her advice to anyone looking to attract and retain a broader talent pool is clear: “Take a long hard look at recruitment of both staff and trainees – where did you go to reach them? If you are only advertising in the same three places, then you’ll likely keep attracting the same people over and over again.” To address social mobility and diversity, she suggests accounting practices need to make efforts to advertise in places they haven’t tried before in order to attract a different set of people. “Speak to the people you want to attract – find out where they look for opportunities in education and work. Listen to their feedback and make the right changes.” Addressing knowledge gaps is key: “The thing that is really challenging is that employers keep using the same measurement tools to assess young people,” Laura Jane Rawlings says. “But we know that not all young people get equal opportunity. Employers have to change their recruitment practices because a lot of them are using yardsticks that are 20 years out of date.” To that end, Youth Employment UK recently launched its Good Youth Employment Benchmark, designed to help employers assess and track their current employment practices. By utilising this benchmark, “Employers can gain insights into what’s working well and identify areas for improvement particularly for those young people with protected characteristics.” Earn as you learn Apprenticeship is a well-established principle for training youngsters in a trade and in recent years it has been extended to cover more white-collar and professional careers, including accounting. Offer young people the chance to develop skills on the job and acquire academic qualifications, the theory goes, and you open up careers to those for whom three years of university isn’t the right route. A growing number of accounting employers are using apprenticeships to open up the profession to a broader cohort, and to include more of those from a disadvantaged background. Key to their success, Emily Jones of Youth Employment UK says, is employer support. “Once someone is in an apprenticeship, you want to make sure it’s a good-quality standard that will help them progress – because ultimately that’s what social mobility is all about.” It’s a key point. Government data published in March 2022 showed that just 60.2% of apprentices training on new-style standards stayed on their programme until the end in 2019/20. Youth Employment UK looked into the worryingly high rate of non-completion and it showed that for those that dropped out, lack of employer support was the key reason. That includes time off for training, but also social support. The government says it recognises the flaws in the current system. A recent BDO survey of over 500 mid-market companies found that 32% want to take on more apprentices but find the associated costs too prohibitive. Another 32% said they want more direction on how to establish an apprenticeship program. The government recently pledged £60m in additional funding to support small businesses taking on apprentices by paying the full cost of training for anyone up to the age of 21. It’s a step in the right direction, but some critics believe government action isn’t enough to tackle social mobility. Employers must lead, too. Some are making real strides. Take PwC, one of the Big Four and increasingly outspoken on its determination to change the nature of its workforce. “Our apprentices can progress at pretty much the same rate as graduates, give or take,” says the firm’s head of social mobility Hollie Crompton, pointing out that she qualified as a chartered accountant via an apprenticeship in four years. “And over the years, the retention of school leavers is actually better than graduates, so they tend to be more loyal, having started with you earlier.” A smarter approach The PwC model – combining outreach to underserved communities, more nuanced and effective recruitment practices (they recently dropped the 2:1 degree requirement), and better in-job support – shows that a blended approach can open doors to many young people who previously felt excluded from a career in accountancy. Ultimately, Emily Jones says, offering a good apprenticeship isn’t rocket science: “It should provide the opportunity to gain skills, work experience, access to progression opportunities and an increase in pay. So even if you’re not motivated by social mobility, if you’re giving those opportunities, then you’re supporting social mobility even without knowing it.” Time for change While the apprenticeship system offers an alternative to university, the harsh reality is it’s producing the same winners and losers. The Social Mobility Commission finds those from better-off backgrounds are almost 80% more likely to end up in a professional role, and it notes “disadvantage gaps… at every stage of the apprenticeship journey, from initial selection of candidates by employers to the quality of training”. AAT recognises the potential of apprenticeships – and the problems they face. That’s why AAT has previously gathered politicians, employers, educators and policy groups at the House of Commons for a round table. Delegates laid out a difficult set of challenges that need to be overcome, from a disjointed and short-term approach to skills policy, to inequality and problems with funding. Each year, £2bn of apprenticeship levy is left unspent by business and reclaimed by HMRC. At the same time, the Government’s rigid funding bands are not matching inflation, leading private training providers to pass on costs to employers, causing some to walk away. AAT’s ‘Time for Change’ campaign activity is part of its wider efforts to address these difficulties. Did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch now
