AAT’s Accountable campaign recognised in awards, but businesses still need HMRC to act

Posted by & filed under Accountable, Members.

On Thursday May 12, AAT’s Accountable campaign was nominated for the outstanding contribution to taxation by a non-profit organisation award at Tolley’s Taxation Awards 2022.

The ongoing campaign is pressing for action to tackle problems arising from unregulated accountants and the catastrophic impact they can have on businesses and individuals.

Everyone involved in the campaign is very proud of the nomination. It comes as HMRC begins a new round of behind-the-scenes workshops with stakeholders – including professional bodies – to chart its next steps.

HMRC considers its options

Indeed, HMRC is at a juncture with measures to raise professional standards. Last year, it abandoned plans to make professional indemnity insurance (PII ) mandatory, bowing to arguments made in AAT’s Accountable campaign and by insurers. Now it is looking at several ways forward – including the option of compulsory membership of a professional body.

As options are considered behind closed doors, several professional and business bodies, accountants, tax agents and advisers continue to support AAT’s call for the Government to provide better protection for consumers by all accountants being subject to an appropriate professional body.

Here’s what they say:

Industry comment

Chris Etherington, Partner, RSM UK

Far too many people find themselves the victim of a rogue accountant or tax adviser, meaning more regulation is desperately needed. Accountancy and tax rules are complex and impenetrable for a lot of people, and individuals need to be able to trust their advisers. It’s staggering that in this day and age, anyone can claim to be an accountant or tax adviser, potentially providing advice without any professional qualifications or insurance.

Similarly, advisers may not be bound by professional and ethical standards, leaving the door open to fraud, money laundering, tax avoidance and evasion. It’s time to address the issue of unregulated accountants and tax advisers so individuals and the Government’s revenues are better protected.

Maggie McGhee, executive director, strategy and governance, ACCA

The regulation of the profession exists – it’s the legal recognition of the term accountant that’s at question here, and the Government are looking at this area in their tax standards work. Currently, anyone can still call themselves an accountant.

Accountability is vital to the services accountants offer, so we support this campaign. It’s important that the client / consumer trust the advice they get from their accountant – otherwise there is no recourse if they want to complain about someone who isn’t a member of a professional body. They are then often left without protection or remedy because we and others can’t investigate the issue or begin disciplinary.

Knowing that their accountant is a member of a professional body would help a great deal. We hope the Government considers these proposals to protect the public from rogue accountants.

George Bull, tax expert and former tax partner at RSM

George Bull was recognised with a lifetime achievement award at Tolley’s ceremony.

Most tax practitioners are members of professional bodies and conduct themselves to the highest standards. Nevertheless, there is growing evidence of consumer harm caused by some unregulated practitioners whose advice may have shortcomings. There are far too many cases where what purports to be tax advice simply does not work. 

Clients – often employees – may be completely unaware of this until HMRC attempts to collect tax which ought to have been paid. They then find they have no support from the unregulated advisers on whom they had relied, and no funds to pay HMRC because the tax saving has been spent. Such unregulated tax advisers are a threat both to taxpayers and to the Exchequer. 

Having contributed to the Independent Review of Legal Services Regulation, I believe that it will only be a matter of time before regulation is required for all tax advisers.

Liz Barclay, Small Business Commissioner

The relationship between a small business and their accountant is a crucial one. Accountants offer technical financial help, and many are also able to help with the strategic planning for your business.

For many small businesses, the accountant is the only professional adviser they engage with, so a qualified, trusted accountant who understands the needs of small businesses and has knowledge of the sector they work in is the ideal. Because the relationship is so vital, it’s important that small businesses can have complete confidence in the advice and services they receive.

Regulation through membership of appropriate professional bodies would help deliver that protection and engender trust.

Ali Jaw, Manager FMAAT, MB Technical Services, Worcester

Membership provides checks and balances. People are protected. And it makes sure your skills gap is looked after. The regular CPD makes sure you’re competent in the area you’re advising. The way I see it, if you go to a doctor, you want to know that they know what they’re talking about, same with a solicitor – why not with an accountant?

The bodies need to continue to work together to lobby the Government and HMRC to make compulsory membership a law, so that from now on we have standard guidelines that all accountants have to follow. And mandatory PII is not good enough. The people who are not regulated will need to be insured, so costs will go up, making PII more expensive for all.

AAT has been championing this for a long time now. I give them a lot of credit. It’s not fair that we have to adhere to all this while competing with people who don’t, who don’t have to pay for membership or give time and money to maintain CPD.

Government should reconsider AAT’s recommendation to belong to an institution that will control and give oversight. I’m extremely proud to be a part of AAT, which is championing this.

Phil Shohet, Senior Consultant, Foulger Underwood, London

I believe in the concept of compulsory membership fully. People in their thousands simply enter the market and say they’re an accountant and, after the pandemic, businesses can’t be sure if they’re getting good advice.

It’s currently very to hire staff, so smaller practices might be hiring inexperienced and unqualified people and providing poor advice to smaller businesses. Smaller clients deserve quality advice to support the business and families into the future. You don’t want to go down to a rock bottom situation where people are giving poor advice, it affects the whole profession. People who’ve set up in their bedrooms without qualification are competing against qualified accountants, so standards aren’t being maintained.

Qualified accountants don’t sell themselves well enough, unless clients ask questions, so it comes down to price. Clients should ask how an accountant is regulated, do they have the right knowledge, the right experience in the right sector. It can be the difference between great advice and bad advice.

Clients don’t know the difference between chartered of certified. It’s how institutes promote themselves. Some bodies need to promote their members in this regard. It’s a great time for AAT to go out into the world and promote its membership.

Yvonne Cooper ACCA, Head of Finance, Access2Funding

Ensuring our employees are members of professional bodies is important as it adds credibility to the business and our tax relief experts, while also providing for a heightened level of trust from our clients. This is particularly pertinent right now given the increase in unscrupulous R&D tax credit firms, many of whom employ no qualified or regulated accountancy or tax employees. For example, at Access2Funding I am a member of ACCA.

I wholly support the Accountable campaign, and hope that the Government can see how important this is too – to make accountants accountable. It shocks me that, in 2022, there is still a lack of regulation in the tax profession. What’s worrying is that this isn’t common knowledge among the general public, people just automatically assume that an accountant is qualified, when sometimes this isn’t the case.

I’d like to see a change by the Government, whereby accountants, just like doctors and lawyers, have to be regulated by the industry.

John Cullinane, Director of Public Policy, Chartered Institute of Taxation

While the government is considering various options in relation to raising standards among tax advisers, we consider the most effective option would be to build on the good work already being done by professional bodies. To ensure high standards, the government could set out the criteria by which a professional body would be recognised as providing the necessary high standards for inclusion. 

A government regulator risks being both costly and ineffective. We understand that around 30% of tax agents are not professional body members and are responsible for most of the behavioural issues encountered by HMRC. It should, however, be recognised that 30% of agents do not represent 30% of the market (they are largely sole traders rather than larger firms) and while there remain challenges on how these agents might come within scope of regulation, we consider that transitional arrangements could be put in place to bring these agents up to the same standards as those currently applying to professional body members.

