AAT seeks volunteers to use Net Zero software

Posted by & filed under Members, Sustainable Business.

AAT wants to hear from licensed members who would like to use a new software platform designed to make light work of implementing action plans to reach net zero. 

Net Zero Now is cloud software that calculates carbon emissions, sets targets, and generates a tailored reduction plan for the subscriber. 

AAT, along with the ICAEW, ACCA and the Good Business Charter, have assisted Net Zero Now by creating a protocol for the accountancy sector, which will be used by the software to certify users. 

This protocol can be downloaded directly from netzeronow.org/accountants, along with a free ‘playbook’ of helpful ideas. Alternatively, companies can subscribe to the Net Zero Now software platform and have it do the heavy lifting. 

What AAT is looking for?

AAT wants to find two practices of 2-25 people interested in taking steps towards net zero. We would like to report on their learnings from implementing a plan, along with how the software platform has helped.

Apply now!

How will your practice benefit?

All costs of using the software will be covered. You will also be given help during the onboarding phase.

Apply now!

Why is AAT doing this?

Achieving net zero is going to be challenging, but it is a legal requirement. We want to help our membership by sharing learnings of how to go about this.

Adam Williamson, AAT’s head of responsible business and policy, commented: “AAT is very aware that net zero can seem daunting, and we want to work closely with our members help them engage with it.” 

Apply now!

How to apply?

To be considered, drop an email to the Content Team briefly describing your company and why you want to be involved. 

Apply now!

Progress your career by specialising in tax

Posted by & filed under Tax.

*This content is brought to you by Tolley.

Are you nearing the end of your AAT studies or already an AAT member?  Did the tax element of your studies spark your interest or are you looking to work in tax?  If so, then a natural next step is to gain the ATT (Association of Taxation Technicians) qualification and specialise in tax.

Where can a career in tax take me?

A wealth of opportunities

Every area of your day-to-day life is impacted by tax, from the food that you eat and the clothes that you wear, to the funding of public services and transportation routes.

Because tax affects all areas of life and business, tax professionals have a lot of flexibility about the type of role and industry they work in, as well as providing portability to move between roles and industries throughout their career.

If you choose a career in tax then you may decide to specialise in a particular area. As a personal tax specialist you could be advising high net worth individuals on tax-efficient investments, or assisting with Inheritance Tax and Trusts and Estates planning for their future. As a corporate tax specialist you may calculate how much Corporation Tax a company has to pay, or look at the tax implications of business transactions, or how to reward staff in a tax efficient way. There are also indirect specialists who work in VAT and international specialists working with cross-border transactions. Whether you choose to be a generalist or a specialist, there is a job in tax for you.  

You’ll have the opportunity to work in industry within in-house tax departments, or in practice for accountancy and tax practices, as well as for charities, the government or even on your own.  You may want to explore the world of tax research and writing, apply your knowledge to help develop information technology solutions for tax practitioners, or even have the calling to teach tax! As a tax professional, you’ll also have ample opportunity to work abroad. 

Always in demand

With every budget, the tax rules change and individuals and organisations need tax professionals to provide expert advice navigating complex tax legislation. For you this means a diverse career, always learning, always challenging yourself and always being in demand to help your clients understand the impact of the changes in the tax law.

This can provide a stable career path; jobs in tax are relatively secure and employers are always looking for good quality candidates with the right skills for a career in tax.

Financially rewarding

The fact that tax professionals are always in demand is also reflected in how much you can earn.  If you prove yourself, you can realistically aim for a management position within three years.  The table below provides an indication of salaries.

Practice LondonRegions
Partner£100,000 to £2.5m£85,000 to £1m
Director£90,000 to £200,000 £75,000 to £150,000
Senior Manager£60,000 to £100,000£50,000 to £80,000
Manager£55,000 to £75,000£40,000 to £53,000
Assistant Manager£42,000 to £55,000£32,000 to £40,000
Tax Senior£32,000 to £45,000£25,000 to £35,000
Tax Assistant £25,000 to £35,000£18,000 to £27,000
Source: Association of Taxation Technicians

Wide-ranging skills

A career in tax is never dull! It’s sometimes perceived that the most important skill you need is numeracy.  However, tax is not just about the numbers. Tax is weaved into business transactions and personal finances. Tax is more a puzzle to solve, than a finite number to crunch.

As a tax professional you’ll be developing a whole range of transferable skills, such as communication, negotiating, planning and problem-solving skills. As tax is constantly changing you’ll be working in a face-paced environment, using commercial acumen to advise your clients on the best way to structure or run their business – a really critical role in helping to shape the strategic direction of the business.

‘A career in tax allows me to use and build a variety of skills within a highly regarded and reputable profession. The profession offers huge development and progression opportunities which is very important to me. Furthermore, the profession is, and always will be, highly sought after, so the job security that comes with a tax career is an added benefit.’

Connor Whelan, Tax Analyst at Costa Coffee

How do I go about it?

The first step to specialising in tax is to undertake the ATT qualification – the essential tax qualification for anyone wanting to work in tax compliance and a professional benchmark respected and recognised by employers and clients.

To qualify you must sit and pass three tax papers, three Computer Based Examinations (CBEs) and have two years of practical experience. The three written papers provide a solid grounding with papers in Personal and Business Taxes; as well as an opportunity to choose a specialism with a third paper.

