How to dissolve a company in a pain-free way
No business will last for ever and the reality is that most companies last less than five years.
In 2018 alone there were 483,800 companies removed from the UK company register.
While there were 634,116 companies formed in the same period it means that for every 100 new companies formed, about 75 reach the end of their life.
There are many reasons why people may voluntarily dissolve their company and look for support from their accountant to do so.
Take on the business
The business may have already served its purpose or the owners might want to retire but can’t find anyone to take on the business. It might be a subsidiary that’s no longer needed or an idea that just never got off the ground.
Section 1003 of the Companies Act 2006 gives the directors the right to apply voluntarily to strike off the company.
Once it’s struck off, the company legally no longer exists, a fact that can be verified by searching against the company name on the public register at Companies House.
Dissolving a company voluntarily?
The voluntary dissolution option is only available where the company is solvent. More specifically:
- It must have no outstanding liabilities – so all of its outstanding creditors must have been paid.
- There must be no outstanding petition to wind up the company, insolvency proceedings or other type of order under the Insolvency Act.
- There cannot be any existing agreements with creditors – for example a Company Voluntary Arrangement or other compromise agreement.
Furthermore, to use the voluntary strike off procedure the company must not in the last three months have:
- Traded (or in another way carried on in business).
- Sold property or rights owned by the business which it sold while trading.
- Changed its name;
- Engaged in any activities other than those required to dissolve the company, conclude its affairs or comply with a legal requirement.
What steps need to be taken?
Firstly, the directors need to tidy up its affairs. While these will depend on the nature of the business, tax affairs will typically need to be settled with HMRC (alongside submitting final accounts and a company tax return) and any business assets distributed between the company’s shareholders. Any bank accounts should be closed.
Companies House form DS01 must then be completed and signed by a majority of the company’s directors (which means all of them if there are only one or two directors appointed). A cheque or postal order for £10 made payable to Companies House must be submitted alongside the form.
Who must be told?
Within seven days of sending form DS01 to Companies House to dissolve the company, a copy of that form must also be sent to interested parties. Legally, therefore, a copy should be sent to any person who is:
- A shareholder (or other ‘member’ of the company).
- An employee of the company.
- A creditor.
- Any director who didn’t sign form DS01.
- The manager or trustee of any pension fund established for employees
What happens next?
If the form is completed to Companies House’s satisfaction, a notice will be published in the London, Edinburgh or Belfast Gazette (depending on where the company is based) giving notice of the intention to strike off the company.
Gazettes are the UK’s official newspapers of record, where both recent and history notices to strike off companies can be viewed.
The Gazette notice gives interested parties the opportunity – usually in a period of two months – to make an objection as to why the company should not be struck off.
Valid reasons for objecting include tax fraud or another offence by the directors, an outstanding legal action or evidence that the company has failed to follow the rules for voluntary strike off (e.g. the directors have failed to inform interested parties of the proposed dissolution).
Can the dissolution be stopped?
The dissolution won’t proceed further if:
- An interested party makes an objection which is upheld by the Registrar before the notice period has expired.
- Companies House are informed by HMRC that the company has an outstanding tax liability; or
- The directors of the company file form DS02 to halt the dissolution.
Otherwise, the Registrar will strike off the company within about two months from the notice in the Gazette. At that point, a second notice will be published in the relevant Gazette and the company will no longer legally exist, with any assets that haven’t been distributed to shareholders becoming the property of the Crown.
Can the company be restored?
Sometimes, well after a company has been removed from the register, a forgotten asset turns up that had been owned or was due to the company. To take proper ownership of this asset requires the company to be restored to the register. This is not a quick or simple process – always double check that there are no assets unaccounted for before concluding the dissolution process.
- Figures quoted in this article have been taken from Inform Direct’s 2018 Company Formations Survey based on data from Companies House and the Office for National Statistics.
- This article originally appeared on the ICPA website. Check it out here.
What did you think of the Budget?
So we've had time to digest, and may be even savour, the details of Philip Hammond's Budget.
Most seem to agree that it was a pretty fair and diplomatic attempt to steady the UK ship before it returns to the increasingly choppy Brexit waters.
Only time, and the next election, will tell whether the Chancellor's roll of the dice/rational policy statement has paid off.
Variety of UK sources
So, just to wrap things up, here's a selection of Budgets comments and observations from a variety of eminent UK sources.
Hammond said: "The years of hard work are paying off, the public finances are in better shape, primarily because we are generating jobs in the UK at a fantastic rate.”
His boss, PM Theresa May agreed: “Austerity coming to an end isn’t just about more money into our public services, it’s about more money in people’s pockets as well.”
