Daily Insight: VAT evidence call, law on accountants and tax avoidance
There may be a bit of light at the end of the tunnel for small businesses that are hampered by the over-complicated (I think that's the expression) VAT system.
The government this week issued a call for evidence from individuals and companies "to explore whether the design of the VAT threshold could better incentivise growth".
This is what the government says it's all about: "The current design of the VAT registration threshold may be dis-incentivising small businesses from growing their business and improving their productivity.
Express your opinions
"This call for evidence will explore the effect of the current threshold on small businesses, and will then go on to consider different policy options, and ask questions on whether those options could better incentivise growth."
Follow this link to find out how to express your opinions. The consultation closes on 5 June. Or, alternatively, and probably sensibly, there's an online survey that should take only seven minutes right here.
Elsewhere, accountants will have to report aggressive tax schemes ... by law.
EU law will come into force
The Guardian says: "Accountants, bankers and lawyers will face penalties if they fail to report ... avoidance schemes that help companies or individuals move money to offshore havens.
The EU law will come into force before Brexit takes shape (like most things) so will be enforceable in the UK.
The ICAEW quotes Richard Murphy, director of Tax Research UK. He says: “The sad fact is that accountants cannot be relied on to be compliant with the law without measures being specifically targeted at them.
Ethical codes
“Every time an accountant says that the ethical codes of their profession are enough to ensure high standards just remind them of this.”
Back to knowledge-intensive small businesses. They could be on the receiving end of about £20 billion over the next 10 years. That's the amount the government is considering setting aside to help start-ups that spend between 10-15 per cent of operating costs on innovation and R&D.
But first there's going to be a consultation...
Guidance and Demonstrably Practical Recommendations (GDPR)
If you've heard about GDPR you are probably fed up with the hype. If you've not heard of it then you are at risk of playing catch up.
GDPR really stands for the General Data Protection Regulation which comes into effect on 25 May 2018 and applies to all of us who are processing personal data.
If you're in practice then you almost certainly are processing personal data - whether for clients, staff, website visitors, prospects or influencers.
Processes and procedures
The size and nature of your practice will affect the processes and procedures you will need to put in place to evidence your compliance with GDPR.
We will only be able to show we are compliant (as is required by GDPR) if we prepare adequately ahead of the deadline.
Last year I was asked to raise awareness of the topic during the ICAEW autumn practice roadshows. That meant researching things so that I could highlight the key points. I made clear then, as I do here, that I don't claim to be an expert and I'm certainly not a lawyer.
Genuinely practical guidance
More recently I am aware that many people are offering summaries of the background to GDPR, of the legal position and are explaining in great detail how it will impact accountants and their clients. On the other hand, there hasn't been much in the way of genuinely practical guidance.
One key reason for the dearth of authoritative practical guidance for accountants has been that we are still waiting for formal guidance from the Information Commissioner's Office (ICO) on key topics. Until this is received some GDPR experts are advising extreme caution.
Four things we can all do
I'm hopeful the reality won't be quite as bad. In the meantime there are four things we can all do:
- Register as a data controller with the Information Commissioner's Office (www.ico.org.uk), if you've not already done so. It costs £35pa and is NOT a new obligation!
- Audit your systems and processes so you are clear about how you obtain, use and retain personal data. You need to be clear and to keep a record as to how you obtain all personal data you hold, where it is held, who has access to it, who you share it with, how long you retain it, how you keep it uptodate and how secure it is (in all the various places it can be accessed).
- If you have staff, brainstorm the issue with them as they will need to be aware of the new obligations too. They will need training in the obligations imposed by GDPR just as they need to understand their obligations under the anti-money laundering legislation.
- Start to plan what you will do to evidence your compliance with GDPR as of 25 May. I have created a list of the most common documents most firms of accountants will need to prepare. You can get a copy here
Daily Insight: Hammond's spring statement
As a person of fairly advancing years, my first port of call in compiling today's Daily Insight was WH Smith's, to scan the front pages for news of and reaction to the chancellor's spring statement.
