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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: totally focused, no hocus pocus by kara allyson

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.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Letters from Friends by D Sharon Pruitt

Earlier this week, the Office of Tax Simplification published a comprehensive list of all the UK tax reliefs and allowances that are available; 1042 of them!

How many contractor accountants can name all of them?

The OTS is now asking people to let them know if they have missed any off the list and invited the public to leave comments on its website if they take advantage of any of the allowances.

John Whiting, the OTS’ tax director, said he expected some people to be surprised at the number of reliefs in our current tax system. In fact, he had only expected to find a couple of hundred. Some of these allowances have a clear, valuable benefit and we do not want to change those. However, others may not be used any longer or be too complex and onerous to be of any great use, and it is those that the team wants to focus on.

Of course this long list is going to contain some odd sounding allowances such as ‘angostura bitters relief’, and this sort of relief will also be closely scrutinised.

The OTS has set criteria for abolition of an allowance and these will take into consideration the cost of administering the relief and the complexity of the legislation.

The OTS has also set up two consultative committees to take on board input from SMEs and their advisers. The small business tax review committee includes the chairman of the PCG, Chris Bryce, and Anita Monteith from the ICAEW.

In separate news, HMRC published its business plan on Monday which lays down its intention to implement real-time information for the PAYE system by April 2014.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: I love clutter by sindesign

UK200 wants the government and accountancy industry bodies to do more to highlight the differences between qualified and unqualified accountants.

Anybody can set themselves up as an accountant and a lot of clients don’t appreciate that firms who are not regulated are offering substandard advice, albeit at a cheaper price than a regulated practice.

The MD of a firm of accountants in Chesterfield pointed out that at first glance there seems to be very little difference between a qualified or unqualified accountant. However, there are some things that an unqualified accountant cannot do.

Software packages now make it easier for limited company contractors to do their own accounts and coupled with the coalition’s proposals to reduce red tape, unqualified accountants could start to find life even easier.

The UK200 Group wants the ICAEW and the ACCA to promote the brand so that people won’t use an unregulated accountant. They would also like to see the government take action to regulate or close down operators who are unqualified.

The vice-president of UK200, Jonathan Russell said that some small accountancy firms are seriously thinking about whether the burden of regulation is now too onerous to bother with. Russell thinks that there are three possible options going forward. Either regulation has to be compulsory for all accountants, or accountants who are not qualified are barred from practising, or the regulation on those who are qualified is reduced so that they can compete on a level playing field.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 234/365 – ::ding:: a stroke of genius by B Rosen

In October last year, Prudential the insurance giant, lost their High court battle to have accountants’ advice made confidential in the same way that advice given by lawyers is.

The case has now gone to the Court of Appeal and last Wednesday the ICAEW spoke out in favour of the Prudential.

Charles Flint QC, speaking on behalf of the ICAEW, told the court that both online accountants and lawyers are performing an identical role in an identical context and therefore you can’t distinguish between them. He added that the institute is interested in getting the best outcome for the public.

The Law Society on the other hand wants the Legal Professional Privilege (LPP) to remain solely for lawyers.

Accountancy bodies have for some time been calling for a level playing field saying that tax advice should be treated in the same manner regardless of whether it is a lawyer or an accountant who gives the advice.

The Prudential originally took the case to court because they think HMRC should only be entitled to see professional advice once a litigation process has been formally instigated. But HMRC is keen to boost up the government’s coffers and combat aggressive tax planning and part of its strategy could be to ramp up its demands that accountants disclose the advice they have given to clients.

It is thought that the case could take as long as three years to resolve and could end up going to the EU for a final ruling.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Baby-foot (Table football) by Duloup

The chief financial regulator, the FSA, wants new powers to censure, fine or even disqualify accountancy and audit firms.

A new report criticises auditors over their failure to scrutinise management adequately in the run up to the financial crisis. The report accuses auditors of showing a disturbing lack of scepticism.

The FSA says it now needs more powers of enforcement so it can deal with individual cases of regulatory concern.

Currently, officials from the FSA only meet auditors once a year but they now want to meet then several times to discuss any potential issues before year ends. The Association also wants to have direct access to listed companies’ audit committees so that they can discuss audit issues.

Michael Izza, the chief executive of ICAEW, said any reform of the audit profession needs to be based on evidence. He defended auditors, saying they had not failed and he flatly rejected that there had been a fundamental failure in auditing processes.

He stressed that last year’s Treasury select committee had determined that there was little evidence to show that auditors had failed in their duties towards limited company contractors.

Izza did agree that there were lessons to be learnt from the crisis and the accountancy profession was asking itself how to evolve the current audit model to meet the ever changing needs of the market. However, changes should focus on the actual situation, he said.

The head of audit at PwC UK, Richard Sexton, said that the FSA’s perception of an auditor’s responsibilities appears to differ from that of the auditing profession. Auditor’s view their role as one of making sure management has the right evidence to back up its assumptions, not to present them with alternative views.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: soma dispenser by Idle Type