Contractor accountants may be interested to learn that Andrew Haldane has called for a separate accounting regime for UK banks.

Haldane is the executive director for financial stability at the Bank of England. He recently told the ICAEW that the current bank accounting rules do not take enough consideration of the ambiguities associated with assets and liabilities.

A fair accounting system would recognise that balance sheets for banks differ from other organisations due to the uncertainties surrounding the valuation of assets and the mismatched maturity of liabilities.

Banks have a more complex asset portfolio and the risks surrounding the valuation of those assets are completely different than they are for non-financial entities. And it is these differences that support a separate regulatory and resolution regime for banks, he added.

The head of the financial services faculty at the ICAEW, Ian Coke, agreed that changes were needed but warned that providing banks with their own accounting regime would prompt other sectors to demand their own regime as well. Furthermore, it could look as if the banks are attempting to become less transparent at a time when they are already coming under increasing criticism.

He went on to say that Haldane’s proposals for disclosing a range of valuations are complex and could be hard to understand.

In January 2010, Lord Turner called for banks to have a separate accounting regime and the issue has been discussed several times before that. Almost every industry can highlight complexities that are unique to their own particular sector, so would it really be fair to change the rules just for the banks?

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Contractor accountants may be interested to learn that the Institute of Chartered Accountants in England and Wales recently launched a business advice service.

The service, which is being administered by SOSCA, covers Dorset, Hampshire and south Wiltshire and was launched on the day Business Link closed down local services.

The aim of the service is to provide small businesses and start-ups with the financial and business advice they need to enable them to play a part in the economic recovery. Owners of small businesses can contact local firms on a range of issues and they will be under no obligation to use that firm in the future.

In excess of 350 ICAEW practices will offer a free initial consultation under the business advice scheme.

Henry Flint, the president of SOSCA, explained that he had a business background and a lot of companies are in desperate need of good advice at the moment. The Business Advice Service provides them with a place to obtain impartial free advice and will fill the void left by the closure of Business Link. He went on to add that he was keen to see member firms provide help to local business owners.

The deputy president of ICAEW, Mark Spofforth, said small business owners need the best advice if they are to get through the fragile recovery. BAS will provide the opportunity for SMEs to have a free consultation with a chartered accountant to discuss their concerns. ICAEW Accountants can offer advice on issues such as starting a business, financial and taxation matters and restructuring.

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Contractor accountants may be interested to learn that the UK’s smallest businesses may soon be exempt from certain EU accounting regulations.

A recent vote in the European Parliament resulted in the decision to let member states decide which Fourth Company Law Directive obligations to impose on their SMEs.

The ICAEW’s head of reporting faculty, Dr Nigel Sleigh-Johnson, said the vote to exempt micro-businesses from the obligation to prepare and file annual accounts under EU laws is a step in the right direction, and something some UK organisations have been fighting for for almost three years.

The coalition has already started looking at alternative ways micro businesses could report in the future, but a lot more work needs to be done to ensure the final outcome will not have any adverse affects.

One major concern about the proposals to reduce reporting requirements is that banks and suppliers will still want to see financial information and therefore micro businesses will still need to demonstrate sound financial management.

The European Council still needs to approve the proposal, but that should just be a formality.

In order to qualify for the relaxed reporting rules, firms must satisfy at least two out of three criteria. They should have no more than €0.5 million in assets, their turnover must be less than €1 million and they should employ a maximum of 10 members of staff.

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Contractor accountants may be interested to hear that the world of finance is a healthy world, at least in the eyes of Bupa.

Bupa recently conducted research that discovered that finance workers are less likely to contract serious health problems than those who work in manufacturing, technology, transport and utilities.

Nearly three-quarters of the workers in the utilities sector were found to be overweight compared to 55% of those working in finance. Only 5.1% of finance professionals are likely to develop high cholesterol levels, compared to 10.1% of transport, storage and distribution workers.

Bupa Health and Wellbeing’s assistant medical director, Dr Peter Mace, said these results prove that working long hours doesn’t automatically lead to an unhealthy lifestyle. He also went on to explain that people can improve their lifestyle and one way of doing this is to understand their health profile and use it as motivation to make positive changes.

