Social Events & Meetings
Tax Matters and Compliance
One of my favourite principles from the current cache we have at our disposal is Principle 8. By way of reminder:
“You must run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles”
I describe it as the management principle. It says it all as far as what managers, and compliance professionals must achieve. It gives us the foundation stone with which to build our compliance structure and it makes everyone a builder of the culture with its catch-all phraseology and inclusivity.
It’s a reminder to all managers/owners of what’s expected of them as the proprietors of the business with its tone from the top message. It delivers the entity regulation message; ‘hey guys, we are all in this together”. It’s an important day one induction message to all people joining the firm.
Principle 8 also provides us with clues about the need for continual contemplation of the nature of the firm’s practice. The key thoughts to reflect on are these: what’s risky about what we do and is what we described as proper governance and risk management in 2011 still relevant in 2017?
Compliance topics are dynamic and a firm which demonstrates a sophisticated response will be constantly revaluating what measures are needed to ensure that a good business environment, in which clients receive a safe legal service, is facilitated. So much has changed since 2011, that I would challenge any firm which has not reviewed its risk assessments and management responses since then. After all, we are currently working with version 19 of the 2011 Handbook, cybercrime is becoming one of the most virulent external threats we are facing, and we are in the spotlight like never before in terms of our response to data protection and anti-money laundering legislation. None of this was the case when the Handbook was launched. No firm should be resting on its corporate laurels.
It is with this in mind, we have this autumn’s (current) main event: the need to respond to the Criminal Finances Act 2017 and tax evasion offences coupled with the SRA’s warning notice about tax avoidance schemes.
SRA outcome (7.5) states that we must comply with all legislation relevant to the business. Given that the Criminal Finances Act includes corporate offences of failing to prevent tax evasion, it’s important to add policies and training to the firm’s risk response. Colleagues must be made aware of the issues so that they can play their part in the safe provision of legal services.
More than this, the SRA has issued a warning notice dealing with tax work more generally (http://www.sra.org.uk/sra/news/press/tax-avoidance-warning-notice-2017.page). Warning notices issued by the regulator always come with the following health warning; “Whilst this warning notice does not form part of the SRA Handbook, we may have regard to it when exercising our regulatory function”. In other words, ignore this at your peril and please ensure that you have accommodated the risks we have identified into your internal compliance strategies.
This warning notice has a sting in its tail as it ties in professional duties with the need to be aware that HMRC is changing its approach to tax schemes and arrangements rapidly and will act not only against what is described as abusive tax avoidance schemes but also other tax avoidance arrangements if it deems this appropriate.
This is an interesting challenge for law firms which will need to develop and implement policies both to ensure adequate management and supervision responses and risk mitigation solutions are in place. Where do you start? Here are some thoughts and questions which you may want to ask yourselves:
- Do we have information which will help with an understanding of this topic? Luckily the ICAEW and other accountancy and tax bodies have produced guidance which helps with this and is available for us to download and use as a reference resource (“Professional Conduct in Relation to Taxation”, https://www.icaew.com/technical/tax/pcrt). This guidance has been endorsed by HMRC and therefore if used is likely to be credible evidence of a commitment to do the right thing.
- Have we identified which of our departments, and which of our fee earners, are performing tax-related services which may have a crossover with the topics mentioned in the warning notice?
- Do our senior management need to be made aware of the SRA’s concerns, the HMRC’s interest and the firm’s hot spots, so that a strategic decision as to next steps can be made?
- Do we add this to our risk register?
- Which of our policies must be adapted?
- What monitoring and supervision techniques should be used to ensure there is commitment to the new policies?
- Do we need to roll out training to those people giving tax advice and those people supervising them?
Using Principle 8 to achieve consensus as to the right response is sensible. Get your response wrong and the SRA says that we may have difficulties in demonstrating adherence to other Principles such as the duty of integrity, upholding the rule of law, maintaining trust in the profession, delivering a proper standard of service and acting in a client’s best interests.
Tracey Calvert
Oakalls Consultancy Limited
tcalvert@oakallsconsultancy.co.uk
www.oakallsconsultancy.co.uk
Like Back to Top Seen 469 times Liked 0 times
Subscribe to Updates
If you enjoyed this, why not subscribe to free email updates and join over 1274 subscribers today!
