How businesses are dealing with the impact of trade and shipping disruption Posted 03/08/2024 by Annie Makoff & filed under Members. Ongoing humanitarian conflicts in addition to recurrent container ship attacks in and around the Red Sea are putting immense pressure on global trade. The Red Sea is a vital trade route connecting Asia and Europe, and accounts for 12% of global trade. Supply chain issues have already been causing challenges for businesses in a post-Brexit and Covid world, with delivery times of some raw materials taking months and businesses having to pay over the odds for certain shipments and materials. But now, the Red Sea crisis is forcing many ships to reroute: shipping giant Maersk warned recently that vessel diversions could continue well into the second half of this year. In many cases, shipments have been cancelled or suspended. Develop your digital skills Learn to leverage automation to reduce errors and increase productivity with our Digital Decoded masterclass. Find out more A recent Bloomberg report said the ongoing chaos could soon eat into companies’ profits. To mitigate the worst effects of trade disruption, some businesses such as Tesla have been forced to temporarily halt some business operations, while others are expected to pass increased costs on to their client base. Retail, automotive and fashion are some of the worst affected industries. There are fears too that the crisis could lead to price hikes of certain consumer goods and food inflation. Other business impacts may include: price hikes for container hires (a recent British Chamber of Commerce (BCC) report found some firms were faced with a 300% hike, for example) material shortages and increased costs of in-demand materials reduced revenue due to delayed or suspended shipping, slowed production and fewer sales profit erosion. We spoke to accountants across the UK whose clients are impacted by trade disruption to find out how they’re attempting to mitigate these challenges. Small businesses are worst affected and support is welcome Karen Feltham MAAT, Owner, Aligned Accounting Shipping delays in the Red Sea have disrupted many of my clients in various industries, although automotive and retailers are most affected. The longer this continues, the more likely it is to affect other industries. Just the nature of retail means it’s fast-moving and when supply can’t meet demand because of the timely movement of goods, the impact is huge. It’s been an issue since late last year. Shipping delays due to route disruptions have led to port congestion, delays in opening containers and then bottlenecks at customs, all of which have been very hard for businesses to navigate. Evaluating, adjusting and adapting has been necessary, whether this is through seeking different suppliers or exploring alternative shipping routes with other companies. Even so, shipping container costs have massively increased, which damages profits. Tough decisions have had to be made, as the costs can only be absorbed so much before they’re passed to the end user. This puts pressure on businesses to maintain their competitive edge. The impact has been more severe on small businesses than on larger companies, mainly due to the smaller profit margins and pressures on owners and staff to negotiate the challenges in a timely manner. Support for small businesses in this climate would be welcome. Verdict: Small businesses are worst affected – they’re having to seek alternative shipping routes or pass on increased costs to customers. Businesses are planning ahead but costs will keep inflation high Theo Theodoulou, Kreston Global Audit Group Chair Clients tell us shipping disruptions are having significant effects on their operations. They are failing to receive inventories on time, which is causing frustrations to end clients. This also means that businesses are now unable to plan ahead with orders and deliveries. In addition, businesses were not able to predict the impact of global conflict when quoting prices. Anyone who quoted the cost of shipping under ‘normal’ conditions will have taken a significant hit on profit margins since shipping costs have increased dramatically. This is a very similar story to that of post-Covid era. Most businesses are now planning ahead for the delivery orders and piling inventory in advance. Some other clients are looking into air freight options where possible, prices permitting. We have not heard of businesses ceasing operations, however there is the intention to pass increased costs to customers and this will unfortunately maintain high inflation rates for the 2024 economy. Verdict: Businesses are planning ahead but passing on costs will keep inflation high. Suez Canal delays taught us to keep smart inventory Farha Jamadar, Head of Finance, Todd Doors and Treasurer, Scottish Council for Voluntary Organisations As a business that imports its products, the Middle East conflict has really affected our supply chain and lead times. Additionally, suppliers have had to increase freight costs reactively due to this disruption, which has affected our gross profits and the prices we sell at. This is not the first time this has happened – we have had a very similar issue when there were delays in the Suez Canal. After that happened we were all able to pivot and contact customers, updating them on the situation.What we learned the first time around was how much this affected business and our seasonality. So as a precaution, we do keep a smart inventory of stock so only limited amounts of customers are affected. People are understanding and amenable to problems caused by the conflict in the Middle East. But we have also been working closely with suppliers to overcome this situation. Verdict: We keep a smart inventory of stock due to lessons learned from previous delays in the Suez Canal. The situation is dire for many businesses Vipul Sheth, Chartered accountant and MD, AdvanceTrack The situation is dire for businesses reliant on timely shipping, particularly wholesalers and manufacturers, with tight turnaround times. Beyond the obvious financial losses coming from disrupted supply chains, it can mean profound challenges in demand forecasting and inventory management. Companies may struggle to accurately anticipate product demand due to uncertain delivery timelines, leading to potential understocking or overstocking issues. This not only translates to lost sales and revenue, potentially eroding market share, but also jeopardises customer or client satisfaction. We have spoken with plenty of major international groups who say this is impacting their ability to serve customers. Fast fashion retailers for example who have supply chains in South and South East Asia are having to switch product manufacture based on how quickly they need to change demand. Some faster fashion products are being shipped from Turkey for example, rather than countries like Vietnam or Bangladesh. Others have reported significant extensions in delivery times. While it’s exporters, wholesalers, and manufacturers who are the most affected, repercussions from those firms are already impacting others along the supply chain, too. Companies are doing what they can to minimise impact by: recalibrating supply chain strategies diversifying transportation modes seeking alternative shipping routes to circumvent the affected areas revising demand forecasting models and inventory management systems to account for potential disruptions exploring contingency plans (allowing extra time for deliveries, prioritising critical shipments or temporarily ceasing non-essential operations to alleviate pressure on strained logistics networks etc. Unfortunately, these aren’t quick and easy tasks and often come with an additional cost, meaning businesses may need pass on increased shipping expenses to customers and clients. Verdict: The situation for many businesses is dire, but they are trying to minimise impact by diversifying transportation modes, exploring contingency plans and revising demand forecasting models. 