Ann White FMAAT, Abacus Accountancy & Payroll Services Limited, Epsom

Anybody can call themselves a bookkeeper or an accountant. It’s not fair. To onboard a client can take five hours – the letter of engagement, due diligence, you have to comply with anti-money laundering (AML), and if you don’t do it right, you risk losing your license. But if you’re not affiliated with a body, you don’t have to do any of that and nobody’s going to check.

They don’t need to do CPD, which qualified accountants need to do every year. It’s a bit demoralising when you come across people that don’t do any of it because they’re not regulated.

I think HMRC should do some form of campaign on TV and in the newspapers where they actually promote qualified accountants.

Accountable campaign objectives

The Government should legally require anyone offering paid for tax/accountancy services to be a member of a professional body – as happens in other professions. This would ensure they are:

  • appropriately qualified,
  • undertake regular CPD,
  • hold PII,
  • are subject to the bodies’ disciplinary procedures and
  • sign up to PCRT (professional conduct in relation to tax)

Why there is a strong case for simpler, lower taxes

Posted by & filed under AAT news, Time for change.

Sir John Redwood, Chairman of the Conservative Economic Affairs Committee, argues for a new way of looking at tax.

This article is part of a series on AAT’s call for a national debate to create a fairer, more effective tax system. Read the full report here.

Tax is always taxing. Taxes do harm to the people and companies paying them, taking away some of their ability to provide for themselves and to invest in the future.

Whad do you think about taxes?

AAT wants to know what members think about the ideas in its report: Time for change, towards a fairer, more efficient tax system. Click the link to join the debate.

Give feedback

What about sin taxes?

Some would say that sin taxes are the exception, taxes that are imposed to change behaviours. Taxing people heavily to put them off smoking has substantial support now most people do not smoke.

The irony is that if these taxes do work then of course they raise diminishing revenue as people switch away from the behaviours governments regard as damaging.

There is also difficulty in getting agreement over which actions are damaging, and the danger that imposing a tax hits those on lower incomes but may do nothing to alter the conduct of the well off. There is little sign that a tax on sugar in drinks has cut childhood obesity as planned. People and drinks suppliers are good at work arounds.

Self-defeating taxes

The truth is that all governments need to impose an array of taxes to raise cash to spend on their priorities. They need to do so in the least damaging way.

They need to restrain excessive spending urges otherwise too many people are unable to pay all their bills to keep their families housed, fed, warm and clothed because tax is too high. They then need to turn to the state for financial assistance from the high taxes imposed!

Of course, all political parties in a democracy recognise the need to collect money from the better off and help those who are worse off, as no-one wishes to see people without a home and the main items for a decent life owing to illness, incapacity or other impediments to earning a living. We also want to provide good free collective services like police, defence, schools and the NHS.

A new starting point

A sensible government needs to start from the proposition that all taxes are harmful and examine how best to raise the cash they need to deliver good public services and support the incomes of the poor.

They need to grasp that if you set the rate of a tax too high you will not maximise the revenue from it. If Income taxes are set too high companies will locate and recruit elsewhere with lower taxes. People will not be motivated to work extra hours or try harder to expand their businesses.

If Corporation Tax is set too high then larger businesses will move abroad or expand abroad or shift transactions to lower tax locations. If taxes on buying homes and cars are set too high people will buy fewer of them, making do with what they have got.

If Capital Gains Tax (CGT) is too high people will not sell successful investments though they might

like to if there was no tax penalty. If one tax is too high and deters work or transactions then other tax revenue is lost. One person’s transaction creates other people’s work.

Tax avoidance

The Government also needs to understand that some taxes are easy to avoid and resented by those who pay them. At 28% CGT on second homes means many owners keep homes they no longer need or use much. Current rates of CGT on shares result in many richer people only taking gains in any given year up to the tax free allowance threshold (currently £12,300). Lower CGT rates would probably lead to more transactions and to more revenue.

The Government should see that taxing income is a tax on jobs. Government usually regard jobs as a good thing, encouraging people to earn to pay their own bills. It is therefore vital to keep jobs taxes to a minimum. It has to be financially worthwhile to work. If taxes on income – National Insurance and Income Tax – take too large a slice of anyone’s income, they are likely to work less.

Government must understand that taxing profitable businesses more can reach the point where fewer people bother to set up and grow a business. The profits they tax would otherwise be spent on expansion, productivity improving investment and the creation of more jobs.

Avoid complexity

There are far too many taxes and far too many offsets and complications in the tax rules. The UK needs to simplify whilst lowering rates. Have fewer exemptions and special cases, and realistic lower rates that will result in more revenue generation.

In a medium size economy open to the world, we cannot afford higher rates than the world average.

Lowering taxes pays off

We should set our Corporation Tax at the new world minimum of 15% to maximise revenue, whilst minimising offsets. Ireland collects much more revenue from big business relative to national income by having one of the lowest world rates of tax. We should make 40% the top rate of income tax to increase revenues from higher earners. Capital gains should be taxed at income tax rates if such gains are achieved within three years, beyond that, gains should be untaxed. This would also take a tax off the statute books.

It’s worth remembering that every time the UK has lowered these tax rates, the Treasury has collected more money.

About the author

Sir John was an Oxfordshire County Councillor in the 1970s. In the mid-1980s he was Chief

Policy Advisor to Margaret Thatcher and in 1987 he became Conservative MP for Wokingham, a position he has continuously held ever since.

A former Minister and Secretary of State, Sir John has been Chairman of the Conservative Economic Affairs Committee since 2010. Sir John was knighted in 2019 for political and public service.

Induction packs can cut invoicing errors – here’s why you should use them

Posted by & filed under Members, Prompt payment.

Small Business Commissioner Liz Barclay argues businesses should be using induction packs to help suppliers get paid.

Getting paid requires effort, organization and often persistence on the part of suppliers and sometimes they get it wrong. That in turn allows the debtor to delay paying them. However, if not getting paid means they go bust, no one wins.

Accountants can create change

As accountants, you work with both large and small organisations, employers and suppliers, and so are ideally placed to help each understand the needs of the other.

Most of us who have taken the plunge and work for ourselves, do it because we love what we do. What we don’t necessarily love is all the paperwork and processes that should go alongside that, and we can fail to create a professional operation where the business bit is given the same priority as the creative bit.

An employer organisation wants the talent, creativity, innovative approach, and agility that the small firm or the freelancer offers, but they also need to make it easy for that firm to work with them. It pays a bigger customer to help a small supplier put all the correct processes in place from the beginning of their working partnership.

Induction packs and partnership working

Many bigger customers produce induction packs (example below) to help any small suppliers they sign up with to understand their payment processes. It makes sense and is something accountants could advocate.

A small supplier may be working with several different customers all with different processes. They may not have a dedicated person to do the invoicing and chasing of payments –  the person doing the work may even handle it themselves.

