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Why do I need a Forensic Accountant?
Forensic accountants are called upon to help in many situations:
- Shareholder and partnership disputes
- Divorce Cases – assessing assets and liabilities
- Professional Negligence claims
- Personal Injury Claims
- Insurance Claims – Business interruption and loss of profit
- Fraud Investigations
- Criminal Investigations
Often Solicitors will appoint Forensic Accountants and obtain quotes from several accountants before making a recommendation to their client.
CIMA Accountants are well suited to Forensic Accounting because of their business experience and analytical skills.
Divorce is a growth area for Forensic Accounting as its common for both parties to value assets and liabilities in different ways, to resolve this in some cases accountants will be jointly appointed by both parties.
The process is normally as follows:
- The Solicitor issues instructions to the Accountant
- The Accountant reads the brief, investigates the information supplied and searches for undisclosed information (for example Land Registry, Companies House, Internet etc)
- The Accountant requests further information via the solicitor
- Appropriate calculations are carried out
- A report is prepared which can be presented to the Court
steve@bicknells.net
Not all accounting is the same
Management accounting combines accounting, finance and management with the leading edge techniques needed to drive successful businesses.
In addition to strong accounting fundamentals, CIMA teaches strategic business and management skills:
- Analysis – understanding the story behind the numbers and using it to make business decisions
- Strategy – using the insight from analysis to help formulate business strategy to create wealth and shareholder value.
- Risk – applying analytical skills to look at end-to-end business processes to identify and manage risk.
- Planning – using accounting techniques to plan and budget.
- Communication – knowing what information management needs and explaining the numbers to non-financial managers.
You can trust CIMA members
CIMA members and students are required to comply with the CIMA code of ethics and to adopt the fundamental principles to their working lives. CIMA members are at the heart of business as its conscience, adding judgment, independence and objectivity to their professional qualification.
Every year, CIMA audits its members to ensure they uphold these ethics and will take action if members have been less than true to them.
CIMA MiPs have secured an exclusive partnership with Angels Den
With over 6,000 investors, Angels Den has already been successfully matching entrepreneurs and investors for the past six years. They have a great track record of successfully funding growing businesses through their unique SpeedFunding and Angel Club events and now offer entrepreneurs and business owners the opportunity to pitch online via their crowdfunding platform.
Angels Den only want to bring their investors the best deals so they spend quality time with each entrepreneur, pre-screening and giving feedback on their business. Those businesses that aren’t quite ready for funding will now be sent to a centralised booking line at CIMA Accountant. Tel 023 8064 3763.
CIMA Members in Practice will provide consultancy in order to assist businesses to present their funding and investment opportunities to Angels Den through its regional offices.
When CIMA Accountant feel they have a business that may be ready for funding, they can now pass these deals onto Piers Lawford at Angels Den.
Not all accountants are the same!
Watch this video to see how we are different…
steve@bicknells.net
How long to keep your records
As a general rule, you should keep your records for a minimum of six years. However,
if you are:
• an employer, you need to keep Pay As You Earn (PAYE) records for 3 years
(in addition to your current year)
• a contractor in the Construction Industry Scheme (CIS), you need to keep your CIS
records for 3 years (in addition to your current year)
• keeping records to complete a personal (non business) tax return, you only need to
keep them for 22 months from the end of the tax year to which they relate.
If you need to keep records for other reasons, for example the Companies’ Act
requires limited companies to keep specific records and you also use those records
for tax purposes, you need to be aware that there may be different time limits for
retaining them. Be careful not to destroy any records you also use for tax purposes
too soon.
niall@odfinancialservice.co.uk
Life after submitting a tax return
You’ve completed your tax returns, you think you can now breathe a sigh of relief, but can you?
HMRC can inspect any taxpayer’s records under Schedule 36 by FA08, FA09 and FA10. They can check the tax records for:-
Pay as You Earn (PAYE)
Value Added Tax (VAT)
Income Tax (IT)
Capital Gains Tax (CGT)
Corporation Tax (CT)
Insurance Premium Tax (IPT)
Inheritance Tax (IHT)
Stamp Duty Land Tax (SDLT)
Stamp Duty Reserve Tax (SDRT)
Petroleum Revenue Tax (PRT)
Aggregates Levy (AGL)
Climate Change Levy (CCL)
Landfill Tax (LFT) and
Bank Payroll Tax (BPT)
The technical term for the inspection is a Compliance Check. They will check that the tax payer has:-
- Complied with their obligations
- Paid the correct amount of tax and at the right time
- Claimed the correct reliefs and allowances
The inspection
This can be completed by anything from a short telephone call to confirm a single fact, to a detailed investigation of a person’s entire financial affairs over a period of years.
