Accountancy, Business and Finance News

20 September 2023

Accountants have a major role to play in addressing corruption, which negatively impact on attitudes towards tax in economies across the globe, according to new research.

The latest Public Trust in Tax survey – which questioned 7,700 members of the public across the globe – shows that 53.8% consider corruption a major problem. However, most of those surveyed believe the role of professional accountants contributes to improving tax systems by making them more efficient (59%), more effective (57%), and fairer (55%).

The biennial survey by IFAC was expanded this year to address not only corruption but also the issues of sustainable development and corruption, and how these two interconnect with trust in the tax system.

It found corruption has a significant impact on attitudes towards tax in economies across the globe, with over half of G20 respondents citing it as a major factor.

At the same time, 68% of respondents in G20 countries see at least some connection between tax and sustainable development, and 57% would be prepared to pay more tax to support it.

The results also show that accountants remain the single most trusted stakeholder in tax in every G20 country, as it has been the case in every biennial G20 Public Trust in Tax survey since it began in 2017.

Kevin Dancey, CEO of IFAC, said: “The impact of corruption on trust in tax has been an emerging theme in our recent surveys, particularly in our 2022 Global Perspectives report, which focuses on jurisdictions outside of the G20.

“Now, for the first time, we have specific data on that point, and the results are illuminating. Taken together with the continued trust in professional accountants, and additional new data on views about sustainable development, insight into the important interconnections between these issues is starting to come into view.”

The survey’s key findings show that:

• Trust in key stakeholders has improved in most regions, but there are still significant variations.

• People see tax systems as a mechanism for positive change, but are concerned about corruption.

• People generally think that levels of taxes paid are reasonable.

11 September 2023

The International Accounting Standards Board (IASB) has issued amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates that will require companies to provide additional information in their financial statements when a currency cannot be exchanged into another currency.

The IASB had asked for stakeholder feedback, and found concerns about diversity in practice in accounting for a lack of exchangeability between currencies. The amendments will help companies and investors by addressing a matter not previously covered in the accounting requirements for the effects of changes in foreign exchange rates.

These amendments will require companies to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when it cannot, in determining the exchange rate to use and the disclosures to provide.

Linda Mezon-Hutter, Vice-Chair of the IASB, said: “These amendments fill a gap in our accounting standards. Diverse views on assessing whether a currency can be exchanged into another currency, and the exchange rate to use when it cannot, could lead to material differences in companies’ financial statements. The amendments will improve the usefulness of information provided to investors.”

The amendments will become effective for annual reporting periods beginning on or after 1 January 2025. Early application is permitted.

Further information is available via an IASB webcast

The amendments will be consolidated into IAS 21 and IFRS 1 in March 2024, at which point they will be available for users with a free website registration.

11 September 2023

Small and medium-sized companies in the UK are struggling to pay their tax bills, according to a study carried out by Premium Credit of more than 550,000 SMEs.

Its research found that around 10% of UK’s 5.5 million SMEs say they are struggling to pay what they owe HMRC, although 15% say they have had issues paying them in the past 10 years. The average bill owed was more than £45,600; however, 10% of respondents had problems with bills of more than £100,000.

And their tax problems could be set to get worse, the research found. Around a fifth of SMEs (19%) say affording tax bills has become more difficult because of the cost-of-living crisis and more than a quarter (26%) say it is likely they will struggle to pay one or more tax bills in the next five years.

The two biggest ‘problem’ taxes are Corporation Tax and VAT – more than half (54%) of those surveyed say their issue is with Corporation Tax, while 35% say they have issues with VAT.

Jennie Hill, chief commercial officer, Premium Credit (Specialist Lending) said: “SME finances are inevitably under pressure from the cost-of-living crisis and that has an impact on their ability to meet tax obligations but paying tax bills is a long-standing issue for companies and is certain to remain so.

“Failing to pay bills on time will lead to fines from HMRC so any company which is struggling should consider spreading the cost for up to a year, which for a small fee will help them to pay bills on time and improve cashflow when it is needed.”

11 September 2023

The Financial Conduct Authority (FCA) has warned that an increasing number of scammers are pretending to be the UK’s financial regulator.

The FCA said criminals impersonating it are trying to con people into handing over money or sensitive information, such as bank account PINs and passwords.

Members of the public have reported more than 7,700 instances of this type of scam to the FCA’s contact centre so far in 2023. Reports of this type of scam have more than doubled since 2021, the FCA said.

The watchdog said that a common tactic used by fraudsters was to tell people they were owed compensation, and then ask for bank details or a processing fee to arrange ‘payment’.

The FCA advised that it did not contact people in this way, and that anyone asked for personal information should hang up the phone or ignore the email.

Steve Smart, an executive director of enforcement at the FCA, urged anyone concerned that they had been contacted by a scammer should check the FCA website.

According to the FCA:

· If you’re suspicious about a call, just hang up. You can check to make sure a call is genuine by contacting the FCA on 0800 111 6768

· Check the sender’s email address. If you’re not sure the email is from the FCA, then you should ignore it and contact the FCA directly.

· You should check the spelling and grammar of an email. If it doesn’t look right, ignore the email and report it to the organisation being impersonated or Action Fraud

· Scammers can make an organisation’s switchboard numbers appear in your caller ID. To protect yourself, don’t give out any personal information following an incoming call and don’t call back using the contact details the callers provide.

The FCA said it is increasingly clamping down on the scammers as household budgets are squeezed from the rising cost of living.

It comes after industry group UK Finance found £1.2bn was lost to fraud in the UK in 2022 – equivalent of £2,300 every minute. Frauds involving payment cards is the most common scam.

The FCA said it was working with the government to ban cold calling for all consumer financial services and products. That would mean, for example, a salesperson could not call you to sell you any type of insurance, such as accident or home insurance.

The regulator said it was being contacted about different types of financial scams, such as ‘boiler room’ scams, where fraudsters cold-call investors offering them worthless, overpriced or even non-existent shares or bonds.

Callers to the regulator also reported being offered investment ‘opportunities’ in non-existent digital currencies, or cryptocurrencies, a widely unregulated and high-risk sector.

11 September 2023

Ministers are set to ditch plans to overhaul the UK’s audit regime due to concerns the government won’t have enough time to pass the changes in parliament.

The government has repeatedly pledged to the audit regime market after a series of high-profile accounting scandals, including the collapse of construction giant Carillion in 2018, which happened after auditors signed off its books.

KPMG was fined more than £14 million over misconduct on major work it carried out for Carillion.

In other instances, the UK's regulators issued a £2m fine against Deloitte for its audit of Mitie Group and a £2.3m fine against Grant Thornton over its audit of Patisserie Valerie.

Legislation was due to be introduced this autumn in the King’s Speech, where government lays out its planned legislation for the forthcoming session of parliament, but the plans are set to be dropped, the Financial Times has reported.

A government source told the Financial Times that “wholesale reform” was unlikely but there are “some measures we can take using secondary legislation to implement some of the reforms”.

He added: “We are still keen to do it — the government isn’t backing off — but it’s the usual question of parliamentary time.”

A government spokesperson told City A.M. that ministers remain “committed to improving audit and corporate governance in the UK”.

“Reform is already underway – the Financial Reporting Council has transformed the way it works, is consulting on changes to the Corporate Governance Code, and now has more powers to ban inadequate auditors from reviewing large companies’ accounts,” they added.

Under the planned shake-up, the accounting watchdog the Financial Reporting Council would be replaced with a more powerful regulator called the Audit, Reporting and Governance Authority, or ARGA.

Some 600 private firms would also be classed as “public interest entities”, resulting in tighter regulation under the plans.

Accounting and finance firms are most at risk of missing out on top talent, according to Access Group’s latest Recruitment and Resourcing Index.

The business management software specialist analysed 20 industries including manufacturing, legal, healthcare and logistics to find out which offer the best candidate experiences, and where there is room for improvement.

Accounting and finance finished bottom of the scale with an index score of 109.7, just below the automotive sector (111.5) and construction (112). The best-performing sectors were retail and ecommerce (158.6), home and interiors (155.6) and tech (152).

Commenting on the findings, Julia Harvie-Liddel, head of recruitment at The Access Group said: “In today’s competitive jobs market, organisations cannot afford to risk losing candidates at the final stage because of poor experiences with their website and arduous application forms.

“The good news is that with a few improvements, employers could see a vast improvement in the number of people who complete their application form. Make sure your careers pages or microsite is performing well from a technical perspective. Like customers, candidates will be put off by sites that are slow to load or don’t display properly on a mobile, so ask your digital team to check its Core Web Vitals (CWV). Just as important is updating your website with the latest roles and engaging content – everything from rewards and benefits to company life.”

Access Group’s Index is compiled using different metrics, including user-experience of careers pages, the number of questions on an application form, and whether candidates can apply via LinkedIn or need to send a covering letter. The higher the score, the better the candidate experience.

Self-employed workers will be able to claim tax relief on the daily Ultra Low Emission Zone (Ulez) charge, HMRC has confirmed.

The tax authority said drivers of non-compliant vehicles will be able to claim if their journey was made “exclusively for the purposes of the trade”. The zone has now been expanded from central London to include all boroughs.

“This is a shot in the arm for sole traders, whose businesses will be hit by the Ulez charge,” Craig Beaumont of the Federation of Small Businesses (FSB) told the Financial Times.

HMRC said self-employed workers are able to claim tax relief on their travel expenses, including low emission zone charges, through their self assessment tax return. However, the relief does not apply to travel from home to work or non-business travel costs.

In a statement HMRC said: “Self Assessment customers are entitled to tax relief on travel expenses, including low emission zone charges, if they have been incurred wholly and exclusively for the purposes of the trade.

“When a self-employed individual claims an allowable expense, the amount is deducted fully from their taxable profits.”

Transport for London (TfL) said: “Rules around tax deductible expenses will apply in the usual way to Ulez charges. This is a matter for HMRC but it is likely to depend upon the nature of the operation and circumstances around incurring the charge as to whether it is tax deductible, as is the case for other expenses.”

The same rules apply to all low emission zones across the UK.

UK employers that offer ‘save-as-you-earn’ (SAYE) schemes to employees should develop communication strategies that explain the tax-free bonus employees can benefit from now the initial bonus rate has been set, an expert has said.

The new bonus rates applying to SAYE savings contracts entered into by reference to invitations issued on or after 18 August 2023 were confirmed last month.

An SAYE plan, or Sharesave scheme, offers eligible employees the opportunity to buy shares in their employer (or parent company) on a tax-advantaged basis.

The bonus rate applicable to an SAYE savings contract is fixed by HMRC and is set when the SAYE invitation is issued. Due to very low interest rates, no bonus has been payable on SAYE savings contracts since the end of 2014. However, the position has changed with interest rates rising, and earlier this year HMRC issued new guidance on how the SAYE bonus rate will be calculated – with the new methodology applicable to SAYE invitations issued on or after 18 August.

SAYE expert Lynette Jacobs, of law firm Pinsent Masons, said: “Now that the bonus rates applying to SAYE contracts with invitation dates on or after 18 August have been confirmed, to obtain maximum benefit from the reintroduction of the bonus, companies who are issuing SAYE/Sharesave invitations which will have the benefit of the bonus should ensure that good communication strategies are in place so that employees understand what the bonus is and its positive impact on their SAYE/Sharesave options.”

HMRC is to publish guidance, keeping a record of the Bank of England base rate, SAYE plan bonus rates, and the effective date for any change.

29 August 2023

The government collected £2.6bn in inheritance tax (IHT) between April and July 2023, which was £0.2bn higher than in the same period a year earlier, latest official statistics show.

Figures from HMRC show that receipts in June 2023 were the highest monthly total on record, although recent rises in interest rates would have impacted on this figure, the tax authority said.

HMRC said charges on overdue tax bills following the recent increases in the Bank of England base rate.

Canada Life tax and estate planning specialist Julia Peake said: “With July receipts for inheritance tax up by almost 6% compared with the same time last year, and June the highest monthly total on record, HMRC is on course for a year of record receipts from IHT.

“The OBR has forecasted that IHT will raise £7.2 billion for the Exchequer this financial year. Housing market buoyancy, despite the recent downturn in the market, and tax thresholds being frozen until 2027-28 are driving the record tax take.

“Simple steps families can take include having up-to-date wills in place and using lifetime gifting and trusts. Seeking advice from a regulated financial adviser should be the first important step.”

In July, HMRC revealed that the number of estates pushed into paying inheritance tax surged to 27,000 in the 2020 to 2021 tax year, representing an annual rise of 17%, or 4,000 households.

Fresh data shows a significant increase in IHT payers since the 2009 to 2010 tax year, when just 15,000 families were lumbered with a bill.

The total sum of IHT gobbled up by the government during the 2020 to 2021 tax year reached £5.76billion, while average IHT bills slipped 1%, or £2,000, to £214,000, HMRC’s figures showed.

It said that higher death levels seen across Britain during the Covid-19 pandemic lifted the number of estates forced to pay IHT in the 2020 to 2021 tax year.

It added: “The rise in tax liabilities created is likely due to the rise in the number of overall deaths in the UK in that year, which resulted in a knock-on rise in taxable wealth transfers.

“The number of deaths in the UK rose from 612,000 to 722,000 (18%). This rise in overall UK deaths will have been due, at least in part, to the effects of the Covid-19 pandemic.”

29 August 2023

Generation Z have misconceptions about a career in accountancy that may be preventing them from seeing it as an attainable goal, potentially limiting the talent pool for the profession going forward.

That’s the conclusion of research by Grant Thornton on Generation Z’s view of accountancy as a career. Analysing responses from 2,000 people aged between 16 – 25 in the UK, the study found the top misconceptions are:

· 62% believe you need high grades to become an accountant

· 57% believe you need to go to university to become an accountant

· 57% think training for accountancy qualifications is expensive

· 53% think accountants sit at desks all day

The research also found that two-thirds (65%) of the young people surveyed have never received careers advice about accountancy, possibly explaining their misconceptions.

However, it also found that those attending private schools are 20% more likely to have received careers advice about accountancy than those from comprehensive schools. Private school students are also more likely to know an accountant than those attending comprehensive schools (52% against 43%).

Grant Thornton said social media and online research are the next most popular ways to source information about accountancy for Gen Z. Those from lower socio-economic backgrounds are more likely to find information in this way, they are also less likely to receive advice about the profession from a family member or friend.

The research also found that the school you attended has a significant impact on whether you view accountancy as an attainable career. Private school attendees are 25% more likely to believe that a career in accountancy is attainable than those from comprehensive schools.

And men are 13% more likely to believe that a career in accountancy is attainable than women.

Overall, half of respondents believe that accountancy is an attainable career for them, while one in four (24%) disagreed. Of those who disagreed, a third attributed it to not knowing enough about the profession to consider it for a career.

“There are now so many different routes available for young people considering joining the accountancy profession, whether that is starting on an apprenticeship straight from school, undertaking an internship or placement, or following the traditional graduate route,” said Richard Waite, People and Culture Director at Grant Thornton. “But it’s clear that there remain significant, and detrimental, misconceptions about access to and working in the accountancy profession.

“It’s therefore vital that employers, such as Grant Thornton, take action to help bridge that gap so we do not miss out on attracting the next generation of new and diverse talent to the sector. Employers need to take the time to actively educate young people, to reach out and work with schools in target areas, such as social mobility cold spots, to tackle some of these false barriers and provide much needed advice and insight to those considering the next step in their lives.

“Alongside the engagement and awareness work we currently do with schools and youth charities, this week we’ve launched a myth busting campaign ahead of our 2023 trainee recruitment window which challenges some of the commonly held myths and offers personal stories from our people about their career path in accountancy.”

• Censuswide surveyed 2,000 respondents aged between 16-25 in the UK between 20 – 29 June 2023 on behalf of Grant Thornton.

21 August 2023

It is highly skilled jobs such as finance, medicine and law that are most exposed from AI-driven automation, according to a ground-breaking report from the Organisation for Economic Co-operation and Development (OECD).

The report, ‘OECD Employment Outlook 2023: Artificial Intelligence and the Labour Market’ claims: “Occupations in finance, medicine and legal activities which often require many years of education, and whose core functions rely on accumulated experience to reach decisions, may suddenly find themselves at risk of automation from AI.”

Unlike previous technology innovations AI can automate non-routine tasks. And generative AI has made most progress in areas such as information ordering, memorisation, perceptual speed and deductive reasoning – all of which relate to non-routine, cognitive tasks. And, as a result, the report says it is now the highly-skilled occupations that are exposed.

OECD stressed that AI adoption is still relatively low because many firms, so far, prefer to rely on voluntary workforce adjustments. The available data suggest that the share of firms that have adopted AI remains in the single digits, although large firms are more likely to have done so (approximately one in three). That means any real negative employment effects of AI are a little way off. However, the report said firms do not hide the fact that one of the main motivations to invest in AI is to improve worker performance (productivity) and reduce staff costs.

However, the authors of the study says the world’s major economies are now at a tipping point when it comes to AI.

Hardly surprising then that one in five (20%) workers in finance are extremely worried about job loss in the next 10 years.

Looking for the positives the report says AI can reduce tedious and dangerous tasks, leading to greater worker engagement and physical safety. However, there are risks. By automating simple tasks AI leaves workers with a more intense, higher-paced work environment. AI can also change the way work is monitored or managed, which may increase perceived fairness, but also poses risks to workers’ privacy and autonomy to execute tasks. AI can also introduce or perpetuate biases.

Read OECD Employment Outlook 2023: Artificial Intelligence and the Labour Market

21 August 2023

The latest figures for April to June 2023 show that callers waited even longer on HMRC helplines than they did in the previous quarter.

The latest statistics for April to June 2023 show that the average time for a call to be answered has lengthened to 22 minutes, 70% of callers wait for more than 10 minutes and only 63% of calls are answered.

The percentage of post answered within 15 working days has remained stable. HMRC has been allocated some additional temporary resource to clear old correspondence. However, this is only available until September.

The key performance indicators show:

HMRC’s latest stats show:

· Customer satisfaction for April to June 2023 was 78%; for April 2022 to March 2023 the figure was 79%; the target is 80%.

· Customer correspondence cleared within 15 working days – 74% and 73% (target 80%).

· Telephones: adviser attempts handled – 63% and 71% (target 85%).

· Telephones: average speed of answer – 22 minutes, 16 minutes (no target).

· Telephones: callers waiting for more than 10 minutes – 70% and 63% (no target).

In an effort to encourage taxpayers to use HMRC’s online digital resources, on 9 June HMRC announced the temporary closure of its Self Assessment Helpline for the period 12 June to 4 September 2023.

HMRC said: “Our customer service levels on phones and post haven’t been where we want them to be. We recognise the real difficulties this has caused some customers and agents.

“A range of factors, from the impact of higher inflation on our resources to an increase in customers with more complex tax affairs, are making it harder to meet our service standards using the same approaches that may have worked in the past

“We’re accelerating changes to how we deliver our services. This means reducing demand for our traditional contact channels and moving an ever-increasing number of our customers onto our digital services so that those who are able to, can manage their tax affairs quickly and easily online and get their tax right from the outset, without needing to contact us.”

• Read HMRC’s report

21 August 2023

The proportion of microbusinesses exporting goods and service grew last year to 46%, up from 39% in 2021 (microbusinesses are those with nine or fewer employees).

Research by the Department of Business and Trade also found that four out of 10 SMEs (up to 250 employees) exported last year, while 54% of large businesses with more than 250 employees also sold goods and services overseas.

The survey of 3,000 businesses pointed out that UK businesses faced significant challenges in 2022, including the effects of the pandemic, the Russian invasion of Ukraine, soaring energy costs and spiralling inflation.

However, it also found that Brexit was still the biggest challenge to UK exporters, with the percentage of all businesses saying that they had stopped exporting in the previous 12 months doubling to 14%.

In total, UK firms made £815bn worth of exports in 2022.

Among businesses that had exported in the last 12 months, two-thirds (66%) had experienced ‘significant’ supply chain issues in 2022. This is slightly below 2021 (70%), but still markedly above 2020 (44%), the survey found.

Businesses aiming to grow their business were asked about their growth plans for the next year. Only 3% spontaneously reported improving or refreshing their supply chain as part of their plans.

However, there was also increasing scepticism about the value of free trade agreements, such as plans to join the CPTPP trade bloc, with almost three in five businesses saying they expected these trade deals to have no impact on their business.

CPTPP – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

• See DBT’s National Survey of Registered Businesses

14 August 2023

More than a quarter of UK adults are now using generative AI at work, according to new research from Deloitte. That equates to around four million workers.

The Deloitte survey found just over half (52%) of the population have heard of generative AI, and one in 10 of those surveyed use it at work.

The report revealed a generative AI tool had been used by 26% of respondents, with one in 10 of these using it at least once a day.

The Deloitte survey found that of those who had used generative AI, more than four out of 10 believe it always produces factually correct answers. One of the biggest flaws in generative AI systems so far is that they are prone to producing glaring factual errors.

Tech expert Sjuul van der Leeuw, CEO of Deployteq, said: “These figures underline the fact that generative AI is already playing a crucial role in our daily lives and this trend is set to continue indefinitely. From transforming public services, shaking up traditional business models and turbocharging the creative industries, it will continue to have a major impact on our economic growth.

“However, it’s vital that nobody is left behind, and this means having the right training and governance policies in place so that this technology can be used responsibly.”

14 August 2023

The EU has launched an initiative designed to help SMEs become more sustainable.

Small companies across the bloc will be able to access support from expert advisors, and get help in accessing the finance they need to transform their business through the Sustainable Transition to the Agile and Green Enterprise (STAGE) project.

Led by the Institute of Entrepreneurship Development in Greece, 14 European organisations have come together for this project.

The launch of the initiative is timed to helps SMEs prepare for the EU’s Corporate Sustainability Reporting Directive (CSRD), which comes into effect in 2024. Although it targets companies with more than 250 staff and a turnover of more than €40m, their reporting will require emissions data from their entire supply chain – which includes SME suppliers.

SMEs will have to prove they have the systems in place to collect and communicate environmental data on their products and services in order to remain competitive, with large companies expected to favour those who align with their CSRD obligations.

However, analysis by Engineers Journal on the impact the sustainability legislation will have on SMEs notes a trend that the smaller the company, the less likely they are to audit or monitor carbon emissions. There are a range of factors contributing to this shortfall, and access to finance is one of them.

The report said further exacerbating the issue “is the trend towards sustainable finance, where investment is increasingly tied to environmental, social and governance (ESG) goals. Because SMEs are not obliged to report ESG data and often don’t have the resources or expertise to do so, they are at a disadvantage when it comes to attracting investment in this environment.”

The STAGE programme for successful applicants will comprise three phases. In the first, a self-assessment tool will help SMEs evaluate their performance across a range of social, innovation, governance, environment and economic factors. Advisors will work with SMEs to draw up a sustainability transition plan based on this evaluation.

Phase two is training, which will be available both online and on-site and will be hosted by STAGE partners organisations. Training programmes will be tailored to the business’s sustainability transition plan, though employees of eligible companies will be able to access as many modules as they like.

Having reached phase three, SMEs will be eligible for the STAGE financial grant programme and tailored financial advisory. They can apply for financial support of up to €50,000 to start implementing their sustainability transition plan.

AIA's Chief Executive, Philip Turnbull, added "AIA recognise the power of collective action for a greener future. I urge SMEs to explore the STAGE program at https://stagepartners.eu/call-for-enterprises and take a significant step toward a more sustainable tomorrow."

14 August 2023

The Financial Reporting Council (FRC) has welcomed the UK government’s publication of the draft statutory instrument on corporate reporting, which will strengthen reporting requirements.

The new requirements will introduce:

• An annual Resilience Statement, setting out how a company is managing risk and building or maintaining resilience over the short, medium, and long term.
• A triennial Audit and Assurance Policy Statement, explaining how the company proposes to assure non-financial reporting over the following three years, as well as an annual update on the implementation of the policy.
• An annual statement about distributable profits and the company’s policy on distributions.
• An annual statement on steps taken to prevent and detect material fraud.

The new rules are some way off, however. They are subject to debate and approval by both the House of Commons and Lords, and once approved will come into force from the start of 2025.

Mark Babington, FRC Executive Director of Regulatory Standards, said: “The publication of this draft statutory instrument demonstrates the government’s continued commitment to audit and corporate governance reform. These enhanced reporting requirements will strengthen transparency and accountability in business by providing key information to investors and other stakeholders.

“The new Resilience Statement, in particular, will give valuable insight into how companies are building resilience amidst current economic challenges. We at the FRC welcome these steps to boost the quality of corporate reporting and enhance the UK’s reputation for high reporting standards.”

He said the FRC is developing guidance, informed by stakeholder outreach and a public consultation, to help companies in complying with the new reporting requirements which we expect to publish before the reporting requirements come into effect.

8 August 2023

The European Commission has adopted the European Sustainability Reporting Standards (ESRS) for all companies subject to the Corporate Sustainability Reporting Directive (CSRD).

The standards cover the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights. They provide information for investors to understand the sustainability impact of the companies in which they invest. They also take account of discussions with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) in order to ensure a very high degree of interoperability between EU and global standards and to prevent unnecessary double reporting by companies.

Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said: “The standards we have adopted are ambitious and are an important tool underpinning the EU’s sustainable finance agenda.

“They strike the right balance between limiting the burden on reporting companies while at the same time enabling companies to show the efforts they are making to meet the green deal agenda, and accordingly have access to sustainable finance.”

The reporting requirements will be phased in over time for different companies.

AIA’s Chief Executive, Philip Turnbull, added “The adoption of the European Sustainability Reporting Standards (ESRS) by the European Commission marks a significant step towards enhancing transparency and accountability in the realm of corporate sustainability. This shift is not only in line with the increasing demand for transparent reporting but also reinforces the accountant's role as a strategic advisor in helping companies navigate the intricacies of sustainable finance.”

8 August 2023

More than a quarter (28%) of British small businesses make more money through social media sales channels than from any other channel, including e-commerce and traditional stores.

That’s according to a study by BT, which also found that despite the increasing adoption of social media as a sales tool, 21% of business owners worry that they do not have the digital skills necessary for them to exploit the potential of social platforms.

More than 500 small businesses in the UK were surveyed as part of BT's study into social media strategy, and it found that Meta-owned platforms are crucial for revenue-seeking entrepreneurs. Facebook was cited as the top social media platform for generating sales by nearly a third (30%) of those polled, followed by Instagram (18%), X/Twitter (10%) and TikTok (9%).

The study also found that with a quarter (25%) utilising organic/non-paid social media to raise income and 22% using sponsored social media postings, social media is becoming more and more popular as a means of generating sales.  

However, some business owners expressed feeling overwhelmed and anxious due to the constant changes in advertising regulations, algorithm updates and evolving consumer behaviour.

A significant majority of small business owners (58%) believe they could use some help with their digital abilities, and even more (60%) wish they had received it in school.

Some 21% said they needed guidance on building an online presence and effectively using social media, while 19% wanted more support in understanding cybersecurity, according to the report.

Chris Sims, Managing Director of BT’s Small and Medium Enterprise division, said that over three-quarters (76%) of successful companies rely on internet presence or social media platforms for the majority of their revenues.

Sims added that utilising social media platforms may give small businesses a competitive edge by enabling them to connect with and engage with new audiences.

AIA’s Director of Sales and Marketing, Carl Jepson, commented “The accountancy sector will play a pivotal role in helping small businesses to navigate the challenges of adapting to evolving advertising regulations and algorithm changes. By staying informed about these changes and their financial implications, accountants can contribute to informed decision-making and strategic planning for businesses aiming to maximise their social media-driven revenue.”

8 August 2023

The UK’s financial watchdog has issued further guidance on how companies can ensure their financial promotions comply with the law.

The Financial Conduct Authority (FCA) says it is looking to modernise the information firms should use when promoting financial products and services online or on social media. The FCA is consulting on extending its guidance to reflect the current ways social media is being used to advertise financial services and products.

Lucy Castledine, director of consumer investments at the FCA, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm. We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online. And for those touting products illegally, we will be taking action against you.”

She said the FCA has been ramping up its scrutiny of online, often illegal, financial promotions, focusing on the increase of the use of ‘finfluencers’ – people with public social media platforms who offer advice about money and investment. It has also collaborated with the Advertising Standards Authority to help educate consumers and influencers about the risks involved in promoting financial products.

• New advertising rules for crypto firms marketing to UK consumers will come into force this Autumn. From 8 October 2023, the FCA will ban incentives to invest in crypto, such as ‘refer a friend’ bonuses. Firms must also introduce clear risk warnings and a 24-hour cooling period to give first-time investors the time to consider their investment decision. These measures are similar to the regime in place for other high-risk investments.

8 August 2023

HMRC is seeking views on proposals to reform the tax treatment of Employee Ownership Trusts and Employee Benefit Trusts.

It wants your views on proposals to reform the tax treatment of two types of employee trusts – Employee Ownership Trusts (EOTs) and Employee Benefit Trusts (EBTs).

The tax authority said: “The aim of the consultation is to ensure that the tax regimes for EBTs and EOTs remain focused on the targeted objectives of rewarding employees and encouraging employee ownership, whilst preventing tax advantages being obtained through use of these trusts outside of these intended purposes.

“HMRC welcomes discussions with interested parties. If you would like to meet with policy officials, please email asres.consult@hmrc.gov.uk.”

The consultation closes at 11:45pm on 25 September 2023.

1 August 2023

Some 85% of medium-sized and 75% of small companies in six Asian countries say ESG (environmental, social, and corporate governance) is a high priority for them, but 37% have a plan on how to achieve their goals.

That’s the findings of a new report from Bloomberg Media and DBS bank, called ‘Catalyst of Sustainability’, which is based on a survey conducted in August 2022 involving 800 SMEs in India, China, Hong Kong, Indonesia and Singapore.

On average, Asian companies that considered ESG a high priority allocated 18% of their budget to ESG projects. They expect this to reach 19.8% within the next three years, with most going towards environmental projects.

Although complying with regulations, attracting talent, boosting revenue, pleasing stakeholders and simply doing the right thing were the main motivators for SMEs to embrace ESG, the survey respondents say that unclear reporting standards and financial concerns are the common barriers to ESG adoption.

Over a third of SMEs pointed out challenges around return on investment, cost of deployment and meeting growth targets. The lack of clarity on ESG standards presented another challenge.

Most SMEs prioritised initiatives that might improve their bottom line and those that can be immediately actioned. Currently, they are focusing more on identifying sustainability issues that are affecting their businesses rather than formulating ESG frameworks and long-term strategies that would take years to fulfil.

Yulanda Chung, Head of Sustainability, Institutional Banking Group, DBS, said: “SMEs can start by identifying material ESG elements to focus on and then evaluate whether these elements could improve their bottom line.

“Analysing industry trends and best practices is another important step to take early on. SMEs can use the findings to conduct risk analysis and understand the accompanying consequences if they do not align to industry standards and government guidelines. These exercises can also help them identify opportunities and begin to plan a course of action. Over time, they can turn this into a timebound, actionable and quantifiable roadmap.”

Reporting requirements can hinder the ESG journey for SMEs, which generally do not have the same resources as large corporations to embark on ESG reporting. The lack of a homogenous framework or standardised guidelines also leads to wide inconsistencies in measuring success and performance.

“When it comes to SMEs, we understand the many challenges they face transitioning to more sustainable business models. But given that they are the lifeblood of economies, it is imperative that SMEs successfully make the transition,” said Piyush Gupta, CEO of DBS.

Researchers spoke to 937 decision-makers in industries including real estate, mobility, power, agriculture and hospitality.

AIA’s Sales and Marketing Director, Carl Jepson, said "AIA is dedicated to equipping its members with the necessary skills, knowledge, and tools to foster sustainable business practices. To support this commitment, AIA members can access valuable resources from our climate solutions partner, Net Zero Now, at a discounted member price. This partnership aims to empower AIA members to contribute actively to environmental sustainability and promote the adoption of eco-friendly practices within the accountancy community."

1 August 2023

HMRC is set to collect more information from taxpayers in the coming years, saying this will help it to provide better outcomes for taxpayers and businesses, improve compliance and build a more resilient tax system.

The changes were outlined in draft Finance Bill measures published on 18 July 2023. It is proposed that from 2025/26, employers will be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting.

It says the information does not have to be relevant to the assessment, charge, collection and recovery of income tax in respect of PAYE income. However, it also says the information must be relevant for the purpose of the collection and management of income tax, corporation tax or capital gains tax.

For shareholders in owner-managed businesses, it is proposed that from the 2025/26 tax year they will be required to provide additional information via their self assessment return. The amount of dividend income received from their own companies will have to be reported separately to other dividend income, and the percentage share they hold in their own companies must be stated.

Failure to report this information incur a fixed penalty of £60.

Self-employed individuals will be required to provide information on the start and end dates of their businesses via their self assessment return. This change is expected to apply from tax year 2025/26 onwards and failure to report will trigger a fixed penalty of £60.

AIA's Director of Operations, David Potts, commented "Keeping up to date with evolving tax regulations and guidelines is key for AIA members supporting their clients. As a membership body for professional accountants, AIA represents SMPs and ensures their voices are heard in conversations with HMRC. We encourage members to get in touch if they have issues or concerns with regulatory burdens imposed so we can raise these issues on their behalf."

1 August 2023

More than a quarter of the UK’s working population (26%) have used generative AI at work, according to the findings from Deloitte’s 2023 Digital Consumer Trends research.

Of those that have tried a generative AI tool, almost a third (30%) say that they only used it once or twice, with 28% using it weekly. One in ten (9%) say they use an AI tool at least once a day.

More than two-thirds (70%) of respondents who have used the technology have done so for personal use, while 34% have used it for education purposes. More than half (56%) of 16-19 year olds who have used generative AI technologies in education.