So an induction pack can make it easy for such companies to keep on top of the detail, which helps both them and the employer.

The induction should include information such as:

  • how to get a Purchase Order number if one is needed,
  • who the contact person is in the payment department for that particular supplier
  • the dates on which the employer pays suppliers

It should also highlight key terms and explain them in a clear and transparent way.

Does 30 days mean 30 days after the invoice is received? Or does it mean 30 days after the end of the month in which it is received?

Small firms need certainty more than anything else or they don’t have the confidence to invest, update, recruit, grow. You client will want the best supplier, so it will pay them to create the conditions in which its partners can flourish.

Pragmatism and flexibility

An induction pack should not be an excuse to apply the letter of the law to processing payments.

Research from 2019 showed that about 4 in 10 invoices were submitted with errors. If your client receives an invoice with errors the instinct may be to consign it to an in tray until the supplier chases payment. That can be counter productive for everyone. Why not pay the invoice and ask for it to be resubmitted with the errors corrected? It benefits the employer to work in partnership with their suppliers. At the Office of the Small Business Commissioner, we hear from larger firms who say that changing their payment practices in this way has improved their company culture.

Capture the detail

Every detail of the work and the payment terms should be written down in case there is a disagreement later. There’s a contract even if it’s verbal but if it’s not written, what’s been agreed is very difficult to pin down. Your client could end up in a costly time-consuming dispute.

If a small supplier is presented with a convoluted, legalistic contract, as an accountant you should advise them to refuse to sign until everything has been clearly explained to their satisfaction. Imposing terms on a supplier is a sure way to encourage them to take their talents and go and work for a rival. As skills shortages bite that’s something that your clients may want to guard against.   

Adjust terms

Suppliers need to know when they’ll be paid and may need payment earlier than the employer’s standards terms. But small firms can be scared to push back because they feel that the bigger customer will go elsewhere.

Your clients need to know that smaller suppliers may not be able to pay their own bills or have an income if they have to wait 120 days to be paid. They may have no choice but to turn down work and find customers who pay much quicker. 30 days after the work is delivered is fair. Using a small supplier to pay for a bigger firm’s R&D is not.  

We tell small firms that if the payment is late, they should chase it up straight away. If a firm is a poor payer there will be time and money wasted paying people just to field calls, and finding new suppliers to replace the ones they’ve broken. Everyone benefits if payments are made on time. Good payers are seen as ethical companies that investors are willing to invest in and skilled people want to work for as employees as well as suppliers. Trust and reputation are hard to build up and very easy to lose.

We advise small suppliers to check out the reputation of the bigger customer before accepting an offer of work. There is a plethora of information out there that can help them make better decisions about who to work with, such as credit reference agencies, the Prompt Payment Code, the BEIS publicly available data and business organisations or trade associations. It may feel wrong to a small business owner to turn down work but avoiding a poor paying customer and a dispute over payments will ultimately make their lives easier and could save their businesses. You clients should aspire to be on the good payer list.

If small firms do ultimately get into a dispute and the customer refuses to pay, they can get help from us at the OSBC.

Example Policy for the Employment of Freelancers

This Policy was introduced in ……… and we are working to implement it. If this isn’t your experience of working with us, please talk to us.

1. Context

We recognise the vital role freelance workers play in the cultural sector, and how much we have to gain from these relationships. We believe it is important to acknowledge the challenges that freelancers face that are not shared by salaried staff, and to find ways of providing employment on a more equitable basis. This policy sets out our commitment.

2. Policy

XXX employs artists, practitioners and other creative staff on a freelance basis, primarily to deliver creative learning activity, develop artistic work with us or to work on productions in collaboration with our Associate Artists and Companies.

We are committed to treating freelancers fairly and respectfully, recognising that you do not benefit from the same terms and conditions as salaried staff. We recognise that we are dependent on the artistic output of freelance staff to maintain XXX’s artistic offer, and seek to establish a more balanced, symbiotic relationship.

This commitment is demonstrated by the following:

2.1 Supporting artists and freelancers

Applying to us

• We aim to streamline application processes whilst ensuring they are accessible to all. We will always advertise the timeline of deadlines, shortlisting, interviews and appointments. Where possible we aim to offer feedback on applications.

Approaching us for development support, programming and commissions

• We want our processes to be as transparent as possible and we regularly publish information on our website about opportunities and how to contact us. You can read our artistic policy for guidelines on what we are looking for and how to approach us. We aim to reply to everyone who contacts us directly about opportunities, and you can expect us to be honest with you about whether a) your work is likely to fit our artistic policy priorities, or b) your work fits in with our timelines for planning and programming.

Contact and Communication

• Freelancers will always have a named point of contact within the organisation, and access to other staff to support their work and practice.

• We value freelancers’ time and will seek to streamline contact time and meetings, and save travel time and costs by offering opportunities to talk by phone or meet online.

• If we are contracting you on a freelance basis to deliver a programme of work for XXX, you will be given a written brief and a line manager. We will discuss all relevant areas of delivery expected from both of us.

• Freelancers working regularly with us become part of the fabric of who we are and will be included in relevant organisation-wide communication, invited to all-staff meetings and special events.

• We like to plan well in advance and for all activities to run smoothly and as stress free as possible for all involved. This means that freelancers should expect to be asked about the arrangements for your activity in advance of delivery, to enable rooms, equipment, refreshments etc to be set up prior to the start of your activity.

• For larger scale events and productions, it is likely we will put a team together including technical, programming, front of house and event support. We will work with you to ensure that the level of support we can offer and any associated costs are clear and agreed in advance.

Correspondence

• Most of our correspondence takes place by email and we aim to reply to emails from artists and freelancers we are working with, wherever possible within 10 working days. We aim to reply to emails from artists and freelancers new to us within 20 working days.

Administration

• We acknowledge how time consuming administration is and will always look at ways to keep this to a minimum for freelancers in areas such as applications, contracts and information based forms.

DBS

• We may require you to have an up to date DBS check to carry out your work with us. If so, we can make arrangements for this.

Professional Development and Training

• If we offer freelancers support and training, we will always be clear about what that is, and when it will be available.

• Wherever possible, we will open up training sessions available to salaried staff to freelancers who work regularly with us.

• Freelancers working with us are offered an opportunity to observe a Board meeting. This is part of our wider commitment to operate as transparently as possible, reduce the mystique around boards, and equip more artists and freelancers with the knowledge and experience that might encourage you to apply to boards in the future.

Resources

• We will make XXX’s resources available to freelancers working with us, including access to office space and printing facilities, workspace and equipment.

• We know how important it is to feel comfortable and like you have a base in a building so whilst working at XXX, freelancers will have access to a Green Room which is equipped with a fridge, kettle and microwave.

Orientation

• If you are new to XXX, we will give you a welcome and a guided tour of the building when you arrive to begin work. We will largely leave you to get on with your work but your named person will be on hand for queries and questions.

