Accountants break down the steps they’ve taken to ensure AML compliance

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

Anti-money laundering (AML) compliance is a varied and detailed area, which can be confusing and intimidating. Here, accountants explain how they’ve tackled issues.

AAT is an AML supervisory authority, and we regulate most but not all of our licensed members under the Money Laundering Regulations. We understand that AML requirements can be time-consuming, difficult and a full-time job in their own right. Bigger firms may employ someone to carry out the work, but sole traders must go it alone.

During our regular compliance reviews, we find certain issues come up more than others. Examples include:

  1. no documented AML policies, controls, and procedures
  2. annual AML compliance review not conducted
  3. firm-wide risk assessment not undertaken
  4. risk assessment not completed as part of initial client due diligence (CDD)
  5. not adequately verifying clients’ identity
  6. ongoing CDD not carried out
  7. no procedures to report discrepancies to Companies House concerning persons of significant control
  8. AML training not kept up to date
  9. not understanding the scope of the licence area Trust and Company Service Provider (TCSP) and ensuring the firm is approved to provide this service.

We spoke to AAT members about the policies, controls, and systems they’ve put in place, as well as the challenges they faced in the process.

Accountants must now be more than finance people

Natalia Micu AATQB, Freelance Accountant and Management Accountant at Novenary

Due diligence should always be an important habit for all accountants – and more so now. My approach is to read and research as much as I can and ensure client documents and sensitive material is always backed up.

These days, accountants must be more than finance people – we must also know the law and how and when to report AML concerns and suspicious activities. We must be sceptical, checking identities, addresses and validity of information.

For most accountants following correct AML guidance, AML compliance takes about a quarter of their time from firm-wide risk assessments, due diligence and transaction monitoring. This time can not be invoiced but it is still essential to do.

Verdict: To comply with AML legislation, accountants must be more than finance people – we must also know the law and how and when to report AML concerns and suspicious activities.

Accountants must stay abreast of ever-evolving AML regulations

Ann White FMAAT AATQB, Abacus Accountancy & Payroll Services Ltd

AML compliance should not be regarded as a regulatory hurdle for accountants. Rather than viewing AML compliance as a regulatory obligation, we should embrace it as an opportunity to contribute to a more secure financial environment.

I adopt a positive approach to AML compliance. AML compliance provides an opportunity to know our clients and understand their businesses. By conducting thorough due diligence as part of AML procedures, we can gain insights into the nature of our clients’ operations, their risk profile, and business structure.

AML compliance offers accountants an opportunity to expand our skill set. We need to stay abreast of the ever-evolving AML regulations and this requires continuous learning and adaptability. A commitment to ongoing education only enhances our professional competence.

AML processes and procedures are an integral part of the day to day running of my business. My key tips for keeping on top of AML compliance are:

  • familiarise yourself with the AML regulations and the requirements of your supervisory body
  • ensure that you have policies and procedures in place and review them regularly
  • make use of the various tools and software available to assist you with compliance
  • keep up to date with AML changes and don’t overlook CPD in this area
  • integrate AML compliance into your day-to-day working
  • keep adequate records as evidence of compliance
  • adopt a proactive not a reactive approach – leaving AML compliance until you have time to catch up is a recipe for disaster.

Verdict: Accountants should stay abreast of ever-changing AML regulation and view compliance as a way to contribute to a more secure environment.

AML can be confusing, but we’re here to help

Professional Standards, AAT

We understand that AML is a daunting area for some licensed members. As a regulatory body, we have a duty to help licensed members stay compliant and one means of doing this is through the practice assurance reviews.

However, as an AML supervisory authority, we are also obliged to uphold the law. Therefore, any breaches identified during a practice assurance review may require action under AAT’s Disciplinary Regulations. The practice assurance reviews are not there to catch licensed members out but are used as a means of ensuring that they are adhering to relevant laws and regulations.

Fortunately, some of the most-flagged issues as highlighted in the introduction are quite simple to resolve.

For example, points 1-7 can be addressed by using and adapting AAT’s templates for licensed members, available in the Professional Zone > Licence Zone > AML supervision and support.

Keep your AML training up to date by using our resources, for example, Knowledge Hub, AAT Comment and AT Magazine. Don’t forget – licensed members are required to regularly review their CPD, and AML is a part of this.

Finally, and perhaps most importantly, licensed members really must know which services they are approved to offer, as providing any service outside the scope of a licence may be grounds for action under the Disciplinary Regulations or termination of a licence.

If in doubt, you must check to avoid making a mistake like the one in point 9, as TCSP violations in particular breach both our compliance framework and the Money Laundering Regulations. You should contact Customer Support in the first instance for clarification before commencing work. Also, AAT’s website provides information on the services available under each license, as well as a description of areas of work a licensed member would expect to provide a client for the service in question.

Staying compliant and keeping abreast of AML legislation is intimidating but essential. If you need help, please reach out to AAT’s AML Helpline – [email protected] or 0207 367 1347.

The rise of blended learning and the role of the tutor

Posted by & filed under Members.

*This content is brought to you by Mindful Education

Over the past few years, the UK’s professional qualifications market has seen a significant uptick in demand for blended learning solutions. From the pandemic, which propelled educational institutions into the unknowns of virtual learning, to the cost-of-living crisis that has seen many adult learners prioritise work over study, the interest in flexible study options is only set to grow.

A shift in expectations

In a post-pandemic world, colleges are finding that learners are expecting digital course elements to form part of their learning experience. To balance professional development with financial pressures, they want flexible study options that will allow them to consider the short term while also investing in their future.

Employers are also seeking professional development that fits around work commitments. In a recent Forbes article, it was predicted that 39% of knowledge workers will have adopted a hybrid working pattern by the end of 2023, indicating an increase in the demand for flexible training options.

Further, during discussions with Mindful Education, AAT reported a recent significant shift in what employers are looking for in a training provider. Most employers who approach them want in-person delivery as well as the ability to access online resources, anytime, anywhere.

With blended learning fast becoming the preferred solution, the quality of the offer becomes a key element.

