SEPTEMBER 2013
THE VOICE OF ALL NQs Contact us
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ALL THE NEWS YOU NEED Pages 4 and 7
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GROUP RELIEF – ALL YOU NEED TO KNOW ABOUT SAVING CORPORATION TAX
TURBULENT TIMES P10 WELCOME TO THE NEW NORMAL – HOW TO LEADERSHIP COPE WITH CHANGE P12 It’s not all about you!
MIRROR, SIGNAL, MANOEUVRE How to manage your career
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SUITABILITY AT WAlkeR DenDle We hAve mAny DiFFeRenT AbiliTieS. The SUiTAbiliTy OF OUR JObS SeTS US APART. Walker Dendle Financial Recruitment has become established as a leading recruiter of professional permanent and temporary finance staff in Surrey and the surrounding area for over 12 years, filling a diverse range of part qualified finance and accounting roles across financial and management accountants to commercial accounting and analysis to finance business partnering. We continually focus on adapting and refining our service to suit you, offering sound and knowledge based careers advice to part qualifieds seeking their next, all-important job move. For more information about the range of career openings available though Walker Dendle Financial Recruitment, please contact: Permanent Division perms@walkerdendle.co.uk Temporary & Contract Division temps@walkerdendle.co.uk Walker Dendle Financial Recruitment Swan House, 51 High Street, Kingston Surrey KT1 1LQ
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COMMENT Current NQ of the Year Jonathan Simons
EDITOR’S COMMENTS Times, they are a changin’ “Come gather ’round people, wherever you roam, and admit that the waters, around you have grown” Bob Dylan knew what we all now know, that change is and always has been the new normal! With this in mind one of our leading features in this issue looks at what could be the key drivers for your future. The changing environment we all work and live in does seem more rapid and intense these days. Our totally connected world puts more and more pressure on everyone to be ‘wired’ 24/7. You can feel Mr Dylan’s water rising if you don’t develop proper coping strategies. One suggestion from me is to turn off your phone when you go to bed – the alarm will still work! Companies’ priorities also change rapidly. The big corporations, for instance, are more and more prepared to lose out on short-term profits if there is any risk to their reputation. But safeguarding reputation is now often out of the hands of the company itself, explains CIMA’s head of ethics Tanya Barman (on page 14). The recent case of one disgruntled British Airways traveller taking out priority ad space on Twitter to warn people off using the airline is a case in point. Your reputation can be under attack from all angles at any time. This latest issue of NQ magazine also has a great piece about managing your career from Lisa Dendle. She stresses that you have to be prepared to accept criticism, something I feel we are all bad at. How many people do you know who would admit to being bad drivers, let alone bad accountants? If this is your first issue of NQ magazine, you can go online to see the last three issues. Go to www.issuu.com and put NQ magazine in the search facility. Graham Hambly, Editor (graham@pqaccountant.com)
THIS ISSUE We are looking for the NQ of the Year 2014 – it could be you! See page 7 for details. Enter via the pq magazine website – www.pqmagazine.co.uk
NEWS
A noble profession Audit is still, according to Sir David Tweedie, a noble profession. In a recent lecture, the former International Accounting Standards Board chair stressed that if audit didn’t exist the markets wouldn’t function. However, he also emphasised that the global financial crisis has meant that a new type of assurance product may be needed – one in which the auditor does more than simply certify the truth and fairness of financial statements. In future, Sir David said he would like to see auditors comment on the assumptions or complexities involved in the audit process, like the going concern assumption. He said that the profession needed to take a more proactive role in identifying unusual facets of a balance sheet, key accounting estimates behind the numbers and direct users of financial statements to areas where they might be wise to seek further information. He said: “Auditors should spell out exactly how these companies are sustainable. Auditors must make their assumptions explicit.” Sir David explained that the global crisis revealed problems with the way independent auditor’s reports were used by the management and interpreted by the market. But he insisted that it wasn’t what caused the crisis. So what did? He says it was the banks being allowed to leverage off their balance sheets to a level that was simply ‘ludicrous’. He said that at the time of the crash the banking system had in the realm of 1%-3% equity, and at one stage a quarter of the world’s GDP was propping up the banking system. No one, the auditors included, saw the crash coming.