Exemptions available

If you are AAT Level 4 exam qualified then you may be eligible for an exemption from the Principles of Accounting Computer Based Exam, allowing you to streamline your journey to becoming ATT qualified.

Where does Tolley fit in?

Tolley Exam Training provides a variety of high-quality tuition options to help you pass your ATT exams first time.

Tax-oriented

We are the only organisation to focus exclusively on professional tax training so you can rest assured that we are experts in our field.

High pass rates

Our ATT pass rates consistently outperform the national average by at least 15%.

Expert tutors

Our training courses are run by some of the most well-known and experienced tutors in the country and they create all the materials they teach.

Flexible study options

We offer a wide range of study methods including a Guaranteed Pass Scheme, virtual Online Tuition Live sessions, face-to-face classroom courses, mix-and-match options and distance learning courses – so you can choose the option that works for you.

Continuous support

Our online Tolley Academy allows you to easily track your progress, interact with fellow students and tutors via our Forums, and practice your exams online in a format that replicates the ATT exams.

‘Tolley’s courses, material and tutors are second to none.  The amount of work they put into making sure the courses are productive and materials easy to follow is evident.’

Joel Kara, Tolley student

To start your tax journey visit www.tolley.co.uk/att or fill out this form and a member of the Tolley Exam Training team will be in touch.

*This content is brought to you by Tolley.

An overview of strategic management accounting

Posted by & filed under Career, Career profiles.

The concept of strategic management accounting has been around since the 1980s and was mostly the domain of large corporations. Now smaller companies are adopting it. Here’s everything you need to know.

The Chartered Institute of Management Accountants (CIMA) defines strategic management accounting as “the provision and analysis of management accounting data about a business and its competitors, for use in developing and monitoring business strategy”.

The purpose of strategic management accounting

Robin Roslender and Susan Hart, part of the Accountancy Research Group at Heriot Watt University, conducted a review of literature relating to strategic management accounting. They identified three distinct conceptions of strategic management accounting:

  • Taking generic strategy tools and looking at how management accounting information can be used to better support strategy.
  • Aligning management accounting with marketing for better strategic positioning. Essentially this means using management accounting within the company’s marketing tools.
  • A catch-all term for a number of modern management accounting techniques, which have a strategic element to them. This generally includes any element of management accounting that involves external and market-oriented information.

The strategic management process

The strategic management process can be broken into several steps, based on Keith Ward’s 1992 book on the subject, Strategic Management Accounting:

Vision, mission, and objectives – the senior management accounting and management accounting team set an overall goal and a series of objectives that relate to that central mission. This will form the basis of the activity of the management accounting team and give them a series of questions to answer.

Information gathering and analysis – the strategic management accountants gather data from a number of sources within the internal environment of the business and the external market. This is then appraised and analysed so that it can feed into the next stage.

Strategy formulation – the data collected and analysed is used to inform a strategic plan for the business, with the creation of several options for review. At the end of this step, some strategic choices will have been made to steer the business towards its ultimate goal. 

Implementation – the choices made by the management team are then implemented across the organisation.

Monitoring and evaluation – the results of implementing those choices are reviewed to determine how successful they’ve been in relation to meeting company goals and objectives. 

The final three stages will all feed back into the information gathering stage, perpetuating a constant cycle of learning and applying new knowledge to strategic decisions. This can occur at a holistic level, or within a specific department within the organisation – finance business partners are essentially involved in strategic management accounting work. 

As you might expect, strategic management accounting involves a lot of work out and about within the business, working directly with non-finance managers and teams. 

Strategic decision making

According to research conducted by CIMA and Nottingham Trent University, the strategic decisions made through management accounting tend to be grouped into four main categories:

  • Pricing
  • Business/market development
  • Product development
  • Merger and acquisition activity

When it comes to pricing, strategic management accountants tend to look at margins, particularly by market sector, according to the research. When it comes to business development, management accounting is used to provide assurance.

Typical strategic management accounting techniques

Activity-based costing

Costing and monitoring of activities by tracing resources consumption and costing the final outputs. Resources are assigned to activities and activities to cost objects based on consumption estimates.

Benchmarking

By using data gathering, targets, and comparators, the strategic management accountant identifies relative levels of performance and underperformance. It helps to determine best practices to improve performance.

Costing

More specifically, strategic management accountants will complete costing based on activity, product attributes, life-cycles, quality, targets, and value chains. All of which work to determine whether an investment in a new or improved product or service is worth it.

Budgeting

Strategic management accountants look at brand value budgeting, and monitoring and capital budgeting. The former involves assigning a financial value to the equity created by the name or image of the brand – it can be represented as the net present value of future cash flow estimates associated with the brand. The latter is all about selecting long-term capital investments.

Competitive position monitoring

Pretty much what it says on the tin – reviewing the company’s performance in the context of its market position, and the market position of key competitors. A strategic management accountant will also estimate competitor costs per unit based on available data and will look at competitor financial statements to determine their strengths and weaknesses.

Customer profitability analysis

The strategic management accountant looks at the revenue streams and service costs involved with different customer groups. 

Further reading:

How can I get involved with my local AAT branch?

Posted by & filed under Career, Members.

AAT’s branch network supports AAT members and students throughout their careers in accounting and finance. It’s easy to get involved with your local AAT branch and there are many benefits.