However, Deloitte said that generative AI technology relatively nascent, with user interfaces, regulatory environment, legal status and accuracy still a work in progress.

And of the four million people using it in the workplace, only 23% believe their employer would approve of them using Generative AI.

Global AI and data lead at Deloitte, Costi Perricos, said: “With millions of people using Generative AI tools in the workplace, potentially without permission, it is critical that employers offer appropriate guidelines and guardrails so that their people know how, when and where they can use the technology. Businesses will also need to consider how they communicate their own policies on generative AI to customers and understand how their suppliers are using the technology to ensure transparency. People need to understand the risk and inaccuracies associated with content generated purely from AI, and where possible be informed when content, such as text, images or audio is AI-generated.”

Among all respondents that have heard of generative AI, 64% believe it may reduce the overall number of jobs available in the future. Furthermore, almost half (48%) of those aware of Generative AI believe it may replace some of their role in the workplace.

Perricos added: “In anticipation of generative AI increasingly becoming a fixture of the workplace, organisations should prioritise upskilling their workers to thrive alongside this technology. Generative AI has the potential to not only replace routine tasks but also create higher-skilled, non-routine opportunities across the labour market. A key focus for employers should be on how to use these new tools so that they can be applied correctly and create value. This shift is ongoing and set to continue in the coming decades.”

1 August 2023

The International Accounting Standards Board (IASB) has got a step closer to the drafting of two new IFRS Accounting Standards, concluding its decision-making process.

The first of these forthcoming Accounting Standards is designed to clarify and enhance information companies provide about their financial performance. The other will simplify the financial statements prepared by subsidiaries of listed groups.

It said it expects to issue the new standards in the first half of 2024.

The IASB said: “The first new Accounting Standard will result in companies reporting more consistently and transparently on their financial performance, making it easier for investors to compare companies. It will help to build trust between companies and investors and ultimately ease the flow of capital. The IASB is now satisfied that it has refined its original proposals published in 2019 to reflect stakeholder feedback. This new Standard is the result of the Primary Financial Statements project and will supersede IAS 1 Presentation of Financial Statements.

“The second new Accounting Standard will reduce disclosure requirements for subsidiaries that are not traded on a public market, or holds assets entrusted to them by their customers. This Standard will enable those subsidiaries to prepare full IFRS financial statements locally by using the information reported to their parent company but with reduced disclosures. This new Standard is the result of the Subsidiaries without Public Accountability: Disclosures project.”

The effective date of both new standards will be for annual reporting periods beginning on or after 1 January 2027 to give companies sufficient time to implement the new requirements. Earlier application will be permitted.

24 July 2023

A quarter of research and development (R&D) tax relief pay-outs to small firms has been lost due to fraud and error, HMRC has admitted.

Of the two R&D tax relief schemes it operates, the one for small businesses (SME) was responsible for £1bn, with one in four claims made either in error or fraudulently. The equivalent scheme for larger firms (RDEC) lost £100 million, bringing total losses to the tax authority between 2020 and 2021 to £1.1 billion

It was initially estimated that 5.5% of the total pay-out was lost; however, that figure has been revised upwards to 24.4%.

HMRC said that although the schemes were “a vital driver of innovation”, it admitted that “the levels of non-compliance are clearly unacceptable. We are introducing new measures to address these issues.”

Akshay Thaman, IP Consultant & Policy Lead at advisory firm GovGrant said: “The R&D tax relief schemes were set up to promote growth, through incentivising R&D and it is clear that the current scrutiny is impacting business confidence. For small businesses, the risk of an enquiry process renders the benefit of the scheme redundant as it is too time consuming and costly to defend even when there is clear compliant activity.

“GovGrant has consistently voiced concerns (including to HMRC and the government more generally) that the policy direction and HMRCs approach to enquiries has grave consequences for any small business carrying out compliant R&D and who rely on the tax relief to continue their innovation.”

24 July 2023

Kuwait has become the latest jurisdiction to ban virtually all operations involving cryptocurrencies.

The country’s main financial regulator, the Capital Markets Authority (CMA), issued a statement on the supervision and issuance of virtual assets in the country.

In the statement the CMA confirmed the commitment to “absolute prohibition” on operations involving cryptocurrencies, including payments, investments and mining.

It also bans local regulators from issuing any licenses allowing firms to provide virtual asset services as a commercial business.

Apart from the prohibitions, the CMA also required customers to be cautious and aware of the risks associated with virtual assets. The regulator particularly flagged cryptocurrencies, arguing that they “don’t carry a legal status and are not issued or supported”.

The CMA added: “It is not linked to any asset or issuer, and that the prices of these assets are always driven by speculation that exposes them to a sharp decline.”

Kuwait’s new regulations align with the country’s measures to combat money laundering and terrorist financing, the regulator stated. The CMA also referred to the conclusions of a study by the National Committee for Combating Money Laundering and Financing of Terrorism regarding the commitment to applying recommendation 15 by the Financial Action Task Force. Recommendation 15 concerns the prevention of the the misuse of virtual assets for money laundering and terrorist financing.

According to local reports, the CMA’s crypto restrictions are part of a new inter-departmental crypto ban involving several supervisory authorities in Kuwait. Similar circulars have reportedly been issued by the Central Bank of Kuwait, the Ministry of Commerce and Industry and the Insurance Regulatory Unit.

24 July 2023

Two-thirds (66%) of businesses said they understood what the government’s Investment Zone policy is trying to achieve, with 68% also believing that the introduction of the Zones will help towards the government’s Levelling Up agenda.

Grant Thornton’s latest Business Outlook Tracker survey of 601 mid-sized businesses on the introduction of Investment Zones found a ‘significant number’ of respondents agreed that being located within one of the Zones would help to support the local region.

The factors they cited include job creation and skills development (70%) and being generally beneficial to local businesses (71%). The positive impact of being in a Zone would also encourage many businesses (72%) to stay within the local area.

The survey also found that despite not currently in the running for an Investment Zone, the East of England was the most positive region about the policy. Almost all (94%) believe that being located within a Zone would help to support the area and be beneficial to local businesses (86%).

In contrast, despite being shortlisted for a Zone, only 50% of businesses in the West Midlands were positive about the policy. Just over half (54%) said they understood what the policy is trying to achieve.

Investment Zones provide a number of financial incentives to local businesses in the area, with the survey finding that there were mixed views on whether they have been chosen correctly. Just over two-thirds (68%) believe that these incentives, such as Stamp Duty Land Tax relief and 100% Business Rates relief, have been focused on the right areas to encourage business investment.

Businesses in Liverpool City Region were significantly above the national average, with 80% agreeing they’re focused on the right areas, while other areas also in line for a Zone – West Midlands (60%), East Midlands (62%) and Greater Manchester (66%) – were less convinced and below the national average.

Wayne Butcher, Director, Public Services Advisory, Grant Thornton UK, said: “Our research shows that there is a generally positive view from businesses, at a national level, on the intended purpose and potential benefits of Investment Zones. You would expect that those chosen for a Zone would be relatively positive about the policy, but it’s clear that there is already a good level of engagement nationally from the business community.

“Businesses can clearly see merit in the approach and view Investment Zones as a useful mechanism to unlock further investment and bolster the economy. But it’s also clear that the level of confidence and understanding of the policy differs across the country, and amongst those already in line for a Zone.”

He added: “While still a relatively new initiative, if this mixed level of understanding is not addressed, there is a risk that it could become a barrier to truly maximising the benefits, for the whole nation, of the new Zones.”

24 July 2023

HMRC has launched a consultation on the national implementation of Pillar 2 of the OECD’s international corporate tax framework.

EU member states reached agreement in principle to implement at EU level the minimum taxation component, known as Pillar 2, in 2022. At the time the OECD said: “Effective implementation of the directive will limit the race to the bottom in corporate tax rates.

“The profit of the large multinational and domestic groups or companies with a combined annual turnover of at least €750 million will be taxed at a minimum rate of 15%. The new rules will reduce the risk of tax base erosion and profit shifting and ensure that the largest multinational groups pay the agreed global minimum rate of corporate tax.”

HMRC said it has contacted groups with a UK presence that may be in scope of Pillar 2. It said: “We have provided key information about the new international tax framework and where they can find further guidance.

“We’ll be providing regular updates on Pillar 2 developments to support business with the upcoming change. We’ve set up a new Pillar 2 Compliance team. The team will work with the adviser community, to help us understand any problems groups may have, and what action we can take to overcome them.” The Pillar 2 Compliance team can be contacted at pillar2mailbox@hmrc.gov.uk.

The tax authority added: “We also published draft technical guidance on multinational top-up tax and Domestic top-up tax, following their introduction in the Finance Bill 2022/23. This guidance provides additional information on which groups will be in scope, and how the taxes will be administered and charged. We are encouraging stakeholders to share their comments on the draft manual and any additional material that the manual should cover, for example, specific parts of the legislation that where further guidance would be beneficial.

Stakeholders can provide comments by emailing pillar2.consultation@hmrc.gov.uk and including ‘HMRC guidance manual’ in the subject line. The consultation closes on 12 September 2023.

17 July 2023

Accountancy and finance professionals must be at the forefront of a just transition to a sustainable future, according to recent research.

A new report, ‘Accounting for Social Values’, says all organisations need to transition to a sustainable future that embraces the economic, environmental and social aspects in combination.

Society faces long-term challenges from social injustice, with stakeholders and regulators increasingly focusing on the social implications of the actions of organisations. That is why defining and measuring the return to society by an organisation’s activities is becoming as important as the financial objectives themselves.

The accountancy and finance profession needs to see this as an opportunity to define its future role and put the social agenda at the core of the profession.

17 July 2023

New guidance to help organisations become ‘nature positive’ in helping tackle the growing risks related to biodiversity loss has been issued by the Association of British Insurers (ABI).

It said nature loss exposes businesses to a wide range of risks, which in turn impacts markets and financial performance. Some studies have estimated that half of global GDP ($44trn) is highly to moderately dependent on nature.

ABI director-general Hannah Gurga said: “Nature loss is one of the most crucial issues facing our planet. It’s shocking decline not only threatens life but will harm businesses and prevent economic growth.

“Yet many businesses have not found it easy to assess their reliance on nature, or to recognise its importance to their business strategies. Our guide will enable our members to better understand this issue, the risks and opportunities it poses to them and their customers, so that they are truly ‘nature positive’.”

There has been a 70% drop in global wildlife populations since 1970; in the UK, a quarter of mammals are at risk of extinction, with 84% of rivers in poor ecological health. The UK ranks in the bottom 10% of countries for biodiversity. Drivers for this loss include climate change, changes in land use, pollution and invasive species.

The ABI’s guidance is launched at the association’s third annual Climate Change summit, where progress among ABI members to reaching net zero is assessed.

AIA's Chief Executive, Philip Turnbull commented ''It is encouraging to see organisations like the ABI taking a holistic approach and actively working towards a more sustainable future. Biodiversity loss poses significant risks not only to the environment but also to businesses and the economy as a whole. We encourage our members to recognise the importance of integrating biodiversity considerations into their business strategies.'

Click here to read AIA's sustainability promise.

17 July 2023

A new study from the BSI– formerly the British Standards Institute – has concluded that the drive towards a sustainable world economy is being hampered by women leaving the workforce early.

BSI’s ‘Lifting the Second Glass Ceiling’ report explores why women around the world are leaving the quitting early –not necessarily out of personal preference. It looks at the factors driving this trend and the outlines the potential benefits to individuals, organisations and society as a whole that can be realized if women are supported to remain in the workforce for longer.

The report found that 42% of working women globally agree that it is uncommon to see older women in positions of leadership. It said women leaving the workforce before they have the opportunity to reach senior positions contributes to significant productivity losses, robs organisations of talented people, and removes mentors who can draw on their experience to guide newer members of staff. It said the main reasons for this exodus were caring responsibilities, structural factors and because women felt they weren’t valued by their employer.

It said individuals, organisations and society all stand to gain from reversing this trend. “Ultimately, it is an opportunity to boost growth and innovation and accelerate progress towards a sustainable world,” it said.

It said looking at what is driving women to leave the workforce early can help an organisation uncover solutions that enable more women to thrive. It said: “Women can only access support around menopause or any other factor if it is first available and they are aware of what is on offer. Employers can partner with employees to embed a supportive culture.”

It added: “Small adjustments can make a big impact. Where possible, providing flexibility in how, when and where people work can greatly lessen the stress on those who might otherwise choose to leave the workforce.”

The BSI urged the sharing of best practice. It said: “As with lifting the original glass ceiling, collaboration between organisations and a willingness to share what strategies are working can help accelerate progress to a sustainable world.

“The aim of this report is to reframe the conversation around women in work. Rather than see the considerations facing this group as a challenge, we all stand to gain by lifting the Second Glass Ceiling and seeing this as an investment in current and future generations and a means to ensure diversity.

“Ultimately, it is an opportunity to boost growth, enhance innovation and accelerate progress towards a sustainable world.”

The BSI polled more than 5,000 women on four continents during its research.

17 July 2023

The adoption of Generative Artificial Intelligence (AI) could add 1.2% to UK productivity, according to a new KPMG report. In terms of the 2022 level of GDP, that’s £31 billion additional output in the UK every year.

KPMG’s analysis shows a relatively small but significant overall effect of the technology, which could impact around 2.5% of tasks performed across the UK, allowing workers to be redeployed to other tasks and activities.

The report found that the impact across different occupations is relatively varied; while 10% of jobs may be facing the most significant impact, with more than 5% of their tasks affected, another 60% of jobs could face little to no direct effect from Generative AI.

The wider implications that Generative AI may have on the economy and society are highly uncertain, said KPMG.

“The benefits of generative AI will be huge if we keep people at the centre of our thinking about it,” said Paul Henninger, Head of Connected Technology at KPMG UK.

“Used in a responsible way, it will accelerate our work, saving people and businesses time and money by removing repetitive tasks and bringing data and insights seamlessly into how we make decisions.

“While there are concerns about the impact of generative AI on jobs, it will likely be used as an enabler of our strategies and processes. Roles will change to work with the technology.”

11 July 2023

Just 12% of accountancy and auditing businesses established in the UK in 2022 were started by women, according to research from Instant Offices.

Using Companies House data, the company found that 3,200 firms carrying out ‘accounting and auditing activities’ were registered in 2022, a 15% hike over 2021’s figure. However, only 368 of these firms were registered by women, indicating a year-on-year fall from 22% in 2021 to 12% last year.

The percentage of accounting firms set up by women in 2020 and 2019 was 20% and 21% respectively.

Instant Offices’ research found that in 2022 London, Birmingham, Manchester, Glasgow and Leeds were the most popular cities for accountancy entrepreneurs.

However, recent research found that of the new practices established in the UK in 2022, 29% were launched by women and 71% by men.

AIA's Director of Business Development, Sharon Gorman commented "The findings from Instant Offices' research highlight a concerning trend regarding gender inequality in the amongst accountancy and auditing businesses in the UK.

"AIA makes efforts to address the gender gap and provides support, mentorship and resources to encourage more women to start and succeed in their own accounting and auditing businesses."

Read AIA's diversity and inclusion values here.

11 July 2023

A financial services bill that the government says is “central to its vision to grow the economy and create an open, sustainable, and technologically advanced financial services sector” has been passed in Parliament.

The Financial Services and Markets Act 2023 is designed to bolster the competitiveness of the UK as a global financial centre and delivers better outcomes for consumers and businesses.

The government says it contains new powers that will set the path for reforms to ‘Solvency II’, which it claims will unlock around £100 billion for productive investment and help cultivate innovation and grow the economy.

The Act also introduces new secondary objectives for the Financial Conduct Authority and the Prudential Regulation Authority – to facilitate the growth and international competitiveness of the UK economy. This will be backed up by changes to enhance the scrutiny and accountability of financial regulators, including ensuring regular reporting and a greater focus on cost-benefit analyses.

Economic Secretary to the Treasury, Andrew Griffith, said: “This landmark piece of legislation gives us control of our financial services rulebook, so it supports UK businesses and consumers and drives growth.

“By repealing old EU laws set in Brussels it will unlock billions in investment – cash that can unlock innovation and grow the economy.”

The Act also:

· enhances the scrutiny of the financial services regulators to ensure clear accountability, appropriate democratic input, and transparent oversight.

· removes unnecessary restrictions on wholesale markets – implementing the key outcomes of the Wholesale Markets Review.

· protects free access to cash in law and introduces crucial protections for victims of Authorised Push Payment scams.

· enables the regulation of cryptoassets to support their safe adoption in the UK

· establishes ‘sandboxes’ that can facilitate the use of new technologies such as blockchain in financial markets.

11 July 2023

The biggest Alcohol Duty reforms in 140 years are set come into effect on 1 August 2023, with all alcoholic drinks based on their alcohol by volume (ABV).

This replaces the current alcohol duty system, which consists of four separate taxes covering beer, cider, spirits and wine and fortified wine.

HMRC said it will “make the system fairer and responsive to new products entering the market as consumer tastes evolve”.

Small producers, including pubs and restaurants, will benefit from reduced rates on qualifying products, such as draught beer and cider, the tax authority said.

In a statement HMRC said that the new system reflected the government’s commitment to tax simplification, helping to foster the right conditions for businesses to prosper and the economy to grow.

Jonathan Athow, Director General of Customer Strategy & Tax Design, HMRC, said: “After listening to feedback from industry, economists, consumer organisations, public health groups and many business owners, the new alcohol duty system will be based on the founding principle of taxing alcoholic products by strength, ensuring consistency across the board for the first time.

“The new system will support the government’s public health objectives, encourage product innovation, remove barriers to growth for small businesses, and provide extra support to small producers, pubs and the hospitality sector.”

The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

These reforms will replace and extend the existing Small Brewers Relief with Small Producer Relief. This means that all small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.

To support the hospitality industry there will also be a reduced rate for draught products – known as Draught Relief. This will reduce alcohol duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.

The reforms will mean that every pint in every pub across the UK will pay less duty than their supermarket equivalent, in line with the government’s Brexit Pubs Guarantee.

To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for 18 months from 1 August 2023 until 1 February 2025.

Low strength drinks below 3.5% ABV will be charged at a new lower rate of duty. In making these changes, the government said it aims to encourage product innovation and ensure the Alcohol Duty system works for business and consumers.

More information on the new Alcohol Duty rates and reliefs can be found on GOV.UK.

Those involved in the production of smaller quantities of alcoholic products, can check the reduced rates of duty that apply to them by using the Small Producer Relief calculator.

11 July 2023

The government is consulting on reforms to the UK’s anti-money laundering (AML) and counter-terrorist financing (CTF) supervision regime.

A 2022 review by HM Treasury found structural inconsistencies and weaknesses with the UK’s AML and CTF supervision regime.

The UK government aims to reform the regime to increase its effectiveness and improve co-ordination across the system.

Under the current regime, there are three statutory supervisors: HMRC, the Financial Conduct Authority (FCA); and the Gambling Commission.

There are also 22 professional body supervisors that supervise the legal and accountancy sectors

HM Treasury proposes the following four models:

OPBAS: The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) would be given enhanced powers to increase the effectiveness of supervision by the professional body supervisors. 

This would strengthen OPBAS’s powers without any changes in the number or type of supervisors.

This model would be the most immediately feasible, requiring no structural changes.

Professional body supervisor consolidation: This model would result in the biggest structural changes determining which professional body supervisor would keep supervision capabilities.

Likely outcomes would see either two or six professional body supervisors retaining responsibility for supervision.

There could be either one accountancy sector supervisor and one legal sector supervisor, both with UK-wide remits, or one accountancy sector supervisor and one legal sector supervisor within each jurisdiction (England and Wales, Scotland, and Northern Ireland).

This model would keep the current system in which private bodies supervise firms but reduce inconsistency and complexity by ensuring only the highest performing supervisors remained.

Single professional services supervisor: This model would see a single body supervise all legal and accountancy sector firms.

It may also supervise some or all the wider sectors currently supervised by HMRC.

While the existing professional body supervisors would no longer be responsible for AML/CTF supervision, they could continue to supervise firms for other purposes.

Single anti-money laundering supervision: Under this model, all AML/CTF supervision in the UK would be undertaken by a single public body.

The major difference between this and the last model is the Financial Conduct Authority and Gambling Commission would also stop supervising firms for AML/CTF compliance.

HMRC, the FCA, the GC and professional body supervisors would continue to supervise firms for general regulatory conduct.

The consultation closes on 30 September 2023, with HM Treasury aiming to decide which model to adopt in early 2024.

The Treasury said: "Our preferred method for receiving responses is our secure survey, which is available here

Alternatively, responses can be sent to Anti-MoneyLaunderingBranch@hmtreasury.gov.uk."

11 July 2023

Malaysia’s private sector companies must work together to stamp out corruption and commit to doing business with integrity to improve the business environment across the country.

That’s the view of the Coalition for Business Integrity (CBI), which issued its call to action at a high-level conference held in Penang, which was attended by more than 100 business leaders, executives and government officials. The theme of the conference was to share expert insight and best practices on how to embed business integrity in companies and their supply chains.

At the conference, the Coalition said it applauded the Malaysian government’s commitment to fighting corruption, but added that there was still much work to be done.

“From the ground, we can see that local business operators continue to suffer from the prevalent corrupt culture in both the public and private sectors which has contributed, among other factors, to the rising cost of living and an increasingly unsustainable business environment in some sectors,” said Mark Chay, Chief Executive Officer, Coalition for Business Integrity Berhad.

Chay called on the government and business sector to make a determined, joint effort to tackle corruption.

The CBI’s call to action comes more than three years after the federal government enacted Section 17A of Malaysian Anti-Corruption Commission Act, which came into law in June 2020.

Under this provision, a company can be considered guilty if any of its employees and/or associates give bribes for the benefit of the organisation. Commercial organisations may also be considered guilty whether or not upper management or its representatives knew about the corruption. The only defence for such commercial organisations is to prove that they had “adequate procedures” implemented for preventing corruption.

In support of private sector efforts to tackle corruption, UN Global Compact Network Malaysia and Brunei (UNGCMYB) launched new digital tools and localised resources that corporates and SMEs can access through its eLearning Academy.

The resources include a special course focused on anti-corruption in the Malaysian context that aims to educate companies and their workforces about how they can embed business integrity across their operations and supply chains.

“Understanding industry best practices and how to apply them in the Malaysian business context is critical for companies. We recognise the importance of this topic and have fully subsidised our localised course on anti-corruption to provide a valuable resource to companies working to demonstrate their commitment to fighting corruption and ensuring they operate with business integrity,” said Shanta Helena Dwarkasing, Director of Programmes, UN Global Compact Network Malaysia and Brunei.

To further guide the private sector, the three co-organisers – Coalition for Business Integrity, UN Global Compact Network Malaysia and Brunei, and the Malaysian International Chamber of Commerce and Industry – are jointly developing a whitepaper compiling key insights, challenges and opportunities highlighted at the conference, to be presented to the state government later this year.

4 July 2023

The UN Conference on Trade and Development (UNCTAD) has posted a pessimistic outlook for global trade in 2023, despite a return to growth following a downturn in the second half of 2022.

Over the first three months of 2023, trade in goods went up by 1.9% from the last quarter of 2022, adding about $100bn (£79bn) in value. Global services trade also increased by 2.8%, worth an additional $50bn.

However, UNCTAD’s latest Global Trade Update predicts a slowdown in global trade growth due to persistent inflation, ongoing vulnerabilities in financial markets, the war in Ukraine and wider geopolitical tensions.

Its report said merchandise trade growth has been mixed among the major economies during the last four quarters with Brazil, India, the US and the EU witnessing significant increases in both imports and exports.

All regions saw international trade grow, except for Russia and central Asian economies.

Global trade trends were influenced by the energy sector, where rising prices resulted in higher trade values until an 11% quarterly drop between January and March 2023. Other sectors that experienced trade increases were agri-food prod­ucts, apparel, chemicals and road vehicles.

The report points out that “friend-shoring” has been on the rise since late 2022 – that is countries prioritising trade with others that share similar political values.

It also notes “a decline in diversification of trade partners, implying that global trade has become more concentrated among major trade relationships”.

In the past 18 months, the decoupling of US-China trade interdependence has seen the US become less significant as an export market for China.

UNCTAD’s latest report is slightly at odds with its predictions in March when it said it expected trade to stagnate to about 1% in the first quarter before rallying later in the year.

4 July 2023

The amount of unpaid UK tax remains at an all-time low of 4.8%, according to the latest figures from HMRC.

The annual Measuring Tax Gaps publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid, which has remained the same as last year’s revised estimate of 4.8%.

In absolute figures, the amount of tax lost was £35.8bn – up from £30.8bn in the previous year. The tax gap has remained at 4.8% because estimated tax liabilities rose from £643 billion in 2020 to 2021 to £739 billion in 2021 to 2022.

Jonathan Athow, HMRC’s Director General for Customer Strategy and Tax Design, said: “The tax we collect funds the country’s public services and we want to ensure everyone pays the correct amount. These figures show most taxpayers and businesses pay what they should.

“This important research enables us to better help those making common mistakes or failing to take sufficient care, as well as tackling the minority deliberately hiding their income.”

The report, published annually, show a long-term reduction in the tax gap. Errors, a lack of sufficient care, evasion and criminal attacks all contribute to the tax gap, which has fallen from 7.5% in 2005 to 2006 to 4.8% in 2021 to 2022.

Further findings for the 2021 to 2022 tax gap publication show:

· at 56% (£20.2 billion), small businesses represent the largest proportion of the tax gap by group, followed by criminals, large businesses and mid-sized businesses at 11% each (£4.1 billion, £3.9 billion and £3.8 billion respectively)

· wealthy individuals account for 5% (£1.7 billion) while all other individuals account for the remaining 6% (£2.1 billion) of the overall tax gap

· Income Tax, National Insurance contributions and Capital Gains Tax makes up 35% (£12.7 billion) of the total tax gap when measured by type of tax

· Corporation Tax (CT) is now estimated as the second largest component of the tax gap by tax type at 30% (£10.6 billion). New data has increased our understanding of the CT tax gap, resulting in revised estimates

· the VAT gap continues a long-term downward trend falling from 14.0% (£11.9 billion) in 2005 to 2006 to 5.4% (£7.6 billion)

· failure to take reasonable care (30%), error (15%), evasion (13%), legal interpretation (12%) criminal attacks (11%) and non-payment (9%) are among the main behavioural reasons for the tax gap

4 July 2023

The number of UK firms worried about insolvency has fallen, despite recent figures that show liquidations hit a four-year high in May.

According to research from business advisory firm Evelyn Partners, 32% of UK businesses believe there is a risk they will become insolvent in the next 12 months, down on the 47% of firms that thought there was a risk of collapse in September 2022.

The latest official Insolvency Service figures show a 40% hike in insolvencies year on year, with over 2,500 firms declared insolvent in May. Some 99 per cent of these firms had revenue of less than £1m.

In contrast, the 500 business owners surveyed by Evelyn Partners had revenue of over £5m, pointing to a stronger outlook for medium-sized businesses.

Claire Burden, partner at Evelyn Partners, said “the size of the business is a factor” in explaining the difference. “A lot of the liquidations at the moment are very small and many haven’t been trading for a while,” she said.

The research also found that the number of firms expecting to make redundancies dropped from 52% in September 2022 to 36% in May.

“Emerging out of these challenging months, it is encouraging that business confidence remains stable, and survival prospects have improved as we head into the summer,” Burden said.

However, 29% of firms said they faced difficulties raising funding. Burden said that while funding from traditional banks is available, there were fairly “high hurdles” to accessing funds, particularly for loss-making companies. “Owners are going to alternative sources of funding for working capital funding for example,” she said.

Traditional bank lending will make up just 12% of total capital UK businesses are hoping to raise in the next six months, the research showed.

4 July 2023

HMRC’s interest rates for late payments will be revised following the Bank of England raising interest rates to 5%.

The Bank of England Monetary Policy Committee announced on 22 June to increase the Bank of England base rate to 5% from 4.5%. HMRC interest rates are linked to the Bank of England base rate.

As a consequence of the change in the base rate, the revenue’s interest rates for late payment and repayment will increase.

These changes will come into effect on:

· 3 July 2023 for quarterly instalment payments

· 11 July 2023 for non-quarterly instalments payments

HMRC interest rates are set in legislation and are linked to the Bank of England base rate.

Late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

HMRC said: “The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

“The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.”

4 July 2023

Denmark, Ireland and Switzerland have been named the top three among 64 economies measured for their global competitiveness in the 2023 IMD World Competitiveness Ranking, published by the World Competitiveness Center.

Denmark also won the crown in 2022, while Ireland jumped from 11th to take second place, and Switzerland was third for the second consecutive year.

The World Competitiveness Center – a unit of the International Institute for Management Development (IMD) – said that all three are small economies that make good use of their access to markets and trading partners, as does Singapore, which came fourth.

Making up the top 10 are the Netherlands in fifth spot, followed by Taiwan, Hong Kong, Sweden, the USA and the UAE.

Germany, the UK and France are absent from the top 20, ranking 22nd, 29th and 33rd respectively.

The World Competitiveness Ranking is considered valuable for evaluating contrasting business environments, aiding international investment decision, and assessing the impact of public policies. The report also serves as an indicator of the quality of life in each country.

The IMD World Competitiveness Yearbook, first published in 1989, analyses and benchmarks the competitiveness of 64 countries worldwide using a combination of surveys, statistical data, and trends. It evaluates how countries manage their competencies to achieve long-term value creation.

27 June 2023

Hundreds of UK businesses have been fined a total of £3.2 million for breaching anti-money laundering rules by HMRC.

The 240 supervised businesses were named and shamed by the tax authority, which issued the fines between 1 July and 31 December 2022 for breaching the regulations.

Xpress Money Services Ltd, based in London, was hit with a large fine of £1.4 million for failing to carry out risk assessments, not having appropriate anti-money laundering controls and failing to conduct proper due diligence checks.

In a statement HMRC said its work with other enforcement agencies and government departments to tackle economic crime and crack down on breaches “is working to drive non-compliant firms out of business”. It said that the number of money service businesses has fallen by around a third from 1,508 in 2020 to 1,049 in 2023, and the number of money service business agents has reduced from 35,507 to 30,217 in the same period.

Nick Sharp, HMRC’s Deputy Director of Economic Crime, Fraud Investigation Service, said: “Money laundering is not a victimless crime. We are here to help businesses protect themselves from criminal attacks and will continue to tackle the minority of businesses which do not comply with the Money Laundering Regulations.

“Serious and organised crime costs the UK billions of pounds every year and our anti-money laundering supervision is a vital tool in combatting that.”

AIA's Director of Operations, David Potts commented, "The significant costs associated with serious and organised crime emphasise the importance of effective anti-money laundering measures. It is essential for businesses to comply with regulations and conduct due diligence to protect themselves and contribute to the overall efforts in combatting money laundering and associated criminal activities."

In addition to the named businesses, another 179 companies received smaller fines totalling more than £200,000 for rule breaches.

HMRC supervises tens of thousands of businesses across the UK under Money Laundering Regulations, and helps these firms protect themselves from criminals who seek to launder cash or finance terrorism.

• A full list of the named companies that have received fines or suspensions under these regulations is available at GOV.UK

Stay up to date with the latest AML guidance from AIA here.

27 June 2023

New rules on how crypto-asset firms can advertise their products, including a cooling-off period for first time investors, have been set out by the UK Financial Conduct Authority (FCA).

They will apply to ‘qualifying crypto-assets’ – any cryptographically secured digital representation of value or contractual rights that is transferable and fungible. However, it will exclude crypto-assets that meet the definition of electronic money or an existing controlled investment.

In a new policy statement, the FCA said crypto-asset companies must ensure that potential purchasers have the appropriate knowledge and experience to invest in their products. On top of that, those marketing crypto-assets to UK consumers will have to introduce a 24-hour cooling-off period for first-time investors from 8 October 2023.

Incentives like ‘refer a friend’ and ‘new joiner’ bonuses will be banned under the new rules, which will require crypto-asset firms to include clear risk warnings in their advertisements and promotions, said financial services specialist Jonathan Cavill of Pinsent Masons.

He said: “This approach is part of the FCA’s continued plan to promote good customer outcomes and ensuring that firms do the right thing. The FCA is keen that customers are able to make an informed choice with respect to financial services and products – and this initiative expands that approach to crypto-assets.”

The change comes after the government announced plans to bring crypto-assets within scope of the FCA’s financial promotion regime earlier this year.

The watchdog has also launched a consultation on new guidance to ensure that firms clearly understand the implications of the financial promotion regime’s requirement for crypto-asset marketing. The regulator said it would publish its final rules on crypto-asset promotions once the government has introduced the legislation that will bring crypto-assets within its regulatory perimeter.

Forensic accounting specialist Hinesh Shah, also of Pinsent Masons, said: “The UK FCA’s proposed ban on crypto incentives and the classification of crypto as ‘restricted mass market investments’ will have a significant impact on crypto-assets firms. These companies will need to conduct adequate due diligence and ensure their promotions are fair, clear and not misleading. Firms that fail to comply may face severe penalties, including imprisonment.”

The new rules will be directly relevant to:

• consumers investing, or who are considering investing, in crypto-assets.

• crypto-assets businesses registered with the FCA.

• crypto-assets businesses considering, or in the process of, registering with the FCA.

• overseas crypto-assets firms marketing, or considering marketing, to UK consumers.

• authorised firms considering communicating or approving crypto-assets financial promotions.

• trade bodies for the crypto-assets sector.

• other persons involved in communicating crypto-assets financial promotions to UK consumers.

27 June 2023

More than a third (36%) of accountants are considering leaving the profession in the next five years, including 30% of under 25s, a new survey has found.

