Company Directors’ Responsibilities

Directors in today’s global market are increasingly being held personally liable for their actions that harm their companies, as well as facing civil and criminal liabilities for failing to comply with the procedures and requirements of various laws. Further, there are several Acts, for which the violation thereof can result in criminal sanctions, including fines and even imprisonment. Directors can find themselves subject to criminal sanctions for such minor infractions as late filing or inadvertently filling out a form incorrectly.

By accepting the assignment as a director, the director establishes a contractual relationship with the company based on two distinguishable obligations:

  1. obligations relating to the functioning of the company; and

  2. management obligations.

Both categories are in the exclusive competence of the director. The obligations relating the functioning of the company pertain to all acts aimed at ensuring the operations of all corporate bodies, to which the director is responsible by law or by the Articles of Association of the company. In this context, the following can be included: the obligation to call the shareholder meeting; the responsibility to prepare and approve the draft budget and to convene the meeting for approval. Furthermore, the obligation to keep accounting records; to announce, register and fulfil the duties of the Business Register. The director is prohibited from acting in conflict of interest with the company or in competition with the latter.

The management obligations indicate all acts aimed to achieve the corporate purpose. For example, the obligation to provide the company with an adequate organisational and accounting structure, to guarantee safety in the workplace and to ensure that the company is acting in accordance with the law. From this point of view, the most important obligation is to act with diligence, i.e. to identify and implement all the necessary measures to take care of the interests of the company.

The scope of this obligation is measured on the basis of two criteria:

  1. nature of the assignment, where all characteristics of the company administered – such as size, activity performed, organisational structure and the position held by the director within the administrative body must be considered;

  2. specific skills, according to the particular knowledge of the director, his technical and managerial skills and his actual experiences need to be kept in mind.

In the event of a court judgment, the Judge will evaluate the director’s behaviour based on the aforementioned criteria. The level of diligence required from a long-experienced managing director of a multinational company may be different from that of a director of a private company with small turnover volumes.

If the following conditions are fulfilled, a Director is liable of non-fulfilment or incorrect fulfilment of his obligations:

  • the director has, in the performance of his duties, adopted a behaviour in violation of the duties and obligations provided law or by the Articles of Association;

  • this behaviour caused damage;

  • a causal link between the behaviour of the director and the damage exists (i.e. the damage is an “immediate and direct consequence” of the behaviour).

Actions to enforce the liability of a director of a limited liability company can be raised:

  • by the company itself,

  • by company’s creditors,

  • by individual shareholders and third parties, if the behaviour of the directors caused damage to them;

Directors can minimise their risks by being aware of their duties and responsibilities and ensuring that they are performed prudently and diligently. Among the steps that a director can take to minimise his liability are the following:

  • attend directors’ meetings regularly;

  • ensure that delegated authority is exercised properly;

  • ensure that directors’ decisions are implemented properly;

  • document measures taken to prevent mismanagement

It is notable that the director holds the position of the company’s legal representative according to the Companies House, based on which a lawsuit is in practice often filed together with a lawsuit against the company. For example, in an employee dismissal case, the director may be sued as the second defendant and claiming for compensation due to his authority to make a decision for the aforementioned act on behalf of the company. However, the law sees the director as a legal representative which is granted protection in terms of personal liability to third parties for any act that has been done prudently and diligently within the scope of his authority. By virtue of his legal representation, such action shall be attributed to the company.

If you need any assistance or require further information regarding company directors responsible please contact us on 0870 228 1999 or email us on info@stanleycarter.co.uk

Skills you need to develop as an accountant

We take a look at the key skills accountants need to develop to pursue a successful career.

Accountants, skills, accounts
Skills required for accountants

If you are striving for a successful career in accountancy, there are a number of key skills which you should look to develop and build upon throughout your career.

A combination of accredited qualifications and excellent interpersonal and professional skills will enable you to pursue the successful career you are aiming for.

Adaptability

The accounting industry is changing rapidly. The role of the accountant is becoming more of an advisory one as technology automates processes and removes the need for paper. Clients have new expectations, and accountants can now collaborate and work with their customers in real time.

With technology bringing constant change, accountants need to be able to adapt quickly and react to whatever curve ball is thrown at them.

Openness           

Honesty is highly valued in the accounting world. Accountants and the firms they work for pride themselves on adhering to the highest ethical standards and always treating their clients with honesty and integrity.

It is important to be transparent when making decisions, providing advice, and completing tasks. This is true of every workplace relationship, whether with clients, your manager, or when working in a team of colleagues.

