STANDARD TERMS OF BUSINESS

28th July 2020 
The following terms of business apply to all engagements accepted by Notting hill Accountants Limited. All work is carried out under these terms except where changes are expressly agreed in writing.
1.  Applicable law
1.1     Our engagement letter, the schedules of services and our standard terms and conditions of business are governed by, and should be construed in accordance with English law. Each party agrees that the courts of England will have exclusive jurisdiction in relation to any claim, dispute or difference concerning this engagement letter and any matter arising from it on any basis. Each party irrevocably waives any right to object to any action being brought in those courts, to claim that the action has been brought in an inappropriate forum, or to claim that those courts do not have jurisdiction.
1.2     We will not accept responsibility if you act on advice previously given by us without first confirming with us that the advice is still valid in light of any change in the law or in your circumstances. We will accept no liability for losses arising from changes in the law, or the interpretation thereof that occur after the date on which the advice is given.
2      Clients’ money
2.1     We will not hold money on your behalf. 
3      Confidentiality
3.1     Unless we are authorised by you to disclose information on your behalf, we confirm that if you give us confidential information we will, at all times during and after this engagement, keep it confidential, except as required by law or as provided for in regulatory, ethical or other professional pronouncements applicable to us or our engagement. 
3.2     You agree that, if we act for other clients who are or who become your competitors, to comply with our duty of confidentiality it will be sufficient for us to take such steps as we think appropriate to preserve the confidentiality of information given to us by you, both during and after this engagement. These may include taking the same or similar steps as we take in respect of the confidentiality of our own information.
3.3     In addition, if we act for other clients whose interests are or may be adverse to yours, we will manage the conflict by implementing additional safeguards to preserve confidentiality. Safeguards may include measures such as separate teams, physical separation of teams, and separate arrangements for storage of, and access to, information. 
3.4     You agree that the effective implementation of such steps or safeguards as described above will provide adequate measures to avoid any real risk of confidentiality being impaired.
3.5     We may, on occasions, subcontract work on your affairs to other tax or accounting professionals. The subcontractors will be bound by our client confidentiality terms. 
4      Conflicts of interest
4.1     We will inform you if we become aware of any conflict of interest in our relationship with you or in our relationship with you and another client, unless we are unable to do so because of our confidentiality obligations. 
5 Disengagement Letter
5.1     If we resign or are asked to resign, we will normally issue a disengagement letter to ensure that our respective responsibilities are clear. 
6      Electronic and other communication
6.1     Unless you instruct us otherwise, we may, if appropriate, communicate with you and with third parties by email or other electronic means. The recipient is responsible for virus checking emails and any attachments.
6.2     With electronic communication, there is a risk of non-receipt, delayed receipt, inadvertent misdirection or interception by third parties. We use virus-scanning software to reduce the risk of viruses and similar damaging items being transmitted in emails or by electronic storage devices. Nevertheless, electronic communication is not totally secure and we cannot be held responsible for damage or loss caused by viruses or for communications which are corrupted or altered after despatch. Nor can we accept any liability for problems or accidental errors relating to this means of communication, especially in relation to commercially sensitive material. These are risks you must bear in return for greater efficiency and lower costs. If you do not wish to accept these risks, please let us know and we will communicate by paper mail, other than when electronic submission is mandatory.
7      Fees and payment terms
7.1     Our fees may depend, not only upon the time spent on your affairs, but also on the level of skill and responsibility and the importance and value of the advice we provide, as well as the level of risk.
7.2     We will bill monthly and our invoices will be due for payment upon presentation. Our fees are exclusive of VAT which will be added where it is chargeable. Any disbursements we incur on your behalf, and expenses incurred in the course of carrying out our work for you, will be added to our invoices where appropriate.
7.3     Unless otherwise agreed to the contrary, our fees do not include the costs of any third party, counsel or other professional fees. If these costs are incurred to fulfil our engagement, such necessary additional charges may be payable by you.
7.4     If you do not accept that an invoiced fee is fair and reasonable, you must notify us within 21 days of receipt, failing which, you will be deemed to have accepted that payment is due.
7.5     If a client company, trust or other entity is unable or unwilling to settle our fees, we reserve the right to seek payment from the individual (or parent company) giving us instructions on behalf of the client, and we shall be entitled to enforce any sums due against the group company or individual nominated to act for you.
8      Help us to give you the best service
8.1     We are committed to providing you with a high quality service that is both efficient and effective. If, at any point you would like to discuss with us how our service to you could be improved, or if you are dissatisfied with the service you are receiving, please let us know.
8.2     If we do not answer your complaint to your satisfaction, you may, of course, take up the matter with our professional body, ICAEW. 
9      Intellectual property rights and use of our name
9.1     We will retain all intellectual property rights in any document prepared by us during the course of carrying out the engagement except where the law specifically states otherwise.
9.2     You are not permitted to use our name in any statement or document you may issue unless our prior written consent has been obtained. The only exception to this restriction would be statements or documents that, in accordance with applicable law, are to be made public.
10    Interpretation