Accounting software platform Dext surveyed 250 accountants and bookkeepers across the UK, asking how they could be happier in their roles. When looking at reasons why they are planning to leave the profession, 21% said they are looking to move to have a complete career change.

Of those wanting to leave the profession, 24% are aged 25-44 and are leaving due to a lack of healthy work/life balance; 22% of those with children are looking to leave for the same reason. For the over 55s, while the majority (67%) are leaving due to retirement, 33% are planning to leave the accounting sector to join a new industry.

The good news is that a whopping 90% of respondents enjoy their role, although 56% feel they spend too much time completing manual tasks. When asked what the accountants of the future would value most, the majority believe it is the better adoption of technology.

Sabby Gill, CEO of Dext, said: “Accountants are vital for supporting entrepreneurs and businesses of all sizes, yet many are leaving because of work/life balance issues. Unfortunately too much of an accountant’s role is still completed manually, meaning that they cannot optimise their time as much as they need to.

“Although it is positive that automation is likely to increase in the next ten years, that will be too late for many accountants who are planning to leave the industry long before then. It’s also concerning that many leaving for work/life balance reasons are parents, as a lack of optimised tasks is pushing this demographic from the accounting profession. It simply doesn’t need to be this way.”

When asked why they joined the accountancy profession, most (53%) joined due to opportunities for career progression, followed by an interest in maths and accounting (52%). And 34% joined because it is a well-respected profession.

“While tech adoption in accounting has come a long way, it still has a way to go. Technology and automation must be prioritised in the industry, otherwise the UK risks losing key talent to other industries,” Gill said.

19 June 2023

National financial watchdogs and criminal authorities could get new powers to access organisations’ financial information in an effort to facilitate investigations of financial crime including money laundering.

The European Union presidency and the European Parliament have reached a provisional agreement that would mandate EU member states to make data from centralized bank account registers available through a single access point.

These registers contain information on bank account holders and their respective banks.

The agreement will allow not only financial intelligence units but also national authorities that handle criminal offences to access the data.

“Access to financial information is a crucial instrument to trace and confiscate proceeds of crimes. Thanks to the agreement reached by the Council and the European Parliament, our police authorities will have better access to illegal money flows” said Swedish Minister for Justice, Gunnar Strömmer.

Currently, such information must be collected via regular cross-border cooperation channels, causing delays and inefficiencies.

Additionally, the European Parliament has endorsed the European Council's proposal requiring financial institutions to share transaction records, such as bank statements, in a standardized format when providing them as part of investigations.

The Organised Crime and Corruption Reporting Project (OCCRP) said the proposed measures “stem from an anticipated revision of the EU anti-money laundering directive, which envisions granting law enforcement authorities access to and the ability to search bank account registries through a central access point”.

It added that while the new anti-money laundering directive currently limits access to financial intelligence units, this agreement is necessary to ensure that law enforcement authorities also enjoy the same level of access.

The agreement must now be endorsed by member states before it can be formally adopted by both the Council and the European Parliament. This adoption will coincide with the adoption of other related legislative instruments in the area of anti-money laundering, which are currently undergoing negotiations.

According to Transparency International EU and Global Finance Integrity, the estimated value of transnational corruption worldwide which relies on “techniques to disguise the origins and destinations of illicit financial flows ranges from €1.3 trillion ($1.39 trillion) to €1.8 trillion ($1.93 trillion) annually”.

AIA's Director of Operations, David Potts, commented “Intelligence and information sharing are key to cracking down on economic crime and it is encouraging to see the European Parliament and EU presidency constructively addressing limitations in the current AML directive.”

Visit AIA's AML Insights page to stay up-to-date with the latest guidance.

19 June 2023

Taxpayers now have until 5 April 2025 to fill gaps in their National Insurance record from April 2006 that may increase their state pension – an extension of nearly two years – the government has announced.

HMRC said that extending the voluntary National Insurance contributions deadline until 2025 means that “people have more time to properly consider whether paying voluntary contributions is right for them and ensures no one need miss out on the possibility of boosting their pension entitlements”.

The original deadline was extended to 31 July 2023, with the tax authority saying tens of thousands of people have taken advantage to pay voluntary contributions.

Victoria Atkins, Financial Secretary to the Treasury, said: “People who have worked hard all their lives deserve to receive their state pension entitlement, and filling gaps in National Insurance records can make a real difference.

“With the deadline extended, there is no immediate rush for people to complete gaps in their record and they will have more time to spread the cost.”

The extension means that taxpayers have a longer period to enable them to afford to fill any gaps if they choose to do so. All relevant voluntary NICs will be accepted at the rates applicable in 2022 to 2023 until 5 April 2025.

Other people who may benefit include those who may have been:

• employed but with low earnings.

• unemployed and not claiming benefits.

• self-employed who did not pay contributions because of small profits.

• living or working outside of the UK.

However, HMRC is warning that paying voluntary contributions does not always increase an individual’s state Pension. Before starting the process, those eligible with gaps in their National Insurance record from April 2006 onwards should check whether they would benefit from filling those gaps.

It said: “They can find out how to check their National Insurance record, obtain a State Pension forecast, decide if making a voluntary National Insurance contribution is worthwhile for them and their pension, and how to make a payment on GOV.UK.

“Taxpayers can check their National Insurance record through their Personal Tax Account.”

19 June 2023

HMRC’s digital tax transformation plan failed to properly factor in the upfront costs to millions of taxpayers and will cost about £1bn more than originally budgets for, according to the National Audit Office (NAO).

The scheme is set to cost £1.3bn – five times more than originally forecast when it was first announced in 2016 in real terms, the NAO said in its new Progress with Making Tax Digital report.

The tax authority omitted significant costs to customers from key business case documents which seek approval for further funding, the report said.

The programme was designed to digitise HMRC’s systems for VAT, income tax self assessment and corporation tax, requiring businesses to keep and submit quarterly digital tax records.

In May 2022, HMRC forecast total net ongoing costs to taxpayers of about £900m over five years to comply with the Making Tax Digital (MTD) policy.

However, the cost of obtaining tax advice and the cost of customers updating their own systems were missed out. It excluded significant upfront costs of £1.5bn to VAT and self assessment customers from the business case’s cost-benefit analysis, the report said.

“If the analysis had been done properly, it would have shown that the combined cost to the government and to customers of proceeding with MTD for self assessment would have exceeded the forecast additional tax revenue,” the NAO said. “Its March 2023 business case omitted upfront costs to customers entirely.”

Gareth Davies, head of the NAO, said: “HMRC’s plan to digitalise the tax system has the potential to improve the system’s efficiency and effectiveness. It has made some recent progress on VAT but it has not yet tackled the most complex elements of the programme and significant delivery risks remain.”

19 June 2023

VAT-registered businesses that owe less than £20,000 of VAT can now set up an online time to pay agreement, also known as a payment plan.

Companies have to fulfil certain criteria before they can do so, as mandated by the tax authority. A VAT-registered business can set up its VAT payment plan if it:

· has filed its latest VAT return.

· owes £20,000 or less.

· is within 28 days of the payment deadline.

· does not have any other payment plans or debts with HMRC.

· plans to pay off its debt within the next six months.

Some businesses are not eligible to use the online service. This includes those that use the VAT cash accounting or annual accounting schemes. Businesses that make VAT payments on account also cannot set up a payment plan online.

Businesses not eligible to use the self-serve time to pay service should contact HMRC if they need to agree a time to pay arrangement.

19 June 2023

Denmark is the safest country in the world based on 15 measures of economic, risk quality and supply chain resilience, according to FM Global’s new Global Resilience Index.

The UK ranks in 13th place in the index, the same position it held in 2022. The top 10 countries/territories for 2023 are:

1. Denmark

2. Singapore

3. Luxembourg

4. Germany

5. Switzerland

6. United States Region 3 (Central)

7. United States Region 1 (East)

8. Sweden

9. Finland

10. Austria

The least resilient three were Ethiopia (128th place), Venezuela (129) and Haiti (130).

The most improved country was the Dominican Republic, which rose from 99th to 95th based on a higher climate risk quality ranking in this year’s index. The biggest faller was Lebanon, which dropped from 101st to 106th.

“Objective data should support most major business decisions, and in the Resilience Index we’ve aggregated salient data to help companies build resilience for decades to come,” said Pentti Tofte, staff senior vice-president, data analytics, FM Global. “When potential disruptions loom, a resilient company can mitigate losses of revenue, market share and growth – losses that may have been unrecoverable.”

The 2023 FM Global Resilience Index is a data-driven tool that provides businesses with a means for understanding the resilience of a country’s economic environment.

It informs them of:

• A country’s vulnerability to disruptive events and its ability to recover swiftly.

• Fifteen key drivers of resilience, such as a changing climate, political risk and control of corruption.

• Risk evaluations of owned locations, critical dependencies within supply chains, aspirations for future expansion and acquisition/divestment due diligence.

• Environmental, Social and Governance (ESG) values.

14 June 2023

The International Accounting Standards Board (IASB) has issued amendments to IAS 12 Income Taxes. The amendments give companies temporary relief from accounting for deferred taxes arising from the Organisation for Economic Co-operation and Development’s (OECD) international tax reforms. 

The OECD published the Pillar Two model rules in December 2021 to ensure that large multinational companies would be subject to a minimum 15% tax rate. More than 135 countries and jurisdictions representing more than 90% of global GDP have agreed to the Pillar Two model rules. 

The IASB has taken urgent action to respond to stakeholders’ concerns about the uncertainty over the accounting for deferred taxes arising from the implementation of the rules. 

The amendments will introduce: 

• a temporary exception to the accounting for deferred taxes arising from jurisdictions implementing the global tax rules. This will help to ensure consistency in the financial statements while easing into the implementation of the rules; and
• targeted disclosure requirements, to help investors better understand a company’s exposure to income taxes arising from the reform, particularly before legislation implementing the rules is in effect.

Companies can benefit from the temporary exception immediately but are required to provide the disclosures to investors for annual reporting periods beginning on or after 1 January 2023. 

Andreas Barckow, Chair of the IASB, said: “These amendments respond to stakeholder feedback and will ensure that companies are supported during the implementation of the OECD’s rules, while enhancing the financial information provided to investors about how these companies are affected by the international tax reform. 

“We are monitoring developments as jurisdictions implement the Pillar Two model rules. A future maintenance project has been added to the pipeline in which we will revisit the temporary exception and related disclosures.” 

14 June 2023

The professional accountancy bodies will come under greater scrutiny from the Financial Reporting Council, in the form of the newly-created Professional Body Supervision (PBS) team.

The FRC has restructured its old Professional Oversight Team and renamed it the PBS. It said the changes will enable FRC to “prepare for the additional powers that will be established by ARGA to enhance the way it oversees the accountancy profession”.

FRC has appointed a new Deputy Director, Dhruve Shah, to support the PBS. He joins from the National Audit Office, where he has served as key audit partner for the audits of a range of government departments, charities and international intergovernmental organisations. Shah will oversee the five teams within PBS, which are:

· Supervision of Professional Bodies.

· Supervisory Functions.

· Qualification & Learning.

· Quality Assurance & International.

· Operational Assurance.

14 June 2023

New guidance to help accountants and finance professionals deliver robust greenhouse gas (GHG) reporting has been released by the International Federation of Accountants (IFAC) and We Mean Business Coalition (WMBC), in partnership with Accounting for Sustainability (A4S), Global Accounting Alliance (GAA) and World Business Council for Sustainable Development (WBCSD).

The first part of the guidance, ‘8 Steps to Enhance GHG Reporting: A Roadmap for Accounting and Finance Professionals’, provides finance and accounting professionals with a roadmap to engage with others across their business to prepare for GHG emissions reporting requirements aligned to financial reporting processes. The second, ‘GHG Reporting Building Blocks for Accountants’, equips accountants with the technical guidance necessary to collect and enhance the quality of data related to all scopes of GHG emissions at individual entity and group levels.

IFAC CEO Kevin Dancey said: “The release of this guidance is a significant step towards enabling professionals to prepare for the increasing demand for investor-grade climate reporting by aligning GHG emissions accounting with financial accounting.”

14 June 2023

Financial institutions with operations in the UAE will soon have to comply with new anti-money laundering (AML) requirements set out by the Central Bank of UAE (CBUAE), relating to virtual assets and virtual asset service providers.

The CBUAE’s guidance for licensed financial institutions on risks related to virtual assets (VAs) and virtual asset service providers (VASPs) come into effect in July 2023. It focuses on risks around money laundering and countering the financing of terrorism (CFT).

Financial services expert Barkha Doshi, of law firm Pinsent Masons, said: “The new guidance will apply to all licensed financial institutions and will assist them in understanding the effective implementation of their AML/CFT obligations.

“The guidance also takes the Financial Action Task Force standards into account and discusses the risks arising from dealing with virtual assets and virtual asset service providers, setting out clear descriptions of VAs, VASPs, and VASP business models,” she added.

She said the guidance provides details on the potential threats and risks related to VAs and VASPs and the relevant laws regulating them, including the Securities and Commodities Authority’s recently introduced regulations governing virtual assets.

“It also identifies the existence of professional money laundering schemes that allow criminals to cash out proceeds generated in virtual currency via illicit online markets,” said Doshi.

The UAE central bank’s guidance also emphasised that cryptocurrencies, the most common form of virtual assets, are most vulnerable to abuse because they are decentralised and anonymous.

Doshi said that in addition to helping financial institutions understand the threats and vulnerabilities related to VAs and VASPs, “the guidance, more importantly, suggests steps that they should take to mitigate the risks when dealing with them”.

14 June 2023

HMRC has closed its self assessment helpline – 0300 200 3310  – until 4 September 2023, with callers being redirected to its online services, including digital assistant and webchat. 

Restrictions on the agent dedicated line (ADL) were removed from 5 June, and agents can now have self assessment queries answered on that line.  

Taxpayers can check online whether they need to complete a self assessment tax return. Taxpayers who need to register for self assessment should follow the online guidance. 

Those requiring self assessment paper forms can obtain these from the self assessment forms orderline. That page currently states “HMRC does not supply blank tax return forms to agents.” However, the Tax Faculty understands that in practice HMRC will issue up to 10 forms to agents.

Speaking recently to a Parliamentary committee, HMRC CEO Jim Harra said: “Our existing resource levels will not enable us to handle current forecast demand – which is set to increase significantly – for our phone and post services in line with our service standards.” 

5 June 2023

A new initiative to help smaller firms improve the quality of their audits has been launched by the Financial Reporting Council (FRC).

Targeted at firms operating in the Public Interest Entity (PIE) market, Scalebox aims to promote competition and choice and support the FRC’s regulatory role.

The FRC said it “recognises that smaller firms, or those new to the PIE market, often face challenges in meeting regulatory expectations. The Scalebox will support firms in developing and maintaining audit quality as they grow or start out in the PIE audit market. It will also provide valuable insights from the FRC for firms that may come within the FRC’s scope for the first time.”

It said the Scalebox will be overseen by an independent team within the FRC’s Audit Firm Supervision (AFS) department.

The FRC said that the types of activities that the Scalebox may undertake include:

• a review of aspects of completed audits to provide feedback on good practice and areas for improvement.

• a review of a particular element of a firm’s system of quality control, including specific areas of audit methodology and audit approach.

• a review of a firm’s actual or proposed governance processes if it has chosen or is planning to adopt the Audit Firm Governance Code

All firms currently in Tier 2 and Tier 3 for FRC Supervision purposes are eligible to join the Scalebox as well as firms intending to enter the PIE audit market.

The FRC's Deputy Chief Executive and Executive Director of Supervision, Sarah Rapson, said: “Today’s unveiling of the Scalebox means the FRC has another tool to use in our role as an improvement regulator and to promote competition and choice in the audit market.

“Through this approach to working with these firms, we hope to increase their audit capabilities and capacity as they enter the PIE audit market which will, over time, increase competition while maintaining high standards of audit quality.”

5 June 2023

The Bank of England’s will fail to meet its inflation target for the next three years, prompting more interest rate rises and tipping the UK into recession, according to researchers at Goldman Sachs.

The Wall Street bank has raised its forecasts for inflation over the next few years after Office for National Statistics’ (ONS) figures showed inflation at 7.8%, higher than expected.

Goldman Sachs is predicting that headline inflation, measured by the consumer price index, will still be above 2% by 2026. It said by the end of this year, CPI will be running at 4.7% and 3.2% by Christmas 2024.

And core inflation could stay much higher than previously thought, at 6%, in six months, it said.

The US banking giant said that the Bank of England’s 12 successive interest rate hikes are failing to tame inflation. It also said strong wage growth caused by workers demanding pay rises to offset soaring living costs threatens to keep inflation elevated.

“We expect services inflation to stay elevated for longer, however, largely because we remain concerned about wage growth not cooling sufficiently and sustainably over the medium term,” Goldman Sachs said.

“Commodity and energy prices have declined, and this has been accompanied by a meaningful moderation in input PPI, suggesting that food CPI inflation should moderate going forward,” it added.

Recently, the UK Chancellor Jeremy Hunt said he is comfortable with the Bank of England tipping the UK into recession if it gets inflation down to 2%.

Britain’s inflation rate is the highest in the G7. The Bank of England’s peers, the Federal Reserve and European Central Bank, are expected to be nearing or at the end of their tightening cycles due to inflation in the US and Europe cooling over the past 12 months.

5 June 2023

The International Accounting Standards Board (IASB) has published ‘Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)’ to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

The amendments include:

• Do not define supplier finance arrangements. Instead, the amendments describe the characteristics of an arrangement for which an entity is required to provide the information. The amendments note that arrangements that are solely credit enhancements for the entity or instruments used by the entity to settle directly with a supplier the amounts owed are not supplier finance arrangements.
• Add two disclosure objectives. Entities will have to disclose in the notes information that enables users of financial statements:
• to assess how supplier finance arrangements affect an entity’s liabilities and cash flows; and
• to understand the effect of supplier finance arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it.
• Complement current requirements in IFRSs by adding to IAS 7 additional disclosure requirements about:
• the terms and conditions of the supplier finance arrangements;
• for the arrangements, as at the beginning and end of the reporting period:
• a) the carrying amounts of financial liabilities that are part of the arrangement and the associated line item presented;
• b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
• c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a) and comparable trade payables that are not part of a supplier finance arrangement; and
• the type and effect of non-cash changes in the carrying amounts of the financial liabilities that are part of the arrangement.

The IASB decided that, in most cases, aggregated information about an entity’s supplier finance arrangements will satisfy the information needs of users of financial statements.

An entity applies the amendments to IAS 7 for annual reporting periods beginning on or after 1 January 2024 (with earlier application permitted) and the amendments to IFRS 7 when it applies the amendments to IAS 7.

There is a certain amount of transition relief provided, including relief regarding comparative information and interim period information.

5 June 2023

Invoice and ‘CEO’ impersonation scams are the top financial frauds businesses face, according to a new report by financial services sector trade body UK Finance.

Its annual fraud report it said that businesses continue to encounter a high level of these types of fraud, even though the number of financial fraud cases and total value of losses both fell in 2022 compared with 2021.

Financial crime investigation expert Hinesh Shah, of the law firm Pinsent Masons, said the report is a reminder that companies need to have robust fraud prevention measures in place.

“The report shows that, over the last year, businesses remain a prime target for scammers in invoice and CEO fraud, with losses totalling millions of pounds and growing year on year. This highlights the importance of implementing robust fraud prevention measures, such as multi-factor authentication and staff training, to protect against increasingly complex forms of fraudulent activity,” he said.

According to the report, in 2022 there were 6,729 cases in which businesses fell victim to an authorised push payment (APP) scam, where a criminal typically tricks individuals and businesses through deception and impersonation into sending money directly to an account controlled by the criminal. Although the case number declined slightly by 4% compared with 7,032 cases recorded in 2021, the value of payments identified as fraudulent stayed the same, at around £77 million.

He said: “The most frequent types of APP fraud in a business context are invoice and mandate fraud and CEO fraud. Around 44.8%, or £34.5m, of the fraudulent payments were due to invoice and mandate scams, such as when fraudsters target businesses by posing as suppliers and claiming that the payment bank account details have changed.”

Another 16.8% of the £77m total was a result of CEO fraud, where a scammer impersonates the CEO or other senior manager to order individuals – typically within the finance department or secretaries – to make a payment to the scammer’s account. The total value of CEO scams increased by 11% from £11.6m in 2021 to £12.9m in 2022, but the total number of cases dipped by 4%, from 396 to 382.

“Businesses must ensure they have adequate security measures in place to protect their sensitive financial information and transactions, including regular software updates and strong password policies. Additionally, it is recommended to adopt additional validation checks to verify the identity of users,” said Shah.

The report showed an overall fall in financial fraud. The total amount stolen through fraud in 2022 was £1.2 billion, an 8% reduction from 2021. The total number of confirmed fraud cases fell by 4% to 2.99 million in 2022.

30 May 2023

The cost-of-living crisis has prompted an increase of almost 25% in the number of calls from workers to employee helplines asking for mental health support.

Analysis of calls to insurer Zurich’s employee assistance programme (EAP), which provides support to employees of its corporate customers, showed a 22% increase in helpline calls from workers struggling with their mental health in the 12 months to March 2023.

The company said it witnessed a 22% increase in callers suffering from anxiety, a 20% increase in workers struggling with low mood, and a 32% rise in callers suffering from depression.

It also found that more than double the number of employees called Zurich’s EAP with financial worries in the year to March than in the previous 12 months.

The figures come after The Office for National Statistics (ONS) said in April that roughly 185.6 million working days were lost owing to sickness or injury in 2022, the highest since records began in 1995.

Nick Homer, head of group risk at Zurich UK, said: “Mental health struggles are a key contributor to workplace absence and it’s clear from these figures that financial pressures are contributing greatly to peoples’ worries.

“At a time when more people are unable to work through illness than at any time this century, it is in employers’ interest to offer proactive and preventative care to their employees who may be struggling. Early identification can lead to swifter intervention, in turn increasing the chance of the employee making a successful return to work.”

30 May 2023

One in five taxpayers will be paying tax at the 40% rate by 2027 as thresholds freezes bite, according to a report from the Institute for Fiscal Studies (IFS).

It said that 2027–28 the number of people paying income tax at the higher rate or above will reach 7.8 million – almost four times the number of adults paying the higher rates since the early 1990s.

The analysis by researchers at IFS found that while in the 1990s essentially no nurses and just one in 16 teachers paid higher-rate tax, by 2027–28 more than one in eight nurses and one in four teachers are set to be higher-rate taxpayers.

The six-year freeze to income tax allowances and thresholds which started in April last year is set to become the single biggest tax-raising measure for decades.

Other IFS findings include:

· In 1991–92, 3.5% of UK adults (1.6 million) paid the 40% higher rate of income tax. By 2022–23, 11% (6.1 million) were paying higher rates, with that figure set to reach 14% (7.8 million) by 2027–28.

· Of that 14%, 3.1% of adults (1.7 million) will face marginal tax rates of either 45% or 60%. (The 60% rate kicks in at £100,000 and the 45% rate at £125,140.) That’s almost as large a share as paid the 40% higher rate at the start of the 1990s.

· That means that for the 40% rate to impact the same fraction of people as it did in 1991, the higher-rate threshold would need to be nearly £100,000 in 2027–28 – almost double its actual level of £50,270.

Isaac Delestre, Research Economist at IFS, said: “For income tax, the story of the last 30 years has been one of higher-rate tax going from being something reserved for only the very richest, to something that a much larger proportion of adults can expect to encounter. Alongside the fact that 1.7 million people will be paying marginal rates of 60% and 45% in the next few years, this represents a fundamental and profound change to the nature and structure of our income tax system.

“The freeze to thresholds is supercharging that process, pulling an additional 2.5 million more people into paying rates of 40% or more by 2027–28. Whether or not the scope of these higher rates should be expanded is a political choice as much as an economic one, but achieving it with a freeze leaves the income tax system hostage to the vagaries of inflation – the higher inflation turns out to be, the bigger impact the freeze will have.”

30 May 2023

Following last year’s consultation, called ‘Raising standards in tax advice: protecting customers claiming tax repayments’, the government announced a number of measures to improve transparency in the repayment agent market and protect customers.

This included the introduction of a new requirement for repayment agents to register with HMRC.

Subsequently, the government will now require paid agents to register with HMRC via the agent services account (ASA) if they want to continue to submit claims for income tax repayments. Agents will be given a three-month window to register with HMRC, which started on 2 May 2023.

HMRC said: “Agents that are already registered on the ASA do not need to re-register. Non-paid, pro bono organisations and individuals not charging fees will also not be required to register.

“Additionally, those who submit repayment claims as part of wider Self Assessment services for their clients and who already have an agent code do not need to register on ASA.” Click here to check if you need an agent services account.

19 May 2023

The Indian government has expanded the scope of its money laundering laws to include individuals representing a company or acting as a director, including their accountants.

The amendments to the Prevention of Money Laundering Act, which apply to chartered accountants, company secretaries and cost and work accountants, requires them to keep records of all financial transactions they undertake for clients.

The new rules covers all individuals helping in the formation of a company, including those acting as a director, secretary or proxy nominee director. And it also includes individuals who provide the company with an office or correspondence address or act as a trustee.

“The scope [of the money laundering regulations] has been widened to include every person representing another person for certain activities,” said Rajat Mohan, a partner at tax consultancy firm AMRG & Associates. This will make the law stricter, he said.

The move is part of India’s attempt to crackdown on the proceeds of crime and comes ahead of a regular assessment of India’s anti money laundering (AML) governance by the Financial Action Task Force (FATF) later this year.

However, some accountants have voiced concerns about the new anti-money laundering regulations, according to a report in the Economic Times.

Amit Maheshwari, tax partner at AKM Global, said that “a few unfortunate incidents have brought services like company formation by these professionals under the Prevention of Money Laundering Act (PMLA)”.

He said: “The Act is a highly stringent piece of legislation, and complying with its regulations necessitates a significant amount of effort and diligence. Such measures are unnecessary as these professionals are already regulated by professional bodies established under various Acts of Parliament.”

Accountants have been added to a list that also includes people involved in gaming activities, registration authorities, real estate agents and dealers in precious metals and stones.

19 May 2023

A new publication from the International Federation of Accountants (IFAC) is now available to help professional accountancy organisations (PAO) take leading roles in the anti-corruption fight in their jurisdictions.

IFAC said its ‘Global Fight, Local Actions: Anti-Corruption Advocacy Workbook for PAOs’ equips “PAOs and accountancy professionals with the background and framework to craft bespoke approaches and messages that best fit their jurisdiction and needs”.

It said ‘Global Fight, Local Actions’ was used to facilitate discussion at the annual Pan African Federation of Accountants PAO Leadership Forum as part of a workshop on anti-money laundering and the Financial Action Task Force (FATF) ‘Grey List’.

“PAOs and the accountancy profession are essential stakeholders at the centre of the fight against corruption, in every jurisdiction, in every region,” said Scott Hanson, Director of Policy & Global Engagement at IFAC. “Equipping our member organisations to lead anti-corruption efforts in their jurisdictions was one of our priority actions in last year’s Action Plan for Fighting Corruption and Economic Crime, which this new workbook delivers. We look forward to talking to PAOs around the world to continue helping them develop their national anti-corruption advocacy plans.”

He said IFAC also plans to build on the foundations of Global Fight, Local Action, with additional initiatives on anti-corruption measures, including the interconnected issues of sustainability reporting, public financial management and financial literacy.

19 May 2023

UK government plans to overhaul the UK’s regulatory framework could have a significant effect on employment regulations, according to legal experts.

A government policy paper to ensure that the work of regulators will “drive economic growth” contains a number of employment-related reform proposals, according to the law firm Pinsent Masons.

It said the changes outlined in the policy paper include the introduction of future legislation to limit the length of restrictive covenants in employment contracts. The government said capping these clauses at three months would give employees more flexibility to join a competitor or create a rival business, but would not interfere with employers’ ability to use paid notice periods or ‘gardening leave’, or to include non-solicitation clauses in employment contracts.

Edward Goodwyn, an employment expert at Pinsent Masons, said the three-month limit might not be the real concern for businesses, who often worry more about the potential for rivals to poach their clients and existing staff members. “For those employers who do need to keep ex-employees away from their competitors, however, we could see an increase in the use of lengthier notice periods and additional garden leave provisions when they draft employment contracts,” Goodwyn said.

The company’s Anne Sammon added: “While we still have no timetable on when these changes will be introduced, employers might wish to start considering the extent of the impact that this change could have on their business. For example, they could carry out an audit of how many employees currently have non-compete clauses in excess of three months, and look at alternative ways to protect their business so that they are well positioned when these changes are implemented.”

The company said: “The policy paper also contains plans to remove ‘retained EU law’ that imposes requirements for keeping working hours records and abolish other administrative requirements under the 1998 Working Time Regulations, as well as offering a simpler method for calculating holiday pay.”

19 May 2023

Half of all UK businesses say they have been impacted by the effects of climate change, according to new research by insurance and risk management specialists Gallagher.

The study of more than 1,500 UK business leaders found that climate change is already a challenge for British businesses, with nearly three-quarters of those surveyed voicing concern over the impact of global warming over the next 10 years.

Two-thirds of those surveyed said a rise in global temperatures of 2C would have a “significant” impact on their business.

The most common effect of climate change on British business are disruption from extreme weather events, including flooding, storms and heatwaves. This is followed by climate change related increased operating costs, supply chain issues and physical damage. The research found that 15% of businesses have already moved premises due to climate change, while 16% have been forced to change their business model.

Sectors facing the greatest threat, according to the research, are hospitality and tourism (57%), banking and finance (53%) and retailers/FMCG firms (50%), demonstrating a significant threat to the UK’s service-based economy.

Climate change was rated behind only the cost of living and the energy crisis as a priority issue, although more than half of all business leaders have not taken steps to mitigate against the risks, with a third failing to include climate change on their risk assessment.

A third of British companies have taken some steps towards mitigating the impact of climate change, with three in ten having spent between £100,000 and £500,000, and one in 10 having spent over a £1m.

The most common strategies used by firms to combat climate change are committing to reduce carbon emissions, reviewing insurance policies, setting a net-zero target and investing in environmentally friendly technologies. The most popular methods already employed are reducing paper use, using automatic lighting, sourcing renewable energy and deploying LED lighting.

Neil Hodgson, managing director of Risk Management at Gallagher, said: “Climate change clearly poses a serious threat to British businesses – and the damage is already being done. The country is committed to reducing our emissions and reaching net zero by 2050, but with half of businesses reporting impacts it seems we are already on the back foot.

“Despite the widespread concern, many business are failing to act to protect themselves from the potential impacts of climate change, whether that is investing in risk management measures in their premises, buying more green equipment or ensuring they have appropriate insurance.

“What is perhaps most concerning is that businesses do not believe themselves responsible for protecting themselves against climate change – instead believing government should prepare them. It is time businesses begin to act.”

15 May 2023

HMRC is reminding agents that their clients can no longer be able to use their existing VAT online account to file their annual VAT returns.

The tax authority said that all VAT-registered businesses must now use Making Tax Digital (MTD) compatible software to keep their VAT records and file their VAT returns.

HMRC said: “To make it quicker and easier for businesses to manage their tax affairs, we’ll sign up all remaining businesses to MTD, unless your client is exempt or has applied for exemption and is awaiting a response from us.”

It said that companies that haven’t started using compatible software must:

• Choose MTD-compatible software that’s right for their business – a list of software, including free options, is on GOV.UK.
• Check the software permissions to allow it to work with MTD. Go to GOV.UK and search ‘manage permissions for tax software’ for information on how to do this.
• Keep digital records for current and future VAT returns – more information about what records must be kept digitally is on GOV.UK.
• File your future VAT returns on time using MTD-compatible software. You can find out how to submit your VAT returns on GOV.UK.

HMRC said: “If your client is already exempt from filing VAT returns online or if they or their business are subject to an insolvency procedure, they’re automatically exempt from MTD.

“You can check if they can apply for an exemption on GOV.UK. HMRC will consider each application on a case-by-case basis.”

It added: “Your client may receive a penalty if they don’t file on time via compatible software. For VAT accounting periods starting on or after 1 January 2023 we have introduced new, fairer penalties for VAT returns that are submitted late and VAT which is paid late. The way interest is charged has also changed.”

More information about new VAT penalties is available at GOV.UK or by watching HMRC’s recorded webinar for businesses.

15 May 2023

A third of SMEs in the UK are ‘extremely confident’ in their ability to reach net zero, according to new survey from BSI, the national standards body.

Its research found that awareness of net zero targets has almost tripled to 82% in two years, with many SMEs already acting to reduce waste (44%) and switch to LED bulbs (38%).

Some 52% of SMEs surveyed had a net zero policy in place, although 17% have yet to take key actions on becoming more sustainable.

The BSI’s research also found that 94% of consumers believe proper verification was important. Two-thirds of these said verification mattered because it demonstrates organisations aren’t ‘greenwashing’, while 32% said verifying against best practice standards can provide a benchmark by which they can compare one business with another.

The findings were published in BSI’s third annual ‘Net Zero Barometer’.

Scott Steedman, director-general, standards at BSI said: “This year’s barometer gives me cause for optimism. With 82% of business leaders telling us that sustainability and achieving net zero is important to their business practice, we are seeing a growing commitment to decarbonising by 2050, along with confidence that it is meaningful to turn long term ambition into immediate action.

“At a time where the attention of many SME leaders is being diverted by economic pressures, they want help to navigate a path that is both credible and realistic. SMEs want to understand both where they are on this journey and what that transition means for them and their stakeholders. They can benefit from having a clear roadmap to how they’re going to achieve net zero, not only in their own operations, but also in their supply chains. Our research shows that with the right guidance – including the use of standards – SMEs are more than able to rise to this moment.”