Strategic decision-making

Automation of many administrative tasks means accountants have more time to focus on the strategic decision-making side of their role; and clients know this.

Individuals who have strong commercial skills and have invested in their accounting training will be considered highly valuable by clients and firms alike.

Information technology expertise

Accountants should look to be knowledgeable in general IT and accounting software, especially when it is likely your client will know how to use it too.

Cloud accounting is the latest technology break-through in the accounting industry. Working in the cloud means data and software are available anytime and anywhere, so clients can keep their finances up to date across different platforms. Many clients will also be technically savvy about the cloud, but for those who aren’t, the accountant needs to step in and explain it clearly.

Communication

Clients and colleagues can communicate with you at any time they want to from anywhere in the world. Accountants need to be willing to interact with people across all mediums, from phone to video conferencing. It is a good idea to master social media as well as the more traditional email.

While clients may contact you regularly via the phone, most will also value face-to-face meetings. This is also the best way to build a trusting relationship. When it comes to complex financial or technical discussions, accountants must be able to relay information clearly and concisely.

Creative problem-solving

Change is likely to bring about challenges as well as positives. Therefore, firms need accountants who can think outside the box and come up with effective ways to solve new problems.

Initiative, a skill which can be developed in professional, educational, and personal situations, is highly valued by employers. Firms are keen to recruit staff who want to share ideas to continually improve business performance.

Customer service skills

For accountants working in public practice, it is essential to be able to build a strong relationship with current customers, in order to retain them, as well as being able to attract new customers.

In corporate accounting, individuals must meet the needs of the organisation’s other departments and their managers. In both instances, strong customer services skills are invaluable.

Here at Stanley Carter we are a highly skilled and experienced accountancy firm. If you require any help or information please contact us on 0161 2056655 or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

FRC needs greater transparency

Despite some negative coverage in recent months, the majority of the Financial Reporting Council’s (FRC’s) stakeholders still consider it to be independent of the auditing profession.

corporate governance, FRC, UK
More transparency needed within corporate governance

However, the UK audit watchdog could do more to help itself; particularly when it comes to convincing institutional investors who are the most concerned about its independence, by making its processes and outcomes more transparent.

Given the variety of areas that the FRC covers, nevertheless, a number of clear messages for the FRC come across, not least that as an organisation that holds others accountable, it also needs to be seen to be holding itself accountable to the same measures.

More than a quarter of institutional investors told researchers that they did not believe the FRC was independent of the audit profession. Reasons cited include the fact it hires many ex-auditors, it receives funding from audit firms, and a suspicion that it does not always hold auditors as accountable as they should be.

When you’re setting standards of governance for other companies and telling companies what they should be doing, then you have to be whiter than white.

Stakeholders want more transparency in the FRC’s disciplinary and enforcement activities.

One way round this issue would be for the FRC to step up its communication about its goals and activities, the researchers suggest. They point out that those stakeholders who are more engaged with the FRC have a greater understanding of its internal processes and constraints. Increasing outreach and communication with less-engaged stakeholders could help to improve favourability and perceptions of transparency.

In response, the FRC says that it has already made changes to meet many of the issues raised, including revising its governance structure to improve processes, publishing its register of interests and investing in its enforcement division.

For your corporate governance queries send us an email on info@stanleycarter.co.uk or check our website for details

www.stanleycarter.co.uk 

HMRC penalties to corporate Directors

The number of personal penalties levied by HM Revenue and Customs (HMRC) against corporate senior accounting officers (SAOs) remained high last year.  The figures showed that HMRC was taking an aggressive approach to enforcement. HMRC office

Given the scale and complexity of the money flows in large businesses, simple errors in the finance department can result in mis-reporting and subsequent fines. Finance directors need to understand all the requirements set out by HMRC. The policies, procedures and systems in place to ensure tax compliance need to be carefully monitored to avoid the potential for mistakes,”

There are two types of personal penalty that can be issued under the regime: firstly, for failing to take steps to ensure the accounting arrangements are adequate; and secondly, for failing to provide an annual certificate either confirming the arrangement are adequate or disclosing details of the deficiencies. Accounting arrangements are considered ‘adequate’ if they enable all relevant tax liabilities to be calculated accurately in all material respects.  Businesses can also be fined under the regime for failing to provide the name of their SAO to HMRC.

The total number of penalties issued under the SAO regime last year was actually lower than the number issued in each of the previous years.

