IR 35 Contractors are “right to be fearful of HMRC reform

Most self-employed workers believe that IR35 is the biggest threat to their business in 2022

 

IR 35 Contractors are “right to be fearful of HMRC reform

Continuing scepticism from contractors around new IR35 rules is justified with public attention having been momentarily diverted from the issue due to the pandemic, the war and other economic factors.

IR35: A ‘forgotten crisis’

The introduction of IR35 reform on April 6, 2021, saw the responsibility for assessing status shift from the contractor to the medium or large business engaging them.

As part of this reform, which mirrors changes introduced in the public sector in 2017, the liability also shifted from the contractor to the fee-paying party in the supply chain (either the recruitment agency or client).

ESB thinks that a lot of companies did rush into potentially rash decisions, theorising that the pandemic has combined with the new rules to create a significant uptick in ‘inside-IR35 roles’ for contractors. A lot of preparations for the changes were quite rushed and perhaps weren’t top of the agenda.

IPSE research from December 2020 paints a similar picture. More than 70 percent of freelancers believe that the most detrimental factor to their financial wellbeing has been the recent IR35 changes, it found.

They went on to argue that wholesale change needs to take place on a societal and legislative level if the contractor sector is to return to a healthy state.

Put simply, without media and industry pressure and a governmental review, the changes to IR35 will continue to burden the whole supply chain, making it increasingly difficult for freelancers to make a living and for UK companies to source the flexible expertise they need to get projects done.

Room for optimism?

In fact, April to November 2021 saw an 83 percent rise in contractors deemed outside-IR35 by their clients. In addition, 39 percent of contractors said that they are confident about their prospects for 2022.

If you take a hard-line approach and say that you don’t want to engage contractors, then you’re cutting out vast swathes of that available market.

We’ve seen a lot of very large companies who really have tried to do things properly and made sure that they are both compliant from a tax point of view but are also able to engage contractors outside IR35 and are therefore able to attract the best talent.

Contracting and the wider economy

The significance of the contracting sector us huge as it contributes more than £300bn to the economy each year.

There’s always this misinterpretation that contractors in some way dodge tax, whereas the opposite is true when you actually look at the economic impact that the industry has. There’s obviously the contractors themselves providing the services, but there’s also tall of that support that goes around it.

Accountants are a prime example of this, noting that we play a key role in supporting the contracting sector. Historically we’ve taken a prime position in terms of providing contractors with advice around IR35 and the tax risks.

However, since the 2021 reforms, a push from agencies and clients to edge contractors into umbrella companies has left the services of accountants redundant in many cases.

However the tide may be turning and that accountants could be presented with new opportunities in the coming months and years. What’s very clear now is that there are a lot of new people coming into contracting. I think there’s a big opportunity for accountants to be on the crest of that wave.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

Spurious R&D claims an unbelievable drain on company resources

Abuse of the tax system will highlight the value of trustworthy advisers

 

 Spurious R&D claims an unbelievable drain on company resources

The significant time and resource loss associated with HMRC inquiries into potentially fraudulent research and development (R&D) claims highlights the need for enhanced diligence.

The finances, depending on the claim, could be significant, but the resources required to deal with an inquiry are just unbelievable.

And when you’re doing that alongside dealing with things like furlough and covid, you can’t focus on running the business.

HMRC figures show a 16 percent increase in the number of R&D tax credit claims for the year ending March 2020. This equates to £7.4bn in total support claimed, up 19 percent from the previous year (£6.3bn).

Although, in theory, this paints a positive picture of innovation in the UK, a suspected uptick in spurious claims has sparked concern.

For instance, of the 85,950 R&D claims made, 85 percent were less than £100,000 in value – conceivably an indication of suspicious activity.

The role of external advisers

Increased abuse of the R&D relief system will inevitably highlight the value of capable and trustworthy advisers.

We hear stories where the end company will make the claim led by the provider, and then the provider will say ‘well it’s your claim, if you didn’t think it was right, you shouldn’t have done it’.

To ESB, that’s not right. We, as a professional adviser, are responsible for explaining what’s going on and ensuring that the client understands everything.

A competent provider will have that to hand because that’s what gets submitted to HMRC to show what expenditure has been included.

That’s a key area – it gives the client certainty that we’re in it for the long haul. We’re here to build ongoing relationships with people and do the right thing for them.

The key role for advisers is to ensure that the right companies are claiming the right amount of tax. That’s why we’re not afraid to say ‘no’ to clients – if we’re not confident about the claim then we won’t submit it.