“Small businesses contribute more than £2 trillion in turnover to the UK economy. The collective impact they can have if they pull together and collaborate to meet net zero goals and ultimately accelerate progress to a sustainable world is significant.”

BSI spoke to 1,000 senior decision makers at UK SMEs and 1,000 UK consumers for the survey.

15 May 2023

The International Auditing and Assurance Standards Board (IAASB) has issued proposed revisions to its current standard on going concern, International Standard on Auditing 570 (Revised), Going Concern.

The proposed changes aim to:

• Promote consistent practice and behaviour and facilitate effective responses to identified risks of material misstatement related to going concern.
• Strengthen the auditor’s evaluation of management’s assessment of going concern, including reinforcing the importance throughout the audit of the appropriate exercise of professional scepticism.
• Enhance transparency with respect to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.

IAASB Chair Tom Seidenstein said: “Investors, regulators and other stakeholders have repeatedly called for more robust audit procedures related to going concern and for increased transparency regarding that work in the auditor’s report.

“The revisions proposed today are a step in that direction. The proposals seek to strengthen going concern requirements by substantially enhancing the auditor’s work effort in relation to going concern and providing enhanced, entity-specific information in the auditor’s report.”

The IAASB has invited all stakeholders to comment on the proposed revisions via the IAASB website. Comments are requested by 24 August 2023.

15 May 2023

Businesses must place nature loss on the same level as climate change in their risk assessments, with more than half of global GDP moderately or highly dependent on nature, according to new PwC analysis.

PwC’s research reveals the extent to which economic activities and natural ecosystems are linked, with 55% of global GDP – equivalent to about $58 trillion – moderately or highly dependent on nature, up almost one-third since 2020.

To help mobilise a response from the business community, PwC is launching a global Centre for Nature Positive Business, which will double the number of nature specialists in the firm to 1,000, with up to 10% based in the UK.

The centre brings together knowledge in biodiversity, water, forestry, regenerative agriculture and geospatial analysis, with the aim of accelerating the global transition to a nature positive and net zero future.

According to the PwC website the centre:

• catalyses collaboration among public, private and civil-society organisations to create new communities of solvers in the fight to halt and reverse nature loss.
• empowers business leaders to play their part, by helping the largest organisations in the world to transition to nature positive business models.
• helps drive the development of frameworks, standards and methodologies that provide the architecture necessary for rapid system-wide change.
• upskills our people around the world to build nature positive, sustainable outcomes into project delivery.
• contributes to and builds trust in the diverse global factbase that underpins the nature-action agenda.

2 May 2023

New guidance from the government on how UK  firms should collect and analyse data on the ethnicity pay gap “is more extensive than first predicted” and could cause “headaches” for many employers, according to law firm Pinsent Masons.

“The aim of the guidance is to develop a consistent, methodological approach to ethnicity pay gap reporting, which can then lead to meaningful action,” the company said in an article on its website. “The guidance explains how employers can report on their ethnicity pay and how they should collect employees’ ethnicity data; gather the required payroll data required to make and analyse ethnicity pay calculations; and develop an action plan to address any identified disparities.”

It said the new guidance “strongly discourages” binary reporting, which is the approach currently adopted by most businesses. It recommends that employers should “try to show as many different ethnic groups as possible in the analysis” and makes reference to the ethnicity classifications in the most recent UK census.

Pinsent Masons’race and ethnicity law expert, Shuabe Shabudin, said that this recommendation “was likely to cause a few headaches” because binary reporting is very often used by employers that are already assessing their ethnicity pay gap. “We are regularly asked by employers how they can increase the response rates to employee surveys and how they can get more data. Clearly reporting on a smaller dataset is going to raise data protection issues, and that is always enough to put even well-meaning employers off,” he added.

The guidance also encourages employers to investigate the underlying causes of any pay disparities and suggests employers could publish an action plan explaining how they intend to address any pay gaps.

Shabudin said the new guidance “paves the way” for ethnicity pay gap reporting to become mandatory. He added: “Until that time, however, companies should voluntarily report this information, and see it as a real opportunity to get the best out of their staff and to actually drive positive cultural and social change.

“Very sensibly, the guidance recommends analysing the data before you put pen to paper on any initiatives to try and correct any disparities. Equally sensible is the recommendation to then create an action plan or strategy. Not only will that focus an employer’s efforts, it also serves as a great indicator of the stance that the company is taking and can give confidence both to existing employees and jobseekers alike,” Shabudin said.

2 May 2023

Bank loans to small and medium sized businesses (SMEs) in the UK fell by £14bn in the year to March, falling to £195bn from £209bn.

The Bank of England data – sourced by debt advisory firm ACP Altenburg – suggests banks started to rein in funding about a year ago when interest rates began to rise. Altenburg’s Will Senbanjo suggested that the recent collapses of Credit Suisse and Silicon Valley Bank (SVB) could further reduce lending as banks focus on reducing risk in their lending books.

“Banks were already reducing their lending to SMEs over the last few years. The recent bank collapses may push them to reduce their risk appetite even more,” he said.

However, in the same period, lending to large businesses grew by £14bn to £336.8bn, up from £322.1bn.

“During times of economic stress we often see banks pivot away from small businesses in favour of lending to bigger businesses. Until the economic picture starts to become less uncertain, smaller businesses are likely to find bank lending harder to come by,” Senbanjo said.

The news comes as regulators in the UK are considering proposals to remove existing incentives for SME lending. Removing the preferential treatment, known as the SME Supporting Factor, will force SME lenders to hold a higher level of capital against loans to the sector.

SME lender Allica Bank suggested that the changes could result in a 25% fall in SME lending, equating to £44bn, City AM has reported.

2 May 2023

Companies that fail to prevent fraud by employees because of insufficient safeguards will be liable to an unlimited fine under new measures brought in by the government.

The failure to prevent fraud offence – included in the Economic Crime and Corporate Transparency Bill – is part of the government’s crackdown on financial crime, as it seeks to better protect businesses and consumers.

Under the new regime, organisations must demonstrate their deterrence measures should fraud be committed by an employee. Failure to do so risks an unlimited fine.

An overall goal is to promote financial crime prevention, encouraging businesses to invest in this area and ensure their own processes are effective in order to minimise incidences and protect consumers, businesses and the taxpayer.

Dr Henry Balani, Head of Industry & Regulatory Affairs for know your customer (KYC) tech specialist Encompass Corporation, said: “Tackling financial crime should be at the forefront of the Government’s plans, and regulatory developments. Those such as the Economic Crime and Corporate Transparency Bill and Economic Crime Plan 2 are key to protecting the UK’s standing as a safe and lucrative place to conduct business, as well as protecting the public from the widespread effects of economic crime. Support from the regulator, as outlined in the FCA’s roadmap for the next 12 months, is a crucial aspect to promoting sound practices, boosting both the prevention and detection of illicit activities.

“Technology has a central role to play in this ongoing fight against financial crime. Leveraging the latest in technology, such as dynamic Know Your Customer (KYC) process automation, for example, can dramatically increase the effectiveness and efficiency of KYC processes and overall compliance, while helping to identify risk faster.”

He added: “Harnessing technology solutions, alongside Government and regulatory focus, can empower businesses to play their part in the response to financial crime, and, in doing so, help to ensure the UK maintains its reputation as a leading hub to do business with.”

Security Minister Tom Tugendhat said: “Our new failure to prevent fraud offence will protect consumers from dishonest and misleading sales practices, and level the playing field for the majority of businesses that behave responsibly.

“This Government is committed to fighting economic crime, as demonstrated by our recently launched Economic Crime Plan 2, which set out how we will give law enforcement more state of the art resources to tackle high level offending.”

25 April 2023

A new online service enabling employers and their agents to apply for, amend or cancel a PAYE settlement agreement (PSA) is now up and running.

Agents accessing the service need to be able to provide:

• the employer’s PAYE reference.
• the name and address of the business.
• relevant telephone numbers.
• an email address (unless signed in with a government gateway user ID).

The deadline for applying for a PSA is 5 July following the first tax year it applies to. For tax year 2022/23, agents have until 5 July 2023 to apply for a PSA.

HMRC said: “What you can include in your PSA payment depends on when you apply. If you applied for a PSA before the start of a tax year, you can include any expenses and benefits contained in the agreement. If you applied for a PSA after the start of the tax year, you might need to report some items separately (e.g. on form P11D).

“You must pay any tax and class 1B NIC owed under a PSA by 22 October after the tax year that the PSA applies to (19 October if paying by cheque). 

“The expenses or benefits to include in a PSA must be minor, irregular or impracticable (impracticable means expenses and benefits that are difficult to place a value on or divide up between individual employees). Trivial benefits do not need to be reported to HMRC so should not be included in a PSA.”

HMRC has updated its guidance for applying for a PSA and amending or cancelling a PSA.

25 April 2023

The Financial Reporting Council FRC has issued FRED 83 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – International tax reform – Pillar Two model rules, which proposes to introduce a temporary exception to the accounting for deferred taxes arising from the implementation of the OECD’s Pillar Two model rules, alongside targeted disclosure requirements.

The OECD’s Pillar Two model rules introduce a global system of interlocking top-up taxes that aim to ensure that large multinational groups pay a minimum amount of income tax.

FRED 83 is based on similar proposals issued by the IASB. To make similar accounting relief and disclosure requirements available in the FRC’s financial reporting standards to a consistent timeframe the FRC is consulting now, rather than waiting for the IASB’s final amendments.

To support the FRC’s intention to finalise any amendments in summer 2023, comments on FRED 83 are requested by 24 May 2023.

25 April 2023

Small businesses in the UK are being encouraged to complete the annual ‘Tell ABAB’ survey and share their views on how to improve the tax system.

Commissioned by an independent body, the Administrative Burdens Advisory Board (ABAB), the survey provides “crucial insight” on the big issues faced by small businesses in the tax system, the government said.

The survey takes about 10 minutes to complete, and it will be open until 2 May 2023. Results from the survey will be published in the ‘Tell ABAB’ Report, which will be published on GOV.UK in the summer of 2023.

“The Administrative Burdens Advisory Board is passionate about listening to and understanding the needs of the small business community. Board members come from a range of businesses and professions, and their goal is to support HMRC to make the tax system quicker and simpler for small businesses,” the government said.

It said ABAB challenges HMRC on its performance, providing robust scrutiny of key initiatives, such as Making Tax Digital, and improving customer experience. Their annual report, which is sent directly to Treasury ministers, reviews HMRC’s progress against ABAB priorities.

“If you are one of the 5.7 million small businesses in the UK (including sole traders, self-employed, micro-businesses and organisations with fewer than 51 employees), then the survey is your opportunity to provide the Administrative Burdens Advisory Board with insight on the tax system which they can then use to support you,” it said.

Access the survey at https://tinyurl.com/4c54usn9

14 April 2023

The UK’s SMEs are facing relentless costs pressures driven by rising inflation and interest rates, according to new research from alternative funding provider Nucleus Commercial Finance.

It found that for the next 12 months the top three threats according to SMEs are high levels of inflation pushing up internal costs, including staffing costs (40%), unprecedented utility bills (37%) and high levels of inflation pushing up external costs (35%).

The mental health of their employees was also a cause of concern for 15 per cent of company bosses, while recruitment and skills shortages were highlighted by 12 per cent of those surveyed as an area of concern.

To address these threats, more than a quarter of SMEs are increasing the price of their products/services (26 per cent), while 17 per cent are planning on switching utility/service providers, and 13 per cent are upskilling their workforce.

“UK SMEs are looking aghast at the storm clouds overhead – fully aware of the challenges posed by the year ahead,” said Chirag Shah, chief executive and founder of Nucleus Commercial Finance. “While rising costs are typically top of mind, it is notable that we are seeing such heightened awareness of mental health and a recognition of the importance of people in building, sustaining, and growing a business.

“But addressing all these challenges requires a financial safety net – something that too few businesses are in a position to build. Some can be delayed or simply patched for the short-term. But, for those issues deemed business critical, it is imperative that finance providers are at hand. By being able to rapidly and accurately assess requests, and then deliver the appropriate financing, they can help ensure that SMEs are in a position to thrive when the sun finally comes out.”

The picture is similar in the US, where small businesses are struggling to secure finance in the wake of the Federal Reserve’s decision to hike interest rates.

The latest Biz2Credit Small Business Lending Index, for February 2023, reported that big banks approved just 14.2 per cent of applications in February, down from 28.3 per cent in February 2020. Small banks granted about 20 per cent of loan applications this February, but they were approving about half of all requests back in early 2020.

14 April 2023

Accountancy firms in Manchester and Nottingham are bearing the brunt of the talent crisis, a new survey by Bright Financial Professionals Index (FPI) has found.

There are, on average, just two potential applicants for every accounting role in each of these cities – meaning firms that are based there have the smallest talent pool from which to recruit.

According to the index, Manchester had the second-highest number of accountancy vacancies in the UK and Ireland at 2,884, after London, which had 5,810 vacancies. While there were more than 57,200 searches for opportunities in the capital per month, comparably 5,840 people wanted to find equivalent roles in Manchester.

Just over 1,400 accountancy roles were advertised in Nottingham – the sixth highest in the list – yet the number of searches for the city was a relatively modest 3,227 per month.

Liverpool, Leeds, Brighton and Sheffield all ranked lowest after Manchester and Nottingham, with an average of three job hunters per role – less than half the national average of seven.

Cities including Carlisle (14 applicants), Norwich and Plymouth (13 applicants each) find themselves with more applicants per role. This is, however, still low when compared with available positions and leaves hiring managers with only a small pool of candidates to pick from.

To find out more about Bright visit https://brightsg.com.

14 April 2023

Between 17 April and 2 June HMRC’s Agent Dedicated Line (ADL) will only answer calls about self assessment late filing penalties and PAYE coding notices, the authority has said.

Agents with other enquiries will have to use the main helpline or are being directed to use the online services, HMRC confirmed.

HMRC said that this temporary change is to reserve capacity for agents who need one-to-one support at the start of the tax year.

This is the second time this year that HMRC has restricted the ADL to reserve capacity on the line for the operators to cater to certain issues.

From December until the end of the self assessment season, the line was reserved for “complex queries” so call handlers could focus on “the highest-priority self assessment calls”.

“To make sure we can give the best-possible service to all customers at one of our busiest times, we’re making a temporary change to our Agent Dedicated Line,” said Richard West, director of personal tax operations. “It’s particularly important at the start of the tax year that we reserve capacity to support agents who need one-to-one help with enquiries they have about self assessment late filing penalties and PAYE coding notices issued in 2023/24, and that’s what these changes will achieve.”

HMRC said agents can also call the main helpline to get their questions answered, although HMRC has said this route is likely to take longer than usual. The restriction of the ADL means that those call handlers will not answer any progress-chasing calls.

HMRC is instead encouraging agents and taxpayers to use online services instead, which the tax department claims are “quick and easy to use”.

14 April 2023

The International Accounting Standards Board is proposing narrow-scope amendments to the classification and measurement requirements for financial instruments.

IFRS 9 specifies how a company should classify and measure financial assets and financial liabilities. The Accounting Standard became effective in January 2018, introducing a new credit impairment model in light of the global financial crisis, and combining classification and measurement requirements, impairment and hedge accounting to replace and improve on IAS 39 Financial Instruments: Recognition and Measurement.

IASB chair Andreas Barckow said: “The recent post-implementation review of the requirements relating to classification and measurement in IFRS 9 indicated the standard is performing as intended, whilst also addressing some specific areas for enhancement. This exposure draft sets out our proposals in response to this feedback.”

Check out the Snapshot of the proposals at: Snapshot of Exposure Draft: Amendments to the Classification and Measurement of Financial Instruments (ifrs.org).

12 April 2023

Compilers of benchmarks used to measure companies’ environmental, social and governance (ESG) performance face penalties if they do not improve their ESG disclosures, the Financial Conduct Authority (FCA) is warning.

Following a review of ESG benchmarks, the FCA found the quality of disclosures to be “poor”, and lacking in “sufficient details and description of ESG factors considered in their benchmark methodologies”.

The regulator’s review found that some descriptions of the market or economic reality measured by benchmarks were “generic”. It also urged ESG compilers to provide clearly signposted links to supporting materials, and to ensure information was easily accessible to users.

A lack of detail in benchmark methodologies also concerned the FCA. “We are concerned that this can contribute towards or lead to greenwashing. This is particularly concerning where benchmarks that purport to pursue ESG objectives apply ESG factors in such a way that the constituents are not materially different to a similar non-ESG benchmark,” it said in a letter to company CEOs.

Peter van Veen, Director, Corporate Governance and Stewardship, ICAEW, said: “Companies need to make sure they do not fall into the trap of treating the compilation of ESG metrics as a tick-box exercise or, worse, as a PR exercise. It is important that companies’ boards assure themselves that the compilation of ESG metrics follows the same rigour as the compilation of financial data to ensure investors can trust the data.”

The FCA’s caution comes as the watchdog steps up efforts to clamp down on greenwashing – when companies make exaggerated or misleading sustainability-related claims about their products that don’t stand up to scrutiny. This, the FCA says, erodes trust in the market for sustainable investment products.

Its proposals contain an anti-greenwashing rule which restates the requirements that all regulated companies making sustainability-related claims must ensure these are “clear, fair and not misleading”.

The warning should come as no surprise to companies, given that last September the financial watchdog issued a clear warning about the “subjective nature of ESG factors and how ESG data and ratings are incorporated” could increase the risk of poor disclosures.

The FCA said in its letter: “Given the importance of ESG benchmarks and our initial supervisory findings, which indicate the potential for widespread failings, we will be doing more work in this area across the portfolio. We will holistically consider the risks of harm related to ESG benchmarks across the value chain.”

12 April 2023

The UK government has set up a review to examine the best ways of protecting employees who blow the whistle on wrongdoing in the workplace.

It wants to encourage organisations to set up appropriate channels for reporting that are properly resourced, accountable and protect confidentiality, to better protect whistleblowers.

The Department for Business and Trade (DBT) is leading the review, focusing on the definition of ‘worker’ for whistleblowing protection purposes. Key questions to be considered include how the whistleblowing framework facilitates disclosures and protects workers; whether whistleblowing information is available and accessible; what the wider benefits and impacts of the whistleblowing framework have been; and what best practice looks like in responding to disclosure.

Sue Gilchrist, an employment law expert at Pinsent Masons, said: “The rising profile of whistleblowing is driven in part by the need to uncover allegations of sexual harassment following the ‘MeToo’ movement, as well as the increasing ESG expectations on businesses.

“The legal framework around whistleblowing has been a critical area of legal compliance for employers, but the UK is in danger of falling behind on developments in this field.”

Gilchrist’s colleague, litigation expert Fiona Cameron, said that organisations “must be prepared to deal with whistleblowing complaints in a timely, efficient and effective manner, if they are not to make things worse”.

She said: “Viewed as an excellent source of information in the drive to improve regulatory compliance and accountability in particular, many jurisdictions now have, or are planning, not only legislation guaranteeing whistleblower protection and encouraging more to come forward, but also requiring employers to have in place suitable channels for whistleblower reporting which are properly resourced, accountable and protect confidentiality.”

“Responsible businesses should ensure that they have in place a policy and procedure for dealing with the emergence of whistleblower complaints. There is a growing recognition that even where not currently a legislative requirement, these can help to demonstrate a culture and commitment to compliance generally,” she said.

3 April 2023

Three to six times more investment is needed globally to tackle the climate crisis, according to UN climate scientists.

Developed countries “have the responsibility” to ensure enough money reaches the areas of the world most vulnerable to climate effects, said Dr Hoesung Lee, Head of the Intergovernmental Panel on Climate Change (IPCC).

People in vulnerable areas – Africa, Asia, South America, small islands and the Arctic – suffered 15 times as many deaths between 2010 and 2020 because of floods, droughts and storms compared with less vulnerable regions, the IPCC found.

In a new report, the scientists underlined the need for drastic greenhouse gas emission cuts and support for developing countries to adapt to worsening conditions.

The report said more money is still going to fossil fuels than to climate mitigation and adaptation, and investment needs to more than triple worldwide.

Dr Lee said: “Money cannot solve everything but it is critical to narrowing the gap between those who are most vulnerable and those who enjoy greater security.

“The report finds the path to a safer, more equitable and sustainable future for all requires three to six times the current amount of financing.

“Countries involved with rich technology and rich financial resources have the responsibility, recognised by the climate convention and Paris agreement, to help the other regions lacking those resources so that all of us can have a better future.”

The IPCC identified insufficient mobilisation of finance as a key barrier to climate action, along with limited resources, lack of business and citizen engagement, low climate literacy, lack of political commitment, limited research and a low sense of urgency.

Fiona Duggan from the Ashden climate change charity said: “The report made crystal clear that we need to be fighting climate breakdown on all fronts, in all countries, at rapid speed.

“In the global south, it means supporting renewable energy take-up that will allow countries to leapfrog the carbon-intensive infrastructure that has done so much damage to the world into clean, renewable, cheaper energy, accessible to the poor and the rich.”

3 April 2023

The rising number of financial scams and increased financial distress has prompted the Financial Conduct Authority (FCA) to revamp its website so consumers can quickly access the information they need.

The regulator has redesigned the consumer section of its website, making it clearer, easier to navigate and more user friendly, it said.

“When consumers come to our website, it’s often when something has gone wrong,” said Emma Stranack, head of consumer engagement, content and channels at the FCA. “So it’s important we give them the information they need to help them resolve their issue. And it’s vital that we do so in a clear, accessible, and sensitive way.

She said FCA research had found the consumers were often overwhelmed by the FCA’s website, and unclear where to start to find the information they needed.

“We took a forensic look at what we communicate to consumers,” said Stranack. “We looked at the subjects we should be covering, and the subjects that were better covered by members of the regulatory family.”

She said the new section of the watchdog’s website focuses on the ‘5 Rs’ – risks; rights; remedies; rule changes; and reporting.

“We want to help consumers identify and avoid unwanted risks, and understand what those risks mean for them. And if something does go wrong, we want to make sure consumers know how to complain and claim compensation if their provider goes out of business,” said Stranack.

She added: “If they suspect a scam, or have experienced poor conduct, we want to encourage consumers to report to us.”

The FCA is also pledging to simplify the language it uses and cut out jargon when it is communicating with consumers.

This means writing clearly and accessibly about technical subjects and not overwhelming readers with details they don’t need, as well as being approachable and acknowledging when consumers might be feeling under pressure or concerned.

3 April 2023

The closure of the Energy Bill Relief Scheme (EBRS) on 1 April could put thousands of small UK firms out of business, according to the Federation of Small Businesses (FSB).

The FSB said 370,000 small businesses who fixed their energy bills last year may need to shrink, restructure or close as higher energy process kick in.

The Energy Bills Discount Scheme (EBDS), now in effect, offers a far lower level of support for small businesses. While market prices have stabilised for those fixing their contracts now, or who are on variable tariffs, those who fixed last year will see huge increases as they are locked into a high price before the Government’s relief.

The FSB quotes the example of a pub using 48,000 kWh per year in electricity and 192,000 kWh in gas, which signed a new contract in August 2022. It would have received a reduction of £60,000 on its estimated £85,000 annual energy bill under the outgoing EBRS. Now, under the new scheme, the business would receive just over £2,000 in support, leaving it a bill to settle of nearly £83,000.

Many small businesses told the FSB that their energy bills had soared three, four, five-fold or even more between 2021 and 2022 – driving a coach and horses through their budgets and in many cases making it unviable for them to remain open without the help provided by the EBRS.

FSB research found that around 24% of small businesses are locked into energy contracts that were signed last year, at a time when wholesale prices were soaring, and over a quarter of this group (28%) could have to downsize, rethink their business model, or even close when they are hit by the rise in energy costs.

In the longer term, we want small firms’ progress towards net zero to be supported by the Government through the introduction of a ‘Help to Green’ scheme, providing small businesses with a £5,000 voucher to invest in energy-saving or even energy-generating measures, such as better insulation, solar panels, or a heat pump when cash balances are at rock bottom.

Tina McKenzie, Policy Chair of the FSB, said: “There’s much that could and should be done rather than leaving small firms high and dry. Allowing the most vulnerable small businesses to renegotiate or ‘blend and extend’ their energy contracts to better reflect lower wholesale energy prices is the least the Government and energy suppliers could do.

“A dozen trade associations representing businesses of all sizes and sectors, have come out to endorse the FSB initiative of ‘Help to Green’. This scheme would be on par with government support for homes and public buildings to retrofit.

“Our message to the Government is: show the small business community that they’re being treated as equal partner in this energy price crisis. That would keep 370,000 small firms off the cliff as well as the jobs and communities which depend upon them.”

24 March 2024

Changes to the business rates system means that ratepayers now need to notify the Valuation Office Agency (VOA) within 60 calendar days of any changes to occupier and property details that affect their assessment of liability for business rates.

This includes when their rent changes, they start or stop occupying a property, or they alter a property. The changes are set to be introduced during 2023, to allow for more frequent property valuation. The penalty regime has been redesigned to give businesses time to comply before they start incurring fines.

Ratepayers must also submit an annual confirmation that they have provided all the information required of them. They must submit this within 60 days after 30 April (the end of each assessable year). The government has said it will not introduce this annual confirmation regime until it has ensured it will be sufficiently straightforward for ratepayers to complete.

The ICAEW said that HMRC undertook a consultation during the summer of 2022 on ‘digitising business rates’. “The project aims to match up the details of businesses held by HMRC and local billing authorities. This would potentially allow HMRC to target future business rates relief more effectively and for both authorities to spot when tax or business rates avoidance is being carried out more easily,” the institute said.

Following the consultation, HMRC has decided that additional information required from ratepayers to allow this matching will be captured as part of the VOA requirement.

The ICAEW said: “This will create a new obligation for ratepayers to provide tax or other reference numbers, with an accompanying sanctions regime for non-compliance. However, the government will design the sanctions regime in a manner which, in the first instance, encourages and supports ratepayers to satisfy their digital business rates obligations.

“HMRC has decided that this project will not immediately include a portal through which businesses can view all their tax and business rates information in one place. This could become a feature in the future, however.”

24 March 2023

The rise in interest rates from 4% to 4.25% has ramped up pressure on the UK’s small businesses already struggling with high inflation, rising rates and a hike in their energy bills.

And small businesses are “counting on the rise in the base rate to be the peak”, according to the Federation of Small Businesses (FSB) National Chair Martin McTague.

He said: “Inflation is exacting huge tolls on small firms, who are even more exposed to spiralling input costs than large businesses, as they lack big corporates’ buying power and the ability to hedge prices. Continuing high inflation is undermining business confidence, and is an especially hard pill to swallow when small firms had been anticipating that it was beginning to be reined in.

McTague said the latest increase in the base rate means more worries for small firms carrying debts with floating rates, and will make it harder for businesses to get the funds they need to grow.

He said the FSB was disappointed that the recent Budget did not contain sufficient measures to set small firms back on a path to growth. There was little for small businesses to cheer elsewhere, with investment incentives aimed squarely at large corporates, and only scraps for small, innovative firms, he said.

“The end of the Energy Bill Relief Scheme, to be replaced in April by the far less supportive Energy Bills Discount Scheme, is another point of high danger for thousands of small firms. Business customers who signed up to new contracts last year when wholesale prices were sky-high must be allowed by energy companies to take advantage of the fall since then in wholesale costs by blending today’s rates with their original contract rates under an extended contract, to reduce the risk of shrinkage or even closure,” he added.

“The Government needs to demonstrate that it is on the side of small businesses who are feeling stressed and under huge margin pressure. We can’t afford to lose huge swathes of small firms, who could under the right circumstances be the engine of growth we need to get us out of our current economic doldrums.”

24 March 2023

The UK’s tax authority has updated it guidance on how it works with accountants and tax professionals, setting out a summary of HMRC’s policy governing working with them.

It says the guidance:

• gives a clear overview of what HMRC will do and in what circumstances.
• clarify the relationship between HMRC and agents and what they can expect from each other.
• be a resource hub for HMRC’s GOV.UK agent information.

In a statement on its website HMRC said: “We’ve also updated our standard for agents. This sets out what we expect from anyone who either advises or represents taxpayers on a professional basis. It covers integrity; professional competence and due care; professional behaviour; tax planning; and agents’ legal obligations.

“It also sets out how we monitor compliance with the standard and what happens when it has not been followed,” HMRC said.

It is urging agents to “read the updated standard and make sure you meet the requirements, which are in line with other industry codes of conduct”.

It added: “Most tax agents are professional and thorough in their work, but we know there are a small minority that do not meet our standard. Using the standard as a point of reference will help agents make sure they are meeting our expectations.

“We value our relationship with agents who add value to the tax system and the part they play in helping our customers meet their tax responsibilities.”

• HMRC’s approach to how it works with agents can be found at https://tinyurl.com/3wtmtsur. Its standards for agents guidance is at https://tinyurl.com/555w28ya

20 March 2023

The problem of attracting graduates into a career in accountancy is becoming a serious problem for the profession that could be getting worse, according to research by Intuit QuickBooks.

In a new poll of 2,000 accountants, it found that nearly half of accountants (44%) say their biggest challenge is the fact that fewer graduates want a career in the profession.

That means 92% of accountants have experienced hiring difficulties in the past year.

However, using technology to attract young accountants could be the answer. Some 86% of respondents believe having financial technologies in place that allow more opportunities for engaging work can help attract younger talent – making this a key route to plugging the skills gap.

A third of those asked thought tech has a direct positive impact on retaining staff, and 30% say tech has resulted in happier and more engaged staff.

Intuit QuickBooks Vice President Jolawn Victor explained: “What clear from the data is that budding accountants are looking for interesting, engaging work. Firms that invest in technology to automate routine tasks will free up their people to perform client-facing, value-add advisory. Those are the firms that will win the talent.”

Peter Greene of PGR accountants revealed his firm has been experiencing hiring challenges for some time and found it difficult to compete against larger accounting firms to attract newly qualified accountants in particular.

Greene said one way PGR differentiated itself was to offer qualified staff a four-day working week.

To help attract the new generation of accountants the firm has also minimised the routine tasks that in the old days they would primarily have been responsible for, using digital tools to help save them hours of their time. It all means employees are more engaged and it has a double benefit of keeping clients happy too, he said.

20 March 2023

The International Sustainability Standards Board (ISSB) has agreed the technical content of its initial standards, which will be formally issued at the end of Q2 2023.

The ISSB also agreed that its initial IFRS Sustainability Disclosure Standards, S1 and S2, will become effective starting January 2024. Given sustainability disclosure is new for many companies globally, the ISSB said it will introduce programmes that support those applying its Standards as market infrastructure and capacity is built.

In a statement on its website it said: “"During this time, given the importance of capacity building to ensure this is a truly global initiative, the ISSB will focus efforts on developing further guidance and training material, as well as working with partners to deliver a core capacity building programme across different economic settings, so that all market participants can access its benefits. There is also a particular need to consider the specific circumstances of emerging and developing economies and smaller companies.

“To deliver this, the ISSB is introducing structured partnerships that leverage specialist expertise to build local understanding for the implementation of the standards. The ISSB has already announced a package of reliefs and guidance to support use of the Standards, enabling companies to scale up their approach to using them over time.”

And ISSB chair Emmanuel Faber said: “We will work with regulators around the world as they play their part, creating the conditions within their markets for adoption, so that investors can use comparable information about sustainability-related risks and opportunities in their investment decisions without delay. We will also actively engage with the many preparers who are considering voluntary adoption of S1 and S2, to better answer their investor needs.”

13 March 2023

The government has extended the voluntary National Insurance deadline to 31 July 2023 to give taxpayers more time to fill gaps in their National Insurance record and help increase the amount they receive in state pension.

This comes after members of the public voiced concern over the previous deadline of 5 April 2023.

Anyone with gaps in their National Insurance record from April 2006 onwards now has more time to decide whether to fill the gaps to boost their new State Pension. Any payments made will be at the lower 2022 to 2023 tax year rates.

As part of transitional arrangements to the new State Pension, taxpayers have been able to make voluntary contributions to any incomplete years in their National Insurance record between April 2006 and April 2016, to help increase the amount they receive when they retire. And after an increase in customer contact, the government has extended the deadline to ensure people have time to make their contributions.

Victoria Atkins, the Financial Secretary to the Treasury, said: “We’ve listened to concerned members of the public and have acted.

“We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their National Insurance record to help bolster their entitlement.”

Thousands of taxpayers with incomplete years in their National Insurance record could be financially better off in their retirement if they make voluntary payments to top up any incomplete or missing years.

Eligible taxpayers can find out how to check their National Insurance record, obtain a State Pension forecast, decide if making a voluntary National Insurance contribution is worthwhile for them and their pension, and how to make a payment on GOV.UK.

Taxpayers can check their National Insurance record, via the HMRC app or their Personal Tax Account.

13 March 2023

UK companies face tough decisions on how they manage higher energy costs if the Energy Bill Relief Scheme is not extended beyond March, or alternative government support provided, according to Grant Thornton.

In its latest Business Outlook Tracker surveying 600 mid-sized businesses, the accountancy firm found one in three (32%) said they would have to pass on the cost of higher energy bills to customers by rising prices if the Scheme – introduced in October 2022 to support businesses with rising energy bills – is not extended or further support provided from April.

A further third of respondents (35%) to the Grant Thornton poll said they would need to find cost efficiencies elsewhere in the business to manage the impact of higher bills.

In the context of high costs across all areas, the research finds that the loss of the relief scheme may have a devastating impact on many mid-market businesses. Without the relief provided by the scheme, around one in 10 (11%) expect they will either be more reliant on debt or even need to cease trading.