Pretty low key I would say. The Daily Express had something about "At last, tax cuts on the way". But then they would.
I felt slightly nostalgic for the time when all the papers would carry colourful cartoons of the chancellor of the day's achievements, complete with 48-page specials on the budget's contents.
No mention of Tigger
Still, I proceeded to the office, where I checked out the online Financial Times. Nothing! Well, not nothing, but an item tucked away in the bottom corner of the home page. No mention of Tigger, let alone a cartoon!
The world of accounting media showed a little more interest, however. Our friends at accountingWEB had a useful wrap by Tom Herbert. On the one hand, the statement was praised for its lack of "fiddly tax changes".
On the other, it was seen as a "missed opportunity" to make a policy difference in tough times. I suspect it's both those things.
Light at the end of the tunnel
At AccountancyAge managing editor Emma Smith suggested the chancellor's upbeat mood maybe shortlived, especially when the OBR's next stats are published in eight months. Perhaps not so much light at the end of the long tunnel we've been stuck in since the 2008 financial crisis then?
Over at the ICAEW, chief executive Michael Izza agreed, saying: “The challenge we face as a country is first to meet those forecasts. Otherwise, the light at the end of the tunnel will never get closer.
“Although positive, the ONS growth forecast of 1.4 per cent for 2018 needs to be seen in the context of stronger global growth. The IMF expects the Eurozone to grow by 2.2 per cent, the US to grow by 2.7 per cent and China to grow by 6.6 per cent this year – all exposing the challenges facing the UK.”
Let's check back in eight months...
Daily Insight: check out the new website
Today's Daily Insight is less about what's happening in the world of accounting and finance and more about exciting times at Accounting Insight News. Yes, that's right, we're blowing our own trumpet (a little bit).
Just to recap, Accounting Insight News is the new content platform running in partnership with the UK's top two events for accounting and finance professionals, Accountex London and Accountex Summit North.
We're aiming to become a favourite stopping off point for anyone who wants to find out what's going on in finance and accounting. We have a tasty menu of news, features and blogs; articles, videos and podcasts. We'll be focusing on tech developments, big issues like MTD and GDPR and the people who make the sector tick.
Great stuff on the site
We've only been going a week but, already, we've got some great stuff on the site, with even more in the offing.
Last week we were at Accountex Summit North at Manchester Central. The event proved a hit with conference visitors, exhibitors and our speakers. And one of the highlights was the formation of Women in Accountancy. The new group, with the self-explanatory title, was born after a successful round table discussion headed by chartered accountant Elaine Clarke. The group has its own section on the Accounting Insight News and its THE place to follow the progress of WIA.
High-altitude accounting
As a regular highlight of Accounting Insight News, I'll be interviewing key influencers in the industry. This feature kicks off with a fascinating interview with accountancy marketing expert Amanda Watts. Check it out here.
Also on the site, we have a high-altitude accounting feature with Paul Shrimpling. And there's an in depth conversation between business development expert Rob Brown and Australian accountancy thought leader Trent McLaren.
There's also a snappy introduction to the General Data Protection Regulations that will be coming into play shortly plus several blog posts on issues and solutions for today's accountants.
And don't forget to sign up for a free fortnightly newsletter HERE!
Daily Insight: multinationals and tax, big audit survey, VAT and Brexit
It's a fairly dank, drizzly Monday morning, so what better way to start Daily Insight than on the issues of tax and audits. The FT has a great investigation into multinationals. And guess what... they are paying lower taxes than they were a decade ago, ie before the financial crisis.
The simple conclusion is that governments' attempts to narrow deficits and rethink taxes have, by and large, left the corporate world untouched. According to KPMG, countries have trimmed corporation tax 5 per cent while personal tax has increased by 6 per cent. You betcha.
Staying with analysis, Accountancy magazine has prepared a FTSE350 and Aim100 auditor survey. They say it provides a "unique insight into the UK audits of listed companies, with analysis of audit fees, non-audit fees, tender activity and engagement tenures".
