FD PARTNERSHIP NEWSLETTERS
Welcome to the 7th edition of FD Partnership, our newsletter for accounting and finance professionals.
As we approach the summer most of the expected casualties in the SME sector are probably already in trouble. The majority of the survivors will have realised early on that it was time to take tough decisions, although many are more than likely riding it out with a dose of good fortune.
The important lesson to learn is that generally speaking if your business is not generating cash then you haven’t got a business. Even more important is that if this applies to your clients it’s your job to point it out to them – before your client ceases to be a client.
Hopefully the sunshine will lift our spirits if the economic data doesn’t.
Oh yes, don't forget that if you are lucky enough to find a bank that will lend, you should check the loan conditions with greater care than previously as some of them are desperate to "get even" and are acting unreasonably. The term "caveat emptor" springs to mind.
Money Laundering Compliance...
FD launches on-line training module
In addition to offering our popular online client identity checks, we are pleased to announce the launch of our online training package. This joint service will be branded under the name of Clientguard, which was specially chosen to reflect what money laundering compliance is all about.
Many of our identity checking customers chose to use us because in addition to keen pricing we offer a full support service to ensure that your clients are aware of and understand why they are being checked electronically.
Our staff are specially trained and clients appreciate the honest and relevant advice they receive. The front end support means that instead of dealing with a faceless call centre or having to submit queries and technical issues online, they can lift the phone and a friendly, knowledgeable voice is at the other end.
Clientguard will bring together the new online training and ID checks as a package, ensuring that customers can arrange appropriate CPD learning at the same time as they implement a suitable checking system. The benefits include lower prices, a one-stop shop and a demonstration to the authorities that they have treated the subject with the appropriate gravity, something which many accountants and financial professionals have yet to do.
To find out more call our dedicated team on 0800 2800 322 or www.fd.ltd.uk/clientguard
Help for accountancy start-ups
Kensington, our accountancy practice brokerage, is launching a groundbreaking practice support service in direct response to requests from first time purchasers of accountancy practices, many of whom are taking over an existing practice.
According to Isaac Ginsbury, manager at Kensington, many prospective purchasers of accountancy practices find the thought of being a sole practitioner and shouldering all the responsibility of the practice themselves quite daunting.
This is on top of the headaches and worries involved in targeting the right practice in the first place. Too many people forget that when they are buying an accountancy practice they are also buying a business, so they’ll probably need expert guidance from somebody who has experience in starting up an accountancy practice themselves and advised others how to do it.
Plenty of people offer marketing and practice growth strategies but many recently qualifieds, as well as experienced accountants who have been employed, are struggling to find advice on the fundamentals, especially if they have never been at the sharp end of a business.
Kensington’s accountancy practice start-up advice is wide ranging and covers all the main areas that need to be addressed. In addition to successfully starting up accountancy practices and managing accountancy practices, our director is also in practice as senior partner in a three partner accountancy practice.
As well as looking at issues directly involved in starting an accountancy practice we can help you to address the fundamental question of whether to start up your own accountancy practice by building up slowly whilst employed or to purchase an existing accountancy practice or buy a block of accountancy fees.
Kensington offers a bespoke package to fit around your personal circumstances when starting up an accountancy practice. We don’t believe in the “one size fits all” approach but will discuss your situation and come up with the optimum launch package to start your own accountancy practice or assist you in taking over an existing accountancy practice but running it the way that suits you best whilst allowing it to develop and grow.
Call the Kensington accountancy practice start-up team on 0800 2800 321 for a no-obligation chat to find out how we can get you going.
Here are some of the key areas we cover to help you start your own accountancy practice
• IT & Software
• Work/life balance
What is transfer pricing?
In its simplest form it is where two businesses are related with each other and the amount of the taxable profit of each can be significantly affected by the results of the transactions between them. There is scope, either through manipulation or insufficient attention to the “arm’s length” principle, for the taxable profit of a business to be significantly depressed.
This is an area that HM Revenue and Customs are targeting and Inspectors are encouraged to look at potential cases for enquiry as part of their Risk Assessment of accounts and also as part of their review of existing enquiries. Their official instructions ask them to establish whether a transaction has the terms and conditions and most importantly the price that you would expect to find if a similar transaction had been carried out between a willing buyer and a willing seller who were wholly independent of one another. If there is reason to doubt whether the transaction would have occurred on the stated terms at arm’s length then there is prima facie a transfer pricing problem and the potential for an enquiry.
The most obvious scenario is a group of companies with an overseas connection. It is possible to manipulate the price of goods to ensure that the greatest profit occurs in the accounts with the lowest marginal rate of tax. As with all tax enquiries HMRC are supposed to take up those enquiries with the greatest risk and our advice is to be careful when dealing with inter-company transactions. Small amounts sold at cost or at loss are unlikely to be picked up but larger amounts could be.
What factors may help an Inspector in determining
a high risk case and ultimately an enquiry:-
• A taxpaying UK business has a commercial relationship with a related party with a low marginal tax rate and receives income from that other business that appears to be small by reference to that relationship or makes payments that appear large by reference to that relationship;
• A loss making UK business has a commercial relationship with a related party with a higher marginal rate and the loss appears to be the result of payments to that business;
• A UK business, whether taxpaying or loss making has a commercial relationship with a related party and there are non-tax factors that might provide an incentive for manipulation, such as regulatory requirements involving customs valuations, anti-dumping duties, currency exchange or price controls, or cash flow incentives within a group affecting where profit is reported or how dividends are financed;
• A UK company that is a member of a group enters into a cost sharing arrangement with other group members with no clear expectation of a future income stream commensurate with its obligation to share costs;
• A UK company that is a member of a group has acquired, created or enhanced an asset, perhaps by incurring expenditure on research and development leading to the creation or enhancement of intellectual property that is used by group members.
HMRC recognise that transfer pricing is not an exact science and there is room for different interpretations and compromise. However with all types of enquiry work knowing how far to push the other side is crucial. As ever we have a team, including ex-Revenue staff, ready to answer your questions.
Taxact hero foils carjacking gang
If you think everything tax related is boring – think again. Our Taxact division manager, Yomi Jacobs, was driving recently and spotted a hooded gang approach a man walking towards his BMW. His 6th sense told him something was about to happen and when he saw a knife being produced he turned around and drove the “taxmobile” towards the gang, scattering them in all directions.
Yomi picked out one of the cowards to chase in the car and cornered him in a local park as the gates were being closed for the night, but he got away as the police were too slow to respond.
Afterwards Yomi rang managing director, Norman Younger, and said that he wished Norman had been in the car as he would have probably instructed him to run the thug over.
Bogus Registry Letters!
Recently formed limited companies are receiving bogus notices that they have to pay a further fee to complete their registration. The fraudster’s style and website are extremely convincing.
The fraud came to light when FD customers rang us to ask why their company formations were incomplete. Subsequent enquiries showed that many other formation agents were receiving similar irate calls.
Companies House are now investigating and it seems that they may have to address the way in which they allow data on new companies to be used, as this sort of scam is not new, although the cunning of the latest team is one of most audacious seen in recent years, even sporting a Charter Mark for excellence!
This episode underscores the importance of using a reputable and established formation agent. We can only wonder as to how many people fell for the ruse even if only ringing the 0870 phone number to listen to long messages.