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What the social life is like during an apprenticeship Posted 03/08/2024 by Marianne Curphey & filed under Apprentices, Students. Apprenticeships at KPMG come with social life and networking opportunities comparable to university. A big draw of uni is the opportunity to make friends and socialise, and a lot of school-leavers consider university partly because of the social life. But you don’t have to miss out if you choose the apprenticeship route, particularly if you join a large firm. The KPMG apprenticeship course is taught at university in concentrated blocks, so apprentices have the experience of going to university together and taking exams at the same time. What’s more, the intake of apprentices each year means that there are plenty of young people just a few years older, and just as in university, you might study or socialise with second- and third-year students. Develop your digital skills Learn to leverage automation to reduce errors and increase productivity with our Digital Decoded masterclass. Find out more “KPMG in the UK takes on over 100 apprentices per year across the country, and that meant there was a big cohort of apprentices joining at the same time as me,” says Tahiya, who is 21 and in her third year as an audit apprentice. “When I joined, I was with a large number of students who were all my age and it meant there was a social networking group that felt like the size of a whole school year. “It was great because you made friends quickly, and you could ask the other joiners if you had any questions about work. You could talk about your struggles together because they’d probably be experiencing the same things. It’s helpful if you need help or support.” Next step for school leavers Tahiya studied Maths, English Literature and Biology for A level and in Year 12 began to look at her options for further study. “University was definitely the route that was encouraged, and I did apply but I always knew I wanted to do something related to accounting and finance. I thought that if I studied for an accounting degree, I wouldn’t have the work experience of being an apprentice and I wouldn’t be earning while I studied, so in the end that was the deciding factor.” She says it is always good to have a backup of different career paths and different opportunities once you finish school, rather than purely focusing on university. Social life at work Tahiya has built up both formal and informal networks at work – she has got involved in social events and done a lot of volunteering. “I have had lots of opportunities to have informal conversations and connections with apprentices because they are all my age and I feel a connection already,” she says. KPMG arranged for all the joiners to have a week at university when they first started, which helped everyone get to know each other. “We also have regular socials after work via an apprentice community that organises socials for all the apprentices, either in the office or at venues outside, such as a bar.” The social committee also organises meetings in the office for apprentices where they can ask questions and share experiences in a relaxed forum. Then there are the informal meet-ups in the bars and restaurants near the office. Tahiya is also involved in charity volunteering, giving talks to schools on the benefits of apprenticeships and she is part of the Hindu network at the firm. The value of training on the job Tahiya says the main fear that people have about apprenticeships is going into a new workplace and having to meet lots of new, more senior colleagues. “It is true that you are put in situations where you have to interact with a lot of new people, but you grow into it,” she explains. “You start speaking up more and getting involved and you open up. I have seen that happen, even to shy people. By learning on the job, we assimilate important communication skills such as how to speak professionally with clients, and how to compose a work email.” Freedom and flexibility Neither does being an apprentice preclude you from enjoying the fun of moving away from home and sharing a house with others. Tahiya decided to join her friends from school in their student house in London and doesn’t regret it. “I moved out with some of my friends who are at university because I wanted the experience of living with them,” she says. “As a university student, you move out of your house for three years and share a place with your friends. I live in London, my family home is in London, and so is my office, but I wanted to get that experience of living independently and doing things by myself. It’s taught me a lot about how to manage my money, transport costs, groceries and rent. “Living together works out well because my friends have their separate university life and I have my own job and office life. Despite the difference in lifestyles, we have fun. Overall, I would say I have had more flexibility and freedom because I am earning a salary, and I can start to save for things that I want in the future. “Money wasn’t really a huge factor in my decision to take up an apprenticeship but earning a salary has taught me a lot about priorities and budgeting. I don’t have any student debt and I have money to spend on things that I enjoy.” Develop your digital skills Learn to leverage automation to reduce errors and increase productivity with our Digital Decoded masterclass. Find out more
Helping businesses understand the capital allowances available Posted 03/08/2024 by Annie Makoff & filed under Members, Tax. Accountants play a crucial role supporting businesses in financial distress. Here are some of the allowances they’re utilising. Huge numbers of UK businesses are believed to be in financial distress. Nearly 600,000 face significant difficulties and 47,000 are on the ‘brink of collapse’, according to a recent Red Flag report by insolvency specialist Begbies Traynor. Health and education, construction and property sectors are among the hardest hit. The number of struggling businesses within health and education increased by 41% at the end of 2023, 33% in construction and 25% in property. Develop your digital skills Demystify cybersecurity, blockchain and cryptocurrency with our Digital Decoded masterclass. Find out more This doesn’t paint a particularly encouraging picture for the coming year. The situation underlines the crucial role accountants can play in providing value-add support and expertise for their clients. Claiming tax relief for eligible capital expenditures on business assets such as plant, machinery, equipment and buildings can reduce a business’s total taxable income. Here are a few capital allowances that are currently available to eligible businesses: Annual investment allowance (AIA): Businesses investing in plant and machinery qualify for a full tax reduction for eligible expenditure. The maximum a company can claim as per annual investment allowance has now been permanently set at £1 million per annum. 