HMRC lose first case to fine a Senior Finance Officer for errors 1

All companies must deliver correct and complete tax returns.

A company may not be able to do this if its tax accounting arrangements are not fit for purpose. These arrangements will range from how it accounts for its business transactions to how it works out its final tax liability.

Schedule 46 FA09 sets out rules for certain large companies. Those companies must establish and maintain their tax accounting arrangements and their Senior Accounting Officer (SAO) is responsible for ensuring that they do.

This guidance tells the reader about

  • the rules that put responsibilities on those companies and particularly their SAOs
  • the actions that those companies and SAOs must take
  • how HMRC will ensure that they comply with the rules, and
  • the penalties chargeable if they fail to comply.

The way in which HMRC ensures compliance with the SAO rules is consistent with HMRC’s wider strategy for Mid-sized and Large Businesses by which we seek to build and maintain open and transparent relationships with companies and to work collaboratively with them in real time to reduce their level of tax compliance risk.

Currently SAO rules only apply to large companies (turnover of £200m plus) but will HMRC extent this to smaller companies?

Senior Accounting Officer Main duty: what is the main duty

The main duty of a Senior Accounting Officer (SAO) is to take reasonable steps to ensure that a qualifying company, see SAOG11000, establishes and maintains appropriate tax accounting arrangements.

This means, in particular, that the SAO must take reasonable steps to

  • monitor the accounting arrangements of the company and
  • identify any respects in which those arrangements are not appropriate tax accounting arrangements.

Penalties

A penalty of £5,000 is charged for the following failures:

  • Failure by the company to notify HMRC of the name and contact details of its SAO
  • Failure by the SAO to carry out their main duty under the rules
  • Failure by the SAO to provide a certificate to HMRC, or providing a certificate that contains a careless or deliberate inaccuracy.

The penalty is payable by the person responsible for the failure, as above.  The penalties are at a flat rate and cannot be mitigated.

K Thathiah v HMRC [2017] UKFTT 601 (3 August 2017)

The FTT found that a senior accounting officer (SAO) had not breached his main duty under FA 2009 Sch 46.

The case related to VAT errors totaling £1.3m despite providing ‘clean’ certificates, however, it was decided that reasonable steps were being taken to ensure the accuracy of VAT returns for example setting up a team, providing training and using an agent.

I think all SAO’s should take this a warning! get the right systems and procedures or face personal penalties

steve@bicknells.net

Why your SME needs a CGMA CFO! 1

Flying Superhero

Many businesses require the skills of professionals to oversee and direct financial operations. These professionals are referred to CFOs, chief financial officers, or financial directors (FD).

So what should your Chief Financial Officer be doing for your business…..

1. The CFO should be able to look into to future to see what the future financial needs of the business will be
2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
3. The CFO should be able to foresee the future tax consequences and risks of decisions
4. He/She should help the business to achieve the best possible credit scores
5. Identify ways to reduce costs and improve profitability
6. Understand the business owners objective and focus the business on achieving those objectives
7. Ensure financial and regulatory compliance
8. Ensure accurate and timely reporting of management information
9. Evaluate growth opportunities
10. Apply corporate governance

What key questions should you regularly ask your CFO…..

1. What is our cash cycle and how can we improve it – Cash Cycle Blog
2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
3. How can we improve profitability – 15 ways to improve profitability Blog
4. What is our Business Plan and is it the right plan – How can you create a Business Plan
5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time CFO or FD) but they need help with:
• Business Plans
• Budgeting and Forecasting
• Cash Flow Management
• Buy or Rent decisions
• Capital Investment Appraisal
• Accounting Procedures and Systems
• Business Strategy
• Busines Funding and Investment
• KPI’s

Expert Advice Fotolia

Virtual FD’s fill this gap because:
1. You only pay for what you need
2. There is no employment contract
3. It provides access to higher level of expertise (in theory)

But be careful who you choose. There is no law preventing anyone from calling themselves an accountant, and as a result small businesses are unknowingly paying someone without the necessary skills to handle their finances and help their business grow.

So what experience does your accountant have to show that they have the skills to be your Virtual FD?