Carolyn Fairbairn, CBI director-general, called the Budget “rock-solid” and, adopting a Halloween turn of phrase, said it was “bringing more treats than tricks for business”.
Enormous contribution
She said: “It recognises the enormous contribution enterprise has made to balancing the UK’s books through jobs, pay and tax and responds to many of the recommendations that firms have made.”
ICAEW chief Michael Izza reckoned Hammond had been “sensible and safe” saying the budget was a “spending sprinkle, not a spending spree.”
“Philip Hammond faces a lot of challenges including funding of the NHS, national debt, Brexit, and a fractious government, and this is reflected in the lack of major announcements in today’s speech.”
Is austerity over?
Over at the Institute for Fiscal Studies, director Paul Johnson addressed the question "is austerity over?" with these observations:
- There was a big upward revision to overall spending plans;
- Spending on the NHS will rise substantially – though less quickly than spending has risen on average over its 70 year history;
- Total day to day spending on public services is planned to rise by about 8 per cent between now and 2023-24, but spending outside of protected areas is essentially flat – and indeed ticks up next year before falling a bit. It falls ona per capita basis;
- Despite more money for universal credit there are still £4bn or so of net welfare cuts working their way through the system, most obviously with the freeze to the rates of most working age benefits next April;
- Total spending is set to rise in real terms but to fall very slightly as a fraction of national income.
He said: "Does that add up to the end of austerity? On a narrow definition perhaps it does, on wider definitions it doesn’t, at least not yet.
"But whatever the precise definitions this is certainly a considerable easing in spending control and a change of fiscal direction. Any idea that there is a serious desire to eliminate the deficit by the mid 2020s is surely for the birds.
This no bonanza
"This is no bonanza. Many public services are going to feel squeezed for some time to come. Cuts are not about to be reversed.
"If I were a prison governor, a local authority chief executive or a headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead."
Not so for Mike Cherry, chair of the Federation of Small Businesses. It's the “most small business-friendly Budget that this chancellor has delivered”.
Backing small business
“Through the Budget, the chancellor is now using the strength of the Treasury to back small business. We have already seen a significant change of tone in recent months towards helping businesses, right from the top of government, and today represents the change of policy that backs this up.
And Adam Marshall, boss at the British Chambers of Commerce, agreed, saying: “The chancellor has demonstrated that he is listening to business concerns by delivering a Budget that supports investment and growth…
“The chancellor has avoided major increases to business tax to fund the government’s spending priorities, which would have undermined the confidence boost to firms from his commitments to supporting enterprise and growth.”
Living standards of the low paid
Unsurprisingly, Torsten Bell, at the Resolution Foundation, a think tank aiming to improve the living standards of the low-paid, had a slightly different take on matters.
"This Budget was a bigger deal than many expected – with a significant easing of austerity," he said.
"But austerity has not been ended. And there will be tougher choices for chancellors in the years ahead. Public spending will remain tight, living standards are set to be sluggish and the tax rises to meet pressures in the 2020s from our ageing society will still be needed – as and when there’s a government with the majority to deliver them."
Finally, Martin Wolf, the FT's chief economics commentator got to the political heart of the Budget "that the hard work" has paid off and sunny days lie ahead... "This, it is surely clear, is the only platform the Conservatives can credibly use as a basis for appealing to the country for support.
"They cannot argue the economic recovery has been satisfactory, because it has been very far from that. They cannot deny they have imposed a fiscal tightening that a large proportion of the people believe was painful and, in important respects, unfair."
2018 Budget straight from the horse's mouth
It's great to read all the different opinions following a budget, and yesterday's 73-minute effort by the chancellor has generated its share of plaudits and critics.
But, rather than jump on the commentary bandwagon just at the moment, I thought I'd take a look at the official line... call it objective (probably not); call it propaganda (certainly a hint of); call it what you will... (you decide!)
Here's a 24-point summary of Philip Hammond's pre-Brexit, post-austerity (?) budget straight from the horse's mouth ... well govuk anyway
1. Public finances have reached a turning point
Since 2009-2010 the deficit has fallen by four-fifths, from 9.9% to 1.9%. Public debt peaked in 2016-17 and is now falling. On average, spending on public services will grow 1.2% above inflation a year from next year until 2023-24.
2. Employment is at a near record high and the OBR forecasts it is set to keep growing
The economy has grown every year since 2010, and is projected to continue growing in each year of the forecast. The unemployment rate is at its lowest for over 40 years, there are over 3.3 million more people in work since 2010 and the OBR forecasts 800,000 more jobs by 2022.
3. National Living Wage will increase to £8.21
From April 2019 the National Living Wage will increase from £7.83 an hour to £8.21. This will benefit around 2.4 million workers, and is a £690 annual pay rise for a full-time worker.
