Welcome to our regular monthly collection of news and announcements that impact accountants and their clients.
As we enter Autumn you’ll continue to be busy on their behalf – which is why we created our accountants hub in the first place so you’ll have access to the most important and accurate insolvency information whenever you need it.
But you can’t read everything and be everywhere at once, so we collect the most interesting and important business and insolvency news stories every month along with new blogs on a range of topics each and every week.
We’re always keen to hear what you think so email us at ask@businessrescueexpert.co.uk because we really want to write what you want to read!
Going Concern guidance
The Financial Reporting Council (FRC) has launched a review of its Going Concern Guidance and are urging accounting firms to contribute to the consultation that will affect how companies report their financial stability.
The deadline for submissions is October 28th and the guidance will impact audits and auditors’ work and responsibilities for years to come.
The FRC’s proposed revisions to the “Guidance on the Going Concern Basis of Accounting and Related Reporting, including Solvency and Liquidity Risks” represent the first major overhaul since 2016 designed to incorporate the lessons learned from recent high-profile corporate collapses and the economic turbulence of the past few years including the pandemic.
Mark Babington, the FRC’s Executive Director of Regulatory Standards, said: “The revised Guidance brings it up to date with recent developments in corporate reporting, audit and evolving reporting practices.
“This consultation demonstrates the FRC’s continued efforts to support UK companies’ delivery of high-quality reporting in a critically important area that enables them to more effectively access capital and grow their business”.
The proposed guidance will apply to all UK companies except small businesses and micro-entities, including those that adhere to the UK Corporate Governance Code.
While non-mandatory, the guidance often becomes best practice, influencing how regulators and courts interpret companies duties. This makes it even more critical for accountants to engage and shape financial reporting requirements in the future.
AI catches more tax avoiders in Austria
The Austrian equivalent of HMRC has been using AI and predictive analytics to recover an additional 1% of revenue in the past year which equates to £175.9 billion.
The investigations uncovered false information in employee tax returns as well as income tax, corporate tax and VAT fraud as well as bogus companies and illegally claimed tax reliefs and subsidies.
10% of cases investigated (375,000) were referred for follow-up enforcement activities.
Christian Weinzinger, head of the PACC special unit that undertook the investigations said: “The PACC was able to use advanced predictive analytics and machine learning methods to help increase additional tax revenue through audit measures and identify individuals and legal entities that were not compliant.”
Data from e-commerce platforms and information obtained from the international exchange of tax information was also examined by AI tools. Plans are in place to expand the use of machine learning methods to include generative AI using large language models as well as expanding cooperation with international tax jurisdictions.
We’re sure HMRC are watching with interest.
ACCA launches new report into Neurodiversity in Accountancy
A new report from the ACCA says that neurodivergent employees add great value and creativity to the accounting discipline.
Less than 30% of individuals with autism or other neurodiverse conditions were in paid employment in 2022 but ACCA estimated that more may mask traits so they can attempt to “better” fit into the workforce.
Co-author of the report Jamie Lyon, head of skills, sectors and technology at ACCA, said: “Supporting neurodivergent employees is essential for creating an inclusive workplace and this doesn’t need to be complex. Often knowing where to start can be the biggest challenge.
“Organisations can approach neuro-inclusion at both an organisational and individual level. The aim for any organisation should be neuro-inclusive design, where possible adjustments and ways of working are part of standard practice and no longer need to be requested.
Attention-deficit hyperactivity disorder (ADHD) is the most common form of neurodivergence with many people going into their adult lives without ever being diagnosed. Additional neurotypes include autism, dyslexia, dyspraxia, dyscalculia, Tourette’s syndrome and long-term injuries to the brain.
It’s estimated that one in five people are neurodivergent and the report is keen to promote the business benefits of hiring more neurodiverse employees citing different ways of thinking about situations and problems and increased levels of productivity.
Additionally, the report believes that Gen Z employees would respond well to creating and promoting a neuro-inclusive environment as they are “more driven by the social impact an organisation makes”.
The report concludes that supporting those with neurodivergent traits through an individual and organisational level could be achieved through using an inclusion design method. This would focus on making it possible for adjustments to be made in standard practice and should not have to be requested.
Almost half of UK Small Businesses are paid late
New research shows that 49% of invoices across the UK were paid late in the last 12 months to June 2024, up from 43% and higher than the 46% recorded in 2020.
Broken down on a geographic basis, businesses and freelancers located in London saw the worst response with 73% seeing late payments compared to Ipswich where just 22% of invoices were paid outside of the specified payment window.
A quarter of SMEs surveyed by FreeAgent for the research said they had felt the future of their business was in jeopardy because they were not getting paid on time.
Roan Lavery, CEO of FreeAgent, said: “Maintaining a healthy cash flow is the number one priority for anyone running a business. However the vast majority of small businesses simply don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep themselves afloat.
“This isn’t just a case of payments coming a few days or weeks late, as some of these invoices take months to settle up or in some cases won’t be paid at all.
“Many small businesses remain in a fragile state so it’s more important than ever to ensure that SMEs are protected and supported. More resources should be put into the Small Business Commissioners remit so the chronic issue of late payment can be properly tackled.”
HMRC accused of lacking strategy to tackle tax evasion
A new National Audit Office (NAO) report says that tax evasion by small businesses is causing the UK to lose billions of pounds a year in revenue and worse, that HMRC does not know how successful it is in tackling the problem.