Not all blended learning is created equal

Some programmes categorised as ‘blended’ are actually online lectures mixed with self-study – there is no classroom-based study. The most effective form of blended learning allows learners to study independently, and on their own terms, when and how they want, with access to a tutor and face-to-face sessions. And the best planned programmes tend to be based on flipped delivery – where learners study online, prior to a taught session in a classroom. This means tutors have more time to focus on difficult concepts with learners, providing coaching and guidance to embed learning.

With the addition of new technologies and the shift in delivery models, tutors are asking how blended learning will impact what they do in the classroom? 

The evolving role of the tutor

Traditionally, classroom-based learning has been syllabus-led, with a top-down approach leaving little room for differentiation. But with the establishment of blended learning, tutors have been able to adopt a more learner-driven approach, with the ability to tailor the support they provide. They can interact with individual learners online and face-to-face – wherever and however is most suitable. Most notably, blended learning has allowed tutors to track learner progression online, and in real time, so they have the information they need to provide meaningful support. Combined with high-quality resources readily available via VLEs, tutors can focus more on planning and preparing classroom sessions around the areas learners find challenging, which in turn means that they can have a greater impact on learner outcomes.

Mindful Education spoke to college tutors across the country about their experiences of blended learning and here’s what they had to say:

“Coming from where we used to have to build our own resources, have the lessons and get them ready, I would recommend it because it gives the tutor and the learner an opportunity to develop and exceed. The development and support I’ve had from Mindful exceeds all my expectations… Working with Mindful Education has been brilliant.” Samantha Carnegie, Accounting and AAT Course Leader, Westminster Adult Education Service

“The Mindful approach has embedded technology in our teaching. It has not taken away the role of the teacher, but I can focus more on reinforcing knowledge and coaching students.” Raymond Njoroge, Senior AAT Tutor, Harlow College

“The quality of the online resources, the questions, the answers. You know we’re getting everything and it’s amazing. It really makes my job so much easier. I’ve been very lucky because Mindful Education has done the legwork for me. The teaching team becomes… coaches, which is really what they should be doing.” MIke Webster, AAT Tutor, Cardiff and Vale College.

Your blended learning partner for professional qualifications

At Mindful Education we produce flexible, award-winning blended learning courses and apprenticeships that continue to set new standards in digital education. We’re an edtech company that specialises in blended learning for professional qualifications including accounting, management, law, business and human resources. A compelling mix of academic expertise, technology and creativity, our courses bring learning to life and achieve outstanding results.

If you’re interested in running Online and On Campus courses and apprenticeships, email our Partnerships team:[email protected]

Find out more about us at: mindful-education.co.uk

*This content is brought to you by Mindful Education

What AAT’s Salary Survey tells employers

Posted by & filed under Employers.

The key themes that employers need to know about when hiring.

AAT’s 2023 Salary Survey has provided a comprehensive snapshot of a profession grappling with a range of challenges – and offering a greater range of opportunities.

From evolving working patterns, pressure on earnings, increasing burnout and a growing drive to move up the career ladder, accountants of all kinds are facing a whole new raft of questions. How do they want to structure their working lives? How important is salary when compared to other benefits? What about the chance to study and progress in their careers through professional training and qualifications?

For employers, the questions are similarly pressing. What does a competitive salary look like? What benefits are most compelling in a dynamic labour market? What do newly qualified accountants look for in a role?

Salaries are rising

The headlines are clear: the survey paints a positive post-pandemic picture of remuneration for AAT membership, with a 14% increase in average salaries for the two-year period from 2021 for AAT’s students and non-licensed members. Meanwhile, salary progression is again evident this year as members move along the membership journey, with the greatest increase being between Level 4 and full member stage – where on average membership carries a 35% jump in average salary.

So it seems that those in the profession are being well rewarded. And certainly, a closer look at the salary levels reveals that employers are increasingly willing to reward good performance, with a much greater proportion of members receiving a bonus in the last year (36%) compared to the percentage actually on a bonus scheme currently (25%), indicating that employers will often give discretionary bonuses.

AAT salary survey

Find detailed insights on salaries, benefits, job satisfaction, job security and work-life balance in our 2023 survey.

Read now

Retention is high

One of the biggest headaches facing employers in a tight labour market – alongside upward pressure on salaries of course – is retaining their best people. In that respect, the survey offers some reassurance: more than three-quarters of responding students or non-licensed professional members (79%) plan to stay with their current employer over the next 12 months, up just 1% on 2021. Less than one in 10 plan to move outside the industry.

So what is driving that high level of ‘stickiness’? It is surely the case that healthy retention rates reflect some uncertainty among accountants over the state of the UK economy, leading many to conclude that the grass may not be greener on the other side of the fence when it comes to moving jobs. It is also likely that more employees are held in place by the benefits on offer from current employers.

Benefits are growing in popularity…

The survey reveals the changing face of the landscape when it comes to employee benefits. Comparing the company benefits on offer this year compared to 2021, the proportion receiving each one has gone up for all benefits except the Parental Leave package (-1%) and stock options (same %). Following this trend, the percentage that don’t receive any benefits has dropped back by 11% to 2019 levels at 8% this year.

Overall, it should be said that career plans related to moving jobs and employers have remained fairly consistent over the years. Interestingly, although figures do vary for different age groups, the largest group of respondents in each age bracket still plan to stay in the same job with the same employer across all ages. That’s 47% aged 19-24, 45% aged 25-34, 59% aged 35-44, 68% aged 45-54 and 67% aged 55+.

…but the ones supplied are not always the ones in demand

However, not everyone is happy, and some benefits are more in demand than others. Comparing the company benefits currently received and those most desired, the biggest discrepancies are for private health care (56% desired, 27% receive it) and flexi-time (52% desired, 28% receive it).

The picture is similar for AATQBs, where once again private healthcare is the most popular benefit – but the discrepancy between those wanting and receiving is the widest. It’s in the Top 5 benefits for 56% of respondents, compared with 24% who currently receive it from their employer. This is followed by an incentive for becoming an AAT professional member: 6% currently receive this compared to 28% who would like to.

Key elements to attract new employees

There will always be movement in the jobs market, of course, and it appears that employers need to adapt to reflect the prevailing trends among professionals. To understand those trends, respondents were asked to pick up to three key elements which would attract them to a new employer or job.

