Kreston Reeves strengthens Private Client legal team with two new solicitors
July 24, 2023
Accountants, business, and wealth advisers Kreston Reeves has strengthened its Private Client Legal team with two new solicitors.
Jenn Trussler joins from Irwin Mitchell and Lily Parisi joins from Sussex law firm GWCA Solicitors. Both bring to the firm experience and expertise in advising individuals and families on Wills, Powers of Attorney, Probate and Estate Administration, Inheritance Tax and Trusts.
The 10-strong legal team at Kreston Reeves works alongside its tax and private client tax wealth management teams providing individuals and families with the advice and support needed to navigate an increasingly complex world.
Simon Levine, Partner and Joint Head of the Legal Services team at Kreston Reeves said: “Our clients increasingly need a holistic view when managing their personal affairs, and Kreston Reeves with its combination of legal, tax and wealth planning provides the perfect solution. It is at the heart of our purpose to guide our clients, colleagues and communities to a brighter future.
“We are delighted to announce the appointments of Jenn and Lily and look forward to the contributions they will make as they build and develop their careers at Kreston Reeves.”
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Earth Day 2023: Liza Robbins
April 21, 2023
As Earth Day 2023 approaches, it is important to acknowledge the importance of sustainability in the corporate world. Due to the increasing environmental difficulties, it is crucial for businesses to integrate sustainable methodologies into their activities. In this article, Liza Robbins, Chief Executive of Kreston Global, provides her perspective on how tax and accounting specialists can assist businesses in focussing on sustainable practices.
Earth Day 2023 theme is ‘Invest in our planet.’ Businesses can profit significantly from a sustainable transition if they invest early on. How do you think businesses will profit – or benefit?
Climate change has become a crucial topic in today’s business world, with various stakeholders such as staff, clients, suppliers, and investors expressing their concerns about the impact of businesses on the environment. As a result, they have high expectations for companies to engage in sustainable practices. Ignoring these issues will result in negative consequences for the reputation and profitability of the business, as sustainable companies are more attractive to stakeholders.
The recruitment and retention of top talent have become significant challenges for businesses globally. Individuals increasingly seek to work for companies that have a positive impact on the planet, and the focus on sustainability can be a key factor in attracting and retaining employees. Therefore, organisations that integrate sustainable practices into their operations will benefit in terms of attracting and retaining talent.
Governments and regulators worldwide are also introducing new policies and laws to combat climate change, and organisations that adopt carbon reduction strategies now will be better equipped to navigate these new requirements. Adopting sustainable practices not only ensures regulatory compliance but also enhances the organisation’s reputation and brand value, positioning the organisation as a trailblazer in sustainability, which is highly attractive to stakeholders. In summary, businesses must recognise that sustainability is not a peripheral issue but a core concern that can drive long-term success and stakeholder satisfaction.
What is the role of accounting networks like Kreston Global in the education and behaviour change that firms and their clients need to take us to net zero by 2050?
At Kreston Global, we recognise the significant role we play in driving positive change in the world. As representatives of the accounting profession, we take great pride in our network’s ability to create a lasting positive impact. With over 25,000 individuals across 115+ countries, we have the reach and the influence to shape the global business landscape.
Our connectivity allows us to leverage our position to educate and consult on sustainable business practices, showcasing good practices that positively influence firms and their clients. At Kreston Global, we firmly believe that sustainability is a critical aspect of modern business, and we actively promote this mindset to our network and beyond.
Kreston Global recently partnered with Treedom Agroforestry to mitigate the emissions generated by enabling our members to connect face-to-face. What actions have you taken in your firms or your personal life that you can share that will help mitigate or reduce emissions?
At our organisation, sustainability is a top priority, and we have taken significant steps to integrate it into our operations. As part of our Strategic Plan, we have made a commitment to ESG and positive impact, and have enlisted the help of our network experts in this area, establishing an ESG Committee to identify best practice that can be shared across the organisation. We strongly believe that sustainability is not just a buzzword but a critical aspect of responsible business practices.
On a personal level, I am deeply committed to the Reduce, Reuse, Recycle mantra. I believe that we should all be mindful of our consumption patterns and strive to reuse items whenever possible. For instance, I have significantly reduced my car usage and prefer to walk or cycle for short journeys. I am delighted that the pleasant weather has made this more feasible lately.
At Kreston Global, we are also committed to reducing our carbon footprint. We carefully consider our travel plans and aim to combine multiple uses for a single flight whenever possible, such as attending meetings or conferences. We are dedicated to doing our part in creating a more sustainable future, both at work and in our personal lives.
To read more about the sustaiblity and ESG reporting in Kreston Global, click here.
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Earth Day 2023: Andrew Griggs
Earth Day is a global event celebrated every year on 22 April to raise awareness about the importance of protecting our planet and taking action against environmental challenges. As we approach Earth Day 2023, it’s important to consider the role that businesses can play in contributing to a more sustainable future.
Andrew Griggs, Senior Partner at Kreston Reeves and head of the Kreston Global ESG Advisory Committee shared his insights on how businesses can incorporate sustainability into their financial reporting and tax compliance, and how they can benefit from investing in sustainable practices.
1. The business world is among the most significant emitters of greenhouse gases and other pollutants. How can businesses incorporate sustainability into their financial reporting and tax compliance?