A changing landscape for R&D Claims

While the UK government has historically encouraged businesses to claim R&D relief, the indications of spurious activity have sparked a recent change of tone.

First, to prevent misuse and ensure that the right amount of relief is being claimed, HMRC installed 100 new officers to its compliance unit in 2021 a move which, according to Clark, encapsulated the shift in stance.

HMRC have got limited resources, but they’re still acknowledging that this needs more attention because the system is open to abuse.

Further to this, efforts were made to strengthen the system in the 2021 Autumn Budget. As a result, the scope of the R&D scheme will be “refocused” to target domestic innovation. At present, UK companies can file for relief based on developments that have been carried out by overseas sub-contractors.

In addition, Chancellor Rishi Sunak announced that the definition of R&D costs that are eligible for tax relief will be extended to include cloud computing and data.

The amendments to the scheme will take effect from April 2023.

But regardless of what’s happening on the legislative side, it’s always partly incumbent on the organisation to remain conscious and vigilant of fraudulent activity.

It’s just about having that stop and check moment and thinking, ‘my accountant whom I work with on a month-to-month basis doesn’t think that I qualify, so how can these cold-callers who don’t know me think that I do?’.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

Glos SMEs should choose MTD software wisely as April 2022 deadline fast approaches

Glos Small businesses should review end-to-end VAT process to ensure it is fully compliant with the upcoming MTD for VAT rules

Glos SMEs should choose MTD software wisely as April 2022 deadline fast approaches

As the deadline for Making Tax Digital (MTD) for VAT approaches, accountants urge businesses to choose wisely when it comes to adopting MTD compliant software to ensure a smooth transition.

Once the right MTD software for the business is in place, the next step is to review their VAT return process and check that each aspect is digitally linked together.

Many of our clients use spreadsheets to build their business VAT return workings and they draw data from their accounting system in order to do so.

We often see a break in the digital link at this point as the data is simply copied from the accounting system and pasted or manually typed into the spreadsheet, which is not permitted under the MTD rules.

Although ESB has been able to help our clients in bridging these digital gaps, we suspect there are still some businesses unaware of the full extent of their MTD obligations and how easily the digital chain can be broken.

MTD for VAT – are you ready?

MTD for VAT was introduced in April 2019 for businesses with a taxable turnover of above the £85,000 threshold, and will be extended to all remaining VAT-registered below the threshold in April 2022.

MTD is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.

HMRC expect most businesses to experience long-term benefits from the MTD initiative, including reduced errors and time saved in managing their tax affairs.

The starting point for businesses who haven’t yet transitioned, is to familiarise yourselves with the new MTD for VAT rules and where necessary, take suitable advice- which ESB accountancy can help you with.

Benefits of MTD

We believe that many businesses are sceptical that the costs of MTD implementation justify the potential benefits to the government, and that this may also be seen as a costly extra compliance exercise.

There may be some taxpayers who value the more regular discipline of tax reporting and the ability to identify their likely tax liability earlier and, therefore, provide for it earlier.

According to a HMRC survey of over 2,000 businesses, 69 percent experienced at least one benefit from MTD, including faster returns submissions and increased confidence that they were getting tax right. 67 percent felt that MTD had reduced the potential for mistakes during the return process.

As of December 2021, nearly 1.6 million taxpayers have joined MTD for VAT with more than 11 million returns successfully submitted.

Some businesses may be eligible for an exemption from MTD, if it is not reasonable or practicable for them to use digital tools for their tax.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

HMRC defers Self Assessment penalties for Glos online filers

HMRC is deferring Self Assessment penalties for Glos online filers – ESB update.

HMRC is deferring Self Assessment penalties for Glos online filers - ESB update.

ESB Accountancy effectively detail the HMRC details as:

1. No penalty for late lodgement as long as return submitted by 28 February.

2. No penalty for late payment provided pay off in full by 1 April or set up a payment plan by the same date.

3. Please remember that a payment plan will also need to take into account tax due by 31 July and that the plan could expire just in time for a largish payment in January 2023 unless that is also anticipated.

4. If you do not need a formal payment plan setting up a direct debit with HMRC to spread the cost of future bills is worth considering to minimise the panic of large lump sum payments once or twice a year.

HMRC deferring details

HMRC will give customers and their representatives additional time if they need it and will operate in the same way as the equivalent waivers last year. However, HMRC is encouraging customers to file and pay on time if they can – almost 6.5 million have already done so.

The Time to Pay options are still available to assist customers. Once they have filed their 2020-21 tax return, customers can set up an online payment plan to spread Self Assessment bills of up to £30,000, over and up to 12 monthly instalments.

