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‘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

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.”

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.”

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.

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.

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.

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.

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.”

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.

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.

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.”

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.

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.

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.”

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.”

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.”

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

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.”

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.

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.

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.”

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.

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.”

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.

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.”

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.”

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.”

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.”

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.”

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.

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.

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.”

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.

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.

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.

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.”

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.

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.

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.

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.

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.

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.

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.”

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.”

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.

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.

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.

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.

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.

For more information click here.

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.

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.”

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.

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.