Subscribe to updates
Alternatively, you can subscribe via RSS 
All email subscriptions must be confirmed to comply with GDPR.
Related Posts
10th January 2018 | January 2018
Welcome to 2018. I hope that you all had an enjoyable festive break and I wish you all a happy New Year. I hope that you all managed to spend some valuable time away from the office and resting from the constant flow of emails and various other reminders that our break is perhaps just a little too short! Sue Aggett with Stephen Mahoney at theSomerset Dinner I certainly welcomed the break as November was a particularly busy month. On 3rd November I attended our Society’s dinner at the Somerset County Cricket ground. This was attended by over 100 of our members. We also welcomed guests from the judiciary and our all-important sponsors. We were joined by representatives from Devon and Dorset & Somerset Air Ambulance trusts and raised an amazing figure in excess of £800 to be shared between the two. There was a “surprise” star prize donated by Dorset & Somerset Air Ambulance – many congratulations to the winner of the bespoke electric guitar. Special thanks go to Past Presidents Rebecca Parkman and Tony Mason for donating prizes for the draw and helping to raise such a significant amount of money for such a worthwhile cause. Special thanks also go to Richard Adams for the excellent Toastmaster role he performed. L-R: Jon Pitt (Kent Law Society), Tony Steiner, MarkHarrison (Newcastle Law Society) , Sue Aggett,Stephen Mahoney, James Scozzi (Surrey Law Society),Chris Hart at the County Societies Group Meeting,November 2017 Towards the middle of November, together with VP Stephen Mahoney, Hon Sec Chris Hart and Tony Steiner we found ourselves in the hallowed environment of Westminster & Holborn Law Society (literally right next door to the Houses of Parliament) who kindly provided a venue for our County Societies meeting. We spent valuable time with colleagues from Kent, Newcastle and Surrey Law Societies. Support for the CSG (which also includes Cheshire and North Wales, and Leicestershire) from both the SRA and The Law Society has been welcomed and between us we represent over 5000 solicitors. In this context a valuable part of the collaboration will be considering and responding to consultations. Following on from that I attended the Federation of European Bars’ Congress, the subject of which was “The role of lawyers in protecting the planet”. We heard very interesting and thought provoking presentations from across Europe focusing on our role in implementing measures to protect the environment, legal and social responsibility in relation to the environment, environmental impact assessments and the human rights of indigenous people where the natural environment is under threat. It seems to me that this area of law impacts on many of us as we advise and represent our clients across the vast legal spectrum. We also heard more of the plight of some of our Eastern European colleagues as changes to the judicial system threaten to undermine the rule of law and the independence of the judiciary. The Vice President’s Committee had it first meeting for well over a year to prepare a response to the SRA’s consultations on “Looking to the future: phase two to the SRA Handbook reforms” and “Looking to the future; better information, more choice”. Debate was supported with the presence of Trevor Hellawell who has much experience in advising in legal practice management and responding to consultations. Nonetheless, this was a significant piece of work and, although there was much common ground, there were some areas which will have greater impact on some practitioners than others. I am very grateful to the committee for the time and effort they put in to responding to these consultations. Closer to home, I thoroughly enjoyed the Practice Management Conference which was very well attended and covered a range of relevant and interesting topics including wealth and investment management, branding for professional services, business planning, SRA reforms, mental health supp...
