Digital software for VAT
From 1 April 2019 most VAT registered businesses with a taxable turnover above £85,000 will be required to use digital software to keep accounts and to digitally submit their tax records to HMRC.
Failure to comply with the new rules may lead to penalties being imposed. Businesses utilising the new scheme will be able to access updated income tax estimates, which will assist with cash flow forecasting. Non-VAT registered businesses will also be able to opt into the scheme to take advantage of this.
HMRC are recommending that accountants identify all clients who may be affected by the new rules; inform those clients of the requirements; and agree how the clients will subsequently transfer digital information to the accountant. They also suggest accountants ensure they have a compliant method for submitting accounts to HMRC and set up an 'agent services' account with HMRC's new online services (see here).
The 18 December 2018 saw the release of two interesting reports into the audit sector: Sir John Kingman's review of the FRC; and the Competition and Markets Authority's (CMA) interim report into competition in the audit sector.
The CMA has recommended a radical split of professional services firms and is now preparing for further consultation, and will make its full and final report later this year.
The Kingman Review has recommended the FRC be abolished and replaced by a new regulator, ARGA, which is accountable to parliament, with a new mandate, new leadership and new powers. The key points from the 76-page report include:
- ARGA should have statutory recognition and funding to make it more robust. Kingman observed that the FRC was "an institution constructed in a different era – a rather ramshackled house, cobbled together with all sorts of extensions over time" and needed to be rebuilt with a "clear and precise sense of purpose and mission".
- Responsibility for the supervision of actuaries should be transferred to the Prudential Regulation Authority.
- ARGA's board should have the power to decide whether to launch audit investigations in cases where there is significant concern.
- ARGA should have the power to approve and register firms conducting audits on public interest entities ('PIEs'), quoted businesses and other large businesses.
- ARGA should have the same powers over accountants as it does for auditors when dealing with PIEs.
- Auditors should have the power to report to ARGA where they have concerns about the viability of a PIE.
- FTSE 350 audits should be carried out by two firms, at least one of which should be outside the Big Four, to build capacity in the audit market.
The Kingman Review can be accessed here
The Government has also announced the appointment of Donald Brydon, outgoing chair of the London Stock Exchange Group, to head up its review of UK audit standards. The Brydon review, or Project Flora as it was originally known, will build on the work of Kingman and the CMA considering the quality of standards delivered by UK auditors and what else can be done to make them “more effective and reputable” as well as how better to meet public, shareholder and investor expectations. A detailed Terms of Reference and project plan were published on 14 February 2019 and can be accessed here.
On 18 January 2019, the ACCA was permitted by the Legal Services Board to regulate its members to carry out the full gamut of probate work. Licensed members of the ICAEW have been authorised to conduct this work for some time.
It remains to be seen how many of the ACCA's 90,000 members will undertake regulated probate work, but between the ACCA and the ICAEW it seems that accountants are increasingly challenging solicitors for work in this area. Probate may therefore become of greater interest to accountants' insurers, although it is unclear whether many more claims or complaints will follow given that accountants have carried out significant (non-regulated) work in this area for many years.
For more information please contact Jonathan Hyde, Director Jonathan.Hyde@dwf.law, Mark Chapman, Solicitor Mark.Chapman@dwf.law or Philippa Varcoe, Senior Associate Philippa.Varcoe@dwf.law