The payment deadline for Self Assessment is 31‌‌ ‌January and interest will be charged from 1‌‌ ‌February on any amounts outstanding. Normally a 5% late payment penalty is charged on any unpaid tax that is still outstanding on 3‌‌ ‌March. This year, like last year, HMRC is giving customers more time to pay or set up a payment plan. Self Assessment customers will not be charged the 5% late payment penalty if they pay their tax or set up a payment plan by midnight on 1‌‌ April. They can pay their tax bill or set up a monthly payment plan online at GOV.‌‌UK.

There is no change to the filing or payment deadline and other obligations are not affected. This means that:

• interest will be charged on late payment. The late payment interest rate from 4 ‌‌ ‌January 2022 is 2.75%

• a return received online in February will be treated as a return received late where there is a valid reasonable excuse for the lateness. This means that:

◦ there will be an extended enquiry window

◦ for returns filed after 28‌‌ ‌February the other late filing penalties (daily penalties from 3 months, 6 and 12 month penalties) will operate as usual

◦ a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1‌‌ ‌April 2022. Further late payment penalties will be charged at the usual 6 and 12 month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up.

• we will not charge late filing penalties for SA700s and SA970s received in February – these returns can only be filed on paper

• for SA800s and SA900s we will not charge a late filing penalty if customers file online by the end of February – the deadline for filing SA800s and SA900s on paper was 31‌‌ ‌October. Customers who file late on paper will be charged a late filing penalty in the normal way, they can appeal against this penalty if they have a reasonable excuse for filing their paper return late

• self-employed customers who need to claim certain contributory benefits soon after 31‌‌ ‌January 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time – this is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 balancing payment that is due to be paid by 31‌‌ ‌January 2022. Benefit entitlements may be affected if they:

◦ couldn’t pay their balancing payment by 31‌‌ ‌January 2022, and

◦ have entered into a Time to Pay arrangement to pay off the balancing payment and other self assessment tax liabilities through instalments.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

3 reasons bookkeepping cost cutting creates absolute chaos in Accounting & Bookkeeping firms

3 reasons bookkeepping cost cutting creates absolute chaos in Accounting & Bookkeeping firms

3 reasons bookkeepping cost cutting creates absolute chaos in Accounting & Bookkeeping firms

Honestly, it doesn’t matter what kind of business you’re running, if you have clients who pay you low fees, it creates chaos on many levels. But we’ll get to that in a second.

Why do cheap clients create absolute chaos?

There are a few reasons. Let’s start by defining what a cheap client is, by looking at an example.

Meet Flora, a firm owner. She had 52 clients who were paying low fees (around £30 per hour) and she was working hourly. She was intelligent, quick and very entrepreneurial. But she was selling herself short for less than £1,500 per month for complex tax work.

When she spoke with her private clients, she’d often tell them that they are not charging enough. How much people charge speaks to two issues:

1. How much you value yourself, and
2. How much you believe your services will transform your clients’ lives.

Usually, you can design an advisory offer that you can charge £1,500 per month. Or, £5,000 – £15,000 per project. However, it depends on what you offer and the specific transformation (the value) the client receives.

Flora had designed a £1,500 per month offer. But she was earning less than £500 per client per month because hourly work is capped based on PRICE. Not value. This is important. The hourly service buyer is not looking for value. They are looking for affordable.

If you sell cheap services, how can you find, recruit and train the right people to operate it? To what extent can you attract quality staff if you are being paid £30 per hour?

The truth is, you cannot. Which causes your first problem:

Problem 1: You will lack the resources you need to invest in good systems

The number one reason cheap clients create chaos is because your business will lack the financial and time resources to put in good systems.

There are two types of accounting and bookkeeping businesses. One that’s built based on high volume. For example, 52 clients charging £30 per hour, capped at £500 per month. Or – type two – 10 clients or five clients charging £3,000 per month.

They have the same amount total revenue. Different number of clients. And therefore, require different infrastructure to operate. One business is in Absolute Chaos. The other is running smoothly.

In our 20 years of business building I am sure about one core truth: Systems run businesses, people run systems. If you have more clients, you will need better (and more sophisticated systems) and more people to operate those systems. Unless of course, you decide to invest heavily in tech. In which case, you are a software company (which is not a bad idea!).

Without good systems in place, finding good people to create repeatable results for your clients is difficult.

So, what happens?