4. The tax-free Personal Allowance will rise to £12,500
The Personal Allowance – the amount you earn before you have to start paying income tax– will increase by a further £650 in April 2019 to £12,500. This rise comes a year earlier than planned, and will be maintained in 2020. This means a basic rate taxpayer will pay £1,205 less tax in 2019-20 than in 2010-11.
5. The Higher Rate Threshold will increase from £46,350 to £50,000 in April 2019
The amount people will have to earn before they pay tax at 40% will increase from £46,350 to £50,000 in April 2019. This means that in 2019-20, there will be nearly 1 million fewer higher rate taxpayers than in 2015-16.
6. £1.7 billion to increase existing work allowances in Universal Credit
Increases to work allowances will mean working parents and people with disabilities claiming Universal Credit will be £630 better off each year. People will also receive extra help as they move from their existing benefits to Universal Credit and there will be targeted support for people repaying debts.
7. A new railcard for all young people aged 26 to 30, available nationally by the end of the year
The first digital only railcard will offer up to a 1/3 off most rail travel.
8. Fuel duty will remain frozen for a ninth year
In 2019, fuel duty will remain frozen for the ninth year in a row, saving the average driver £1,000 since 2010.
9. Short-haul rates of Air Passenger Duty will not rise
Short-haul rates of Air Passenger Duty will not rise for the eighth year in a row, keeping costs down for 80% of passengers. Long-haul rates will rise in line with inflation.
10. Duty on beer, cider and spirits remains frozen
The cost of a pint of beer will be 2p lower than if duty had risen by inflation.
11. NHS funding will increase, including more spending for mental health
The NHS is the public’s number one priority and the government will increase its budget by £20.5 billion after inflation by 2023-24. Within this, the NHS will increase mental health spending by more than £2 billion a year by 2023-24.
12. £650 million for social care next year
Local authorities in England will receive a further £650 million in social care funding next year.
13. Lifting the borrowing cap to allow local authorities to build more housing
From today in England the government is lifting the cap on the amount of money local authorities are able to borrow to build housing. Local authorities fund housing through a separate Housing Revenue Account (HRA). The Welsh government is also taking immediate steps to lift the cap in Wales.
14. £400 million extra for schools this year
This will be £10,000 for the average primary school and £50,000 for the average secondary school.
15. A commemorative 50p Brexit coin will be available to buy from Spring 2019
The Royal Mint will create a new commemorative Brexit coin to mark the UK’s exit from the European Union.
16. Up to £19 million in commemoration of the Centenary of the WWI Armistice
- Up to £8 million to help with the cost of repairs and alternations to village halls, Miners’ welfare facilities and Armed Forces organisations’ facilities.
- £10 million to support veterans with mental health needs through the Armed Forces Covenant Fund Trust.
- £1 million for First World War Battlefield visits for school students.
17. £30 billion to improve roads
A £28.8 billion National Roads Fund, paid for by road tax, includes £25.3 billion for the Strategic Road Network (motorways, trunk and A roads). The largest ever investment of this kind.
It will also help fund the new network of local roads (known as the Major Road Network), and larger local road projects. Local authorities will receive £420 million to fix potholes on roads and renew bridges and tunnels, and there will be a £150 million to improve local traffic hotspots such as roundabouts.
18. More money for Scotland, Wales and Northern Ireland
Scotland, Wales and Northern Ireland will all get more money to spend in devolved areas, including education, health and housing. This Budget means:
- over £950 million more for the Scottish Government through to 2020-21
- over £550 million more for the Welsh Government through to 2020-21
- over £320 million more for a Northern Ireland Executive through to 2020-21
There will also be £150 million for a Tay Cities Deal, £120 million for a North Wales Growth Deal, £350 million for a Belfast City Region Deal and opening negotiations on Derry/Londonderry and Strabane City Region Deal.
19. Over £1.5 billion to support the high street
Small retail businesses will see their business rates bills cut by a third for two years from April 2019, saving them £900 million. Local high streets will benefit from £675 million to improve transport links, re-develop empty shops as homes and offices and restore and re-use old and historic properties. Public lavatories will receive 100% business rates relief. This adds to previous reductions in business rates since Budget 2016 which will save firms over £12 billion over the next five years.
20. £1 billion more for defence over the next two years
The Ministry of Defence will receive an extra £1 billion to help protect the UK against changing threats such as the rise in cyber-attacks and the resurgence of state-based threats. This funding adds to the £800 million announced earlier this year.
21. Increasing funding to help departments to prepare for Brexit to over £4 billion
The government is providing £500 million of additional funding for departments to prepare for Brexit for 2019-20. This is on top of the £1.5 billion already announced for that year.