100% first-year allowance: Businesses can claim the full amount of plant, machinery and equipment within the first year of purchase. Temporary first-year allowance: Businesses can claim a super deduction of 130% of costs from pre-profit tax or use the 50% special rate first-year allowance to deduct 50% of costs from pre-profit tax. This applies to qualifying plant and machinery investments on expenditures incurred from 1 April 2021 to 31 March 2023. Writing down allowance: This allows businesses to claim tax relief on eligible assets over a longer period and can be used if the business asset no longer or doesn’t qualify for other allowances. Research and development allowance (RDA): RDA provides tax relief on costs relating to research and development. Business Premises Renovation Allowance (BPRA): Businesses are entitled to a 100% tax credit on eligible costs relating to converting or renovating business premises in a disadvantaged area. Audio-visual expenditure credit (AVEC) and video games expenditure credit (VGEC): AVEC and VGEC replaced previous Film, TV and Video Games Relief from January 2024. These two new schemes allow companies to claim credits based on eligible productions or video games expenditure (subject to a maximum cap) rather than via an HMRC tax refund. Relief rate is 34% for video games, film and high-end TV whereas the rate for animation and children’s TV is 39%. But how aware are businesses of these types of capital allowances and are they taking full advantage of them? We spoke to accountants to find out. Businesses struggle with complexities of capital allowances Carmen Morrison, Senior Consultant, Capital Allowances Tax Analysis, Ryan Many businesses struggle to claim all the capital allowances available to them due to the specialist nature of the tax area and legislative criteria that must be met within specific time limits. Capital allowance is a form of tax relief that often gets missed or underutilised when ensuring tax efficiency. We find capital allowances are normally claimed on expenditure that occurs on ad hoc/day-to-day capitalised expenditure within the business. But on big projects such as construction, property refurbishment or purchase, capital allowance is often missed. The two main rates of capital allowances are:Main Rate Allowance: allowing expenditure to be written down at 18% per annumSpecial Rate Allowances: allowing expenditure to be written down at 6% per annum. These can also be deducted from profits at 100% in the year the expenditure was incurred, as long as the expenditure is analysed as soon as possible due to strict timelines for Annual Investment Allowance and/or Full Expensing. I’ve also been encouraging clients to make use of: Super Deduction: Companies can claim 130% capital allowance on qualifying plant and machinery investments on expenditures incurred between 1 April 2021 and 31 March 2023. Annual Investment Allowances and Full Expensing: the taxpayer can claim 100% deduction in the year of expenditure and 50% First Year Allowances for Special Rate Expenditure. Verdict: Businesses struggle to understand capital allowance availability due to specialist and complex nature of the tax area – but there are many avenues I encourage clients to explore. Capital allowances essential to survival of small businesses Ellis Harris-Boulter MAAT, Founder and Director, FieCo Accountancy & Marketing and AAT Tutor We’re seeing increasing signs of economic strain, particularly on cash flow, across a range of industry sectors. This is reflected particularly through credit control with worsening collection trends and increased irrecoverable debt, and what appears to be a contracted job market. The generous 130% super deduction introduced in 2021 demonstrated the power of policy on investment. Despite this relief ending on 31 March 2023, the fact that full expensing has been made permanent will be reassuring to many businesses. Verdict: the importance of ensuring clients, particularly small businesses with limited cash flows, understand the allowances available to them cannot be overstated. Overlooked allowances can make quite a difference Marie Hensfield, AAT-qualified accountant, Sherwin Currid Accountancy Struggling businesses cannot afford to overpay tax. It is really critical that their accountant maximises the amount of tax relief they can legitimately claim on their tax return. But many small businesses aren’t aware of the tax reliefs available to them, particularly if they buy equipment and vehicles when they’re first getting started. Self-employed individuals and director-shareholders of limited companies rely on their accountants to let them know how they can take advantage of these capital allowances to reduce their tax bills. Helping clients with the timing of capital purchases and how this will affect their tax liabilities is also important, as small businesses often have cashflow constraints. Lots of our clients in particular weren’t aware of the Super Deduction capital allowances until we pointed these out. We have helped clients save thousands with this. The Structures and Buildings allowance is another one which often goes under the radar – at 3% per year, this can add up if overlooked. Verdict: The Super Deduction capital allowance and the Structure and Buildings allowance are often overlooked but can make quite a difference to businesses. There needs to be more information and education to help businesses utilise capital allowance schemes Claire Bartlett, Director, Arden Bookkeeping I am seeing my clients struggle financially much more now. I believe it is only now that businesses are really feeling the effect of Covid; during the pandemic there was so much financial support available, but now businesses are having to repay that support while facing increased overheads and less spending in the economy. None of my clients are aware independently of what is available to them through capital allowance schemes. It is up to us as professionals to advise and support them. There is not enough information available to the general public about capital allowances and how they can be utilised. I feel much more education is required around this tax scheme to ensure as many businesses as possible are benefitting from capital allowances like the super deduction. The economy is incredibly tough right now and small businesses need as much support as possible to help them navigate this difficult period in business. My client base is made up of micro and small businesses. Although the capital expenditure they can claim is small, utilising the super deduction has made and is making a big difference. Verdict: More information and education is needed to help businesses understand and utilise capital allowance schemes. 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Government considers “historic step” of compulsory professional membership Posted 03/06/2024 by David Nunn & filed under Accountable, Members, News. The Government could make membership of a professional body mandatory to clamp down on “incompetent, unprofessional or unscrupulous” tax advisers. Compulsory professional membership is one of three options being considered as a means of creating enforceable professional standards across the profession. The move, announced after the budget, is seen as a “historic win” by AAT, which has campaigned for regulatory reform for over a decade. Reform is needed to protect clients from poor advice. Two-thirds of complaints about tax advice to HMRC are about the one-third of accountants who are unregulated. HMRC research has also shown that unaffiliated agents don’t work to recognised standards: Just 4% of unaffiliated agents follow the Professional Conduct in Relation to Taxation (PCRT). Only 18% follow HMRC’s standards of tax advice. 