AAT has a network of 49 branches throughout the UK, as well as one international branch in Botswana. Run by over 300 volunteer members, the branch network aims to support AAT members throughout their careers in accounting and finance. 

AAT branches are run according to seven overarching principles: selflessness, integrity, objectivity, accountability, openness, honesty, and leadership. Their primary objectives include identifying and meeting local members’ CPD needs, providing a social forum for networking, and helping students to attain their qualifications. 

Branch events are made possible thanks to the commitment and enthusiasm of the many volunteers. Each branch runs courses and events in all areas of accounting, tax and professional development, as well as offering support and valuable networking opportunities. Events are held throughout the year, usually during evenings and weekends. 

AAT’s branch network is open to full, fellow, affiliate and student members, as well as the wider business community. As such, it caters for all AAT members, from students to qualified professionals working in senior positions. 

A training tool 

Leicestershire branch vice chairperson Steve Harratt, like all branch committee members, is a volunteer and fits his duties organising branch activities around his work and personal commitments. 

“I joined my local branch nearly 20 years ago and it’s a resource I didn’t want to lose,” he says. “It was like a training tool to me and that’s the reason it’s important we try and retain that. One of the biggest advantages of local events is networking and building local connections. A lot of the time, some of the issues our members are facing are very similar and often there are a lot of people within that area who are facing the same problems, so it’s a great opportunity to have a cup of tea with people in a similar position and discuss those issues. Whether it’s getting the answer to your question or hearing you’re not alone, you can talk it through and feel better about it.” 

AAT’s president Heather Hill regularly attends branch events and meets with members. 

“When I first moved to my area in the early ’90s, I set up on my own, but I felt quite isolated,” she explains. “I remembered AAT held branch events, so I investigated that and joined my local branch. I was so happy that I had somewhere local to go and start networking. When you’re in practice on your own and just starting out, it can be handy to talk things through with someone else who can offer you that reassurance. That meant a lot to me.

Nothing beats in-person and if you find out somebody needs assistance, you exchange contact details, so you have that supportive network and bonding. If you don’t know anyone when you go to a branch event, you’ll get to know the committee and they’ll encourage you. Branch events have such a warm atmosphere and it’s great to be with like-minded people.” 

Volunteering  

There are further benefits for those who wish to volunteer with their local branch, including the vital experience volunteering can provide for future senior roles. 

“A lot of people who have gone onto AAT Council, vice presidency and presidency of AAT started their progression by volunteering for their local branch,” AAT product support and delivery manager Tom Duncan explains. “It’s a great way for people to get involved and volunteer their time to progress in that way. For younger members who perhaps have less work experience, it’s a great opportunity to add more strings to your bow through roles such as treasury and event planning and organisation, which you otherwise may not have.”   

Benefits of getting involved with your local AAT branch 

  • Meet members and students in your area 

As an AAT student, contact with AAT and other AAT members is often virtual, such as visiting the website or social media pages. You may not have many opportunities to meet other AAT members face-to-face, especially if you study by distance. By getting involved with your local branch, you have the opportunity to spend time with other AAT members and students, and create a network. 

  • Network with professionals 

A common question from students is how and where to network – and AAT branch events are an excellent start. There are opportunities to network at the start or end of each event and you will be surrounded by fellow AAT members and students from all sectors and industries. 

  • Gain CPD in relevant areas of accounting and finance 

As well as ensuring you are keeping up-to-date with any changes affecting your work, attending branch events counts towards your continuing professional development (CPD). For students who are considering progressing to full AAT membership, CPD is an important part of this. 

  • Share ideas 

Whether you are currently working in an accounting position or not, branch events are a great place to share ideas and experiences with other accounting professionals. Each branch event focuses on a different topic and will often involve a question and answer session, where AAT members and students can ask questions or share their ideas and experiences. 

Find your next local branch event at aat.org.uk/aat-events 

Further reading:

Where AAT can take you: Becoming self-employed

Posted by & filed under Students.

AAT Licensed Accountant Will Blower got his start as an apprentice before taking the plunge into self-employment. After launching in 2020, his growing firm, Realise Finance, now provides accounting services to over 100 clients.

Will Blower launched his accounting firm, Realise Finance, when he was just 22 years old – and when the UK was in the thick of the Covid-19 pandemic. 

The AAT Licensed Accountant took the plunge into self-employment in July 2020 and has since grown his business and taken on a part-time staff member to help with administration work. 

“I thought that clients would need help at that time, so it was a good opportunity for me,” he explains. “I had a handful of clients to begin with and we’re now at over 100 clients. The growth at the start was slow, but the end of last year was massive for us – I think it was a combination of Covid-19 and our reputation getting out there a bit more. I haven’t spent any money on advertising – Google ads or Facebook ads or anything like that. I wanted to develop a good reputation and grow that way.” 

In the first few months after starting his business, Will worked with some other small accounting firms as a subcontractor to ensure he was still earning money, but the Peterborough-based accountant now has enough clients of his own to keep busy. 

Around 85% of Will’s clients are based in Lincolnshire and Cambridgeshire, which enables him to meet his clients face-to-face as often as possible. 

“My selling point is the personal side of accounting and my clients like that. That’s why they’ve come on board,” he says. “We can automate things for them, but I’ll still be the adviser that’s there for them. I want to make sure my clients feel like they’ve got someone to go to and they don’t feel worried about running their business.” 