RSM Tenon is rescued
Baker Tilly’s shareholders have voted unanimously to approve the rescue of RSM Tenon, its stricken rival. The deal should save many of the 2,300 jobs at Tenon, which 4
It’s a record – fine that is…
The Financial Reporting Council (FRC) has published its final report into the disciplinary hearing against Deloitte over its role with MG Rover Group, which collapsed eight years ago with the loss of 6,000 jobs. The Independent Tribunal found the 13 allegations against the firm all proven, and having heard the final submissions has imposed a record-breaking £14m fine and a severe reprimand. The previous biggest fine to date was £1.4m, levied against PwC for its work at JP Morgan. Deloitte Manchester partner Maghsoud Einollahi was also excluded from the profession for three years and fined £250,000, although it is understood that the firm will also pick up the tab here. The FRC’s Paul George said “The final report of the Tribunal provides a clear analysis of the case and how it reached its conclusions. It should be essential reading for all members of the profession. The sanctions imposed are in line with the FRC’s aim to ensure penalties are proportionate and have the necessary deterrent effect to prevent misconduct and bolster public and market confidence.” Deloitte made £30m from advising the Phoenix Four on their ill-fated attempt to rescue the car maker. It admitted to persistently and deliberately flouting professional standards. The tribunal pointed out that the accountants placed their own interest ahead of that of the public and compromised their own objectives when advising on two transactions.
went into administration recently when its lender, Lloyds Bank, refused to relax the covenants on its £80m of debts. Baker Tilly said that RSM Tenon will continue trading under that name for a short period of time, while a rolling programme of integration gets under way to seamlessly create one newly merged firm operating as Baker Tilly. Baker Tilly’s national managing partner, Laurence Longe, said: “This merger is an excellent outcome for clients, partners and staff of both firms.” NQ Magazine September 2013
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NEWS
Banks join the Are you our NQ fight against of the Year? ‘five-year’ rule At last year’s PQ Magazine Awards there were joint THE VOICE winners of the converted OF ALL NQs NQ award. Saad Mir managed to stand out from LOOKING TO the group. The 22 year old THE FUTURE TENDERING & AUDIT held a key role at Deloitte and had won the Deloitte WHO OWNS Pakistan Trainee of the YOUR CV? MEET Year Award in 2011. Our JONATHAN, AN NQ STAR STILL ILL…? other winner was Jonathan Our NQ of the Year spills the beans MARKETING Simons, who became MAKE EASY TROUBLE the ‘Champion’ for Grant AT THE TOWN HALL Thornton’s audit software GOVERNANCE UPDATE and data interrogation software. It couldn’t be easier to nominate for this year’s awards and, yes, you can nominate yourself. All we need is 250 words on why your nominee deserves to be our NQ of the Year 2014. Remember, you need your CV to stand out! Go to pqmagazine.co.uk to download our form, or just send your 250 words to awards@pqmagazine.com. MARCH 2013
Four of the UK’s biggest banks say it is not necessary to change auditors every five years, as recently outlined by the Competition Commission (CC). The shake-up of the audit market is finally nearing completion, and HSBC, Barclays, RBS and Standard Chartered are all arguing that the CC’s proposals would be costly, disruptive and even potentially harmful to competition and the quality of oversight. The banks have been joined by the likes of Shell, Standard Life and Icap, who have expressed ‘serious concerns’ about the CC’s new tendering rules. The CC’s final findings are due out in early October. The Financial Reporting Council (FRC) agrees that requiring companies to re-tender their audit contract every five years would be disproportionately costly for companies and audit firms, and could in fact undermine the goal of promoting competition. It is also concerned by the risk that tendering at five-yearly intervals will not be taken seriously by companies and may result in a sham process. What is confusing companies is the fact that the FRC, Competition Commission and law makers in Europe are all coming at the problem from different angles. Europe says audits need to be rotated every 14 years, the FRC wants 10 and CC says five. For the record, Barclays has had the same auditor for 117 years (PwC in its various guises). • In a recent poll, 81% of members of CIMA members said they agreed with the statement that auditors should be automatically rotated less than every 10 years.