45% don’t know what the standard is. 80% of unregulated accountants don’t hold a professional qualification. Share your experiences of unregulated agents Have you ever taken on clients who were previously using an unregulated tax agent? If so, please fill out our feedback form so we can gather valuable evidence to take to the government in support of our Accountable campaign. Fill out the form In a 12-week consultation between now and 29 May, the Treasury will seek views on three possible ways to tackle the problem: mandatory membership of a recognised professional body; joint enforcement by HMRC and the industry; and regulation by a separate statutory government body. AAT welcomes the development. Through its Accountable campaign, it has long argued that membership of a professional body is the best way to drive up standards, as it would require tax agents to: be appropriately qualified, undertake regular CPD, hold Professional Indemnity Insurance (PII), be subject to the body’s disciplinary procedures, and sign up to PCRT (professional conduct in relation to tax). Although compulsory membership is just one of three possible regulatory models the government is considering, for AAT’s Director of Professional Standards and Policy Adam Harper the choice is clear. “AAT and our members have been banging the drum through our Accountable campaign over the years for a very simple, but very powerful principle: by making the unregulated operators accountable for their conduct we can ensure consistent, reliable professional standards consumers can trust. “We know that the public expect a professional, honest service when they engage accountants and tax advisory agents. Most are shocked when they hear that, if they have engaged an unregulated, unsupervised, tax agent, there’s no method of recourse if things go wrong. “It’s in the interests of the whole profession that every person engaged in tax advisory are conducting themselves in ways that upholds high professional standards and protects consumers.” Full details of the consultation can be found here. What to avoid when communicating with HMRC Dealing with HMRC can be complicated and daunting. Our online masterclass taking place on Friday 22 March will help you work with them strategically. Find out more
Local government finance teams face tipping point according to new report Posted 03/05/2024 by AAT Comment & filed under Members, News. The struggles of AAT members working in local authorities’ finance teams have been laid bare in a report from the Local Government Information Unit (LGIU): The State of Local Government Finance in England 2024. Over half of local authorities in England anticipate “effective bankruptcy” within five years, with 9% at risk in the coming year. Confidence in the financial sustainability of councils has plummeted from 14% in 2023 to a mere 4% in 2024. Inflation and the cost of living crisis were major challenges for over 90% of respondents. To cope, 90% of councils are raising council tax, while the same proportion are increasing fees and charges. Two-thirds are forced to cut spending on services, leading to costlier services with reduced availability for residents. Even councils with good financial governance are now at risk (see AT January-February issue, Havering: A council in the eye of a storm). Systemic and structural factors are now affecting the vast majority of authorities across the UK, the report found. As a result, finance teams are overstretched and in a state of continuous crisis management. What to avoid when communicating with HMRC Dealing with HMRC can be complicated and daunting. Our online masterclass taking place on Friday 22 March will help you work with them strategically. Find out more “It is no longer possible to ignore or misunderstand the problems local government faces, they are undeniable,” LGIU chief executive Jonathan Carr-West said. He added: “this report, for the first time, demonstrates how widespread councils’ desperate funding situation is. It is impossible to deny there is a structural funding issue.” Most alarmingly, almost one in 10 (9%) of the 128 councils surveyed warned they expect to issue a Section 114 notice — effective bankruptcy — in the next 12 months. The report also identified that financial resilience among councils is at an all-time low, after more than half of respondents drew on their reserves this financial year and plan to draw on them again in the upcoming year. Just 4% of respondents said they felt confident about their organisation’s finances. One respondent told the LGIU: “The situation is catastrophic and is posing an existential threat to local government.” In terms of possible solutions, the overwhelming majority of councils surveyed favour multi-year funding settlements from central government, ending competitive bidding for additional funding and retaining 100% of business rates generated in their jurisdictions. Another survey respondent highlighted the urgent need for action: “Difficult decisions will need to be taken about what the role of local government is in future and how it will be funded, but trying to avoid making those decisions is now proving more damaging and risks more local authorities reaching a point of financial failure.” AAT’s response Jonathan Gorvin, AAT’s Executive Director of Strategy and Compliance, commented: “We are deeply concerned at reports that many local authorities could face significant financial difficulties over the next five years. The situation is increasingly urgent and must be taken seriously by central government. It is shocking that a sizeable number of local authorities are already at breaking point.” “Our members working in local authorities in England have been on the front line of trying to make a difficult complex funding landscape work, and we recognise and support the great work and value they bring in creating more efficient and effective councils” A key challenge for Councils will be attracting and retaining talent in such challenging circumstances, particularly in critical professions facing a skills shortage, including accountancy. More councils filing section 114 notices, effectively going bankrupt, could see local governments miss out on recruiting and retaining the accounting technicians and bookkeepers, whose valuable skills were in high demand right now, he said. What to avoid when communicating with HMRC Dealing with HMRC can be complicated and daunting. Our online masterclass taking place on Friday 22 March will help you work with them strategically. Find out more