Salary and flexibility (such as hybrid working) stand out as the two main elements. Indeed, 85% rate salary as the biggest factor, with flexibility (56%) the next most important element. Those are followed by the chance to progress within the company, and the overall benefits package on offer.

The issue of flexibility is especially pertinent here, given the unsettled post-Covid landscape, where some employers struggle to get staff back into the office while others fully embrace the remote model.

Anecdotally, professionals are struggling: “Difficult to find work from home opportunities or ones that can fit in around school hours,” one reported, with another seeking “Hybrid working and part-time hours locally- I have disabilities.”

Employers are feeling the strain

Employers must grapple with these issues. But while employees have their complaints, it’s not an easy time for those looking to hire staff. Quantity and quality are both concerns. “There is a lack of candidates training/or having trained in the AAT qualification in Somerset. The bigger firms tend to be able to recruit, but it is harder for smaller firms,” reported one employer, while others cited the lack of quality staff – not lack of applications.

Recruiting further down the career also seems tough: “Difficult to find staff interested in bookkeeping and payroll,” reported one hiring company, with another complaining of a “Lack of candidates especially with any accounts experience.”

What I wish I’d known when I started my practice

Posted by & filed under Members, Practice management, Run your business.

Learn from other members’ mistakes before you take the plunge.

Is 2024 the year when you’ve resolved to launch your own business? The prospect of being your own boss is hugely exciting, but it can also be daunting and few strike out on their own without some nagging doubts keeping them awake at night.

  • What sort of clients do you want to attract?
  • What are the best marketing tools to help you reach your target audience?
  • How can you define your USP and make sure you stand out from the competition?
  • How will you balance your client-focused work with all the admin tasks involved in running your own business?
  • How will you recruit the right people when the time comes to grow your team?

We asked three accountancy business owners to share their top tips, and tell us about their early mistakes so you can avoid them.

Get your policies and pricing strategy in place

Ria-Jaine Lincoln MAAT, Director, The Beauty Accountant

I wish I knew how important it was to price on value from the start. Most problems around pricing arise from feeling undervalued and potentially resentful about managing difficult client conversations and expectations.

Have set policies and engagement letters in place and refer back to these when dealing with tricky clients. This will help you see where something may have gone wrong. Sometimes we won’t know what’s triggered a client but if you’ve followed your processes and provided a good customer journey, the chances are it’s not about you. Tax and money are difficult topics for many people so my biggest tip is not to take things personally.

Talk about your business and sell each day. Social media is a free tool so business owners should all have a social media marketing strategy and way to analyse performance from the KPIs that are readily available. In the early days, before you start to see a trickle of referrals from word of mouth, also consider other paid marketing options such as ads, leaflet drops and sponsorship.

Verdict: Robust policies can prevent problems further down the line.

Your website needs to reflect you and your business values

Craig Dyer MAAT AATQB, Managing Director, CA Dyer Accounts & Bookkeeping Ltd

I wish I’d invested in my website early on and made it more personal and less sterile. In my experience, a lot of clients who are looking for small, local accountants and bookkeepers want that personal touch so your website should paint a picture of who you are.

On the About Us section of our site, individual staff members share a bit about themselves and their career journeys. We also have a series of blogs that emphasise our key values. For example, we’ve included some stuff about the volunteering and charity work we’re involved in. One client is a local café so we’re including a series of healthy and vegan recipes, which ties in with our focus on sustainability. Clients tell us they really like our website because it gives them a feel for who we are, and I know it works because every single client has stayed with us.

Getting plenty of reviews is really important too and that’s something I wish I’d realised earlier. It sets you apart from the local competition and builds trust so make it a matter of course to ask clients for a review.

Verdict: Personalising your website can help attract clients and build trust, as can getting plenty of reviews.

Learn to say no and make time for yourself

Bev Flanangan MAAT, Director, Bev Flanagan Financial Ltd

As accountants, we love to help wherever we can, which meant that I often said yes when I really shouldn’t have done. I took on clients who I knew would be awkward and agreed to reduce my prices just to gain a client. I was undercharging so I couldn’t afford a team and therefore had to do all the accounts work myself. I soon realised that I couldn’t build and scale my practice like this as I was running round like a headless chicken.

In the beginning, I neglected not only my family and friends but, more importantly, myself. Now, I put all my preservation goals in my diary. Preservation goals are things you’ll do no matter what – it could be weekly date nights, taking your kids to school and picking them up, or going to the gym.

Be confident in your marketing; don’t compare yourself to other people or let imposter syndrome kick in. It doesn’t matter what everyone else is doing. We’re all different and have totally different circumstances. You’re starting out on an amazing journey with your own practice. There will be bumps on the road but the positives definitely outweigh the negatives.

Verdict: Taking care of your own wellbeing pays dividends.

Key priorities HMRC must keep in mind

Posted by & filed under Members, Policy.

Ahead of the Chancellor’s Spring Statement, we consider priority areas for the profession.

As a professional membership organisation, AAT has a number of roles. We maintain and improve professional standards, represent the voice of the profession across business and the wider economy, and take a leading role in advocating for the interests of accountants with government and other regulators.

With the Chancellor’s Spring Statement approaching, it seems apposite that we outline some key areas which we believe to be priorities for the profession. All of these have several elements in common: they are all important and urgent; they all require engagement from government, HMRC, business and professional bodies; they are all long-term systemic challenges that must be reckoned with. And finally – and most importantly – they are all likely to be enhanced by a properly regulated accountancy profession where standards are rigorously maintained and applied across the board.

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.

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Tax simplification

The first is tax simplification. We have lobbied hard in a variety of forums to drive this agenda, with a straightforward message: a simple, fair and effective tax system benefits everyone in the country. That’s not just a matter of reducing the burden on business – and smaller ones in particular – it’s also vital to the health of the UK economy. The staggering fact that the failure to take reasonable care and taxpayer error represented 45% (or £16.2bn) of the tax gap in 2021-22 sums up why this should be an urgent priority for the government.