NQ Magazine September 2013
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Lisa Dendle on how you can ‘manage’ your CV
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What we can learn from the Mid-Staffs scandal
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Sir Roger Carr on Cadbury’s code – an antidote to risk
How to tackle the moral maze of local government
P15
No special relationship The ACCA and US-based Institute of Management Accountants (IMA) have said their mutual recognition agreement (MRA) will not be going ahead. It appears that the two organisations believe there are too many risks of the MRA being misused as an inappropriate entry point by some in the market for ACCA students and CMA candidates. In particular, the ACCA feared that there could be students who might make career decisions based on perceived ‘shortcut routes’ to qualification rather than on the merits of each qualification. Both bodies have said they will continue to promote each other’s qualifications as a post-member opportunity to enrich careers. ACCA CEO Helen Brand explained that both institutes share a vision centred on public value and acting in the public interest. Although disappointed that the MRA was not going to proceed she promised the strategic partnership would continue and still develop over time. 7
CAREERS
Mirror, signal,
Lisa Dendle outlines how you can manage your career to maximise your skills
I
f you’re a car driver you will remember the immortal words: “Congratulations – you’ve passed!” With that came the sense of independence as you motored off to face the challenges of, in my case, the M25 without the security of dual control! A well-deserved reward after weeks, or possibly months, of perfecting your art, learning the theory parrot-fashion and rehearsing your three-point turn to precision. So why is it that all of the prudence and good habits of the classroom get forgotten with alarming speed, if not instantaneously, once you’ve ripped up the ‘L’ plates? It is understandable that, after years of study, textbooks and, let’s face it, hard work, newly qualifieds might be tempted to view attaining certification as the end of the road. In fact, it is just the beginning of the journey – your career. Sure, a little silliness and celebration is acceptable, if not a rite of passage, but then it is time to really focus on the road ahead, and not to fall into bad habits. Until now, you have probably not really appreciated how much ‘dual control’ there has been throughout your studies 8
and professional life. Parents, tutors, coaches and mentors will have encouraged you every step of the way, and steered you in the right direction, but now it is up to you to choose the right highway and to navigate your career path effectively. The first lesson is that the world does not owe you a living now that you have qualified – harsh, but true! You are going to have to compete with the best for the top jobs, now and in the future, so you need to start planning ahead. Where do you want to be in, say, five years’ time? Fix that, and then work backward. Be realistic – you are not necessarily going to get the plum job straight away; nor the salary to retire on. You will most certainly have to work for it – think of the most successful people you know and be prepared to put in some hard graft from day one. Strong discipline and a good work ethic are critical if you are to succeed, particularly in such competitive times. Loyalty and commitment are other essential qualities that you will need to display. Up until now your employer has invested time, effort and money in helping you to qualify and NQ Magazine September 2013
CAREERS
manoeuvre....
it is important to accept that, contractually, you have a duty to perform at work to the best of your ability in return for a good wage, and being prepared to go the extra mile will set you apart from the ever burgeoning crowd. No one is going to commend you for being egocentric so remember, there is no ‘I’ in team. Think strategically. Who can help you achieve your professional goals? Build up a strong network of experts who can facilitate and influence your career choices: colleagues, bosses, recruitment consultants, friends and family. Communicate effectively, network like mad and cherish your most valuable connections. Do not just rely on email or social networking; these are great mediums to a point, but will not make significant others feel truly valued. You are solely responsible for your personal PR now, so take it seriously. Above all, be prepared to accept criticism and learn from it. Taking constructive feedback on board can only assist in developing your skills set and technical competencies further and being too proud to listen or learn from your mistakes is a fundamental error. Choose your jobs and promotions carefully and avoid being seduced by title and money alone – job content and NQ Magazine September 2013
the exposure are as vital as a posh label. Ask yourself frequently: am I still heading in the right direction? Is my career road map on track? What valuable lessons have I learnt from my past experience and how can I improve? Be prepared to take advice from the experts and act on it. Be realistic, you don’t deserve to get a job just because you want it. Do you have adequate skills and experience to make you the most desirable hire from a business perspective? If not, be willing to take a slightly different route and get a foot in the door. Inevitably, there will be U-turns and crossroads and you may not always take the right junction, but by applying certain codes of conduct now and throughout your career (think of it as the Professional Highway Code!) there is no reason why you should not be a major success and achieve the greatness in your profession NQ that you are capable of. • Lisa Dendle is managing director of top recruiters Walkers Dendle 9
LEADERSHIP
Five things you should know about leadership There are numerous theories about what makes a great leader. Here Paul Carcone distils the essence of modern thinking into five bite-sized chunks that get to the heart of effective leadership
L
eadership is a paradoxical, highly context-dependent and intensely human endeavour. Despite vast research into the subject, it also remains the most ethereal and study-resistant aspect of business. Leadership study has evolved significantly from the Great Man Theories of the late 1800s to the (currently) in vogue concepts such as Transformational Leadership. While each of the subsequent established schools of thought shifted according to the prevailing environment, the following are five enduring insights into effective leadership.
1. It’s not all about you The cornerstone to effective leadership is the realisation that being a leader is not about personal aggrandisement. Rather, it is about enabling, encouraging and motivating a team to give of their best, and this only happens when the whole group feels
(this is not to be confused with being simply gregarious or generally noisy). Gandhi, for example, provides a prime example of how quiet determination, if applied artfully, can provide an incredibly compelling leadership force.