Flexibility and freedom 

Will has an office space, but often spends time working remotely, from a coffee shop or other meeting space. 

“The best part of the job, for me, is the flexibility and freedom to be able to work anywhere,” he says. “It works really well. Every day is different. One day I could be meeting a client at a coffee shop or going out to visit a client, and on another day I could be in the office doing accounting work or working on the business. It’s really varied.” 

Looking to the future, Will has plans for expansion. 

“We’ve got the capacity to bring on more clients,” he says. “Later on this year, I’d like to bring on an apprentice to do AAT training, and that will give me the opportunity to bring on even more clients. 

“A lot of the time, people move to us because they’re not happy with their accountant – they can’t get hold of them or they don’t reply to them. I want to make sure that I keep that personal touch with my clients. If we had too many clients then there would be a risk that we couldn’t offer that, so that has to be at the core of the business.” 

Starting out 

Will was introduced to AAT through his career coach at school.  “It wasn’t like I always wanted to be an accountant – I actually wasn’t too sure what I wanted to do. I knew I didn’t want to go to university.”  The option to study and earn money at the same time appealed to Will. 

“I got into accounting through the apprenticeship route,” he says. “I joined a local firm and I got a lot of experience between junior level and partner. That was my first step into accounting.”  After completing his AAT qualifications, Will then moved to an audit/accounts role at another accounting firm, where he was able to take on more responsibility. 

“Right from when I started out in accounting, I’d help out my uncle with his self-assessment, as I was ‘the accountant in the family’,” Will says. “So from that, I thought, ‘you can do it yourself’ and I looked at the steps I’d need to take to go out on my own. I needed to qualify with AAT to have a good regulatory body behind me, so that was my first goal. Qualifying with AAT was a big achievement for me, because it meant that I could do all of this.” 

Getting his AAT licence was a smooth process, he notes, and he felt confident that AAT were there to help with resources and advice if he needed it. 

Having secured his AAT licence, it was onto the “scary part” of making money and establishing his firm and its credibility, Will explains. “I was quitting a nine-to-five accounting job with a salary and I didn’t know how many clients I was going to get. That was definitely the most difficult part of the process.” 

Although he had some income from his subcontracting work, it wasn’t guaranteed and he worked hard to ensure he got his business off the ground. 

“You have to be brave,” Will says. “Put yourself out there. When you work in accountancy, at the start, you’ll be given jobs that can be quite easy and when you complete them you’ll be given more of the same. You have to ask to get more experience with things you aren’t sure of, so you can get a more well-rounded skillset. Put yourself outside your comfort zone because it helps you to grow.”   

Will’s advice 

“When you work in accountancy, you’ll be given jobs that can be quite easy and when you complete them you’ll be given more of the same. You have to ask to get more experience with things you aren’t sure of, so you can get a more well-rounded skillset. Put yourself outside your comfort zone because it helps you to grow.” 

“Later on this year, I’d like to bring on an apprentice to do AAT training, and that will give me the opportunity to bring on even more clients.” 

Further reading:

The trust dividend – why private equity firms are buying accountants

Posted by & filed under Members.

The pandemic caused the public’s trust in accountants to soar, now that’s helping to fuel acquisitions.

A flurry of private equity (PE) funding into UK accountancy firms over the past few years points to a real trend. This might be music to the ears for some practice owners, especially with a recession looming, inflation rising and a generally uncertain outlook for businesses and their accountants.

Notable recent examples of activity include:

London-based Jeffreys Henry, which in late 2021 secured “growth investment” from Tenzing. Tenzing typically invests in “niche market leaders and challenger businesses, valued between £10m and £200m”. The plan, according to Jeffreys Henry, is to “significantly grow the firm through new services, technology innovation and strategic M&A opportunities”.

Another example in late 2021 is August Equity, which bought into Scottish firm Anderson Anderson and Brown (AAB), which then promptly bought Leeds-based independent Sagars in a move that will see it strengthen its geographical reach beyond its core region in Scotland.

Farnell Clarke in Norwich last year appointed Baird Capital director Louise Kingston as a non-executive director to help drive its “next phase of growth”.

Why does PE find the UK accountancy sector attractive?

Above all else, private equity wants to buy something, grow it and add value, then sell it later at a profit.

Within this remit UK accountancy is attractive as firstly, there simply aren’t enough accountants to meet demand; secondly, the sector is fragmented, so there is the opportunity to grow businesses quickly by scaling up through M&A; thirdly, the sector is ripe for service diversification, adding value with technological innovation, and attracting a strong talent pipeline.

And then there’s the trust dividend.

“After the initial shock of the pandemic, businesses quickly turned to their accountants for everything — furlough, Business Bounce-Back loans, grants, business interruption loans — you name it. It had ‘my accountant’ written all over it, as they’re the only ones with the skill base,” said Gordon Gilchrist, a consultant at 2020 Innovation and a keynote speaker at May’s Accountex conference during which he focused on the private equity trend.

“This was coupled with the delightful notion that, culturally, accountants do not kick people when they’re down, it’s just not in our blood. We don’t charge more money or take advantage of people because they’re desperate.

“The accountant’s attitude towards their clients during the pandemic of ‘let’s get through this together’ has paid dividends hand over fist,” he said.

What kind of practices are PE firms buying?