Access Requirements

• We will ask if freelancers have any access requirements when we start working with you. We endeavour to meet the access requirements of all members of staff, including freelancers, and to fulfil access riders.

2.2 Other terms and conditions

Fees and Payments

• XXX prioritises paying freelancers as quickly as possible, and definitely within 14 days of receipt of invoice.

• We do not require freelancers to fill out supplier forms, but will make payments providing an invoice with the following information is provided at least seven days before payment is due:
– Contact details including email and phone number
– Date, nature of work undertaken and agreed fee
– Bank or building society account details, to enable electronic payments

• We always agree fees and payment schedules in advance and are honest and upfront about what we can afford. We expect freelancers to scale the activity to fit within the available fee, not to reduce your fee or work unpaid hours. We want freelancers to tell us if our expectations are bigger than the fee available.

• We acknowledge that freelancers have to make provision for your own sick pay, holiday pay, pension, training and development and other costs within your fees, so we expect rates to be higher than the salaried equivalent.

• Freelance staff are responsible for your own tax and National Insurance. We will ask you to confirm this on your invoice together with your Unique Tax Reference (UTR) number.

• We do not expect freelancers to cashflow XXX’s activity. We will arrange advance payment or part-payment where appropriate and either pay directly or repay expenses as soon as possible.

Planning and Agreements

• We will always agree fees, arrangements, responsibilities, timescales and deadlines for activity in writing. This will not always be a formal contract but may take the form of a letter of agreement or email exchange. We are happy to provide more formal paperwork if requested.

• If delivery circumstances change, for XXX or for freelance staff, we will try and find alternative ways for freelancers to engage in your contracted work and receive payment as planned, providing alternatives (streaming, blended delivery, online) are appropriate, practical and possible for the purpose of the work.

Postponements and Cancellations

• We will always agree in writing and in advance what will happen in terms of fees if the activity is postponed or cancelled.

Policies and Information

• Where relevant, we will share our Safeguarding Policy with freelancers in advance of starting work, and arrange safeguarding training and DBS checks when required.

When things go wrong

• Sometimes things go wrong. We hope our own systems will pick this up, or that by establishing honest relationships based on trust, freelancers will be able to tell us if something goes wrong. Any issues can be raised with your main point of contact or directly with XXX’s Chief Executive. We will always respond.

How will rising interest rates affect clients and businesses?

Posted by & filed under Members, News.

Rates are at their highest since 2009 and threatening to combine with inflation to create a gloomy outlook.

For the first time in thirteen years, interest rates have reached 1% to try to counter rising inflation. This week inflation hit a 40-year high of 9%, and the Bank of England has warned that it could pass 10% by the end of 2022.

Since December, interest rates have increased three times: 0.5% in February, 0.75% in March and now, 1% in May.

Increasing interest rates are an attempt to encourage people to spend and borrow less, which in turns pushes down the rate of inflation. Yet higher interest rates inevitably have a significant impact on businesses – SMEs in particular – who have a difficult balancing act between raising prices to maintain profit levels while retaining customers and paying decent wages.

Interest rates increases are likely to affect:

  • Loans and mortgages.
  • Profit margins.
  • Cost of goods, materials and services.
  • Wages.
  • Overall standard of living.

We spoke to several accountants across the UK to gauge their reactions on the latest rise and how it’s affecting their clients.

Bank of England say it’s a short-term squeeze but we are not so sure

Dominic Bourquin, partner, Monahans

Clients are concerned that with costs increasing and customers being unwilling to have those costs passed on to them, margins will be squeezed. An increase in borrowing costs is the last thing they need.

Businesses that rely on short-term financing, such as overdrafts, to overcome cashflow shortages will inevitably see an increase in their borrowing costs, especially over the coming months with markets expecting further rises to take base rates to 2.25% by the end of the year.

The Bank of England talks as if this is a relatively short-term squeeze on businesses and individuals, but with inflation set to hit 10% by the end of the year and a clear upward trajectory for interest rates, we are not so sure.

Next steps: A well-managed debtor book will be essential in the coming months. This is to ensure:

  • Customers pay within their credit terms.
  • Stragglers are followed up for payment in an orderly manner.
  • Credit terms are not extended to those businesses without the requisite credit history to mitigate the risk of bad debts.

Also, implementing a monthly cash forecast to monitor pinch points and when short-term financing might be required will also be critical to ensure that businesses manage their cash effectively and keep their borrowing costs in check.

Verdict: Bank of England say it’s a short-term squeeze but we are not so sure.

Interest rate hikes have come at a bad time for many struggling businesses

Lauren Harvey, assistant accounts manager, The Accountancy Partnership

It is highly likely that the cost of business will increase, especially for companies that have taken out non-fixed rate loans or credits. Businesses are just starting to recover from the pandemic, and many will have relied on loans to cope throughout it, so the interest hike has come at a really bad time for many who are already struggling to stay afloat.

In addition to interest rates, businesses are contending with National Insurance increasing, raw materials getting more expensive and the ongoing crisis around fuel and energy prices.

Next steps: Careful cashflow management will become much more crucial than ever. In some cases, there sadly simply won’t be enough cash to manage. However, business owners can give themselves the best chance through detailed financial reporting which will improve the way cash flow is managed and help them make the best decisions at the best time.

Verdict: Interest rate hikes have come at a bad time for many struggling businesses.

Businesses with debt facilities on variable rates will be most affected, making it harder to repay loans and raise funds

Laura Leslie, corporate director, DSG Chartered Accountants

Interest rate is at the highest point it has been in several years. From rising costs to a potential change in consumer spending, this is continuing to put a squeeze on businesses.

In the longer term, the purpose of the interest rate rise is to offset the increase in inflation, which – amongst other price rises such as energy costs – is leading to the cost of living increase. As interest rates rise, it encourages less spending and borrowing, which means the inflation rate will start to fall back to a lower level.

If consumer spending slows down, this may impact some businesses, especially at the luxury end of the market, but it is unlikely to have a material effect in the short term. More likely, the cost to businesses is likely to be on those that have debt facilities on variable rates. This will affect bank loans overdrafts and lines credit – and it might also make fund raises harder for capital spend and the cost of repayments significantly higher.

Next steps: Companies should ensure they review their banking facilities and forecast any interest rare increases into future cash flows. They should also review when any fixed term interest rate periods are coming to an end.

Verdict: Businesses with debt facilities on variable rates will be most affected, making it harder to raise funds and repay loans.

A life-changing opportunity: Asim Raza explains what the AAT Bursary means for him

Posted by & filed under Bursary scheme.

AAT Bursary recipient Asim Raza started studying with AAT in 2019 after arriving in the UK from Pakistan a few years earlier.

He was overjoyed when he learned that he had been awarded the Bursary for the 2021-22 academic year and could therefore continue studying for his Level 4 Professional Diploma.

“I found out about the Bursary scheme from my AAT Level 3 tutor, with whom I was studying at my local college in Stoke-on-Trent,” Asim said.