If you have any queries about your tax or HMRC penalties send us an email on info@stanleycarter.co.uk or check our website for further information www.stanleycarter.co.uk

UK Government Budget

UK Chancellor of the Exchequer Philip Hammond unveiled his Budget statement on November 22, under the new arrangement for the main annual tax changes to be announced in the autumn for the following year. Some predicted tax increases did not materialise, which will be welcomed by the wider business community.

 

Capital allowances

The temporary schemes for 100% first year allowances (FYAs) for purchases of zero emission goods vehicles, and for gas refueling equipment, which were due to end for expenditure incurred after March 31 2018, will now be extended for a further three years.

With immediate effect, there are some minor changes to the list of energy-saving technologies eligible for 100% first year allowances (FYAs). Lessors are not eligible to claim FYAs, but the use of hire purchase type facilities will allow customers to claim them.

The temporary scheme of first year tax credits (FYTCs) for environmentally beneficial capital expenditure, involving projects within a designated list of energy and water technologies, which were due to expire in April 2018, will now be extended for a further five years. FYTCs can be claimed by companies in a tax loss position, at two thirds of the corporation tax rate. The use of leasing facilities becomes a relatively less attractive option for potential lessees who could claim FYTCs while purchasing assets outright.

Vehicle taxes

Various income tax and vehicle excise duty (VED) changes are designed to promote environmental objectives. The diesel supplement for the income tax benefit in kind (BIK) charge for diesel cars not certified to the RDE2 standard will rise from 3% to 4% with effect from April 6 2018.

The first year rate of vehicle excise duty (VED) for new diesel non-RDE cars will be increased by one band from April 2018. Other VED rates will rise in line with the retail price index from next April.

Electricity provided by employers for the workplace charging of employees’ electric and hybrid cars will be exempted from BIK charges with effect from April 2018.
However, there will be no changes in motor fuel duty rates next year.

Some tax increases

There are some significant tax increases. In the taxation of capital gains by companies, indexation relief for inflation is to end in respect of changes in the retail price index after the end of this year. This will match the capital gains tax (CGT) rules for individuals, where indexation relief was removed in 2008. The ultimate impact of this change will obviously depend on future inflation rates.

A new move against cross-border corporation tax avoidance will target the use of favourable tax jurisdictions to hold intellectual property rights such as core product brands. The Chancellor proposes a new withholding-type tax at the income tax basic rate on royalty payments to associated entities based in low tax jurisdictions, by international groups trading in the UK. The change will take effect from April 2019, and a consultation paper on the details is to be issued at the beginning of next month.

Other steps against tax avoidance and evasion include:

  • a move against VAT evasion in online sales, making the marketplaces jointly liable with suppliers for unpaid VAT, from the enactment of the next Finance Bill;
  • a further strengthening of legislation in the 2016 Finance Act designed to tackle “disguised remuneration” of employees or quasi-employees for income tax purposes;

Other significant changes

For micro-businesses, the Chancellor announced that the VAT registration threshold will remain at annual turnover of £85,000 at least until April 2020. It remains under review for the longer term, and the UK threshold is low by comparison with other EU countries.

The rate of the tax credit for research and development expenditure is to be increased from 11% to 12% from January 1 2018.

Economic background

The Chancellor acknowledged that the UK’s recent economic performance has not been as good as previously expected, due to a generally stagnant trend in productivity. The latest official forecast is that the UK economy will grow by around 1.5% in each of years up to 2022, compared with earlier forecasts of 2% annual growth.

However, he still predicts a continuing gradual improvement in the budgetary position, having avoided major new tax increases or expenditure cuts in this Budget. Annual public borrowing, which rose to nearly 10% of gross domestic product (GDP) in the aftermath of the financial crash in 2008, is projected to fall steadily from 2.4% of GDP in the current financial year to 1.1% by 2022/23. Overall national debt is projected to peak at 86.5% of GDP this year (having more than doubled since 2008), then falling to 79.1% by 2022/23.

If you have any concerns about the last budget and how it will affect you or your business please send us an email on info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Cloud good or bad for Accountants?

In 2017, accountancy practices face many challenges that span the regulatory, economic, political and technology spheres. In particular, digital transformation has brought about rapid change, with accountancy practices needing to consider how to thrive in the digital age, and how to evolve their businesses to maintain pace with the digital revolution in the UK and beyond.

The majority of UK businesses are now leveraging technology to achieve business success. The adoption of cloud technology has almost doubled in the past seven years, according to a study by the Cloud Industry Forum (CIF), with 88% of businesses now using cloud services. In addition, as revealed by the CIF in March 2017, 67% of companies expect to increase their adoption of cloud services by March 2018.