PE firms like buying a larger regional practice, perhaps in the top 50, then bolting on smaller regional outfits to quickly reach scale.

“They have several million pounds to splash around and they’re looking for regional practices with gross recurring fees in the multimillions, then they just bolt on one at a time, half a million here, a million there,” said Norman Younger of Maximiti.

Gilchrist agrees: “They have learned the way forward is to buy a strong firm in Yorkshire and then build around Yorkshire, or buy a strong firm in London and build around London. A good example is Cow Corner, which has bought into Brighton-based Galloways and is building up quite quickly in the area. It has also bought Mitchell Charlesworth in the Northwest and is looking to tuck in firms there.”

The profile of the smaller satellite practices being scooped up are those with £500,000 to £3 million turnover, according to Norman Younger of Maximiti. “£1 million turnover is a good size, especially if there’s only one or two partners.”

What are PE firms willing to pay?

Younger says that the multiples for firms have been sticky for a long time, around 1.1 and 1.2 x current revenue. “There’s always been an imbalance of supply and demand, there’s too many buyers chasing too few firms. I pushed up multiples during and post Covid to 1.3 or 1.4, and I’m getting it for good firms that tick all the boxes.

“What I do find is that the smaller fry are desperate to find somebody who will pay that higher multiple, but the corporate PEs tend to fish at the higher end of the market, where there are fewer buyers, and they won’t pay the higher multiples. I always tell people, leave the money to the end. Let’s find the best fit.”

What does the money do?

While PE might be considered an expensive route to growth compared to borrowing money and trusting in your own management, it does bring unique expertise.

“PE firms give you management and all sorts of knowledge, which as an accountant, you wouldn’t necessarily apply to yourself. You apply the principles when you’re advising clients, but there’s a classic cobbler’s shoe scenario in which accountants know how to advise their clients and their businesses, but for some extraordinary reason, they can’t see the wood for the trees for their own businesses,” said Gilchrist.

They also bring deep pockets. “As a supply led industry, if I buy a tax person, my tax fees will go up. A less confident accountant wouldn’t get a chequebook out for £80,000-100,000 to buy a tax guru for fear they won’t get their money back. Whereas a PE firm, who’ve got balls of steel, just say ‘you want £80,000, here’s a £100,000, go and get five of them if you want’, because it is all about earning fees and growing,” said Gilchrist.

This can free up accountants to do what they do best — earn fees, nurture client relationships and diversify services — while PE takes care of the rest.

PE will likely wield more back office or operational influence, building out the cloud accounting capabilities and implement new workflows in order to drive scale.

PE investment means equity share structures are in play, which can help with talent acquisition and retention, while also potentially shaking up the partnership model. “Share options attract capital gains tax at 20%, whereas your salary could be into 45-50% tax and national insurance. So net take home pay can be much, much higher with a lower share option for salary swap,” said Gilchrist.

What’s in it for PE?

Most are working to a medium-to-long time horizon and want a good income stream to get a solid return on equity (ROE). Younger says a well run practice will make returns in three to three and half years. “Practices throw off cash, and the more specialist you are, the more you throw off. The ultimate game for all PE is to sell — build up a regional brand and sell on to one of the bigger players or join a group like Azets, and hopefully they’ll be taken over and then you’ll get a part when they’re taken over.”

Know your PE from a pretender

Norman Younger says there are two types of private equity. “There’s the genuine private equity who know what they’re doing, they they’ve done it before, whether with accountants or in other fields. They’ve got proper advisory boards and they have the money lined up.

“Then you have the other ones, the ‘wannabes’ who I’ve learned to flush out pretty quickly. They put a snazzy looking information pack together and paint themselves as a PE firm, but in reality they’re men of straw. It’s usually a few accountants who’ve come together and think they’re going be the next Deloitte or Azets. They’ve got no money behind them, it’s all hot air. They think the talk a good talk, but they can’t deliver the goods, and most of them have jobs still.”

The genuine players are well funded, continued Younger, but there’s a bit of a scattergun approach to their investing. “I’ve seen one or two trying to create something and they’re just buying anything they can get their hands on, there’s nothing in common between what they’re buying. They’ll buy four or five practises, a £50,000 payroll bureau and then at the other end of the country a firm of accountants turning over £150,000 specialising in farmers.

“So the trend is there and everyone’s trying to jump on it, but I think that the serious players who’ve got the cash to burn, they’re the ones who will perform.”

How businesses are tackling Bounce Back Loan repayments

Posted by & filed under Coronavirus, Members.

Repayments for Bounce Back Loans loans are now starting, following a series of flexible payment deferral options including the Pay as You Grow scheme. How are businesses coping?

Bounce Back Loans (BBL) were introduced during the Covid-19 pandemic to provide financial support to small and medium-sized businesses. Under the scheme, eligible businesses could borrow between £2,000 and £50,000 at government-guaranteed low rates of interest.

BBLs were intended solely to benefit the business itself, whether to purchase equipment, protect jobs or help ease cash flow issues. However, there have been numerous cases of Bounce Back Loan fraud and other abuses where loans were used for personal benefit or taken out for non-existent companies.

Nonetheless, BBLs were extended to cover the entire 2020/2021 financial year.