AAT reviews the Chancellor’s 2024 Budget Posted 03/05/2024 by David Nunn & filed under Members, News. We summarise what should be the final budget before the general election and give reaction from the profession. Chancellor Jeremy Hunt has delivered his second, and perhaps final Budget, ahead of the expected General Election later this year. The big news for AAT was the decision to consider compulsory professional membership to drive up standards of tax advice. We also welcome measures that will help businesses and boost employment.But there are also criticisms from the profession about the lack of a coherent investment plan to support skills and the effect of freezing thresholds on tax complexity. What did you think of the budget? Help us develop AAT’s budget response by taking five minutes to share your views on the Budget. Lightning survey Taxation The Government is cutting the main rate of Class 1 employee NICs from 10% to 8%. This will take effect from 6 April 2024. The Government will also make a further 2p cut to the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement. The current non-UK domiciled tax rules will be replaced with a new residence-based regime commencing on 6 April 2025. Transitional arrangements for existing non-doms will be put in place. The Government is announcing new metrics to measure progress against tax simplification. These will be drawn from HMRC’s annual customer survey and will include HMRC’s estimate of the net change in cost to businesses of meeting tax obligations from tax measures. A further set of tax administration and maintenance announcements will be made on 18th April 2024 at Tax Administration and Maintenance Day. The Government is extending the Energy Profits Levy (EPL) to the end of March 2029. From 1 April, the rate at which entities with UK annual revenue greater than £1bn, and which are regulated for Anti-Money Laundering purposes, will pay the Economic Crime (anti-money laundering) Levy will increase from £250,000 to £500,000 per annum. A new duty on vaping products will be introduced from 1 October 2026. The 2025-26 Air Passenger Duty rates for economy passengers will increase in line with forecast RPI, rounded to the nearest pound. Rates for those flying premium economy, business and first class and for private jet passengers will also increase by forecast RPI and will be further adjusted for recent high inflation. The Empty Property Relief “reset period” for Business Rates will be extended from six weeks to thirteen weeks from 1 April 2024 in England. The Government will also consult on a “General Anti-Avoidance Rule” for business rates in England, and has published a summary of responses to the Business Rates Avoidance and Evasion Consultation. The Government will maintain the starting rate for savings, the 0% band for savings income, at £5,000 from 6 April 2024 to 5 April 2025. The Government is launching a consultation to seek views on how best to implement the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. Ministers will legislate in the Spring Finance Bill 2024 to ensure individuals cannot use a company to bypass anti avoidance legislation, known as Transfer of Assets Abroad (ToAA) provisions, in order to avoid UK income tax. The changes will take effect for income arising to a person abroad from 6 April 2024. From 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC. From 6 April 2024, the higher rate of Capital Gains Tax for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. Private Residence Relief will continue to apply. The Government will abolish the Furnished Holiday Lettings tax regime, eliminating the current tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants. From 1 June 2024, Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty Land Tax regime in England and Northern Ireland, will be abolished. The Government will freeze alcohol duty from 1 August 2024 until 1 February 2025. The Government will freeze fuel duty rates for 2024-25. HMRC will establish an expert advisory panel to support the administration of R&D tax reliefs. Small Business The VAT registration threshold will be increased from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000, and will be frozen at these levels. These changes will apply from 1 April 2024. The Government will publish shortly draft legislation on an extension of full expensing to assets for leasing. Full expensing will be extended to assets for leasing when fiscal conditions allow. The Recovery Loan Scheme has been renamed as the Growth Guarantee Scheme and extended until the end of March 2026. HMRC has published new guidance around the tax deductibility of training costs for sole traders and the self employed. The Government will legislate to reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor. Ministers will carry out further work to review the scope of the exemptions. The Government will shortly be launching the SME Digital Adoption Taskforce, which will investigate how best to support the adoption of digital technology by SMEs in order to boost their productivity. A new £7.4m AI Upskilling Fund pilot will be launched to help SMEs develop the AI skills of the future. Professional Standards The Government is publishing a consultation on ways to strengthen the regulatory framework in the tax advice market. Three options – including compulsory professional body membership – are being considered (full story here). HMRC Services The Government is investing a further £140m to improve HMRC’s ability to manage tax debts. This will expand HMRC’s debt management capacity to support both individual and business taxpayers out of debt faster and collect tax that is due. Ministers will also improve and simplify HMRC’s digital services to support Income Tax Self Assessment taxpayers seeking to pay tax in instalments. These changes will be implemented from September 2025. Industry reactions Jonathan Gorvin, Executive Director of Strategy and Compliance, gave AAT’s reaction: “We see opportunities for small business in this Budget, and we certainly welcome the move to regulate tax practitioners.” “We look forward to seeing more of the details in the coming weeks. However, so far there seems to be a lack of skills focus in the Government’s announcements. Employers are local communities are crying out for investment now in accountancy skills.” Robert Marchant, VAT specialist and Head of Tax at Crowe UK said fiscal drag would hamper growth:“Fiscal drag drags on. It’s disappointing that no steps were taken to reduce its impact. A continued freezing of tax thresholds results in an increase in those paying higher rates of tax and in additional tax complexity for many.” Suzanne Gallagher, head of UK payroll at Employment Hero, was concerned about the workload from NI reductions: “The end of the tax year is the busiest time of the year for accountants, and the chancellor just added a huge headache by cutting National Insurance Charges (NICs) at the last minute. Luckily, accountants and other payroll professionals are getting used to this kind of rapid change to tax rates – this is the fourth change to NICs since early 2022.” Adam Zoucha, MD EMEA at accounting workflow provider, FloQast welcomed the decision to make full expensing of leased assets permanent:“Companies have been gifted a cashflow lifeline. The opportunity to double-down on full expensing, will be welcomed by low-margin, low profit or loss-making businesses struggling to balance the books in a flat economy. Crucially, it will incentivise spending on longer-term investments vital to driving growth and productivity, while keeping cash in reserve. “Economic conditions remain tough, and the onus is firmly on companies to build fiscal resilience and navigate a recessionary environment. Keeping tight control over financial processes and focusing on careful financial planning will be crucial to weathering the storm and pivoting in line with evolving market conditions as Britain heads towards the next general election.”