“I think there are great opportunities for UK businesses to incorporate sustainability into reporting, simply by looking at what is mandatory now for larger companies (over 500 employees) and following that lead to getting ahead of the curve as it will be mandatory for SMEs soon. From a financial management perspective, all business benefits from knowing their ESG risks and opportunities, and seeing what the impact of their business has on their wider community and stakeholders. And of course, it gives anyone looking closely at that business, be it as an investor, potential recruit or to do business with, a sense of the business culture, values and ethos.”
2. Earth Day 2023 theme is ‘Invest in our planet.’ Businesses can profit significantly from a sustainable transition if they invest early on. How do you think businesses will profit – or benefit?
“As I mentioned above, getting in early is always useful as it can take time to build a comprehensive ESG approach. I know from our own journey as a firm that wanted to have a positive impact on the world and society that the earlier you start the better. We began ours in 2018 and in March this year have achieved B Corporation certification which was one of our goals. The benefits of this inside-out approach have been substantial in terms of increasing staff engagement and morale, improving our financial performance, creating standout in the marketplace, and attracting/retaining clients.”
3. How can tax incentives for sustainable initiatives positively impact a company’s bottom line, and how can businesses take advantage of them with the help of tax and accounting professionals to quantify these benefits in their financial statements?
“Environmental tax incentives in the UK are quite good – there are capital allowances on energy efficient practices (improving heating and energy consumption) and investments in zero carbon technology (ie building infrastructure/electric car/bikes for staff etc). We know that adopting these and other measures such as turning down the heating slightly, going paperless, encouraging recycling and looking at lower water usage and plastic reduction has had a considerable impact in a positive way on our bottom line.”
4. What is the role of accounting networks like Kreston Global in the education and behaviour change that firms and their clients need to take us to net zero by 2050?
“In Kreston we have the opportunity to reach – both across our 165 member firms in 115 countries but in turn to influence and engage their clients and people. This allows us to change behaviours across a large global footprint and create impetus for change by galvanising the whole network. Our network’s impact strategy includes a committee of some of our ESG leaders to help direct and mentor other firms in this area.”
5. Kreston Global recently partnered with Treedom Agroforestry to mitigate the emissions generated by enabling our members to connect face-to-face. What actions have you taken in your firms or your personal life that you can share that will help mitigate or reduce emissions?
“As previously mentioned, as a firm we have committed to becoming a B Corporation so we can live our values of not only becoming net zero but ensuring a long-term commitment to staying net zero – and helping others to do so as well as part of being B corp.“
In conclusion, Andrew’s insights highlight the importance of incorporating sustainability into businesses’ financial reporting and tax compliance, investing in sustainable practices, taking advantage of available tax incentives, and the role of accounting networks in driving education and behaviour change. As we celebrate Earth Day 2023 with the theme of ‘Invest in our planet,’ it’s important to remember that businesses can profit significantly from a sustainable transition if they invest early on.
Global vacancies
10 North Place
April 19, 2023
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Stuart Brown
Kreston Global ESG Committee member, Head of Technical and Compliance at Duncan & Toplis
Stuart is an FCA-qualified chartered accountant with more than ten years of practical accounting and audit experience.
He leads the technical developments for Duncan & Toplis. This covers audit, financial reporting and maintaining the quality of work.
He has recently been appointed to Duncan & Toplis’ operations board and has become a member of the ICAEW’s influential Ethics Advisory Committee. Stuart also sits on the Kreston Global ESG Committee.
ESG reporting in the UK
March 8, 2023
ESG reporting in the UK applies to entities that are classified as ‘large’ for reporting periods beginning on or after 1 April 2019, there has been a requirement to report on energy use and associated greenhouse gas emissions.
For accounting periods beginning on or after 6 April 2022 UK company law has mandated disclosure covering climate-related matters for certain entities. Disclosure must include a description of:
Governance arrangements for climate-related risk assessments and opportunities, including a description as to how an entity identifies such risks, how they assess them and their response.
How this risk assessment links to the overall risk management process.
The most significant risks identified and their impact on an entity.
How able to cope with the risks identified an entity is covering different scenarios.
Specific targets (including KPIs) used by an entity to manage identified risks and how the entity is performing against those risks.
Such disclosure is not required for all entities and has been introduced only for:
UK companies that have more than 500 employees and are either traded, banking or insurance companies.
UK companies listed on AIM with more than 500 employees.
Other UK companies that have more than 500 employees and a turnover of more than £500m.
LLPs that have more than 500 employees and a turnover of more than £500m.
In addition, in the UK, the listing rules mandated by the Financial Conduct Authority (FCA) require premium-listed and standard-listed companies to make disclosures under the TCFD (Task Force for Climate-related Financial Disclosure) framework. Further details on this can be found at https://www.fsb-tcfd.org/publications/.
Transition Plan Taskforce
2022 also saw the launch of the Transition Plan Taskforce (TPT). The aim of this group is to standardise the disclosure framework relating to the communication of the transition plans (to net zero) of UK private companies, to ensure that consistent, detailed, robust and credible plans are in place. Further details can be found at https://transitiontaskforce.net/.
Although mandatory disclosure of ESG-related matters is currently focused on the largest entities, entities of all sizes should feel encouraged to start to bring in ESG matters into their reporting and strategic decisions. All companies will benefit from being aware of the risks that they face from ESG matters and on the impact that their activities have on a wider stakeholder group.
If you would like to talk to one of our experts about your ESG reporting obligations in the UK, please get in touch.