10th January 2018 | January 2018
Over the last ten years technology has advanced massively. It was not so long ago that mobile phones were the size of a brick. Now emails and the internet can be accessed on the move. However, whilst technology has moved on, travelling has become more and more difficult. Homeworking has become the answer for many but how have the tax rules kept up with these changes? Your status is important The tax rules differ considerably depending on whether you are self-employed, working as a sole trader or partner, or whether you are an employee, even if that is as an employee of your own company. One way or the other though, if you want to maximise the tax position, it is essential to keep good records. If not, HMRC may seek to rectify the tax position several years down the line. This can lead to unexpected bills, including several years’ worth of tax, interest and penalties. General rules Generally, any costs paid on behalf of, or reimbursed to, an employee by their employer will be taxable. The employee will then have to claim the personal tax relief themselves and prove that they incurred those costs ‘wholly, exclusively and necessarily’ in carrying out their job. The word ‘necessarily’ creates a much tighter test than that for the self-employed. In addition, the way in which the services are provided can sometimes make a substantial difference to that tax cost. For example, if the employer provides something for the employee, the rules are often much more generous than if the employee bought it themselves and attempted to claim the tax relief. A bit of advice and forward planning can often prove to be fruitful. An exemption The rules for employees in relation to ‘use of home as office’ contains a specific exemption from a tax charge. They allow payments made by employers to employees for additional household expenses to be tax free, where the employee incurs those costs in carrying out the duties of the employment under homeworking arrangements. ‘Homeworking arrangements’ means arrangements between the employee and the employer under which the employee regularly performs some or all of the duties of the employment at home. The arrangements do not need to be in writing but it is advisable to do this, as the exemption does not apply where an employee works at home informally. Where these rules are met, the additional costs of heating and lighting the work area and the metered cost of increased water usage can be met. There might also be increased charges for internet access, home contents insurance or business telephone calls and where working at home leads to a liability for business rates. HMRC accept that the additional cost incurred can also be included. However, unlike the self-employed, HMRC do not accept that a proportion of household fixed costs such as mortgage interest, rent, council tax or water rates are allowable. HMRC accept that a £4 per week payment from the employer is acceptable without too much formality if the above tests are met. However, to justify a higher payment, the message is: prove it! Tax relief The above rules only allow tax free payments to be made in specific circumstances. However, if payments are made outside of these rules or, in fact, no payments are made at all, the employee can claim personal tax relief themselves if they can prove that they incurred those costs or received those payments ‘wholly, exclusively and necessarily’ for the purposes of their job. In reality this is extremely difficult – some would say impossible – as HMRC require the following tests to be met: the employee performs the substantive duties of their job from home (i.e. the central duties of the job) those duties cannot be performed without the use of appropriate facilities no such facilities are available to the employee on the employer’s premises or are too far away and at no time either before or after the employmen...
10th January 2018 | January 2018
Thank you to everyone who responded to the stakeholder survey that I circulated before Christmas in preparation for the DASLS strategic review. Congratulations to Deborah Baker, Toller Beattie who won the prize draw of a case of wine. The review working party meet in February and so it is not too late to give us feedback about DASLS, what we do and how we do it. The survey is still available for returns (email me for a link) or you may wish to simply drop me a line with any thoughts you have. Have you ever considered becoming more involved with DASLS? Our Sub-Committees are the lifeblood of what we do and they always welcome new members. They offer a great development opportunity for members to exchange ideas and thoughts about legal practice and get to know others across the region. Generally they meet around 3 or 4 times a year so the commitment is not huge but can be very rewarding. The Sub-Committees are: Contentious Business, Education & Training, In-house, International Relations, Mediation, Non-Contentious Business, Practice Management and Social. If this interests you please speak to me or Monique – 01392 366333. You may have seen a new name at DASLS in the last month, Beth Adams. Beth has been doing an excellent job standing in as our Team Secretary whilst we seek a permanent recruit. I am pleased to report that we have just made an appointment and all being well they will start towards the end of January. 2018 promises to be as interesting as 2017 with continuing changes to practice, GDPR, artificial intelligence, client expectations and of course Brexit. DASLS will continue to represent you at a regional and national level bolstered by our recently formed County Societies Group. We will keep you up to date with developments as we hear about them through this Newsletter, Buzz and our programme of training events, meetings and conferences. The next social event will be the Challenge Cup Quiz on Thursday 1st February. Please support this and our other social events – if you would be interested in helping run an event in your area please do get in touch. Tony Steiner tony@dasls.com ...