22. The Annual Investment Allowance will increase to £1 million from 1 January 2019 to 31 December 2020
The government will increase the Annual Investment Allowance five-fold from £200,000 to £1 million to help businesses to invest and grow. Also, from October 2018, businesses will be able to deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.
23. A 2% digital services tax on large digital firms
From April 2020, large social media platforms, search engines and online marketplaces will pay a 2% tax on the revenues they earn which are linked to UK users.
24. Further changes to the apprenticeship levy to support employers
From April, large businesses will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Some employers will pay half of what they currently pay for apprenticeship training - from 10% to 5%. The government will pay the remaining 95%.
Will investigation and AI shake up the audit world?
The audit sector is set for a massive shake up, I feel, as the Competition and Markets Authority (CMA) begins a major probe, with the spotlight clearly fixed on the Big Four — PwC, EY, KPMG and Deloitte.
This review signals the beginning of the levelling of the playing field between the biggest of the of accountancy firms and the rest of the industry.
The 'top dogs' are under more scrutiny than ever, with the CMA writing to government about the problems it is investigating.
The fact is, thanks to major technological advances, the time is now perfect to loosen the Big Four grip and let other firms seize the opportunity to thrive in the auditing marketplace.
Far greater insight
Specifically, Artificial Intelligence (AI) enables professionals to gain far greater insight without replacing any human intelligence. In fact, these tools enable accountants to apply critical thinking (which AI cannot) to provide detailed insights and add value to their client relationships.
While the Big Four have poured development funds into the technology, it has been difficult for accountancy practices to invest in AI... until now.
Companies such as IRIS are bringing AI to the rest of the accountancy market, so they are now ready and available to take advantage. These tools can level the playing field for accountants, whose frustration has been swelling over the significant advantage they feel the Big Four have over everyone else.
Market is failing
The final outcome of the CMA probe will be fascinating, especially because investigators have left open all possible actions if it ultimately concludes the market is failing.
The CMA says its first focus is on choice and switching - specifically that the largest UK companies “still turn almost exclusively” to one of the Big Four when selecting an auditor to review their books.
All this comes amid strong criticism of the sector from the Financial Reporting Council, which has just revealed that 27 per cent of the audits it looked at needed “more than limited improvements”.
Officials revealed a significant decline in audits achieving a good standard in the FRC annual report – just 73% compared to 81% in 2017. This was due to “an unacceptable deterioration in quality at one firm, KPMG”.
Powerful band of firms
We shouldn’t underestimate the significance of the CMA investigation. It shows this powerful band of firms are not beyond reach and hopefully encourages more practices into auditing the larger FTSE100 companies.
AI is a great way for medium-sized firms to scale up their operations to tackle much larger audits, enabling a review of 100 per cent of transactions rather than a select sample. It’s like having a digital in-built senior auditor and it has the potential to be a game-changer.
In essence, firms using the AI technology can compete and offer more comprehensive audits to larger companies whilst utilising fewer staff.
We’re confident that accountants who use AI will be the ones who achieve the most success in coming years.
We hope that accountants across the UK have the confidence to take advantage of the evolving audit situation and it’ll be fascinating to see how the CMA probe develops in coming months.
MTD-ready spreadsheet for cash-based businesses
Hot on the heels of Clear Books’ September product enhancements, a new feature has been released that makes Clear Books Micro more efficient and intuitive to use for cash-based businesses.
Clear Books CFO and head of product David Carr explained; “Most accounting software is created for ‘pay me later’ businesses that issue an invoice and request a BACs settlement.
"These systems recognise income when the invoice is generated and allocate transactions recorded on bank statements to the invoice when it is paid.
"Whilst this is useful for many small businesses, it neglects those ‘pay me now’ businesses like cafes and shops who have no need to generate invoices.”
Makes accounting easy
The new cash-based business feature in Clear Books Micro makes accounting easy for ‘pay me now’ businesses by eliminating sales invoice and bill/expense entry.
Instead of using invoice generation to recognise business income, it guides the cash-based user to explain daily takings directly from a list of bank transactions - while still posting all the required double-entry accounting transactions behind the scenes.
The user interface for ‘pay me later’ businesses has three tabs and allows businesses to record a sales invoice and ‘allocate’ a bank transaction to it when the payment is made.
The new user interface for ‘pay me now’ businesses has only one tab and allows businesses to ‘explain’ takings directly from their bank feed.
David Carr said that the usability enhancements are evidence of Clear Books’ commitment to provide a clear & simple user interface that helps small businesses easily keep on top of their record keeping for MTD VAT returns.