Accountancy is full of exciting and fulfilling career options Posted 02/29/2024 by Marianne Curphey & filed under Career, Members, Students. An AAT qualification opens the door to many different kinds of accounting careers. Here are some of the things you could do. An AAT qualification can set you on the path to different career options depending on your areas of interest and your skills. There is the opportunity to run your own practice, specialise in audit or management accounting, or work for public or private organisations. For example, forensic accountants helped uncover the Post Office/Horizon scandal and played a key role in convicting the gangster Al Capone in the 1930s. AAT President Kevin Bragg notes that “all workplaces will have a need for technical grounding. At a company level, accountants are needed for everything from compliance, company costing and product costing. With the ongoing skills build up being hugely transferable. That’s why an AAT-qualified accountant can continue studying and go on to become an auditor or a management accountant. “Our Accountants in Practice have a wide variety of knowledge and technical skills to offer to clients through their own businesses. “Tax advisors across different industries will experience very different day-to-day tasks, with some spending time on the minutiae of tax breaks for say heavy industry, and others finding where’s most economically viable way to shoot TV programmes. Outside of the better-known areas of accounting, this sector is also responding to changing needs, with accounting jobs popping up in sustainability and even cloud-based software. “It’s a wonderfully versatile area to work and I hope people begin to realise how many exciting opportunities accounting can offer them.” A wealth of accountancy careers are available “There are a multitude of opportunities available for newly qualified accountants,” says Chris Goulding, Managing Director of specialist HR recruitment firm, Wade Macdonald. “It can be helpful to analyse what skills and interests you have that might match potential roles. If you are talented at finding and communicating a ‘story’ out of financial data you may be suited to a reporting role. If you have commercial acumen, internal audit could be a good fit. However, skills can be developed, so it is completely possible to change career directions later on,” he says. I started as an accountancy apprentice studying AAT. The promotion and career aspects are massive in the accounting industry and beyond. This career path gives technical skills and life skills that can be applied within the industry and outside the industry. I know fellow accountancy professionals who have made the step into operating director roles or CFO within industry. Craig Wells, Associate Director, Saul Fairholm Chartered Accountants Management Accounting Management accountants analyse financial information and give businesses the data they need to make strategic decisions. They prepare reports, analyse budgets and draw up financial statements. They provide insight into the company’s performance and create forecasts to help allocate resources efficiently. “Management Accountants play an important finance business partnering role for our operational managers, protect the business from financial risk, and lead and develop our own teams,” says Stevie Dennis MAAT, Management Accountant at Vertu Motors. “My responsibilities include balance sheet reconciliations, accruals, prepayments, production of the management accounts, leading management meetings, working capital reviews and accounts reviews; providing analysis on any variance from budget; and recommending areas of improvement through profit generation and cost saving. Sean Farnell is a Partner at Burgis & Bullock specialising in client services and business growth services for owner-managed businesses. He has a full portfolio of clients ranging from personal tax, through small businesses and family-owned Limited Companies, as well as larger company clients. “The role of the management accountant has changed quite a lot since when I was training back in the 1980s,” he says. “It was much more reactive, these days it’s more proactive. The role now is to keep track of the day-to-day finances of a business, measuring that against factors such as performance and cash flow. Then to advise the client on the next steps and small changes that can have a significant impact on their business. Ultimately, it is all about making sure that a business is moving in the right direction. “There is definitely scope to rise from an accounts assistant role to specialising in management accounts, and rising all the way to a C-level position.” Tax Accounting Tax accountants specialise in preparing and filing tax returns for individuals, businesses and organisations. Their role is to help clients comply with tax laws and regulations, minimise tax liabilities by claiming legitimate allowances, and ensure tax returns are accurate and on time. Forensic Accounting Forensic accountants investigate financial fraud and crime. Through the careful and meticulous analysis of financial records and transactions they can uncover discrepancies and irregularities. Forensic accountants have helped investigate the bugs in the IT system which led to the Horizon/Post Office scandal, uncovered the paper trail that led to the prosecution of Bernie Madoff for running a Ponzi scheme, and helped convict gangster Al Capone. You can find out more about starting out in forensic accounting. Environmental Accounting Environmental accountants focus on assessing the impact of business activities from an Environmental, Society and Governance (ESG) perspective. This could include scrutinising energy consumption and emissions data to measure costs and benefits. “One example of this is the increase in green finance roles, particularly in reporting, which offers accountants the chance to engage with people in multiple departments outside of their organisation,” says Chris Goulding. Bookkeeping Bookkeepers are responsible for recording financial transactions, doing bank reconciliations and tracking income and expenses. They can also process invoices and payments and provide financial reports for individuals or small businesses. Jo Wood is the owner of Jo Wood Virtual FD Ltd and a co-founder of the 6 Figure Bookkeeper. She says her role is satisfying because of “the unlimited potential to impact someone’s life for the better”. “In this role, you really have the opportunity to change lives,” she says. “Small business owners are so busy working that they often do not even know that they are making a loss.” She started out as a Level 4 AAT Bookkeeper and says career prospects with the qualification are “unlimited”. “I became a Finance Manager running a multi-million-pound firm, changing the whole sales structure and getting involved in operation as well as reporting to the senior leadership team,” she says. Government Accounting Government accountants work at a national or local level managing public money and ensuring it is properly allocated and fairly spent. Their role is to adhere to accounting standards and regulations and help with planning and budgets. Cloud accounting Cloud accounting systems have transformed careers within accountancy and has empowered accountants to support clients in new ways. “Cloud accounting has disrupted the accounting profession, enabling us to enhance the services that accountants already offer, providing greater access to data and transparency,” says Becki Roberts, Director at the Nottingham office of UHY Hacker Young and head of the UHY National Cloud Group. It enables accountants to focus more on having important conversations with clients and taking a greater advisory role rather than concentrating on administrative tasks. Auditing Auditors analyse financial records, financial statements, and investigate internal controls to ensure that financial information is accurate and reliable. Their role also involves ensuring a company is compliant with legal obligations, regulatory requirements and accounting standards. Craig Wells, Associate Director at Saul Fairholm Chartered Accountants is in charge of the management and completion of audit engagements within the practice and is part of the senior leadership team. “There are lots of areas that I enjoy about my job, the main one being providing a professional audit service that also adds value to our clients,” he says. Unlimited career potential “I started as an accountancy apprentice studying AAT,” says Craig Wells. “The promotion and career aspects are massive in the accounting industry and beyond. This career path gives technical skills and life skills that can be applied within the industry and outside the industry. I know fellow accountancy professionals who have made the step into operating director roles or CFO within industry.” Survival mission You never know what adventures lie around the corner. The headline photo is of Jo Wilkinson who, after qualifying, became Finance Director of North Brewing. During the pandemic, the company faced a bleak future with closed taprooms and lost revenue. But Jo brought her skills in scenario modelling and forecasting to bear, helping the company survive through an innovative plan to convert taprooms into bottle shops.