4. It’s more complicated now than ever
valued, empowered and meticulously well looked after. Clearly, there are times where difficult and unpopular decisions are required, and these need to be made in a sympathetically yet unflinching manner. However, if bad news is imparted by a trusted and respected boss, the resilience, loyalty and good nature with which the team takes it will often amaze.
2. It is always situationdependent A century of leadership study has shown only that leadership is contextually dependent, thus requiring a unique and customised approach to every situation. Accordingly, effective leadership is best viewed in terms of every leader-team interaction requiring a sensitive bespoke personal judgement. There is no permanent magic formula.
3. There are some enduring trends There are a few enduring ingredients to successful leadership that are essential. However, these are also those most resistant to scientific definition. Overall, an outstanding leader will always have a compelling nature or aura that sets them apart. Although different for every leader, this can best be described, clumsily, as charisma 10
Effective leadership in the 21st century has been complicated further by the multi-cultural, international context in which every sector now operates. The emergence of Generations Y and Z into the workplace has also meant that staff members have greater expectations of superiors and a diminished inclination to followership without tangibly reciprocated benefit. Given also that recent scandals have created an increasingly circumspect view of authority figures, leaders must now work much harder to win the respect and trust required for effective working relationships.
5. In the end…it is all about you Any successful leader’s relationship with their team will, ultimately, always be personality driven. This becomes increasingly apparent in difficult periods and requires that that leader’s consistent empathy, resolution and, above all, positivity are all arranged in just the right configuration for each and every circumstance. Therein lies the true art of leadership. Nothing can insulate the leader from the inescapable fact that leadership is a profoundly personal dynamic for which only the leader has NQ unequivocal responsibility. • Paul Carcone is a captain in the British Army and a former PQ Award winner (Boss of the Year) NQ Magazine September 2013
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GLOBAL SURVEY
Turbu times Turbulence is the new norm for finance professionals, says Faye Chua, so how can you best prepare yourself?
T
he world is changing. Of course it is, it always is, but what is driving the change? What does it mean for accountants at the start of their careers? In 2012, ACCA and IMA conducted a global survey to answer just those questions. In the past decade we’ve seen a change in focus from what is expected of finance professionals; they are now expected to be much more forward-looking and take a more active role in business planning and strategy. The focus on external economic factors is probably higher now than at any other time. There is no doubt we live in a global economy – companies from all over the world are competing for the finite resources that the earth has to offer, as shown from the first short-term driver there is an expectation that fuel and energy costs will continue to rise (see box facing page). This puts the focus clearly on the finance function. If a company is to retain its profitability against a backdrop of rising energy costs, it will be the responsibility of the company accountants to drive efficiency and identify other areas of the business where costs can be cut. 12
The expected impact on the profession continues through to the medium and long-term. It is widely expected that annual reports will need to be more integrated and show much more than just historical financial data. The finance function will have to work with all areas of the business to provide non-financial information, details about environmental costs, exposure to risk and corporate social responsibility commitments. Investors, especially institutional investors, need to be sure about where they put their money. The long-term drivers of change are more difficult to predict, both for the profession and the business world. Again, we see further evidence of the way the profession will change, and it is expected that more and more companies will be trading globally. This has consequences for all finance professionals, whether as part of a corporate finance team or within practice. The continued growth of what are currently seen as ‘emerging markets’ may see a move away from the US dollar as the global reserve currency – with the increase in international trade by smaller companies they will be exposed to currency fluctuations and they will be looking to their accountants to help mitigate that risk. NQ Magazine September 2013
GLOBAL SURVEY
ulent s The recent years of near zero growth have led to economists and business leaders reconsidering whether the current economic model will fit with the post 2008 economy. It may be that in the future we will see an increase in budgeting for a zero growth economy. This will be especially challenging for the finance function: how do you account for zero growth over a number years, rather than months, especially when other costs may continue to rise? There is no doubt that business leaders expect change to continue. If the accountancy profession is to maintain its levels of trust and respectability it must embrace these changes and be prepared to step forward and play a leading role in driving business and economic success in uncertain times. Some 2,500 professional accountants and business professionals took part in the survey for the tree categories: the short-term (up to three years); the medium-term (four to nine years); and the long-term (10+ years). • Faye Chua is ACCA’s Head NQ of Future Research NQ Magazine September 2013
