Thursday 30 April 2009
With a longer than usual notification period it feels like the Budget has been a long time coming. Whether or not it was worth waiting for we will leave you to decide. You may recall in our February newswire, one of our concerns of a late Budget was the possible delay in the publication of the Finance Bill, as this would cause problems for our tax team with regards to the preparation of notes for forthcoming courses. We are delighted (and relieved) to say that the Bill was published today so we will be able to meet all of the deadlines we need to!
From the calls received following the Budget it seems one area of particular interest is 'Furnished Holiday Lettings'. To help you explain this in more detail to your clients we have prepared a client letter but in checking the detail we have found issues regarding the claim procedure that HMRC have not made clear. In particular the 'deadline' referred to of July this year may well not be an effective deadline anyway. As soon as we have clarification of what HMRC are stating we will issue the letter, hopefully in the next couple of weeks.
Also this month our audit and accounts team has noticed the same query being logged with our technical support service on a number of occasions. It seems that HMRC have become quite interested in the calculation of the average number of employees insofar as it is relevant to the qualification of a company as small. The mechanics of the calculation itself are being questioned. Quite why the calculation is being looked at is unclear; however, it could potentially be related to research and development tax credits or capital allowances. If this is relevant to you, you may find the example included in 'Audit and Accountancy issues' below helpful.
Nicola Hurley
Director
nicola.hurley@mercia-group.co.uk
Partners' Conference - Relieve the squeeze... how to win in the downturn
Few firms have escaped the effects of the current downturn. Many are having to cope with tightening cash flow, loss of clients and reducing margins/cutting costs. This one day conference has brought together recognised experts in their field to provide you with practical guidance on how best to survive the current recession and how to ensure you are best/well placed to take advantage of the upturn when it arrives.
The Conference will be held on 12 June 2009 at the Hilton East Midlands, Castle Donnington and costs £285 (plus VAT) per person, 10% discount for local members and 25% discount for national members. For full details please click here.
Tax Cards
Tax cards are an excellent way to keep your firm's name in front of your clients and provide them with a useful summary of the key rates for 2009/10.
There is a choice of three printed sizes available for delivery in May, June, July and August. HTML and PDF versions can be ordered at any time and can be despatched within two working days of receipt of order or approval of artwork. For more information, to order online or request a free printed sample, please click here. Alternatively call the Marketing Support Team on 0116 258 1242.
Audit and Accountancy Issues
A new style audit report
As mentioned in our March newswire, the APB has issued ISA+ 700 (Revised) - The Auditor's Report on Financial Statements. The revised ISA+ makes changes to our Companies Act 2006 audit reports and is applicable for limited companies (but not to limited company charities as yet) for accounting periods beginning on or after 6 April 2008 and ending on or after 5 April 2009.
The ISA+ contains new style, more concise example audit reports and there is now a choice to set out the scope of the audit in the report itself, elsewhere in the annual report, or to refer the reader of the report to the "Statement of the Scope of an Audit" on the APB's website.
The opinion paragraph of the audit report has also been amended and is now split between the following:
- Opinion on financial statements;
- Opinion on other matters prescribed by the Companies Act 2006; and
- Matters on which we are required to report by exception.
Guidance from ISA 706 - Emphasis of Matter Paragraphs and Other Matter Paragraphs has also been included.
Going forward we can expect further changes that will aim to make audit reports more informative, as the APB will continue to work with the IAASB in this area.
The new style reports are effective for limited companies as set out above and for all other UK entities (including charities) for periods ending on or after 15 December 2010 (the date for the introduction of the clarity ISAs).
You can find a copy of ISA+ 700 (revised) on the APB's website.
Higher charity thresholds
SI 2009 / 508 - The Charities Acts 1992 and 1993 (Substitution of Sums) Order 2009
This rather innocuous entitled Statutory Instrument which was laid before parliament in March 2009 introduces, inter alia, some important and, broadly welcome, increases in the thresholds for charities. These include:
- the threshold for requiring accounts to be externally examined is raised from £10,000 to £25,000;
- similarly, the threshold for registered charities to submit their annual accounts and Trustees Annual Reports to the Charity Commission is raised from £10,000 to £25,000;
- the threshold for the preparation by non-company charities of accruals accounts is raised from £100,000 to £250,000; and
- the assets element of the audit threshold is raised from £2.8 million to £3.26 million and the lower income trigger for this is raised from £100,000 to £250,000.
Whilst we had been expecting changes to charity thresholds, the general expectation was that they would apply to accounting periods starting on or after 1 April 2009. The change in fact applies to any accounting periods ending on or after 1 April 2009.
Therefore, the change is a year earlier than expected for many year ends and does open the door to the possibility of extending an accounting period to take advantage of the higher thresholds.