Basis Period Reform: what you and your clients need to know Posted 06/11/2024 by Xero & filed under Tax. This content is brought to you by Xero. Basis Period Reform brings the basis period for income tax in line with the tax year. The measure impacts sole traders and partnerships – particularly those who don’t use the tax year basis already. Instead of reporting profits from a client’s accounting year on their income tax return, you need to report the profits generated during the tax year. Here, we take a quick look at what Basis Period Reform means for your practice and clients. Basis Period Reform timeline (and examples) There are two phases to Basis Period Reform: The 2023/24 tax year is a transitional periodClients who don’t align their accounting period with the tax year will have a longer basis period for the 2023/24 tax year. You’ll need to apportion profits from their accounting period, plus the period that brings them up to April 2024 (the end of the 2023/24 tax year) to submit their income tax return. Note: HMRC accepts 31 March – 5 April accounting dates as tax year aligned. The 2024/25 tax year is when the measure comes into full effectAll sole traders and partnerships need to use the tax year basis. For clients who don’t move their accounting date, you’ll need to apportion profits from their two accounting periods that fall within the tax year. Here’s an example: Your client, Lucy, has a 31 December year-end. For Lucy’s 2023/24 tax return, you will need to report profits from her accounting period, plus the transitional period up to the end of the 2023/24 tax year. So that’s 1 January 2023 – 31 December 2023 (Lucy’s accounting year) plus the transitional part, 1 January 2024 – 31 March 2024. A total basis period of 15 months. As a result, some clients could face higher tax bills for the transitional year. HMRC is allowing these taxpayers to spread overlap profit bills across five years. The impact for you and your clients If clients decide to keep their accounting dates, you’ll need to prepare two sets of accounts for them – one for internal reporting, and another for their income tax returns. In some cases, providing final figures for clients with accounting dates that fall later in the year won’t be possible. Instead, you’ll need to provide provisional figures when the return is due and submit final figures in their next tax return. That means two sets of accounts and two tax returns per client, per year. Having cloud-based software in place will help you handle the additional admin. Xero makes it easier to draw up sets of accounts for your clients’ internal reporting and HMRC. Plus, using automation features like bank reconciliation means you can match transactions faster and spend less time on admin – and more time supporting your clients. Preparing your practice and clients Basis Period Reform changes the way your practice and clients prepare for income tax returns. It’s therefore important to spend some time brushing up on the new rules, segmenting your client base, and advising clients on the help available. In our complete guide to Basis Period Reform, we share tips for preparing your practice and clients, and explain how software can lift the administrative burden for you. Read our complete guide to Basis Period Reform This content is brought to you by Xero.
“HMRC expect agents to act with high standards, but do we see the same in return?” Posted 06/05/2024 by Annie Makoff & filed under Members. Where accountants see problems with HMRC’s service standards, and what they’d like to see changed. HMRC’s latest monthly performance report published in April for February 2024 shows the main customer service performance indicators for 2023 to 2024 in comparison to each particular month. These customer service performance indicators look at: Customer satisfaction levels. Level of support for online customers. Number of phone calls answered by HMRC. How quickly correspondence is dealt with. According to HMRC’s latest data, 78.6% of customers in February were either ‘satisfied’ or ‘very satisfied’ with HMRC’s phone, webchat and digital services, falling slightly short of HMRC’s 80% target. Did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch now HMRC received over 3 million phone calls in February, with 2 million callers requesting to speak to an advisor. Just 66.6% of these were answered, rather short of HMRC’s target of 85%. Of the 1.5 million iForms received by HMRC with 1.2 million requiring a response, 80.5% of correspondence was cleared within 15 days. As well as being in line with HMRC’s 80% target, it also shows improvement from last year, when 75% of correspondence was cleared within 15 days. Of correspondence received in February, 92.1% was cleared within 40 days, slightly missing HMRC’s 95% target. HMRC also have a Once and Done score, which asks customers a Yes/No question about if they were able to achive what they wanted to. 83.8% of customers responded ‘yes’, a slight drop from last month’s 86.8%. On the surface, these figures don’t seem catastrophic, yet social media platforms and online forums are regularly awash with HMRC-related frustrations and complaints from accountants, agents and business owners themselves around poor levels of customer service at HMRC. So how does all this bear out from accountants themselves? How satisfied are accountants and bookkeepers with HMRC service levels at the moment and crucially, what do they think HMRC need to do in order to improve things? HMRC desperately needs to invest in staff levels and training Ellis Harris-Boulter MAAT, Founder and Director, FieCo Accountancy and Marketing and AAT Tutor. It isn’t hard to find an accountant or taxpayer who is frustrated with HMRC’s performance. HMRC rightly expect agents to be professional and act with high standards, but do we see the same in return? Years ago, you used to be able drop into a local HMRC office and have your issues sorted. Now, there’s huge delays in receiving VAT numbers, long waiting times on the phone and sudden U-turns on plans to close essential tax helplines, to name a few issues. I see two fundamental problems: HMRC is under-resourced, and manages an over-complicated tax system. HMRC needs to be quickly awarded with significant additional funding. This should surely pay for itself, with a tax gap of £36bn in 2021/22. Labour’s policy proposal to invest over £500m in HMRC annually will undoubtedly help, but I wonder if this goes far enough, since the increase in staff levels amount to less than 10%. Additionally, complex legislation has meant that HMRC manages an