Businesses entering repayments have several options:

  • Repay the loan over a period of 6 or 10 years in monthly instalments.
  • Repay the loan early without facing early repayment charges.
  • Pay interest-only repayments over a six-month period (this can be done up to three times during the duration of the loan)
  • Pause repayments for up to six months. 

We spoke to accountants to find out how their clients are managing these repayments and what advice they can provide.

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Repayments can strain cash flow so draw up short-term rolling forecasts to avoid surprises

Andy Kay, Partner, Corporate Finance Midlands, Crowe


In some cases, the need to repay these loans is putting a strain on cash flow.  Any interest-free periods are likely to have expired and where capital payment holidays were granted, these are likely to have ended.  There are headwinds that are impacting cash and the ability to repay, including supply chain and raw material issues, excessive stocks locking up cash flow in working capital, the cost of energy and utilities, wage pressures and general inflationary concerns. 

Some businesses are considering repaying in their entirety if cash flow permits. Most businesses are making timely repayments and some are actively seeking restructuring and re-phasing of the loan terms.

Next steps:  Where cash is stressed, the fundamental approaches to cash flow management should never be neglected. Short-term rolling cash flow forecasts should be drawn up, reviewed and updated while stakeholder management is key so as to avoid surprises. The debt may be able to be rescheduled to ease cash flow issues, but the best remedy is to consult guidance and advice early.

Verdict: Repayments can put strain on cash flow so draw up short-term rolling cash flow forecasts to avoid surprises.

Businesses that cannot repay Bounce Back Loan may need to consider Creditor’s Voluntary Liquidation (CVL)

John Bell, Senior Partner, Clarke Bell (licensed insolvency practitioner)

Many company directors are currently seeking advice from their accountant because of a Bounce Back Loan (BBL) they took out and can’t afford to pay back.

Some are opting to dissolve their companies. But any attempt to dissolve a company with an outstanding BBL will almost certainly be opposed by the bank. Directors have said that their bank told them they needed to put their company into Creditors’ Voluntary Liquidation (CVL).

A BBL is secured by the Government, so under CVL, the bank can pursue the Government to get a full repayment of the loan.

From the director’s point of view, a CVL is normally the best option. This is true even when some of the BBL was misused to pay off household items, like a mortgage.

The part of the BBL that was used correctly for business purposes will be written off in the CVL. Any part that was used incorrectly, will need to be repaid. In such cases, the liquidator will set up a repayment schedule to enable the director to pay it back in an affordable and timely manner.

Next steps: Businesses that cannot afford to repay the loan should seek advice from their accountant and an insolvency practitioner.

Verdict: Consider the CVL option as an alternative to dissolving the company, especially if BBL is outstanding.

Businesses who factored in repayments into their forecasts are managing much better

Tanya Ibberson, Founder, Financial Wing Woman and Director, FD Business Services

I have two clients who have now gone into insolvency, so they aren’t repaying any of this debt.

The ones that are repaying say they feel grateful for the lifeline, yet are now struggling to balance repayments alongside hugely increasing prices elsewhere in their businesses.

One client has been trying to renegotiate payment terms, but their bank is not entertaining any changes as the rates were already favourable to begin with. Some are looking to add more value to existing clients to generate additional income to help cover the cash needed for repayments. Others are cutting costs elsewhere.

Overall, those who factored the repayments into their forecasts are managing much better.

Taking on any financing arrangement always needs consideration before you sign. I always compare this to entering the yellow boxes on the road to my clients – you need to have a clear exit before you go in.

Next steps: Step ‘outside’ your business and take an objective view of how the finances look. What bills have you got coming up?
What does your cash flow forecast look like?
What’s the income and cost pipeline looking like? 

I always advise that it’s important not to be short-sighted and just focus on cutting costs to save cash – redundancies are not always the smart move.

Verdict: Businesses who factored in repayments into their forecasts are managing much better.

Businesses should consider short and long-term cash needs before repaying Bounce Back Loan

Simon Michaels, Director, HW Fisher


The Bounce Back Loan was seen as a cash windfall in a time of need. A self-certifying application enabled business owners to apply for a loan within minutes with little finance experience required. Many didn’t consider the consequences of repaying the loan and the cash impact further down the line.

There was a misunderstanding among borrowers who believed a government-back loan was not like any other loan and was more favourable to the borrower. In fact, Government support was really there to protect the banks – if a borrower was unable to repay the debt, then the bank was protected by the Government.

There were two schools of thought with borrowers: they either applied for the loan and took advantage of interest-free funding for one year and on the anniversary of the loan repaid the capital, and those that used the funds to survive or grow the business.

Nevertheless, this loan came with no personal guarantees and low-interest rates of 2.5%. Although some clients have taken the decision to repay this debt, many continue to use this facility as additional working capital.

Next steps: As we approach what is believed to be difficult economic conditions, these additional funds could be welcome. The repayments are spread over 6+years making both capital and interest manageable. With competitive interest rates and attractive repayment terms, borrowers should consider their cash needs, both now and in the future, before repaying their Bounce Back Loan.

Verdict: Businesses should consider short and long-term cash needs before repaying a Bounce Back Loan.

Treat BBL as any other loan and stick to repayment terms – but don’t repay early

Simon Smith, Partner, Wellers

Bounce Back Loans aren’t causing any additional issues for our clients over and above existing stresses from running a business in today’s financial landscape of inflation, rising interest rates, Brexit and the ongoing war in Ukraine.