Making Tax Digital

The second area is Making Tax Digital (MTD). The postponement of the introduction of MTD for Income Tax Self Assessment (ITSA) in December 2022 was another delay in a journey to a digital tax system that has become increasingly painful. Stakeholders are losing faith and patience – the fact that 85% of AAT Licensed Accountants believe the ITSA registration process was not well understood or was only understood with the help of an accountant or other professional says it all.

As we’ve previously made clear, it’s essential that MTD returns to its original objective of delivering a simpler, faster system that will be easier for all to use. A more efficient system is beneficial both to HMRC and taxpayers. HMRC must also stick to its revised MTD timeline, allowing no further delays.

Supporting SMEs

Third is tax reform to support SMEs. There’s no doubt that SMEs face disproportionate administrative burdens on tax compliance relative to their turnover. Simplifying the tax for SMEs can improve compliance and productivity, so we are in full support of greater promotion of tax relief and clearer guidance from HMRC.

Improving professional standards

Finally, the drive towards Increasing Professional Standards in the Accountancy Profession must be maintained. With unregulated accountants making up one-third of the profession but accounting for two-thirds of complaints to HMRC, this is perhaps the most fundamental and pressing issue. Without addressing it, none of the above problems are likely to be resolved.

It’s for that reason that we have put the question of professional regulation at the heart of our recent Accountable campaign. In recent years Accountable has been the public face of our advocacy efforts, and it has proved pivotal in effecting better dialogue between AAT, its members and the wider community. The work can be hard at times, requiring patience, resilience and the ability to compromise. But make no mistake: it’s vital that the profession engages with these issues not only for its own benefit, but also for the general good of business, government and taxpayers.

We are keen to work collaboratively with HMRC to help drive through appropriate solutions. The evidence of the impact that successful collaboration can have is already there, with numerous examples of how a symbiotic relationship has delivered real benefits. For instance, our work on developing the professional conduct in relation to taxation (PCRT) framework and guidance. That guidance is embedded in the Code of Ethics for each of the seven PCRT bodies, and indeed HRMC’s own standard for agents has been developed to encompass core elements of the PCRT guidance.

The issue of unregulated accountants affects so much of the workings of the economy, from confidence in business to the effectiveness of government policy and the efficient functioning of HMRC, a body that has seen its resourcing cut to dangerous levels in recent years. Solving the conundrum will require compromise and realism on all sides. We can’t punish our way to a solution, nor can we allow professional standards to be compromised in the hope of progress. And – most important – we must not simply ignore the issue and hope it goes away.

So, as the Spring Statement rolls around, we hope that the spirit of collaboration persists. The past suggests it can deliver exceptional results.

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

Why the ‘side-hustle tax’ isn’t as controversial as it sounds

Posted by & filed under Members, Tax.

New rules came into effect in January regarding online selling platforms, but ordinary people are less likely to be affected than some have implied.

There’s been a flurry of reports in the media recently of a so-called ‘side hustle tax’ following HMRC’s crackdown on online sellers and traders using online marketplaces as a side hustle.

Under the new rules which came into effect in January, online selling platforms such as eBay, Vinted, Etsy and Airbnb will be required to collect, share and report details of transactions as well as sellers’ income to HMRC.

The rules relate to the sales of goods including second-hand or handmade clothes or items as well as services and holiday lets.

But media coverage hasn’t been entirely clear as to who is likely to be affected and crucially, what the new rules actually are. Some reports have suggested it is a new tax which will affect anyone selling items on eBay, including those who are using online marketplaces to simply declutter.

In reality, the only change is the requirement for online marketplaces to share income and transaction data about their sellers. There is an existing threshold for earnings from side-hustles, set at £1,000 which will now be easier to enforce. Anyone earning above this from online sales and who has subsequently profited must register as self-employed and file a self-assessment. Income from online sales which are below £1,000 do not need to be declared.

HMRC has also sought to clarify the new regulations:

  • Goods or services sold online are only taxable if the seller is a trader and/or is making a profit.
  • The £1,000 trading allowance threshold applies to those selling goods which have been purchased purely for resale with the intention of profit/capital gain.
  • However, those selling unwanted goods will not need to pay tax on sales of their goods, even if the value exceeds £1,000, provided these items have previously been for personal use. These items are therefore not part of an individual’s income/earnings. For example, selling a personal car for £25,000 will not need to be declared to HMRC.

We spoke to accountants across the UK for further clarification on the issue as well as their views on how it’s been handled.

Sellers who earned above the trading allowance prior to 2024 need to pay tax retrospectively to avoid penalties

Jess Long, Senior Private Tax Consultant, Monahans

The new rules require platforms like eBay, Uber and Airbnb to report detailed information about their income directly to HMRC. Previously, HMRC requested revenue figures on an ad-hoc basis, but the new rules will require these platforms to report this information as part of their general affairs.

In particular:

Overseas entities will also be required to report this information directly to HMRC, which will impact those who are selling items abroad using online marketplaces, as well as those who rent out properties, such as holiday lets, overseas.

The trading allowance allows people selling a few items to earn up to £1,000 per year tax-free. However, if an individual’s income goes over the annual allowance, even by just 1p, they must declare this to HMRC and will likely need to complete a self-assessment tax return to pay what they owe.

HMRC has also announced that those earning over the £1,000 allowance in previous years will also be expected to file a tax return retrospectively and pay tax due – or face penalties.

Verdict: Sellers who earned over £1,000 in previous years will be required to file a tax return and pay tax retrospectively, or face penalties.

Those clearing out their storage are unlikely to be targeted

Julie Pocock MAAT, Director, Kingfisher Services

Despite headlines and media reports, there is no new ‘side hustle tax’. The only thing which has changed is that digital selling platforms such as eBay, Facebook Marketplace, Airbnb etc must share the details of their users with HMRC.

This means that those online sellers and traders who do not declare their income are more likely to be caught.

If you are trading and make over £1,000 turnover (not profit) during a tax year, you must declare your income to HMRC via a self-assessment tax return. This is a strict amount and there is no buffer.

If you are buying goods in, making items to sell online, or renting out property (even your driveway!) then you are likely to be classed as ‘trading’ and the rules will apply to you, too.

If, however, you are selling the odd item on Ebay or Facebook Marketplace to clear out your loft or garage, you are unlikely to be classed as trading and the rules will not apply to you.