Meanwhile, the ICAEW has launched a guide entitled ‘International Trade: An Accountants Guide’ to support the coalition’s exporting for growth campaign.

Lord Green, the trade and investment minister, said that members of the ICAEW are bound to have SMEs in their portfolios and they will understand the way they work. The government wants to see the UK’s export levels increasing to match the EU average of 25%, and as well as providing SMEs with advice, accountants may be able to introduce them to new overseas contacts.

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Chas Roy-Chowdhury, the head of taxation at ACCA, claims that HMRC is giving out incorrect advice about the possibility of a refund of VAT in cases of personal insolvency.

Earlier this year, the Revenue lost a case against Paymex, a debt advice business, and as a result the supervisory role of practitioners in personal insolvency cases is now VAT exempt.

However, last month HMRC published guidance on reclaiming VAT and it contained what Roy-Chowdhury says is a “veiled threat” warning practitioners that they should not dig too deeply into the past. If an independent practitioner does not want to disturb the past, the Revenue will not do so either and it is totally up to the IP whether or not to claim a VAT refund.

Mr Roy-Chowdhury said HMRC needs to set the record straight so that IPs understand their position regarding tax. He believes the latest guidance goes against that issued by recognised professional licensing bodies in the summer.

He said the licensing forces, including CIMA, ICAEW and IPA, should unite and seek discussions to clarify the problem with the Revenue. Furthermore, he estimates that HMRC could owe hundreds of millions of pounds to insolvency practitioners in VAT refunds.

The Paymex case centred around an Individual Voluntary Arrangement and Roy-Chowdhury believes the VAT exemption could apply to insolvency procedures that work in a similar way – such as a Company Voluntary Arrangement. But, HMRC is not proactive when it comes to clarifying whether IPs with a supervisory role in corporate administrations are also exempt.

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The AAT, ICAEW and Manchester Metropolitan University have got together and launched a low cost accountancy qualification which it hopes will enable more people to take up the profession.

The new programme starts in January next year and will be delivered through MMU’s business school. Students will be required to attend two three-hour weekly sessions. The programme is flexible, there are multiple entry points and students will gain a recognised qualification once they have completed each stage. The entire course costs £15,000 but this is based on current fee levels.

Students will be able to obtain an AAT qualification, as well as a BA (Hons) in professional accountancy after three years nine months. A further two years of study will complete the ACA qualification from the ICAEW and a masters degree in professional accountancy.

AAT president, Hilary Lindsay, said that making accountancy an affordable career choice will lead to a larger pool of talent to support future economic growth.

PwC has applauded the decision to launch the part-time course, saying the combination of higher education and professional skills development will ensure its graduates receive favourable treatment from the firm.

Meanwhile, the Professional Oversight Board has said that audit qualifying bodies should improve the way they award exemptions from some professional examinations. Furthermore, all supervisory bodies must strengthen the process for approving people who are allowed to sign audit opinions.

In particular, the report singled out the ACCA as an organisation that needs to ensure applicants are competent to do their job when initial audit experience was obtained some years ago. The board also said that the ACCA has already implemented some significant changes into its final audit examination and these will be reviewed to establish whether the exam is now sufficiently challenging.

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Contractor accountants may want to consider working alongside their clients to come up with cost saving measures after the ICAEW said this year promises to be extremely difficult financially for many companies.

The combination of low consumer confidence and public sector spending cuts will have a considerable impact on their revenue generating ability, the Institute warns.

ICAEW’s head of enterprise, Clive Lewis, said that despite the recent decrease, inflation is still high, but this is only one of many pressures facing companies at the moment.

In order to offset increased costs, the Institute has put forward a number of suggestions which could interest accountants, such as whether profit margins can be increased. It also suggests re-examining the fundamentals of products and services but warns against switching to cheap materials which could damage a brand and affect sales.

A lot of suppliers are offering incentives and there could be benefits to changing. There are now new suppliers with competitive prices in the market place and things could have changed significantly since a company’s supplier base was last reviewed.

Businesses should also tackle overheads such as energy costs, human resources and space. Significant improvements can be gleaned by more effective organisation of workloads and workspaces.