HMRC may undertake checks by either asking for information or documents or by arranging a meeting or visit.
They may:
- Require taxpayers by notice in writing to provide information and produce documents (a “taxpayer notice”)
- Require third parties by notice in writing (for example a supplier or bank) to provide information and produce documents (a “third party notice”)
The caveat being that these requirements are reasonable for the purpose of checking a tax position. The generic term for these types of notice is information notice.
The recipient has the protection of a right of appeal to, or prior approval by, an independent tribunal. There is no right of appeal however where the notice only refers to information or documents that form part of a taxpayer’s statutory records, or any person’s records that relate to:
- The supply of goods and services
- The acquisition of goods from another member state, or
- The importation of goods from outside the European Union (EU) by a business
If the taxpayer is not forthcoming with the information, HMRC may invoke their statutory powers to obtain them.
They may also request assistance with aspects of a tax check from other government departments.
This could include a situation where there is reason to believe that a taxpayer:
- did not notify chargeability to tax
- did not register for VAT if required, or
- is operating in the informal economy
Restrictions on Information Powers
The taxman is not all-powerful; some safeguards have been installed, set out in the law and with guidance so that in carrying out compliance checks
- HMRC’s powers are used reasonably and proportionately
- Taxpayers are clear about when a compliance check begins and ends
- Officers have no right to enter any parts of premises that are used solely as a dwelling, whether to carry out an inspection or to examine documents produced under an information notice. They can, however, enter if invited
- FA09 adds to Sch 36 FA08 a power to inspect all property for the purpose of valuation (for direct taxes purposes). This requires either the taxpayer’s agreement or Tribunal approval
- Unannounced visits will only be made where agreement has been given by an authorised officer
Other safeguards include the fact that officers can’t require certain things to be provided:
- Information relating to the conduct of appeals against HMRC decisions
- Legally privileged information
- Auditors or tax advisers advice to a client about their tax affairs
- Information about a person’s medical or spiritual welfare
- Journalistic material
Time constraints
- Information over six years old can only be included in a notice issued by or with the approval of an authorised officer
- HMRC cannot give a notice in respect of the tax position of a dead person more than four years after the person’s death
The Power to Visit Business Premises and Check Assets and Records
Inspection powers allow an officer of HMRC to enter business premises and inspect the premises, business assets and statutory records.
If an information notice has been issued earlier, the documents required in that notice could be inspected at the same time.
FA09 incorporates into Schedule 36 inspection powers in respect of the:
- business premises of Involved third parties
- valuation of premises for Income Tax or Corporation Tax
These inspections:
- must only be undertaken where it is reasonably required to establish the tax position and
- will normally be by prior arrangement, the date and time being convenient to the taxpayer
The Power to Visit Business Premises and Check Assets and Records
Inspection powers also allow any officer to enter any premises when they believe the premises are to be used in connection with taxable supplies of goods or taxable acquisition of goods from Member States, and such goods or documents relating to such goods are on the premises.
There is no right of appeal against an inspection but the occupier can refuse entry and prevent the inspection from being completed.
The occupier can be penalised for such obstruction, where the inspection has been approved by a Tribunal.
There may be occasions when a pre-arranged visit will be inappropriate, for example where there is a strong risk that the taxpayer would move the business or remove stock or other assets. In such cases, an unannounced visit may be undertaken subject to prior agreement by an authorised officer.
If a formal statutory approach is needed, and it has not been possible to agree the time of inspection and give written confirmation, the inspection must be approved by a Tribunal and 7 days written notice of the time of the inspection given. The application for approval must be made by, or with the approval of, an authorised officer.
When a Penalty can be charged where a person:
- Fails to comply with an information notice
- Conceals, destroys or otherwise disposes of documents required by an information notice
- Conceals, destroys or otherwise disposes of documents that they have been notified are, or are likely to be, required by an information notice
- Deliberately obstructs an inspection that has been approved by the Tribunal.
- In complying with an information notice provides inaccurate information or produces a document that contains an inaccuracy,
- Fails to comply with a notice requiring contact details of a tax/duty debtor to HMRC.
