Toni Hunter's SuperBlog

The designatory letters DChA are used by holders of a Diploma in Charity Accounting, a qualification awarded by The Institute of Chartered Accountants (ICAEW) who hope that it will inspire confidence that the holder of the Diploma has the knowledge to make a real difference to the prosperity of an organisation through understanding of charity accounting and financial management.

Prior to 2007 the diploma could be achieved through study and examination or by submitting evidence of experience in advising the 3rd sector.  The ‘experience’ route is no longer available.

At the time of writing this post, around 700 accountants in the UK hold this diploma (listed here) and just over half of these working in practice as auditors / independant examiners and advisers.   The remaining mainly being financial managers working with in the sector itself.

As a trustee, what does using an accountant with the Diploma mean to you?

• Confidence to trust them to provide specialist financial care with knowledge of your sector and its inherent challenges
• Reassurance that they understand the complexities of Charity Accounting
• Non-financial matters such as governance are addressed with practical solutions
• Information is presented in a straightforward and understandable manner
• Value for Money services with fixed fees and experienced resources to keep fees to a minimum
• You can get on with running your charity knowing that you are in safe hands!

In my opinion providing services to not-for-profit organisations takes additional expertise as the sector has specific accounting requirements as well as a different type environment in terms of targets, principles, reporting and management needs.  Often the people working within this sector do so for low or no monetary reward and do not necessarily have the same skills of someone who has been involved in a corporate environment.  Therefore the level of support and the approach taken to professional advice should be different.

To get the most value from your professional advisers, it is essential that they have carried out adequate and relevant professional development (CPD) and have experience in your industry.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

The new ‘VAT online service’ (VOS) was launched by H M Revenue & Customs (HMRC) in November in prepartion for the compulsory online filing of VAT returns and electronic payment of liabiliies for VAT periods commencing 1st April 2010.

These new regulations will be enforced and effect all

• existing VAT registered businesses with a turnover (excluding VAT) of £100,000 or more (taken from the previous four returns submitted)
• businesses that register for VAT on or after 1st April 2010, regardless of turnover.

Once your business has been required to file online once, it must continue to do so.  The only exemptions are businesses involved in an insolvency procedure or those who have satisfied HMRC that the religious beliefs are incompatible with the requirement to use electronic communications!

If your business is VAT registered, you can expect to receive a letter from HMRC during February 2010 notifying you of your obligations.

There are proposals for this to be just the first step of the process and that all VAT registered businesses should manage their VAT returns and payments electronically from 1st April 2011.

The new VOS will enable users to

• Register for VAT
• Enrol for electronic filing
• View previously submitted electronic returns
• Set up email alerts to remind business owners of when returns should be submitted

Of course, if you do not want to be burdened with this, your accountant will be able to act as your agent in the same way as they can file payroll and self-assessment returns.  They will ask you to an authority to act (HMRC form 64-8 is not adequate for VOS) and may re-issue their letter of engagement to clarify the terms of this service.

More information can be sought from your accountant or HMRC’s online services website

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post

During an economic downturn both individuals and organisations can suffer from adverse pressure, increasing the motivation for fraudulent behaviour.

Organisations are at risk from fraud both internally from employees and shareholders, and externally from suppliers, contractors and other organisations.

According to KPMG (data: July 2009) more than 160 cases of serious fraud, worth in aggregate £636million came to UK courts in the first half of 2009, the highest number of cases in the 21 year history of the KMPG Fraud Barometer.

Fraud has many guises such as ineligible claimants of state benefit, money laundering and unauthorised sharing of databases.

Internal Fraud: Warning signs might include

• Staff who have personal financial problems or have lifestyles not commensurate with their remuneration
• Employees who work late or appear to be under stress without a heavy workload
• Staff under pressure from unrealistic targets set by management or heavy emphasis on performance related pay.
• Internal and/or external complaints about certain people/teams
• Unwillingness to delegate and/or reluctance to take holidays
• Over-friendly relationships with external stakeholders
• New staff resigning quickly as they are uncomfortable with ‘unusual behaviour’ but do not wish to report it

External Fraud: Warning signs might include

• Insistance on dealing with one individual
• Cash only or high volume, low value transactions
• Unusual/sporadic payment behaviour
• Increased prices without explanation
• High staff turnover and/or lack of management control

Obviously, these are only indicators and you should not accuse anyone just because their behaviours fit one of these points!

In a future post I will provide ideas on how to reduce the risk of fraud to your organisation.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Are you aware that the minimum retirement age is increasing to 55 from 6th April 2010?

This will mean that you will no longer be able to obtain an income or draw tax-free cash from your private pension before your 55th birthday except on the grounds of ill-health.

If you are aged 50 to 54 on 5th April 2010, you need to speak to your IFA as soon as possible to discuss your retirement plan as you will lose access to pension funds until you are 55 if you don’t act before 5th April 2010.  Please give your adviser time to administer your plans, there’s little point in approaching them at the end of March.

You have three options:

1. Buy an annuity
2. Transfer to an income drawdown scheme
3. Do nothing and wait until your 55!

Did you know that you do not need to physically retire to start taking income from your pension plan?  This means you could take your tax-free cash drawdown and reinvest it while you continue to work, giving you increased flexibility and control over your future.

Obviously taking cash from your fund will reduce its value so you need to talk to an adviser about the effect of this on the long term income you will derive from the plan.

The message here is clear, if you are 50 -54 years old and haven’t spoken to your IFA for some time, now is the time to do.  Don’t procrastinate, it could cost you dearly.