Global vacancies
Winship House, Winship Way
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Kreston Charities Report reveals uncertain future for UK charities
March 7, 2023
The Kreston Charities Report 2023, released by the Kreston UK Charity Group, has revealed that UK charities are facing an uncertain economic outlook, challenging recruitment, and fundamental issues such as a lack of diversity at board level. The report provides important insight into the experiences of a wide range of charities across the UK, with Duncan & Toplis contributing significantly to the report.
Charities are feeling the pinch, with a large majority seeing costs rise over the past 12 months due to soaring energy bills and a steep hike in inflation. This, combined with limited financial resources and challenges in recruitment efforts, has left many charities facing an uncertain future. However, 73% of charities consider their financial reserves to be sufficient to cover future development plans and contingencies for increased costs or reduced income.
Recruitment has become more challenging for charities, with rising costs and limited financial resources making it difficult to offer competitive salaries. To overcome this, charities are looking to offer non-financial rewards to entice new recruits and retain existing employees.
Charity board diversity
The report also highlights fundamental issues such as a lack of diversity at board level, which is a major worry for the charities surveyed. 72% of charities are concerned about the lack of diversity among their Board of Trustees. Mental health support for staff/volunteers has become increasingly important, with 82% of charities stating that their beneficiaries are more affected by mental health now than they were before the pandemic.
Charities and cybersecurity
Despite the challenges, the report also shows that charities are on the whole well-equipped to deal with cybersecurity, and environmental issues are increasingly important, with half of the charities addressing climate concerns despite them not being part of their objectives.
The Kreston Charities Report 2023 provides important insights into the challenges and opportunities facing UK charities and highlights the need for charities to address fundamental issues such as diversity and mental health support.
If you would are a charity and you would like to speak to one of our UK firms, please find your nearest UK office here.
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International Women’s Day: Jenny Reed
International Women’s Day is celebrated globally every 8 March to recognise the contributions of women to social, economic, cultural, and political advancements. The day also calls for action to accelerate progress towards gender equality and women’s empowerment. This year, Kreston Global aims to feature a few remarkable women from their network and learn from their experiences on what it means to be a successful woman in the organisation.
Jenny Reed is a well-established figure in the accounting and auditing industry, with over 25 years of experience across both public practice and industry. Earlier this year, she was appointed Director of Quality and Professional Standards at Kreston Global, a role she has taken on with great enthusiasm and expertise. Before this, she served as the Head of Audit and Assurance at Baker Tilly International, where she established a reputation for herself as a dedicated and innovative leader.
What drives as a senior role in the global accounting network? My key driver is the desire to help people – I work for the benefit of our member firms, so everything I do is to help them, ultimately to help them help their clients.
Do you think the sector welcomes females in leadership roles? Things have improved since I joined the accountancy profession some 25 years ago. When I was a trainee, I wasn’t even allowed to wear trousers at work! Thankfully, things have moved on a lot since then, and we are seeing far more female directors and partners and more women in senior leadership roles within the global offices of accounting networks. So I think it’s imperative to do all I can to encourage and enable the next generation of women moving up in the profession. We can all do that at every stage of our careers.
What qualities do you need to be a successful female leader in global accounting? Working internationally is a great privilege. People from different countries, cultures, and backgrounds have their perspectives and ways of working, and part of my role is to help bring those other ideas and views together for the benefit of the whole network. You need to be a good listener and have much humility – I have strong opinions but hold them very lightly, as I never know when someone worldwide will have a better idea or approach. A certain amount of diplomacy and patience is also needed – bringing people together and reaching a consensus can take time but is valuable to the organisation.
We recently surveyed ‘interpreneurs’ – entrepreneurs looking to expand internationally. The data showed that female CEOs were more likely than males to consider expanding overseas. Why do you think this might be? Historically, many women believed they needed to work harder and be better than men to get ahead, and their drive to succeed may encourage them to take the risk to go global. Effective overseas expansion is always a collaborative effort, so since teamwork is a strength of many women, this statistic doesn’t surprise me.
There was a significant indication that existing networks were an attraction to overseas expansion in particular countries; why do you think female interpreneurs value this more than their male counterparts? Knowing that you have access to local knowledge and expertise through an accounting network is reassuring and gives confidence to interpreneurs to focus on what they do best.
What advice would you give your 28-year-old self? When I applied for trainee roles in accountancy, I was surprised at how many interviews I was offered. In the early part of my career, I would frequently underestimate my abilities and not push myself forward for promotions. The best advice I could give my younger self would be to have confidence in my abilities and to reach for the stars!
Read more from our other featured women for International Women’s Day, here.
Steve Gully is a highly experienced fiduciary and company director with over 20 years of experience in the international financial services industry. He has worked in companies that have undergone acquisition, acquisition of others and have been sold, demonstrating his adaptability and ability to cope with change. With a significant background working in an International Private Bank, Steve has developed detailed knowledge of the UK property markets for residential, commercial, agricultural, investment, and development projects.
Steve is also a proven leader with excellent people management skills, and strong commercial, technical, and solution-oriented skills. He has acted as a trusted advisor to a number of UHNW families and individuals and has held appointments as a board member on regulated financial services businesses, trading companies, and joint venture companies. His areas of expertise include Trust and Fiduciary Management, Wealth Management, Trust Law, Fiduciary Compliance, Family Office, Private Trust Companies, UHNWI/HNWI, Offshore structuring, Discretionary Management, Administration services, and Contentious Disputes.