These rights are covered in sections 38 FA 08 and 09
Types of Penalties
There are four types and amounts of penalty:
- An initial penalty of £300
- A daily penalty of up to £60 for every day that the failure or obstruction continues after the date the initial penalty is assessed
- A tax-related penalty
- A penalty not exceeding £3000 for providing inaccurate information or documents in response to an information notice
A tax-related penalty is in addition to the initial penalty and any daily penalties. The amount of the penalty is decided by the Upper Tribunal having regard to the amount of tax which either has not, or is unlikely to be, paid by that person.
A person is not liable to a penalty if they have a reasonable excuse for:
- Failing to comply with an information notice, or
- Providing inaccurate details or documents, or
- Deliberately obstructing a tribunal approved inspection
If they correct their failure as soon as the excuse ends, the excuse will then be treated as continuing until the correction is made.
Normally, daily penalties will not be assessed after the failure has been remedied.
Record Keeping
Schedule 37 of FA08 amended existing record keeping legislation in respect of PAYE, VAT, IT, CGT and CT, whilst Schedule 50 to FA2009 extends this approach to IPT, SDLT, AGL, CCL, and LFT with BPT being included from 8 April 2010. Following consultation it was accepted that SDRT and PRT did not require separate statutory provisions, whilst IHT will be addressed through guidance.
These provisions are aimed at alignment and clarification.
This approach is designed to be flexible across a range of business and non-business taxpayers.
There are penalties for failure to keep adequate records.
The basic requirements in relation to record keeping have not changed but rules have been aligned on how long records are kept.
niall@odfinancialservice.co.uk
12 really quick and easy tax tips for PAYE workers
- Child care vouchers – if you have children attending a nursery or looked after by a professional childminder, your employer can join a Childcare voucher scheme. This allows for £55 of the weekly cost to be deducted free of tax and NI if you are a basic tax rate payer, or £28 if you are a higher rate tax payer.
- Pensions – if you pay into a work pension scheme, 20% tax is automatically deducted. For high rate tax payers, you can claim additional relief either by declaring it on your Self-Assessment or calling the taxman.
- Company cars – are a pain and the tax is huge BUT if you have a company van, the benefit in kind is capped at £3,000 so for a basic rate tax payer the cost of driving is only £600 or £1,200 for a higher rate payer.
- Professional membership fees – your membership to a recognised trade or professional body it is a deductible expense, but not for your hobbies.
- Share incentive schemes – there are loads of schemes that allow either NI or Capital Gains Tax to be saved, you don’t have work for a listed company either.
- Giving your work colleagues a lift to work – if your employer encourages car pooling you can claim 5p a mile for the passenger without incurring any additional tax charge.
- Cycle to work – get your employer to provides a bike both for travel to work and play, it’s not considered as a benefit in kind.
- Then after a time you can buy it off them at market value.
- Season ticket loans – your company can advance the cost of an annual season ticket up to £5,000, much cheaper than buying a ticket weekly.
- From April 2014 this increases to £10,000 (not really sure if that’s a blessing?)
- Electric Cars – from April 2015 there’s no benefit in kind.
- Working from home – it is becoming increasingly more common for staff to work from home. You can claim £4 a week allowance without having to produce receipts.
Any questions contact the author at niall@odfinancialservices.co.uk
CIMA shows professionals how to do the right thing
The Chartered Institute of Management Accountants (CIMA) has produced an ethical scenario tool to help businesses comply with ethical standards in a volatile and complex business environment.
This follows a recent Chartered Global Management Accountant (CGMA) survey which revealed that nearly 25% of respondents worldwide worked for an organisation that had suffered from a serious reputational failure. This rose to over a third in the UK, which has witnessed a series of corporate crises ranging from LIBOR to tax avoidance and meat scandals. CGMA research last year also highlighted that one in three finance professionals around the world have faced pressure to act unethically.
As CIMA members in practice are committed to upholding a Code of Ethics, the institute has produced this interactive tool to support and guide ethical decision-making. Created with input from members globally, and available to the wider business community, it takes the user through a series of challenges in areas such as conflict of interest, the supply chain, bribery and data protection.
Tanya Barman, CIMA’s Head of Ethics, said:
“Ethical challenges are part of working life, and often there is no perfect answer. But if they are not dealt with appropriately, there may be severe consequences when they come to light – both for the individuals and for the companies they work for.”
“Unfortunately it is still common for employees, be they in finance or in other parts of the business, to face pressure to compromise their ethical standards, and the standards of their company. It is vital to act ethically; to build long-term business success and avoid the shortcuts that can turn into tomorrow’s scandal.”