FOR EACH CATEGORY THREE KEY DRIVERS WERE IDENTIFIED:
Short-term 1. Environment – fuel and energy costs. 2. Science and technology – cyber-crime and cybersecurity. 3. Business – potential strengthening of corporate governance regulation and practice globally. Medium-term 1. Accountancy – increased requirement for nonfinancial information and integrated reporting. 2. Accountancy – increased focus on the accountants role as business partner. 3. Accountancy – greater harmonisation of global accounting and business standards. Long-term 1. Economy – changes in the global reserve currency from the US dollar to a different currency. 2. Politics – a change in the focus of global governance institutions. 3. Economy – a radical alteration of the system of using money as the basis of a system of exchange. 13
MANAGING RISK
Bad reputation N
ot a week goes by without a new scandal making the headlines. Often such stories originate in cyberspace with early revelations being spread by social media. Once out, the story gathers pace across a host of online channels – as well as in the traditional media. The days of a letter of complaint being lost in the internal mail, or lengthy journalistic investigations breaking a story, are now fading as weaknesses – or even criminal acts – within an organisation are now often brought to light in cyberspace. 14
Tanya Barman explains why managing risk is of paramount importance in the age of new media, and how short-term losses can lead to long-term profit A recent global CGMA survey of more than 1,300 finance leaders, conducted by CIMA and the AICPA, found that reputational risk is a growing concern and steps are being taken to ensure that the fall-out doesn’t impact the company’s future balance sheet. Over three-quarters (76%) of global financial leaders said their company was prepared to lose profit in the short term for the sake of protecting its long-term reputation, and the same number (76%) place more focus on reputational risk today than in previous years. The more cynical among us might regard such insight with
surprise, bearing in mind the continued pressure to perform against quarterly targets, until you learn that nearly a quarter (22%) of those who responded worked for an organisation that had experienced a reputational failure. For those from the UK, this rose to nearly a third. Once bitten, twice shy. Not all press, despite the adage, is good, as stock prices can plummet in hours and customers turn away, sometimes never to return. Even if it is not your organistion that faces the crisis, you can be sure that if you are in the same sector the wake-up call may be just as loud. You only have to NQ Magazine September 2013
MANAGING RISK recall coverage of the BP gulf oil spill in 2010 to realise how many others in the extractive industry sat up and took note. Not surprisingly, the second-highest factor for the increase in focus on reputation was “reputational failure at a leading organisation or competitor”. Nothing keeps a chief executive awake at night more than wondering whether they may have to defend their company 24/7 against relentless probing and coverage. Harder still when the issue is indefensible. The catastrophic fire in the clothing factory in Dhaka that cost over a thousand lives was an impossible case for any leading clothes retailer to rationalise. Mistakes of this scale, through failure in regulations and extreme mismanagement at a local level, quite simply shouldn’t happen. With a spotlight on the supply chain around the world, simply ticking boxes is no longer adequate in terms of ethical behaviour. There is a need to clearly evidence thaty you have taken steps to do the right thing and communicated
that widely. Organisations must mitigate against the risks in the first place and ensure that they are run soundly for the long term. Yet the CGMA survey found that just under a third of businesses (30%) always considered the implications of reputational risk, another third (35%) sometimes did, leaving a third to, I guess, just cross their fingers that if things came out they wouldn’t hit too hard. Even fewer, just 11%, had a formal process for calculating the financial impact of not managing such risk. Safeguarding reputation is now often out of the hands of the company itself and influenced by external stakeholders such as customers, regulators, lobby groups and wider society. It is therefore of concern that that only a minority, just 20%, used feedback from social media channels to anticipate and manage reputation risk. Bearing in mind that the respondents identified that customers and their own employees had the biggest influence over reputation, understanding, and
engaging with, social media should be higher. All companies, wherever they operate and whatever their size, must increase their focus on the longterm, minimising risk and maximising opportunity. Ensuring appropriate collection, reporting and monitoring of reputational risk information will not only enable those in finance to performance manage an important aspect of their business, but will also be crucial for long-term sustainability. After all, if there is something you’d rather the public didn’t know, how will you manage once they do? More than likely, it is all just a matter of time. Ultimately, transparency NQ counters a ticking time bomb.
