Client errors and SARs: an update
The Anti Money Laundering Compliance Company will be issuing a comprehensive review of suspicious activity reporting.
Here's an extract from the guide, which considers guidance and experience on dealing with client errors.
Suspicious Activity Reports (SARs) lead to a lot of discussion whenever I’m delivering a talk. A key area of debate is correcting client errors. Such errors will pretty much be exclusively to do with tax.
Let’s consider where a client has made an error on a VAT return that is about to be submitted. You spot the error and let the client know that you will correct it or ask them to correct it; it’s then corrected. This is an error that has been corrected before any submission to HMRC, so is no longer an error.
Tax evasion
Reconsider this scenario, when the client refuses to correct the error. Then what? You have seen your client undertake tax evasion, haven’t you? This requires a SAR as there is criminal intent and a proceed of crime.
Perhaps a little more difficult is where a client wishes to correct a historical error. I recently attended an excellent AML training day put on by one of our partners; one of the speakers was a solicitor. From the discussion it was clear that for a criminal offence to occur there must be intent.
In my mind this is a very important point. What if you are considering the intent of a client who has made a historical and often repeated error, such as: “I forgot to declare the income from a rental property”. If we are mindful of our reporting duty and have a suspicion or grounds for suspicion, it must be for us to determine if a non-disclosure was intended or not. In this situation, how can we ever say with certainty that there was no intent?
Sector guidance
This seems like a good point to see what the sector guidance says.
AMLGAS (Anti-Money Laundering Guidance for the Accountancy Sector) explains the following: “6.1.14 – An innocent error or mistake would not normally give rise to criminal proceeds (unless a strict liability offence). If a client is known or believed to have acted in error, they should have the situation explained to them.
"They must then promptly bring their conduct within the law to avoid committing a money laundering offence. Where there is uncertainty because certain legal issues lie outside the competence of the practitioner, the client should be referred to an appropriate specialist or legal professional.”
Innocent mistake
So, if the client makes an innocent error or mistake, then this would not normally give rise to criminal proceedings; this is a useful statement, but we need to delve a bit deeper.
It’s important here to consider whether you have any suspicion or grounds for suspicion that there was an element of intent in the matter discovered.
If you have suspicion that the matter was not an innocent error or mistake, then further thought must be given to a SAR. There would have to be no element of suspicion, or grounds for suspicion of intent for a SAR to not need to be considered, hence the reference in AMLGAS to “known or believed to have acted in error”.
AMLGAS does not seek to distinguish between new and historical errors. For me, the fact that an error has led to an incorrect filing or a filing not taking place that should have been has a risk that that error was intentional. You must decide if it is an innocent mistake (namely was there intent?) and whether proceeds of crime already exist because of the intent.
Money laundering
If proceeds of crime exist then it’s likely that money laundering has already taken place and so reliance on the AMLGAS comments about avoid committing a money laundering offence are not relevant.
My personal view is to consider using a two SAR structure. The first SAR ensures that the matter is reported and that your Porceeds of Crime Act obligations are satisfied. Within the SAR it can be made clear that HMRC are being/or have been informed of the matter and that the client intends to settle any unpaid taxes. A mention that a second report will follow once the matter has been resolved should also be included.
This way, you are doing all that you can to help your client while protecting yourself at the same time.
Once resolved
The matter can then be dealt with in the normal fashion and once resolved a further report is made to confirm that the matter is concluded and that a previous SAR was made along with the first SARs reference number.
You may feel that this reporting of matters, which are to be resolved seems worthless and the National Crime Agency may not wish for these reports, but if you fall into a habit of not making SARs when you are obliged to who’s taking the risk? Your client? No, it’s you!
Our sector has been heavily criticised for not making enough SAR reports and so please don’t let yourself be the scapegoat for the sector.
The final thought on this is that the work that our sector does in correcting errors and mistakes before they are submitted to HMRC are overlooked. You will know how many times in a year you prevent the filing of incorrect figures to HMRC. We should at least get some good press for this.