Bookkeeping framework
“Clear Books’ online spreadsheet gives small businesses that all important bookkeeping framework in a familiar format. The tabs and column headers guide them through the bookkeeping process by showing what they need to record and where, and the sums, sorts and filters automate all the calculations in the background.”
Information entered into Clear Books Micro by either ‘pay me later’ or ‘pay me now’ businesses is available immediately to accountants who use their feature rich Clear Books Practice Edition to adjust the journal, and to create and submit MTD VAT returns to HMRC.
Accountants and Clear Books Micro users can switch their clients to the new ‘cash based view’ by disabling ‘sales invoices’ and ‘bills’ tabs in the settings menu.
The Secret Accountant: the 2018 Budget and all that
Theresa May told the Tory party conference that people deserve a break from the long spell of austerity and claimed this would soon be coming to an end.
The PM's bold words have, of course, put pressure on the chancellor to ensure that his (third) Budget on Monday reflects this ... and brings hope for the future.
The Budget affects everyone in the UK and often beyond, from individuals to large corporations. With Brexit on the horizon, this makes Philip Hammond's next statement more relevant than ever.
This is the final budget before the UK leaves the EU and, with a lot of uncertainty surrounding Brexit and how the economy is prepared to deal with this, the government’s exit plan will be a significant and closely watched part of the speech.
Enterprise Management Incentive
One specific area likely to be affected by Brexit is Enterprise Management Incentive (EMI) schemes. EMIs are approved by EU state aid rules, and it is uncertain whether these will be re-approved following the UK’s exit from the EU.
Fuel duty is an area that hits many of us and, although it was speculated that this would go up for the first time in nearly a decade, the PM has confirmed that this will remain frozen for the ninth year in a row, which is positive news for motorists.
Another positive for business-minded individuals is that the government is encouraging entrepreneurs by committing to a significant investment in Research and Development (R&D) funding, with over £4.7bn planned to be invested over the next four years.
IR35 legislation
Another area the Budget may affect is the ‘contractor’ sector with potential further changes to IR35 legislation, with the recent reform and views of this within the public sector also now moving into the private sector.
Those individuals using a PSC (Private Service Company) to trade through, are generally viewed to be operating in this way to avoid National Insurance contributions and other tax, therefore a stricter look at a company’s IR35 status will be extended to those in the private sector as well as public.
An impact of this move could be more individuals moving to full-time employment rather than trading through a company, where they will likely pay similar amounts of tax anyway resulting in a minimal gain from this legislation.
Following the Budget release on Monday, I will revisit the key topics and what the results actually mean for each of us.
How AI can help accounting stay afloat
The UK audit market is awash with tension. A variety of factors are redefining the landscape, but most prominent are the widespread scrutiny of auditing practices and high-profile allegations of malpractice.
As a result of these tensions, trust in accountancy is falling – with both the public and politicians questioning the role and responsibilities of the audit profession.
With the sector braced for major reforms, this is a time of significant change. The combination of a market in flux and transformative technology means that this is the perfect time for those in the field to re-evaluate their status quo and charter their way to success.
Despite the rising problems, the sector’s response to the predicament has, to date, been underwhelming.
Some firms have taken a passive approach by abandoning any audit work due to the fear of repercussions, but this is a drastic measure, especially when there are more positive and proactive ways to tackle the problem. By grabbing on to the life raft of new technologies and methodologies, accountancy can weather the storm and break through this new wave of scandals.
The need for change
The current pressures on the accounting industry are symptomatic of a changing environment. The rapid proliferation of digital channels is transforming business operations and redefining consumer expectations.
Big Data is no longer a future prospect, it’s the new normal. As datasets grow in size and complexity, organisations must strengthen their infrastructure to manage data effectively.
As the internet enables client businesses to transact on a global scale, accountancy firms are adapting their organisational structures to cope with the inherent complexities in data management and the use of multiple ERP systems across the global enterprise is only exacerbating their challenge.
The growing volume of information flowing across modern accounting practices naturally brings increased risks around data integrity. These risks typically manifest themselves in the crucial audit phase where the ability to detect financial anomalies is critical. Unfortunately, the traditional tools of audit are ill-equipped to handle the explosion of data and leave accounting practices worryingly exposed.
However, whilst the world around them changes inexorably, the audit methodologies applied by accounting firms have barely shifted. The repercussions are there for all to see.
As trust in the profession erodes, the ‘expectation gap’ between what an audit is officially required to do and what society has come to expect is growing wider. Firms holding up their letters of engagement and declaring that they’ve met their requirements is necessary, but no longer sufficient.