• Tanya Barman is head of ethics at CIMA. CIMA has just released an ethical CPD tool, ‘Are you doing the right thing?’ Find out here: http://www.cimaglobal.com/ ethicstool
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15
OPINION
Dear Prudence or Fair Value? Steve Priddy believes the standards setters have taken a retrograde step when it comes to the concept of fair value
16
NQ Magazine September 2013
“My business habits had one other bright feature, which I called ‘leaving a Margin’. For example, supposing Herbert’s debts to be one hundred and sixty-four pounds four-andtwopence, I would say, ‘Leave a margin, and put them down at two hundred.’ Or, supposing my own to be four times as much, I would leave a margin, and put them down at seven hundred. I had the highest opinion of the wisdom of this same Margin, but I am bound to acknowledge that on looking back, I deem it to have been an expensive device. For, we always ran into new debt immediately, to the full extent of the margin, and sometimes, in the sense of freedom and solvency it imparted, got pretty far on into another margin.” Charles Dickens, Great Expectations
NQ Magazine September 2013
T
he great novelist Charles Dickens, in one of his greatest masterpieces, points to two of the fundamental traits of being human: our ability to hoodwink ourselves and our ability to be over optimistic. As chartered accountants, whether management or statutory, I can safely say you will encounter these traits throughout your careers. In this opinion piece I will argue that the standard setters’ abandonment of Dear Prudence ‘in favour of the alluring Fair Value’ is a retrogressive step that you will have to work around. Financial statements have never been a purely historical record of accounting transactions. They are rather shot through with estimations, judgements, and views about the future. Here are some examples: • Accounts are prepared on a going concern basis. Assets and liabilities are valued on the basis that the organisation will be alive and kicking for the foreseeable future – usually taken to be at least 12 months since the date of sign off of the balance sheet. • Long-term contracts and work in progress are underpinned by an assessment of the recoverability of future sums, as well as the accuracy of future project costs. • Tangible assets are predicated on an assessment of useful economic life and depreciated accordingly. • Intangible assets are subject to an impairment test. Part of that impairment test is to discount future cash flows at the current cost of a company’s capital, which in turn is based on a very distinctive view of the future. • Point values are included for all items in the financial statements where a value range based on a stated confidence level would often be more appropriate. And if the above, and many other examples, apply to statutory accounts, they apply even more to an organisation’s management accounts. They have to because the overwhelming majority of working people are not accountants, and because the majority of them, as with young Pip in the above quote, are eternally optimistic. Markets know this, and are unforgiving when things go wrong. For example, Royal Dutch Shell’s calculation of proven reserves forms no part of its statutory accounts
OPINION but when it was shown in 2004 that these had been deliberately overstated, the share price plunged and several directors at C-level were forced to resign. This was because a key element of Shell’s future was suddenly undermined. When I started out in accountancy there were four fundamental accounting concepts. One of these was Dear Prudence. For once, the standard setters had reflected on human nature and enshrined in regulation that it was a good thing to temper natural optimism with a dose of reality. Put simply, a bird in the hand was to them worth two in the bush. If you see trouble ahead, provide for it now; only recognise revenue when it is virtually certain to materialise. Hopefully, this will sound to you like common sense – it is at the centre of Prospect Theory as developed by the Nobel Prize winner Daniel Kahneman. Unfortunately, this statement of common sense was not good enough for our standard setting masters. What they drew attention to was ‘bathwater provisioning’, i.e. the never-to-betrusted CFO managing earnings by the introduction of a whole series of margins, thereby depressing the true and fair statement of financial performance. Dear Prudence was unceremoniously dumped in favour of the youthful Fair Value. In my opinion this was a serious retrogressive step. Firstly, it demonstrates a mistrust of those practitioners in finance and their exercise of professional judgement. Secondly, it assumes rather naively that a Fair Value is possible in all circumstances and for all economic transactions. But, lastly and most importantly, it shows a complete misrecognition of how we as human beings are wired, and how we behave at the margin. As far as I am concerned, Dear Prudence never left the counting house. I hope the same applies NQ for you in your future careers.
• Dr Steve Priddy is Director of Research at LSBF 17
REED FINANCE SALARY GUIDE
In practice We take a look at the Reed Finance Practice Salary Guide 2013
F
or those who choose to remain in practice after qualifying the career progression opportunities are currently “very good”, says Reed’s Richard Post (pictured). He went on to point out that the role of business advisor is becoming ever more valuable, and as such qualified candidates are
enjoying a greater variety of work and development opportunity than in previous years. This is especially true in the independent practice environment. In national practices, demand from corporate clients has led to even further specialist advice being sought, meaning the accountancy profession is at the forefront of business strategy
and even policy. Post said that in both instances those who can adapt to such challenges are assured of career progression. • If you want to know more about other regions and the pay of senior managers and partners then go to the Reed Accountancy & Reed Finance Practice Salary Guide 2013.