YOU – the owner – end up doing all this work. You find yourself doing a lot of client work or fixing the work your staff did. This is what happened to Flora. As the owner, you’re supposed to be working ON your business, not in your business.

Flora calls it The Chaos Cycle.

Problem 2: Cheap clients effects your confidence during the sales cycle

Selling to cheap clients for an extended time affects what you believe about what (and how) you can sell your services. You can sell £2,000 per month clients or £20,000 projects. It is possible. But it requires you change the way you think about yourself and your business.

Here is an example:

Let’s says that you have a sales appointment today. The appointment is with a £6,000,000 property business. They need help fixing a complex finance issue. And you have the skill to fix it.

Over the past five years however, you have worked only with cheap clients. And cheap projects. As a result, your belief of your value is also “cheap”.

So, you ask yourself: “Why would they pay me more?”

“Why would I charge more money to do the same thing?”

“How should I price this?”

“Maybe I should increase my fees just a little bit?”

You end up pitching £50 per hour (instead of £30). WIN!

The company rejects your proposal.

What happened?

The issue here is very common. You didn’t have confidence in the sales cycle. All the cheap engagements sucked the life out of your ability to close lucrative deals.

You see, the company that needed your help was paying for a solution. A transformation. A result. But you were selling the same services you always sell – bookkeeping and accounting.

Businesses have deeper issues. Deeper than compliance work. They are looking to maximise profits and grow. Most importantly, they are willing to pay LARGE fees to companies that helps them achieve that goal. This reality requires you to become an advisor during the sales process and explore their issue deeply.

This process is called consultative selling and it requires that you:

1. Decide who you want to help
2. Decide what your unique offer will be to help them
3. Make a list of all the pains, problems and thoughts that these people have in line with your solution

And you need to do all this work, BEFORE, you ever get on the phone to a prospect.

This is challenging. Your competition will never do this work. But if you do the work, you will win the business.

Problem 3: Burnout Before Earnout

For accountants and bookkeepers who have been running their firm for a long time with cheap clients… they get tired. Who wouldn’t be?

Working 50 – 90 hours per week in a business that is more like holding two full-time jobs. They find themselves in the burnout trap. Too tired to fix the issue. Making money from the current chaos business so they do not want to change.

Why change now?

Because after the COVID crisis, business owners need more help than ever before. Will you step up and help? Don’t get me wrong here, you are not a charity. You should be paid very well for what you do. But before you can get paid well, you need to increase your fees. And, if you must, focus on a better client avatar.

The Solution: Focus your business on one ideal client

The solution is simpler than you think (Read: Simple, not easy!)

The way for you to change the way you charge your client, isn’t about “just increasing your fees”. It’s about POSITIONING. Stop positioning yourself as a commodity. Instead, positioning yourself as a transformation provider for one specific thing.

Flora has a book  called The One Thing and she says it’s so powerful.

It talks about just doing one thing. Unfortunately, accounting firms are more like supermarkets. Supermarket sell cheap things.

Focus on ONE thing, ONE transformation. Get good at that one thing and you will be known for that ONE thing.

So where do you start?

You start by designing your core advisory/consulting offer…

Here is how:

1. Decide who you want to help. And, specifically, what problem you solve.
2. Decide what your unique offer will be to help them solve this problem
3. Outline the steps a new client would need to go through to succeed.
4. Create the sales deck for pitching your service
5. Start generating leads.

It’s simple. Not easy.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Glos SMEs focus on growth and turn to Recovery Loan Scheme

Glos SMEs focus on growth and turn to Recovery Loan Scheme

Glos SMEs focus on growth and turn to Recovery Loan Scheme

Small business owners in Gloucestershire are feeling optimistic about economic conditions for growth, according to iwoca’s quarterly SME Expert Index of UK brokers.

• Growing the business is the most important reason cited by SMEs accessing finance, overtaking ‘managing day to day cash flow’ for the first time this year.
• Prior to the Recovery Loan Scheme being extended, nearly 40% of brokers saw client demand for the scheme increase compared to Q2.
• iwoca’s SME Expert Index provides regular snapshots of the lending market from the perspective of industry experts.

The Index reveals that over a third (35%) of brokers reported the top motivator for applying for unsecured finance was to ‘grow the business’ – a 12 percentage point increase from the previous quarter.

For the first time since the Index was launched, ‘managing day to day cash flow’ was not the most requested reason for applying for unsecured finance, dropping by 6 percentage points on the previous quarter. There was also a decline in the number of SMEs citing ‘recovery from lockdown or closure’ or to ‘bridge occasional cash flow gaps’ as a reason for needing finance.

iwoca’s Q3 SME Expert Index is based on insight from UK brokers who collectively submitted over 1000 applications for unsecured finance on behalf of their SME clients over a four-week period in August.