HMRC have posted on their Social Media channels about this change and what it means, yet I’m unsure if this will be enough for people to realise and understand how the changes will affect them. I believe HMRC should be promoting this change more widely.

Verdict: HMRC’s social media posts about changes affecting side-hustle traders won’t be enough to raise awareness. People selling odds and ends online don’t need to worry.

Anyone whose goods fit with HMRC ‘badges of trade’ will need to pay tax on earnings

Emily Coltman, Chief Accountant, FreeAgent, Central

HMRC now requires online platforms like eBay, Vinted and so forth to share data about who’s selling how much through their sites.

However, the rules about who has to pay tax when they make sales through these platforms have not changed – there is no new ‘side-hustle tax’.

If you are making sales (before any fees or costs are taken off) of over £1,000 a year, then you need to consider whether what you’re selling counts as a trade. If it does and fits with HMRC’s ‘badges of trade’, then you need to register as self-employed, fill in a tax return, report this income to HMRC and potentially pay tax and NI on it.

The ‘badges of trade’ include such points as:

  • Are you intending to make a profit?
  • How did you acquire what you’re selling?
  • Did you buy the goods you’re selling with the intent to sell them for a profit?
  • Did you or your family ‘enjoy’ the goods before selling them?

There has been a good deal of media coverage of this but it’s fair to say that not everybody will know the rules.

Verdict: Sellers should consider if what they’re selling fits with HMRC ‘badges of trade’. If so, they’ll need to file a tax return and pay tax on their earnings.

The changes are to ensure traders pay the right taxes

Laura Day-Henderson, Director, More Than Bookkeeping, and owner, Future Ready Consultancy Group

These changes won’t affect individual sellers who are decluttering or selling their unwanted items. You only have to declare revenue from trade. You can, therefore, sell your personal car for more than £1,000 on eBay and not declare it to HMRC.

The line is drawn when a seller purchases or makes items specifically to sell. Once this happens, they can earn up to £1,000 before they have to register as self-employed and pay tax. However, once they earn even just a penny over the threshold, they are required to declare the income to HMRC as it is now taxable.

To reiterate, income only needs to be declared if it exceeds £1,000. Personal tax allowance can be used against this income, but it just ensures all taxes are paid. By ensuring everyone pays their relevant taxes, the government hopefully won’t need to raise taxes for everyone else.

Verdict: These changes just ensure the right taxes are paid by traders – individuals who are decluttering won’t be affected.

How to bring sustainability measures into your practice

Posted by & filed under Climate change, Members, Sustainable Business.

As larger businesses start measuring their Scope 3 emissions, small businesses will have to measure their own emissions to help meet regulations. Find out the kind of changes practices are making.

The sustainability reporting space is currently saturated with an estimated 600 standards, initiatives and frameworks in an attempt to help organisations reduce emissions. The International Sustainability Standards Board (ISSB) was launched by the IFRS in 2021 to create a standardised universal ESG reporting framework.

ISSB includes IFRS S1 and S2.

IFRS S1 provides disclosure requirements and guidance for all sustainability-related risks and opportunities an entity may face over the short, medium and long term.

IFRS S2 provides disclosure requirements and guidance for all climate-related risks and opportunities an entity may face over the short, medium and long term. S2 in particular builds on previous recommendations by the Taskforce on Climate-related Financial Disclosures (TCFD) and also includes industry-based disclosure requirements from SASB.

The TCFD (which ISSB standards are based on) includes six general requirements applied across four distinct pillars of Governance, Strategy, Risk and Impact management and Metrics and targets:

  • approach to materiality
  • scope of disclosures
  • consideration of nature-related issues
  • locations
  • integration with other sustainability issues
  • stakeholder agreement.

2024 marks the official global implementation of ISSB standards along with the EU Corporate Sustainability Reporting Directive. Under the EU directive, EU companies and non-EU companies with subsidiaries in the EU and/or those who are listed on the EU-regulated market are now subject to these mandatory requirements.

Companies with a year end of 31 December 2024 are expected to have their sustainability reports due in 2025.

In addition to all this, entities are now required to report carbon emissions under the Greenhouse Gas Protocol (GHG), a protocol which is underpinned by Scopes 1, 2 and 3:

  • Scope 1: relates to emissions from sources owned or controlled by the entity e.g. carbon emissions created from office, facility and/or company vehicle usage
  • Scope 2: relates to emissions created indirectly from the entity e.g. electricity, heating or cooling systems
  • Scope 3: relates to emissions created from the entity’s value or supply chain e.g. waste disposal, goods transportation, business travel.

That means that if you work with a company measuring its Scope 3 emissions, you will need to report on your own emissions as part of the other business’s reporting.

We spoke to three pioneering accountants and bookkeepers about how they’re managing the process, from embarking on ESG goals to transitioning to net zero, and how they’re encouraging their clients and students, too.

I’ve launched a programme to educate accountants and bookkeepers

Kathryn Frimond, Owner, Your Local Bookkeeper

It’s really important to walk the walk not just talk the talk, although I hate that phrase!

For example, I think as a society we buy a lot of unnecessary stuff. I always ask myself ‘do I really need this?’

Within my business we:

  • follow a People-Planet-Profit model, as we believe it’s possible to profit while focusing on the planet and environment first
  • recently launched Sustainable Accountancy Professionals Programme, a six-module programme to help accountants get their practice on the road to net zero.
  • recently launched carbon footprint assessment service
  • measure our Scope 1 and 2 carbon emissions, as per the GHG protocol
  • are starting to measure Scope 3 although this is not yet mandatory.

The science is very clear on climate change and how we have very little time left. Every business needs to take notice and prepare for sustainability reporting. Why? Because current sustainability regulations will soon filter down to smaller businesses.

For example, Tesco will soon need to measure Scope 3 which includes reviewing their supply chains. They’ll be asking farmers, cleaners and so on for their sustainability or carbon reduction plans. All suppliers and contractors who work for the government or NHS will also have to provide sustainability reports soon. Additionally, investors do scrutinise sustainability reports, so companies will need to have them to win deals and tenders.

I believe accountants are well-placed to encourage sustainability. We’re business advisors and know client businesses inside out. We can provide a lot of guidance and support around sustainability reporting.