- This blog is also on the ICPA website. You can find us at HERE.
The backbone of accountancy
Accountancy practices are advisory practices. Not sure? Just ask an accountant for advice and see for yourself.
As Elaine Clark says: “I guess the only fault about compliance accountants is that, generally, they do not shout about how good they are at what they do and the services that they provide. They just do it!”
As I travel around talking to small practice accountants I find them inquisitive, knowledgeable, dynamic, literate and caring.
They use all these qualities for the good of clients, their clients’ families, their clients’ staff, their own staff and their own families, and I think it fair to say the good of the country as a whole.
Quiet majority
We are the quiet majority that actually make the system work for millions of taxpayers – and HMRC and HM Treasury.
We are the backbone of the profession, we deal with the nitty-gritty of the system, we handle the day-to-day interactions and we even take the flak from clients when things go wrong (even though very often what has gone wrong is out of our control).
I’d go so far as to say we are the backbone of HMRC as well, and I’m not exaggerating. Just imagine how much harder their job would be if all the errors they made that we put right had in fact to be resolved by them rather than us.
Heartbeat of the profession
While we are the backbone of the profession, we are also its heartbeat – we feel the pulse of businesses throughout the land, we help make the adjustments that save many from problems, and also help them drive forward their planned growth.
It’s what we do, it’s part of our DNA, and no one who has never been in practice will have experienced the highs and lows that we experience, not just from our own practice but from the businesses and taxpayers that we help.
They can look on from the outside and cheer us along, but they will never feel what we feel, they will never enjoy the successes we have, they will never will develop the bonds with clients and their families that we have.
Twittersphere
Yet the so-called ‘twittersphere’ and ‘blogosphere’ are full of all sorts telling us that compliance is dead and we can only exist as an advisory practice.
This statement alone shows exactly how little they know about what we do and how we do it. It shows their ignorance of the work of thousands of accountants across the UK who work tirelessly and with great professionalism and ability.
They are already advisory practices, but just happen to be advisory practices that don’t use the software or systems that they are trying to sell us.
‘Compliance disparagers’
We are accountants, we are important, we understand our clients. Do the "compliance disparagers", as Elaine calls them, "understand us?
The answer is for me a resounding no – and yet they feel it is perfectly reasonable to tell us what is or is not the future, simply because they give themselves a fancy title like "futurist" or "commentator".
And, of course, because the internet allows for self-publicity on steroids they constantly shout loud and long about how easy accountancy would be “if only…”
Supporting you support your clients
The ICPA supports accountants in practice: our motto is “Supporting you support your clients”. We know how important you are, we know how hard your job is, we know how hard you work and we will never disparage what you do.
We are the backbone of the profession, and while others talk about accountancy we just get on with the job of being the very best accountant we can be.
This is always worth remembering – the naysayers will actually never be that because they are not accountants.
Jargon-busting: speaking the language of your clients
A shift in the accounting industry has caused widespread reverberations. With changes to the typical client offering, and an increase in fintech solutions, today's world of accounting is a far cry from the pencil pushing stereotype.
But what has remained intact is the importance of establishing, and maintaining, good client relationships. Formed on a basis of communication and honesty, these relationships determine the character and reputation of your firm.
In order to have these conversations, it’s necessary to avoid using too much jargon - or overcomplicated language. But how do you avoid it? And how do you listen out for the everyday concerns of your clients?
What is jargon?
Linguistically, jargon can be defined as a sociolect - which means that it’s a language used by a specific class, group, or profession. So, by very definition, accounting “jargon” ostracises those that don’t speak it.
For most accountants and bookkeepers, it’s second nature to use technical language when talking to colleagues or clients. And using acronyms just keeps things moving faster, imho. In a lot of ways, jargon can be a good thing.
But, being aware of the language you use is important, just as it’s important to know your audience.
Feelings of confusion
It’s this language that can lead to feelings of confusion and disillusionment for your clients. This, in turn, can culminate in less engagement with you, your firm, and most importantly with their numbers.