Demand for government-backed finance increases

Prior to the extension of the government-backed Recovery Loan Scheme (RLS), almost 40% of brokers report that they saw an increase in demand for the scheme compared to Q2. One in seven brokers (14%) saw demand increase significantly – submitting 50% or more applications compared to the previous four weeks.

Broker respondents collectively had approximately 1800 of their customers specifically requesting an RLS loan over the four-week period in August.

With more fintechs and banks receiving RLS accreditation, 75% of brokers submitted a client application to an accredited RLS lender. This compares to 20% in Q2, when brokers opted instead to wait for more lenders to be accredited or applied for a non-government backed product.

Growing demand for unsecured finance

A third (33%) of brokers said that they had submitted more lending applications for unsecured finance compared to the four weeks prior, suggesting that more businesses are looking to finance their growth.

The Index found that demand for loans under £25,000 had almost doubled compared to the second quarter, making it the most requested amount in Q3 (32%). Just over half (51%) of respondents said that they had applied for less than £50,000 on behalf of their clients.

Colin Goldstein, Commercial Growth Director of iwoca, mentioned that the latest findings from their SME Expert Index are encouraging; it’s great to hear from brokers that the small businesses they work with are beginning to feel more confident about their future.

SME owners, brokers and lenders will welcome the decision by the Treasury to extend the Recovery Loan Scheme, particularly as demand continues to increase. Our economic recovery relies heavily on our six million small business owners, so it’s key that companies like iwoca continue to provide them with access to finance, including the government- backed Recovery Loans.

Broker Sam Jones from NGI Finance says that growth now seems to be the main driver for their clients: they’ve made it through all the lockdowns and the furlough scheme has ended, so they’re now in a position to regroup and plan ahead with a more positive mindset on how their businesses will perform. Growth inevitably costs, so using external finance to fund that keeps SME owners in control of their businesses and allows them to stay on top of the all important cash flow.

The first quarter of the year was really busy with the end of CBILS and – whilst he wouldn’t say demand is close to approaching the level of requests they saw then – they’re certainly having more conversations with clients and fielding an increase in enquiries than they were during the summer months.

After a slow roll out of RLS there’s an increased availability across the market which has naturally increased awareness and demand for the product. They’re also now seeing clients needing to repay Bounce Back Loans and CBILS, so they’re considering their options for further funding or refinance.

SME Expert Index

This SME Expert Index from iwoca provides a snapshot on what’s driving small business owners to borrow, the trends seen in the types and value of finance being accessed, and how these patterns change as the country emerges from the pandemic. iwoca publishes this index every quarter to capture the experience of brokers working with small businesses.

Iwoca is accredited to the Recovery Loan Scheme, having distributed nearly £400 million to small businesses through the Government’s Coronavirus Business Interruption Loan Scheme (CBILS). In June 2020 the lender launched iwocaPay – an online buy now pay later invoice checkout to help small businesses get paid. iwoca is reaching 1.8 million businesses across the UK and Germany through its embedded lending technology, which allows businesses to access loans through a range of platforms such as accountancy software apps and digital neo-banks.

 

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Create, protect and sustain value – the role of accountants as trusted professionals at the heart of sustainable organisations

Create, protect and sustain value – the role of accountants as trusted professionals at the heart of sustainable organisations

Create, protect and sustain value – the role of accountants as trusted professionals at the heart of sustainable organisations

Analysis from ACCA (the Association of Chartered Certified Accountants) uncovers the drivers of change shaping sustainable business and the must-have capabilities needed from accountants as sustainable business and finance professionals of the next decade.

ACCA is building on its global research programme with the launch of the new report, Professional accountants at the heart of sustainable organisations. This latest research considers the future of the accountancy profession and identifies four new emerging career zones of opportunity for finance professionals where they can make vital contributions to businesses and other organisations:

• Zone 1: Transformation drivers
• Zone 2: Enterprise analysts
• Zone 3: Assurance providers
• Zone 4: Stakeholder reporters

The report also outlines the core competencies needed in assessing the outlook to 2030, reflecting the skills, knowledge and behaviours required for an ACCA-qualified accountant to meet the future needs and demands of the profession. Individuals will need to balance these core capabilities – such as collaboration, ethics, sustainability and expertise – to fit their role and stage of career.