“I was surprised to be chosen because I thought there must be lots of applicants like me. I even burst into tears of excitement when I found out I has been chosen, as without the Bursary I would not have been able to progress to Level 4. “It’s truly a life-changing opportunity for me.”

Asim’s story:

Born in Pakistan, Asim, 39, completed a Bachelor of Commerce degree in his home country before going on to work in Accountancy in the Middle East for the next 10 years or so. “I have always been good at numeracy and had a passion for working in the accounting field,” he said.

He built up lots of work experience but did not have a specialised accounting qualification at that time. When his work in the Middle East suddenly came to an end, he and his family could not stay in Pakistan due to security concerns.

“Unfortunately, I could not risk staying in my home country with my children,” said Asim, who now lives in Stoke-on-Trent with his family. “The stressful and unsafe circumstances forced me to take a decision to migrate to the UK in September 2016.”

Once settled in Stoke-on-Trent, Asim looked for accountancy courses and was accepted on AAT Levels 1, 2, and then 3, all of which were funded by the college.

“The Stoke on Trent college management supported me so much, especially when it came to studying for the Level 3 qualification,” he said. “Funding for Levels 1 and 2 is quite widely available, but at that time funding for Level 3 was only possible via a government advance loan or through the college on case-to-case basis, which is what I was awarded.”

Today, having successfully completed the first three levels, he’s well into his Level 4 course. And he doesn’t intend to stop there. “Receiving the AAT Bursary is a huge opportunity for people experiencing difficulties in funding their studies,” Asim added.

“It opens a number of doors to building a successful career in the accounting field. “Personally, I would like to go on to do my Association of Chartered Certified Accountants (ACCA) qualifications and become a chartered accountant if I can.

“Ultimately, my dream then is to work for a big professional accountancy or finance management company and utilise my work experience and learning to serve the organisation and the wider community, perhaps going on to set up my own company one day.”

The AAT Bursary scheme

The AAT Bursary scheme is designed to increase diversity and social mobility in the accounting sector by helping financially disadvantaged students to study for an AAT qualification regardless of their personal circumstances.

Open to UK residents aged 16 or over, the Bursary scheme is available to fund a range of AAT accounting, bookkeeping, and business qualifications – from the Access Award in Bookkeeping (Level 1) and the Foundation Diploma in Accounting and Business (Level 2) for 16 to 19-year-olds to the Professional Diploma in Accounting (Level 4).

For successful applicants, it covers all the costs involved in taking the relevant qualification (including one set of re-sits if required) – up to a maximum pay out of £5,000.

“This Bursary provides a whole bunch of advantages because it covers not only the tuition fees for the whole course but also the exam fees and a year’s AAT membership fees,” Asim said.

Find out more about the scheme

You can read more about apply for the AAT Bursary and the eligibility requirements via the AAT website.

“When you apply for the AAT Bursary, you have to provide true picture of your financial situation and explain in detail why you cannot fund your studies,” Asim said.

“I would recommend applicants are as open and honest as possible about their circumstances, especially when it comes to detailing why this bursary is the only possible option to support their course fee. In my view, that’s the best way to have a chance at being accepted.”

AAT is proud to have been changing lives for more than four decades. We thank Asim for sharing his inspirational story with us and wish him all the best with his future career.

Further reading

Shape AAT’s future – and accelerate your development – by joining Council

Posted by & filed under AAT news, Members, Members in business.

Joining the AAT Council is a chance to shape AAT and the profession, while accelerating your personal development.

Do you have what it takes to become an AAT Council member? Or does AAT Council have what it takes to captivate you?

Be ready to be surprised.

Develop AAT’s vision

AAT is in a time of change. A new CEO is building a long-term strategy to modernise the organisation and make it even more transformational, modern and relevant. And AAT is searching for a diverse range of people from its membership who can help make it happen by bringing their insights and experiences, constructively challenging or contributing ideas.

That could mean you.

Stand for Council

We want a broader range of members to stand for election to AAT Council to help us develop AAT’s new strategic plan. Put yourself forward now.

Nominate yourself

Wider opportunities

“We are looking for AAT members who believe in the organisation and are ready to get even more involved,” says AAT CEO, Sarah Beale. “AAT is ­an organisation that changes lives and has a huge impact socially and in education. We are looking for people to be custodians of that and ensure we continue to go from strength to strength.”

You’ll be joining a council of passionate people, many of whom are from the profession and some who have skill sets in running large organisations. You will also be exposed to the operational running of a complex £35 million organisation.

And whatever your skillset and experience, you will be fully supported.

Accelerate your personal development

Those who have taken the plunge and stood for election to Council have found it massively rewarding in terms of personal development, as members’ experiences show.

Andy Murray, Finance Executive at Lindenmeyr International, confirms this. He became the youngest ever member of AAT Council when he joined in 2020 at the age of 27.

“Being on Council is like free CPD. You learn about governance, pensions, all sorts. I’m exposed to top-level stuff such as corporate governance and best practice: stuff that many professionals my age (I’m 29) rarely get to do. There are also networking opportunities as you’re in direct contact with the AAT executive team and CEO.”

What kind of person is AAT looking for?

AAT is keen to attract a broader cross-section of its membership through elections, especially from larger organisations, industry and the public sector.

“We are looking for all kinds of people from all kinds of experiences to help us shape AAT,” says Sarah Beale.  

“If you have never been a trustee before, that’s fine – we’ll make sure you understand your role and how you fit into governance. If you have experience, that’s valuable too. AAT will support you.”

“What we are looking for is diversity of thought,” says Karen Marshall, Company Secretary.

Andy Murray adds: “We need individuals who can bring skills and experience such as commercial awareness, governance and education. Those with recent experience of the AAT qualification would be good too. We’re looking for people who are open-minded, passionate and unafraid to challenge.”

Heather Durell (pictured above), founding Director of London-based accountancy firm Ask the Boss, was prompted to get involved by an article in AT magazine.

“I’ve only been on AAT Council for six months, but we’ve helped bring about change on everything from vice-presidential nominations to next year’s pricing through to altering CPD requirements for licenced members.”

“We’re currently working on AAT’s 2030 vision, which is very exciting,” she adds, “One of the best things is that the AAT’s executive team, including the CEO, sit on every Council meeting.”

Ready to get involved?

You can stand for election to Council by completing the form available at aat.org.uk.

Case study: John Thornton, Director e-Resources

“You get so much back through the friendships and knowledge you gain”

John Thornton, Director, e-ssential Resources, joined the Council in 2015.

“AAT is a super organisation that achieves so much in the way it changes lives. I was both invited and keen to get involved, because I felt there was so much opportunity to do more. If I could help shape AAT in some way by providing personal feedback about what I and others found valuable, I thought that would be a good thing.”

Thornton stresses you don’t have to have all the answers when you start. Joining Council is a huge opportunity to learn and develop, especially with AAT’s support to learn the ropes.