Investment market audit
"As part of this survey, read exclusive coverage of the first ever AIM 100 auditors survey covering the investment market and measuring the fee value of audit and non-audit services conducted." Check it out here.
Still on surveys, the Association of Accounting Technicians has discovered that most UK small businesses prefer apprentices over graduates. According to a report in AccountancyAge:
"Apprentices have significant long-term impacts on these businesses, with 83 per cent of those surveyed saying that apprentices have added value to their business within six months of taking them on, and 63 per cent agreeing that taking on apprentices provides them with staff who are more suited to their businesses.
Best way into business
"Comparing apprenticeships with university, 57 per cent of those who have taken on apprentices said this is the best way into their business’ industry, while 18 per cent said a degree is the best.
And finally, accountingWEB has a piece with the tantalising headline "Six possible dates for leaving EU VAT regime".
Among several illuminating observations, author Richard Asquith notes: "An estimated 27,000 online retailers currently sell goods to EU consumers through their UK VAT number under the distance selling thresholds. These thresholds would not be available after Brexit, and so those companies would have to register for VAT in each country within the EU or cease to sell in that country."
Have a great week!
How to ensure your VAT clients provide happy returns
It’s a situation that's far from ideal for most accountants - preparing a VAT return from a bag of receipts, or trying to reconcile a client’s bank account only to find dozens of transactions that have no matching paperwork.
Chasing a client eats up precious time that could be spent on other work. And it can be stressful when you’re working to multiple deadlines, even causing longer-term issues when it comes to preparing financial statements.
So how do you get encourage clients to keep and provide good VAT records?
Be clear, be concise
Remember, clients will often engage an accountant to manage their affairs because they only have a loose understanding of accounting and the tax system - they rely on your expertise to help guide their business. This gives the accountant some room to let the client know how best to organise their VAT records.
Accountants all have preferred styles and methods and it’s important to communicate clearly with your client as to how you work best:
- Prepare a sheet of general VAT guidelines to hand out to your clients. All clients have their own internal bookkeeping systems but laying out concisely what documents you need and how best to organise them can help the client work their system to your needs too.
- If something isn’t working, let the client know. It could be your client’s sales are being recorded in a confusing way, or they pay suppliers by cheque and don’t keep a record of who they have paid. Whatever the issue, discuss it with the client early so it doesn’t become habitual and harder to change down the line.
- Keep discussing! Nothing is set in stone, your clients will often change areas of their businesses, find new revenue streams and new suppliers with different standards. Do a quick assessment of the VAT records provided each quarter, and let the client know how to best adapt their record keeping to changes in their business.
Explain the benefits
Even after trying to communicate how to best provide good VAT records, there isn’t always incentive for the client to do so – they’re paying you to handle this sort of thing after all!
Make sure your client knows why their records are important - they won’t want to pay more tax than necessary and VAT records often provide the cornerstone for a business’s entire accounting system.
Poor documentation can lead to lost VAT claims, problems in preparing end-of-year accounts, higher corporation tax bills and difficulty preparing regular management accounts for the client.
Finally, don’t be afraid to be open with the client when it comes to calculating your fees. Accounting fees are normally time-based and, by letting them know by eating up your time can lead to a higher fee, they will often become far more receptive to your recommendations.
By focusing on the benefits to the client, whether that’s in accounting fees, tax savings or reporting, you’ll find a greater willingness to provide you with proper records. They are in business to make money and they understand that you are too.
Making tax digital
As part of the government’s Making tax digital strategy, the VAT return process is the first area that HMRC is aiming to digitise in April 2019. Making tax digital aims to improve compliance by making VAT Returns more transparent via the requirement of digital records for VAT transactions and receipts.
While this may prove a challenge for some businesses, it should hopefully improve the quality of VAT records provided as digital images of invoices and receipts will be required via a paperwork solution such as Receipt Bank.
This will make it far easier for accountants to read records – saving yourself time – but should also be sold to the client as positive too! After all, finding space for six years-worth of VAT records can be a challenge and by encouraging your clients to go digital both of you can benefit from improved records and less paperwork to store!