Leveraging the power of technology enables employees to work better, reduces the need for meetings and cuts down on communication costs, the Institute advises and companies can further cut down by taking advantage of all the tax allowances and reliefs they are entitled to.

KPMG recently reported that businesses could see £90bn added to their costs as the savings they made during the recession get wiped out. 80% of business leaders say the cost of finance is outstripping their cost-cutting efforts, whilst 76% blame salary inflation.

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It’s time to get out the crystal ball, I believe. The inaugural meting of the shiny new IR35 Forum is on Friday 6th May. This is the body that Mr Osborne has charged with “improving the administration of IR35”. Which, given the present state of he administration of IR35, is a pretty open-ended kind of brief.

Clearly we aren’t going to see very much as a result of this first meeting. No doubt HMRC, who are in the chair, will present their Terms of Reference for the Forum’s agreement. Which will most likely be given, unless they contain something along the lines of “HMRC are right so there’s no point arguing” of course. They will agree the key issues such as which biscuits to buy and when next to meet, but that will be about it

But let’s assume they are honest about it – or that the other forum members keep them honest about it – and the objective is to deliver exactly what Osborne asked for, better administration of IR35. Let’s leap forward a year and see what may have happened. There are I believe three possible outcomes.

Firstly IR35 has been shown to be totally unworkable and will no longer be applied. Well that’s the dream result for some – like me, for example – but rather too far beyond the bounds of possibility. IR35 will still be festering away in the distance for a while yet. Heigh ho…

Secondly IR35 cases are only being brought against those who are genuinely within its scope. Well we can dream, but without changing the wording of IR35 so it becomes clear what that scope actually is, that is also a forlorn hope. For one thing HMRC are probably convinced that every case they’ve brought to date has been justified. For all their talk of “high risk” cases, if the rules aren’t changed the target stays the same; and that’s anyone that HMRC thinks they can bully into submission.

Finally IR35 cases are settled quickly and amicably. Yeah right. If there is no reduction in the number of cases being brought – and there aren’t that many in the overall scheme of things anyway – the only way to speed things up is for HMRC to start replying to the other side a lot quicker than they do. It’s not unusual for several months to elapse between each new step in the inquiry. Cases may well last for an average three years, but a lot of that time – probably 2 years 11 months of it – absolutely damn all is happening.

It’s also worth looking at the makeup of the Forum. There are HMRC people, tax experts of various shades, both independents and from the main industry bodies like ICAEW and CIOT, someone from the recruitment industry and a solitary representative of the freelance contractors in the shape of the PCG who, you might think, are the ones with the greatest interest in this whole debate. And who, it must also be said, are probably the only ones there who don’t have some kind of interest in maintaining the status quo. So clearly there is no question of the forum being biased in any particular direction then. Which is nice.

So I am not all that optimistic that anything significant will have changed. Although, along with 1.4 million other contractors, I would be delighted to be proved wrong.

Now there’s a challenge…

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The European Commission wants to reduce significantly the burden of administration, legal uncertainties and compliance costs that face EU businesses and online accountants at present.

It has now published proposals to calculate the tax base of all the 27 member countries under a common system.

The Common Consolidated Tax Base would provide companies with a ‘one stop shop’ system when it comes to filing tax returns. The system would also enable organisations to consolidate all profits and losses incurred across the European Union. EU states would still retain the right to set their own tax rates.

Under the current system, companies trading across borders could be dealing with 27 different rules for tax calculations, including a complex way of working out the taxation on intra-group transactions.

The commissioner for taxation, customs, anti-fraud and audit, Algirdas Šemeta, said the CCTB will make doing business with the EU cheaper, easier and convenient. It will also benefit SMEs that want to expand outwith their domestic market. The proposal will benefit business and improve the EU’s global competitiveness.

However, research conducted by the Oxford University Centre for Business Taxation has found that the UK’s GDP would fall by 0.05% if these plans are implemented.

The ICAEW has said that the idea of a consolidated tax base if good and will make it easier to trade, minimise disputes and reduce compliance costs. But the new system will run alongside the old model and therefore administrative burdens will be increased. The Institute is therefore calling for the scheme to be voluntary.