AAT member perks at the Festival of Accounting & Bookkeeping Posted 02/29/2024 by AAT Comment & filed under Bookkeepers, Events. The Festival of Accounting & Bookkeeping promises two days of technology and transformation, smart business ideas, and inspiring insights from industry experts. FAB will be held on 13 and 14 March and will feature a host of exciting industry experts, including Jo Fairley, entrepreneur and co-founder of Green & Blacks; author and journalist Simon Singh; Chris Ducker, virtual CEO and founder of Youpreneur.com; tax guru Rebecca Benneyworth; AI expert Katie King; and tax campaigner Dan Neidle to name a few. As a key partner, AAT will be there to help you discover how you and your practice can stay on top in the evolving world of business, finance and accountancy. You can find the AAT stand at Pitch F6. Book your tickets Enter AAT’s code – AATVIP24 – to access VIP benefits when you visit the Festival of Accounting & Bookkeeping Book now Get your VIP pass, courtesy of AAT There will be exclusive VIP access for all AAT Members with an access-all-areas wristband, a VIP lounge with complimentary food and drinks, invites to the VIP-only networking events plus early-bird invites to FAB Breakfast Briefings. Use the code AATVIP24 when following this link. AAT is a key partner at the Festival of Accounting & Bookkeeping (FAB).
AML what you need to know Posted 02/29/2024 by Capium & filed under Members. This content is brought to you by Capium. The Anti Money Laundering (AML) guidance provides the accountancy industry with the requirements of the Money Laundering Regulations 2017 (MLR 2017) which increased the scope from the earlier Money Laundering Regulations of 2007. The MLR 2017 outlines the additional responsibilities for financial service providers including accountants as they operate in areas with higher money laundering risk. It requires accountants to adopt a risk-based strategy, to prevent criminals from utilising their professional services to launder money. Accountants must put measures in place to identify their clients and monitor how they use their services. As per the HMRC, if you provide any of the following services you need to register for AML supervision with an accounting body or HM Revenue and customs themselves. auditors who carry out statutory audit work accountants who provide accountancy services to clients tax advisers and consultants who provide advice to clients about their tax affairs payroll agents that provide accountancy services or tax advice customs practitioners, freight forwarders and similar businesses if they provide accountancy or tax services professional bookkeeping services If you perform any of the above services, then you will need to register with any of the main supervisory bodies below(accurate at the time of writing this article). What is AML compliance in the UK? In every country, different checks are required for various reasons. In the UK Anti-Money laundering regulations set the standards that businesses must follow when completing legislative checks within the UK. Organisations take a particular number of steps and controls to ensure that all AML compliance obligations are met. The main supervisory bodies for AML For Money Laundering Regulations, the main supervisory bodies for accountants, bookkeepers, tax advisers and other financial advisers are the: Association of Accounting Technicians Association of Chartered Certified Accountants Association of International Accountants Association of Taxation Technicians Chartered Institute of Management Accountants Chartered Institute of Taxation Financial Conduct Authority HM Revenue and Customs Institute of Certified Bookkeepers Institute of Chartered Accountants in Ireland Institute of Chartered Accountants in Scotland Institute of Chartered Accountants of England and Wales Institute of Financial Accountants International Association of Bookkeepers Law Society Now that we know how and why the AML was implemented, let’s look into how we can perform these checks to stay compliant. Ever wondered what Anti-Money Laundering solutions do? As an Accountant, you don’t need to understand every unturned stone, but at the same time, you need to know the basics and why it’s important to have a solution in place when you need it! Let’s start with the basics: What is an AML check? An Anti-Money Laundering (AML) check is an ID (identity assessment) to ensure that all people or investors are who they claim to be and to prevent financial crime. AML checks are a safeguard to help stop businesses from becoming directly or indirectly caught up in criminal activity. Regulated businesses that fail to undertake these checks are likely to be subject to substantial fines as well as other serious consequences. There are several different types of checks, from ‘know your customer’ (a basic verification) to real-time checks to assess their potential risk. In most cases today, these checks can be carried out and completed in the background using a separate application/solution online. What is an AML solution? There are AML solutions available today online security checks, but wouldn’t it be wonderful if they worked with your current software solution? Is it expensive? Most AML checks are easy to use, allowing instant decisive decisions. Capium’s solution is just a few pounds per check. Have a look for yourself here. Strengthening AML Compliance In today’s dynamic business landscape, financial institutions and accounting firms play a part in preventing and detecting suspicious activities that could lead to money laundering. Regulatory bodies are tightening their grip on anti-money laundering (AML) measures, accountants must stay ahead of the curve. Capium explores the significance of AML compliance for accountants and introduces Capium AML as a sturdy solution to streamline and enhance these efforts. Understanding AML Compliance: Anti-money laundering compliance involves a set of regulations and procedures designed to prevent and detect activities that may facilitate money laundering or terrorist financing. For accountants, who often handle financial transactions and sensitive