Verdict: I’m running education and support programmes to help others with sustainability reporting, while living and working sustainably myself.

Don’t get bogged down in definitions, focus on what needs doing

Aaron Westgate, Chartered Accountant and Accountancy Teacher

As an accountancy training provider, we’re pulling together free guidance and resources around sustainable reporting and gathering data to assess our current emissions and carbon footprints.

Within the courses we deliver, sustainability is a key theme and it’s something that’s examined very carefully. We often engage in class discussions about sustainability reports of specific businesses to evaluate what’s good, bad or inadequate.

Many students are already reviewing their own clients’ carbon emission reports which is really impressive.

The need for scepticism here is really important. I often ask students to look at annual reports and identify what areas they think may be examples of greenwashing. For example, one company we looked at claimed they had reduced carbon emissions by 50% but when we looked in more detail, it was referring to a particular part of the business which only produced 1% of emissions anyway, so they hadn’t actually halved their total carbon emissions at all!

All this is important because it’s going sustainability reporting is soon going to be a legal requirement for every company. Large companies are now required to consider Scope 3 which affects suppliers. Accountancy practices that aren’t doing anything around sustainability could get cut out if they don’t meet the emission requirements of bigger companies.

And aside from the moral and ethical issue of taking sustainability seriously, there’s a business case too: studies have found that companies that care about sustainability outperform competitors.

Overall, I think there’s too much focus on definitions and technical details which can put a lot of people off thinking about sustainability. These details have their place, but it’s better to engage in open discussions with clients around what specifically needs to be done to meet targets rather than getting bogged down in definitions.

Verdict: Don’t get bogged down in definitions and technical details – instead focus on what needs to be done to meet targets. Scope 3 measures are going to affect us all.

Focus on making little day-to-day sustainable changes

Libby Walklett FMAAT, Director, The Ethical Bookkeeper, Chair of the AAT Gloucestershire Branch, elected AAT council board member and member of AAT Audit and Risk Board

I’m fairly early on in my sustainability journey but I’m tackling it by focusing on the tiny little changes I can make personally and within the business, rather than getting overwhelmed. My business is predominantly paperless now and client correspondence is done digitally. That in itself isn’t entirely ideal because you can have a digital footprint, but it’s about doing what you can. It’s important to really understand the impact of your decisions.

I’ve signed up to the Good Business Charter and won’t work with anyone whose values don’t align with mine. I pay supplier invoices early or on time because I recognise the importance for their cash flow, too.

I think it’s also important to question everything and have that degree of scepticism we’re taught as accountants and bookkeepers to ensure the decisions we make are as sustainable as possible. Always ask yourself ‘Could I do better next time?’

Conversations with clients about sustainability should be brought naturally into conversations rather than forcing it – it’s about encouraging businesses to do their bit and think differently.

At home, my mantra is reduce, reuse and recycle. My energy provider is Octopus Energy (a green energy provider), I’ve started using Vinted, ‘treeapp’, planted trees with Carma, and I use SMOL for my cleaning products.

Verdict: I’m focusing on the little day-to-day sustainable changes otherwise it’s too easy to become overwhelmed with the bigger picture.

Useful resources

AAT guidance on putting sustainability into practice (includes a checklist) aatcomment.org.uk

Accounting for Sustainaibility: www.accountingforsustainability.org/reporting

Transition Taskforce: https://transitiontaskforce.net/

The multimillion-pound service bringing accountancy into disrepute

Posted by & filed under Accountable, Members, Tax.

Tax refund services are an easy money-maker, but customers are getting angry about misleading adverts and HMRC is taking notice.

As many accountants know, claiming a tax rebate on behalf of a customer is a fuss-free process: either direct them to HMRC where they can do it for free via a couple of clicks, or submit the info yourself using all the usual compliance/anti-money-laundering (AML) checks.

Maybe because it is so easy, some firms – many unregulated – are now offering tax refund services, often neglecting AML and taking a sizeable chunk of the customer’s rebate. Indeed, some are charging fees as large as half of the value of the money owed. As Helen Barrett, Professional Standards Manager at AAT says, “It’s big money for not much work.”

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Customers are wising up though. Many are arguing they were tricked by unclear advertising which failed to inform them fees would be so high. HMRC is also on the case, recently teaming up with the Committees of Advertising Practice (CAP) to issue an enforcement notice to clamp down on misleading advertising. 

Here, we explain what tax refund services are, along with the checks you should carry out if you wish to offer them yourself.

What are tax refund services?

Tax refund (or repayment or rebate) services are provided by many accountancy firms and other agents in the UK, usually on behalf of individuals who may be owed a refund on overpaid tax from HMRC. Customers may need tax refunded by HMRC for many reasons. This usually happens if they’ve paid too much tax, such as on payment from a job, expenses for working from home, their pension or self-assessment return.

With members of the public realising they can claim unclaimed marriage tax allowance, or tax relief for working from home during Covid, a spate of tax refund services have sprung up in recent years.

Why are tax refund services controversial?

Tax refund services make money by taking a percentage of any tax repayment claimed for their clients. Sometimes this cut can be as much as 50% or more. It can leave customers out-of-pocket, says Barrett, who notes “some people have signed up expecting a tax refund of £1,000, but by the time the agent has taken their 40% commission + tax, the customer is left with just £200.”

Many members of the public don’t realise that they can claim a tax refund themselves by using the portal on HMRC’s website. Others, says Barrett, have been hoodwinked by websites which “shout about getting a tax refund from HMRC, but bury the info they’ll take half your claim in the small print… They have no idea what commission or percentage the agent will take.”

Processing tax refunds for the public might be lucrative work for agents/accountants but it’s a relatively quick and effortless procedure. This has led many to be blasé about the compliance checks they should be making on customers, such as AML.

“Many of these agents are carrying out AML and collecting the client’s photo ID after they’ve procured the tax refund, when they should be doing it well before obtaining any money from them,” says Barrett. “If you’re an accountant regulated by AAT, we’d expect the same AML checks as any other procedure.”

“We’d also want them to consider the code of ethics at all times,” she adds. “In terms of principles, act with integrity, behave professionally and be transparent about what you’re doing. This includes letting the client know what they’re signing up for.”