SCOTLAND & NI
NQ
Assistant Manager
Manger
NORTH EAST
NQ
Assistant Manager
Manger
Audit & Assurance
£29,400£34,300
£30,700£38,400
£38,500£48,200
Audit & Assurance
£29,400£34,300
£30,700£38,400
£38,500£48,200
Corporate finance
£31,400£37,200
£34,100£43,800
£38,800£53,300
Corporate finance
£31,400£37,200
£34,100£43,800
£38,800£53,300
Personal tax
£28,900£36,100
£32,700£40,900
£40,600£51,800
Personal tax
£28,900£36,100
£32,700£40,900
£40,600£51,800
NORTH WEST
NQ
Assistant Manager
Manger
MIDLANDS
NQ
Assistant Manager
Manger
Audit & Assurance
£25,500£35,300
£30,700 -£40,500
£33,700£43,300
Audit & Assurance
£24,500£36,300
£30,700£40,300
£34,700£49,100
Corporate finance
£29,400£34,300
£29,400£34,300
£38,800£54,600
Corporate finance
£28,400£34,300
£33,100£42,000
£38,800£53,300
Personal tax
£26,800£36,900
£30,700£39,800
£35,600£54,600
Personal tax
£27,700£37,100
£31,700£40,800
£39,600£55,800
SOUTH WEST
NQ
Assistant Manager
Manger
CENTRAL LONDON
NQ
Assistant Manager
Manger
Audit & Assurance
£25,000£35,300
£32,000£39,000
£34,700£48,000
Audit & Assurance
£38,000£45,000
£43,200£50,000
£50,000£60,000
Corporate finance
£31,000£32,300
£37,000£42,000
£45,000£60,700
Corporate finance
£42,100£49,999
£48,700£58,400
£58,100£67,800
Personal tax
£30,000£37,000
£32,000£46,800
£40,000£60,000
Personal tax
£38,000£44,900
£46,000£50,000
£50,000£68,000
18
NQ Magazine September 2013
ICAS TAx ProfeSSIonAl The new name in Tax ICAS has applied its world class approach to the development of the CA qualification to create the ITP professional tax qualification, delivered jointly by ICAS and Tax Training Experts, Tolley Tax Training. The ITP could be your opportunity to enhance your tax knowledge and career prospects. ITP equips you will the breadth of knowledge of all key taxes, a deep technical tax expertise and skills development for advising clients, culminating in the award of a professional qualification and designation.
CA, ACA, ACCA, ATT, CIMA or part qualified CTA? You are already eligible to apply for a number of exemptions making the qualification achievable in a timely and affordable manner.
To join our growing community of ICAS Tax Professionals call 0141 272 2614 or visit icas.org.uk/itp-nq ITP training provider
ICAS: YOUR TAX QUALIFICATION
Tuition and exams can be approached in the order and timescale which best suits your business and personal needs, whether one at a time or a full level at one sitting.
Relevant
ICAS says: we’ve created a new professional tax qualification. So what’s all the excitement about?
I
CAS has applied its world-class approach to the development of the CA qualification to create the ITP professional tax qualification, delivered jointly by ICAS and tax training experts Tolley Tax Training. The qualification has been created to meet the changing demands and needs of employers and students in the field of taxation. Both the structure and the syllabus content have been developed in consultation with tax practices, with the key aim of providing the relevant tax skills and knowledge required of a tax professional working in a varied client environment. The qualification has a primary focus on taxation, while also providing the building blocks of accounting and law required of a tax professional. Successful candidates demonstrating appropriate work experience will be awarded the designatory letters ‘ITP’ and will join a community of tax professionals affiliated to ICAS. The qualification can be used alongside the CA qualification, as a stand-alone tax qualification or following on from an accounting qualification,
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demonstrating a depth of knowledge and expertise in tax. ITP is relevant both to tax professionals developing their knowledge and skills in the initial stages of their tax career, and also to those who have been working in tax for some time and wish to consolidate their knowledge and skills. The objective is to equip individuals with a breadth of knowledge of all key taxes, and a development of their skills to apply this knowledge to a client scenario.
The ITP qualification is: • Professional. • Designed and delivered by tax professionals for tax professionals, equipping you with both knowledge and skills. • Flexible. ITP has a variety of different study routes to fit in with business needs, lifestyle and preferred study method, ranging from distance learning (supported by online material) to full classroom tuition. Classes and examinations are held in both Edinburgh and London with two exam diets per year.
ITP is reviewed constantly to ensure the syllabus is up-to-date and in tune with industry. Whether studying tax for the first time, or an experienced tax professional, you start the qualification at the point that reflects existing experience and qualifications, allowing you to concentrate on up-skilling current knowledge.