So, why should accountancy practices prepare to move to the cloud, and what steps should they take to get there?

What to gain from the cloud

Digital transformation has had a significant impact on the accountancy industry. As technology enables “traditional” accounting bookkeeping services to be automated, accountants have been presented with an opportunity to transition to an advisory role, adding value to clients.

So, what are the benefits of moving your practice to the cloud?

 Improved efficiency

With the cloud comes efficiency. Technology allows accountants to automate repetitive tasks, saving time spent on paperwork. And the cloud also eliminates the need for spreadsheets as well as reducing the risk of manual errors, improving accuracy of data.

Increased accessibility

Data in the cloud can be shared with clients, colleagues, or anybody who needs access, at any point. It also provides accountants with the freedom to work remotely – all you need is an internet connection.

Improved decision-making

Accountants can leverage real-time information to help make informed decisions and provide strategic advice to clients. Whereas accountancy practices without cloud capabilities must often delay decision-making until end of year historical data is available, accountants on the cloud can make the right decisions quickly.

Streamlined systems

A paperless working environment is a key advantage for practices overrun by paper records. Cloud technology also offers a reliable storage system, with quick and efficient access to client and business data, all stored safely and securely with no danger of missing or lost files.

Before moving your clients to the cloud, become a true advocate of the technology by first moving your practice’s accounts to a cloud accounting system. This will enable you to use the system to interpret your own data first and adjust to the system before turning to client data. Become accustomed to the differences between your existing accounting set-up and the new services that the cloud technology offers, fully understanding the benefits that you can leverage to fulfil your clients’ advisory needs.

Finally, it’s important to identify the right clients to move to the cloud first. Young, tech-savvy and small companies are the ideal candidates. By beginning with business that don’t have stock control, custom requirements and a large number of transactions will make the transition smoother for your practice.

For further information about your accountancy needs send us an email on info@stanleycarter.co.uk or check our website www.stanleycarter.co.uk

SME Bank accounts

Banks are looking for new revenue streams. Providing excellent service to SME customers is an opportunity often overlooked by banks. There are an estimated 4.7 million SMEs in the UK – accounting for 99.9% of private sector business. Can you afford to ignore this market?

Business customers don’t have time to fill out a time-consuming and complicated application and then wait days — or even weeks — to open a new bank account, or to repeatedly enter the same information into separate applications to obtain multiple products. If the process isn’t quick and easy from any device, customers simply decide to take their business to a bank that offers a more convenient and customer-friendly experience.

To date, banks have been unwilling to tailor their services to meet the specific needs of SMEs. By failing small business owners, banks are ignoring the opportunities of the lucrative business banking market. Large banks likely have upside available today for existing SME customers, adding a cross sell capability — to apply for additional credit, for example — would bring banks a significant upside.

The good news is anyone can adopt the best practices , proven by the success of top banks, to create a customer-focused acquisition and onboarding experience.

If you need help to open a business bank account email us your details to info@stanleycarter.co.uk or check our website for further details on www.stanleycarter.co.uk

Accounting and Banking for small businesses

What would you do if your business bank account was your accounting software.  This is the concept of an accounting bank and this combination of accounting and banking is set to revolutionise how millions of entrepreneurs run their small business. It will simplify your business administration duties.

With the advent of cloud accounting software and API bank feeds, many small businesses increasingly use the bank statement as the primary source of their bookkeeping records. A bookkeeper typically imports all bank transactions into cloud accounting software and then goes through transaction by transaction explaining the account code, VAT rate and contact information.

This is a duplication of effort that is inefficient. For example, when you set up a payee in your bank account and make a payment out, you then repeat the same task in your accounting software, setting up a supplier and explaining the payment out.

For startups, setting up a new business current account takes time. In most cases it’s several long paper forms and about a month of back and forth with different bank reps. Even then the account may not be approved. The lack of a bank account when a business starts trading often creates a mess as personal accounts are used instead.

It is the businesses run on spreadsheets who are set to gain the most from an accounting bank. Making Tax Digital, HMRC’s transformation of tax, is set to cause these business owners a significant amount of pain over the next few years as they are forced to adopt digital systems to do online quarterly MTD filings for VAT, income tax and corporation tax.

So how does an accounting bank help solve all these problems?

With an accounting bank a small business can go about its day to day banking, a task they want to do. The accounting bank comes complete with a UK bank account number and sort code that can be opened within five minutes and not 30 days. Contactless Mastercard, faster payments, direct debits and BACS are all included.