It is the curse of knowledge that can often lead to the use of highly complex language. Terms that are commonplace to you, even particularly simple, can alienate a client. For some, when you use technical terms, you may as well be speaking in tongues.
In the past, maintaining the position as a financial savant was accepted - even encouraged. Clients wanted to know that they were in safe hands with someone that knew what they were talking about - even if they didn’t.
But the world has since moved on. Relationships between accountants and clients are now becoming more balanced and business owners no longer wish to feel distanced from their numbers.
How better communication can help your clients
Having a simple conversation with your client about their business, their finances, and their stresses, can be incredibly illuminating.
Being the trusted adviser means being an active member of your clients' financial team. Spotting corners to cut, and cash-saving skills, are no longer enough in the world of modern accounting.
Instead, accountants must read between the lines for concerns over payroll, making it to the end of the quarter, and everything in between.
Speaking the language of your client can often mean that you understand their concerns before you even lay eyes on their forecasts or projections. It is essential to understand that speaking your clients’ language is a form of data collection that can’t be replicated in any kind of cloud-based app, never mind a spreadsheet.
It’s natural to want to be heard and understood. So make sure that your clients understand everything that’s being said to them. Don’t let miscommunication be your lingua franca.
Float to team up with progressive accounting firms
Float, the cash flow forecasting software for Xero, QuickBooks Online and FreeAgent, is launching a revamped accountancy partnership programme.
It enables firms to provide clients with more insightful advisory services via Float’s real-time cash flow forecasts.
Partners can also access features such as scenario planning to help clients prepare for the future using their financial data.
Business situations
'What if’ scenarios can include a range of possible business situations such as new hires/wages, a lost customer or changes to VAT/tax – this helps Float users plan and budget and make more informed, data-driven decisions for their business
The partner programme is aimed at progressive firms and early adopters of accounting cloud software, which are now looking for new ways to enhance and differentiate their advisory services amid making tax digital.
Float partners will be able to leverage Float as a value-added service to help with day-to-day client services, as well as client acquisition and retention.
Existing users
Float Platinum partners will also be featured on the Float website as a recommended partner, with Float’s existing users increasingly seeking recommendations when searching for cloud-savvy financial advisers.
“MTD will level the playing field for everyone and make digital accounting the new normal” says Colin Hewitt, Float CEO and founder.
“Firms that want to thrive in this environment need to take that extra step and prove they offer better advisory services and can use the latest technologies to solve the most complex challenges facing clients.
Ticks a lot of boxes
"Using only essential cloud accounting platforms is no longer enough - Float instantly ticks a lot of boxes for accountants who want to get noticed by the right kinds of prospective clients.”
“Having spoken with firms to understand their priorities and challenges, we think they will love our partnership programme and the prospect of offering their clients more accurate and less time-consuming cash flow forecasts and scenario planning. After all, what business leader isn’t kept awake at some point by their cash flow challenges?”
“Float is a powerful tool for cash flow forecasting and this programme means we can roll it out to our entire client base hassle free," says Hilary Dyson, cloud accounting senior manager at Anderson Anderson Brown (AAB), one of the first firms to sign up to the Platinum tier of the partnership programme. "
A cash flow forecast should be at the heart of every business report. Giving businesses tools like Float and Xero in addition to ReceiptBank gives our clients’ a real time view of their finances and helps them to make the best decisions.”
As well as discounted licenses (prices start from £7 per client per month) joining the Float partner programme provides firms with:
- 10 Float users per client company
- Unlimited staff logins
- Priority online and telephone support
- 10 ‘what if’ scenarios per client company
- Training sessions for firms to ensure key staff get the most value from Float
- Training webinars and onboarding direct with clients
- Marketing strategy and support
Five point plan for tackling MTD
The Making Tax Digital reforms spearheaded by HMRC begin to come into force next year. They’re designed to help the government lose less cash through erroneous tax return filings. For that reason they rely on software and technology in order to plug the gaps that manual filing can cause. This article will explain how you need to prepare...