Consistent With all elements created and delivered by ICAS and Tolley, examination style and content matches the teaching material. No matter where you are based, the delivery is consistent in every training centre, in line with ICAS recognised high standards. “ITP has expanded my knowledge and understanding of all key taxes, assisting me in developing skills that I am already applying to a variety of client scenarios,” explains Jennifer Houston CA ITP, who recently completed the qualification. “It is very flexible in its nature if you do not want to sit all exams at different levels in the one sitting. ICAS also provide excellent support throughout.” If you are a CA, ACA, ACCA, ATT, CIMA or part-qualified CTA you are already eligible to apply for a number of exemptions, making the qualification achievable in a timely and affordable manner. NQ To join our growing community of ICAS Tax Professionals call us on 0141 272 2614 or visit icas.org.uk/itp-nq for more information. NQ Magazine September 2013
Continue your professional development journey with Kaplan Hawksmere. Follow us: @kaplanhawksmere Žƌ ƐŝŐŶ ƵƉ ƚŽ ŽƵƌ ŶĞǁƐůĞƩĞƌ HERE
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0845 833 3212 training@kaplanhawksmere.co.uk www.kaplanhawksmere.co.uk
GROUP RELIEF
Group Relief: old rules, and some new ones Liz Halford explains all you need to know about saving corporation tax via group relief arrangements 22
NQ Magazine September 2013
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roup relief enables losses of one company to be used by a different company within the same group, so that the group as a whole can save the maximum amount of corporation tax.
So, what is a group relief group? A group relief group exists when a company is a 75% subsidiary of another company. The group includes the parent and its 75% subsidiaries. A company is a 75% subsidiary if: • T he parent company holds at least 75% of the ordinary share capital; and • T hose shares entitle the parent to at least 75% of the distributable profits available to equity holders; and • T hose shares entitle the parent to at least 75% of the company’s assets that are available for distribution to equity holders on a winding up. For a sub-subsidiary, you need to multiply through the subsidiary holdings to establish the proportion the parent holds. An equity holder is a person holding ordinary shares in the company, or a loan creditor where the loan is not a normal commercial loan. Therefore, holding 75% of the ordinary shares would not result in a group if a non-commercial loan creditor is entitled to 30% of the assets. Companies join a group when the conditions are first met. They leave a group when ‘arrangements’ are in place that enable the company at some point in the future to cease to be a member of the group. For accounting periods ending on or after 1 April 2013, if a statutory body has imposed conditions that stipulate that a company must leave a group at a pre-determined date, this will not be classed as ‘arrangements’. For example, a company contracts with the NHS to build and run a hospital on their behalf through a company. The ownership of the company will revert to the NHS at the end of the contract, in 25 years’ time. The rules as they stood inadvertently prevented this company from accessing group relief; the new rules remove this restriction. NQ Magazine September 2013
Group relief What about overseas companies? Losses can be surrendered between UK resident companies. Losses made by EEA subsidiaries can be surrendered to UK companies. UK permanent establishments of nonresident companies can surrender losses to, and claim losses from, UK companies. However, the circumstances in which losses of these non-resident companies can be surrendered to a UK company are extremely limited, such that if the loss can potentially be relieved outside of the UK, in any period, it cannot be relieved in the UK. From 1 April 2013, this rule has been relaxed for UK permanent establishments of EEA resident companies. Rather than the restriction applying if the company has the ability to relieve the losses elsewhere, it only applies if the loss has actually been used overseas.
Which losses can be surrendered? Group relief can only be claimed for current year losses. If the surrendering and claimant companies have different chargeable accounting periods, the losses must be time apportioned and surrendered based on overlapping periods. The following losses can be surrendered: • Trade losses • Non-trade loan relationship deficits • Excess qualifying charitable donations • Excess UK property business losses • Excess management expenses • Excess non-trading losses on intangible fixed assets Prior to 20 March 2013, ‘excess’ meant the amount above gross profits of the surrendering company, prior to any losses (including brought forward) being set off. From 20 March 2013, it refers to amounts in excess of the profit-related threshold. This threshold is the sum of the surrendering company’s gross profits as above, and any Controlled Foreign Company (CFC) profits that have been apportioned to the surrendering company. This new rule is to close a loophole whereby companies could divert profits to a CFC to reduce its gross profits, giving higher surrenderable excess losses.
How much loss can be claimed? A company can claim losses up to its taxable total profits (TTP) for the same overlapping period.
How do I decide where to use the losses? Group relief is extremely flexible, with the group able to choose how much loss is surrendered to each group company. The group will set losses against the companies paying the highest marginal rate of tax. You would ordinarily surrender losses to companies in the marginal rate band, as these companies suffer a tax rate of 23.75% in FY2013, compared to the main rate of 23%. However, given the recent decreases in corporation tax rates, it may be preferable to carry the loss back in the loss making company following a current year claim, if this would save tax at the FY2012 main rate of 24% or marginal rate of 25%.
NQ
• Liz Halford is a tutor at Tolley Exam Training, part of LexisNexis. She can be contacted on 020 3364 4500 or examtraining@lexisnexis.co.uk 23
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