Occasionally, firms can fall foul of authorities. Last year, tax rebate firm Tax Credits Ltd was closed by HMRC after ignoring their AML measures and using adverts which had similar green fonts to official HMRC adverts. The vague terms and conditions on Tax Credit Ltd’s website also meant many customers didn’t know what they were signing up for.

If AAT suspects any members are scrimping on their AML or misleading the public, it will act. Says Barrett: “If there’s a breach of the code of ethics, or we find out you’re not doing your AML, or if we get a complaint about a member not being transparent about their fees, we’d investigate it as professional misconduct.”

Are these services legal?

Put simply, yes. “Sadly, these firms can charge what they want,” says Barrett. “We’ve had people call AAT asking if we can ask these firms to give them the money. However, if they’ve signed up for it, there’s little we can do. It’s like them paying to use cowboy builders for their house extension.”

Because the contract the client has signed with the tax refund company is legally binding, HMRC is obliged to pay personal rebates directly to the agent (rather than the individual).

But being negligent about AML is not legal and could result in some harsh penalties. At best, a disciplinary remand from AAT; at worst, a fine or custodial sentence.

 “Your client could be a criminal,” points out Barrett. “And if you’re obtaining a tax refund for them without asking who they are through due diligence/risk assessment, you could be obtaining a tax refund for criminal money. This means you’ll be part of their crime.”

Would tax refund services still be profitable with the required AML checks?

When it comes to those currently ignoring their AML obligations, Barrett thinks not. “We appreciate AML is time-consuming – the average professional service firm spends four days a month on compliance according to the SRA,” she says. “If they did their compliance checks – such as obtaining passports, utility bills and doing a risk assessment – it would slow them down, impacting their income. The fact is that it’s the law, so they have to do it.” 

What is HMRC doing?

In December, the HMRC and CAP (which writes the codes advertisers need to follow) issued a joint enforcement notice warning tax refund firms (and their advertisers) that they must take steps not to mislead the public through their ads.

Adverts will need to inform people about any fees payable and that HMRC can provide this the service to customers for free. The enforcement notice also states that “They mustn’t imply that their ‘online calculator tools’ can determine if consumers are entitled to a refund by oversimplifying the rules.”

What could stem the tide of tax refund companies?

A regulated accountancy industry in the UK would help: at present, a third of the sector is unregulated, meaning anybody can offer tax refund services without having a qualification or being a member of a professional body such as AAT.

“The unregulated sector is a minefield, which has led to this lack of transparency,” says Barrett. “Whereas AAT members adhere to a code of ethics and our disciplinary/policy framework, so if somebody does have a complaint against them, we can investigate it.”

If customers wish to hire a firm to claim their tax refund on their behalf, Barrett recommends they find one via AAT’s directory of licensed accountants/bookkeepers.

Tax refund services checklist

Are you running – or planning to run – a tax refund service? Here are the mandatory procedures all AAT members must follow.

  • Carry out customer due diligence (CDD) to assess the legitimacy of your client’s financial activities including background checks and business documentation such as financial statements and annual returns.
  • Verify your client’s identity, which should include photo identification and a utility bill.
  • Undertake a client risk assessment, which should include the client’s background, their business activities, the jurisdiction they operate in, plus whether they are a politically exposed person (PEP).
  • Putting a signed letter of engagement in place.
  • Ensure your advertising of the tax rebate services corresponds with HMRC/CAP’s enforcement notice, which includes:
    • Detail any fees the customer will be paying.
    • Inform customers they can also claim tax refunds directly through HMRC.
  • Ensure the terms and conditions of your service are clearly defined and meet AAT’s Client Care policy.
  • Whenever managing clients’ money, members should set up a Client’s Money Account (putting clients’ money into your usual business account will violate AAT’s Client Money Policy).
  • Abide by AAT’s Code of Professional Ethics at all times.

Here’s more on AML procedures.

If you have any questions about tax refund services, contact an AAT adviser on +44(0)20 3735 2468 or email [email protected]

To discuss any questions you may have on AML procedures, call +44(0)20 7367 1347 or email [email protected]

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“I definitely feel apprenticeships are way better than university”

Posted by & filed under Apprentices, Members, National Apprenticeship Week.

Two members tell us why apprenticeships were right for their accounting careers – and an AAT apprenticeship is “like gold dust”.

We spoke to AAT members Charmaine Cardozo MAAT and Ben Boutwood MAAT about why they opted for apprenticeships over university. Both took on apprenticeships early in their careers and feel they benefited from training, on-the-job experience and financial security.

There’s a reason AAT is so keen on apprenticeships. As AAT President Christina Earls attests, they’re “a great way to help social mobility, giving people from all kinds of backgrounds a way into finance. It’s so valuable that they are open to anyone whatever their age or educational background. And AAT offers entry to the accounting profession whatever qualifications you got at school.

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“It also helps that you can independently earn while you learn. I am very happy that the apprenticeship schemes now in place offer affordable training that can lead to better opportunities at work. As a learning coach for apprentices, I found some of my apprentices were able to get promoted while they were still learning. That’s because the work examples they developed to showcase their skills for the apprenticeship were the same competencies required for higher-paid roles.

“No surprise there! Apprenticeships are designed by employers to develop technical knowledge, skills and experience that are desperately needed in this day and age. A bonus to taking the AAT apprenticeship route is the support you get as an employee in developing vital soft skills that your line manager wouldn’t otherwise have time to help you with.”

Here our members explain the benefits and how apprenticeships have worked for them in their own words.

First, tell us about how you got an apprenticeship, and why you chose accounting.

Charmaine: I studied my AAT Level 4 through an apprenticeship and gained my MAAT membership. My firm Passman Leonard offered me the apprenticeship in May 2019, when I was a Trainee Accountant. Having completed my AAT, they offered me a full-time role and a promotion to Accounts Assistant.

I believe apprenticeships are a great way to start your career in Finance because they empower you financially and avoid university debt. Apprenticeships enable young people to become independent and obtain their own homes, security and success. You also gain training and on-the-job experience while completing your education, and it’s very likely you’ll get a permanent position at the end.