10.1  If any provision of our engagement letter or terms of business is held to be void, that provision will be deemed not to form part of this contract. In the event of any conflict between these terms of business and the engagement letter or appendices, the relevant provision in the engagement letter or schedules will take precedence.
11    Internal disputes within a client
11.1  If we become aware of a dispute between the parties who own the business or who are in some way involved in its ownership and management, it should be noted that our client is the business and we would not provide information or services to one party without the express knowledge and permission of all parties. Unless otherwise agreed by all parties, we will continue to supply information to the normal place of business for the attention of the directors. If conflicting advice, information or instructions are received from different directors in the business, we will refer the matter back to the board of directors and take no further action until the board has agreed the action to be taken.
12    Lien
12.1  Insofar as we are permitted to so by law or by professional guidelines, we reserve the right to exercise a lien over all funds, documents and records in our possession relating to all engagements for you until all outstanding fees and disbursements are paid in full.
13    Limitation of third party rights
13.1  The advice and information we provide to you as part of our service is for your sole use, and not for any third party to whom you may communicate it, unless we have expressly agreed in the engagement letter that a specified third party may rely on our work. We accept no responsibility to third parties, including any group company to whom the engagement letter is not addressed, for any advice, information or material produced as part of our work for you which you make available to them. A party to this agreement is the only person who has the right to enforce any of its terms, and no rights or benefits are conferred on any third party under the Contracts (Rights of Third Parties) Act 1999.
14    Period of engagement and termination 
14.1  Unless otherwise agreed in our engagement letter, our work will begin when we receive implicit or explicit acceptance of that letter. Except as stated in that letter, we will not be responsible for periods before that date.
14.2  Each of us may terminate our agreement by giving not less than 21 days’ notice in writing to the other party except if you fail to cooperate with us or we have reason to believe that you have provided us with misleading information, in which case we may terminate this agreement immediately. Termination will be without prejudice to any rights that may have accrued to either of us before termination.
14.3  We reserve the right to terminate the engagement between us with immediate effect in the event of: your insolvency, bankruptcy or other arrangement being reached with creditors; an independence issue or change in the law which means we can no longer act; failure to pay our fees by the due dates; or either party being in breach of their obligations if this is not corrected within 30 days of being asked to do so.
14.4  In the event of termination of our contract, we will endeavour to agree with you the arrangements for the completion of work in progress at that time, unless we are required for legal or regulatory reasons to cease work immediately. In that event, we will not be required to carry out further work and shall not be responsible or liable for any consequences arising from termination.
15    Professional rules and statutory obligations
15.1  We will observe and act in accordance with the Bye-laws, regulations and Code of Ethics of ICAEW and will accept instructions to act for you on this basis. We will not be liable for any loss, damage or cost arising from our compliance with statutory or regulatory obligations. You can see copies of these requirements in our offices. The requirements are also available online at icaew.com/en/membership/regulations-standards-and-guidance.
16    Quality control
16.1  As part of our ongoing commitment to provide a quality service, our files are periodically reviewed by an independent regulatory or quality control body. These reviewers are highly experienced professionals and are bound by the same rules of confidentiality as our principal.
16.2  When dealing with HMRC on your behalf we are required to be honest and to take reasonable care to ensure that your returns are correct. To enable us to do this, you are required to be honest with us and to provide us with all necessary information in a timely manner. For more information about ‘Your Charter’ for your dealings with HMRC, visit http://www.gov.uk/government/publications/your-charter. To the best of our abilities, we will ensure that HMRC meet their side of the Charter in their dealings with you.
17    Reliance on advice
17.1  We will endeavour to record all advice on important matters in writing. Advice given orally is not intended to be relied upon unless confirmed in writing. Therefore, if we provide oral advice (for example, during the course of a meeting or a telephone conversation) and you wish to be able to rely on that advice, you must ask for the advice to be confirmed by us in writing. Advice is valid as at the date it was given.
18    Retention of papers
18.1  You have a legal responsibility to retain documents and records relevant to your financial affairs. During the course of our work we may collect information from you and others relevant to your tax and financial affairs. We will return any original documents to you [if requested]. Documents and records relevant to your tax affairs are required by law to be retained as follows:
Individuals, trustees and partnerships:
a)     with trading or rental income: five years and 10 months after the end of the tax year
b)     otherwise: 22 months after the end of the tax year.
Companies, Limited Liability Partnerships, and other corporate entities:
c)     six years from the end of the accounting period.
18.2  Although certain documents may legally belong to you, we may destroy correspondence and other papers that we store electronically or otherwise that are more than seven years old, except documents we think may be of continuing significance. You must tell us if you wish us to keep any document for any longer period. 
19    Timing of our services 
19.1  If you provide us with all information and explanations on a timely basis in accordance with our requirements, we will plan to undertake the work within a reasonable period of time to meet any regulatory deadlines. However, failure to complete our services before any such regulatory deadline would not, of itself, mean that we are liable for any penalty or additional costs arising.