Those with Bounce Back Loans have benefitted from a year’s holiday before the repayments began and have used their loan to help bolster working capital. In fact, some of our clients have already repaid their loans in full.

The interest rate for repaying Bounce Back Loans is minimal in comparison to most other types of finance. As long as a business’s cash flow is generally not overstretched, repayments shouldn’t cause big issues. If it is, then a wider look needs to be taken at the business’s cash flow and cash position.  

Next steps: Business owners should follow the same principles as any other type of loan by staying within the repayment terms or it will impact their credit rating.

Some accountants may advise paying off the loan early, but I wouldn’t advise this: the cost of the loans is cheap in terms of interest rates, compared to other finance options, so if there is still money left, I would advise using it – whether for investment, marketing, or as working capital to enhance the business.

Verdict: Treat BBL as any other loan and stick to repayment terms – but don’t repay early. Interest rates are relatively cheap – so make use of any money left for business benefit.

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Reform the tax system to increase the effectiveness of the housing market

Posted by & filed under Members, Tax reform, Time for change.

AAT proposes alternatives to the Prime Minister’s plans to improve housing access.

Earlier this month, the Prime Minister set out plans to help first-time buyers, increase access to homes and extend the right to buy.

The proposals received a generally negative response with the Daily Telegraph stating the plans are, “disjointed and ill-considered” and the Independent describing them as a “godawful mess”. Labour MP Lisa Nandy derided the plans as “absolutely unworkable” and Liberal Democrat deputy leader, Daisy Cooper MP, said the policy announcement was “hot air and waffle.

In response, AAT has alerted policymakers to a range of alternative reforms that would help make the housing market in the UK more effective by improving the tax system.

Better targeting of Capital Gains Tax (CGT)

Some have argued that the general CGT rate be increased to mirror investment property (18% or 28%). Landlords would doubtless prefer a reduction to match the general rate of 10% or 20%. An arguably fairer change, which would also raise revenue, would be for the rate for investment property to be permanently reduced and the general rate permanently increased. This would mean reducing the four different tax rates to two, with a simplified system effectively splitting the difference by charging 14% or 24% on all gains irrespective of their nature.

The higher rate of CGT for property is having an increasingly negative impact on the housing market where numerous recent tax changes have made buy-to-let an increasingly unattractive proposition for many landlords thus limiting any increase in rental properties at a time of high demand (and therefore increasing rents) whilst the increased CGT liability prevents existing landlords from selling their property, contributing to higher house prices due to limited supply.

The National Residential Landlords Association produce a regular “Landlords Confidence Index” which consistently shows that at least a third of landlords wish to sell their properties. This has not translated into action, with many landlords effectively stuck in a business that they wish to exit but cannot.

Increase the rent-a-room relief threshold

The tax-free threshold for rent-a-room tax relief has not increased since 2016. Had it done no more than increase in line with inflation, it would today be almost £9,500.

So, to encourage greater numbers of room rentals, increasing the opportunities for employment mobility for tenants and additional income for landlords (especially important during the current cost of living crisis) AAT recommends that this relief be increased to £9,500 from April 2023 and that it increase in line with inflation (CPI) on an annual basis thereafter as a means of future-proofing the relief, ensuring it remains fit for purpose and reducing the need for future HM Treasury review.

Properly address the second homes loophole

Thanks in large part to a successful AAT campaign, this loophole which sees both Council Tax and Business Rates avoided, will reduce from April 2023 with a new requirement to make a property available to let for at least 140 days and actually let for a minimum of 70 days coming into force.

However, AAT does not believe this change goes far enough and there should instead be a requirement for a property to be made available for a minimum of 210 days a year and for it to be actually let for 105 days in order to qualify for relief. This would bring it into line with various tax reliefs and allowances that are already available for Furnished Holiday Lettings.

Bold yet simple reform of Stamp Duty

As AAT has long recommended, Stamp Duty liability should be switched from the buyer to the seller.

This would remove every single first-time buyer from Stamp Duty liability, irrespective of the house price, without a complicated, bureaucratic and costly First Time Buyers scheme as operated at present (saving the taxpayer the £675m a year cost).

It would also help more people get on the property ladder by reducing immediate upfront costs for ALL buyers.

Crucially, it would also maintain substantial multi-billion-pound revenue for the exchequer. Although those paying will change, the amount will not.

Such a change would make Stamp Duty fairer by improving buyers’ ability to pay. Those moving up the ladder will pay duty on the lower-priced house that they are selling, not the higher-price one they are buying.

Finally, it would partly address the issue of intergenerational fairness. The only homeowners having to pay more than at present will be some downsizers (just 7% of all home movers) who are usually older homeowners. In most cases, although not all, downsizers will have little or no mortgage to pay and will have significant equity. Downsizers are therefore likely best placed among all homeowner types to pay a little extra, certainly better placed than first-time buyers who are typically the younger generation. Furthermore, many “downsizers” buy a smaller property that costs broadly the same or in some cases more, than the property they are selling.

Some argue that such a reform would see existing homebuyers being taxed twice having paid Duty to buy their property before a change came into force and then paying to sell after any liability switch takes place. This completely ignores the fact that they will still be much better off than under the current system because they will not pay any tax when they buy their next home. The double taxation argument is therefore redundant except in the very limited circumstances where a seller never ever buys a property again.