You can find out more about the changes on the Office of the Third Sector's or the Charity Commission's website. A copy of the SI can be found on the OPSI website.
Subscribers to our Charities Specialist Assignment Manual have recently received an update that takes account of the above changes, as well as numerous other recent regulatory and legislative changes.
If you are a subscriber and have not received your copy please email or call Sarah Moore or 0116 2581200.
Changes to the Solicitors' Accounts Rules (SAR)
Changes to the SAR have been made with effect from 31 March 2009. The changes have been made as part of a general updating of the Solicitors' Code of Conduct to introduce firm-based regulation and legal disciplinary practices, as provided for in the Legal Services Act 2007.
In respect of the SAR, the key changes:
- amend Rule 23 to allow 'managers' including non-lawyers the right to sign for client account withdrawals; and
- abolish the statutory concept of a 'controlled trust' and thus allow the same interest provisions to apply as to 'client money'.
You can find a copy of the amended SAR on the Solicitors Regulation Authority website.
An update to our Solicitors' Accounts Rules Specialist Assignment Manual, taking account of these changes, will be issued at the beginning of May.
Calculating the average number of employees
It seems that HMRC have become quite interested in the calculation of the average number of employees insofar as it is relevant to the qualification of a company as small. The mechanics of the calculation itself are being questioned. Quite why the calculation is being looked at is unclear, however, it could potentially be related to research and development tax credits or capital allowances.
If this may be relevant to you click here to find out more about how the number should be calculated, including an example.
Update on disclosing dividends to directors
If you attended one of our 2007 / 2008 audit and accountancy courses you may recall that one of the earlier changes brought about by the company law reform process was the removal of the need to disclose directors' interests in the directors' report.
This change also started a debate on whether dividends paid to directors therefore now required specific disclosure in the financial statements as this information could 'no longer be worked out' through other disclosures. At the time we did not subscribe to this argument and did not feel that specific disclosure was needed as a result of this change. Our view has always been that disclosure in the directors' report cannot satisfy the requirement of an accounting standard and therefore changes to the disclosures therein cannot offset what is required within the accounts themselves.
It seems however that this view is not shared by others and in particular the QAD, who have confirmed that dividends to directors should now be disclosed under FRS 8 and that they will be looking for this in the financial statements that they review.
It would seem therefore that this disclosure should in fact have been made since FRS 8 was first issued in October 1995!
Tax Issues
Budget 2009
Just in case it passed you by, Alistair Darling's second Budget included the following announcements:
- Introduction from 2010 of a 50% top rate of tax for those with income over £150,000 and a gradual reduction in the personal allowances for those with income over £100,000
- introduction of a temporary first year allowance for most types of plant and machinery
- enhanced relief for trading losses extended by a further year
- extension of the furnished holiday lettings scheme to properties in the EEA - but removal of the scheme completely from April 2010 and
- changes to the VAT rules for services.
To read the press notices and other documents please visit the following link.
New and revised guidance on residence and domicile
HMRC have published new and revised guidance on changes to residence and domicile tax rules as a result of the Finance Act 2008. Click here to view.
Benchmark scale rates for day subsistence
HMRC have introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments to employees who incur allowable business travel expenses free of tax and NIC from 6 April 2009. To view the brief click here.
The end of paper VAT returns
VAT Notes 4 2008 outlined HMRC plans to phase out paper VAT returns with effect from 1 April 2010, when it is expected that all VAT registered businesses with an annual VAT exclusive turnover of £100,000 or more, and all newly VAT registered businesses (whatever their turnover), will be required to submit their VAT returns online and make payments electronically. Paper returns will still be an option for the remaining VAT registered businesses but this will be reviewed in the run up to 2012.
For further information please contact a member of the VAT services team at IVC on 0870 264 0080.
More VAT news
If you would like to read more about recent tax investigation and VAT developments, please click here for this month's IVC news round-up.
To see the IVC Budget 2009 summary of VAT changes, please click here.
Office Gossip and Idle Chat!
News about the Mercia Team
There are lots of little snippets to share about comings and goings...
- We are delighted that Kiran has returned to work in the training admin department after a long period of illness.
- Helen James (A&A lecturer), Zoe Canham (marketing executive) and wife of Matt Green (design team leader) are all having babies.
- Chetan Tailor (graphic designer) was recruited on a six month contract to help us over the busy Budget period and he leaves us at the end of the month.
- Karen Duncan (Scotland training manager) is due to have an operation next week and will be off work for a while. We wish her all the best for a speedy recovery.
We have been busy recruiting and next month we will have news of a new IT assistant, database developer/coordinator and new addition to our technical team.