Understanding the Non-Dom Regime and the 2023 UK Spring Budget
February 20, 2023
Understanding the non-dom regime is crucial to ensure you comply with the tax laws and avoid penalties. Kreston Global HNWI expert, Steve Gully, Director at Alex Picot Trust, discusses the non-dom regime, recent changes, and the impact of the 2023 UK Spring Budget on non-doms with eprivateclient. Read the full article here, or the summary below.
What is the Non-Dom Regime?
The non-dom regime is a tax system that applies to individuals who are not domiciled in the UK. Non-doms have to pay tax on their UK income and gains, but they are not taxed on their foreign income and gains if they do not bring them to the UK.
Non-Dom Remittance Basis
Non-doms can choose to pay tax on the remittance basis, which means they only pay tax on the income and gains they bring to the UK. This can be an advantage for non-doms who have significant income and gains outside the UK. However, they must pay an annual charge to use the remittance basis if they have been UK resident for more than seven years.
Recent Changes to the Non-Dom Regime
In 2017, the UK government introduced new rules that affect the non-dom regime. Under these rules, non-doms who have been resident in the UK for 15 out of the last 20 years must pay tax on their worldwide income and gains. In addition, non-doms who have a UK residential property in a company structure are also subject to inheritance tax.
Impact of the 2023 UK Spring Budget on Non-Doms
The 2023 UK Spring Budget introduced several changes that affect the non-dom regime. Firstly, the annual charge for non-doms who have been UK resident for more than seven years has increased from £30,000 to £60,000. Secondly, the threshold for paying tax on worldwide income and gains has been reduced from 15 out of the last 20 years to 10 out of the last 15 years. Thirdly, non-doms who have a UK residential property in a company structure will now be subject to capital gains tax when they sell the property.
Conclusion
Understanding the non-dom regime is crucial for individuals who are not domiciled in the UK. It is essential to comply with tax laws and avoid penalties. The recent changes introduced in the 2023 UK Spring Budget have significant implications for non-doms, and it is essential to seek professional advice to ensure you understand your tax obligations fully. Remember that the non-dom regime is complex, and the rules are continually changing, so it is crucial to keep up to date with the latest developments.
If you would like to speak to Steve Gully about any impact the changes in the Spring Budget have had on your investments, get in touch.
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February finance update from James Cowper Kreston
February 14, 2023
The latest James Cowper Kreston Finance Update newsletter for February 2023 is here.
The UK-based firm has released an easy-to-digest finance update newsletter, highlighting the key issues that affect businesses from the start of this year. In addition, it offers a helpful summary of the most recent economic developments in the United Kingdom, giving global readers the key headlines impacting businesses this month. Including insight on the energy support bill reductions and interest rates raised to the highest level in 14 years, the February financial update is a bite-sized version of the UK economic landscape.
There is also an opportunity to register for their upcoming seminar on Tuesday, 21 February. The free, 45-minute seminar, “Managing Businesses in Uncertain Times – Directors’ Responsibilities,” will welcome specialists to discuss what Business Directors should understand regarding their responsibilities and obligations and provide insight into how to mitigate risks they may face while navigating the UK’s challenging economy.
To find out more about James Cowper Kreston, click here. Click here to read the James Cowper Kreston newsletter in full.
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11th Annual Kreston Academies Benchmark Report
February 10, 2023
The Kreston Academies Benchmark Report shows escalating anxieties among academy trusts regarding the future of their financial health. Although there are considerable surpluses in the sector, per-student income has increased by a mere 1% against inflation rates of over 10%, higher energy costs, and teacher pay increases. Consequently, 88% of trusts anticipate future decreases in surpluses and reserves.
Kreston Academies Benchmark highlights include:
The sector’s financial surpluses are lower than in the previous record-breaking year. However, a substantial number of single academy trusts (SATs) in the primary sector (47%) reported deficits for 2021/22, indicating that larger trusts have tremendous fiscal success.
This is the first time primary SATs have seen average in-year deficits in four years. This is due to a few primary SATs with huge deficits caused by capital and maintenance expenditures that pulled down the overall average.
The Office of National Statistics (ONS) has reported a 30% rise in capital spending compared to 2022. This is due to a predicted drop of at least 12% in primary and nursery school attendees in the next 6 years, resulting in a 7.4% decrease in MAT revenue reserves per pupil from £802 to £743. Despite this, larger trusts with more than 7,500 pupils still achieve surpluses similar to 2021. 70% of MATs expect growth by 2023/24, with 5% expecting growth of 7+ schools for both 2023 and 2024.
There was a noticeable decrease in grant funding for academies that moved trust in 2021/22, with only 23% receiving it compared to 63% back in 2014/15. The total level of funding was £1.73m, significantly lower than the £3.16m seen last year.
If you are interested in the Kreston Academies Benchmark Report, have a UK-based academy trust, and would like accounting advice and support, please get in touch with one of our members here.
The article in Compliance Week outlines how the European Union is set to shake up corporate reporting on environmental, social, and governance (ESG) goals by introducing new regulations. Companies are being urged to use 2023 to prepare for these changes and stakeholders’ expectations.
Regulators in the EU have been increasingly vocal about the need for companies to act more sustainably and report their actions and progress in achieving ESG goals in a more meaningful and transparent manner. Last month, the EU agreed to pass legislation to do just that.
Action
The Corporate Sustainability Reporting Directive (CSRD) will introduce more detailed reporting requirements for large and listed companies on non-financial areas such as environmental impacts, social rights, human rights, and corporate governance. The directive will ensure that sustainability information will sit alongside financial information and be audited, which means that the initial compliance cost for companies could be significant as the amount of data that needs to be collected will likely increase, along with the number of people involved in the integrated reporting process.