History of accounting

History of Accounting

Humans have been practicing accounting since time immemorial . Archaeologists have found clay tablets in Middle East1 with writings and numbers as a form of accounting for wars, harvest and taxes.

The modern `double entry bookkeeping` system is thought to be Italian in origin. India had and still has sophisticated accounting system which is different from the double entry system.

Like all trades, accountants have being forming associations to advance their interests; earliest known example is Collegion di Rasonati in Venice formed in 1581. Members were auditors of ship building business in Venice Arsenale.

Word debit and credit are of medieval Tuscan2 origin, a form of Latin language. According to that `he owes` is debit and `he trusts` is credit.

Debits are traditionally entered on the left-hand side of a ledger and credits on the right-hand side. Some reason the origins to be Christian in nature – in the Bible3; at the last judgement, when we are called to account, the sheep (the good) go up on Christ’s right and the goat (the bad) to the left.

So, whose balance shall we put on the left: that of the wretched customer who has not yet paid us, or that of the kind supplier who has trusted us to pay later? Hence debtors’ balances are entered on the left4.

Earliest surviving book which mentions double entry bookkeeping  is of Luca Pacioli. Please note Luca did not invent double bookkeeping, it had been practiced for more than 200 years before him.

 

Notes:

  1. Some scientists believe first human civilisations started in Middle East in the Fertile Crescent.
  2. Language spoken in Tuscany region of Italy.
  3. As seen from the painting of last judgement by Michelangelo in Sistine Chapel in Rome. Poor me – I have walked past Sistine Chapel but not been inside.
  4. This paragraph is so beautiful that I lifted it straight from the book – Accounting a short introduction by Christopher Nobes.

 

Loan to directors and Shareholder

These rules are covered under Corporation Tax Act (CTA) 2010: Section 455 to 465

Section 455 will apply to loans to directors who are also shareholder (owning 5% or more) and to shareholders who are not directors. It does not apply to directors who are not shareholders.

When was the loan repaid Tax Position
Within 9 months of Year end (YE) No Tax
After 9 months of YE Tax @ 32.5% (previously use to be 25%)

Relief given in the YE when loan re-paid. Relief should be claimed within 4 years.

 

Tax avoidance measures:

Section 464C introduced w.e.f. 20 March 2013. Basically any window dressing is set aside. For more information see CTM61615.