Chris Petts, Restructuring Partner at Grant Thornton UK, said: “As the end to the Energy Bill Relief Scheme approaches, businesses need to be forecasting based on the assumption that they will receive no further support with energy bills once the current scheme ends in March. Although the Energy Bills Discount Scheme is set to take effect from April, this will only provide support if wholesale prices peak over pre-defined values, which means that most businesses will receive no support.

“There will be some tough decisions to be made as businesses continue to battle high costs and high interest rates. Many are expecting to have to pass on the cost to the already hard-hit consumer in the form of higher prices, and others may have no other option but to rely on debt or, in extreme cases, to cease trading.

“With the increase in corporation tax also set to hit many businesses from 1 April, business leaders need to be actively planning for this additional cost increase and looking for ways to reduce their energy consumption, make efficiency savings, generate their own power and budget for continued high prices. Businesses will need to rely on the resilience and adaptability they have built over the past two years, and those who are alert to the situation and have already started planning and preparing possible scenarios stand themselves in good stead to make it through.”

13 March 2023

The largest global companies are continuing to show progress on corporate reporting and related assurance involving environmental, social and governance (ESG) issues, according to a new report from the International Federation of Accountants (IFAC) and AICPA & CIMA.

However, ‘The State of Play in Sustainability Assurance’ report states that “significant hurdles remain… when it comes to providing consistent, comparable and high-quality sustainability information for investors and lenders”.

Some 95% of large companies reported on ESG matters in 2021, the latest year available, the study found, up from 91% in 2019. It found 64% of companies obtained assurance over at least some ESG information in 2021, up from 51% in 2019. “The inability so far to coalesce around agreed upon global standards continues to create challenges, however,” the report noted.

“Even as we see companies increasingly report on ESG and sustainability, the data we’re tracking reveals continuing fragmentation around the world in terms of which standards and frameworks are used,” said IFAC CEO Kevin Dancey.

“Eighty-six percent of companies use multiple standards and frameworks. This patchwork system does not support consistent, comparable, and reliable reporting. Importantly, it also does not provide the necessary foundation for globally consistent, high-quality sustainability assurance.”

The report also examines the extent to the way companies plan to reduce their emissions. It said while two-thirds of companies disclosed targets, they lag the rate at which companies report their historic greenhouse gas emissions (97%).

“Steady increases in reporting and assurance are significant, yet more companies need to take the additional step to obtain assurance to build trust and confidence in what they report,” said Susan Coffey, AICPA & CIMA’s CEO of public accounting. “Our profession’s role in providing that assurance is crucial. CPAs have unquestioned competence, professional judgment and operate within a robust system built with public protection in mind. We should be the clear choice for instilling trust and value in ESG data around the world.”

The report also said that while accounting firms conduct more engagements, their market share – 57% of sustainability/ESG assurance engagements – has declined from 63% in 2019.

Some 1,350 companies were reviewed, 100 from each of the largest six economies. The current report includes data from 2019-2021.

Companies included in the survey were based in Argentina, Australia, Brazil, Canada, mainland China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Mexico, Saudia Arabia, Singapore, South Africa, South Korea, Spain Turkey, the UK and the USA.

13 March 2023

The UK economy is likely to avoid a technical recession but will shrink by 0.3% in 2023 before returning to growth in 2024, the British Chambers of Commerce (BCC) is predicting.

In its latest UK Economic Outlook, it forecasts inflation will slow to 5% by Q4 2023, but adds that the economy will not return to its pre-pandemic size until the final quarter of 2024.

In the short term, the BCC is now expecting the first quarter of 2023 to see GDP fall, before three consecutive quarters of flat or weak growth, leading to an overall contraction of 0.3% for the year, it said.

The BCC also expects the economy to grow in 2024, at 0.6%, compared with the Bank of England’s forecast of 0.25% shrinkage.

The BCC Outlook said: “The expectation for 2023 has been revised upwards from -1.3% in the BCC’s last forecast, due to a more resilient economic performance at the end of 2022. Household spending held up well, despite a fall in real disposable income due to rising energy costs, inflation outstripping wages, frozen income tax allowances and higher mortgage payments.

“Exports were also stronger than expected in the second half of 2022, in part due to fuel and machinery demand, and also trade in precious metals – likely seen as a safe harbour in uncertain times. However, this trend is not expected to continue with a 4.5% decline in exports predicted across 2023. BCC research also shows that while overall export values have held up, many smaller companies are not reporting any improvements in their trading conditions.

“Despite a big drop in business confidence in Q3 2022, this now appears to have stabilised, albeit at a lower level. Business investment has now returned to pre-pandemic levels, although it was not performing well then. With an expected rise in corporation tax coming down the tracks, alongside a business rates revaluation in April, and higher interest rates, this is likely to lead to flatlining investment in 2023 at 0.2%.”

The BCC said that overall investment is expected to contract by 1.5% in 2023, but business investment will make a positive contribution of 0.2%. Household consumption is also expected to fall by 0.4% and Government spending is expected to increase by 1.8%.

“The overall picture for 2024 shows a return to growth but only at a level which will see the UK economy finally get back to its pre-pandemic size (Q4 2019) in the final quarter. Net exports, household spending and business investment will all be in weak positive territory, but with the contribution of government spending falling, the recovery will be lacking in strength,” it said.

Commenting on the forecast, Alex Veitch, Director of Policy at the British Chambers of Commerce, said: “Although the economy should now avoid a technical recession, the stark reality is that businesses face a very difficult year ahead. With the Government having little fiscal headroom for the Spring Budget, it is vital it spends the money it has got wisely.

“Businesses tell us they are most concerned about the difficulties in recruiting staff, paying their energy bills and rising taxes.

“We know we have a tough year ahead and there is currently little incentive for firms to risk ploughing their dwindling cash reserves or fresh loans into new projects. 

“But unless we unlock investment into growth areas of our economy, then the UK will get left behind by our competitors.

“The Chancellor must show more faith in the ability and talent of our businesses. If he backs them, by acting on childcare to ease staff shortages and helping them manage their energy costs, then the UK economy could still prosper.”

3 March 2023

Almost every organisation that participated in the world’s biggest four-day working week trial is to continue with the reduced hours model after “incredible” UK pilot results, a new study says.

The report, from UK think tank Autonomy and academics at the University of Cambridge and Boston College, found that at least 56 of the 61 participating organisations (92%) will continue with the four-day working week, with 18 saying they had made the trial permanent.

While the results showed that the companies’ revenues stayed broadly the same – rising by 1.4% on average over the six-month period – some of the biggest benefits of shorter working hours were employees’ improved mental and physical wellbeing, with 39% being less stressed and 71% having reduced levels of burnout at the end of the trial.

Tomas Chamorro-Premuzic, chief innovation officer at ManpowerGroup and professor of business psychology at Columbia University and UCL, said: “I would have expected a favourable trend, but not unanimous support,” he said.

“The main explanation for this success is that people just work harder when you reward them with freedom and flexibility. In other words, if you are forcing people to spend five days at work for tasks they could achieve in four, then let them have a four-day week.”

During the trial period job retention improved, with a big decline (57%) in the likelihood that a staff member would quit the company where they worked a four-day week, along with a 65% fall in the number of sick days taken.

Around 2,900 employees took part in the trial by campaign group 4 Day Week Global, which ran from June to December 2022.

3 March 2023

Rising rates of Corporation Tax could lead to a significant reduction in investment and increase the risk of companies closing, business advisory group Azets is warning.

UK firms will be under pressure to find an extra £18 billion per year of Corporation Tax payments by 2025/26 following a 31.58% proportionate increase in the rate, which is due to take effect in April.

Corporation Tax, which is currently 19%, will rise to 25% on 1 April 2023 and will raise an estimated additional £12bn in the first year, rising to £18bn by 2025/26. UK businesses currently contribute around £68bn in Corporation Tax per annum, equating to 2.9% of UK GDP.

Nicola Campbell, a Partner at the firm’s Glasgow City office, said that despite soaring prices and the challenging economic climate, the Government announced last October that it would persevere with the baseline increase on profits of more than £250,000.

She said: “This additional tax burden could lead to a significant reduction in investment and the risk of businesses closing.

“It is a significant increase and some businesses may not yet be fully aware of the implications. There is concern that the scale of the tax increase along with rising interest rates and inflationary pressures will restrict inward investment opportunities and in turn growth.

“The tax burden on business has become higher than we have seen in the last two decades across the board, from National Insurance Contributions (NICs) to Corporation Tax.

“The greatest worry, though, is the impact on owner managed businesses who can’t invest in growing their business as they need the profits to pay the household bills.”

Campbell added: “With an increase on this scale it is more important than ever that UK SMEs actively manage their Corporation Tax liabilities. Cash and liquidity are critical for every business so we would encourage owners and directors to take full advantage of available tax reliefs.”

She said these included: maximising the Annual Investment Allowance (AIA) of £1m; claiming R&D tax relief; maximising pension contributions; maximising staff benefits and investing in staff well-being; and buying electric vehicles.

3 March 2023

India is a “bright spot” in the world economy, and will contribute 15% of global economic growth in 2023 by itself, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva.

She said prudent fiscal policy and significant financing for capital investments provided in the Budget will help drive growth momentum.

“India’s performance has been quite impressive. For this year, we expect India to retain a high growth rate, 6.8% for the year that ends in March. For FY 2023/24 (April 2023 to March 2024) we project 6.1%, a bit of slow down like the rest of the world economy, but way above the global average. And in that way, India is providing about 15% of global growth in 2023,” Georgieva told the Press Trust of India news agency.

That is the fastest growth rate among major economies, she said.

“Why is India a bright spot? Because one, the country has done really well to turn the digitalisation that has been already moving quite well into a major driver of overcoming the impact of the pandemic and creating opportunities for growth and jobs,” she said.

“Second, because India's fiscal policy has been responsive to economic conditions. We have seen the new Budget presented, and it signals the commitment to fiscal consolidation, while at the same time provides significant financing for capital investments. And three, because India didn't shy away to learn the lessons from the pandemic and to implement very strong policies to overcome what has been really a difficult time for a number of months,” she said.

Georgieva said she was impressed by two things in the latest annual Budget presented by Union Finance Minister Nirmala Sitaraman. She said: “The first one is how much care is placed on balancing development needs with fiscal responsibility in India. So, you have a Budget, that is realistic on the revenue side with a focus on growth-supporting spending. And, secondly, the investment in capital expenditures, that is there to provide the long-term foundation for growth.”

The capital spending increase, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020-21 and 2021-22.

The IMF’s MD praised the government for its focus on the green economy, including renewables with potential to shift the country towards clean energy and keep growth going.  

The IMF chief was also full of praise for the government’s support for entrepreneurs. “I cannot praise enough what India is doing to open up space for entrepreneurs. That is visible in the digital space. India put in place public digital infrastructure that is so well attuned for private initiatives to blend in to take advantage of this infrastructure,” she said.

The results are not only impressive for India but also have generated interest from other countries as well, she said. “And last but not least, India does have young population – 15 million people are added to the labour force every year. When you have strong investment climate that generates jobs, that is a great advantage.”

24 February 2023

The rate of corporation tax is set to rise from 1 April 2023, two years after the measure was first announced in the Spring Budget of 2012.

The changes will mean that:

• if your company makes profits of less than £50,000, the small profits rate of 19% will apply;
• if your company makes profits of over £250,000, the main rate of 25% will apply;
• If your company sits somewhere in the middle – that is profits between £50,000 and £250,000 – you will pay a tapered rate of corporation tax.

As well as rises to the main rate of corporation tax rises, the super deduction can only be applied on purchases made up to 31 March 2023. Currently, the super deduction allows companies to claim enhanced capital allowances of 130% on all qualifying plant and machinery purchases up to this date.

Sophie Glynn of UHY Hacker Young said: “If your company has plans to make qualifying capital purchases in the year, it is worth considering bringing forward the purchase to benefit from the increased allowances. Of course, the cashflow implications of bringing forward the purchase date of capital equipment should be taken into consideration.

“Any losses made in the year can be increased by the super deduction, meaning there are higher losses to carry forward and offset against future profits.”

Glynn added that it was important, where applicable, to ensure your historical losses are in order.

“Legislation allowed for losses made between 1 April 2020 and 31 March 2022 to be carried back for three years, giving relief at 19%,” she said.

“However, it is worth considering whether or not to carry those losses forward, potentially obtaining relief at a maximum of 26.5% (where profits are in the marginal rate band). Again, the cashflow implications should be a consideration when deciding on how to utilise losses.”

24 February 2023

HM Treasury and the Bank of England are consulting on a potential digital pound, or central bank digital currency (CBDC).

The public are being invited to give their views on the scheme; at the same time the central bank will now take forward further research and development work.

“The consultation is being launched because both HM Treasury and the Bank want to ensure the public have access to safe money that is convenient to use as our everyday lives become more digital, while supporting private sector innovation, choice and efficiency in digital payments,” the Bank of England said in a statement on its website.

Governor of the Bank of England, Andrew Bailey, said: “As the world around us and the way we pay for things becomes more digitalised, the case for a digital pound in the future continues to grow. A digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability.

“However, there are a number implications which our technical work will need to carefully consider. This consultation and the further work the Bank will now do will be the foundation for what would be a profound decision for the country on the way we use money.”

The bank said a digital pound:

• would replicate the role of cash in a digital world, so that it is risk-free, highly trusted and accessible.
• £10 of a digital pound would always be worth the same as £10 of cash.
• would be subject to rigorous standards of privacy and data protection – neither Government nor the Bank would have access to personal data and holders would have the same level of privacy as a bank account.
• could be accessed through digital wallets offered to consumers by the private sector through smartphones or smartcards.
• could be used for payments online and in-store.

The bank said: “Unlike cryptoassets and stablecoins, the digital pound would be issued by the Bank of England and not the private sector. We are separately already legislating to protect Access to Cash.

“This means that it will have intrinsic value and not be volatile, unlike unbacked cryptoassets as there would be a central authority to back it.

“The needs of vulnerable people are being considered in the digital pound design process ensuring that it would be simple and straightforward to use and understood and trusted by the public as a form of money.

“A decision about whether to implement a digital pound will be taken around the middle of the decade and will largely be based on future developments in money and payments. The earliest stage at which the digital pound could be launched would be the second half of the decade.”

24 February 2023

Thousands of small firms across the UK are set to scale back investment if the government goes ahead with plans to cut R&D tax support for SMEs, according to new research by the Federation of Small Businesses (FSB).

One in five small firms that have been supported through the scheme in the past three years say cuts to the tax relief rate will reduce their viability, the FSB found.

Almost two-thirds (64%) of small firms which successfully applied for the tax credits in the last three years say they are now less likely to invest in innovation, equivalent to 50,000 small firms. A quarter (24%) say they will be forced to turn to lower-risk projects and more than one in 10 (12%) say they will have to make staff redundant or put recruitment plans on hold.

The new FSB research shows the impact will be greatest in deterring new entrants. Since the scheme was introduced, around 30% of small firms claiming R&D tax relief each year are new claimants, and FSB research indicates the long-time deterrent impact on potential innovators is even larger than on small firms already innovating, with four times as many firms not currently undertaking R&D saying they are now less likely to take the plunge.

Martin McTague, FSB National Chair, said: “Our findings are a reminder to the Chancellor that the Government still has time to do the right thing – delay or scrap the plan to cut R&D tax credits for small businesses from April.

“The Chancellor’s decision to rely on estimates that exclude the impact on start-ups and new entrants in making this decision was incredibly disappointing – the kind of basic error that leaves even the best idea for a prototype a smoking ruin on the ground, not worthy of a country with our history of innovators, innovation, and enterprise.

“However, there are very encouraging recent signs of hope that the Chancellor has not forgotten his small business roots, and we certainly think it’s possible he could deliver a great budget for growth. Let’s hope he will now be less credulous when presented with bureaucratic certainty that only big firms can deliver R&D.”

He added: “Our members tell us the tax credits scheme is more accessible and useful than grants in creating cutting-edge products and services in the UK – it means R&D is led by small firms who can react far quicker to new possibilities than public grant systems administered by quangos many inventors haven’t heard of, meaning time wasted writing bid applications instead of innovating.

“We’ve also heard of reports that start-ups plan to expand overseas where R&D support for small firms is more generous, just when we’re looking at growing more UK tech start-ups. Gutting the R&D tax credits scheme will sadly be kryptonite for the Prime Minister’s pledge to make our country a science and technology superpower.

 “The SME R&D tax credits scheme has been brilliant in encouraging small businesses to invest for the first time in R&D and we must do everything we can to avoid throwing away 10 years of small business progress.”

20 February 2023

A wave of business investment was “stopped in its tracks” by the UK leaving the European Union, dealing a blow to the British economy worth £1,000 for every household, a Bank of England policy advisor has said.

Jonathan Haskel, an external member of the Monetary Policy Committee, said there had been a sharp drop in the pace of business investment in the UK since Brexit.

Officials at the central bank have issued a number of warning about the economic impact of Brexit

Ben Broadbent, the Bank of England’s deputy governor, recently said that the hit to the UK economy from Brexit was coming through faster than had previously been expected.

His comments follow a warning by the International Monetary Fund (IMF) that the UK would be the only leading economy to contract this year. Investment by British businesses, which have been plagued by uncertainty and weaker trade ties to the EU, has lagged behind previous performance and other countries since Brexit.

Haskel said the “productivity penalty” from Brexit was currently 1.3% of GDP, or about £29bn (€32.8bn) in total, or £1,000 per household. By the end of the Bank of England’s forecast period, the penalty will increase to 2.8% of GDP, he added.

“If you look in the period up to 2016, it’s true that we had a bigger slowdown in productivity up to 2016, but we had a lot of investment,” he said in a web podcast. “We had a big boom between 2012-ish to 2016,” Haskel said.

“But then investment just plateaued from 2016, and we dropped to the bottom of G7 countries,” he said.

The Bank of England said Brexit, while not the only factor, was a major cause of the reduction of the UK economy’s potential growth. At its February Monetary Policy Report, the central bank warned business investment was “very subdued”.

Haskel said: “We were at the top of the wave of investment in 2012. If we pushed that out a little bit, then our slowdown may not have looked quite so bad, but it was stopped in its tracks in 2016,” he said.

20 February 2023

HMRC is starting to levy ‘super-penalties’ of up to 200% of tax owed on taxpayers who failed to file their income tax return on time, according to accountancy firm UHY Hacker Young.

It said that HMRC has changed the way it interprets the rules around taxpayers ‘deliberately withholding information.’ As a result, ‘super-penalties’ are being levied on some people whose tax return is filed more than 12 months late, where HMRC thinks the taxpayer has been deliberately withholding information.

HMRC’s new standard for ‘deliberately withholding information’ is demonstrated by two recent tax tribunal cases. In these cases, HMRC levied ‘super-penalties’ on taxpayers delayed filing returns for multiple years because they could not afford their tax bills. Before, these very late filers would have been met with substantial but less extreme punishment.

UHY Hacker Young tax partner Graham Boar said: “Punishing late filers in the same way as those who lie on their tax returns or evade taxes altogether will be seen as excessive by many.

“There are all kinds of circumstances that cause people to file their income tax returns late. Most people who file after the deadline do so because they cannot afford the tax bill and hope that late filing gives them extra time to gather the funds. For others their personal and tax affairs get too much and they just try to forget about it.”

He added: “Blatantly lying on tax returns or evading tax payment altogether is a much more serious crime so it seems unfair that people who have filed late because of negligence should receive as harsh a punishment as evasion.

“We saw cases ruled on in 2022 where taxpayers were subjected to super-penalties despite mitigating circumstances and an inability to pay.”

20 February 2023

Mileage allowances rates should be increased to reflect the increasing cost to employed workers who use their own vehicles for business use, says the Association of Taxation Technicians (ATT).

Approved Mileage Allowance Payments (AMAPs) allow employers to make tax-free payments up to certain limits to their employees when those employees carry out business travel in their own cars, vans, motorcycles or cycles. However, the rates have been unchanged for at least 10 years and in some cases several decades more. The current mileage allowance rate is 45p per mile for the first 10,000 miles in a private car or van, dropping to 25p per mile after that.

A further 5p per mile can be paid per passenger, provided they are also travelling for the business. The rate for motorcycles is 24p per mile and 20p per mile for cycles.

20 February 2023

A new set of guidelines targeting workplace discrimination has been introduced in Singapore, international law firm Pinsent Masons has reported.

It said the new guidelines “will enhance the existing Tripartite Guidelines on Fair Employment Practices (TGFEP) in setting up and maintaining a harmonious workplace, according to a joint statement by the Tripartite Alliance”.

Singapore’s workplace tripartite partners are the Ministry of Manpower (MOM), the National Trades Union Congress (NTUC) and Singapore National Employers Federation (SNEF).

Mayumi Soh of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, said: “As the workforce grows increasingly diverse in Singapore, it is crucial that workplace relations continue to grow harmoniously, where individuals are respectful and sensitive towards different personal beliefs and values.”

Under the new guidelines, workers supporting causes outside the workplace should not face any kind of bullying or harassment within the workplace.

“According to the guidelines, employers should be sensitive to employees’ diverse cultures, values and beliefs when implementing events and policies; assess employees for performance based solely on work-related requirements; provide employees with a safe forum in which to raise their concerns via appropriate complaint handling procedures; and continue to showcase the importance of an inclusive and harmonious workplace. Employees should not be required to attend events or comply with policies which are not related to work,” the law firm reports.

Soh added: “It is important that employers in Singapore engage in fair practices and remain respectful of the personal values and beliefs of their employees in order to create a conducive work environment.”

13 February 2023

Companies should take the practical step of adding the value of ‘nature’ to annual accounts to help save the planet, according to Professor Paolo Quattrone of Manchester Business School, and Associate Professor Ariela Caglio of Bocconi University, Milan.

Quattrone and Caglio believe adding a line for nature in the current accounting and auditing system would allow nature to be a visible key stakeholder and to have a voice and value.

This approach would also allow greater focus and capital to be given to nature – and human activity would move decisively and permanently to net positive.

Their long-term hope is that governments, central banks and regulators could legislate to make this compulsory – but in the meantime, they urge corporations, and indeed all organisations, to start adding nature in their financial reports voluntarily and to set up bonds for nature’s repair and revival.

Quattrone stressed: “Currently, financial structures are not set up to recognise nature in financial reports. With its roots in the first industrial revolution, and codified by Adam Smith, who reduced value to utility, and in turn market price, the current accounting system recognises only production and assets and not how nature is affected – usually damaged, destroyed or exploited – by this production.

“The addition of a Provision for Nature in the Value-Added for Nature Income Statement (VAN) would force stakeholders to pay serious attention to how we relate our corporate activity to nature.”

13 February 2023

Between 2018 and 2020, almost 400,000 people earning less than £13,000 received a penalty for not filing a tax return on time, according to research by Tax Policy Associates.

It found that very few of those fined had any tax to pay, given that the tax-free personal allowance was around £12,000. But, by failing to submit a tax return, they were fined at least £100, and often thousands of pounds. For most of those affected, the penalty represents more than half their weekly income.

Data obtained under a Freedom of Information Act request “clearly demonstrates that late filing penalties are being disproportionately levied on those on low incomes, most of whom in fact have no tax to pay”, the organisation said.

“The critical problem is that almost none of these taxpayers have any tax to pay. We know this for two reasons.

“First, the personal allowance was £11,850 in 2018/19 and £12,500 in 2019/20, and anyone earning less than that had no income tax liability. Taxpayers in the lowest three income deciles earn less than £13,000 – so very few will have tax to pay.

“Second, this is confirmed by the data on penalties issued for late payment (as opposed to late filing). The first three deciles pay almost no late payment penalties. This won’t be because they are more punctual at paying than they are at filing; it will simply be because they almost always have no tax to pay.”

Tax Policy Associates has three recommendations for HMRC. It said: “HMRC should start monitoring late submission penalties across income deciles… to provide a more complete picture of the impact on the low paid, including the level of penalties paid.”

It also said HMRC should rework its processes: “The data reveals that there is a significant population of self assessment ‘taxpayers’ who are being required to complete an income tax self assessment, are charged a late submission penalty, but turn out to have no tax to pay.

“HMRC should analyse this population with a view to determining how many of these are taxpayers who in retrospect should not have been required to submit a self assessment return at all; whether that could have been determined in advance, on the basis of the information HMRC possessed at the time; if it could be determined in advance, what additional processes should be put in place by HMRC to prevent such taxpayers being required to submit a self assessment in the future: and if there are small changes which could impact this population’s tax compliance, for example changing envelope labelling (although it may be this work has already been done).”

Thirdly, it said fixed rate late submission penalties should be automatically cancelled (and, if paid, refunded) if HMRC later determines that a taxpayer has no taxable income. Most likely that would be after a subsequent submission of a self assessment form; but no further application or appeal should be required.

It said: “Similarly, there should be an automatic abatement of penalties (by, say, 50%) if HMRC determines that a taxpayer has a taxable income but it is low (for example less than £15,000).

“In both cases, an exception could be made where HMRC can demonstrate that the failure to file was intentional (i.e. for truly exceptional cases, and not applied by an automated process).

“We anticipate that creating such a cancellation and abatement rule may fall outside HMRC’s ‘care and management powers’, and therefore may require a change of law.”

13 February 2023

Environmental, Social and Governance (ESG) is now firmly established as a decision-making factor in the UK’s finance functions, according to research from American Express.

The credit card giant’s study found that nine in 10 (89%) financial leaders say ESG factors are important when it comes to business spending and investment decisions. 

The research, based on a survey of senior finance decision makers at larger UK businesses, found that finance functions have already put in place KPIs and metrics to measure business performance across various ESG pillars. These include ethics (70%), carbon reduction (69%), employee diversity, equity and inclusion (DE&I) (66%), supply chain equality and fairness (64%) and energy use, reduction or sourcing (63%).

Topping the list of areas where KPIs on ESG are not currently in place but where finance leaders have plans to implement are customer DE&I (35%); community outreach (33%); giving and philanthropy (33%); and climate risk (32%).

The survey also found that finance functions are helping lead the charge on environmental sustainability, a vital component of ESG activity, with more than a quarter (27%) saying that tackling sustainability is a pressing challenge for their business in 2023. 

While six in 10 (60%) finance leaders at these larger UK businesses say that business travel is important to the success of their business – underlined by the fact that almost half (46%) expect to spend more on business travel in 2023 – over three-quarters (77%) acknowledge the need to balance business travel with greater focus on environmental sustainability.

13 February 2023

American Express general manager, UK commercial, Stacey Sterbenz, said: “Given the challenging operating environment, it’s encouraging to see UK finance functions, and the businesses they serve, embracing ESG principles when it comes to spend and investment decisions. It’s clear that finance teams in partnership with their colleagues across the business, are leading the charge to improve and manage their impact on the world they operate in.”

Despite the challenging business landscape, 92% of senior finance decision makers from larger businesses are feeling confident about the prospects and performance of their business in the next six months; a similar number (88%) reported the same for the next 12 months. Furthermore, six in 10 (60%) anticipate that their business’ financial performance will be better this year, compared to 2022, with only around one in seven (14%) expecting their performance to suffer this year.

6 February 2023

A record 11.7 million taxpayers submitted their tax returns on time, according to HMRC.

Its figures show that, on 31 January, 861,085 people filed online to meet the deadline. Some 36,767 customers filed in the last hour before the deadline, but the peak hour for filing on the day was 4pm–5pm, when 68,462 customers submitted their tax return.

More than 12 million people were expected to file a Self Assessment tax return for the 2021 to 2022 tax year. HMRC is urging customers who missed the deadline to submit theirs as soon as possible or risk facing a penalty.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Thank you to the millions of customers and agents who got their tax returns in on time. Customers who have yet to file, and who are concerned that they will not be able to pay in full, may be able to spread the cost of what they owe with a payment plan.

“Search ‘pay my Self Assessment’ on GOV.UK to find out more.”

HMRC said: “Customers can plan ahead for their 2022 to 2023 tax bill and set up a regular payment plan to help spread the cost. HMRC’s Budget Payment Plan enables customers who are up to date with previous payments to make regular weekly or monthly contributions towards their next tax bill.

“A Budget Payment Plan is different from payments on account, which are usually due by midnight on 31 January and 31 July.”

6 February 2023

The United States economic watchdog is proposing updating its rules to strengthen and modernise its ethics compliance programme.

Currently, Securities and Exchange Commission (SEC) staff are not allowed to trade in securities of companies the agency is investigating, engaging in short selling, transacting in derivatives, participating in initial public offerings (IPOs) for seven days, or buying or carrying securities on margin.

The proposed amendments would:

• Expand the current prohibited holdings restrictions, banning employees from investing in financial industry sector funds;
• Authorise the SEC to collect data on employees’ securities transactions and holdings directly from financial institutions through an automated electronic system; and
• Exempt diversified mutual funds from the Supplemental Ethics Rule’s requirements, given that they generally pose a low risk of conflicts of interest, misuse of non-public information for personal gain, or appearance problems. Mutual funds that concentrate investments in a particular sector, industry, business, state, or country other than the US would remain subject to the rules.

SEC chair Gary Gensler said: “I was pleased to support [the] proposal to strengthen, modernise, and optimise the SEC’s ethics requirements. We at the Securities and Exchange Commission are entrusted by the public to oversee the US capital markets. These amendments, if adopted, would help ensure that the SEC honours the trust that the public has placed in us.”

6 February 2023

Seven in 10 UK businesses support the idea of giving asylum seekers the right to work after waiting six months for their claims to be processed, a report from the International Rescue Committee (IRC) has found.

The report, ‘From Harm to Home’, found that nearly 70% of UK business ‘decision makers’ believe the time asylum seekers must wait before working should be halved from 12 months down to six, with 64% saying this would benefit the economy.

Backing the idea, the Federation of Small Businesses (FSB) policy chair Tina McKenzie said: “Small firms are faced with a widespread labour shortage, so we’d like to see measures to help small businesses access talents from across the world. We support the campaign to lift the ban on people seeking asylum’s right to work.”

McKenzie added: “We’d also like to see a nation-wide refugee entrepreneurship programme to support aspiring refugee business owners.”

Laura Kyrke-Smith, IRC UK executive director, said the “report sets out a humane and pragmatic approach to resettling and integrating refugees in the UK. It’s an approach that the government could adopt immediately”.

In a separate survey, IRC polled a representative sample of 2,000 members of the British public on refugees and their right to work. Kyrke-Smith said: “The majority [of people polled] back the enhanced support for refugee integration that we propose,” she added.

The IRC recommended a three-point plan which includes providing over 10,000 resettlement sites, developing a ‘national integration strategy’ and reinstating the Cabinet post of minister of refugees.

27 January 2023

The UK Treasury should look at ways in which UK tax policy can incentivise investment in decarbonisation and research and development (R&D) to deliver on net zero emissions, a government-commissioned report has concluded.

The recommendation was included in a comprehensive review of the government’s approach to combatting climate change, published by Chris Skidmore MP. He recommended that any such review of tax policy is completed by the end of this year.

Tax expert Penny Simmons of Pinsent Masons welcomed the findings in the report. She said: “The latest calls for a tax review echo previous recommendations in the Climate Change Committee’s 2022 report to parliament on progress in reducing emissions and will hopefully provide the government with the impetus needed to allocate resources for a comprehensive review of how the UK tax system can support the net zero transition.

“To date, there has been limited discussion from the government about the role of tax policy in supporting decarbonisation.”

The report references both the Canadian government’s recent introduction of a tax credit for hydrogen production, and US tax incentives in the Inflation Reduction Act, to encourage energy efficiency and investment in decarbonisation.

“It is interesting that the report stops short of recommending that the Treasury should pursue a policy of using taxation as a way of incentivising investment, rather that it should explore whether introducing tax reliefs will increase investment in decarbonisation and, therefore, how tax policy can be used to encourage business investment,” said Simmons.

“The report acknowledges that revenue support in the form of loans, grants and government funding may be more effective than tax incentives in some circumstances, particularly given the current cost pressures that businesses are facing. It is asking the Treasury to do the research and continue the conversation,” she said.

The report also recommends that by Autumn 2023 the government reviews how to incentivise greater R&D for net zero innovation, including considering the role of R&D tax credits.

Simmons said: “The recommendations on reviewing R&D tax credits are timely given that the Treasury has just published a consultation on R&D tax credits, with a view to introducing a new single scheme, based on the existing RDEC, which predominantly targets larger businesses.

“It is also interesting that the Skidmore report references evidence from the OECD in 2020 that suggests that R&D tax credits targeting smaller businesses are more effective at stimulating R&D investment than those targeting larger businesses.

“This evidence conflicts with the Treasury’s view that additionality in the current SME tax scheme is lower than the RDEC. It is hoped that Treasury carefully considers the recommendations of the report as part of the R&D tax consultation process, particularly when determining whether more generous support should be provided for different types of R&D,” she said.

27 January 2023

The Government is proposing to re-jig R&D tax benefits for small businesses, and has launched a consultation saying there was “merit to the case for further support” for the UK’s SMEs.

In his Autumn Statement in November 2022, Chancellor Jeremy Hunt tilted R&D investment incentives towards larger companies, causing a backlash with trade bodies. The Research and Development Expenditure Credit (RDEC) rate for larger businesses increased by 7% while the SME additional deduction dropped from 130% to 86%.

At the time, the Federation of Small Businesses (FSB) accused the Chancellor of “economic vandalism” over his decision to cut investment incentives for SMEs. It said he had made an “unprovoked attack” on SMEs by reforming R&D tax credits.

Additionally, tax credits for small businesses will be less generous from April after concerns the UK is lagging other countries in terms of R&D investment. The government said the decision was based on fears the generous scheme could be taken advantage of by fraudsters.