Speak to your accountant
The key date to note for Making Tax Digital is April 2019. If your accountant prepares your accounts for you, you’ll need to check with them that they either (ideally) already have HMRC-compliant software in place well before then, or that they plan to shift to a compliant system right away. If you file your own, it may be worth speaking to an accountant anyway if you have any questions as that can put your mind at rest.
Find out your status
Not all firms are going to be affected by the Making Tax Digital reforms at the same time. In fact, some firms are going to be affected earlier, while others will have a longer implementation period at their disposal. However, it is still worth preparing for Making Tax Digital sooner rather than later no matter what your implementation date is: new solutions can take time to get set up, especially given that you’ll need to link them to your pre-existing systems.
Audit your software
Once you know when you’re going to be affected by Making Tax Digital, your next step needs to be to think about your current software setup and whether or not it’s compliant. The worst-case scenario here is that you currently complete your tax returns by hand: if that applies to you, you’ll have to make a substantial shift to digital pretty soon. For those who use Microsoft Excel or another spreadsheet provider, you’ll have to talk to your provider or accountant about integrating this with the HMRC API.
Train your staff
If you have staff on your finance team, they’re going to need to know about Making Tax Digital. While ultimately, responsibility for compliance will still lie with whoever signs off the tax returns within the organisation, staff members should be aware so that they can keep an eye on problems with any new software and flag them as soon as possible.
Prepare for the future
While April 2019 is the key date for those who pay VAT, other taxpayers are also going to have to think about Making Tax Digital. At an unspecified date in the future, payers of income and corporation tax will also be brought into the fold – so thinking ahead is going to be essential.
Making Tax Digital can seem on the face of it like a tough job and an unnecessary intrusion on an already overly long to-do list. However, while there is a long checklist of jobs for people in this space to think about, it’s definitely the case that savvy finance team leaders can take the initiative and prepare well in advance of the April 2019 implementation date.
Worried about Making Tax Digital? The Access MTD resource hub is a great place to find out how it might affect you and what you can do about it.
Big accountancy firms tackle partners over sexual harassment
In a week when Deloitte joined other big accounting firms by admitting they had fired male partners for inappropriate sexual behaviour or bullying, it's worth just taking a look at the following comment.
“You can’t meet someone more junior to you in a bar on a Friday evening after work and assume she or he is attracted to you [and is seeking] a one-night stand. You just can’t do it.
“Some people definitely would have to have that explained to them. So we’ve been very clear on what is acceptable in our firm.”
Fire 20 of its partners
That's Deloitte chief executive David Sproul, amplifying his company's admission to fire 20 of its 1,000 partners over the past five years.
It's staggering. Not the numbers. But the comment itself. And the fact that it had to be made. And, even worse, the fact there are 'people' (And professionals, too!) who have to have that explained to them!
I mean, are we meant to be impressed by this sudden expression of openness and honesty by the Big Four? Really? It's nearly 2019 for goodness sake!
A few more facts
Anyway, rant over. Back to a few more facts on this story...
EY dispatched five UK partners because of inappropriate behaviour, including sexual harassment and bullying. That's out of 681 in the past four years.
Next up was KPMG. Seven of its 635 UK partners left in similar circumstances over that period.
Anti-harassment
Moving on to PwC... five out of 915. And BDO: one out of nearly 200.
Apparently, Deloitte introduced anti-harassment and discrimination training plus helplines a while back. The #MeToo movement on social media has also highlighted misconduct and other tawdry behaviour in business and politics.
Quite why the big accountancy firms have decided to open up on this now, though, is slightly odd.
Maybe the wider business community will follow. Though I wouldn't hold your breath, especially when you add those pesky shareholders into the equation...
Investigate HMRC powers, say UK Lords
With Theresa May's no-confidence vote monopolising the news agenda, it's not surprising that important matters are getting overlooked, ignored or dipping beneath the radar.
While the accounting/tax media homed in on the House of Lords' recent comments about HMRC, it still strikes me that this issue may be edging into the above territory. It's certainly worth revisiting.