Society expects more. It’s incumbent on the industry to bridge that gap. Thankfully, transformative tools that leverage the powerful combination of human and artificial intelligence are helping proactive firms to modernise audit processes and mitigate the risk of accounting error.
Transformative technology
The recent rise in accounting scandals is clear proof that the old tools of audit are no longer capable of interrogating the tsunami of big data.
Outdated, rules-based computer-aided audit tools (CAATs) and sampling practices present major barriers to detecting anomalies in financial data.
The use of CAATs is widespread and familiar, but assisted scripting tools rely heavily on technical skill-sets to manually script rules. Not only are these skill-sets in short supply, the rules themselves can easily be circumvented.
Fundamentally, the CAAT-based approach commonly results in limited coverage across large and proliferating datasets, making it difficult to detect errors, unusual transactions or anomalies.
In addition, sampling methodologies can only detect lack of evidence in the subset of the data. Sampling methodology is an extremely weak indicator that the whole dataset is free of error, leaving to chance the uncovering errors in the vast majority of the dataset.
Combined these two constraints make practices vulnerable to significant, and avoidable risk. There is a better way.
AI – augmented intelligence
The application of artificial intelligence (AI) to auditing processes is revolutionising financial analysis for accounting firms. AI tools allow practices to perform rapid, risk-ranked analysis on all transactions.
The approach leverages AI and machine learning algorithms, in correlation with multiple testing criteria, to analyse entire datasets quickly, efficiently and reliably. This comprehensive methodology, which provides a view of every data point by user, vendor, transaction or risk, significantly bolsters organisations’ capacity to detect financial irregularities.
Moreover, far from the fear of technology replacing humans, AI enhances and supports accounting practices’ capabilities. Crucially, AI tools don’t make decisions – they simply highlight data for human intervention and provide a rationale that helps accountants form and justify decisions. AI isn’t replacing humans, it’s augmenting them, and serving as a capacity multiplier.
The use of AI eliminates the risk of traditional sampling methodologies. What’s more, because the best tools don’t require any scripting, accountants are freed to spend more time providing value to clients.
This presents a huge opportunity for competitive advantage. Because fundamentally, whilst the ability to reduce risks is hugely beneficial, AI technology is not solely about detecting error and fraud.
The smartest tools offer sophisticated data analytics and powerful visualisation to help firms provide enhanced value to clients in real-time.
This moves client engagement beyond the constraints of the annual audit, enabling accountants to identify potential problems and provide proactive advice – moving the analysis from hindsight, to insights to foresights. In the process, this can help practices build better partnership-based relationships that ensure clients avoid unwelcome surprises at year-end.
The adoption of AI can be a major differentiator in a crowded, competitive marketplace. In the past, smaller organisations have shied away from large-scale deployments, put off by the perceived cost of implementation. The advent of cloud-based services has levelled the playing field, creating a platform for AI that is affordable and accessible to everyone. Auditing tools, powered by the AI in the cloud, provide organisations a competitive advantage and the chance to become leading-edge overnight.
Time for change
Despite rapid technological advances and a global revolution in consumer expectations, the audit profession has barely changed its methodologies in many decades. It’s time it did.
As confidence in the sector plummets, AI tools can bring greater transparency and transform the capabilities of accounting firms to navigate the sea of big data and in the process close the ‘expectation gap’ with the public.
Those that integrate AI solutions within their audit process will benefit from faster, more effective and reliable results that go beyond the rules and overcome the constraints of traditional sampling methodologies.
AI-based methodology gives practices the reassurance of full coverage analysis, enabling them to analyse every single transaction and escalate potential anomalies for closer human investigation. In addition, they offer enhanced data analytics and real-time visibility that can help accountants give their clients substantial added value.
Ultimately, AI presents a powerful opportunity to redefine accounting, mitigate risk and restore trust in the profession. At a time when the audit industry is facing public backlash due to various scandals and allegations, the smartest organisations will be those that take control by throwing overboard their old methodologies and use AI innovation as their anchor. AI based solutions offer a life raft to accountancy in the sea of perils to navigate the profession to a safe harbour.
How's your GDPR journey?
The day that every business was dreading finally arrived; data protection ‘D-Day’ came and went on Friday 25 May and, despite the GDPR hype hitting inboxes across the country, the world didn’t come to an end.
Now that the deadline has passed let's look at the impact of the changes so far and consider what will change for businesses in the next few months.
There has already been a flurry of data released which makes some interesting reading, including:
- Research by the Chartered Institute of Marketing (CIM) highlights that of the consumers that were polled, 48 per cent still lacked an understanding of how organisations use their personal data. This is an increase from 31 per cent since the same research was conducted two years ago.