unwieldy taxation system. To their credit, their detailed written tax information is often backed with a good selection of scenarios and guidance. But I’ve heard reference to Hong Kong’s well respected tax system, governed by a code less than 300 pages, compared to the UKs 10,000s of pages. So under-resourced and overly burdened by a complicated tax code, alongside pressure to create digital tax systems, it’s no surprise that we all feel like we fall between the gaps. Verdict: HMRC desperately need significant funding to invest in staff levels and training. HMRC needs upgraded infrastructure and a more streamlined system Kirsty Nash MAAT, Licensed Accountant, Tiny Shark Accounting It’s no secret that HMRC’s service levels are causing mass frustration and they only appear to be getting worse. One major issue experienced by myself, my clients and peers is the incredibly long wait times for phone support, which can be exacerbated by inconsistent and sometimes inaccurate information when you do finally speak to someone. This lack of reliable, timely support can cause delays in filings and even more grief when trying to resolve something that has gone wrong. This adds unnecessary stress and workload for accountants and individuals alike, and dare I say, HMRC as well. HMRC needs to upgrade their infrastructure and continue their efforts for a digital, more streamlined system so that they in turn can better manage service levels. It also needs to enhance customer support by improving the training of customer service representatives and by not suddenly choosing to close (and then reopen) phone lines. Recent news that HMRC will be receiving additional funding is a welcome update and acknowledgement of the issues currently faced by taxpayers. I will be watching for updates with interest. Verdict: HMRC need to upgrade infrastructure and continue efforts for digital and more streamlined system. HMRC should implement a ticketing system to help track progress Alison Bryan FMAAT, Flourish Accounts I often encounter issues and frustrations with HMRC. I’m always spending too long on hold. Over 40 minutes is sadly normal. When I do get through, often the person I speak to can’t answer my question and I then have to be referred for a call back. I’m often not able to use the online chat as it seems there is never anyone available. HMRC staff are always polite but I feel for them too as they are often not trained well enough to respond to questions and queries. I’d like to be able to do more online rather than having to call. A ticket system would be amazing because even if I have to wait, I can track progress. Verdict: HMRC should implement a ticket system because then progress can be tracked. Did you miss out on our popular Spring tax update masterclass? Fear not – we’ve recorded the session, which is now available on-demand for you to purchase and watch at your leisure. Watch now
AML Alerts – evading gold-related sanctions; art storage sector Posted 05/31/2024 by AAT Comment & filed under Anti-money laundering, Members. Accountancy sector AML Alerts – Gold-based Financial and Trade Sanctions Circumvention and Financial Sanctions Evasion, Money Laundering & Cultural Property Trafficking Through the Art Storage Sector. We draw your attention to intelligence provided to help identify indicators relating to risks associated with the following AML alerts recently published by the National Crime Agency (NCA). NECC Gold-based Financial and Trade Sanctions Circumvention (File) which provides information on common techniques sanctioned individuals and entities, and their enablers, are suspected to be using to evade sanctions related to gold. NECC Financial Sanctions Evasion, Money Laundering & Cultural Property Trafficking Through the Art Storage Sector (PDF) which highlights the sanctions evasion and money laundering risks presented to UK industries linked to the art storage sector, and serves as a reminder of due diligence checks and reporting obligations. You are also advised to also refer to the National Crime Agency website page on Money Laundering & Illicit Finance for the latest news and publications relating to Suspicious Activity Reporting. We strongly recommend that you read these documents and if you come across situations/circumstances that involve the circumstances described, refer to the reporting requirements and glossary codes to take appropriate action. It would be useful if you could provide any feedback on the usefulness of the intelligence provided to [email protected]. Any comments provided will be treated in the strictest of confidence.
AML Alert – Illicit finance risks from NETPs Posted 05/31/2024 by AAT Comment & filed under Anti-money laundering, Members. Accountancy sector AML Alert – Illicit finance risks associated with Non-Established Taxable Persons (NETPs) acting as cross-border e-commerce traders. We draw your attention to intelligence provided to help identify indicators relating to risks associated with Illicit finance risks associated with NETPs acting as cross-border e-commerce traders. The attached summary AML Alert (PDF) has been produced by the Accountancy AML Supervisors’ Group (AASG) relating to a JMLIT Amber Alert published by the National Economic Crime Centre (NECC). The purpose of the alert is to raise awareness of the fact that some NETPs will be part of organised crime groups (OCGs) who are attacking HMRC’s VAT system by fraudulently registering for VAT with the aim of submitting fraudulent VAT repayment claims and stealing revenue which reduces funds available for public services. You are also advised to refer to the National Crime Agency website page on Money Laundering & Illicit Finance for the latest news and publications relating to Suspicious Activity Reporting. We strongly recommend that you read this document and if you come across situations that are similar to the circumstances described, refer to the reporting requirements and glossary codes to take appropriate action. It would be useful if you could provide any feedback on the usefulness of the intelligence provided to [email protected]. Any comments provided will be treated in the strictest of confidence.