In its report titled 'HMRC Powers: Treating Taxpayers Fairly', the economic affairs committee is basically calling for a wholesale review of the UK tax authority. The report concludes that recent powers given to HMRC undermine the rule of law and hinder taxpayers' access to justice.
It's serious stuff.
Widening the role
These are the key findings of the committee...
- The government should consider widening the role of HMRC's Adjudicator or increasing HMRC obligations to respond to and act on Adjudicator recommendations.
- HMRC should urgently review all loan charge cases where the only remaining consideration is the individual's ability to pay, and establish a dedicated helpline to give those affected by the loan charge advice and support. Such action should take place well in advance of the loan charge coming into effect in April 2019.
- The government should withdraw clauses 79 and 80 of the Finance Bill, which would extend HMRC time limits to assess offshore matters to 12 years.
- The government should withdraw its proposal, for which consultation closed in October, to remove oversight of the tax tribunal from HMRC access to information about taxpayers from third parties.
- Penalties associated with General Anti-Abuse Rule and Follower Notices restrict access to justice and should be abolished.
The government should legislate to give the First-tier Tribunal (Tax) the power to conduct judicial reviews. - The Treasury should assess whether HMRC is adequately resourced to fulfil its charter obligations in the next spending peview.
And this is what the committee's chairman Michael Forsyth had to say on the matter. "HMRC is right to tackle tax evasion and aggressive tax avoidance. However, a careful balance must be struck between clamping down and treating taxpayers fairly.
"Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.
Taxpayer safeguards
"Since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.
"Some of these powers disproportionately affect unrepresented and lower income taxpayers. We took some disturbing evidence on the government’s approach to the loan charge.
This is devastating the lives of middle and lower income individuals, from the private and public sector (including the National Health Service) who used disguised remuneration schemes, in many cases being required to do so by their employers.
"The charge is retrospective in its effect, claiming tax from years which should be closed to enquiry. We have included some of the personal accounts submitted to us as written evidence as an appendix to our report.
"Clauses 79 and 80 of this year’s Finance Bill would introduce another disproportionate power. Extending HMRC’s time limits for assessing offshore matters to 12 years would place an unreasonable burden on a disproportionate number of taxpayers, who would be required to retain records for two or three times longer than currently.
"We need to work together to build new principles for the tax system, taking a tough approach to tax avoidance while treating taxpayers fairly. We recommend a new review of HMRC powers, and an independent review to consider new oversight arrangements for HMRC."
Tax accountants lag behind the MTD curve
I'm yet to see survey results that demonstrate the accounting profession is fully supportive of, and prepared for, the digital future. The latest piece of research by Thomson Reuters does little to change that.
UK tax professionals are still unsure how to get ready MTD for VAT.
About 70 per cent of the 146 tax and accounting professionals surveyed said they had developed plans, but not started implementation.
The research also found that 37 per cent will now halt changing policies until HMRC provides updates about the revised October 2019 MTD for VAT deadline for “businesses with complex requirements”.
Records maintenance
About 72 per cent say software and digital records maintenance top their MTD worry list.
Over 60 per cent of accountants still manually track VAT, despite 80 per cent saying they use the HMRC portal to submit VAT returns. That's up from 53 per cent in summer 2018.
According to Thomson Reurters: "Increased use of the portal is positive, but it is clear that finance departments are unsure on the technological and process changes they need to make moving forward."
Quick fix approach
When it comes to storing VAT info, over half of those asked still prefer the spreadsheet! And a third (34 per cent) believe that they will still use Excel to keep digital records relating to VAT post-MTD-implementation.
This would imply that they are considering a “quick fix approach to MTD for VAT”.
Kim Hau, of ONESOURCE Indirect Tax at Thomson Reuters says: “There is a real opportunity for tax accountants to embrace software that does much more than simply file a return.
"By accepting the inevitable move towards digital tax reporting, companies can use the new October 2019 deadline to implement indirect tax compliance software that will bring benefits such as automation, reporting, cost savings and improved compliance.