- Only 41 per cent of individuals polled are aware of the new regulations, demonstrating that despite the hype there is still a lack of understanding of what the new regulations mean for people, and what their rights now are.
- When looking at businesses themselves, research commissioned by cybersecurity insiders found that only 7 per cent of those surveyed confirmed that they were fully compliant in time for the deadline. With consumers, of those surveyed 25 per cent admitted having no or limited knowledge of the new law.
So there is still a way to go to get the legislation fully implemented and understood.
Large brands the first GDPR targets
It was probably inevitable that major brands would be among the first targets for the regulators and within hours of the deadline Facebook, Instagram, Google and WhatsApp become the first brands to hit the headlines.
European digital rights group Noyb has filed a complaint against these organisations citing that their new terms of service do not comply with GDPR, as they did not allow users to consent freely. If the complaint proceeds, it could result in fines of more than £3bn.
Certainly, articles in the press about the size of potential fines struck fear into small businesses.
However, Elizabeth Denham, Information Commissioner, has confirmed that small businesses that did not make extensive use of customer data would not come under close scrutiny.
She was also keen to make it clear that the ICO are not on the hunt to persecute any misdemeanour in regards to the new regulations.
Does it mean small businesses are off the hook? No, but it does relieve concern that as long as businesses are taking steps to protect the data they hold the ICO will be sympathetic towards them. It is organisations who are ignorant of or deliberately disregarding data protection that need to be wary.
What’s next?
It is clear that there is still a way to go for businesses and consumers alike to get to grips fully with the changes and there are certainly likely to be further high-profile stories hitting the headlines over the forthcoming months.
The GDPR will continue to evolve, with another set of regulations on the horizon in the form of the updated Privacy and Electronic Communications Regulations (PECR), so data protection is going to be a hot topic for a considerable time to come.
PECR sits alongside GDPR and governs e-privacy rules. No official news has yet been circulated explaining how PECR could be updated following GDPR.
It’s not just a marketing issue
The focus in the run up to the 25 May was very much on the handling of marketing data, with consent emails landing in inboxes across the country by the thousands. However, what shouldn’t be forgotten is that GDPR covers more than just the personal data held by a business on its customers. Employee data falls within the regulations too, something that many businesses appear to have missed. Storing and sending salary and other personal information on employees (including payslips) needs to fully comply with the legislation and employees need to be communicated with and consent obtained.
At Qtac our new online portal has been designed specifically for this purpose. It enables businesses to securely manage and share their payroll data between the business, their payroll provider and employees. For a free demonstration call 0117 935 3500.
This blog originally appeared on the ICPA website.
A glimpse into the crystal ball (of accountancy)
The business world is going digital and accountancy is no exception, driven by advances in technology and constant changes in regulation. The role of an accountant, once perceived as a number cruncher, has already evolved to encompass new skills, with even more of a focus on technology and relationship management.
To further explore the pace and impact of technological change over the next decade, in June of this year, Thomson Reuters commissioned research into the views of senior-level accountants in practice. Most of the 345 respondents work for accountancy practices with fewer than 10 staff and just over three-quarters hold a senior role.
In addition, Thomson Reuters also invited experts to share their views on the findings for their Accountant of Tomorrow report. The report explores accountants’ needs, wants and visions for the future.
Pivotal role in the future of accountancy
Over 95 per cent of the accountants surveyed stated that their role was likely to change due to technology. Some 74 per cent of these understand this change to be very likely; displaying an acceptance that technology will continue to play a pivotal role in the future of accountancy.
Stephen Pell, Pell Artists Accountants and one of the selected experts, sees technology as a positive for the profession. He said: “Technology is going to make life much more enjoyable and rewarding for an accountant, only bringing benefits to them as an adviser, and to their clients.”
However, many are concerned about the challenges that come with the digitalisation of accounting over the next 10 years. A significant 25 per cent of participants were concerned about making tax digital, for instance. About 16 per cent were extremely concerned about choosing the right software, while almost half were somewhat concerned with their software choices, giving the impression that digital tax is still a grey area for accountants.
Cloud technology
Thomson Reuters commented that with the significant progress in the next 10 years to move clients and practices online, cloud technology would be the most significant driver of change in the role of being an accountant.
The report went on to comment that, in the same way as the anticipated requirements for Making Tax Digital, one of the consequences of cloud accounting would be the use of real-time data and more in-depth analytics.
Reflecting this, when asked which three specific advancements in technology would change their role in the next ten years, 67 per cent of accountants cited cloud-based systems, while 52 per cent highlighted the use of real-time data and more in-depth analytics. Also featured on the list of advancements were greater integration between the applications we use and artificial intelligence (AI), or machine learning.