Helen Brand OBE, chief executive of ACCA, had stated that with the unprecedented challenges the world has faced since the start of the Covid-19 pandemic, our world today is not as many expected. This new report emphasises the role of business in society. Organisations large and small – in the private and public sectors – will play an essential role in forging a better world for the longer term beyond the ravages of the pandemic, and in dealing with the growing environmental emergency. The accountancy profession is an integral part of this.

The newly identified career zones represent a wealth of opportunity for accountancy jobs in all sectors and industries across the globe. Professional accountants are the sustainable business and finance professionals of the next decade, driving good business decision-making, creating new organisational value, protecting existing value, and communicating that value to the outside world through their reporting.

In tomorrow’s complex world, a human touch is still needed, where finance professionals bring their competencies, ethical and professional judgment to bear alongside their technical mastery and technological know-how to support organisations to generate sustainable societal value.

The report uses findings gathered over the past two years, including a survey of over 2,000 responses from finance professionals, and is enriched by a wide-ranging and extensive engagement programme of roundtables with external stakeholders across the world from October 2020 to June 2021. These explored the drivers of change impacting the profession as well as examining the core capabilities needed by accountants in the future including consultation with focus groups, ACCA global forums and market specific external experts.

This engagement has informed ACCA’s new skills framework, which details the essential capabilities that all sustainable business and finance professionals will need to thrive in the future. Furthermore, it showcases how these capabilities will be needed across the various career opportunities ahead.

Report author, Jamie Lyon, feels that with growing organisational complexity, competing stakeholder needs, monumental societal change, workforce transition, challenged finances, technological disruption and an environmental emergency, organisations across the globe are challenged as never before. The 2020s in accountancy are a decade in which the profession is integral to building sustainable businesses that generate both financial returns and long-term value for society, while caring for the planet.

The Covid-19 crisis has accelerated business change at a pace unimaginable before the onset of the crisis and has presented organisations with unforeseen challenges but also unprecedented opportunities. There are major drivers of change that organisations now must navigate as they seek to be sustainable financially for the long term and create societal value -from the economy, to geopolitics to the climate crisis. It’s a world of great opportunity for the sustainable business and finance professional.

To help people understand the opportunities, ACCA is also launching a new career navigator. This tool will help users understand the core capabilities needed at different stages of a career journey and set them apart as a sustainable business and finance professional. They’ll be able to plan their career path by exploring emerging career opportunities and job roles mapped to the blend of capabilities these require, and access relevant learning and job opportunities.

 

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Growth and productivity: is outsourcing accountancy the answer?

Growth and productivity: is outsourcing accountancy the answer?

Growth and productivity: is outsourcing accountancy the answer?

Outsourcing book-keeping and accounting can free Glos business people for more productive tasks.

A third (34%) of UK accountants do not trust that outsourcing is done correctly or to a high enough standard, according to latest research from IRIS Software Group (IRIS), the UK’s leading provider of accountancy software and services.

The research reveals many accountants are reluctant to outsource certain elements of their role thanks to out-of-date assumptions. From the beginning of the COVID-19 pandemic, accountants have been their clients’ essential, trusted advisors. Yet with the threat of business survival still at large, accountancy professionals need more support in managing admin-heavy tasks so they can focus on what matters most – helping clients and growing their business.

IRIS’ latest insights paper surveyed 200 senior accountants and their opinions on outsourcing. It found 42% of accountants associate outsourcing with negative connotations, with 68% saying that they haven’t considered outsourcing in the last 6-12 months – despite a rising demand for advisory-led services since the start of the pandemic.

However, the research further revealed that accountants would gladly use the extra time freed up by outsourcing to dedicate more time to work-life balance (45%), complete higher fee-earning work (33%), build client relationships (27%), and one in five (20%) would use it to focus on business advisory.

Matthew Elliott, Managing Director at Clarity Accountants feels that accountancy is very traditional and value has always been found in the tangible reports created and delivered to clients. But now, there is new value to be found in relationships with customers and offering a better service. By outsourcing they’re not bogged down in compliance work, so they can focus on cross-selling services and increasing the value they bring to their clients.

Outsourcing gives us the bandwidth and capacity to scale the business. Without it, I don’t think we could have grown to the scale we have.”

Before COVID-19, 24% of accountancy firms surveyed were planning on hiring extra staff to help ease workload. Although no one could have predicted the uncertainty COVID-19 would bring, recruiting full time employees could have been the wrong decision at a time when staying agile was key. It demonstrated how the flexibility of outsourcing wins out over the risk of costly and unreliable recruitment.