“Through releasing this tool – to both members and the wider business population – we hope to encourage better working cultures that lend themselves to the ethical standards that most firms subscribe to.”
The tool is available at: www.cimaglobal.com/ethicstool
‘Bean counter’ view of accountants is holding back entrepreneurs
Some entrepreneurs and small businesses may be holding themselves back by refusing to share information with their accountants who they sometimes regard as little more than “bean counters”, according to a new study.
There is a tendency for UK businesses, to make decisions without adequate financial information or analysis, there is often poor cash flow management and time and opportunities are being wasted because some owner-managers don’t want anyone else to know their business, it concludes.
The report, funded by the Chartered Institute of Management Accountants (CIMA) and compiled by Dr Michael Lucas of the Open University along with Professor Malcolm Prowle and Glynn Lowth, from Nottingham Business School, part of Nottingham Trent University urges accountants to improve their image by refuting bean counter accusations and promoting themselves in business partnering roles.
“Given the importance of financial issues and the increasing need for enterprises to operate economically, efficiently, effectively, efficaciously and ethically, management accounting has potentially a crucial role to play in improving the quality of planning, control and decision-making,” says the CIMA report called Management Accounting Practices of UK SME’s.
The authors also call for further research into the way small and medium-sized enterprises (SMEs) reach critical decisions and into the psychological profile of executives, particularly owner managers.
Dr Lucas said: “While most business owners are good at using accounting services for monitoring cash flow and costs they do not always appreciate that management accountants can add a great deal to decision making in the management of the business. Accountants were sometimes regarded as little more than bean counters, rather than potentially having a business partnering role where they can advise and improve efficiency
“Some entrepreneurs, in particular, are reluctant to employ management accountants, expressing a desire to maintain control and have exclusive access to information they consider sensitive.This could lead to higher costs in terms of management time which is turn can put constraints in time spend in growing the business.”
The report says its exploratory findings give important insights which should inform the development of further large-scale survey research into whether accounting tools were used and, if not, why not.
These tools include: Product costing; budgets for planning and control; standard costing variance analysis; cost-volume-profit analysis; responsibility centres; capital expenditure appraisal techniques; working capital measures; and strategic management accounting.
Dr Lucas is Senior Lecturer in Accounting at the Open University Business School, Professor Prowle is professor of business performance at Nottingham Business School and Mr Lowth, who is a former President of CIMA, is a visiting fellow at the Nottingham business school.
DUE DILIGENCE
Buying, selling or thinking of setting up a business always do your research, known in the trade as due diligence.
The holy trinity of due diligence is always the customers, the company, and the management.
The fundamental question is there a demand for the service or product? Don’t base it just on hunches or observations. Who are already out there doing it? For very little money Companies House or try Company Check can be a great starting point, it’s amazing what information you can get, even for a small company.
Don’t forget pricing, premium products and services command premium pricing try and pull off anything less will fail. The adage is true “You can’t fool all the people all of the time”.
What is the USP (Unique Selling Proposition) why would somebody want to trade with this business? Recognise it, flaunt it.
The company has to be sound, fit for purpose. There has to be clarity on costs, know the suppliers. Is there sufficient support, think about staff, IP, premises and systems, benchmarking, QA?
Thirdly, the management, no man is an island. The most undervalued asset in any business is the staff. It is often unlikely a person holds all the skills to perform all roles and responsibilities. Identify the key skills and resource.
Whether you are buying selling or setting up a business it always takes longer than first estimates and you can’t forecast for all events.
Covering the bases these are some generic points to be going on with.
| Customer | 1. Market Research |
| 2. Customers’ Profile | |
| 3. Competitors’ Profile | |
| 4. Managing Market Risks | |
| 5. Pricing | |
| 6. Promotion and Advertising | |
| Company | A. Running the Business |
| 1. Staff | |
| 2. Key Suppliers | |
| 3. Equipment | |
| 4. Managing Operational Risks | |
| 5. Legal Requirements | |
| B. Finances | |
| 1. Start-up / Selling Costs | |
| 2. Breakeven Analysis | |
| 3. Funding options and Tax incentives | |
| 4. Cash Flow Forecasting | |
| 5. 5 Year Plan | |
| 6. Profit & Loss Account | |
| 7. Balance Sheet | |
| Management | 1. Job descriptions |
| 2. Contracts | |
| 3. Remuneration |
Business Accountant 