Now, plans set out in the Treasury’s consultation include the replacement of both these existing R&D tax schemes with a single, combined scheme based on RDEC. The Treasury said the move will simplify the R&D tax system and bring the UK in line with other countries.

The FSB are sceptical of the new changes, saying it “risks a huge amount of disruption for little gain.

Small businesses spent £24bn on R&D in 2021 – 4% more than they did in 2020. The credits are typically used by tech and biotech companies.

Overall expenditure on research and development performed by UK businesses (in current prices) was £46.9bn in 2021, an increase of £2.9bn since 2020 and £5.9bn since 2018.

27 January 2023

While the global economic outlook remains tense, the International Monetary Fund (IMF) is optimistic that growth in 2023 will be better than forecast in late 2022, the World Economic Forum’s final panel session concluded in Davos.

“It is less bad than we feared a couple of months ago,” IMF Managing Director Kristalina Georgieva said, while acknowledging that the Ukraine war, the energy crisis and soaring inflation could, individually or collectively, trigger a worldwide recession.

She said optimism was based on the potential for China to boost growth and that the IMF now forecast growth in China to hit 4.4% for 2023.

Georgieva said the IMF was likely to raise its current forecast of 2.7% global growth for this year when it publishes an update at the end of the month, while cautioning against expecting any “dramatic improvement” on that figure.

“Less bad doesn't quite yet mean good," she added. “Be careful not to get on the other side of the spectrum, from being too pessimistic to being too optimistic.”

European Central Bank (ECB) President Christine Lagarde was similarly optimistic for the Eurozone economy, saying the “news has become much more positive in the last few weeks”, moving from talk of a recession to “a small contraction”.

The ECB predicts 0.5% growth in the Eurozone in 2023, according to its latest forecast. “So it’s not a brilliant year but it is a lot better than what we had feared,” Lagarde said.

Also speaking in Davos, KPMG CEO Paul Knopp said: “I do not think we're in a recession in the United States. I actually see some pillars of strength in the U.S. when it comes to innovation [and] technology. The Inflation Reduction Act, actually, also helped with respect to spending in the U.S.

“There’s no doubt that there are challenges, too, when it comes to interest rates and inflation,” Knopp added. “But I am personally optimistic that there may not be a recession or, if there is one, it’ll be short and shallow.”

20 January 2023

Accountancy and the way it is taught, and the way it is ‘undertaken’, is inadvertently fuelling the climate crisis, according to a leading academic.

Professor Ian Thomson of Birmingham University said the way in which most people do their accounting actual incentivises climate change, saying there is an urgent need to decarbonise the ‘hidden carbon curriculum’ in university accounting degrees. Doing nothing is no longer an option, he said.

The problem is that the environment was seen as a marginalised issue by many accountants until recently, yet all transactions past, present and future have a direct effect on greenhouse gas emissions (GHG). They aren’t a subsection, and can no longer be seem that way, he claimed.

Thomson said: “All the decisions and actions taken by institutions, governments, business, communities and individuals impact on greenhouse gas that enters our atmosphere – it is ubiquitous.”

He wants everyone to envisage a world where everything came with a GHG price tag as well as a financial price tag. Imagine a world where every decision maker is carbon sensitive and climate literate, with every decision taken accounts for the GHG consequences, he said, and every accountant is able to calculate the impact of every decision.

Thomson believes this is where we need to be right now, and accountants are in breach of their ethical duties if they aren’t doing it, he said.

Yet right now, nothing has a definitive GHG tag and very few accountants are able to calculate the climate impact of any decision.

Thomson stressed: “When accountancy students graduate they should be asking themselves what carbon accounting competencies or capacity they have on graduation.” He felt we are not preparing our students for the actual types of decisions they are going to be required to undertake.

He is worried about the lack of lecturers who can teach the impacts of climate change and how to deal with notions like stranded assets and stranded liabilities, which are challenging businesses’ ability to carry on as going concerns.

Things have changed where he works. Birmingham Business School was the first university in the world to integrate climate change throughout its accounting and finance degree programme, so it’s in every core module.

20 January 2023

HMRC is to introduce legislation to change the way repayment agents are paid for their services, to better protect taxpayers and improve standards in the sector.

The legislation is designed to stop the use of legally binding ‘assignments’ as part of claiming an income tax repayment, which can only be cancelled if the agent and taxpayer both agreed to do so. This can be challenging for customers who become dissatisfied with their agent, or who simply wish to take over managing their own affairs.

Under new arrangements, if a taxpayer chooses to use a repayment agent to reclaim overpaid tax and wants it sent to the agent they will need to make a nomination, which they can cancel at any time. The new process will make it easier for taxpayers to stay in control of their repayments.

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “Taxpayers deserve better – we want to make sure they are better protected before choosing to enter into an agreement with a repayment agent. HMRC’s updated standards for agents will level the playing field and provide the benchmark we expect all repayment agents to meet.

“The changes follow HMRC’s consultation last summer on ‘Raising standards in tax advice: Protecting customers claiming tax repayments’. Responses to the consultation highlighted the need to improve agent transparency and standards with the overall aim of better protection for taxpayers.”

As a result, HMRC is today also setting out the following measures:

• updated standards for agents – applicable to all tax agents and include greater transparency requirements.
• a new HMRC registration process for repayment agents – to make the agent sector more transparent so customers better understand what they are signing up to.

Victoria Todd, Head of the Low Incomes Tax Reform Group, said: “We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection. Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable. The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behaviour.”

These changes form part of the government’s commitment to tackle problems in the repayment agent market, which is currently an unregulated sector.

Responses to HMRC’s recent consultation overwhelmingly supported the need for improving standards in the repayment agent sector.

11 September 2023

The International Accounting Standards Board (IASB) has issued amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates that will require companies to provide additional information in their financial statements when a currency cannot be exchanged into another currency.

The IASB had asked for stakeholder feedback, and found concerns about diversity in practice in accounting for a lack of exchangeability between currencies. The amendments will help companies and investors by addressing a matter not previously covered in the accounting requirements for the effects of changes in foreign exchange rates.

These amendments will require companies to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when it cannot, in determining the exchange rate to use and the disclosures to provide.

Linda Mezon-Hutter, Vice-Chair of the IASB, said: “These amendments fill a gap in our accounting standards. Diverse views on assessing whether a currency can be exchanged into another currency, and the exchange rate to use when it cannot, could lead to material differences in companies’ financial statements. The amendments will improve the usefulness of information provided to investors.”

The amendments will become effective for annual reporting periods beginning on or after 1 January 2025. Early application is permitted.

Further information is available via an IASB webcast

The amendments will be consolidated into IAS 21 and IFRS 1 in March 2024, at which point they will be available for users with a free website registration.

20 January 2023

Green jobs are growing at around four times the rate of the overall UK employment market, with 2.2% of all new jobs classed as green. However, more than one-third of these roles are now based in London and the South East.

The second edition of PwC’s Green Jobs Barometer has found that the number of green jobs advertised in the UK has almost trebled in the past year, equating to 336,000 posts, providing encouragement that the economy is becoming greener.

Carl Sizer, PwC UK’s Head of Regions, said: “The huge growth in green jobs over the last year illustrates how we are creating a Green Britain. One year on, our Green Jobs Barometer has shone a light on the regions and sectors where these jobs are being created.

“While Wales and Scotland are among the top performers, it’s striking that one in five new green roles are based in the capital. If growth continues on this trajectory the compounding effect means the green economy will increase London’s dominance over other cities and regions. If we want to meet our Net Zero ambitions while driving growth, then the green economy needs to be nationwide.”

20 January 2023

The governor of India’s central bank, the Reserve Bank of India (RBI), has called for a ban on all cryptocurrencies, saying they “will undermine the authority of the RBI and lead to the dollarization of the economy”.

Speaking at a recent economic conference, Shaktikanta Das stressed that the central bank’s view is to completely ban cryptocurrencies like bitcoin and ether, saying they have no underlying value.

He said: “Some people call cryptocurrency an asset, some call it a financial product, but every asset or financial product needs to have an underlying value. But cryptocurrency does not have any underlying value,” and he likened cryptocurrency trading to gambling.

“Anything whose valuation is dependent entirely on make-believe is nothing but 100% speculation, or to put it bluntly, it is gambling,” Das said. “In our country, we don’t allow gambling. If you want to allow gambling, treat it as gambling and lay down the rules.”

And he added: “Cryptocurrency masquerading as a financial product or a financial asset is a completely misplaced argument.”

The bank governor also warned about the risks crypto poses to the Indian economy. He said: “The Reserve Bank, being the monetary authority of the country as the central bank, will lose control over the money supply in the economy … It will undermine the authority of the RBI and lead to the dollarisation of the economy.” Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities.

India does not have a regulatory framework for cryptocurrencies, although the government has been working on a crypto bill for several years.

13 January 2023

The UK is set to experience one of the worst recessions and poorest recoveries among the G7 countries in 2023, according to a recent survey by the Financial Times.

The newspaper polled UK-based economists, who cited inflation, higher interest rates and the conflict in Ukraine as the main reasons for their pessimism. Government policy designed to control inflation will also contribute to the downturn, they said.

They also anticipate that household incomes will be reduced, with higher borrowing rates adding to the impact of soaring food and energy prices.

Forecasts compiled by Consensus Economics for the Financial Times show UK GDP shrinking by 1% in 2023, compared with a contraction of just 0.1% for the eurozone as a whole and growth of 0.25% in the US.

Many respondents also noted that the UK’s recovery, once it begins, is expected to be a slow one, due to “the long shadow of Brexit” and the absence of any plan to boost long-term growth, the paper said.

Meanwhile, the International Monetary Fund has said half of EU countries are expected to be hit by recession this year, with the UK's downturn expected to be both deeper and more prolonged.

13 January 2023

Some 40% of the UK’s commercial properties are underinsured, according to research by insurance broker Gallagher.

The company found that the shortfall of underinsured properties was an average of 43% against the rebuild value covered by their insurance – and where there is a gap, businesses are likely to be liable to pay the difference.

Almost all (96%) of the claims managers questioned for the survey said there has been a rise in the number of underinsured properties in the past 12 months, partly due to the rapid inflation in the cost of building materials.

Government figures published in October 2022 showed a 16.7% increase for ‘all work’ year-on year, with the cost of steel up by 13% and the price of timber up by 35% year-on-year in 2021-2022.

Rising labour costs were also a contributory factor, the survey found.

Gallagher’s research found that 65% of business leaders who own their premises have not reviewed their commercial property insurance during the past year, indicating that many could now be at risk. Some have gone even longer without looking at their policy, with one in six (16%) not having reviewed their insurance at any point in the last five years.

Gary Fletcher, Gallagher’s managing director for the south in the UK, said: “Property underinsurance is at a record high currently because of issues such as inflation and the rising cost of materials.

“However, business owners also often make the mistake that the valuation of the property is based on what it would sell for and, as property prices haven’t changed a great deal over the last year, that the valuation is the same.

“In fact, the valuation is based on rebuild costs which have unfortunately risen dramatically over the last year. As a broker we advise our clients on their insurance, and the need to review their cover when issues like this arise, but some businesses won’t necessarily realise the extent of the issue.”

The most common reasons cited by business owners for not reviewing their property valuation was thinking nothing had changed since last time they checked (29%), trying to keep insurance costs down while inflation is causing budget constraints elsewhere (23%) and simply being too busy with other priorities (20%) to think about it.

6 January 2023

A third of the world economy will be in recession this year, according to Kristalina Georgieva, MD of the International Monetary Fund (IMF).

She said that while some countries will technically not be in a recession, “it would feel like recession for hundreds of millions of people”.

Georgieva said 2023 was set to be a tougher year than 2022, as the three major economic engines – the US, EU and China – are experiencing economic slowdowns. Countries across the globe are battling the fallout from the war in Ukraine, surging prices and higher interest rates, she said.

“We expect one third of the world economy to be in recession,” Georgieva told the CBS news programme Face the Nation. “For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.

China is experiencing a surge in Covid-19 infections and has scrapped its zero-Covid policy, lifting many social restrictions. “For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative,” she said.

Georgieva added that the US was the “most resilient” of the world’s leading economies and said it may be able to avoid falling into recession.

6 January 2023

Private sector activity fell in the three months to December 2022 (down by 13%), at a slightly faster pace than in the previous month (down 7%), according to the Confederation of British Industry (CBI).

The CBI’s latest Growth Indicator also showed that private sector activity has now fallen for five consecutive quarters.

It said the steeper fall in December was largely due to a quickening decline in consumer services volumes (-54% from -32% in November), and manufacturing output falling (-9%) after a brief return to growth in November (+18%).

Distribution sales saw a slower decline (-12% from -23% in November) and business and professional services remained stagnant (-1%) for the second successive survey.

The CBI’s report said private sector activity is expected to fall at a faster pace in the next three months (-22%), due to quicker declines in business and professional services (-17%) and distribution (-30%).

 A somewhat slower fall is expected in consumer services (-40%), though this would still mark a heavy decline in volumes. Manufacturing output is expected to continue falling modestly (-10%).

Martin Sartorius, principal economist at the CBI, said: “The decline in private sector activity over December extends a downward trend that looks set to deepen going into 2023.

“Businesses continue to face a number of headwinds, with rising costs, labour shortages, and weakening demand contributing to a gloomy outlook for next year.

“It is essential that the Government supports firms with their growth ambitions through this tough economic climate. Businesses are looking for concrete plans to support investment and put the UK on a road to a sustainable growth economy.”

22 December 2022

From 1 January 2023 until 31 January 2023, HMRC’s Agent Dedicated Line (ADL) will only field questions on complex self assessment (SA) queries.

The revenue said this was “to make sure we can support you to complete your clients’ SA return.

In a letter to agents it said: “The SA peak is always our busiest time. To help us provide the best service we can through the SA peak, we want to make sure that you always use our digital services where possible and only use the ADL for SA related enquires.

“If you need to ring for other reasons throughout January you should use the normal customer lines where they will get answered, but it may take a little longer than usual.”

HMRC said agents should:

• use the Agent Dashboard for the quickest way to establish when to expect a reply from HMRC to a query or request.
• sign up for the Income Record Viewer service as an agent to access pay and tax details, employment history and tax codes.
• remind customers to use their Personal Tax Account (PTA) to access general tax information and employment histories. Customers can also use their PTA to request a SA302.

HMRC said: “We receive lots of calls to the ADL which are not complex enquiries for example, PAYE queries in relation to progress-chasing, queries about general tax information and employment histories. You can get these answers on our self-serve digital channels.”

22 December 2022

For the second year running Dubai has been named the leading hub for residence and citizenship by investment (RCBI), with over 150,000 Golden Visas issued.

Research by Swiss boutique firm Passport Legacy found that the UAE leads the world with 35 international RCBI specialists in 2022, climbing up from 30 in the previous year, the report said, adding that Emirates will be able to “sustain its growth with the minimum investment required recently having been reduced and access being opened up to talented individuals across multiple industries”.

The UAE Golden Visa scheme continues to grow in popularity, with more than 150,000 people signing up to it.

The Golden Visa can be extended to family members. Children can be sponsored by a Golden Visa or Green Residence visa holder until the age of 25 – an increase from the previous limit of 18 years – with no age limit for unmarried daughters. Children are granted a residence permit, regardless of age.

The UAE Golden Visa residency programme was first implemented in 2019 and enables expats to live, work, and study in the UAE without the need of a national sponsor and with 100 percent ownership of their business on the UAE’s mainland.

Under the new regulations, the UAE Golden Visa offers a 10-year residence to investors, entrepreneurs, ‘exceptional talents’, scientists, professionals and outstanding students and graduates, among others.

Passport Legacy UAE HQ managing partner and founder, Jeffrey Henseler, said: “The UAE’s rank as the best RCBI hub in the world is supported by several appealing factors such as world-class infrastructure, a business-friendly environment, a strategic geographic location, and favourable government policies promoting trade and investment. This has also helped the country stand pat with the first-ranked passport in the world.”

Henseler added: “With approximately 5,000 people around the world looking to secure dual citizenship through RCBI each year, and the ongoing success of the UAE Golden Visa incentive, the country will continue being increasingly sought out as a leading destination of choice.”

22 December 2022

The UK economy is likely to experience a protracted recession as inflation continues to ravage both businesses and consumer sending power, according to a new report from KPMG.

GDP will shrink 1.3% in 2023, with the rate of price increases averaging 7%, an upward revision from 5.6% in previous forecasts.

However, the Big 4 accountancy firm say while the economy will lose nearly 2% of GDP, peak to trough, the aftermath of the 2008 financial crisis led to a 6% slump.

Inflation in 2022, driven by supply chain breakdowns and Russia’s invasion of Ukraine, which spooked international energy markets, has seen prices jump 10.7%.

Economists now however think inflation peaked in October when the rate hit 11.1%. But KPMG thinks the surge in prices will extend into next year, wiping out pay growth.

In November 2022, the Office for Budget Responsibility predicted living standards would drop 7.1% over the next two years, the biggest fall since records began in the 1950s.

Yael Selfin, chief economist at KPMG UK, said: “The increase in energy and food prices during 2022, as well as higher overall inflation, have significantly reduced households’ purchasing power.”

“Rising interest rates have added another headwind to growth,” she added. In December, the Bank of England knocked rates 50 points higher for the ninth time in a row to 3.5 per cent, the steepest rate since the financial crisis.

A slowing in consumption will prompt businesses to shed workers to protect their finances. KPMG said unemployment is set to peak to 5.6% in the middle of 2024, meaning nearly 700,000 people will lose their jobs.

But the Big 4 accountant predicted the Bank will stop raising rates at 4%, about 0.5 percentage points lower than market expectations.

22 December 2022

India is the fastest growing major economy in the world and is all set to achieve $5 trillion GDP by 2024-25.
Addressing an event organised by industry body FICCI, Union Minister Nitin Gadkari said the government is aiming to boost growth and employment in a sustainable way. The road transport and highways minister said India will play a key role in achieving global Sustainable Development Goals (SDGs) 2030.

Gadkari also said that the country needs to increase its exports and reduce imports.

One of the reasons for optimism is the buoyancy of the jobs market, with a new report finding that Indian start-ups created 230,000 jobs in 2022.

The report, from financial services platform StrideOne, said that the total number of jobs created by start-ups grew at a compound annual growth rate (CAGR) of 78% between 2017-22, and are projected to grow at a CAGR of 24% in the forecast period of 2022-27.

The Indian start-up sector is the third largest in the world after the US and China. India has over 770,000 registered start-ups with the Department for Promotion of Industry and Internal Trade. The combined valuation of the start-ups is over $400 billion.

Ishpreet Singh Gandhi, Founder of StrideOne, said that growth in the sector had “unlocked several opportunities in various aspects such as scalability, alternate funding options, and expansion into the global market. It has also enhanced the capacity to create millions of jobs.”

He said: “This meteoric rise of start-ups has made India the third largest start-up ecosystem in the world, this has significantly impacted the Indian economy and showcases the ability to contribute approximately 4%-5% to the GDP of India.”

However, the report also noted that 2022 saw massive layoffs being announced by start-ups and even larger, more established tech companies. Tech giants including Amazon, Hewlett-Packard, Meta, Twitter and others also laid off employees citing prevailing market conditions as the reason.

16 December 2022

The Bank of England has raised the base rate of interest to 3.5%, meaning rates are at their highest level since October 2008.

The bank’s monetary policy committee (MPC) backed a 50 basis point rise, the ninth consecutive monthly rate rise.

Commenting on the rise, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “The interest rate rise to 3.5%, while expected, adds further pressure to firms facing soaring costs from all directions.

“With some evidence of inflation now beginning to ease, it will be vital that further interest rate action does not exacerbate the recession the UK is entering.”

He said  that the increase to the interest rate “will come as bad news for both mortgage holders and firms that have higher borrowing costs, particularly those who need to buy in bulk to mitigate against supply chain shocks.

“The Bank of England now face a conundrum of when to ease monetary policy, given that the main drivers of inflation have shifted from external factors, such as shipping and raw material costs, to domestic factors, such as energy and labour costs.

“Only business investment and growth will solve the stagflation problem. Firms need to see concrete actions on the measures that produce the right environment to invest, such as infrastructure, skills, and trade.”

16 December 2022

A leading accountancy body is advising firms to “think very carefully before they offer a verification service” for firms registering on the new Register of Overseas Entities (ROE).

As part of the Economic Crime (Transparency and Enforcement) Act 2022, overseas entities that own land or property in the UK will be required to declare their beneficial owners and register this information by 31 January 2023.

Accountants are able to undertake verification work in relation to the ROE, but the ICAEW is warning that they must ensure the accuracy of any information provided to Companies House.

“As it currently stands, a firm could be liable to prosecution if they verify documents that turn out to be false, even though there is no malicious intent. Firms should consider the AML risks associated with undertaking verification work,” the institute said.

Those having to register include overseas entities that already own or lease land or property in the UK. It also includes entities that want to purchase or sell land or property in the UK. Those affected must declare their beneficial owners or managers on the ROE within set time limits.

Additional information can be found on Companies House website.

16 December 2022

HMRC is ramping up its enforcement action against organisations using software to hide till sales, leading a recent international probe in the UK, US and Australia.

More than 100 HMRC officers visited 90 businesses across England, Scotland and Wales in a week of coordinated action against businesses suspected of using an Electronic Sales Suppression (ESS) tool to manipulate their takings to evade paying tax.

These businesses can now make a voluntary disclosure to correct their records and pay the right tax. HMRC will follow up with those who don’t come forward, which could lead to more severe penalties.

It is suspected the system was designed and sold by a group based in Staffordshire. Sales are put through the till as normal, but the system allows records to be manipulated by deleting sales and routing card payments through an offshore bank.

The group is also suspected of selling the system to businesses in the US and Australia.

Operations were carried out in Australia and the US during a week of action co-ordinated by the ground-breaking operational alliance the Joint Chiefs of Global Tax Enforcement (J5).

The latest operation follows a HMRC investigation in May into a different ESS system. Three people were arrested and investigations are ongoing.

HMRC’s Director of Fraud Investigation, Simon York, said: “This was a highly sophisticated, truly global attack on the UK and our international partners. The group behind this activity is suspected of enabling thousands of businesses to evade tax in what is a large-scale, technologically enabled fraud.

“HMRC’s ground-breaking response, with internationally co-ordinated action, marks a significant moment in our efforts to close the net on those we suspect of designing, supplying and using electronic sales suppression software.

“Most businesses pay the tax that they owe. HMRC is on the side of this honest majority and our action helps to ensure they are not being under-cut by tax-evading competitors.

“This is just the beginning of our work in this area, and we already have other suspected suppliers in our sights. We are urging all users of these types of systems to come to us, before we come to them.”

Information on making a disclosure can be found at GOV.uk.

16 December 2022

The number of company insolvencies in England and Wales rose by 21% year-on-year in November 2022, with 2,029 registered companies becoming insolvent.

Corporate insolvencies increased by 4.2% in the month to a total of 2,029, compared with October’s total of 1,948.

The figure is the second-highest monthly one for 2022, beaten only by March, when pandemic-related protections against court orders ended.

The Insolvency Service said November’s increase partly reflected more winding-up petitions from tax authorities, as well as 95 compulsory liquidations requested by a single bank, which it did not name.

Christina Fitzgerald, President of R3, the insolvency and restructuring trade body, commented: “The rise in corporate insolvency numbers has been mainly driven by an increase in Compulsory Liquidations, while Creditor Voluntary Liquidations (CVLS) and Administration numbers have also increased. Increases in CVLs and Compulsory Liquidations are the key drivers of the increase from this time last year and from three years ago.

“What we’re seeing here is a perfect storm of creditors pursuing unpaid debts and directors choosing to close down their businesses – either before this choice is taken away from them or because they have simply run out of road.

“An increasing number of businesses are buckling under the strain of more than two and half years of economic turmoil. Companies have been battered by the pandemic, rising costs, reduced spending and increasing inflation, and a growing number are now turning to an insolvency process to resolve their financial distress.”

For individuals, there was an 11% increase in Individual Voluntary Arrangements (IVAs) compared with the three months to the end of November 2021.

9 December 2022

SMEs are generating 44% of the UK’s non-household greenhouse gas emissions, according to new research from Sage and the International Chamber of Commerce (ICC).

That amounts to 160 million tonnes of greenhouse gas emissions. And, if you add supply chains, that 44% figure becomes 63%.

These SMEs want to be greener, but 90% feel restrained by obstacles such as cash flow and find it difficult to find the right solutions to improve their environmental impact.

Sage also found that only 36% of SMEs have publicly communicated a net-zero target as part of their efforts to fight climate change.

The call has now come for the government to create a comprehensive plan that empowers SMEs to reduce greenhouse gas emissions.

Specific policy recommendations include:

• Tailor all existing and future environmental standards and reporting requirements to SMEs so they are not overly complex or costly.
• Equip SMEs with adequate data, technology and training to ensure they can easily measure and reduce their environmental footprint.
• Provide a comprehensive suite of fiscal interventions, including tax credits, that can support SMEs to take more ambitious climate action and invest in net zero emissions technologies.

Read the full SME Climate Impact report here.

9 December 2022

The Financial Reporting Council (FRC) has announced new supervision measures to support smaller audit firms seeking to grow their share of the audit market without compromising audit quality.

Tier 2 and Tier 3 firms audit a minority of listed companies and other public interest entities (PIEs) within the FRC’s regulatory scope. However, their share of the market has recently grown from 9% to 13%, partly as a result of the larger Tier 1 firms de-risking their audit portfolios.

The FRC said its inspection findings at Tier 2 and Tier 3 firms “have identified significant shortcomings in audit quality. From 2016/17 to 2021/22 the FRC reviewed 51 audits at Tier 2 and Tier 3 firms and found that 67% of them required more than limited improvements. This compares to 27% for the larger Tier 1 firms over a comparable period. While this is a small sample focused on higher risks audits, the findings are unacceptable.”

Recognising the challenges smaller firms have in conducting high-quality PIE audits and the need for a more resilient audit market, the FRC is extending the scope of its supervision activities at these firms and intends to launch a new initiative, an ‘Audit Firm Scalebox’ which will include bespoke measures to help smaller firms taking on PIE audits and those scaling up the number or complexity of PIEs they audit.

The Scalebox will:

• help new PIE audit firms better understand regulatory expectations and be able to meet high-quality standards when they take on PIE audits.
• help firms to develop robust quality control systems as they grow.
• provide smaller firms, which have fewer central resources, with direct and immediate access to the regulator.

The Scalebox will not replace existing FRC supervisory work but will be operated by a separate, dedicated team in order to enhance the FRC’s role as an improvement regulator.

The FRC has also gained additional supervisory powers through the new PIE Auditor Registration regime which came into effect on 5 December 2022. This enhances the FRC’s ability to drive improvements in audit quality, ensure firms are growing sustainably and more closely monitor the auditor’s work as well as enabling the FRC to apply conditions or undertakings when concerns are identified.

The FRC’s Executive Director of Supervision, Sarah Rapson, said: “Public interest entities must be audited by audit firms with appropriate resources and robust quality control procedures to deliver high-quality audit.

“To improve competition and choice in the market it is vital that the smaller firms have the capability and capacity to ‘scale up’ without compromising audit quality. Many smaller firms inspected by the FRC are already taking effective action to address inspection findings, but it is imperative all firms take action to improve audit quality.

“The FRC acknowledges the need to do more to support smaller firms and we will publish more details of our new initiatives in due course.”

9 December 2022

The Administrative Burdens Advisory Board (ABAB) wants to hear from small businesses on how HMRC can simplify and improve tax administration.

ABAB is an independent board comprising members from a range of business backgrounds and professions who represent the small business community. It was established in 2006 to provide business insight and expertise to HMRC, acting as a ‘critical friend’ on issues relating to regulation and administration of tax for small businesses.

ABAB also challenges HMRC on their performance, providing robust, independent scrutiny against key initiatives that affect small businesses.

It said: “We can’t fundamentally change the tax system (simplification of the tax system is being progressed by the Office of Tax Simplification – and we support them in this work), but the insight and understanding, particularly around issues currently causing small businesses unnecessary problems, will help us work with HMRC to influence and target future improvements in the way it is administered.

“Our goal is to make a noticeable difference for small business by supporting HMRC to help make tax easier, quicker and simpler.”

To facilitate this work, ABAB:

• holds quarterly meetings with HMRC to discuss their performance and key initiatives that impact on business experience.
• engages practically with HMRC on big issues affecting small business, currently:
• Making Tax Digital.
• improving customer experience.
• listens to and understands small businesses and their representative bodies’ concerns, and works with HMRC to help improve them.
• provides feedback and critically assess HMRC’s performance against its commitments.

If you want to contribute then contact advisoryboard.adminburden@hmrc.gov.uk

2 December 2022

‘Heroic statements’ on climate action and social responsibility have long been marketing gimmicks used by businesses, according to the Global Reporting Initiative (GRI).

With corporate sustainability an increasingly hot topic in the financial world and beyond, headlines about ‘greenwashing’ scandals are on the rise. That means a move to mandatory assurance of sustainability data is now ‘only a matter of time’, according to GRI.

It says that with the emergence of a new global system for sustainability reporting taking shape, for both impact and financial disclosure, the attention is turning to the gatekeepers of information – the auditors. Inaccurate and incomplete data undermines the credibility of sustainability information and GRI believe effective reporting cannot be achieved without effective controls, and vice versa.

GRI’s CEO Eelco van der Enden said: “To put it simply, greenwashing is akin to fraud: it misleads stakeholders, markets and consumers – and must be stopped. We need to view exaggerating sustainability efforts as on the same level as overstating revenues or profits, because both can be equally damaging to investors and public trust.

“While many GRI reporters already provide some assurance on a voluntary basis, the transition to mandatory auditing of sustainability information is only a matter of time.”

In issue 9 of the organisation’s bulletin The GRI Perspective, called ‘Auditing to save the planet: the battle against greenwashing’, it says: “Consolidating best practice on a global level is an important stage in the professionalization of sustainability reporting auditing. GRI therefore welcomes that the IAASB is developing a sustainability reporting assurance standard.

“The shift to a sustainability focused economy affects supply chains, finance flows and education systems – and proper audits are one of the main value drivers.

“If business, investors and other stakeholders cannot trust published sustainability information, from both the financial and impact perspectives, it will be hard to demonstrate how they are contributing to a better world for everyone.”

For more go to https://tinyurl.com/553x32y5

2 December 2022

The UK has signed up to two tax treaties that mean HMRC will receive more information from overseas tax authorities on income from digital platforms and certain offshore structuring.

The two treaties are called multi-lateral competent authority agreements (MCAA), and each covers a different aspect of activity.

The first relates to the automatic exchange of information under the OECD Model Rules for Reporting by Digital Platforms. These regulations are expected to come into force from 1 January 2024. The UK is one of 22 signatories to this agreement, including a number of EU countries as well as Canada and New Zealand.

The second MCAA relates to the automatic exchange of information about arrangements that attempt to either circumvent the Common Reporting Standard or prevent the identification of beneficial owners of entities and trusts.

This agreement was signed by the UK and only 15 other countries; other signatories include a number of tax havens, such as Jersey, Guernsey, Isle of Man, Bermuda and the Cayman Islands.

Steven Porter, a tax disputes expert at Pinsent Masons, said these new arrangements will come into force between two signatories when they have made the necessary notifications to the OECD, which will maintain a list of the exchanging countries. The exchange of information will happen in both directions, so HMRC will disclose information it has obtained from UK reports to its fellow signatories as well as receive information from them.

He said: “It is not surprising that the UK is an early adopter of automatic exchange of information on these matters, since it has committed to adopting both measures for some time.

“While we wait for implementation of the exchanges of information and for more countries to sign up, taxpayers with structures in place that may be affected by the MDRs or with income from a digital platform that has not been declared should use the time to regularise their tax affairs. A voluntary disclosure now is likely to be treated much more favourably by HMRC than after HMRC have obtained data from their fellow signatories and started enquiries.”

2 December 2022

One in five working accountants say their job progression is being negatively affected by the cost-of-living crisis, a new survey from CABA has found.

Of those, two-thirds (65%) feel their employer is focusing more on the business’ finances than employee progression, and almost two in five (38%) are having to fill in for others due to cost cuts. An additional two in five (40%) are working more regularly from home to avoid the cost of commuting, prompting concerns about the knock-on effect on progression due to their absence from the office.

CABA also found that some 27% of accountants believe the crisis has meant there are simply fewer opportunities available at work. One in five (22%) are now worried about losing their jobs, while 16% have either started or considered taking up an additional job to help cope with the cost-of-living crisis.

Mark Pearce, Head of Service Delivery and Development at caba, comments: “Trying to develop your career can be tough, especially if you’re working in a particularly busy role, and the cost-of-living crisis has only heightened this challenge.

“Whether you’re exhausted from juggling additional jobs, missing out on opportunities in the office or feel like your development has been de-prioritised you’re not alone, and there is support out there for you.”

25 November 2022

Specific accounting standards are urgently needed for new asset types such as certified carbon offset credits, says a new report from Imperial College Business School.

The report, ‘Financial Accounting for Carbon Finance: A New Standard for a New Paradigm’, shows how emerging global carbon markets and new investable assets make the need for new accounting regulations more pressing in the fight against climate change.

The new accounting standards will also be a major step towards achieving transparency, the researchers said. Despite the lack of clarity around accounting standards, in 2021 global carbon markets grew to a record $851 billion. Accounting standards – particularly around carbon credits – are now widely considered crucial to scaling up carbon markets and achieving net zero by 2050.

To achieve change, report author Dr Raul Rosales said there needs to be a re-think on the definition of carbon offsets. Rather than being classed as intangible assets or inventories, carbon offsets should be considered as investable assets used as part of a bank’s offering to corporate clients for ‘offsetting’ and ‘hedging’ purposes.

Imperial College Business School said: “While the emergence of global carbon markets has created numerous opportunities, it also presents significant challenges. In particular, the new investable assets that this shift has created, in the form of carbon offsets, call for a specific standard for this new asset class.

“Relatedly, there is a need to review and expand the existing definition of financial instruments in this context. A transparent and faithful accounting representation is needed sooner rather than later, as currently, there is no specific accounting definition for carbon offsets as financial instruments in the financial accounting regulations, nor standard guidelines for this.”

The report can be accessed here.

25 November 2022

UK companies are global leaders in ESG reporting, scoring in the top quartile of the 58 countries measured across the Environmental, Social and Governance (ESG) reporting criteria assessed, according to the findings of KPMG’s Survey of Sustainability Reporting.

First published in 1993, the KPMG Survey of Sustainability Reporting is produced every two years and this year’s edition provides analysis of the ESG reports from 5,800 companies across 58 countries and jurisdictions.

However, the latest findings show that there is still a disconnect between the urgency of addressing climate change and social equity, and the ‘hard results’ provided by businesses. That said, KPMG found sustainability reporting has grown steadily. The world’s top 250 companies – known as the G250 – are almost all providing some form of sustainability reporting, with 96% of this group reporting on sustainability or ESG matters.

25 November 2022

New employees can use the secure HMRC app to find out their personal tax information and pass details on to their employer – saving them time.

As tens of thousands of people start seasonal jobs over the next few weeks, they can use the HM Revenue and Customs (HMRC) app to save them time to find details they need to pass on to their employer.

In the 12 months up to October 2022, HMRC received almost 3 million calls from people asking for information that is now readily available on the app, with more than 340,000 using it to access employment and income information since July 2022.

New functions and capability mean that customers can access their income and employment history, salary information, National Insurance number or tax code via the app, whenever they need it. The information can be downloaded and printed – so there is no need to call HMRC to ask for it to be sent in the post. This means that using the app rather than calling the helpline makes the process much quicker.

Myrtle Lloyd, HMRC’s Director General of Customer Services, said: “Whether you’re starting a new role in customer services, delivering parcels or managing warehouse logistics – the HMRC app is a secure and easy way to access your tax code, National Insurance number and employment details so you can let your new employer know. It’s accessible at the touch of a button and is quicker than calling HMRC.”

App users will need a user ID and password, so they can access their personal information. If customers need to set one up, the app will guide them through the process.

More than 3.5 million people have used the HMRC app since it launched in September 2016, and more than 1.6 million customers used it at least once in the last year.

HMRC has released a video which explains how customers can use the HMRC app to check their employment history, income, tax codes and National Insurance number.

To find out how to download it, search ‘HMRC app’ on GOV.UK.

18 November 2022

The time is right for a new tax on extreme carbon emitters, according to a new report from Autonomy, an independent research organisation.

The top 1% of earners – around 670,000 people – consume more carbon than the 6.7 million people at the bottom of the income scale. The report, called ‘A Climate Fund for Climate Action: the benefits of taxing extreme carbon emitters’, said: “In other words, it would take 26 years for a low earner in the UK to consume as much carbon as the very richest do in a single year.”

The report says there has been a huge missed opportunity to use tax to ensure those who pollute the earth pay some of the cost of cleaning it up. It explains that if a carbon tax had been set at the price proposed by the Swedish Ministry of Finance (£115 per ton of carbon), the revenue raised from the top 1% would have amounted to £126 billion over the past 20 years.

It said £126 billion would have been sufficient for the UK to:

• Invest in almost five times current offshore wind capacity.
• Triple current solar (PV) capacity.
• Double onshore wind capacity.
• Add 2.1 GW of tidal energy capacity and add a similar amount of pumped storage hydropower.
• Retrofit almost eight million homes, upgrading their efficiency, cutting energy bills while reducing overall emissions.

“These investments would amount to drastically replacing gas-generated energy with renewable sources, and would decrease dependency on imports,” Autonomy said.

18 November 2022

Significant progress on transparency and the exchange of tax information is being made across the world, according to the OECD’s Global Forum.

In its ‘Peer Review of the Automatic Exchange of Financial Account Information 2022’ report, the organisation notes that jurisdictions are automatically exchanging information on 111 million accounts, and are ensuring that financial institutions comply with their legal obligations.

The report contains the first peer reviews with ‘effectiveness ratings’ for the 99 countries and jurisdictions that committed to starting Automatic Exchange of Information (AEOI) in 2017 or 2018. It shows that virtually all jurisdictions have put in place the necessary legal frameworks and successfully started exchanges, and are exchanging information without significant timing or technical issues.

Two-thirds of the jurisdictions ensuring financial institutions are reporting accurate information have been given ‘On Track’ ratings. A further 15 jurisdictions are found to have put in place credible compliance frameworks. The need for further implementation actions led these jurisdictions to be rated as ‘Partially Compliant’.

And 19 jurisdictions have been found to have fundamental deficiencies in their frameworks; they have not yet completed the development of their operational frameworks to verify financial institutions’ compliance. They were rated ‘Non-Compliant’.

“The Global Forum continues to shape the tax transparency landscape,” said OECD Secretary-General Mathias Cormann. “Widening access to financial account information for tax administrations helps ensure everyone pays their fair share of tax, boosting revenue mobilisation for countries worldwide, and particularly for developing countries.”

In 2022, countries automatically exchanged information on 111 million financial accounts worldwide, covering total assets of €11 trillion. Over €114 billion in additional tax revenues have been identified through voluntary disclosure programmes, offshore tax investigations and related measures since 2009.

 “The Global Forum is working to guarantee that all its members are supported to implement the tax transparency standards, and to use them to fight tax evasion and mobilise domestic resources,” said Maria Jose Garde, Chair of the Global Forum. “No jurisdiction can be left behind. This is the idea that has defined the spirit in which our 165 members work together to keep advancing tax transparency, and it shall continue to be the case.”

18 November 2022

The world is changing fast and accountants need to innovate and change with it. That’s the theme of the upcoming LSBU Business School/PQ magazine 6th annual conference, which will examine how accountants can adapt and lead from the front.

This free online conference takes place on Wednesday 7 December. You can sign up to ‘Accountants are the new innovators – don’t be left behind’ at https://tinyurl.com/5yu59c7y

Topics under discussion include:

• What innovation looks like for accountants.
• Blockchain and how it can change your life forever.
• How all firms can become net zero.
• What the job market looks like right now.
• Integrating carbon accounting into the curriculum.
• How the NHS survived the pandemic.

The line-up includes some of the most outspoken and provocative speakers in the profession, including PQ columnist Lord Sikka and Taxwatch’s Professor Richard Murphy.

The afternoon session will be kicked-off by Generation CFO’s Chris Argent. Other speakers include Claire Gravil, Head of Finance, Direct Commissioning COVID Vaccination Programme, NHS England and NHS Improvement; Sotiris Kyriacou, Head of London Skills Development Network & Programme Lead – Coaching & Mentoring (London NHS Region); Professor Ian Thomson, Director, Lloyds Banking Group for Responsible Business and University of Birmingham; Dr Ross Thompson, Lecturer in Accountancy and Finance, Arden University; and David Rothera, Climate Project Manager, Net Zero Now.

The day will be wrapped up with a roundtable debate, where delegates will be able to ask the panellists questions.

11 November 2022

Specific accounting standards are urgently needed for new asset types such as certified carbon offset credits, says a new report from Imperial College Business School.

The report, Financial Accounting for Carbon Finance: A New Standard for a New Paradigm, shows how emerging global carbon markets and new investable assets make the need for new accounting regulations more pressing in the fight against climate change.

The new accounting standards will also be a major step towards achieving transparency, the researchers said. Despite the lack of clarity around accounting standards, in 2021 global carbon markets grew to a record $851 billion. Accounting standards – particularly around carbon credits – are now widely considered crucial to scaling up carbon markets and achieving net zero by 2050.

To achieve change report author Dr Raul Rosales said there needs to be a re-think on the definition of carbon offsets. Rather than being classed as intangible assets or inventories, carbon offsets should be considered as investable assets used as part of a bank’s offering to corporate clients for ‘offsetting’ and ‘hedging’ purposes.

The report can be accessed here.

11 November 2022

HMRC’s approach to tackling tax fraud via civil channels has created a serious enforcement gap, according to a new report.

The report, issued jointly by the All-Party Parliamentary Group on Anti-Corruption & Responsible Tax (APPG) and TaxWatch, said that cases are frequently handled as tax avoidance rather than evasion, provided they comply with the “rules of the game”.

The report recommends an immediate legislative change that would see more cases going down the criminal rather than the civil route.

The report says: “We recommend that HMRC officers should be required by law to consider for separate investigation and potential prosecution the promoters and enablers involved in tax avoidance arrangement.

“The case should then be referred for prosecution unless a determination is made that a successful prosecution would be unlikely or contrary to the public interest.

“Further, any civil settlement reached between HMRC and a taxpayer should be conditional on a requirement on the taxpayer to co-operate with any future criminal investigation into their advisers.”

The report acknowledges also says that those involved in legitimate tax planning “should have nothing to fear as the egregious or aggressive instances of tax avoidance will be self-selecting”. It contends that trying to expressly carve out legitimate tax planning based on a civil law understanding of tax avoidance would reinstate the precise problem that the intervention seeks to address.

The second longer-term recommendation is to consider the option of separating the enforcement of tax law from the collection of tax.

The report says: “In several European countries, the collection of tax is seen as a separate activity from law enforcement, with the authority to investigate tax crime held by branches of the police specializing in economic crime. An additional recommendation, for the longer term, is therefore that the option be considered of separating the enforcement of tax law from the collection of tax altogether.”

4 November 2022

The International Accounting Standards Board (IASB) has issued amendments to IAS 1 Presentation of Financial Statements that aim to improve the information companies provide about long-term debt with covenants.

IAS 1 requires a company to classify debt as non-current only if the company can avoid settling the debt in the 12 months after the reporting date. However, a company’s ability to do so is often subject to complying with covenants. For example, a company might have long-term debt that could become repayable within 12 months if the company fails to comply with covenants in that 12-month period.

The amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in the notes to the financial statements.

The IASB expects the amendments to improve the information a company provides about long-term debt with covenants by enabling investors to understand the risk that such debt could become repayable early.

The amendments also respond to stakeholders’ feedback on the classification of debt as current or non-current when applying requirements introduced in 2020 that are not yet in effect.

The amendments are effective for annual reporting periods beginning on or after 1 January 2024, with early adoption permitted.

4 November 2022

Many young people from disadvantaged backgrounds still believe that a culture of ‘not what you know, but who you know’ is a barrier to progression and social mobility, according to new research from BDO.

A third of young people from a lower social-economic backgrounds (SEB) say a lack of connections or ‘professional network’ could have a negative impact when applying for jobs.

Almost a third (31%) also believe that you may be less successful in a job application or interview if the employer or hiring manager has a different background to you.

Differences between the employer and employee’s background are also considered to be a barrier when it comes to career progression and reaching more senior positions.

Almost a third (30%) of those from a lower SEB believe job progression and promotions could be negatively impacted if the person you work for has a different background to you, for example went to a different type of school or were raised in a different area. This compares with less than a quarter (23%) of those from other backgrounds who believe the same.

4 November 2022

The US and Europe risk losing billions in tax revenue if they fail to implement the global tax deal agreed by 136 countries in Autumn 2021, which would force multinational corporations with annual revenues of more than €750m (£643m) pay tax at a minimum 15%.

The OECD has said progress on the tax deal has stalled. The US has faced criticism for delaying the imposition of the tax, while the EU has faced opposition to the plans from members states Poland and Hungary.

The OECD’s recently departed tax chief, Pascal Saint-Amans, told the Financial Times that if there’s no agreement, countries will begin implementing the deal on their own. And Germany has said it will implement the rules unilaterally.

Saint-Amans said he sees “serious risks of unilateral measures, and therefore trade sanctions”. He added: “If there is no agreement, countries will move. They will move unilaterally, because they can. That’s our legal and political assessment.”

4 November 2022

UK VAT registered companies that failed to sign up for Making Tax Digital for VAT by the 1 November deadline will be liable for non-compliance penalties, and won’t be able to file their VAT returns. And failing to file their VAT return will leave the firms liable to a default surcharge penalty.

Tax compliance tax firm Avalara’s research found that up to 832,000 businesses had not registered for MTD by 31 October – up to 33% of UK VAT registered businesses.

MTD was extended to all UK VAT registered businesses, regardless of their size or turnover, or whether they voluntarily registered for VAT, on 1 April this year. And on 1 November HMRC closed its web-based VAT online service, meaning any business that hasn’t already signed up for MTD and started using MTD compatible software now won’t be able to file their UK VAT returns.

A new VAT penalty regime comes into effect from January 2023, with late return submission penalties and late payment penalties and interest applying.

Any UK VAT registered business could face penalties of up to £1,600 a year if they do not file their UK VAT return to HMRC using compatible software.

Businesses must also use the checking functions with the software they use. Where checks have not been run and errors have been identified, HMRC may charge penalties.

“Time is ticking for UK VAT registered businesses who are yet to sign up for MTD or meet the main requirements,” said Alex Baulf, senior director of global indirect tax at Avalara.

“With a range of different penalties for failing to comply that could be in the thousands, as well as the inability to submit a VAT return and receive a VAT refund, businesses looking to stay afloat during what is set to be a tough winter want to ensure non-compliance isn’t added to the list of bills to pay.”

28 October 2022

Companies must ensure investors and other stakeholders receive reliable information about a company’s financial performance and prospects, the Financial Reporting Council (FRC) said in its annual report.

In its Annual Review of Corporate Reporting report, the FRC reiterated the need for high-quality disclosures from companies, in order to support more informed decision-making.

The FRC reviewed 252 companies’ accounts and, while the overall quality of corporate reporting within the FTSE 350 had been maintained, 27 companies were required to restate aspects of their accounts, the report said.

The FRC said it “was disappointed to find errors in cash flow statements, an area where both companies and their auditors must improve”. The review also identified scope for improvement in reporting on financial instruments and deferred tax assets.

It added: “In times of economic uncertainty companies must clearly identify their principal risks, ensure these are reflected in their business strategy and disclosed in their annual report and accounts. To support better disclosures, the review includes examples of key matters companies must consider during uncertain times such as the need to disclose significant judgements in relation to going concern assessments.”

The FRC’s Executive Director of Supervision Sarah Rapson said: “During periods of economic and geopolitical uncertainty it is vital that companies not only comply with relevant reporting requirements but deliver high-quality information for investors and other stakeholders.

“While these are challenging economic times, companies need to be agile, continually assess evolving risks and ensure these are clearly explained in their annual reports.

“As an improvement regulator, the FRC will be closely monitoring companies cash flow statements and other areas of reporting where we expect to see further improvements.”

4 October 2022

Complying with Making Tax Digital for VAT requirements has increased costs ‘slightly’ or ‘significantly’ for 42% of accountants and tax agents, while 34% said it had increased the time spent ‘slightly’ or ‘significantly’, according to a new survey.

And some 28% felt that it had both increased the time and their costs ‘slightly’ or ‘significantly’.

The first Tell ABAB Survey since the end of the EU Exit Transition Period and the Covid-19 pandemic focused on multiple themes, including:

• Making Tax Digital (MTD).
• Covid-19 business support schemes.
• HMRC forms.

Some 3,000 people took part in the survey – 68% from business and 32% identifying as tax agents.

From April 2019, VAT registered businesses with a turnover exceeding the £85,000 VAT registration threshold needed to keep VAT records digitally and file their VAT returns using Making Tax Digital (MTD) compatible software.

The Administrative Burdens Advisory Board (ABAB) survey found 68% of respondents said their business was VAT registered, with an 90% of those already keeping digital records and filing VAT returns using MTD compatible software.

Those that were already keeping digital records were asked to rate their experience of MTD, with 54% describing it as ‘Very easy’ or ‘Easy’. Some 47% of respondents said there was no significant effect on cost and 42% saying there was no significant effect on time.

However, 42% reported that it had increased their costs ‘slightly’ or ‘significantly’ whilst 34% said it had increased the time spent ‘slightly’ or ‘significantly’; 28% felt that it had both increased the time and their cost ‘slightly’ or ‘significantly’.

Regarding the government’s Covid-19 support schemes, survey responses were mainly positive, with 55% of respondents describing them as ‘Excellent’ or ‘Good’. Only 16% said that they thought HMRC’s response to the pandemic was ‘Poor’.

When analysed by age groups, there were some differences in how each sector answered, with a smaller percentage of those aged 44 or below giving a score of ‘Excellent’. There was also a big difference between the 25-34 and 45-54 age bands when looking at the percentage who answered that the HMRC Covid19 response was ‘Good’, with 29% and 44% respectively.

When asked how easy it was to make a SEISS claim, 77% gave a score of ‘Excellent’ or ‘Good’, with only 8% giving a response of ‘Poor’. However, 74% of respondents said the question was not applicable for them or gave no answer, so the percentages given above are calculated from 791 responses.

Of those that gave an answer for ‘how easy did you find the process for making a JRS claim?’ 67% gave a score of ‘Excellent’ or ‘Good’ with only 9% giving a response of ‘Poor’. In total, 40% of respondents gave no answer, so these percentages are calculated from 1,799 responses.

One question that elicited a more negative response was ‘how easy was it to contact and work with HMRC to amend a claim?’ For those who answered the question and did not select ‘not applicable’, 41% gave a score of ‘Poor’ and only 26% gave a response of ‘Excellent’ or ‘Good’. These percentages are calculated from 947 responses.

The ABAB survey also asked for views on which HMRC forms were the most problematic. Of the 800 comments made, the forms mentioned repeatedly were P11D/P11Db; 64-8; CT61; and CT600.

The comments received indicate a need to standardise forms, allow forms to be saved when partially completed, and called for a clearer use of language.

Survey participants felt that all forms should be online, and processed online, without the need to be printed and posted back to HMRC.

• You can access the full report by going to https://tinyurl.com/4v3huyhv

28 October 2022

Trade between the UK and India hit record levels despite the fact that the much-vaunted free trade agreement between the two countries has yet to be signed.

Exports from the UK in July (£939m) and August (£913m) surpassed £900m for the first time, putting the total volume of exports to India so far in 2022 at £5.5bn (January-August). The figure beats all full calendar years on record except 2011 (£6.4bn), according to new data compiled by financial services firm Ebury.

Imports of goods from India into the UK also hit an all-time high in August 2022, reaching £990m. Imports were in excess of £900m for seven consecutive months from January 2022, having never broken that figure before.

“India’s growing economy and demographic changes such as a growing middle-class make it likely to become increasingly important over the coming years as the UK widens its trading links post-Brexit,” said Jack Sirett, a partner at Ebury.

“A successfully negotiated FTA would put rocket fuel in trading volumes which are already rising rapidly, particularly in sectors such as automotive, agri-food, machinery and pharmaceutical industries that are keen to export to India by providing further certainty and decreasing tariffs,” Sirett said.

The UK government had pledged to sign a trade deal with India by 24 October (Diwali), but negotiations between the two countries are still ongoing. The UK’s Department for International Trade (DIT) said the two governments have “closed a majority of chapters” of the deal.

According to City AM, there has been fundamental difficulties in getting the Indian government to change its protectionist stance and to allow more British services firms access to the country.

A DIT spokesperson said: “India is an economic superpower, projected to be to be the world’s third largest economy by 2050. Improving access to this dynamic market will provide huge opportunities for UK businesses, building on a trading relationship currently worth more than £24 billion.

“That’s why we are negotiating an ambitious Free Trade Agreement that works for both countries. We have already closed the majority of chapters and look forward to the next round of talks shortly.”

21 October 2022

More than one in 10 of all Limited Liability Partnerships (LLPs) incorporated in Britain in the past 20 years bear the hallmarks of shell companies used for serious financial crimes, according to a new report from Transparency International UK.

Its ‘Partners in Crime’ report uncovers how more than 21,000 LLPs – 14% of all LLPs set up between 2001 and 2021 – share almost identical characteristics with those known to have been used in major corruption and money laundering schemes.

Transparency International estimates the economic damage caused runs into hundreds of billions of pounds, much of this flowing out of Russia.

The organisation has welcomed the Economic Crime and Corporate Transparency Bill legislation, currently in the Committee stage in Parliament. It includes reforms that could help end the abuse of the UK’s company registration system, including new powers for Companies House. But it added that the measures “would only solve part of the problem and still leave vulnerabilities for money launderers to exploit”.

Duncan Hames, Director of Policy at Transparency International UK, said: “This research lays bare the seemingly industrial-scale abuse of UK LLPs and how this type of company has been used to facilitate billions in economic harm.

“With a substantial proportion of LLPs showing red flags for use in high-end money laundering, it’s clear that those engaged in corruption and other major financial crimes are one step ahead of the Government’s response. Key to getting on the front foot is a long-overdue reform of Companies House, effective anti-money laundering regulators and properly resourced law enforcement that can provide a credible deterrent to economic crime.”

He added: “Parliament should prohibit opaque corporate control of UK-registered companies to further strengthen this legislation and buttress Britain's defences against dirty money.”

Transparency International said the red flags to look out for include:

• one or more of the corporate partners based in one of 21 high-risk jurisdictions (HRJs), 15 of which are either British Overseas Territories or members of Commonwealth nations.
• 10 or fewer partners.
• relatively few, if any, ‘natural persons’ (or beneficial owners) as partners.
• partners spanning dozens, sometimes hundreds, of LLPs.
• partners appearing in tandem alongside their ‘pair’, usually another secretive offshore corporate partner, on the paperwork of 10 or more LLPs.
• both the LLPs and their officers registered at one of a relatively small number of addresses, typically alongside hundreds of other identikit LLPs.
• where they have data on Persons with Significant Control (PSC), it is frequently either non-compliant or a natural person based in Russia, Ukraine, a Baltic state or somewhere else in the former Soviet Union.

21 October 2022

The online VAT return will continue to be available for a short period for businesses trading under the VAT registration threshold, HMRC has confirmed.

HMRC will be closing the online VAT return from 1 November for businesses filing VAT returns quarterly or monthly. However, the tax authority said that businesses with a taxable turnover of less than £85,000 a year can continue to use their VAT online account for a limited period to file VAT returns due on 7 November.

The ICAEW said: “This is a welcome concession as these businesses have only been subject to the Making Tax Digital (MTD) VAT rules since this April. It will effectively give taxpayers between one and three additional months to register for MTD.”

HMRC advising that businesses that have not yet registered for MTD (and are not exempt) should follow these steps:

• Choose MTD-compatible software – you can find a list of software, including free options, on the gov.uk website.
• Check the permissions in the software – go to gov.uk and search ‘manage permissions for tax software’ for information on how to do this.
• Keep digital records for current and future VAT returns – you can find out what records they need to keep on gov.uk.
• Sign up for MTD and file future VAT returns using the MTD-compatible software – to find out how to do this go to gov.uk and search ‘record VAT’.

Businesses filing VAT returns annually will be able to use their VAT online account to file VAT returns until 15 May 2023.

21 October 2022

Queen Mary University of London and PQ magazine have joined forces to provide you with a free evening looking at the future of tax.

The PQ team and a whole list of guests will be descending on Queen Mary University on Wednesday 26 October to discuss how the government will tax us in the future and what the new priorities should be. Please come and join us.

The evening will start at 6pm, but doors will open at 5pm for networking. To sign up go to https://tinyurl.com/2psjj4ey.

PQ magazine editor Graham Hambly said: “The panel will include ICAEW’s head of taxation policy, Anita Monteith, and ACCA’s Head of Policy, Technical and Strategic Engagement, Glenn Collins. We will also have Kaplan’s Neil da Costa and Queen Mary’s very own Andrew Wade on hand. And Makayla Combes from the Ad Valorem Group will also be there to answer your questions.”

14 October 2022

Current corporate reporting by a majority of companies producing the highest levels of greenhouse gas emissions would not comply with proposed new requirements from the International Sustainability Standards Board (ISSB).

This is the key finding from research carried out by ACCA and the Adam Smith Business School at Glasgow University, which aimed to find out how prepared companies are for new climate-related reporting rules being developed by the ISSB, which was formed last November.

Analysis found that most companies fall short of the type and level of disclosure that the ISSB is proposing. The researchers also found that disclosures were often scattered and duplicated across different company.

14 October 2022

The International Federation of Accountants (IFAC) has launched a pilot accountancy capacity building programmes in both Ghana and Burkina Faso.

IFAC has joined forces with Gavi, the Vaccine Alliance, and the Global Fund to Fight AIDS, Tuberculosis and Malaria, to help strengthen the accountancy profession’s infrastructure in both countries.

The pilot projects aim to support robust accounting practices in the public health sector, help to improve the financial management of donor funds, and provide long-term benefits to the economy and society.

Assietou Diouf, managing director, finance and operations at Gavi, said: “Sound financial management is key to ensuring Gavi’s programmes are able to improve the lives of as many people as possible.

“These pilot projects in Ghana and Burkina Faso are intended to boost transparency and build local skills and capacity at the local level. However, beyond that, we also expect them to contribute to a framework for better accounting practices that could one day benefit all Gavi-supported countries.”

7 October 2022

The International Accounting Standards Board (IASB) has issued amendments to IFRS 16 Leases, which add to requirements explaining how a company accounts for a sale and leaseback after the date of the transaction.

A sale and leaseback is a transaction where a company sells an asset and leases that same asset back for a period of time from the new owner.

IFRS 16 includes requirements on how to account for a sale and leaseback at the date the transaction takes place. However, IFRS 16 had previously not specified how to measure the transaction when reporting after that date. The amendments issued add to the sale and leaseback requirements in IFRS 16, thereby supporting the consistent application of the Accounting Standard.

These amendments will not change the accounting for leases other than those arising in a sale and leaseback transaction.

7 October 2022

The Chancellor Kwasi Kwarteng is to reverse recent amendments to the controversial IR35 off-payroll rules, scrapping the reforms that were rolled out in the public and private sectors in 2017 and 2021 respectively.

From April 2023, the original rules will apply, making contractors responsible for assessing their own tax affairs.

Dave Chaplin, CEO of tax compliance firm IR35 Shield, said: “Contractors and businesses will be celebrating as Liz Truss and her government have not only kept to their promise but gone further and repealed a legislation that has had a damaging effect on business and contractors’ livelihoods for the past five years.

“These onerous reforms were never going to work and were flawed from the start. The Chancellor has done the right thing and removed an unnecessary burden for firms of trying to solve a complex riddle every time they hire a worker.”

The Chancellor said IR35 reform had imposed “unnecessary cost and complexity” for “many businesses”.

In its published Growth Plan, the government says: “From [April 2023], workers providing their services via an intermediary will once again be responsible for determining their employment status.

“And [they will be responsible for] paying the appropriate amount tax and National Insurance contributions.

“This will free up time and money for businesses that engage contractors, that could be put towards other priorities.”

The ContractorUK website said: “Until now, a long line of Treasury ministers, backed by HMRC, have said the IR35 changes of 2017/2021 do not affect the genuinely self-employed, totally at odds with evidence that some organisations have outright banned all limited company workers.

“Along with a planned increase in corporation tax from 2023 being cancelled, and the April 2021 rise in NICs being reversed, advisers to contractors are almost lost for words at IR35 reform being U-turned.

And IR 35 expert Seb Maley, from Qdos, commented: “The fiscal changes announced today are likely to go down as some of the most pro-contracting in memory.

“Repealing IR35 reform is a huge victory for contractors. The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them.”

Maley added: “The government mustn’t waste time, though. The last thing contractors and businesses impacted by IR35 need is uncertainty. A clear and robust roadmap for reversing IR35 reform in both the public and private sectors is needed.”

30 September 2022

The International Standards Board (IASB) is proposing an update to IFRS for SMEs.

The IASB’s proposals include updating the principles of the standard to align to those of The Conceptual Framework for Financial Reporting issued in 2018 and simplified requirements based on IFRS 13 Fair Value Measurement and IFRS 15 Revenue from Contracts with Customers.

The IASB is also proposing to update the standard for new requirements in IFRS 3 Business Combinations, IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements. The proposed updates include other improvements made to full IFRS Accounting Standards since the second edition of IFRS for SMEs Accounting Standard was published in 2015.

Andreas Barckow, Chair of the IASB, said: “The IFRS for SMEs Accounting Standard has always been about keeping accounting requirements as simple as possible and cost-effective for eligible companies. These proposed updates respond to the feedback on how to keep the Standard current while maintaining its simplicity.”

23 September 2022

The International Federation of Accountants (IFAC) has unveiled its Action Plan for Fighting Corruption and Economic Crime, outlining the global profession’s approach to fighting corruption, working across all sectors.

Launching the Action Plan, IFAC said it provides “a framework for how we can enhance the accountancy profession’s role in combating corruption and economic crimes”.

The framework is organized into five pillars, which are:

• harnessing the full potential of education and professional development;
• supporting global standards;
• contributing towards evidence-based policymaking;
• strengthening impact through engagement and public partnership; and
• contributing expertise through thought leadership and advocacy.

IFAC said: “These five pillars are broad enough to provide a consistent framework for actions to support the plan as it evolves over time. The boundaries between the different pillars are not meant to be clear cut.

“The pillars are founded on the need for a whole-ecosystem approach, with the global accountancy profession as a core part and contributor to that ecosystem. Other key actors include political leaders, government agencies, civil servants, business leaders, add company management and those charged with governance, global policymakers, law enforcement, other regulated professionals (such as lawyers), and individual citizens and taxpayers. These actors all must work together in an increasingly global—yet still largely domestic—policy framework of treaties, legislation, and regulations.”

It added: “While many of the actions will be conducted by IFAC, it is an action plan for the whole profession. We hope that professional accountancy organizations (PAOs), Network Partners, and individual professional accountants support this Action Plan and continue to engage on how to maximize the profession’s contributions.”

16 September 2022

Large UK companies can utilise HMRC’s ‘Check Employment Status for Tax’ (CEST) tool when determining employment status under the IR35 rules, the tax authority has confirmed.

In updated guidance, it said that “a status determination using CEST would be considered to represent HMRC’s known position”, as long as the information is accurate and the results are not “achieved through contrived arrangements”.

Tax expert Penny Simmons of law firm Pinsent Masons said: “If the business follows the CEST determination, there would then be no requirement to notify. Large businesses are required to notify HMRC where they have adopted an uncertain tax treatment, which will be a treatment contrary to HMRC’s ‘known position’, under new rules introduced on 1 April 2022.

“Whilst there still remains no obligation for a business to use CEST, by categorising a CEST determination as a ‘known position’, HMRC has provided another compelling reason for large businesses to use CEST when making IR35 determinations. It is important to remember that the uncertain tax treatment notification rules only apply to large businesses and therefore, HMRC’s guidance here is not directly applicable to smaller businesses.”

If the CEST tool is unable to make a determination, the “known position criterion would not be met” the guidance confirms. In these circumstances, the business would be expected to review HMRC’s guidance “to determine whether the principles in the guidance provide HMRC’s known position”.

“Although CEST and has been widely criticised – it fails to provide a determination in 15% of cases and is less effective in complex cases – all businesses, whether large or small, should still use CEST as part of a robust IR35 compliance process. In complex cases, when making determinations, it may be advisable to use a combination of CEST and expert judgment,” said Simmons.

She added: “If a business is faced with an HMRC IR35 enquiry, proper use of CEST may also support a contention that the business has taken reasonable care when making determinations, since HMRC has previously confirmed that it will stand by a CEST determination if the information provided is true and accurate.”

16 September 2022

Companies House is set to launch its new WebFiling service, which is says will have improved functionality and upgraded security features, and is the first step in creating a single sign-in across all its services.

New benefits include:

• multi-factor authentication.
• the ability to link your company to your WebFiling account to give you more control over your filings.
• the ability to digitally authorise people to file on your behalf on WebFiling, and to remove authorisation.
• easily seeing who’s digitally authorised to file for your company.
• an option to sign up to emails to help you with the running of your company.

Companies House said: “Once you’ve linked your company to your account, you will not need to enter your authentication code every time you file online. If you own or file on behalf of more than one company, you’ll be able to manage all your companies from one account.

“Once the new account is introduced, you’ll also be able to digitally authorise yourself and other directors to file for your new company as part of the online incorporation process.”

It added: “This is the first step in creating a single sign-in across all Companies House services, and it’s an important milestone in our 2020 to 2025 strategy.

“If you do not have a WebFiling account, you do not need to do anything at this time. If you sign up for a WebFiling account in the future, you’ll have access to these benefits.”

9 September 2022

HMRC has released further guidance on Making Tax Digital for income tax self assessment that explains what taxpayers must do to comply with the requirements.

The tax authority has issued four sets of guidance to help taxpayers through the process of signing up for Making Tax Digital for income tax self assessment (MTD ITSA). They are:

• Check if you can sign up for Making Tax Digital for Income Tax
• Using Making Tax Digital for Income Tax
• Sign up as an individual for Making Tax Digital for Income Tax
• Check when to sign up for Making Tax Digital for Income Tax

This guidance explains that those not needing to sign up to MTD ITSA include:

• a trustee, including a charitable trustee or a trustee of non-registered pension schemes.
• a representative of someone who has died.
• a non-resident company (although they can voluntarily sign up if their qualifying income is above £10,000).
• partnerships don’t need to sign up until 6 April 2025.
• Non-doms do not need to meet the requirements in relation to their foreign income, but do for their UK self-employment income.

The guidance also confirms that the MTD ITSA requirements must be met from 6 April 2024. Taxpayers who are eligible to sign up to MTD ITSA will need to first submit their self assessment tax return for 2022/23 by 31 January 2024. HMRC will review that return and check if the taxpayer’s qualifying income is more than £10,000. HMRC will then inform the taxpayer of their requirement to sign up and they or their agent then need to find compatible software and authorise it.

Taxpayers will have to repeat the software authorisation process every 18 months (as is the case for MTD for VAT).

Taxpayers must meet the requirements if they are registered for self assessment, receive income from self-employment or property (or both) and their total qualifying income is more than £10,000.

9 September 2022

From Tuesday 1 November 2022, businesses will no longer be able to use their existing VAT online account to file their quarterly or monthly VAT returns, HMRC has warned.

The tax authority said that businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023. VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns.

HMRC said: “If your clients do not sign up for MTD and file their VAT returns through MTD-compatible software, they may have to pay a penalty. The best way for businesses to avoid penalties is to start using MTD now.

“Even if your clients already use MTD-compatible software to keep their records and file their VAT returns online, don’t forget they must sign up to MTD before they file their next return.”

HMRC said that companies that haven’t signed up to MTD and started using compatible software must:

• Choose MTD-compatible software that’s right for them – you can find a list of software on GOV.UK.
• Check the permissions in their software – once they’ve allowed it to work with MTD, they can file their VAT returns easily. Go to GOV.UK and search 'manage permissions for tax software' for information on how your clients should do this.
• Keep digital records for their current and future VAT returns – you can find out what records they need to keep on GOV.UK.
• Sign up for MTD and file their future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’.

It said: “Your clients who file quarterly or monthly VAT returns must complete these steps in order to file their returns due after 1 November.”

Businesses may be able to get a discount on software through the UK Government’s 'Help to Grow: Digital scheme', which offers 50% off compatible digital accounting software.

26 August 2022

As part of the Making Tax Digital initiative, HMRC are set to bring in changes to the tax basis period for sole traders and partnerships. These changes will only apply if the taxpayer does not have a 31 March or 5 April year end.

“Many traders have a 30 April year end and year ended 30 April 2022 will form the taxable profits for the tax year to the 5 April 2023. But for the tax year 2023/24 the taxable income will be the profits from 1 May 2022 to 31 March 2024 (or 5 April 2024), from this there will be deduction for overlap relief (if there is any),” explained Clive Gawthorpe, a Partner at UHY Hacker Young. “HMRC are planning to allow part of the extra profit to be calculated and spread over five years which includes 2023/24, but, if the business ceases early, the amount spread becomes immediately taxable.”

He added: “Thereafter the tax return will include the profits for the year ended 31 March or 5 April. If the business year end does not tie into these dates, there will have to be a recalculation to ensure the correct profit is taxed – probably a time apportionment.”

This is likely to increase tax liabilities for 2023/24 and moving forward, he said.

From 6 April 2024, self-employed and property landlords with incomes over £10,000 will have to file with HMRC digital information on a quarterly basis.

The first submission will be for the period 6 April 2024 to 5 July 2024 (or 1 April 2024 to 30 June 2024) regardless of the accounting year of the taxpayers. The deadline for submission will be 5 August 2024, and so on.

After 2024 it is expected that MTD will be brought in for partnerships and eventually for companies.

Gawthorpe said: “If you do not have a 31 March or 5 April year end, do not move your current year end until 5 April 2024, so you can benefit from the income spreading.”

And he added: “Do digitise your records, and improve your record keeping, to reduce the final amendments required in the future. The sooner this is put into practice the easier it will be when the returns are needed in 2024.”

26 August 2022

Accountants are being urged to make sure they understand their obligations when filing clients’ details to the new Register of Overseas Entities.

Part of the Companies House reforms that came into effect on 1 August 2022, the introduction of the Register is an attempt by the government to reduce money laundering and other financial crime utilising the UK’s financial system.

In short, any overseas entities that wants to buy, sell, or transfer property or land in the UK must register with Companies House and declare who their registrable beneficial owners or managing officers are.

Importantly, overseas entities must state that they have complied with their duty to take reasonable steps to identify (and provide information about) their registrable beneficial owners. Providing false or misleading information is a criminal offence.

A UK-regulated agent must complete verification checks on all beneficial owners and managing officers of an overseas entity before it can be registered. The agent must be based in the UK and supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. They can be an individual or a corporate entity, such as a financial institution or legal professional.

The Department for Business, Energy and Industrial Strategy (BEIS) has produced guidance for those who may undertake verification on behalf of an overseas entity. But BEIS warns agents that “there are differences between what’s required under the Money Laundering Regulations (MLRs) by way of client due diligence and what is required by way of verification under the [new] Regulations. As such, a relevant person cannot only do what they would normally do under the MLRs and as set out in related industry guidance.”

BEIS said that “there is no risk-based approach to verification… so relevant persons must be confident they’ve seen documents and/ or information from reliable, independent sources to verify each piece of relevant information”. This places significant responsibility on the ‘relevant persons’ under the legislation, it said.

26 August 2022

From September 2022, HMRC is changing the way it carries out VAT assessments for traders using online marketplaces who are based overseas.

HMRC stated: “We’ll start sending assessments instead of asking for information from traders, in cases where information we hold indicates that VAT returns are inaccurate. We’re doing this because we believe we have the right information to do so without needing traders to send us this information.”

The assessments will be sent to the trader’s registered UK address, which may be their agent’s address.

They will cover VAT returns for periods up until December 2020, and be subject to statutory review and appeals rights.

The assessment letters will also tell traders what to do if they think that the information held by HMRC is wrong, and they want to provide more information.

HMRC said: “If a trader struggles to pay an assessment, we’ll work with them to arrange more time to pay. If they do not pay their assessment or arrange a time-to-pay agreement, we’ll issue a Joint and Several liability notice to the hosts of the online platform they trade from.

“The marketplace will then decide what it thinks is necessary to protect itself from being pursued by us for the trader’s VAT debts. This may include withdrawing permission for them to sell on its website.”

If this happens, the trader will not be able to trade on the marketplace until HMRC withdraw the notice. It can then take up to six weeks for hosts to allow a trader to use their platform again.

HMRC said: “We want to encourage traders and their agents to correct returns before they receive an assessment, to avoid any penalties.”

Further guidance is available here.

19 August 2022

HMRC has received 13,775 reports from whistleblowers to date, informing the tax authority of potential furlough scheme fraud.

The figures show how HMRC is stepping up its enforcement activity as it aims to recover money fraudulently claimed and prosecute the offenders, according to Andrew Sackey, a Partner at law firm Pinsent Masons.

Sackey said that error, as well as fraud, was likely to be widespread because of the complexity of the rules governing the various support schemes. He said the huge number of furlough claims made at the height of the pandemic – and the necessity to make the payments immediately – made it very difficult for HMRC to spot fraudulent claims.

However, HMRC making public information about whether an employer has made a furlough claim has led to a spate of reports from whistleblowers. Employees are increasingly using this information to make fraud reports through HMRC’s digital reporting service.

Directors or business owners found guilty of furlough fraud face significant penalties, including being made personally liable to repay the overclaimed furlough funds and even prison sentences.

Sackey said that any business that suspects it may have claimed furlough incorrectly should investigate what went wrong. Should a breach be found, business owners should seek advice on how best to quantify the amount, and voluntarily engage with HMRC to repay the funds. This will give the owner a better chance of avoiding the harshest penalties, he explained.

Sackey said: “Whistleblowers have played a major role in helping HMRC catch those who defrauded the furlough scheme or were otherwise not entitled to the benefits claims.

“Significant numbers of employees who found themselves unwittingly playing a part in a breach of the rules or even fraud will have reported them in response. HMRC is increasingly looking to take strong and public action in respect of those it considers may have taken public money they were not entitled to.”

He added: “This is the kind of fraud that HMRC will, in the most egregious cases, feel should result in criminal prosecution. There is significant public interest in the justice system dealing with those who broke the rules to took advantage of the furlough system at a time of national crisis.”

A spokesperson for HMRC said: “We designed anti-fraud measures into the Covid support schemes from the beginning, and we are taking tough action to tackle fraudulent and criminal behaviour.”

He added: “We have blocked tens of millions of pounds of claims being paid out in the first place and we are using the full range of our powers to recover incorrectly paid claims. We currently have a number of criminal investigations ongoing, we have opened over 40,000 civil inquiries, and have already made 35 arrests for suspected help scheme fraud.”

In March 2021, the government announced the formation of the Taxpayer Protection Taskforce within HMRC, with the aim of cracking down on Covid-related fraud.

19 August 2022

Cyberattacks are taking an increasing toll on the world’s finances, with the European Commission estimating the cost of cybercrime to the global economy as €5.5 trillion in 2020.

That is double that reported in 2015, and the figure could worsen as more people and devices are connected to the internet – the Commission estimates that by 2030 some 125 billion devices could be connected to the internet, up from 27 billion in 2017, while 90% of people aged over six are expected to be online.

The Commission said that “from cyberattacks on hospitals to hacks on power grids and water supply, attackers are threatening the supply of essential services. And as cars and homes become increasingly connected, they could be threatened or exploited in unforeseen ways”.

It added: “However, the damage caused by cyberattacks goes beyond the economy and finance, affecting the very democratic foundations of the EU and threatening the basic functioning of society. That is why the European Union has been working to strengthen cybersecurity.”

In May 2022, Parliament and Council negotiators reached an agreement on the NIS2 Directive, which are comprehensive rules to strengthen EU-wide resilience.

Meanwhile, the EU’s European Council on Foreign Relations has highlighted the vulnerabilities of the global energy ecosystem to cyberattacks.

It said: “Utility companies are exposed to relatively high risks because their networks of both physical infrastructure and cyber-infrastructure – including distributors, suppliers, storage facilities, and other assets – often overlap and are spread across many countries.

“Secondly, the digital infrastructure that supports the global energy sector operates around the clock, with virtually no downtime.

“Thirdly, the vulnerability of the global energy sector is rooted in the many motivations for attacks against it… these include attacks carried out by states trying to achieve geopolitical goals, by criminals attempting to extort money from desperate companies, and by activists seeking to publicise their agendas or oppose particular projects.”

It added: “The vulnerabilities of Europe’s digital security and global energy interconnections could have a significant impact on citizens’ lives

Therefore, given the frequency with which these structures come under attack and how vital they are to the economy, the energy sector is a key geopolitical battleground. The vulnerabilities of Europe’s digital security and global energy interconnections could have a significant impact on citizens’ lives.”

12 August 2022

The Financial Reporting Council’s 4^th annual enforcement review reveals a record number of cases resolved in the past year and record financial sanctions of £46.5 million imposed.

KPMG was reprimanded four times and fined £10m before discounts for its co-operation. Grant Thornton was fined three times, PwC was penalised twice, with EY and Deloitte fined once each.

The increase in the total financial sanctions, up from £16.5m in 2020/21, reflects the seriousness and high number of cases concluded. It also reflects the FRC’s growing capability to take on the large and complex cases that are an increasingly prominent feature of its work, supported by a 23% growth in the Enforcement Division’s headcount.

The report also reveals that the increased focus on non-financial sanctions has continued. Non-financial sanctions, which are carefully tailored to the facts of each case, are becoming increasingly sophisticated, with a focus on tackling the underlying causes of failure in order to reduce the risk of recurrence. The report emphasises the critical importance of detailed follow-up reporting so that the effectiveness of such sanctions can be closely monitored.

For the vast majority of concluded cases, a lack of audit evidence and a lack of professional scepticism featured – both of which go to the heart of robust audit.

12 August 2022

HMRC’s latest performance data, for the period April to June 2022, shows that its performance has still not returned to pre-pandemic levels.

The tax authority’s monthly and quarterly performance reports show that:

• Average call waiting time increased from about 15 minutes in March to 19 minutes in April before improving to 13 minutes in June. Before the Covid-19 pandemic, the target was five minutes.
• Percentage of people waiting more than 10 minutes remained at around 60% across the quarter. The pre-pandemic target was 15%.
• When it came to calls answered, 71% of calls were answered in March, falling to 66% in April. It improved in June to 79%.
• The percentage of correspondence answered  around within 15 working days has declined each month and was 59% in June. It was 65% in March.

• After peaking at £72bn in 2020, HMRC’s debt balance reached its lowest point since the start of the pandemic in January 2022 at £38.8bn. Since then, it has grown to just over £42bn at the end of June 2022. HMRC is forecasting that, given the current economic conditions, the debt balance will remain broadly static through 2022/23.

HMRC said: “We have made progress towards the levels of customer service performance we would expect to achieve. We began the new financial year in a better position than in 2021 to 2022, but some of our customer service levels still aren’t where we want them to be and we’re sorry to customers and agents who have been affected.

“We expect to see continuing pressure on our services for some time, but we’re maintaining service levels across most areas of our business and we’re focussed on continuing to deliver improvements for our customers in the remaining quarters of the year.”

HMRC helpline opening hours continue to be significantly shorter than before the pandemic.

12 August 2022

One in six university students in the UK have admitted they have cheated while taking online exams in the past year, according to a poll by law group Alpha Academic Appeals.

The survey of 900 undergraduates found that around 16% of students broke the rules. Of those students who admitted to cheating just 5% were caught by their institutions.

Alpha found that more than half of students (52%) knew people who had cheated in online assessments.

Despite the end of Covid-19 restrictions, most universities continued with online assessments this summer instead of traditional in-person exams. Some 79% of students in the survey believed that it was easier to cheat in online exams than in exam halls.

The reported methods of cheating were not sophisticated, showing the ease with which cheating occurs in remote assessments. Common methods included calling or messaging friends for help during the exam, using Google to search for answers on a separate device, or asking parents to read through answers prior to submission.

5 August 2022

More than 16,000 companies that took out bounce back loans to help them through the pandemic have gone bust, without paying the money back.

A BBC investigation also found that hundreds of company directors who got loans they were not entitled to have also been disqualified.

The cost to the taxpayer of these insolvencies could be as much as £500m, and is likely to grow as more companies go under.

The figures, obtained under a Freedom of Information request, have been described as “shocking” by a former head of the Serious Fraud Office. Sir David Green QC called checks the government required banks to do on bounce back loan applicants “hopelessly inadequate”, the BBC reported.

Banks issued around 1.5 million loans worth £47bn, which were supposed to be paid back within 10 years.

Under the scheme any small company could apply for a loan of up to £50,000 depending on its turnover. Applicants were allowed to “self-certify” the figures.

“You wouldn’t send an army into battle without assessing the risks. And just the same in this situation, the risks, which were obvious, should have been assessed and addressed,” said Sir David, who is now chairman of the Fraud Advisory Panel, told the BBC. He added that bounce back loans must be recovered wherever possible.

The government has said it will “not tolerate” people defrauding taxpayers.

The government has instructed the National Investigation Service (Natis) to look into the scheme. The latest figures show Natis, which has a £6m budget, made 49 arrests and recovered just £4.1m. It has identified 673 suspects of whom 559 used the bounce back loan scheme.

5 August 2022

Importers must switch to new customs system, says HMRC

More than 3,500 businesses risk significant delays to importing goods if they don’t move to the new Customs Declaration Service for import declarations by 1 October 2022.

HMRC is also warning importers that the Customs Handling Import and Export Freight (CHIEF) system will close for import declarations on that date.

HMRC said: “Businesses should check that their customs agents are ready to use the Customs Declaration Service. Those without a customs agent must set themselves up to make their own declarations using software that works with the system.

“Many businesses are already using the Customs Declaration Service, however around 3,500 businesses are yet to move. It can take several weeks to be fully set-up on the Customs Declaration Service so those waiting to register risk being unable to import goods to the UK from 1 October.”

HMRC is contacting affected businesses by phone and email to inform them of the steps they need to take. Further information is available on GOV.UK, including a Customs Declaration Service toolkit and checklists, which outlines the steps traders need to take.

Traders can also register or check they have access to the Customs Declaration Service on GOV.UK and access live customer support services for additional help.

CHIEF will close for export declarations on 31 March 2023, with businesses being required to use the Customs Declaration Service to send goods out of the UK.

• There is more information about using the Customs Declaration Service on GOV.UK.

5 August 2022

The Financial Reporting Council (FRC) resolved a record number of cases in the past year, dishing out record fines of £46.5 million.

The FRC’s 4^th annual enforcement review explains that KPMG was reprimanded four times and fined £10m before discounts for its co-operation. Grant Thornton was fined three times, PwC was penalised twice, with EY and Deloitte fined once each.

The increase in the total financial sanctions, up from £16.5m in 2020/21, reflects the seriousness and high number of cases resolved. It also reflects the FRC’s growing willingness to take on large and complex cases that are an increasingly prominent feature of its work, supported by a 23% growth in the Enforcement Division’s headcount.

The report also reveals that the increased focus on non-financial sanctions has continued. Non-financial sanctions, which are carefully tailored to the facts of each case, are becoming increasingly sophisticated with a focus on tackling the underlying causes of failure in order to reduce the risk of recurrence. The report emphasises the critical importance of detailed follow-up reporting so that the effectiveness of such sanctions can be closely monitored.

For the vast majority of concluded cases, a lack of audit evidence and a lack of professional scepticism featured – both of which go to the heart of robust audit.

The FRC continues to encourage and incentivise full and frank co-operation. While progress in this area has been slower than hoped, there have been some positive changes, including through self-reporting, comprehensive admissions and proactive steps to address the causes of matters self-reported.

5 August 2022

The Organisation for Economic Development (OECD) is to delay implementation of ‘Pillar 1’ of its proposed framework, which aims to address taxation of the global digital economy.

Eloise Walker, corporate tax expert at Pinsent Masons, described the decision to delay the planned reforms by 12 months to 2024 as “unsurprising and predictable”.

She said: “Securing international agreement on Pillar 1 has been seen as challenging for some time now, so it is unsurprising and, in many ways, predictable that the OECD has announced that implementation is being delayed 12 months.

“From a UK perspective, the UK government has previously expressed its desire for Pillar 1 to be implemented to help resolve longstanding concerns that the international corporate tax system has not kept up-to-date with the digitalisation of the economy and how digital businesses generate value and profits from online users. Therefore, it is unlikely that a new UK government will have a differing approach,” she said.

“However, wider implementation is dependent on international agreement, which is difficult given political challenges in securing agreement, particularly from the US. Some aspects of Pillar 1 are likely to be implemented in some form eventually, although the implementation plan may end up being pushed back further and the finer detail of the proposals may well shift,” she said.

The Pillar 1 proposals, which focuses on where large global businesses are required to pay corporate taxes, were agreed by 136 countries in October 2021.

Walker explained: “Pillar 1 involves a partial reallocation of taxing rights over the profits of the largest and most profitable multinational businesses to the jurisdictions where consumers, rather than the businesses, are located. It is currently envisaged that multinational businesses with global turnover above €20 billion will be subject to tax on a proportion of their profits in the countries where they operate.

“Pillar 2 of the framework will introduce a global 15% minimum corporate tax rate. Under those initiative, large multinational enterprises will pay a minimum 15% tax on profits in each country where they operate.

“The OECD’s framework will operate on a country-by-country basis.”

29 July 2022

The number of UK business becoming insolvent has leapt by 70% in the past 12 months, from 11,261 to 19,191, research from Mazars has found.

The accountancy and advisory giant said a major factor in the increase was due to the highest interest rates in 13 years, which have made businesses’ debts more expensive. Interest rates rose for the fifth consecutive time in June.

Mazars’s report also found that businesses are finding it increasingly difficult to refinance their debts at a competitive rate, while inflationary pressures are increasing operating costs.

One sector particularly badly hit is construction, which has seen 3,611 insolvencies in the past year, up 112% from 1,705 the year.

Rebecca Dacre, a Partner at Mazars, said “Businesses are fighting a losing battle against rising costs – with the added worry of falling consumer spending. With energy prices rising, businesses are being forced to increase their prices despite consumers feeling the pinch. Many businesses that were already struggling are now facing a real crisis.

“Price pressures are becoming more embedded as interest rates rise and the economy contracts. Whilst easing slightly from the peak in March, the latest insolvency figures will still cast greater uncertainty over businesses that are already facing a grim outlook.”

She added: “The financial support that the Government provided during the pandemic has been withdrawn, and the UK economy appears to be seeing some of the post-Covid wave of insolvencies that were feared. Sadly, the dismal outlook means more pain for businesses is likely.”

29 July 2022

The £4.5bn Recovery Loan Scheme, offering a government guarantee for small businesses looking to raise finance, has been extended for another two years.

The government will underwrite 70% of the loan in the event of default, with the maximum loan size remaining at £2m. However, lenders may now require a personal guarantee from the borrower.

The Recovery Loan Scheme was launched in April 2021 to help companies struggling with the impact of Covid-19. It has supported almost 19,000 businesses, with the average loan being £202,000.

Business secretary Kwasi Kwarteng said: “Small businesses are the lifeblood of the British economy, which is why we are determined to support our traders and entrepreneurs in dealing with worldwide inflationary pressures.

“The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs and driving economic growth in the UK.”

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said: “After two years of pandemic disruption and with a faltering global economy, the BCC has been calling for this continued financial support for firms. The two-year extension to the Recovery Loan Scheme will be a lifeline for many businesses facing a rising tide of costs.

“It is now essential that businesses in need of this extra support can access the scheme as quickly as possible to make sure they get help before it’s too late.”

However, Gregory Taylor, MHA head of banking and finance, said the extension did not go far enough to helping SMEs. “Requiring a personal guarantee from the borrower de-risks the government’s own 70% guarantee and puts the risk back on business owners” he said.

The minimum funding is £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts. The lender will carry out credit checks and fraud checks before granting the finance.

The annual interest rate and other fees cannot be more than 14.99%.

The British Business Bank (BBB) has named the accredited lenders, who are:

• Term loans – Aldermore, Arbuthnot Latham, Bank of Scotland, Barclays, Clydesdale Bank, Danske Bank, HSBC UK, Lloyds Bank, Natwest, OakNorth Bank, Paragon, Santander, SecureTrust, Skipton Business Finance, RBS, Ulster Bank and Yorkshire Bank.
• Invoice Finance – HSBC UK, Skipton Business Finance.
• Asset Finance – Aldermore, Paragon.
• Revolving credit (overdrafts) – Arbuthnot Latham, Ebury.

Those wanting to access the scheme should apply directly to the lender.

22 July 2022

The UK is missing out on a total of £2.7bn in underpaid VAT, according to new study by Thomson Reuters.

HMRC believes 208 of the UK’s 2,000 largest businesses have underpaid VAT by an average of £13.4m each, the study said. The £13.4m figure relates to “tax under consideration”, which is an estimate of the amount of VAT the taxman believes has gone unpaid, prior to full tax investigations being completed.

The study also said that businesses should expect HMRC to increase the number of tax investigations after the authority received an additional £292m to tackle underpayment of tax in last year’s Autumn Budget.

“The government has beefed up HMRC’s tax compliance capabilities and will be expecting results. Large corporates, which HMRC views as underpaying VAT, are likely to be a high priority target for investigation,” said Jas Sandhu Dade, head of corporates Europe at Thomson Reuters.

22 July 2022

The UK’s small companies are struggling to fill vacancies, according to the latest Small Business Index from Xero.

May’s Index was unchanged in May at 86 points, with stronger sales and wage rises being offset by the number of job vacancies – the figures show that the number of people employed by small firms fell by 5% year-on-year in May. There are now 11.1% fewer jobs in the small business sector than there were in February 2020, before the pandemic began.

The good news is that sales are stronger, up 14.3% increase year-on-year, and the last 12 months has seen a record rise in wages among small firms (up 5% on May 2021). However, they appear to be struggling to compete with big business when it comes to salaries, perks and job security.

However, late payments to small businesses also increased in May, with the average time to pay rising by 1.1 days to 30.6 days. On average, payments were late by 8.8 days beyond the agreed terms.

Small businesses in the construction and manufacturing industries saw the biggest drop in employee numbers, falling 10.8% and 10% respectively. Xero’s report said: “As construction and manufacturing make up 7.2% and 9% of total employment in small firms, an inability to fill vacancies in these sectors will have severe implications for the rest of the economy.”

Retail was only sector to record negative sales growth (-1.3%), the second consecutive month that retail sales have fallen.

Alex von Schirmeister, Managing Director UK & EMEA at Xero, said: “Small firms are facing a major talent crisis. They are having to offer some of the highest wages in recent memory to compete for staff, which is just piling more pressure on them with other rising costs. That’s troubling in sectors such as manufacturing and construction that are inherently linked to other industries, like retail.”

“The government must do more to help in areas like late payments. When big businesses hold on to unapproved debt, it chokes small firms’ cash flow so they can’t compete for workers. We need to incentivise early payments and penalise late payers, and expose the repeat offenders.”

• The Xero Small Business Insights programme looks at the sector’s health, drawning on data collected from hundreds of thousands of subscribers. It releases a monthly index, as well as reports and multimedia about the small business economy.

15 July 2022

The UK’s Financial Reporting Council (FRC) has published comprehensive professional guidance for auditors, in the hope that it will improve how they exercise their judgement.

The FRC’s Mark Babington said: “Professional judgement is a fundamental requirement for high quality audit. Unfortunately, the FRC’s supervision and enforcement work regularly finds professional judgement has not been exercised effectively and consistently, undermining audit quality and trust in audited accounts.”

The new guidance, which is the first of its kind by a regulator, sets out a clear framework for how auditors should exercise professional judgement to enhance audit quality.

Check out the full report.

15 July 2022

Use of technology by small and medium businesses (SMEs) contributes £216 billion to the UK economy.

However, new research from Sage says if these SMEs unlock the full benefits of technology it could add an extra £232 billion, boosting the value of tech use to the UK economy by almost double to £448 billion annually.

The new ‘Digital Britain: How Small Businesses are turning the tide on tech’ report found that 92% of firms see technology as critical to their survival, but are worried about the lack of capital, knowing where to invest and not having the right policy framework to enable growth.

Accessing and understanding commercial data is going to be a big opportunity to drive performance, but just a quarter of SMEs have adopted technology to collect and analyse this data.

Sage is calling on big tech companies and the government to adopt a pro-tech, pro-enterprise approach and deliver improved financial incentives to encourage greater investment in productivity-enhancing technologies, more data sharing so SMEs can innovate and adequate futureproofing of digital infrastructure.

8 July 2022

Businesses that manufacture or import plastic packaging into the UK may have to submit a plastic packaging tax (PPT) return by 29 July 2022.

The UK’s (PPT) took effect from 1 April 2022:

• The first PPT return will cover the period from the date the business became liable to register for the tax to 30 June 2022.
• The return will become available to submit on the government gateway from 1 July 2022.
• The deadline for completion of the return, and payment of any PPT due, is 29 July 2022.

Although PPT is only payable on plastic packaging components that contain less than 30% recycled plastic, a business will still be required to register for PPT if it:

• expects to import into the UK or manufacture in the UK 10 tonnes or more of finished plastic packaging components in the next 30 days; or
• has imported into the UK or manufactured in the UK 10 tonnes or more of finished plastic packaging components since 1 April 2022.

Businesses must register within 30 days of triggering the registration requirement.

Groups of companies can register and submit PPT returns as a group by appointing a UK-established representative member. It is important to note that each company in the group must individually trigger PPT registration requirements.

Once registered, businesses or groups can submit their PPT returns through the government gateway.

To complete the return, a business liable to PPT will need records to show the total weight (in kilograms) of any finished plastic packaging components that, in the period, it:

• manufactured in the UK;
• imported into the UK;
• directly exported or that it expects to directly export in the next 12 months (to cancel or defer a liability);
• manufactured or imported for use in the immediate packaging of licensed human medicines, that were not and will not be directly exported (to claim an exemption); and
• manufactured or imported that contained at least 30% recycled plastic content, that will not be directly exported (to claim an exemption).

Businesses can also claim credit for PPT paid in a previous accounting period that another business in the supply chain has later converted or exported, although not on its first return.

Failure to comply with the requirements of PPT – including failure to register, file or pay a return – could lead to a fixed penalty of £500, with an additional daily penalty of £40 for each day the business continues to fail to comply.

8 July 2022

HMRC has estimated that the tax gap for the 2020 to 2021 tax year is £32bn, or 5.1% – the second lowest recorded percentage and unchanged from the previous year.

The annual Measuring Tax Gaps publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid during the financial year.

In monetary terms, the tax gap for the 2020 to 2021 tax year is £32bn. At 5.1%, there has been no change in the percentage tax gap compared to the previous year, although the monetary value has fallen by £2bn from £34bn in the 2019 to 2020 tax year.

The total tax due to be paid fell from £672bn in 2019 to 2020 to £635bn in 2020 to 2021 due to the economic impact of the pandemic.

HMRC said: “The estimate for the 2020 to 2021 tax gap is the best assessment based on the evidence available at this time. There is some uncertainty for the tax gap estimates for the first year of the pandemic and estimates could be subject to revisions in future years.

“HMRC has published tax gap estimates since the 2005 to 2006 tax year. There has been a long-term reduction in the overall tax gap from 7.5% in 2005 to 2006, to 5.1% in the 2020 to 2021 tax year. The reduction is a result of the government’s action to help taxpayers get their tax right first time, whilst bearing down on the small minority who are deliberately non-compliant.”

Further findings for the 2020 to 2021 tax gap publication show:

• the tax gap for Income Tax, National Insurance contributions and Capital Gains Tax is 3.5% (£12.7 billion), representing 39.5% of the total tax gap by type of tax.
• the VAT gap shows a strong downward trend falling from 14.1% in 2005 to 2006 to 7.0% in 2020 to 2021.
• the Corporation Tax gap reduced from 11.5% in 2005 to 2006, to 9.2% in 2020 to 2021, reaching a low of 6.5% in 2011 to 2012, remaining broadly stable since 2014 to 2015.
• at 48% (£15.6 billion), small businesses represent the largest proportion of the tax gap by customer group, followed by criminals at 16% (£5.2 billion).
• individuals account for 8% (£2.5 billion) of the overall tax gap and, at 5% (£1.5 billion), wealthy individuals have the smallest tax gap by customer group.
• failure to take reasonable care (19%), criminal attacks (16%), non-payment (15%) and evasion (15%) are the main reasons for the tax gap by behaviour.

The tax authority said: “HMRC publishes the tax gap because it believes it is important to be transparent in its work. The data helps build trust in HMRC’s ability to support taxpayers in meeting their obligations and pay the tax they owe. It also helps inform the future work and priorities for HMRC, and where it can make the greater difference for taxpayers.”

1 July 2022

HMRC has contacted more than 220,000 VAT-registered businesses to encourage them to migrate to the UK’s new streamlined customs IT platform, if they’re not already using it.

After 30 September this year, businesses must use the Customs Declaration Service to make import declarations if they want to continue to import goods.

The Customs Declaration Service has been running since 2018 and should now be used for making import declarations when moving goods into the UK, HMRC said. The service will replace the old Customs Handling Import and Export Freight (CHIEF), representing a significant upgrade by providing businesses with a more user-friendly, streamlined system that offers greater functionality.

HMRC said: “This marks the first step towards the government’s vision of a Single Trade Window, which will have considerable benefits for businesses through reduced form-filling, better data use across government and a smoother experience for users.

“Businesses with a customs agent must make sure they are ready to make their import declarations on the Customs Declaration Service by 30 September. Those without a customs agent must set themselves up to make their own declarations using software that works with the system before the 30 September deadline.

“Lots of businesses use a customs agent to make declarations on their behalf. If businesses want to hire one, they can find a list of customs agents on GOV.UK. This list is regularly updated to show which agents are ready to use the Customs Declaration Service.”

Larger businesses, such as freight forwarders and hauliers, must start working with their software developer, community service provider or agent to begin the migration process now, the Revenue said.

Postal operators, such as Royal Mail, will continue to make customs declarations on behalf of UK small businesses who receive goods from abroad by post, and inform them of any tax or duty owed.

To help all businesses and agents prepare for the Customs Declaration Service, more information is available on GOV.UK, including a Customs Declaration Service toolkit and checklists, which break down the steps traders need to take. Traders can also register or check they have access to the Customs Declaration Service on GOV.UK and access live customer support services for additional help.

There is more information about using the Customs Declaration Service on GOV.UK.

1 July 2022

A whopping 70% of accountants and lawyers are ‘more concerned’ about money laundering since Russia invaded Ukraine in February, according to a new survey.

The war, and subsequent sanctions against Russia, has prompted 75% of companies to move anti-money laundering (AML) up the company agenda.

Despite 53% of respondents having identified an instance of suspected money laundering in the past three years (with 24% identifying more than one) only 45% are confident in their AML procedures. Alongside this, a staggering 91% think companies need to embrace online technologies to aid compliance with AML regulations. Likewise, 87% respondents are putting more rigid policies in place to be compliant and meet AML regulations.

The core reason for money laundering rising up company agendas is a focus on customer transparency and ethical customer onboarding (68%). This was closely followed by external risks (50%), such as the situation in Russia and people traffickers, and increased risks of fines (46%). Worryingly, 76% of respondents believe the threat will continue to get worse over the next three years.

To deal with the growing threat of money laundering, 80% of respondents reported that they are turning to technology to become more compliant, while 53% said they were turning to outsourcing services and 28% turning to hiring.

Simon Luke, UK Country Manager, said: “Even before the Ukrainian conflict and Russian sanctions, the UK has been recognised as a hub for Russian money-laundering. Accountants and lawyers need quick, easy and accurate ways to onboard customers and complete financial transactions without fear.”

When asked what the main causes for concern were, the growth in online transactions (38%) was the most common answer. This was followed by the growth of unethical business practices (23%) and the Russian situation (18%).

• The poll was conducted on behalf of First AML, which surveyed 200 accountants and lawyers in the UK to discover attitudes toward current compliance and AML procedures.