Digital influx
But how will this digital influx directly impact services, and will digital free up accountants’ time – or will it impede day-to-day tasks?
When asked if participants’ time spent on standard tasks would be more, less or stay the same, most agreed that compliance exercises would see a very considerable reduction in the time required per task.
Bookkeeping was viewed as the task that would most benefit accountants through digital technology. Personal tax and company tax were tasks considered to be eased the most following digital changes, whereas accounts preparation and VAT review and submission, albeit slightly less, were also deemed to be those that could be digitalised in order to free up accountants’ time.
Automation is key
Since the introduction of digital processes, many have fought with the emergence of technology – and have been arguing that ‘robots will take our jobs’. Instead of feeling threatened by automation, it should be embraced as a means to spend time on more challenging (and chargeable) work.
As Freddie Faure, co-founder at CooperFaure Accountants, argues: “Machines can only do so much, but they can’t think and they can’t interpret information. You would still need an accountant to do the critical assessments and understand how you can use that information to help the business in the future.”
When asked which critical accountancy tasks are most likely to become automated by technology in the next 10 years, bookkeeping came out top, with 78 per cent of those asked agreeing that it was the most likely.
Data collection
Other common choices for tasks most likely to become automated were data collection and tax return submission/filing. On the other hand, those tasks deemed least likely were client communication, business plan creation and auditing.
Each of these findings lead us to deduce that the introduction of digital software will not hinder an accountant’s workload, but will instead allow more time for advisory tasks, planning, business development and nurture of the client/accountant relationship.
While accountants predict that technology will indeed absorb more traditional accountancy tasks, those such as advisory services and business development will take more time – although accountants foresee advisory to be a critical knowledge area and one with the greatest potential for growth.
A future for change
Participants were asked how their role would evolve over the next ten years. Almost all agreed that they would need to integrate new skills and capabilities into their role, that their firm’s business model would be different in ten years’ time and that they themselves would become more efficient due to technology.
Just over 25 per cent agreed that their firm would outsource more compliance work in 10 years’ time. Some see this as positive – tasks absorbed through technology will ease their workload, whereas others worry that fewer accountants will be needed as a result. One thing all agree on: the world of accountancy will change.
Jon Cooper, co-founder of CooperFaure Accountants, said: “We’re at the start of a pivotal 10 years, with the advances in technology and artificial intelligence only likely to accelerate. It’s a game changer that could cut down the headcount for both accountants and businesses with in-house teams.”
Prepare for the future
So how can the accountant of tomorrow prepare for the future? They must be open to changing core elements of their firm, such as technology, processes and their business model. Keeping clients compliant will continue to be at the heart of their offering, but much of the work to complete these tasks will be automated. More accurate and timely data will provide opportunities to offer more forward-focused services, and could cause accountants to adjust their business model.
Software partnerships will also be key in the digital age. As technology facilitates the digital world, Thomson Reuters is already working on the solutions needed to take accountants through the next 10 years, with the increasing use of real-time data and ever-changing regulatory requirements.
Download the ‘Accountant of Tomorrow’ report HERE
- Thanks to Thomson Reuters for this article, which originally appeared on the ICPA website. You can find us at www.icpa.org.uk, email [email protected], by phone on 0800-074-2896.
FreeAgent launches RBS & NatWest licences for accountants
Cloud accounting group FreeAgent has launched a set of licences for accountants with clients who bank with the Royal Bank of Scotland and NatWest.
The company, whose software is designed for accountants working with small businesses and contractors, will enable practices to add their new clients to FreeAgent for free, provided that they have either an RBS or NatWest business account.
The new licences stem from FreeAgent’s recent acquisition by the RBS Group, which already offers FreeAgent software free to all of its small business customers.
Ed Molyneux, CEO and co-founder of FreeAgent , said: “We’re delighted to be able to now give accountancy practices throughout the country the chance to enjoy the benefits of our RBS and NatWest relationship.
“With more than a million business owners currently banking with these high street banks - approximately a quarter of the UK’s small business sector - this is a significant opportunity for accountants looking to expand and grow their practices.
"But it’s also great news for small business owners looking for additional accounting help and support over the coming years as Making Tax Digital starts to take effect.
“Furthermore, as FreeAgent was recently added to HMRC’s list of software providers that are ready for the introduction of MTD for VAT, it also means that accountants and small business owners banking with RBS and NatWest now have access to a free, MTD-ready solution.
"We envisage that this will prove very popular during the run up to next April, when the first phase of digital tax comes into effect.”
Accountants who are not currently FreeAgent partners can visit www.freeagent.com/accountants or contact FreeAgent directly to get set up with a Practice Dashboard, from which they can start adding their RBS and NatWest clients.