“Tackling tax evasion in high street and online retail” looks at:
- How well HMRC understands and assesses the risk and scale of tax evasion in retail and its strategy to tackle evasion
- Whether HMRC and key partners have cost-effective systems and controls to reduce the risk of tax evasion in retail
- Whether HMRC responds effectively to different methods of tax evasion in retail and ensures lessons are learned to improve its approach
The report notes that HMRC’s illustrative estimate of tax lost due to evasion in 2022/23 is £5.5 billion of which 81% came from small businesses.
This is up from 66% in 2019/20 despite the overall level of tax evasion stabilising in recent years according to HMRC.
The report also contained the eye-catching conclusion that HMRC does not have a specific strategy for tax evasion.
Noting instead: “HMRC has an overall compliance strategy that focuses on tackling all forms of non-compliance with an overall aim to stop the tax gap increasing. The strategy is primarily tailored around types of taxpayers such as small or medium sized businesses.
“HMRC has chosen not to develop a specific strategy for tackling tax evasion, or other forms of non-compliant behaviour (such as tax avoidance) in case this undermines its ability to deploy resources flexibly to changing risks.”
The report also identified weaknesses in company registration criteria as another significant risk.
“Since 2011, when online incorporations were introduced, it has been quick and easy to set up UK companies online from anywhere in the world, leaving the UK vulnerable to tax evasion from fraudulent businesses.
“Government introduced tighter requirements at Companies House from March 2024 but some new measures will not be in force until Companies House develops the necessary systems and capability, or until further secondary legislation (verifying directors’ identities) is in place.”
The NAO made several recommendations including HMRC demonstrating that it has sufficient strategic focus on tackling tax evasion in key areas of risk. It added that HMRC should “take a leadership role in working with other relevant parts of government to develop a shared understanding of the drivers of tax evasion and a more joined-up approach to tackling it.”
HMRC responded: “We generated a record £843.4 billion in tax revenues last year paying for the vital public services everyone relies on.
“The UK has one of the lowest tax gaps reported in the world, but the government is committed to reducing it further. While the vast majority of businesses pay the tax that’s due, we will continue to use our civil and criminal powers against the determined minority who refuse to play by the rules. Such action helped us protect £41.8 billion in the past 12 months.
“We also work closely with partners including the Insolvency Service and Companies House to tackle evasion in retail and online services.”
Companies House log-in changes
Accountants and businesses will have to use the government’s new single sign-in service, Gov.uk One Login, to access Companies House accounts instead of the current Government Gateway process.
Companies House has confirmed that from Autumn it will move to the new system which will have to be used by companies to access all online services on the companies’ register in time.
Phase one of the rollout will complete by the end of 2024 with a private beta pilot. This will be followed by a public beta trial.
Once the public beta is complete, every user signing in to the Find and update company information service will need to use Gov.UK One Login.
Companies House added that the “WebFiling service will move to the new login service at a later date. We’ll give users plenty of notice before this change happens.”
The new login service also has two-factor authentication and will be rolled out across all government web services to replace Government Gateway accounts over the next three years with full implementation by mid-2027.
Employment law changes for accountants
The new government has announced two pieces of legislation in the King’s Speech to make some profound changes to employment law which will have a direct effect on accountancy practices all over the UK.
The Employment Rights Bill and the Equality (Race and Disability) Bills haven’t yet been published but their scope and impact are apparent. As are the “New Deal for Working People” reforms outlined in the manifesto.
The Employment Rights Bill in particular addresses some issues raised by the accountancy profession specifically including the establishment and protection of an individual’s work/life balance and to make work within it and others accessible.
Some of the key proposals include:
- Right to Switch Off
Workers will be provided with the right not to be contacted or monitored outside of their normal working hours.
- Flexible working by default
Designed so flexibility in working practices should be a genuine default position from day one of employment. There’s reference to flexi-time and term-time arrangements and it’s believed the intention is that anyone who requires flexibility in their working hours or location because of caring or family responsibilities should not be excluded from certain roles or professions.
This won’t be entirely unfettered as accountants and others will retain the ability to reject proposals that aren’t reasonable or feasible such as ahead of a crucial tax return deadline for example.
- Family rights
The new bill proposes that any new mother returning from maternity leave should be protected from dismissal for six months following their return except in specific circumstances yet to be defined. This goes further than changes made in April where an individual should be offered a suitable alternative role if made redundant within 18 months following childbirth. There is also a proposal to review the parental leave system and paternity leave likely to become day one rights (currently requiring 26 weeks service.) Bereavement leave will also be a statutory right for all and carers’ leave a paid right.
- Fair and equal pay
National minimum wage rates are expected to increase to match the living wage. The government also proposes removing the lower pay band for 18 to 20 year olds. Statutory sick pay will be made available from the first day of sickness or injury-related absence. The Equality (Race and Disability) Bill also intends to introduce Race and Disability pay gap reporting obligations. Like the current obligation to provide data on the gender pay gap, this will apply to employers of 250 people or more.
- Zero-hour contracts
The manifesto stated that exploitative contracts would be outlawed and the bill suggests that anyone working regular hours over a 12-week reference period should have a contract reflecting those hours.
Additionally the extension of rights to make a claim at an employment tribunal will have an immediate impact on employers. At present to make a claim of unfair dismissal, any former employee must have been employed for at least two years and must start the claim process within three months. The new Bill gives employees the right to claim unfair dismissal from the first day of employment and extends the claim time limit to six months.
Employers will still be able to dismiss an employee fairly within the first two years, but they will need to follow a fair and reasonable process. This applies for dismissals for conduct, performance, redundancy and, in the case of new starters, for the failure to pass their probation.