The CSRD will apply to large companies already covered by the EU’s non-financial reporting directive from 2025 and other companies incrementally year-on-year through 2029, depending on their size and/or revenues. For the 2025 financial year, companies with a net turnover of 40 million euros (U.S. $42.5 million) or more, at least €20 million (U.S. $21.2 million) in assets, and 250-plus employees will need to report. Around 50,000 organizations in the European Union or with EU-based subsidiaries will need to comply.
CSRD Updates
In a Nov. 9 speech, Mairead McGuinness, European commissioner for financial stability, financial services, and the capital markets union, said, “For the first time …we are putting sustainability reporting on an equal footing with financial reporting.” She added that the final text of the CSRD provides a good basis for alignment with the EU’s proposed Corporate Sustainability Due Diligence Directive, which is currently being negotiated between the European Commission, European Parliament, and the European Council and aims to further improve long-term corporate governance.
On Nov. 23, the European Financial Reporting Advisory Group, which provides technical advice to the European Commission, submitted its first draft of CSRD standards, which the commission must review/amend before making them available for public consultation in the spring. Under the 12 standards, companies would be required to publish comprehensive and comparable information about their sustainability, from their environmental impact regarding pollution, climate change, and biodiversity to workers’ rights, communities affected by their operations, and the impact on customers.
Stuart Brown, Kreston Global ESG committee member was invited to comment, stating he felt that businesses should not feel overwhelmed by the new compliance directive, but see it as an opportunity to assess their own ESG risks.
Get in touch to discuss your ESG reporting with one of our experts.
Meera heads up the James Cowper Kreston VAT & Duty services and leads firm services into South East Asia.
She has built up extensive technical knowledge over more than 20 years specialising in VAT taking a practical approach and successfully arguing against HMRC to achieve substantial VAT savings and compensation for clients.
Meera’s experience covers business restructuring (mergers and acquisitions), VAT cost reduction strategies, international cross-border supply chains, partial exemption methods, land and property transactions, film production, charities, VAT planning and mitigation and assisting businesses with disputes with HMRC. With a number of years of experience at HM Revenue and Customs, she brings a range of skills and expertise in inspections and negotiations, valuable to clients.
VAT on UK imports as a non-established overseas business
January 5, 2023
We are often required to offer advice on VAT on UK imports. If your business is not established in the UK and you intend to import goods for resale there, you need to consider your VAT compliance obligations. Your business is likely to be required to register for and pay VAT on the first import of goods and subsequent sale.
What is a non-established overseas business?
Referred to by HM Revenue & Customs (HMRC) in the UK as a “non-established taxable person”, abbreviated to NETP, the overseas business does not have a fixed establishment in the UK. They trade using their overseas entity, absent a UK branch registered at Companies House. A fixed establishment has all of the following: • A UK physical location with a degree of permanence; • Human resources under the control of the overseas business; • Resources capable of making and receiving supplies of goods or services.
The following characteristics alone do not create a fixed establishment. • Storage of goods; • Computer servers; • Accountants or an agent’s UK address; • A UK VAT registration number, without the three positive indicators (location, staff, capability); • Employees moved to the UK temporarily, for a time-specific project.
What different VAT conditions apply to a NETP?
A NETP, cannot make use of the UK VAT registration threshold, whereas a UK-established business can make £85,000 of taxable sales in the UK in any 12-month period, before compulsorily VAT registration. A NETP must compulsorily register for VAT when they make their first taxable sale of goods they import into the UK. If services are provided from overseas businesses to UK businesses, which are subject to the Reverse Charge procedure by the UK recipient, these supplies do not force the overseas company to register for VAT in the UK. Possible business models were available to a NETP selling goods in the UK.
Import as an owner of the goods into the UK, and register for VAT as a NETP immediately before or after the first sale in the UK.
Arrange for the UK customer to take title to the goods before they physically arrive in the UK, so the customer is responsible for submission of a UK import entry to HMRC. This model may be unpopular with the UK customer, who gains the responsibility and cost of submission of the UK import entry to HMRC. This model does not work with a “Just In Time” supply model which requires prompt delivery of goods after the order is received, and usually requires local storage of goods in the UK, rather than importing goods to order.
A commission model, where a sales order received from a UK customer is passed to a third-party UK business, which supplies the goods to the customer. Commission is earned from the UK supplier, a b2b supply of services, which does not require that the overseas business register for VAT in the UK. There are several potential negative commercial impacts for such a model including “poaching” of the customer by the UK supplier, but this model can work for some businesses. This arrangement avoids the need for the overseas business to register for VAT in the UK.
Enter a formal agency arrangement for VAT purposes, where title to the goods in the UK, for customs and VAT purposes passes to an appointed UK agent. The UK agent acts as if they own the goods, collects proceeds of resale, declares the VAT to HMRC and passes the proceeds to the overseas business, less an agency fee. This arrangement avoids the need for the overseas business to register for VAT in the UK.
What to consider if the NETP registers for VAT in the UK, following the first model above.
Most NETPs appoint a UK VAT agent to manage the UK VAT registration requirements, although it is not compulsory. There is no requirement to appoint a “fiscal representative” in the UK, so the agent does NOT become jointly and severally liable for the amounts due on the VAT return. The VAT return must be submitted digitally to HMRC using Making Tax Digital (MTD) approved accounting software, so the software of the NETP will probably not meet this requirement.