Ben: I left school when I was 18 and almost felt like I had no direction. My school was pushing for people to go to university, but I knew it wasn’t my calling. I was keen to get into work early, get a skill under my belt – and train alongside working so I could earn some money, and learn on the job. However, I didn’t know what that was at the time! So I applied for a job as a ‘trainee accountant’ over the summer, and started work full-time in September 2014.

I had no experience in Accounting or Finance, other than doing Business Studies at A-Level. However, maths was never my strong point, so I had reservations about whether I would be cut out for the job. I was assured early on that accounting was actually more about people, strategy and communication than numbers and figures! As a people person, I wanted to make sure I was in a job where I could interact with clients regularly, and not feel like I was just sitting at a desk pumping numbers into a computer.

How did your apprenticeship begin?

Ben: After 12 months of learning the basics, I enrolled in Level 3 AAT at one of the local colleges, and that’s really where my journey started. I completed Level 3 by the summer of 2016, and then by 2018 I was well on my way to completing my Level 4 AAT. I have now been MAAT for a number of years, and I’m still working in the same firm.

Where’s your apprenticeship taken you and why are they a great way to start your career?

Ben: A lot has changed, I am now semi-senior, and I’m involved in mentoring. I would encourage anyone who is unsure about what to do, to go down the AAT apprentice route. It worked wonders for me and I am very happy with my career path and progression, as well as all the invaluable skills I have picked up along the way.

Apprenticeships are a great way to start a career in finance, simply because the nature of the job is very hands-on. Although you can learn a lot by sitting in a classroom, nothing will equip you better, faster and more readily than experiencing it first-hand. So much of what I learned at college was directly reinforced by my day-to-day work, and vice versa. You naturally learn so much, so quickly – it’s a perfect combination.

Why did you choose an apprenticeship over a university degree, and how do the qualifications compare?

Charmaine: I chose an apprenticeship over a degree mainly because I could gain job experience while studying an accounting qualification. I gained the finance qualification for free as I didn’t have to pay for my college or course fees since my company covered it. This saved me the student loan debt and provided me flexibility to study and sit my exams whenever I was ready.

Definitely I feel apprenticeships are way better than university. You can gain an accounting qualification such as AAT/ACCA, which is equivalent to the Accounting and Finance Degree at university, for free and without incurring any debt. You can also sit the exams in your own time as and when you prefer.

Ben: I chose an apprenticeship for a couple of reasons. First, the financial burden of a student loan terrified me. It helped that I could earn a salary and have my training paid for – all whilst my friends were paying thousands and thousands a year. It always seemed to be my round at the pub when I was in my late teens! Second, I didn’t want to wait several years for my career to start, with no designated path for me to follow. I left school and started my career within a few months.

University’s a great option if you’re deeply passionate about something or know exactly what you want to do. But realistically you can become an apprentice or do a course for most careers, with partial or full funding. You get the benefits of a recognised skill or qualification, without the financial costs or lost time. With an apprenticeship you’ve had nothing but experience, which puts you in a much better position than your peers!

Why are apprenticeships good for business?

Charmaine: Apprenticeships are a cost-effective way to train staff, and apprentices contribute to the workplace while they’re learning. Funding can also be available to businesses to support the cost of the apprentice while they are learning. For those on lower salaries under the age of 25, employers’ national insurance contributions are also waived, which is of great benefit to businesses.

Ben: I think the most obvious benefit is financial. Apprentices can be cheaper salary-wise as they’re often younger and less experienced, plus there are apprentice schemes and grants available. It’s a win-win. And if your apprentice is a younger person, they can be moulded perfectly for the business’s values and systems. Regardless of age, you’re getting a fresh member of the team who is 100% willing to learn your business from top to bottom, and usually they learn a lot quicker that way because they have to.

Would you recommend apprenticeships to others?

Charmaine: I would tell a school leaver to take on an apprenticeship if there’s one available in their chosen field of study. I’d also advise them to research the qualifications and benefits offered by the company they’re applying to. They should also take short online courses and read more about apprenticeships to help prepare them for when they start an apprenticeship.

Ben: My advice would be to seriously think about what is right for you and only you. Whatever field you want to go into, see if there’s a college doing a relevant course. A lot of colleges are teamed with local businesses for apprentice roles, so you will have the support you need, and won’t feel like you’re tackling it alone. Choosing what you want to do feels like the most daunting task, but you can always get another qualification or do another course.

If you are business minded at all, an AAT apprenticeship is like gold dust. It gives you the understanding and fundamentals of accounting, and those skills are so transferable. If you wanted to change into another area of business, having an accounting/finance qualification under your belt will make you stand out. It also makes life easier if you can understand basic tax!

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Succession, loyalty, and leadership – the triple win of apprenticeships

Posted by & filed under Employer newsletter, National Apprenticeship Week.

When hiring becomes inspiring: apprenticeships are proving a secret weapon in the talent war.


Anthony Clarke, AAT Business Development Manager, marks the start of National Apprenticeship Week by revealing how apprenticeships are solving employers’ most pressing problems.

  • Succession planning: Apprenticeships provide a clear pathway for talented young people to progress within the company, ensuring a steady pipeline of future leaders. By nurturing their skills and knowledge from the ground up, employers find they can develop a workforce that is deeply invested in the company’s success and ready to take on leadership roles when the time comes.
  • Staff retention: Apprenticeships foster a strong sense of loyalty and commitment among employees. They feel valued and supported in their development, which reduces the likelihood of them seeking opportunities elsewhere. Additionally, apprentices often bring fresh perspectives and innovative ideas to the table, which can help to revitalize the workforce and keep the company competitive.
  • Training leaders: Apprenticeships provide a valuable opportunity for experienced employees to develop their leadership skills by mentoring and coaching the next generation. This not only benefits the apprentices but also helps to create a more engaged and supportive work environment for everyone. By investing in leadership development, you can ensure that your company has a strong pipeline of future leaders who are ready to take the helm.

Facts and figures

Research by CIPD – the  professional body for HR and people development – found hiring apprentices had the following benefits:

  • 80% of employers have maintained or improved future skills in the business.
  • 70% of employers have seen improvements in the goods and services they offer.
  • 66% of employers have experienced improved staff morale.

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