"It will mean businesses are ready for 2019, 2020 and other future tax changes, rather than taking a quick fix ‘sticking plaster’ approach.”
Thomson Reuters is a provider of news and information-based tools to professionals. Its network of journalists keep customers up to speed on global developments, with a particular focus on legal, regulatory and tax changes. For more information on Thomson Reuters, visit tr.com and for the latest world news, reuters.com.
BTCSoftware launches MTD information hub
Tax software specialists BTCSoftware have launched an MTD information hub - available to all accounting practitioners and bookkeepers.
The hub will have detailed information about the following:
- BTCSoftware MTD for VAT Solutions - BTCHub
- HMRC Announcements – Keeping you updated on the latest developments on MTD for VAT
- Simple to follow guides on signing up your clients/business to the MTD for VAT public pilot
- Guidance on setting up the new Agent Services Account and completing steps involved before you start using software to file MTD VAT returns
In addition to the above, any other information you need to learn about MTD for VAT can be found on our information hub, click here to see more.
“The information hub will give people the opportunity to follow and read more about MTD which is relevant to them and help our customers and support them effectively with their plans,” says Paul Oldridge, business development director of BTCSoftware.
“This new information portal will help people looking at all aspects of Making Tax Digital; it is designed to empower the customer with more direct information about MTD”. Customer focus and innovation in products and service are indeed at the heart of our business model.
MTD public Beta goes live
The launch of the MTD information Hub follows the published announcement by HMRC on MTD private beta going live.
“We are excited as this is significant and relevant to our customers. We have been speaking to them and receiving extremely positive feedback about the way the information we provide to them. BTCSoftware will be announcing further plans in 2019 regarding the BTCHub,” Oldridge concludes.
BTCHub – MTD for VAT made easy software solutions
BTCHub is BTCSoftware’s MTD for VAT solution. For the past two years, the BTCSoftware Team has been working in close partnership with HMRC to ensure Making Tax Digital for VAT (MTD for VAT) is as smooth as possible for its customers. BTCSoftware is delighted to collaborate with HMRC to make MTD for VAT software a reality. The Award-winning software company believes in the importance of working with HMRC find practical solutions to the technical challenges MTD presents.
Following on from its work road-testing the MTD technology, BTCSoftware was delighted to be featured in HMRC’s list of approved MTD for VAT software developers back in July 2018. This recognises that it has satisfactorily;
- tested its products in HMRC’s test environment
- already demonstrated a prototype of its software to HMRC
- proved its software complied with HMRC’s rules and guidelines
For more information
To talk to one of the BTCSoftware team about its MTD for VAT solutions or to book a demo, call 0345 241 5030 or email [email protected] or visit www.btcsoftware.co.uk
Payroll records: keeping your ducks in a row!
You may have heard about the director of a payroll processing company who got into hot water back in September 2018.
Here's a court case that illustrates the importance of getting your ducks in a row when it comes to payroll.
John Hanbury was appointed as director of Crownsbury Ltd. But within six months the company went into administration. The Insolvency Service found that he had failed to ensure the group maintained and delivered adequate payroll and accounting records.
What's the big deal?
There may be some of you out there who are scratching their heads and wondering what the big deal is.
Well, let me explain. Investigators found receipts totalling £7,849 that they were unable to substantiate.
They also found a number of unexplained payments going out of the company account including a receipt of £520,000 on 15 April 2016 that went undetermined.
Also, the receipts totalling £7,849 came from a company of which Hanbury was also a director.
Disqualified for seven years
He was disqualified for seven years. He is :
- unable to act as a director of a company,
- be a recipient of company property, or
- take part, directly or indirectly, in the promotion, formation or management of a limited liability partnership.
This story shows just how important it is to keep proper records and to always practice your business affairs with complete transparency.
Being organised and efficient is not everyone’s forte, and that’s why we at BrightPay have technology that eases the burden for you. Check it out HERE.