AAT does not believe switching Stamp Duty liability is a panacea, but it would be considerably fairer, simpler, more effective and cheaper than the current Stamp Duty regime.

Summary

The above AAT policy recommendations would cost just a fraction of the plans announced by Boris Johnson earlier this month and would almost certainly be more effective in improving the current housing market in the UK.

What do you think? AAT is keen to hear your views on this issue and with this in mind, please don’t hesitate to get in touch and let us know: [email protected].

Can I switch to an apprenticeship?

Posted by & filed under Apprenticeships.

It isn’t just school-leavers who use apprenticeships to launch their careers. Many people who’ve been in jobs for years are becoming apprentices to improve their prospects.

Here’s how you can leap across to an apprenticeship, even if you’re already studying or in a job… 

What does an average accounting apprentice look like? Chances are, you’ve pictured a young school-leaver. Try imagining that typical apprentice again. Today, nearly half (47%) of all apprenticeships started are by people aged 25 and over, with many joining or switching from other careers. 

“There’s no upper age limit on apprenticeships – you can become one at any age,” says Simon Deane, director at training provider Accountancy Learning. He outlines the following scenarios where people might want to make a sideways switch: 

  • You might be working in another department such as marketing, with no financial experience whatsoever, but want to work in accountancy. You may even be able to leap across to an apprenticeship while staying on the same salary. 
  • You could already be working in finance, but don’t have any formal qualifications. Many professionals are inspired to gain qualifications after watching ambitious younger apprentices come into the office armed with new skills learned through their 20% off-the-job training, and are worried about being overtaken. 
  • As a way of jump-starting your career. If you’re studying AAT Level 2 or 3, you can earn money in a job while progressing to study Level 4. Best of all, your new employer will pay for your tuition. 

How to make the switch 

If you want to become an apprentice within your current company 

If you’d like to move to the finance team of your current company, ask your HR team or manager about apprenticeship opportunities. They might have an apprenticeship scheme that you can apply for. If there’s no apprenticeship programme, don’t worry! Your boss may still consider taking on an apprentice. However, you may need to convince them of the benefits.

Put a business case together in writing before sharing this with your boss. Talk about the advantages of apprenticeships for your company, plus what you’d like to achieve in the role. Remember, your boss might have some old-fashioned ideas about apprentices – such as they’re only for manual professions – so make sure there are plenty of statistics and facts in your proposal about how they’ve benefited other firms. 

If you’re studying and/or want to work for another company 

Apprenticeship schemes are available at companies of all sizes. Do you want to be an apprentice at a Big Four firm, such as KPMG or EY, which all have acclaimed apprenticeship schemes? Or do you fancy working for a practice? Maybe you want to work in ‘industry’ – large organisations from the civil service to Network Rail all offer apprenticeships. 

If you’ve identified the company you’d like to work for, head to their website for more information. 

Or you can see what other apprenticeship opportunities are available – and apply for them – here: 

What’s the best way to revise for an assessment?

Posted by & filed under Students.

Worried your last-minute cramming won’t hack it? From studying those topics that scare you to revising the written email answer out loud, exam expert Cath Littler shares her advice on tackling assessments 

Be an ‘active learner’ 

Active learning is where you actively engage with the subjects you’re revising. Don’t just read – take notes and challenge yourself by tackling scenario-based questions. This will help embed the knowledge in your mind early on, meaning it will be easier to access in your brain when it comes to the assessment. 

Repeat it again 

Finding something difficult? Repeat it again and again (and again) until you get it right. If you’re not comfortable with calculating percentages, do the same questions or calculations again – eventually it will embed itself in your psyche. If you’re given 10 invoice calculations, do all 10 of them, don’t just do five and think you’ve got it licked. 

Revise the topics that scare you 

You could spend 10 hours revising topics you find easy, but it would be 10 hours of useless revision because you already know it. Instead, ask yourself: “What do I find difficult?” If there’s anything you don’t want to study because it’s hard, tackle that.

But do it through active learning – challenge yourself by asking difficult questions or maybe using AAT’s Green Light tests. Many students think Green Light tests are difficult, but they’re only hard because they make you think and actively engage. 

Use practice assessments in the correct way 

AAT offers practice assessments through the Lifelong Learning Portal. When you’re marking the answers, see which tasks you’ve done badly in. Then go away and revise that topic area. One of the biggest mistakes students make is that they think they’re okay if they pass a practice assessment.

What they don’t realise is they’ve only done one assessment. You might have answered a question on accruals correctly, but there could be different accruals questions in the assessment itself. If you pass a practice assessment at 70%, that doesn’t necessarily mean you’ll pass the real assessment. 

Practice tricky writing elements 

The assessments have writing elements, such as emails and reports. Nobody likes these, not even the tutors – the reason we got into accountancy is because we like maths, not English. The good news? Anybody can practise these. There is a formula for writing business letters – once you get to grips with writing that formula, you can do it. When revising, it can help if you try to explain what you’re trying to say in the email/letter out loud, even if it’s to your dog. 

Reach out for help 

Some AAT classes set up their own Facebook pages or WhatsApp groups, where they’ll talk about topics/questions they don’t understand. Your tutors are also on email, so get in touch – but don’t leave it to the last minute. If the exam is on a Monday, please don’t email them on a Sunday morning – as they might not be around to answer in time! 

Further reading: