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Here you will find a range of the latest news articles from around the accounting and finance world. These news articles will offer a range of opinions on current key accounting, auditing, business and finance topics.

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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.”

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.

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:

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 4th 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.

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 4th 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.