“Sometimes people think being on Council is a massive role that is frightening. But I felt community and friendship. I was welcomed and made to feel my views mattered and were worthwhile.

“I think what holds people back from getting involved in Council is that members are a “breed apart”. Actually, what is needed is people who can ask the right questions, not necessarily provide the answers.

“In terms of personal growth, it is so valuable. I learned so much from being involved with AAT’s executive team, the chief executive and other council members. It’s not a one way street where you give up time through volunteering. You get so much back through the friendships and knowledge you gain, and personal through growth.”

Stand for Council

We want a broader range of members to stand for election to AAT Council to help us develop AAT’s new strategic plan. Put yourself forward now.

Nominate yourself

How studying AAT positively shaped my future

Posted by & filed under Career.

It’s a little over two years since completing my AAT study journey and becoming a Full Member (MAAT). Someone recently asked me what advice I would give to my younger self.

Reflecting on my studies, I am sure the thoughts and feelings below will strike a chord with many student members.  

Managing additional commitments

Firstly, taking on additional commitments is time consuming and can often feel like untold pressure. One of the first things I would tell my younger self is that embracing pressure rather than fighting it is key to turning fear into energy. Making time to study, preparing for exams and allowing yourself the space to absorb the learning takes time and adjustment. The initial weeks and months often feel quite daunting. However, realising that being in control of your studies and accommodating all of these new feelings is what’s truly important.

Going back to work on a Monday after another weekend studying continuously, working all week and studying every evening, only to face another weekend of studying. I would certainly tell my younger self that this pattern is not sustainable. Its only once you become consumed by your studies that you realise that quantity doesn’t equal quality.  Looking back, I always believed that results deserved reward, what I would tell my younger self is that being kind to yourself fuels a positive mind set. 

Managing your studies

Realising that balancing work, study and ‘me’ time is the driver for success. I feel a triangle is a good representation of the balance of time. Everyone has different commitments but it is important to manage your studies and not allow them to engulf your life, maintaining a relatively even balance between your commitments keeps everything manageable. 

There will undoubtedly be pinch points where the pressure feels greater. Whether that’s on the run up to an exam or balancing social and study commitments. I found the risk of not listening became corrosive to my success.   I would tell my younger self to pause, take a breath and listen to those around me, especially myself! Whether those whose advice you trust are personal or professional, they are all part of your study support network. Reach out to your network with both arms open. If someone is telling you it’s time to take a break, they are probably right!

Some AAT modules sink in naturally, where others require intense study and persistence.  What I would tell my younger self is that you will always get there and its ok to take as long as you need.  Every study journey is individual and it’simportant to realise that it’s a marathon and not a sprint.Crossing the finishing line is more important than the time taken to complete the race.

The importance of reflection

Being part of the AAT family has taught me how to reflect. It’s only through crossing the finishing line that I realise that I could have been kinder to myself along the way.  I didn’t need to compare myself to others and I didn’t need to put pressureon myself to cross the line in record time.  Harnessing the energy of those in my support web would have given me a natural boost.

Allowing myself the time to pause, reflect and engage would have capitalised my time, finding solutions to challenges much quicker. AAT has allowed me to develop a level of thinking that appreciates the importance of all the ingredients it takes to make study effective. Rest and relaxation are equally important to research and revision when it comes to studying successfully.

AAT is a choice not a chore, do not forget to enjoy your studies!  I am thankful everyday of my working career for the skills, tips and techniques that have helped me go from strength to strength. AAT gave me the foundation to build my career. I always worked throughout my studies, since qualifying I have enjoyed promotions to more senior roles as well as additional responsibilities such as Company Secretary.  

A pathway to success

Two years post qualified and the enthusiasm, energy and positivity from my studies drives me through the challenges in the field. I often refer back to my learning of the AAT qualification for inspiration in how to approach and solve problems. Whilst I will never stop learning, the grounding from achieving MAAT will be a sense of pride that stays with me forever. I always believed that hard work and dedication brought positive results. Studying AAT taught me that believing in myself is what truly gains results. 

Further reading:

Sustainability measures that make business sense

Posted by & filed under Members, Sustainable Business.

Is sustainability an expensive nice-to-have? Or are there green actions that can also benefit the business?

For small businesses struggling to survive the energy crisis, supply chain disruption and inflation, tackling sustainability can seem like a luxury they can’t afford.

Last year, officials gathered for COP26 in Glasgow hoping to accelerate climate action. Meanwhile, a survey of SMEs by ACCA and the Corporate Finance Network found they lacked the time and resources to initiate sustainability strategies and were struggling to know where to start.

“‘I’m extremely apprehensive about the trends this data revealed on the state of UK SMEs  financial restrictions are the number one reason holding businesses back from putting a sustainability strategy in place,” commented Claire Bennison, Head of ACCA UK.

Ellen McKee, an advisor with the sustainability advisor Anthesis, sympathisers with their plight: “With the continued challenges of doing business during a global pandemic compounded by supply chain volatility, rising costs and wider economic uncertainty, it’s no wonder that sustainability is often pushed to the bottom of the daily task list in small businesses.’

So why should you make the effort?

But there are many reasons why businesses should think about their sustainability, including improved brand, sales and recruitment.  Also, the UK has a legal requirement to achieve net zero carbon emissions by 2050, so it’s a good idea to get a head start.

Alongside this, the energy crisis and rising costs also provide a fresh incentive to look at reducing waste. Here are some green ideas that can contribute to sustainability while making business sense.

Lighting

LED light bulbs might seem pricier than traditional options at first, but they use far less energy, have far lower running costs and considerably longer lifespans. Dan Firmager, one of the leads on Kreston Reeves’ recent achievement of carbon neutrality, says that the return on investment on LED bulbs is a lot sooner than people generally assume.

Compare LEDs to traditional incandescent bulbs. According to The Lightbulb Company, a 10W LED costs £2-15, lasts 25,000+ hours at a yearly running cost of £3.60, compared to a 60W incandescent bulb costing £2-6, lasting only 1,000-2,000 hours at a cost of £23.88 per year.

Also, while the incandescent pumps out 172.68kg of CO2 emissions per year – the demand on your energy supplier to power the bulb – an LED bulb emits only 28.8kg, hence the lower running cost.

Motion sensors

Couple LEDs with motion sensors, which help to avoid the unnecessary use of electricity and therefore help to lower your bill. They can save as much as 60% on lighting costs, which often account for up to 50% of a commercial building’s energy bill. A decent sensor can cost as little as £5-20 and are easy to install.

Smart thermostats

Save money on your heating bill by installing a smart thermostat. These can automatically adjust the temperature in a business according to its needs and, as they’re connected to the internet, can be controlled remotely. Some can even learn your daily activity and movements and set temperature based on these habits.

Google estimates that in the UK people can save between 8.4% and 16.5% of their heating’s energy use with its Nest smart thermostat. Competitor Tado estimates up to 31%, while Hive reckons people could, pre-Ukraine crisis, save up to £110 per year. At a cost of between £100 and £200, a smart thermostat could pay for itself in the first year, then provide annual savings thereafter.