client information, staying compliant is not just a legal obligation but also a critical step in maintaining the financial system’s integrity. The Role of Accountants in AML: Accountants are on the front lines of financial transactions, making them key players in the fight against money laundering. Their responsibilities include due diligence, monitoring financial activities, and reporting suspicious transactions to relevant authorities. AML compliance protects the firm and its clients but also contributes to the overall stability of the financial ecosystem. Capium AML: A Comprehensive Solution Capium AML is a reliable tool for accountants seeking a comprehensive AML solution. The module supports firms with the required tools to comply with regulatory requirements, identify potential risks, and prevent financial crime. Here are some key features that make Capium AML stand out: Regulatory Compliance: Capium AML keeps pace with evolving AML regulations, ensuring that your firm remains in full compliance with the latest legal requirements. Client Due Diligence: Capium AML streamlines the client onboarding process by automating due diligence checks. This enhances the accuracy of client risk assessments. Transaction Monitoring: The platform provides real-time monitoring of financial transactions, allowing accountants to identify and investigate suspicious activities quickly. Risk Assessment, Reporting and Documentation: Capium AML generates comprehensive reports, ensuring your firm has a documented trail of AML compliance efforts, along with onboarding enhancements. It’s crucial for regulatory audits and internal reviews. Training and Guidance: Capium customers have an exclusive training program set up at a competitive fee (just £40). In the ever-evolving landscape of financial regulations, accountants must prioritise AML compliance to protect their firms, clients, and the broader financial system. Capium AML serves as a valuable ally in this endeavour, offering a sturdy and user-friendly solution to enhance AML efforts. Speak to Capium Give Capium a call on 020 3322 5578 to see if we can help, or you can book yourself in here. This content is brought to you by Capium. This is a sponsored post by Capium. We are pleased to bring these products to your attention, which we believe may assist with your AML compliance, but please note that this does not constitute a recommendation from AAT. Liability for AML compliance ultimately remains with you when it comes to your firm demonstrating that any customer due diligence conducted by a third party meets anti-money laundering legislation.
Suspicious Activity Report (SAR) intel is proving invaluable in law enforcement investigations Posted 02/28/2024 by AAT Comment & filed under Anti-money laundering, Anti-money laundering, Members. Your regular CDD, risk assessments and SARs are helping detect suspicious activity as early as possible, and preventing crime. SARs are a critical intelligence resource for law enforcement – they provide information like phone numbers, addresses, company details, investment activity, bank accounts and details of other assets. They have been instrumental in identifying sex offenders, fraud victims, murder suspects, missing persons, people traffickers, fugitives and terrorist financing. Accountancy and bookkeeping firms (including sole practitioners) play a critical role in alerting law enforcement to potential instances of money laundering and terrorist financing. Undertaking regular Customer Due Diligence (CDD) and risk assessments can help firms detect instances of suspicious activity as early as possible and the submission of SARs can help reduce and prevent financial crime. SARs case studies The latest SARs Reporter Booklet published by the UK Financial Intelligence Unit (UKFIU) uses case studies to provide a snapshot of how SARs intel initiates and supports law enforcement investigations. For example, as a result of multiple reporters submitting SARs against one business due to concerns over the high-value payments being frequently received in multiple accounts held by the business, law enforcement was able to obtain multiple Account Freezing Orders and forfeitures on all funds in the accounts, totalling over £100,000. Risk indicators and the Accountancy AML Supervisors Group Risk Outlook Some of the key risk indicators leading to the submission of the SARs in the case studies used include: high-value cash deposits in newly opened accounts lack of source of funds customer failing to engage with customer due diligence measures multiple accounts for one business frequently receiving and withdrawing high-value payments high-value transfers of unknown origin frequently being transferred out of the account soon after transactions not in keeping with the business profiles of the customer, whether due to size or frequency payments from firms unrelated to the business multiple linked business accounts in receipt of large credits that were rapidly dispersed to third parties in the UK and to overseas businesses. Firms are reminded that the risk of money laundering and terrorist financing is constantly evolving. Firms should regularly review the Accountancy AML Supervisors Group Risk Outlook, and any other risks published by their supervisory authority (such as the AML Alerts that AAT publishes in Knowledge Hub) to make sure they have identified all the areas relevant to their own business –particularly as risks may evolve because of changes to the firm’s client base, geography and services provided. Guidance on making an SAR The quality of an SAR can affect the UKFIU’s ability to prioritise and process the report. It can also affect the relevant agency’s decision or ability to investigate. Before making an SAR, firms should familiarise themselves with the UKFIU’s Guidance on Submitting Better Quality SARs. AAT’s AML helpline AAT’s AML helpline offers advice for AAT-supervised firms on all aspects of complying with the Money Laundering Regulations, such as advice on how to report suspected illegal activity. To discuss any questions you might have, call us on +44 (0)20 7367 1347 or email [email protected].