It might be the summer (technically), but there’s still plenty of news that impacts accountants and their clients flying around that you might have missed.
Fortunately that’s why we have our accountants hub so you won’t miss any of them as well as our regular collection of the latest interesting insolvency and business stories and news along with new blogs every week.
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HMRC nets additional £67.5 million in football probes
HMRC has achieved some good results of their own following a series of investigations into football clubs, players and agents in the last tax year.
Over 80 players and 20 clubs were investigated along with 21 agents facing further action as a reported £67.5 million was recouped in unpaid tax. This forms part of an impressive haul of £384 million in unpaid taxes that have been collected as part of similar crackdowns on the sector over the past five years.
Because of the high earnings associated with the football industry, several of its participants have been caught in questionable investment opportunities. 129 footballers were investigated in relation to film schemes which HMRC considered tax avoidance rather than cinephile appreciation schemes.
At the end of last season in May, HMRC produced guidelines aimed at agents and their increasing use of dual representation contracts. This is where agents claim they work for the player and the club, rather than the more likely scenario that they work for the player under transfer.
HMRC believes these arrangements cause significant losses in income tax, VAT and National Insurance Contributions and are acting accordingly .
The guidelines state it will no longer accept a 50/50 split of agent’s fees as the standard approach. From now on if a club claims that an agent also worked for them in a transfer it must provide evidence to prove it. If they cannot, then the agent’s fee will be deemed to be 100% by the player themselves.
There have been several other exacerbating factors bringing HMRC onto the field. These include:-
- Clubs and agents failing to inform younger players, often under 18, that salaries of over £150,000 require tax returns. Young players and their families with no experience of tax law and their responsibilities often fail to file triggering investigations and penalties.
- Historic tax avoidance schemes during the 2000s and afterwards see many older players having to pay unpaid bill and penalties
- Over-aggressive use of Image Rights – HMRC accepts players’ limited companies being paid by clubs for the use of their images, thereby paying corporation tax as opposed to income tax. Several investigations have found that the players’ image rights are without value such as in the case of lower league players or those with little name recognition.
- Misclassification – HMRC are investigating several workers at clubs such as medical teams being wrongly classified as self-employed under IR35 rules.
Baroness Ford appointed inaugural head of CPIA
The new Centre for Public Interest Audit (CPIA), a new body that will bring together auditors to shape best practice and inform the future of public interest entity audit (PIE) in the UK has appointed Baroness Margaret Ford of Cunninghame as the first Chair of the organisation.
Baroness Ford has a background of more than 25 years as a Non-Executive Director and Chair across private and publicly listed companies, as well as government bodies and has recently acted as independent non-executive Chair for the Deloitte Audit Governance Board, as well as Chair of Newriver REIT and STV Group plc.
She sits as a crossbench peer in the House of Lords and is currently Chair of London Gatwick Airport.
She said: “Audit and Assurance plays a critical role in the UK’s capital markets and the importance of tackling the most challenging areas of the industry cannot be underestimated.
“Our ambition is to proactively identify both shortcomings and best practice in public interest entity audit to support a more robust, resilient and forward-looking profession, delivering value for and enabling confidence among all stakeholders.”
The CPIA’s mission aligns with the new government’s aim to strengthen regulatory powers via the forthcoming Audit Reform and Corporate Governance Bill.
Their membership welcomes the full spectrum of UK PIE auditors as well as the The Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland (ICAS).
Are late payment punishments tough enough?
One of the most maddening things for an accountant is when you sweat to do your job and get your client’s accounts correct and filed on time only to see certain PLC’s just not bother.
The latest being adding-soft-drinks-to-beer-specialists Brewdog who’s annual accounts are currently two months overdue, being expected on June 30th.
PLC’s have six months from the financial year end to file with Companies House while private firms have nine with financial penalties ranging from £150 to £7,500 if not submitted within six months.
Penalties can be doubled for firms who breach the rules two years in a row, as happened to Revolut in 2023.
But is even a £15,000 enough of a deterrent when smaller businesses and their professional accountants manage to meet their professional obligations? Does the penalty system that was first introduced in 1992 need updating?
Dan Neidle of Tax Policy Associates said: “Companies House penalties for late filings are pretty hefty for a small business but utterly irrelevant for a large company.
“It would make sense to make the fine geared to the size of the business, with the maximum becoming the greater of £7,500 and 0.1% of net assets – which would be £150,000 in Brewdog’s case.
“There are essentially no repercussions for a large company, as the maximum penalties top out at £7,500. Peanuts.”
Last year Companies House issued the maximum £7,500 penalty to 27 companies that filed later than six months and the double sum to 31 who were late in successive years.
Additionally, more than 2,000 prosecutions were opened against directors who failed to deliver accounts in the UK with 870 convictions.
Companies House also have the ability to trigger a striking-off process for very late submission but this is rare.
A spokesperson for Companies House said all companies must file accounts. They said: “If they fail to do so, there is an active pursuit process to secure the filing of the overdue documents.
“Failure to deliver accounts is also a criminal offence and all the directors of a company risk prosecution.”
Sometimes doing the right thing is its own reward.
Like enjoying a decent pint of beer, not one that has had a can of Lilt emptied into it.
FCA highlight the main issues around non-compliance
New research from the Financial Conduct Authority (FCA) shows that inadequate client and firm-wide risk assessments plus insufficient compliance monitoring are the main issues of non-compliance they have found.
This is following an HM Treasury report on anti-money laundering (AML) and counter-terrorist financing (CTF) that found that 18% of financial firms assessed were non-compliant with the rules including a third of accountancy firms.
The FCA found that 4% of firms subject to a desk-based review by financial crime specialists in 2022/23 were non-compliant while 14% that were subject to an FCA visit were also non-compliant.
The most common breaches identified by the accountancy and legal Professional Body Supervisors (PBSs) included inadequate documented policies and procedures; inadequate client risk assessment or records and no or inadequate firm-wide risk assessment.
Many PBSs noted a lack of knowledge or understanding of the regulations was “a common theme among firms with non-compliance or poor procedures”.
HMRC themselves are the supervisory body for estate and letting agencies, art market participants, high-value dealers, money service businesses and trust and company service providers as well as accountancy providers that aren’t supervised by one of the accountancy PBSs.
These total around 35,411 firms.
Music to your ears?
While 27% of accountants work in silence, more than half feel stressed at work and think playing music could relieve some tension according to a survey from music licensing company PPL PRS.
Ignoring vested interest for a moment, 72% of the accountancy firms who responded that they did allow music in the office found that 45% of staff had less stress; 43% found it boosted the general mood in the workplace and most importantly, 32% reported an increase in productivity.
Only 11% of respondents said they didn’t want to work with any music saying it had no effect on their productivity or the mood of the office.
Aside from the music, the survey also found that over half of respondents (56%) worked eight or more hours a day and 14% would be at their desk for nine hours or more.