If the NETP keeps stocks in the UK and does not import to fulfil a specific order, it needs to ensure that the import valuation on the customs entry is accurate, given that it does not yet have a sales invoice value to match to the incoming goods. The import valuation method for customs cannot, therefore, be Method 1, the price paid or payable, as the NETP is moving their own goods to the UK. Another valuation method needs to be used. Advice from a UK customs/VAT agent should be gathered before import.
The UK customs import entry needs to quote a UK “Economic Operators Registration and Identification Number” (an EORI). An EU EORI will have no effect. A NETP cannot obtain a UK EORI number as the applicant needs to have a UK establishment. The NETP will need to appoint a customs representative in the UK to be the “importer of record”, who will quote their EORI number on the UK import entry in box 14. This is referred to as “indirect representation”, where the customs agent becomes jointly and severally liable for the custom duties and import VAT. The NETP is the consignee, the owner and the recipient of the goods. The NETP’s VAT number is quoted in box 8 of the import entry and this allows the customs agent to use Postponed VAT Accounting (PVA) for import VAT. PVA allows the NETP to pay no import VAT at the time of the goods arrival, but rather pay and claim (usually the same amount) on their next UK VAT return.
If the NETP is using the UK as a base for physically selling non-EU goods also to the EU (in addition to UK sales), this potentially could lead to double taxation of customs duty, once on arrival in the UK (dependent upon the HS code in the UK tariff) and again on arrival in the EU (dependent upon the HS code in the EU tariff). If so, one solution is to use the customs import relief termed “Inward Processing”, where the customs duty is relieved if the goods are to be exported outside the UK. Further guidance about how Inward Processing works in the UK can be obtained from a customs duty specialist. The same potential difficulty arises in reverse if non-EU goods are imported into the EU and then subsequently moved to the UK.
Goods sold via an online platform/marketplace
If the platform delivers goods or processes payments, HMRC requires that the marketplace is liable for declaring UK VAT to HMRC. This is a separate topic, but mentioned here in passing.
Contact us now
If you own a non-established overseas business and you would like to discuss your VAT needs, please get in touch with one of our Indirect Tax experts today.
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Alex Peal
Joint Managing Partner for James Cowper Kreston in the UK
Alex is joint Managing Partner for James Cowper Kreston in the UK, and an Audit and Assurance partner acting for many owner managed organisations and individuals. He has a specialist knowledge of the film industry and also is a member of the Kreston Global Audit Group.
How is audit reform affecting the profession?
September 22, 2022
After several high-profile failures and large company collapses in recent years, the audit sector has found itself under heavy scrutiny.
In fact, 2021/22 saw a record amount of fines issued by the Financial Reporting Council (FRC) totalling £46.5 million – almost triple the £16.5m issued in the year before.
The ripple effect of large company collapses has taken its toll on public trust in audit and corporate governance, particularly when it comes to the performance of the UK’s four largest audit firms.
As the Government implements new audit reforms and the market slowly shifts away from the Big Four, smaller audit clients can also expect to see some impacts as a result of these changes.
These include replacing the FRC with a new Audit, Reporting and Governance Authority (ARGA).
ARGA will have a number of new powers compared to the old regulator, including the ability to ban failing auditors from reviewing large companies’ accounts, sanction directors of large companies for breaches of duty, and oversee professional bodies’ regulation of the accountancy profession.
The reforms also bring more large private companies within scope of the regulator, redefining public interest entities as those with more than 750 employees and £750 million in annual turnover.
A gradual shift from the Big Four
Another key reform means FTSE 350 companies will be required to conduct part of their audit with a challenger firm outside of the Big Four – a move intended to improve competition in the market.
A recent report from the FRC shows this shift is already happening to some extent. While in 2017, Big Four firms audited 96.8% of FTSE 250, that percentage had dropped to 89.2% by 2022.
And when it came to the UK market outside of those largest firms, the Big Four’s share had reduced from 74.2% to 28.2% over the same period of time.
So while the Big Four remains dominant over the UK’s largest companies, smaller companies are now seeing a much broader choice in the audit market, and are increasingly likely to work with a challenger firm.
What does the reform mean for smaller audit clients?
In theory, this increased competition should mean you see higher-quality work as an audit client, with rivalry between auditors encouraging enhanced services and lower fees.
The reality would appear to be that firms are spending more time on audits which does improve quality. However, this also comes at a cost because firms have realised that they need to increase fees to a level commensurate with the work that they are doing. Therefore, audit fees have actually risen rather than fallen.
In addition, because firms are spending more time on audits, without an increase in the total number of auditors there will be a reduction in capacity in the audit market. This can be seen in the market, and it has made it hard for some companies and particularly not for profit entities to find auditors willing to quote for work.
Another key change for smaller audit clients to look out for is the loosening of reporting requirements.
At the same time as it published its consultation response in May, the Government also announced plans to update the definition of micro-enterprises, with the aim of reducing the reporting burden on smaller businesses.
Micro-enterprises are currently defined as those which employ fewer than 10 people and have a turnover or annual balance sheet below €2 million.
The Government believes this threshold could be “forcing too many of Britain’s smallest businesses to spend time and money preparing accounts to a level of detail only needed for larger companies”.
It also says it will consider the reporting requirements on smaller public interest entities, and review the current restrictions on remunerating directors in shares.
