This is just a little notice to say that our office closes on Friday 21st December at 2:00pm and re-opens on Wednesday 2nd January at 9:00am.
There are so many big things happening at home and around the world this month. For example you would have to be in hibernation to miss the mega debate on Brexit but then there were the California wildfires which destroyed ironically a place called Paradise where 83 died, 500 remain missing and 10,000 homes burned. The month draws to a conclusion with the sea clash between Russia and Ukraine when Russian coastguard ships opened fire on two Ukrainian gunboats and a tug boat and the cauldron of tension between the two rapidly increased to Ukraine warning of a full-scale war with Russia.
We have also been told that Grenfell Tower fire was probably caused by faulty wiring inside a Hotpoint fridge freezer; David Cameron is welcomed to China where he is setting up a private equity fund; one in six pints of milk get thrown away unused; and the hike in tuition fees and has raised the debate on whether getting a university degree still delivers on the investment required.
Incredibly while all this is taking place Prince Charles makes a speech and tells us that “Accountants are best placed to provide sustainable business solutions to companies.” This is what he told an audience of business leaders at the annual summit forum for Accounting for Sustainability Project (A4S).
That is quite a remarkable jaw dropping statement in the light of what has been reported this month in the press about the performance and integrity of accountants.
Patisserie Valerie accountants Grant Thornton are under investigation by the Financial Reporting Council (FRC) for its role as the auditor of the company which almost collapsed in October after it discovered a £40m black hole in its accounts.
Last month the former finance director of the cake and cafe chain (Chris Marsh) was arrested following the discovery of accounting irregularities. Mr Marsh is an accountant and a member of the ICAEW.
The company was rescued from the collapse by its chairman Mr Luke Johnson who poured in £20m of his own money after the revelation that it was almost £10m in debt rather than having £28m in the bank as it had previously been reported. It is hard to imagine how a cake and coffee shop can get into this kind of mess and it be missed by the accounting and management professionals.
Did you notice that in August this year Grant Thornton (GT) was fined £3m by the FRC for misconduct over its audits of Vimto producer Nichols and, very close to home, the University of Salford. A former senior partner of the firm Eric Healey was fined £200k (discounted to £150k) and excluded from the ICAEW (Institute of Chartered Accountants for England and Wales) for 5 years.
But GT is not the only accountancy firm in the spotlight. KPMG (one of the big 4) is also under investigation by the FRC for its role as auditor of Carrillion the giant construction company which collapsed in January due to the large amount of debt it was carrying and a plethora of uncompleted public contracts. Whatever individuals may say about what is or isn’t included in an audit, it is hard to imagine that something of the shaky finances of a company like this was missed by the professionals.
So how has your November been? What does your news look like? Whether you are global, national, regional or local – please get an accountant that is qualified, experienced and shot through with integrity.
Tom Bathgate MBA
With all the changes we have experienced in the last few years it may sound far fetched but the key commentators on the subject of Making Tax Digital (MTD) tell us that this is the most fundamental change to the administration of the tax system for at least 20 years.
It is really vital that we are aware of the essential elements for businesses and organisations which are:
It will become mandatory for almost all businesses and organisations (self-employed, partnerships, limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
There will be a requirement to submit income tax updates to HMRC each quarter and a final end of year return,directly from software.
WHEN DOES IT START?
For VAT: MTD for VAT starts in April 2019. If you are not currently VAT registered; MTD for VAT will be relevant to you only if you become VAT registered.
For Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns): MTDis expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.
For Corporation Tax (limited companies):The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
WHAT ARE THE EXEMPTIONS?
WHAT DO I NEED TO DO NOW?
If you are a client of Huddarts it is important to be aware that we need to discuss your transition to MTD.
Although there is no firm date for when you will be required to comply there are advantages to digitalisation and the transition to MTD will be much smoother for those that are keeping electronic accounting records.
Some things to think about:
– We may need to consider the possibility of a digital exclusion exemption.
– If you currently use accounting software it will need to be upgraded. If you are considering acquiring software or joining the pilot, please discuss this with us first.
– If you currently maintain records on a spreadsheet you will need to acquire software which will allow returns and updates to be made directly from the spreadsheets, or engage us to do this work.
– If you currently maintain records on paper your processes will need to change. You will need to provide records to us promptly after each quarter-end and engage us to do the bookkeeping, quarterly and annual reporting or acquire and use appropriate software.
WHERE CAN I GET FURTHER INFORMATION FROM ABOUT THE CHANGES?
Please get in touch with Charles Lucas or Kendal Blackburn. If you send an email by using the contact page on our website please mark it for the attention of Charles and Kendal. They will be delighted to hear from you.
Alternatively you can phone to speak with them. The office number is on our home page.
We will of course be posting further information on our website and like the young chap below (looking very dapper indeed and somewhat keen on finding out as much as he can about MTD) we would love you to keep reading the posts and referring to them.
Q: What is a forensic accountant and why might I need one?
A forensic accountant (‘FA’) is someone who prepares reports for civil and criminal courts. He or she is instructed either by a party to the proceedings or jointly if the court decides that is a better option. In any event the FA’s duty is to the court.
You may need a forensic accountant for example if you :
1. Want a business valuation in connection with a divorce or separation;
2. Have been a victim of fraud in your business and you want it investigating;
3. Are in dispute with a business partner about any financial matter or payout;
4. Have been in an accident and are making a personal injury claim;
Q: How does an investigation work? Is it a dark art or is there a clear methodology?
Because the matters which the forensic accountant is reporting on are generally legal issues the FA is normally instructed by a solicitor. That creates the framework for the FA to operate in and from which he can create his report.
A report requires the FA to undertake a detailed analysis of the evidence made available along with any further information he or she may discover along the way. Each case is different requiring a variety of approaches and techniques. For example a business valuation requires a review of existing data whereas an investigation requires the use of audit and interrogation techniques.
Q: Is the truth uncovered in every case?
Whilst the establishing of the truth may be a laudable aim, most cases are decided on the balance of probability in the civil courts and on the basis of beyond reasonable doubt in the criminal court. A business valuation, for example, is largely the opinion of the expert ie the FA and not necessarily the view of everybody – particularly the warring parties! The quality of the advocacy of the barristers also has a large part to play.
Q: How widespread is fraud in the North West and what is the prosecution rate like?
Fraud is at epidemic levels all over the world and the North West is no different. There is a very low level of fraud investigation work undertaken by the authorities , even fewer prosecutions and even fewer convictions.
The statistics are particularly poor and hard to obtain but a few years ago there were only 38 fraud prosecutions in the North West with a conviction rate of around 80%. Whilst the reporting of fraud and the processing of that data is at an industrial level, the follow up by the police, HMRC and other agencies is almost nil. That means that many cases of fraud have to be pursued through the civil courts in order to have any chance of recovery and restitution for the aggrieved party.
Q: Graham Salmon – tell me a little bit about you and how to contact you?
I am a chartered accountant and a certified fraud examiner.
My specialism is the SME sector and I cover fraud, valuations, investigations, criminal defence.
I am also frequently instructed in proceeds of crime act cases (POCAs) and housing association and charity frauds.
I appear in court on a regular basis all over the country although not every case requires a court appearance by me.
My contact details are:
Graham Salmon FCA, CFE