06th March 2020 | March 2020
Dear All, This year really is flying by. I have just had my birthday. After updating you previously on the excellent catch up I had with the Law Society CEO Paul Tennant on his visit to the south west last November, I had not expected to be back in touch with him quite so soon. Sadly, this time it was in less happy circumstances. I was, like many of you, shocked and saddened in January to hear the news and see the pictures of the substantial fire at Chancery Lane in London. I have emailed Paul Tennant and James Shepherd, our Law Society Relationship Management Executive, to send our best wishes and we are hoping that the building will be back to full use very soon. As I write this report, preparations are in full swing for the 2020 DASLS Legal Awards & Dinner. As you know the Annual Dinner is being held again this year at Exeter Cathedral. The event is to take place on the 30th April 2020. After the success of last year, we are hoping that once again the event is sold out which would mean we will have around 480 people attending. If you have not done so already, please contact Llew Nicholls and the team at our Awards partners ‘Grow Marketing’ who have worked very hard alongside our very own Tony and Monique to achieve full sponsorship of this event. You can contact Llew to book the remaining places by emailing Llew directly at Llew@growmarketinguk.com. There have been more nominations than ever before with more entries making the short list. Please do not miss this dazzling occasion. You will all have received DASLS latest 2020 training courses programme. Tony Steiner and the team have worked hard to arrange these events. You will see that as members you get preferential rates and if appropriate reduced rates for multiple attendees from your firms. Please take advantage of these services as a proportion of the monies do go to support our Society’s broad continuing education offering. If I do not see you individually before I look forward to catching up with you at the 2020 DASLS Legal Awards and Annual Dinner in April. With very best wishes Nigel Lyons President 2019-2020...
06th March 2020 | March 2020
New AML Regulations and the pursuit of the beneficial owner. Introduction The new Money Laundering & Terrorist Finance (Amendment) Regulations 2019 which came into force on 10 January have modified a number of aspects of the 2017 AML Regulations, with which we have been complying for some time. However, many firms’ procedures hark back to the earlier days of the 2007 Regulations and have not been modified or updated much over recent years. This article seeks to set out what the new Regulations in fact require, and the steps we should be taking in relevant cases. The Policy It has been true for some time that the ultimate aim of all the regulatory rules is transparency – it has always been the case that the use of artificial structures such as trusts, companies, bearer shares, foundations and charities – whilst perfectly legal – have to some extent also benefitted from the extra anonymity they offer to the true owner and recipient of the funds and services we provide. If we offer services to these types of entity, the Regulations require us to go some way to identifying the individuals who are actually benefitting from our services, and this entails uncovering the true ownership of the organisation. Whilst this would be difficult in many instances – Cayman Island companies with bearer shares, for example – we must nevertheless attempt to get some assurances from the creators of the companies, accountants or registrars as to the ownership of the shares, and have some way of being notified of any change in ownership. We also need to be aware of the PEP and Sanctions status of these individuals. Further, for UK companies, the PSC Regulations 2016 impose an exactly similar obligation on the companies themselves to identify their beneficial owners and notify Companies House of any shareholder with 25% or more of the shares or exercising control over management of the business. The Regulations The Regulations provide that we must, as part of our CDD procedures Identify the client – this means coming to know who they are, by name and some other characteristic, e.g. address, date of birth, date of incorporation Verify that identity – by means of reliable and independent data and documentation Identify the beneficial owner (if the client is an entity) – though not necessarily verifying that identity Identify and verify the identity of the person actually instructing us (if not already done). What this means for us When acting for a COMPANY (that is not a listed company) the Regulations require us to obtain Details of the company as registered (which must be proven by a copy of the register entries available from Companies House or equivalent registry) – name, number, registered office address, principal place of business the law to which it is subject details of its governing documentation (its memorandum) names of the directors. Names of any beneficial owners, and the identity of any individual owners of legal entities which own the client Names and verification of the persons instructing us on behalf of the company, and their authority to do so. Note that we cannot rely on the information provided by the company under the PSC Regulations but we must undertake our own research in order to fulfil our CDD duties. Further, if as part of that research, we discover that the Companies House data on PSC’s is incorrect, then we are now under a further obligation to notify the Registrar of Companies of this fact. We also need to establish that PEPs and Sanctions checks are also undertaken. If genuinely positive entries are revealed in response we should undertake enhanced CDD steps or cease to act, accordingly. Electronic searches are a permissible avenue to use provided the search provider can offer us the necessary assurances that the person actually claiming an identity is IN FACT that person. Check also whether ...