If you don’t have an IFA, I can recommend through personal and client experience, the advice of Chris Langdon at RHG 01438 345734. 

Please bear in mind that while accountants have a good working knowledge of retirement planning, most are not regulated or insured to give advice.  Make sure you are getting good quality advice bespoke to your needs from a professionally qualified  financial adviser.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

When working with charities, the question I get asked the most is “is our TAR detailed enough?” as they naturally do not want to expose all, yet they appreciate that this is a key document that is clearly defined by the SORP 2005 and is crucial in demonstrating compliance with the public benefit tests (see previous blog post ‘Public benefit – your best defence…’)

To answer the question directly the report should:

• be about 4-6 pages of A4 print, font 11 for a small to medium sized organisation
• clearly explain how the organisation fulfils it’s objects and adheres to it’s governing document
• use plain English and refer to the accounts to which it is attached, but not regurgitate the accounting information
• use the prescribed format set out in the SORP.  i.e. use the 7 key headings.

For those who are not familiar with the SORP 2005, these prescribed headings are:

1. References and administrative details of the Charity, its Trustees and advisers
2. Structure, Governance and Management
3. Objectives and Activities
4. Achievements and Performance
5. Financial Review
6. Plans for future periods
7. Funds held as a Custodian Trustee (if appropriate)

Model reports are available on the Charity Commission Website  http://www.charity-commission.gov.uk/

Some key points that are often missed

• In paragraph 2 explain how trustees are recruited and outline the policies for induction/training of trustees.  Mapping the skills of the board and recruiting to fill skills gaps is a sign of great governance.  If your organisation has carried out this exercise, brag!
• When explaining to the reader your objectives, paragraph 3, focus on the positive impact significant activities have had and explain how they have contributed to the achievement of the stated objectives.  If the organisation is grant making, ensure the policies are explained and if volunteers are utilised, readers need to understand their role and contribution.  If possible, quantify this in terms of hours, locations etcetera
• Performance, paragraph 4, should identify milestones and KPI’s so that achievements can be benchmarked against objectives.  The public are keen to know the percentage of resources allocated to overheads, they need to understand the ROI i.e. impact per pound of funds raised.  This is obviously difficult to quantify as many of the aims are emotional, not financial, but trustees should not shy away from trying.  I have often seen larger, national charities measure their impact in terms of taxpayers money saved.
• The financial review needs to look at each fund and state the principle financial policies adopted.  Take time to clearly explain the reserves policy in particular as the Charity Commission will be monitoring this.  Make comment on how the current years performance and the current activities effect reserves.  Also, outline any financial commitments such as borrowing or obligatory grants.

This list is not exhaustive, but I hope I have set out the key points, please call me if you would like to discuss your TAR or would like me to review your draft.  Please note however, that an auditor can not write this report for you so please don’t ask!

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Self-assessment deadlines have changed – don’t be late!

H M Revenue & Customs (HMRC) are working hard to encourage businesses and individual taxpayers to file online to help them become more efficient and effective.  As part of this strategy they have changed the deadline if you wish to continue submitting a paper Return.

Generally, if you are sent a notice to complete a Tax Return you must return it completed before the later of 31 October following the end of the tax year and three months following the date of issue of the notice. Failure to do so will result in a £100 penalty regardless of the tax due. This is a significant change, so beware. (£100 per partner if the Return relates to a partnership)

For paper returns submitted by this date, HMRC will:

• calculate your tax for you (though you or your accountant can calculate it for yourself if you want)
• tell you what to pay by the following 31 January
• collect tax through your tax code (if possible) where you owe less than £2,000.

Returns sent via HMRC’s website or an electronic service provided by your accountant may be submitted up to 31 January.  There are many advantages of electronic submission which all our clients benefit from, the main ones being:

• Tax Returns are processed almost immediately and an acknowledgement of successful submission is provided.
• Your liability is calculated automatically and any refund due is issued by the system direct to your bank account.  Typically this occurs within 10 working days and saves banking and postage costs/time.  Manual processing can take weeks, sometimes months.
• PAYE coding notices are updated and re-issued without delay (if appropriate)
• The lack of ‘human’ intervention prevents processing errors and re-enforces the process now, check later strategy intended for Self-Assessment

There are a few situations where online tax returns can’t be made. In these cases the submission deadline is 31 January.

Companies House deadlines and penalties have changed too…..

If you operate your business through a Limited Company please be aware that the accounts filing deadline has been reduced by one month for accounting periods beginning on or after 6th April 2008.

A private company now only has 21 months from incorporation or in subsequent years nine months from its’ accounting period end to submit financial statements to Companies House.

From 1st February 2009 the late filing penalties imposed by Companies House have also become a lot more onerous.

If your accounts or Tax Returns are not up to date,

call us for a free no obligation consultation. 01480 426500

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Just to make life a little more awkward for the average taxpayer, H M Revenue & Customs (HMRC) have changed the bank accounts to which you would normally make your PAYE and NIC payments.

As most businesses use CHAPS/BACS or internet banking for settling these regular liabilities, as encouraged by HMRC, this is a little irritating, but easily dealt with.  Please make sure any default settings are updated to show the new account details, which are:

HMRC Cumbernauld  08-32-10  a/c 12001039

or HMRC Shipley 08-32-10 a/c 12001020

 The old account will remain open for a short while, but it is recommended that the new accounts are used as soon as possible.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.