Firms must act smart. They have to be proficient with their time and proactive if they are to stay as the beating heart of British business. We need to break the stigma attached to outsourcing. It’s an efficient way for accountancy firms to resolve any talent gaps, extend practice services and reduce costs, all while increasing profits and margins and enabling them to scale at pace. To unlock these benefits, it’s time for accountants to hang up their hang ups around outsourcing.

 

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Many businesses failing to focus on cash flow, survey finds

Many businesses failing to focus on cash flow, survey finds

Many businesses failing to focus on cash flow, survey finds

Only 14% of UK Finance departments report a primary focus on cash flow during the COVID-19 pandemic.

The majority of businesses focussed on cost-cutting exercises and the use of Government support. For example, 41% confirmed they had furloughed accounts payable staff over the past 12 months.

As of June 2021, approximately 11.6 million jobs had been placed on furlough in the United Kingdom as part of the government’s job retention scheme at a cost of around £100 billion.

Ian Smith, GM and Finance Director for document management provider Invu, the company that commissioned the research, argues that cash is the key metric in a crisis.

At the start of a crisis, working capital assets and liabilities unwind as the volume of business reduces. For most businesses, this releases cash tied up in working capital and together with cost-cutting may help a business survive to the bottom of the cycle. Emerging from the crisis will see both increasing expenditure and increasing working capital requirements, a nasty pincer movement on cash resources.

Surviving this cycle is dependent on having full visibility of working capital commitments which places a high reliance on timely and accurate management accounts and visibility of future financial commitments.

The survey showed 16% of UK businesses can take up to 20 days to publish their management accounts – a further 7% taking over 30 days.

Smith argues that this is far too long in a normal business environment, let alone a crisis, as the relevance of the information diminishes after each passing day, providing little value for decision making.

The survey showed that a minority of businesses, 32%, use budgetary controls at the point of making a purchase commitment, and 68% of those businesses believed their purchasing process was effective.

The majority of businesses appear to make financial commitments without fully understanding their financial business impact at the point of purchase. Combining this with slow management reporting means the impact on cash is often not known until it’s too late to do anything about it, narrowing the gap between making a commitment and understanding its impact on cash flow needs to be a priority. Businesses failing to address this are at risk.

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Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Making Tax Digital (MTD) is less about tax and regulation than you may think

Making Tax Digital (MTD) is less about tax and regulation than you may think

 

Making Tax Digital (MTD) is less about tax and regulation than you may think

Booking will be the key for MTD effective

When we think of Making Tax Digital (MTD) for Income Tax, the obvious association is tax and regulation, but the reality is that MTD in any form is less about either of the above and more about how practices need to evolve as organisations, and how they might encourage their clients to begin to operate in a digital way.

When it comes to practices making as smooth a transition as possible for their clients, there may be a certain amount of expectation setting and education that make MTD for Income Tax a streamlined process rather than the burdensome task many practices fear. There is a real opportunity to transform customer interactions across the entire journey into a seamless, client-focused end-to-end digital experience.

Evolving as Digital Organisations

A shift in mindset to encompass digital working is needed among both practices and their clients as we edge towards the deadline for implementing MTD for Income Tax in April 2023. In their preparations, many practices have begun to explore technology solutions, and it’s often left to the tax department to assess these and lead the way.

However, the reality is that most of the job of MTD for Income Tax will not involve the tax department, and rather, will fall on the department already doing the bookkeeping or VAT. The fundamental principle in MTD for Income Tax is that the record keeping needs to be digital and recorded as close to real time as possible, but understandably, ‘Making Bookkeeping Digital’ probably doesn’t have quite the same impact!

In recognising the true nature of the requirements, what practices will no doubt soon realise is that MTD for Income Tax is less about regulation and tax, and more about preparing clients to work digitally as soon as possible. In fact, it’s also less about specific technology, and more about being comfortable with digital workflows and new ways of working, particularly when preparing clients to make the transition from annual bookkeeping, to quarterly bookkeeping.

Setting Expectations

Most practices have wanted their clients to use digital bookkeeping products for some time now and MTD for Income Tax and its quarterly reporting requirement may just be the catalyst they need.

The upside is that these practices will then be able to have sight of the client data they need, and to keep tabs on it throughout the year without the rigmarole of sending backups via email and ensuring clients don’t work on it at the same time.

However, the complexity is that these increased checkpoints have the potential to change relationships with clients around areas of responsibility and expectation. Just because an advisor has 24×7 access to a digital bookkeeping solution and a client’s data, doesn’t mean that there is a constant human audit service ready to flag when figures aren’t correct.