The accounting is automated with transactions being automatically categorised as sales, travel, legal fees etc. No longer is there the need for back and forth between you and your accountant over a messy spreadsheet. In fact the bookkeeping is no longer a task that you need to do.

Accounting banks have MTD built in to let the business owner carry on with their banking as you always have done, for their accountant to make the MTD submissions seamlessly from the application.

You can create an invoice and when it’s paid it will automatically reconcile. You can view a profit and loss report or submit a VAT return. An accounting bank does everything you need to run your business.

Steve Jobs described creativity as connecting things and you need look no further than Tesla connecting cars and batteries or Sellotape connecting glue and cellophane to see how simple but obvious these solutions are. Think of an accounting bank as HSBC and Sage connected as one.

Top accountancy companies post significant growth

The top 15 tax companies and top 15 audit companies have been released this week, based on data submitted by firms for the Top 50+50 Accountancy Firms 2017.

In both tables, PwC leads the way with total UK tax fee income of £822m and audit and accounting fee income of £1.24bn.

The remaining Big Four firms replicate the same positions occupied in the Top 50+50 table with Deloitte in second, and EY and KPMG in third and fourth respectively.

Deloitte recorded audit and accounting fee income of £824m and tax fee income of £654m. EY took £581m from tax services and £619m from audit and accounting, and KPMG registered £498m in audit and accounting and £479m in the tax table.

Elsewhere in the tables, BDO occupied fifth position in both tax and audit ahead of Grant Thornton. The firm, which placed sixth in the main Top 50+50 rankings, had a total tax fee income of £126.8m, with Grant Thornton slightly behind on £104.4m. In audit, BDO edged ahead of RSM by £10.4m with total audit and accounting income of £170.4m. Grant Thornton took seventh with £148.4m.

Saffery Champness has ranked at number 13 in tax, but slipped out of the top 15 in audit and accounting. UHY Hacker Young entered the audit table with fee income of £30.13m, ahead of MHA MacIntyre Hudson and Smith & Williamson.

PKF UKI posted strong growth of 24% in tax services this year, holding ninth position in the table. The firm also holds ninth in the audit table with growth of 16% and fee income of £71.26m.

Other firms showing strong growth this year are Moore Stephens, with a 27.9% increase in tax fee income compared to 2016, and Haines Watts and MacIntyre Hudson with 18.6% and 20.8% tax growth respectively.

The only firm to post negative growth across the two tables was KPMG, with a decline of 3% in audit compared to 2016 figures.

Accounting reforms and post – Brexit

The International Accounting Standards Board (IASB) has instructed its staff to prioritise the development of new type of financial performance measure to be included in IFRS statements.

The board expressed a preference for a measure based on earnings before interest and tax (EBIT) over parallel plans to include a management-defined measure of performance.

The IASB also signalled a preference for a modified version of EBIT over any off-the-shelf definition.

The decisions came during the board’s latest discussions on its Primary Financial Statements project.

The body that advises the European Union on accounting matters, EFRAG, has published a draft comment letter in support of an IASB draft statement on materiality.

In a webcast to introduce the proposals, IASB member Francoise Flores said: “The definition of materiality is easy to understand but difficult to apply. It is a totally company-specific notion that requires the exercise of judgement tailored to a company’s circumstances.”

In the context of financial reporting, material information is data that is either significant or relevant.

Flores added: “Currently, there is little if any guidance in IFRS on how to make materiality judgements. This lack of guidance can be regarded as partly responsible for IFRS disclosure requirements not being sufficiently challenged in practice from a materiality perspective and rather being used as a checklist.”

The IASB’s practice statement is non-mandatory. Interested parties have until 5 January 2018 to comment on the EFRAG draft.

UK should maintain international standards post-Brexit

The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that the UK has failed to give sufficient thought to the implications of its vote to leave the EU.

In a policy discussion paper on the implications of Brexit for financial reporting, the institute said it supported a UK-specific endorsement mechanism for new international standards.

The report’s authors argued: “[A] new national mechanism could function more smoothly and far more quickly than the EU’s, and indeed this should be regarded as a key prize available to the UK from the change in endorsement arrangements.”

The paper also considered the option of accepting all international financial reporting standards (IFRS) as issued by the IASB with no modifications, as well as continuing to participate in the EU’s current endorsement mechanism.

Finally, the ICAEW also called for the UK to join the IFRS Foundation’s Monitoring Board and the Accounting Standards Advisory Forum.

Under the rules governing membership of the two bodies, there is no current basis for UK membership of either body.

IPE has learned that UK government officials are considering separate proposals for a UK endorsement mechanism – possibly modelled on the Australian model.