Water sensors and tap adaptors

Businesses can save up to 30% on water bills by installing devices such as tap adapters and sensors, according to Water Plus. Efficient taps mix water with air meaning 50% less water will come out, while sensors that turn taps on when they detect close movement, when washing hands for example, can cut water usage by 70%.

You can get UK government help through the Enhanced Capital Allowance (ECA) scheme, which lets businesses claim 100% first year capital allowance on water efficiency products from an approved list.

Printing and paper

According to consultants Gartner, as much as 3% of a business’s revenue is spent on paper and printing costs. Now the good thing about seeking to reduce these costs is that many of the solutions are inherently better for the planet — double-sided printing, refillable ink cartridges, for example.

Let’s say your business per year prints 2,000 pages of black & white (B&W) A4 all single-sided. At 2.75p per sheet of A4 this would cost £550. If you were to print all these double-sided, using 1,000 sheets instead of 2,000, the cost per sheet would be 4.5p for a total of £450 — a saving of £100 per year. By setting all printers to automatically print double-sided you’ll save money and reduce paper usage.

Now look at the price and usage of ink and toner. Ink is generally cheaper than toner, but needs replenishing more frequently. Let’s say a business’s average ink costs £120 per year, or £300 for toner. If you bought refilled cartridges instead of brand new ones, you could make a saving of 30-50% on inks and toners, according to the European Toner & Inkjet Remanufacturers Association, which would equate to a maximum saving in the case above of £60 per year for inks and £150 for toners.

Combine these with your double-sided paper savings and you’re looking at potentially hundreds of pounds in savings a year, while also reducing paper and plastic usage and waste.

“We have always had the approach that doing small things can be very effective. For example, changing to LED lighting, changing stationery supplier to one that uses more sustainable products, using less paper. We print everything double-sided by default, for example, and we do more over email with electronic letterheads,” says James Peach, Audit and Assurance Partner and Kreston Reeves.

Green champions and busy bosses

All this might seem like a lot of extra work, but within all businesses, there will probably be at least one “green champion” — someone waiting for the opportunity to start making a company greener, says McKee. “Providing them with the authority to take that first step might be all it takes to start realising sustainable performance and financial savings.”

And if you’re a green champion in waiting, but faced with an overworked or skeptical boss or client, McKee recommends a few ways to get people on board: “Communicate how implementing sustainable practices will generate value to the business. Consider 1) reduced costs; 2) improved performance, eg a growing customer base; and 3) cost of inaction (eg regulatory costs (such as taxes), loss of customers, loss of staff etc)”.

While small can be beautiful at the start, Peach cautions about the limitations of a piecemeal approach to sustainability. “Be clear about what you are doing and why. Take clear and conscious decisions about what you are doing and how you are going to do it. Avoid doing things half-heartedly or you may miss out. You need proper buy in to get the full benefits.”

He adds that the prize can be worthwhile: “You can ultimately grow your top line if you are an advisor in the professional services market doing something to stand out. It can register with prospects. They might think these guys are doing something good that’s in line with us. So let’s work with them.”

How my AAT Tutor made a real difference

Posted by & filed under Career.

AAT tutors make a real difference to the lives of their students, whether they are school leavers, career changers or mature students. Tutors give support, guidance and enthusiasm to help you kickstart your accountancy career.

“My AAT training overall has been an enjoyable experience, being able to have the flexibility and a myriad of support avenues has made the whole qualification process simple and stress-free,” says George Moss,
Practice Manager at Bee Motion Accounting Ltd in Stockport. 

Become an AAT tutor

Becoming an AAT tutor is not only a great way to kick start your teaching career but also allows you to inspire the next generation of accounting technicians.

Find out more

Building key foundations

“AAT training has not only given me the piece of paper to do my job, but the knowledge to succeed in my industry. This was reflected in my success during the Sage Impact awards 2021, winning “apprentice of the year” followed by being a “rising star” finalist at the Accounting Excellence awards 2021. This out of the box thinking, questioning mindset and overall exposure to accounting given throughout my training enables me to hit the ground running.”

He says he would 100% recommend AAT whether you are a school leaver searching for a profession or someone later in life seeking a career change. “It is suitable for everyone. The vast number of opportunities that are made available to you following the completion of your training is limitless.”

George studied at The Apprenticeship Academy under the team led by Angela Renshaw, programme Manager- Accountancy.

“The team really go above and beyond to ensure that all content is understood, leaving you filled with confidence ahead of your exam dates,” he says. “The layered resources available, which include the AAT lifelong learning portal, resolved all issues when tackling any pesky topics. The approach taken by the Apprentice Academy helped prepare me not only for my exams, but for the industry, all the tutors were able to interpret the content of the course giving me a deeper understanding of each topic.”

Seeing students succeed

“The best part of the job is the satisfaction of seeing students succeed,” says Angela Renshaw, programme manager, accountancy at The Apprentice Academy. She has been managing and delivering AAT qualifications across all levels for the last 14 years.

“We work predominantly with apprentices and as a tutor you go from seeing a 16 to 18 year old going into their first job, really shy, never had a job before, and see the process of them turning into a new adult.

“It is also rewarding to help those learners that struggle. If you get somebody that struggles, and they pass their AAT qualification, that is just a great sense of achievement. When learners are young they are trying to manage work and study at the same time. You are a bit like a life coach as you’re trying to help them with their time management and keep them on track.”

“I left my old job and then started a new one and Angela was really helpful for that because I had a bit of trouble with my fees,” says Rebecca Kinsey AAT student at The Apprentice Academy. “She helped me through it and managed to get it sorted so that was a big relief.”

“Working with Angela and having her at the Academy is a massive benefit for any student that comes here,” says Jodie Buc, a fellow student at The Apprentice Academy.

Sam Hannigan is programme manager at Premier Training and says being an AAT tutor fitted in with her lifestyle and bringing up her children.

“Fifteen years on I still love teaching and I love teaching AAT,” she says. “It is important to me now to make sure that I motivate others and support others like I was supported. My career is just going from strength to strength.”

Enthusiasm and support for your students is key

“To be a good tutor you need passion and to be enthusiastic about what you do,” says Phil Toomer MAAT, AAT Tutor for distance learning at First Intuition. “Originally, I was planning a career change to qualify as an accountant and do other people’s books. I wanted to cut down the overtime hours in my previous job, which was in a printing factory, working with Camelot, producing scratch cards, where I had been working for 18 years.

“I became interested in tutoring when I was doing AAt Level Two and I joined a small Facebook group with fellow students. We got to know each other and I found that I was helping the other students even on Level Four questions because I’ve always enjoyed numeracy and found it interesting.”

After becoming Level Four qualified Phil decided to become a tutor, and loves the challenge and variety of the role, as well as the rewards of seeing students progress and qualify.