It’s important to prepare clients for this change in the relationship and set expectations by working with them more digitally now. This may help to address the fear than many practices have, which is that they will be experiencing a large extra burden that they are unable to charge for.

Making it Personal

As practices make the digital mindset shift, there’s often a fear that these new digital processes, including automation applied to what may have traditionally been manual, will affect advisor’s ability to provide a personal service to their clients.

However, if implemented correctly and appropriately, technology should inspire innovation and help practices to build stronger relationships. Sharing information digitally and having more transparency can often introduce more touchpoints, and the move to digital absolutely does not need to replace personal relationships.

Digital should actually enable practices and their clients to have more meaningful relationships, as the rather mundane necessity of constantly requesting information to be sent back and forth can be removed. Just having that data on tap will allow advisors to work more closely with their clients, and move beyond the administrative, operational tasks to dig down into what value add services they may be able to offer.

These are just a few of the mindset changes we’ll begin to see practices make with their clients as we begin the two-year countdown to MTD for Income Tax. While it may seem a daunting process, remember that it’s not the first regulatory hurdle that practices have had to overcome in the past, five, ten or even twenty years. Like all regulation, it’s a chance to adapt and to work smarter, and with the right approach to digital, practices may just find MTD for Income Tax is a new opportunity to have better, more meaningful and more profitable relationships with clients.

 

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Accountants can be trusted

Accountants can be trusted

Accountants can be trusted

The accountancy industry is set for an overhaul after the collapse of Carillion and BHS dented its reputation.

The CMA is proposing that the parts of accountancy firms that perform audits should be separated, that FTSE 350 firms have two auditors, and that there should be more oversight as to how they are chosen.

Stephen Rawlinson, an analyst at Applied Value, felt that over the last 20 years they’ve had a plethora of companies that have gone bust, and normally the signs were there.

He stated that you could see from the accounting numbers with hindsight where they had been flattered, and accounts are there to present a true and fair view.

He adds that the accountants “are not lying – this isn’t Brexit, this isn’t the Leavers,” but they can “present a flattering picture over quite a long period of time.”

The FRC watchdog has been slow to change the rules, the shareholders have been slow to understand the accounts properly, and the partners of the audit firms haven’t recognised fully their own fiduciary responsibility, nor… have been fined heavily enough where the accounts have been found to be overly flattering.

The collapse of Carillion last year helped raise the issue of the role of auditors at companies.

What are accountants for?

Former Deliotte partner Eric Tracey, of GO Investment Partners, stated that an auditor’s job is to examine the accounts of a company and reassure shareholders the company is not lying,

What does he think of the proposal from the Competition and Markets Authority to break up the big four auditors – PwC, Deliotte, EY and KPMG?

He isn’t sure that it will change behaviour and thinks audit committee reports should outline issues such as why shareholders are “shorting” stocks – that is taking a bet that the share price will fall.

Stephen Clapham, of Behind the Balance Sheet, is blunter: Daft, stupid idea. You make them smaller… you make them less independent.

Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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Business confidence in Gloucestershire surges to near-record high

Business confidence in Gloucestershire surges to near-record high

 

 

Business confidence in the Gloucestershire has risen to a near-record high since a quarterly survey began in 2004, despite record falls in sales in the past 12 months.

 

We found that business confidence across the County had surged to a near-record high. This was likely a result of optimism surrounding the vaccination programme, which has fuelled expectations of a sharp rebound in economic activity set to last into 2022.

 

Conditions remained difficult for businesses, though the County could see increased levels of domestic tourism if international travel restrictions continue, which could benefit some of the region’s businesses.

 

Nearly half of those surveyed cited customer demand as a growing challenge, which was among the highest rates in the UK and is over 20 percentage points above its rate from a year ago. 

 

Meanwhile, late payments were a more pressing issue for three in 10 companies. The proportion of businesses experiencing this problem has almost doubled from a year ago. 

 

Looking ahead

Uncertainties remain for businesses in Gloucestershire around the shape and pace that economic recovery will take. However, domestic sales are set to increase by 7.7%, the fastest rate seen since the BCM began in 2004, while exports are expected to rise by 4.4%, both sharper than the national forecast.

 

Employment is also set to increase by 2.4% while profits are forecast to increase by 6.7%.

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Please talk to us at ESB Accountancy to discuss how your business can comply with the new tax, finance and accounting laws – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us buttonpayroll bookkeeping services small business help contact esb accountancy gloucestershire cheltenhamor please fill the form at the bottom of the contact us page.

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