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A number of leading organisations are calling on George Osborne to deliver a budget that supports small businesses such as contractor accountants.

Recent research from BDO found that business leaders in the UK want the coalition to speed up its plans for simplification of the tax system and concentrate on helping entrepreneurs, rather than big multinationals, in the budget.

66% of business leaders think the coalition should accelerate its plan to reform the business taxation system and make it fit the needs of all UK firms.

Respondents to the survey were also asked what measures the chancellor should take to reduce the deficit. 50% favoured more public spending cuts but very few thought the solution was to increase taxes such as income tax or VAT.

However, when the economic situation improves, 41% of business leaders believe a cut in personal taxation should be prioritised. 35% said further measures should be taken to reduce the deficit and only 6% thought a cut in corporation tax was a priority.

Stephen Herring, a senior tax partner at BDO, said the results highlight that there is an urgent need for business tax reforms to drive business growth across all sectors.

The REC has written to George Osborne asking him to make sure the Budget really is a ‘Budget for Jobs’. The letter builds on the themes of the REC manifesto to remove the barriers that are prohibiting growth and deliver opportunities and jobs.

In particular the REC suggests avoiding any increase in business taxes, implementing an NI holiday for SMEs that hire young people and scrapping the National Insurance increase. The Confederation also calls on the government to do all it can to smooth the AWR implementation and promote flexible working.

The ICAEW says the chancellor should concentrate on long-term growth plans rather than quick-fix solutions. In order to achieve this, he should develop a simpler taxation system, a better approach to supporting enterprise and a highly-skilled, socially mobile workforce.

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Last Friday, Vince Cable announced that the audit system is to be overhauled; a move that could save SMEs and accountants for contractors £440 million each year.

The reforms will make it easier for new and expanding businesses to negotiate the auditing system, giving them more scope to concentrate on growth and expansion. The EU has less stringent auditing requirements and Cable’s reforms will bring the UK’s SMEs more into line with their European counterparts.

Furthermore, micro businesses and limited company contractors will only need to produce one simplified set of accounts. This amendment could benefit two million companies and save around £400 million annually.

After the announcement, Cable said small firms have to be allowed to grow and the audit reforms will ensure that small businesses can concentrate on growth and hiring, rather than paperwork.

Reaction from the major accountancy bodies was mixed. The assistant director of business policy at the ICAS, Paul Probin, said it was not in the public interest to remove the audit requirement from medium sized businesses.

The ACCA’s head of technical pointed out that the proposals were still at the consultation stage but clearly a lot of firms will be conducting fewer audits and he said he was disappointed that accounting and auditing rules had been labelled as red tape.

The ICAEW, on the other hand, broadly supports measures that ease the regulatory burden on small businesses. The audit threshold is currently £6.5 million turnover and he believes that if it is raised larger companies will carry on having audits voluntarily.

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HMRC has decided to rethink its policy of just sending documents to taxpayers and not their agents. The new policy, which was introduced in September, was designed as a cost saving measure.

However, the Revenue has backtracked slightly and said that some documents will also be sent to tax advisers and contractor accountants.

The decision has been welcomed but the CIOT, but the Institute remains concerned that this change will not include all tax documents.

The CIOT’s deputy president, Anthony Thomas, said that we all know government departments are under pressure to cut costs but HMRC is likely to face more queries and adjustments by keeping agents in the dark about the tax obligations of their clients. This action could end up costing the government more than it saves.

The documents that will be sent to agents include Tax Calculation P800, Entry to Self-Assessment letter SA250 and Exit from Self-Assessment letter SA251.

Agents will not receive copies of their clients’ P2 PAYE Coding Notices but the form the taxpayer receives will advise him to show it to a tax agent or adviser.

HMRC plans to use some of the money saved from the withdrawal of P2 agent copies to create an IT solution allowing e-enabled tax agents to see the P2s of their Self-Assessment clients online.

Meanwhile, members of ICAEW have said the standard of service provided by the Revenue is still declining. 70% of members said they needed to contact HMRC more than once to resolve a single enquiry and 61% said the technical knowledge of many of the Revenue’s employees leaves much to be desired.

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