You can find more on Making Tax Digital here.
Daily Insight: Izza and the Big Four, approaches to diversity ... and women in accountancy
A bit of a 'set-to' kicks our last Daily Insight of the week. On Thursday, Lib-Dem leader Vince Cable called for the Big Four accounting firms to be broken up in the light of the Carillion debacle. Yesterday, ICAEW chief Michael Izza said that was the wrong approach to resolving the problem of their market dominance.
Izza thinks there should be an inquiry into why other audit firms are not challenging the Big Four in any meaningful sense.
He says: "Until we address the underlying issues dissuading smaller firms from playing a greater part in audit, we will be no closer to a cure.”
This kind of thinking is eminently sensible, and could be applied to lots of other areas of life. Unfortunately, it's an approach that's a little less effective at generating exciting headlines.
Diversity and discrimination
Yesterday was International Women's Day, which, among many other things, coincided with the launch of Women in Accountancy (WIA) by chartered accountant Elaine Clark and Accountex event director Zoe Lacey-Cooper. Excellent stuff.
There were lots of other stories focusing on diversity and discrimination. Economia, for instance, reported that there are a record number of women on FTSE 100 boards. Fast food group McDonald's , on the other hand, found itself in trouble for its women's day gesture of upturning its trademark M into a W. Maybe just stick to fast food.
Over at the Financial Times, the group's Undercover Economist Tim Harford looked at Hollywood's approach to sexual discrimination and diversity. He pointed to actress Frances McDormand's call for the "inclusion rider". That's where top stars demand diversity and equality in casting otherwise they won't be in the film. Harford's piece referred to research that found this about JRR Tolkien's The Hobbit: the book has 1,900 instances of the word "he" and one of "she". What an illuminating statistic!
IoD chief steps aside
Barbara Judge, chair of the Institute of Directors, has stepped aside from her role amid allegations of racism and bullying. She will contest the allegations, reported in the Times. Meanwhile, an investigation will take place.
Daily Insight: tax dodgers, Brexit bill... and an accounting alliance
A warm and sunny welcome to Daily Insight. The first headline that caught my eye this morning was "HMRC cracks down on offshore tax dodgers".
The revenue says those with overseas assets risk higher fines if they don't follow the rules. The crackdown starts in October this year. So HMRC suggests that people “put their cards on the table”.
“Everyone has to pay their tax and the vast majority of people and businesses already do. It’s on their behalf that we are cracking down on offshore tax cheats,” said David Richardson, HMRC’s chief of customer strategy and tax design.
From tax dodgers to Hammond and Brexit
The Financial Times's big story of the day focuses on chancellor Philip Hammond and Brexit. Apparently, when Hammond delivers his spring statement next Tuesday, he's going to present the accounts for the UK leaving the EU.
The Office for Budget Responsibility has been busy 'estimating' the impact of the divorce payments on the public purse. The government has "agreed to obligations" of £35 billion to £39 billion.
The FT says the idea to pay the money back over years is likely to rattle Eurosceptics who want a clean break from Brussels.
Scotland signs accounting deal with US
Accountancy Age has an interesting story about a deal between Scots accountants and their US chums. The Institute of Chartered Accountants Scotland has signed an agreement with US accountancy bodies NASBA and AICPA. It will allow members from each country to practice the jurisdiction of the other nation.
The agreement will create opportunities for professionals to work in other countries, says the website.
They quote Anton Colella, CEO of ICAS. “This is an historic agreement. It’s the first of its kind between a UK chartered accountancy body and American accountancy bodies, and comes at a pivotal point for the UK.
“It not only creates new opportunities in the world of transatlantic trade, but also reinforces the high standing in which we hold our American colleagues, and the expertise they value in us.” A special relationship?
Daily Insight: Accountex Summit ... it's grin up North!
Welcome to day two of Daily Insight. Let's start with this: by any measure, the first Accountex Summit North was an overwhelming success.