Broadly speaking, the Government has been keen to emphasise that smaller businesses will see no extra regulations under the reforms – its focus is instead on the UK’s largest companies.
Get in touch to talk about how changes to the audit market could affect you.
News
Dean Pearson
Global Head of R&D Tax
Tax Partner at BHP dealing with tax advice to businesses and owner managers. Advising clients on a range of issues including VAT, property transactions, share schemes, reorganisations and company valuations. A corporate tax specialist with extensive experience in claiming tax reliefs for innovation, such as R&D tax credits and the Patent Box.
Advice for firms with clients who have UK operations
September 13, 2022
How will Research and Development tax relief be affected by the upcoming UK Finance Bill?
On 20 July 2022 (Legislation Day), the UK Government revealed draft legislation for the upcoming changes to R&D tax relief. Many of the changes, which form part of the forthcoming Finance Bill 2022/23, had already been anticipated prior to the announcement, but it is always interesting to see what the detail looks like. One area that was awaited with interest was the proposal that companies notify their intention to make R&D claims in advance.
From 1 April 2023, companies will need to digitally pre-notify HMRC of any planned R&D claims, and within six months of the end of the period to which the claim relates.
Fortunately, businesses that have claimed in one of the preceding three accounting periods will not need to pre-notify. This key exemption to the pre-notification ruling is welcome news for all companies that have claimed R&D tax relief in a recent accounting period but, for those who haven’t, it could prove to be a headache.
Also from April 2023, tax reliefs will be refocused towards innovation undertaken in the UK, meaning that expenditure on subcontracted R&D and externally provided workers (EPWs) must be incurred within the UK, while additional relief will be denied for any R&D activity performed overseas.
Other key changes highlighted on Legislation Day include the expansion
of qualifying expenditure to incorporate costs for data and cloud computing associated with R&D, and that all Corporation Tax returns that contain an R&D claim will need to be submitted to HMRC by way of a digital service.
Making a claim
Under the existing rules, a company can make a claim for the previous two accounting periods because they have a statutory right to amend a tax return up to 12 months after the filing deadline.
But the new rules state that, if the business hasn’t made a claim in any of the preceding three accounting periods, it wouldn’t be able to submit a claim for the two previous periods that would normally be open (under the current rules), since notification must take place within six months
of the end of the accounting period in question. This is the case even though the statutory deadline for filing or amending these returns is yet to pass. Therefore, retrospective claims may not be possible without being proactive.
If you need to make an R&D claim for a previous accounting period, you must do so before 1 April next year. If you or your clients need some further guidance on this, please contact our Global head of R&D Tax, Dean Pearson.
News
Ian Miles
Partner, James Cowper Kreston, Global Mobility Lead, Kreston Global
Ian has been a partner at James Cowper Kreston since 2008, with a diverse portfolio of high-net-worth clients. Before he joined James Cowper Kreston, Ian began his career in a Big 6 firm, where he was a National Client Service Director, chairing the Estate Planning Group.
Ian is the global mobility lead for the UK for Kreston Global.
Tax advice on bringing capital into the UK
July 26, 2022
The advice for bringing capital into the UK changed over three years ago. There was a window of opportunity for UK resident individuals who were non-UK domiciled to “cleanse” their offshore accounts so that they could remit funds to the UK free of UK tax. This window closed on 5 April 2019 so that it is no longer possible for someone who is living in the UK to cleanse their funds into clean capital, income and capital gains in order to remit tax-free cash to the UK.
Bringing clean capital into the UK
From 6 April 2019 onwards it has been important for those who are moving to the UK to live to separate out their funds outside the UK between the original capital, income earned on that capital and capital gains. This means identifying the three constituent parts, and making arrangements so that income and gains that arise after the person has arrived in the UK are kept separate by separating them into different bank or broker accounts. Their finances are “clean” up to the point that they move to the UK and become resident here. That clean capital can then be remitted to the UK free of tax whereas the income or gains would be subject to income tax or capital gains tax respectively if remitted. This segregation process must be set up before the individual arrives in the UK.
Avoiding mixed funds
We have experience of one individual who came to see us after arriving in the UK and wanted to bring in cash to buy a house. Unfortunately, this individual had been in the UK for a number of months so cleansing wasn’t possible and they hadn’t segregated accounts before arrival with the result that what is known as a “mixed” fund was remitted and was taxed on the element that represented income and gains.
This shows the importance of taking the right advice before leaving for the UK.
Why choose Kreston Global?
Kreston firms are committed to long-term client oversight and the service we provide means that we work closely together, including offshore service providers, to ensure that the correct solution for each client is designed, implemented and kept under review.
Kreston Global’s network of global mobility experts are well positioned to assist HNWIs in offering tax advice to individuals or companies.
If you’d like to find out more about our global mobility services, get in touch by phone or email or visit the global mobility page. You can also become a member and realise the full benefits of our global network.
News
Stuart Brown
Head of Technical & Compliance, Director of Duncan & Toplis
Stuart is director and head of technical and compliance at Duncan & Toplis. Stuart leads the technical developments for the business, including auditing, financial reporting, and quality assurance. It supports the continuous improvement of our processes using the Lean Six Sigma methodology.
In 2021, Stuart was appointed to Duncan & Toplis’ operations board and became a member of the ICAEW’s influential Ethics Advisory Committee (EAC). As a committee member, he gives advice on complicated or precedent-setting cases and contributes to the development of new guidance and other policy issues.