“Each day is different,” he says. “I get a lot of emails and I have a lot of papers for marking but I also get a lot of phone calls from students asking for help with questions. That could be from any student on any unit on any qualification. So I really do have to prepare and be able to be flexible. I go to at conferences and meet other tutors and we’ve just started meeting up again once a month.

“Sometimes I get students who are upset, perhaps who have sat an exam and it has not gone well. It’s important for me to give everybody my full attention and make sure that they’re listened to, whether it is a technical question or just a bit of support.

“One of my students refers to me as her teacher and her life counsellor. Particularly in Covid it was important to be supportive because many of the students were lonely and I might be the only person that they had spoken to that week. An important part of my job is being a point of contact.”

Advice for potential new tutors

“For other tutors, I would say that you have to be really invested in your students. They’re not just a number. I really love my job. It’s really rewarding when you help somebody on their career journey. It’s great when you can see them qualify. I’ve seen students go from AAT Level Two to Level Three and Level Four and then receive letters from them at the end.

“I used to be quite a shy person but now it’s really great to get the feedback from the students and know that you spent 20 minutes on a phone call and you have made a difference.

“The highlights are that I was shortlisted in 2019 for AAT Tutor of the Year and I was absolutely thrilled to make the shortlist. You have to have the right kind of attitude to be a successful tutor: enthusiastic and interested in people and wanting to support them.”

Become an AAT tutor

Becoming an AAT tutor is not only a great way to kick start your teaching career but also allows you to inspire the next generation of accounting technicians.

Find out more

AAT played a key role in my career growth

Stefan Barrett, founder of Bee Motion accounting, says the AAT and everyone at The Apprenticeship Academy has played a key role in the growth and development of Bee Motion.

“We are big advocates of employing generation Zs, providing opportunities within the local community to help kickstart people’s professions,” he says.

“The AAT qualifications enable our present team, and those of the future to understand the all-important skills required to thrive in the industry. As we watch our team progress with their studies at the AAT, it helps consolidate their knowledge enabling their work to come on leaps & bounds.

“The development within the AAT course over the previous years has truly benefited Bee Motion, the fundamentals of accounting incorporated within the course help our team to become professionals by developing the important characteristics required for our industry.”

Further reading:

The pain points of MTD ITSA and how to deal with them

Posted by & filed under Making Tax Digital, Members.

Making Tax Digital (MTD) for Income Self Assessment (ITSA) will come into force in April 2024, but action is needed now.

Although the implementation is two years away, accountants and clients need to be working together now to plan and ensure readiness for the 2024 deadline.

The Government is running a pilot scheme to allow some businesses to test the service before it becomes mandatory.

MTD ITSA will apply to self-employed business owners and landlords whose income and property exceed £10,00 in a tax year.

MTD ITSA will involve

  • Four quarterly updates to HMRC detailing income and expenses.
  • End of Period Statement (EOPS).
  • Final declaration at the end of the tax year.

MTD ITSA requires more administration than the previous system so scrupulous record-keeping will be essential moving forwards.

We spoke to accountants and industry specialists to find out how they are helping their clients prepare.

Implement compatible software now so you can iron out issues

Clare Bowen, Director, Monahans

There still isn’t enough guidance around Making Tax Digital Income Tax Self-Assessment (MTD ITSA) from HMRC and it’s making the changeover for accountants a harder job than necessary.

The biggest challenge is helping clients see the value of MTD. In our nature as humans, we can be reluctant to change, especially when it comes to assets such as finances. We’re needing to work hard to showcase to clients that this move is in fact a positive one.

It’s about demonstrating what other benefits the business can leverage from MTD ITSA compliance. The best way is to showcase how much time this way of working saves a client and what that translates to financially. Additionally, MTD ITSA enables clients to be more aware of their cashflow, which helps them to budget better and ultimately become more profitable.

The whole process of digitising accounts has promoted an explosion in the software market. This means that there is choice, value, and quality to be found from providers. While some are better than others, overall, it’s a win for businesses.

Next steps: Decide on the best compatible software for your situation and begin filing that way as soon as you can. If you have any hiccups along the way or need support, now is the best time to get issues ironed out well before 2024.

Verdict: Consider implementing compatible software now to ensure enough time to iron out any issues before 2024 deadline

Transition to digital record-keeping and look into MTD ITSA compatible software

Marina Trinchese, executive tax manager, Rayner Essex

There have been several delays with MTD ITSA so I understand why businesses may not be taking too much interest in this at the moment. However, following the successful introduction of MTD for VAT over the last few years with the scheme extended earlier this month to all VAT registered businesses, there is no doubt that it is a matter of time until MTD ITSA is introduced.

Next steps: Businesses who are not already keeping digital records should look to transition to digital record-keeping. For individuals who currently submit their own tax returns and intend to continue doing so following the introduction of MTD ITSA, they will need to ensure they have software that is compatible with MTD ITSA as they will not be able to use the current self-assessment HMRC software once MTD ITSA has been introduced.

For individuals who will engage a tax adviser to prepare and submit the quarterly updates and end of year submissions to HMRC, their adviser should write to them setting out the process they will need to follow once MTD ITSA has been introduced.

Verdict: Transition to digital record keeping and start to look into MTD ITSA compatible software.

Streamline existing software systems and use compliance automation where possible

Jim Scott, MD of accountancy, IRIS Software Group

I don’t believe the average individual or SME impacted by these changes has really processed the implications of MTD ITSA on them and their business. Or more importantly, the things which need to change in order for them to fulfil their new legal obligations.

Failure to prepare is preparing to fail. While it seems far away, the April 2024 deadline will come around quickly. Businesses must start talking to their accountant now to clarify responsibilities on both sides.

One issue I’ve observed is that accountants don’t always have a clear picture of the type of businesses (or personal circumstances) their clients have. In many cases, this means they can’t anticipate the level of income or expenses each client will generate and worse still, can often mean they’re in the dark about clients’ record-keeping processes. This will tie their hands when MTD for ITSA comes into force in April 2024. They won’t be able to plan resource effectively or predict and mitigate potential road blockers ahead of time.

Next steps: Consider streamlining existing software processes using compliance automation where possible, in place of unconnected systems or move to cloud-based platforms.

Verdict: Streamline existing software processes where possible or consider cloud-based platforms.

Check enrolment date, speak to your account and look at available software

Daniel Tomassen, private client manager, HW Fisher

There is still a lot of discussions on-going for MTD ITSA and how it will be implemented effectively. Businesses should firstly check when there expected enrolment date is. It differs between self-employed and certain partnerships.

Businesses need to be speaking to their accountants for updates on the implementation on MTD. There are also numerous online webinars which businesses can watch for free, which can provide them with an overview of things to look out for.

Next steps: Although the deadline is a few years away, businesses should be looking at software which can assist them with meeting their obligations. There are numerous different providers, with different capabilities. Furthermore, the providers themselves have different grades of packages. One provider/package may suit one business but not another, if the businesses start researching now, they can ensure by the time they are required to enrol they have a package which suits their needs.

Verdict: Check enrolment date, speak to your account and look at available software.