What do accountants want to see from the next government? Posted 05/30/2024 by Annie Makoff & filed under Members. With the UK gearing up for a general election on 4 July 2024, we ask accountants about the policies they’d like to see put in place. With the country gearing up for the snap 2024 general election on 4 July, political parties are falling all over themselves to reveal what they hope will be vote-winning policies and pledges to tempt voters at the ballot box. At the time of writing, manifestos have not yet been released. So what do accountants want to see from the next government in terms of policies, regulations, funding allocations and areas of investment? Funding opportunities for SMEs and complete overhaul of HMRC Tom Hamilton, Founder and Director, Erdingsworth Business and Tax Advisors I’d like the next government to implement more transparency and use sense when deciding on changing the rate of any national insurance or PAYE. There should be in-depth consultation with registered agents on the best ways to deal with these issues. I’d also like to see better opportunities for SMEs rather than being treated as an afterthought. Both HMRC and Companies House need a complete overhaul. Wait times on responses to letters, refunds and the phone lines are not good enough. HMRC in particular needs to be more proactive in tackling tax evaders than it has been and the staff on the phone lines either need to be replaced or retrained, as the current attitude is ‘no experience needed’. I’d also like to see clearer and easier grant funding from local and national growth hubs. The government needs to sit down with banks and building societies and actually get them to fund SMEs again as currently SMEs face jumping through hoops to get any funding. Verdict: I’d like to see more funding opportunities for SMEs and a complete overhaul of HMRC and Companies House. Improved access to finance for small business, continued Companies House reforms Matt Cusack, Owner and Accountant, Start.Biz I’d like to see the business asset disposal release increased from £1m to £10m to further incentivise entrepreneurs and for them to be able to share more with teams. I’d also like to see a reduction in VAT. The 20% rate should be reduced as some smaller businesses and start-ups are priced out of the market as well as consumers to trial their services. Increased and more stringent regulations on company formation would also be important, so I hope the Companies House reforms continue. In particular, there should be a requirement to use agents when registering with Companies House. As regulated agents, the onus will therefore be on them to check and police undertake proper AML checks. This will also remove false companies being set up. Access to finance currently is incredibly hard for small businesses. I’d like to see some form of regulation to compel high street banks, who are sitting on war chests, to be obliged to release some to this size of business. Verdict: I’d like to see improved access to finance for small business, reduced VAT and more stringent regulations on company formations. Umbrella company regulation to tackle fraudulent and illegal activity Paul Nesham, Chartered Accountant, Partner, RfM Accountants and CEO, Payroll Compliance Authority (PCA) Two big areas of concern we’d like the next government to prioritise are non-compliance with legislation and tax fraud. One main change I would like to see coming out of the election is around regulation of the umbrella company market, which has been mooted by HMRC, including greater detail on when this will be put in place. This is for the sake of the innocent businesses and workers who are impacted by fraudulent operators. As CEO of the PCA, we see fraudulent activity carried out by a minority of umbrella companies that undertake the payroll function for recruitment firms and other businesses. Through various means, these umbrella companies engage in illegal practices to bypass HMRC, with the ultimate victims being the recruitment businesses and workers, who are stung by unexpected tax bills and other serious consequences down the line. I would therefore like to see regulation of umbrella companies included in respective parties’ election campaigns, and for the new government to push ahead with implementing regulation as soon as is practicably possible. It is a move that would support workers and businesses, as well as the government, by flushing out umbrella companies that are cheating HMRC out of taxes that are owed. Verdict: I’d like the new government to push ahead with umbrella company regulation to tackle fraudulent and illegal activity. Audit market reforms and incentives to address skills shortages Stuart Brown, Director, Duncan & Toplis As is the norm with election campaigns, pledges will often be made with the intention of grabbing headlines. That usually involves either restricting or imposing further regulations with little thought as to the consequences five or six years down the line. I hope the next government keenly think through the long-term impacts of any policy decisions before enacting them. I’d like to see the next government focusing on reform within the audit market. There’s still a significant lag in reform, despite a huge amount of time and money being spent on initiatives to improve competition within the market. There have also been proposals to amend company size limits. Among other things, this would mean that many firms fall will outside the audit requirements. This may have the undesired effect of reducing the reliability of published financial data. Reduced ‘administrative burden’ must be weighed up against the lack of oversight. I’d like to see better investment in schools to promote accounting as a career choice, especially due to the talent shortages we are witnessing. Many potential accountants need extra incentives to look at the school-leaver/apprenticeship route rather than university. Verdict: I’d like to see audit market reforms and more incentives to encourage young people to become accountants to address skills shortages.