Root Cause Analysis
July 25, 2022
Have you heard of Root Cause Analysis (RCA)?
In the auditing world, it has recently taken centre stage as audit practices around the globe prepare for the 15 December 2022 – the effective date of the new International Standard for Quality Management auditing standard (ISQM1).
Under the new standard, there is a requirement for auditing practices to use RCA to assist with the practice-wide improvements of audit quality. Prior to this, some national authorities (such as the Financial Reporting Council in the UK) have required firms to perform RCA following audit quality reviews to analyse their findings and attempt to prevent issues from reoccurring once identified.
What is Root Cause Analysis?
The clue is, quite literally, in the name.
Simply put, it is a tool to pinpoint what the root cause of a given situation is. For audit purposes, it may be used to find out why the quality of an audit file was not up to expected standards, or why an audit was not performed as efficiently as it should have been. RCA is especially effective for discovering the underlying cause of issues and can be used in any industry, helping to focus efforts on improving or circumventing the identified problem(s).
I was first introduced to RCA while studying for the black belt qualification in the process improvement methodology known as Lean Six Sigma (LSS). At the core of LSS is the philosophy of continual improvement, a mind-set that every process can be improved. Before something can be improved, we first need to identify what is wrong with it and, importantly, what has caused the issue to begin with.
If we do not know what has caused the issue, how can the issue possibly be rectified? Or avoided in future?
In our firm we have carefully utilised RCA while improving a number of our own internal processes including billing, client onboarding, client communication and workflow methodology. How?
You can find a wealth of advice online regarding how to perform RCA, here I’d like to provide a brief overview of how we approach it at Duncan & Toplis.
What’s the problem? Effective RCA implementation
Firstly, you need to identify exactly what issue you are investigating.
Do not try to just jump straight into high-level issues. For example, avoid starting an RCA meeting on the premise that “our customers don’t like the new widget”. Some preliminary investigation is needed here. Does it not work? Is it manufactured too slowly? Is it too expensive? Clearly, defining the issue will help to focus the analysis.
Secondly, collect the required data. Once the issue has been defined, obtain the required data and compare it to a measurable expectation. For example, the production of a widget may be too slow for customers. Set an expectation of how long production should take and compare this to the actual time it is taking. In this case, you may then want to obtain the times between each stage of the production process to better highlight production bottlenecks.
Next, arrange an RCA meeting. This should involve all key stakeholders of the process or project. Ideally, the meeting should be coordinated by someone independent of the process / project under review to ensure that the conversation is focussed and remains entirely objective.
Asking a lot of “Whys”
We tend to start the conversation with the broad question of “Why?”.
Why is X not happening in Y? Keep asking “why?” until there is consensus in the group as to the specific root cause of an issue. This is why RCA is sometimes referred to as the ‘5 whys’. Think of the questioning nature of toddlers! The data collected in the previous stage can provide effective evidence for the conclusions reached.
Of course, meetings may not run so smoothly. If that is the case, the conversation can be focussed through the use of several different models. For example, the Ishikawa (or fishbone) diagram is something that we utilise at Duncan & Toplis. This enables different potential causes of an issue to be visually represented and funnels the conversation into different categories, such as equipment, process, people, materials, environment and management.
Once the root cause of an issue has been identified, targeted solutions can be implemented to resolve the issue.
Sometimes, the team may conclude that there are two or more issues that equally appear to be the root causes of an issue. In this case, pick a solution to focus on one cause and review the outcome. If that does not work, move on to the next cause until improvements are seen. Do not attempt to remedy both in tandem as this will impact your ability to measure the individual success of both measures.
This is a very brief overview of Root Cause Analysis, but hopefully, it has given you a taste to investigate further and to help you to strive towards process perfection!
If there are ongoing issues with processes in your business have you considered undertaking a root cause analysis?
Speak to your nearest Kreston member firm or contact marketing@kreston.com for help to find a specialist in your location.
News
Kreston Reeves appoints restructuring partner
May 27, 2022
Accountants, business and financial advisers Kreston Reeves has strengthened its market-leading Restructuring team with the appointment of Carrie James.
A licensed insolvency practitioner, Carrie joined Kreston Reeves on 18 May from SKSi where she was the managing director and head of insolvency.
She brings to the firm an impressive track record of helping businesses solve problems that are too great to be resolved on their own. Much of her work has an international perspective, with strengths in the mining and natural resources sectors. Carrie also brings a proven track record in building and growing a business, founding SA Insolvency before merging with Benedict MacKenzie, now SKSi, and leading its expansion programme.
Carrie is the immediate past president of the Insolvency Practitioners Association and sits on its External Affairs and Membership Committee and its Management and Risk Committee.
Commenting on her appointment, Carrie said:
“Kreston Reeves is a firm I have long admired. It has a strong position in London and the South East yet with significant opportunity for growth. Importantly, the firm is principled with values that reflect my own. it is an exciting time to be joining the firm.”
Andrew Tate, Partner and Head of Restructuring and Transformation at Kreston Reeves said:
“This is a significant appointment for Kreston Reeves. Carrie is highly respected and with a strong presence in the insolvency community. We are thrilled by her decision to join Kreston Reeves and look forward to working alongside her.”
News
Kreston takes action on Earth Day
May 12, 2022
Environmental sustainability is essential for our earth, as climate change is ever-growing all businesses can adapt to support this. Accountants and auditors are in the best place to be able to give advice to clients on ESG and aid with sustainability frameworks in the future.
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