 

Repaying loan via dividends/salary/bonus is not window dressing.

 

Points to be aware:

1)     No non-business expenses posted as business expense.

2)     All employment income has appropriate tax and NIC deducted.

3)     If DLA balance anytime during the year over £10k. It will be treated as beneficial loan and showed by reported in P11D and NIC Class 1A paid.

Please note this limit does not apply to Sec 455 charge.

To avoid this , one can issue interim dividends to ensure loan balance does not go over £10k anytime during the year.

Useful links:

Agent toolkit

 

Hospitality Sector: Rishi’s Plan for Jobs 2020

1. Introduction

Today “the give away Chancellor” Rishi Sunak has announced a string of measures to kick-start the economy.

2. Job Retention Bonus

A one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.

3. Hospitality sector

This sector has been among the hardest hit by the pandemic and necessary restrictions.

3.1 Eat Out to Help Out – This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount. Further details of how to sign up for this are awaited.

3.2 Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

3.3 Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.

4. Young people

4.1 Kickstart Scheme – A 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.

4.2 High quality traineeships for young people – For 16-24 year olds. For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee.

4.3 Payments for employers who hire new apprentices –A new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021.

 

5. Housing

5.1 Temporary Stamp Duty Land Tax (SDLT) cut – The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021.

5.2 Green Homes Grant – The government will provide at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. Vouchers will need to be applied.

 

6. Measure announced earlier

See point 4.2 of the source guidance quoted below for more details:

6.1 Support for Businesses

  • Coronavirus Business Interruption Loan Scheme (CBILS)
  • Bounce Back Loan Scheme (BBLS)
  • Temporarily waiving VAT on Personal Protective Equipment (PPE) from 1 May to 31 October 2020
  • Business rates holidays for retail, hospitality and leisure sectors, and for nurseries
  • Business grants
  • Statutory Sick Pay (SSP) Rebate Scheme
  • Safeguarding high streets – The government has implemented measures to safeguard UK high streets by protecting shops and other businesses from aggressive forms of debt recovery and protecting commercial tenants in England, Wales and Northern Ireland from eviction until 30 September. This is accompanied by the government’s publication of a Code of Practice which encourages fair and transparent discussions between landlords and tenants over rental payments during the coronavirus pandemic. The government has also worked closely with lenders to confirm support and flexibility is being shown to commercial borrowers.

 

6.2 Support for Individuals

  • Coronavirus Job Retention Scheme (CJRS)
  • Self-Employment Income Support Scheme (SEISS) – The applications for the first SEISS grant are open until 13 July. From 17 August until 19 October, eligible applicants whose businesses have been adversely affected by COVID-19 on or after 14 July will be able to claim a second and final taxable grant worth 70% of their average monthly trading profits, paid in another single instalment covering three months’ worth of profits, capped at £6,570.
  • Statutory Sick Pay (SSP) – COVID-19 related SSP has been made payable from the first day of sickness absence, rather than the fourth, and extended to people self-isolating and shielding.
  • Mortgage and credit payment holidays includes Buy to Let mortgages
  • Support for housing and renters – the government has extended the stay on repossession proceedings in the private and social rented sector until 23 August 2020. Lenders should also pause repossession proceedings until 31 October 2020 to help people to stay in their homes. The government also introduced emergency measures in the Coronavirus Act 2020, which are in place until 30 September, to require landlords to give tenants at least three months’ notice before seeking repossession.
  • Income Tax Self-Assessment – The government has supported individuals and the self-employed by deferring Income Tax Self-Assessment payments due in July 2020 to January 2021.

Source: HM Treasury: A Plan for Jobs : documents

 

Small companies , which documents I have to file and where ?

Small companies have to file documents at two places :

 

1 – Companies house ; and

2 – HMRC

 

Companies house : two documents

1 – Annual accounts  – Companies house does not charge for filing this document.

2 – Annual return – Companies house charges a single annual charge, information can be updated for free throughout the year by filing further confirmation statements during the payment period.

 

HMRC : two document

1 – Companies Tax return

2 – Owner tax return