More than 1,000 attendees from the world of accounting and finance went to the conference at Manchester Central on Tuesday. And there were plenty of smiling faces. Who says accountants are a grim lot?
The keynote auditorium was packed for engaging presentations by the likes of former BBC business journalist Declan Curry.
The Summit's smaller theatres hosted sessions on a variety of topics, including an MTD masterclass by taxation expert Andrew Hubbard.
While chartered accountant Elaine Clark ran a couple of popular and well-received discussions on "Woman in Accountancy" and "Surviving as a Sole Practitioner".
A big thumbs up
Accountex North's 600 Twitter followers were unanimous, giving the Summit a massive thumbs up. And the word on the floor, from what I heard, was equally positive.
Accounting Insight will return to Accountex Summit North with a full, in-depth on the event on Thursday.
In other news, Rebecca Cave reports on the MTD/VAT sphere. Despite a wide-reaching consultation on the draft MTD for VAT legislation, there appear to be only a couple of amends to the version that was passed without debate in parliament last week.
Two Significant changes to MTD for VAT
Rebecca says: "I have compared the final VAT regulations and the draft version, and found only two significant changes: The VAT records (the electronic account) must be preserved using MTD functional compatible software unless the trade is exempt from the MTD regime. In reg 7: the rules which determine what information must be kept and maintained for each transaction can be varied by HMRC if it is satisfied that the complying with the regulation is likely to be impossible, impractical or unduly onerous."
Meanwhile, on the subject of Brexit, Philip Hammond, UK chancellor, is calling for financial services to be included in any free trade agreement. He says: “Our markets are already deeply interconnected, and we have demonstrated how we can work together over the past decade as we have repaired and defended the financial stability of our continent.
Mutual Brexit interests
"I am clear not only that it is possible to include financial services within a trade deal but that it is very much in our mutual interest to do so.”
And finally, a shake-up at Yorkshire accountants Revell Ward has resulted in three women taking control of the fiirm.
They are audit director Karen Borowski, tax director Lesley Sutton and business services director Jennifer Davies.
“All-female boards are extremely rare in a male-dominated sector like ours, so we are already way ahead of the national target for plcs. Despite the laughs we've had around ‘doing it for the girls’, there are very sound business reasons behind our decision,” said Borowski.
Welcome to Accountex Summit North and the first edition of Daily Insight
Good morning everyone, and welcome to today's launch of Accounting Insight News, a content platform for accountancy and finance professionals. More specifically, welcome to Daily Insight, your update on what's fresh and, we hope, engaging in the world of finance and accounting.
Let's get straight to it ... nearly. But first this: We're live at Accountex Summit North in magnificent Manchester. So do stop by the Literature Lounge and say hello, if you can.
OK, on with the show. Today's headlines. As we're in my home town of Manchester, I may as well kick off with another subject that is close to my heart, the Daily Mirror. The newspaper/media group where I worked for 15 years in its not-quite halcyon days, has bought the Daily Express and renamed the group 'Reach'. I really don't know what to say about that, but, fortunately the Financial Times does.
Staying on the subject of costs, the ICAEW is worried about audit regulation. It says rising costs are causing some audit firms to question the value of staying in the public interest entity (PIE) market.
"In its response to the FRC’s consultation on the 2018/21 strategy and levy proposals, ICAEW points out that the FRC’s operation and audit quality review levies are ultimately a cost to UK business and affect competition in the audit market.
Vernon Soare, ICAEW’s chief operating officer, says he is disappointed that the FRC does not view addressing the burden of the cost of oversight and regulation as a priority.
“There is a point at which high regulatory costs will impair market fundamentals and negatively impair outcomes, particularly if regulatory costs cause participants to drop out of the PIE market,” he says.
Finally for today, as I know many people are busy at Accountex Summit North, there seems to be an interesting debate bubbling about whether or not accountants should charge for fixing people's bookkeeping errors. Check it out on accountingWEB.
Personally, I can't help thinking it might be a bit too much and a little too late, what with MTD and all that. Anyway, see you tomorrow!