I am sure that in theory they have the technical skills but is that enough?
With the exception of CGMA (CIMA) accountants many accountants in practice have never worked in business let alone been a Finance Director!

I happen to think that time served experience as a CFO does make a difference because it greatly improves your insight and skills.

Would you get on a plane with a Pilot who in theory knew how to fly but had never actually piloted a plane before?

When you choose a Virtual FD you are trusting them with the success of your business. Choose wisely!

CIMA operates a Masters degree standard scheme of qualifying examinations for prospective members. It is active in promoting local education, training and management development operations, the promotion of new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. WIKIPEDIA

Chartered Global Management Accountant™ (CGMA®) is the global designation for management accountants. It’s powered by the resources and expertise of AICPA and CIMA, two of the world’s leading accounting organisations.

steve@bicknells.net

 

Has your Virtual FD ever been a Real FD? Reply

Flying Superhero

If you search the internet you will find that almost every accounting practice now offers to be your Virtual FD. Compliance work on year end accounts and tax returns has become highly competitive and accountants feel they should provide additional services.

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time FD) but they need help with:

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Busines Funding and Investment
  • KPI’s

Virtual FD’s fill this gap because:

  1. You only pay for what you need
  2. There is no employment contract
  3. It provides access to higher level of expertise (in theory)

In May this year the ACCA issued a warning after research from cloud accounting software provider ClearBooks showed just 8 per cent of small businesses considered an accountant’s qualifications when choosing one. There is no law preventing anyone from calling themselves an accountant, and that as a result small businesses could be unknowingly paying someone without the necessary skills to handle their finances and help their business grow.

Although some unqualified accountants may do good work, an unqualified accountant is not answerable to any regulatory body and so cannot be disciplined. They have not passed exams that would have tested their knowledge, they are not subjected to any ongoing inspection of their practices and processes, and, crucially, they are not obliged to participate in any ongoing training to keep them up to date with ever changing legislation. Many may not even have any professional indemnity insurance, which clients can turn to if their qualified accountant makes a mistake.

So what experience does your accountant have to show that they have the skills to be your Virtual FD?

I am sure that in theory they have the technical skills but is that enough?

With the exception of CIMA accountants many accountants in practice have never worked in business let alone been a Finance Director!

I happen to think that time served experience as an FD does make a difference because it greatly improves your insight and skills.

Would you get on a plane with a Pilot who in theory knew how to fly but had never actually piloted a plane before?

When you choose a Virtual FD you are trusting them with the success of your business. Choose wisely!

steve@bicknells.net

 

 

 

 

5 key questions you need to ask your FD Reply

Profitability

As businesses grow, their needs increase. The person steering the finances needs to be someone who can take on a broad commercial role. Forecasting, IT, tax issues, insurance and back office functions – all these need to run smoothly. But a fast-growth business needs someone who can anticipate both future opportunities and potential problems.

A good financial director will help owner-managers understand which aspects of the business are the most profitable, as well as forecasting ways to exploit other opportunities. (Santander)

So what key questions should you regularly ask your FD…..

  1. What is our cash cycle and how can we improve it – Cash Cycle Blog
  2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
  3. How can we improve profitability – 15 ways to improve profitability Blog
  4. What is our Business Plan and is it the right plan – Business Plan Blog
  5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog

steve@bicknells.net

10 things your Finance Director should be doing…. Reply

Flying Superhero

SME’s often mis-understand the purpose of a Finance Director and the value they can bring to a business.

The job of a finance director is not just about producing regular accounts: they can help your company with strategy and development. If you want a small, stable business, then you can settle for a risk-averse book-keeper. But a good FD is key if you are growing your business because FDs develop future financial forecasts and push business growth. [Smarta]

So what should your Finance Director be doing for your business…..

  1. The FD should be able to look into to future to see what the future financial needs of the business will be
  2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
  3. The FD should be able to foresee the future tax consequences and risks of decisions
  4. He/She should help the business to achieve the best possible credit scores
  5. Identify ways to reduce costs and improve profitability
  6. Understand the business owners objective and focus the business on achieving those objectives
  7. Ensure financial and regulatory compliance
  8. Ensure accurate and timely reporting of management information
  9. Evaluate growth opportunities
  10. Apply corporate governance

steve@bicknells.net