Transcript of Video - Covid-19 Crisis - What Accountants
Need to Do
This transcript about Covid-19 crisis management was created using AI and may contain some mistakes.
Hello and welcome to our Covid-19 crisis management “What accountants need to do” webinar. I’ll be really honest with you. I didn’t expect to be coming to you in these circumstances and we saw the Corona virus coming on. We heard about it in China, but it was just kind of one of those things that was off over there in the distance. And then it came to Iran, and then it came too easily. But so many people just assumed that this was going to be okay. So many people just assumed that you know,
that this was one of these things that would pass so many people on today’s webinar. You’re Irish based, your UK based. What have we been talking about for the last year? What have we been talking about for the last two years? Three years? Well, it’s Brexit. And as an accountant said to me yesterday, they said, Does bring back Brexit will deal with the fallout of Brexit any day in comparison to crow numbers. So, first of all, welcome on today’s Webinar. Thank you for joining us,
and we are a little bit concerned. We’ve over a thousand registrants and so we’re a little bit concerned as the weather resume and will be able to handle the numbers and will be able to handle the from a broadband perspective. But it looks like everybody is on here what we might do just before we start and just down in the chat box and down in the chat box. If you could just go into the chat box and just let me know where you’re dialling in from and so they can get a sense of who’s on here with me.
Okay, First things first. What is today’s session about? Well, I’m looking at this from five different perspectives. I want to look at Corona virus in your team. I wanna look at Corona virus in your customers Corona virus in your business Corona virus in your services and Corona virus and your future. Now we do have some downloads. Okay, so we have people from kill their y’all Bedford, Somerset, Tipperary and North Wales. West England. Okay. Excellent. Perth in Scotland. So we have people from the four corners.
We even have some people in here from America. Excellent. Welcome. Welcome. All. So first things first. What I want you to do is I want you to go to our downloads so down below in the in the chat box, and even our Jonathan are going to put up a link where you can download and the slides for today’s session. Our employee Q and A our client communication letter on other checklist that we have we’re going to go through. So you might as well do that now, at the start of the session and so keep an eye out and Ivan’s going to put it up,
and then you should be able to you should be able to download as we go through to the session. Okay, So as we go through to the session and if you have questions, either go to your chat box at the bottom of screen or go to Q and A. And I have them coming up here and now I’m not necessarily saying I’m going to be able to answer all of your questions. I want to make this very, very clear at the outset. I am not a medical expert. I am not a Corona expert.
I am not a pandemic expert, but what I am is somebody who is running a business who was acutely aware from the business owners perspective of the challenges. But mawr importantly, from dealing with accountants over the last week. And as this has developed that I am seeing the issues I am seeing the concerns on, I am seeing the challenges that the accountancy profession is facing. So if you have any questions, please put him in here on either myself or the guys will try and answer them as we go through this session.
Okay, First, I need to start a to very, very start. So there has been widespread condemnation and criticism of social media in the run up to where we are now, okay on. But the criticism of social media is that it’s it’s creating fear. It’s creating fear in people. Now. How I refer to fear is false evidence appearing real? And But this isn’t just a manufactured fear anymore. This is there. There’s a real issue here. No, one of the very first concerns I have is that a lot of people are still don’t appear to be taking this that seriously.
So what we’re finding is there are people who are plunged into the depths of despair and are terrified about what’s happening. And then there are the people who on the other side, are kind of almost flippant. Well, sure, you know, this flu will pass. Now any of you did know me. OK, any of you that know me? No, that I am an optimist, that I see the opportunity. I look for the opportunity. I try and see the positives. And in this session,
I am going to see the opportunity, look for the opportunity and see the positives. Some accountants have spoken to one last forty eight hours, particularly among more profit pro thrive group. And they’re extremely, some of them are really, really positive. And so there is going to be opportunity here on the horizon. But we kind of have this block to get over. Which is some people are saying is the next two weeks. Other people are saying it’s the next three months, but let’s come back to that.
So fear, false evidence, appearing real versus being dismissive. We probably need to be somewhere in the middle. Right now. We probably need to be somewhere in the middle. No, for me, what this is about is about leadership, and it is about action. And I’ve already spoken to accountants already spoken to accountants this morning on when I spoke to the accounts this morning, some of them were extremely, extremely concerned on DSS. Some of them were sort of what I would describe his flip flopping,
and it is perfectly natural to be concerned here. But I see that the accountancy profession has a huge responsibility to show leadership and take action, like what we’re talking about here is we’re talking about In the first instance, we’re talking about health. In the second instance, we’re talking about society, and then the third instance, we’re talking about the economy now. First things first, the health pieces riel like, I’ll be perfectly honest with you. Out of a twenty five person team we now have out of our team.
We have four families who have been tested. We have no cases of Corona virus currently in our building, but as of yesterday, we basically everybody’s working from home and we’re getting ready in case one of those results come back as a positive, and I am not going to get into the health element of this here. Other than one of the most helpful websites that I’ve seen is a website called World Ometer W or L D O N E T T E r. And they have a krone virus tracker on that.
For me, that’s something that I look at every day. I actually avoid social media. I avoid WhatsApp groups that are not positive. And I have only going to Facebook groups that are positive where people coming forward with answers and I try and avoid the news. But I cheque out this website once a day. So first things first their health and on the requirement to take this seriously that the second thing is going to be the fabric of society. And what we’re seeing now is we’re seeing China after eight to ten weeks coming gradually back into production on that the virus has been controlled.
Society as we know it is going to be different after Corona furs than what it was before going lovers. And then there is the economy. Now we come back to that in a second. Okay, so so so First of all, I think we need to acknowledge and appreciate the first line of defence on the first line of defence are the medical profession and I saw some statistics here this morning and I saw some statistics here this morning and those statistics suggested that a quarter of all cases are actually health care professionals.
These people are out the front line. They’re actually engaging in head and hand combat with this thing on. They are being affected and impacted the first line of defence. The medical profession. We need to acknowledge what they’re doing. Who is the second line of defence? You see, this is where I see you coming in. Because I see accountants being the second line of defence. Why don’t I see account has been the second line of defence. I see the accountants being the second line of defence because business owners and small business owners,
as you well know, are the backbone of our economy, the backbone of society. So when these people are under pressure, the future, the future economy Yes, the governments have responsibilities on Do you know the government’s on globally action is going to have to be taken. We heard this morning and the eurozone quantity of easing already set at one trillion. We’ve seen the UK government step in take action in terms of loans in terms of tax, in terms of people can’t pay taxes. They can engage the same with what we’ve seen here in Ireland with the revenue commissioners.
But you see, the future economy is based on the business is surviving. Here’s something that I want to talk about on dg Very, very get very, very clear on this right from the outset. Okay, some of you may be a little bit relaxed. What’s all this cruel of Irish panic about Maura? View may be freaking out wherever you are in the spectrum. It doesn’t matter, because here’s something that I know for definite. What I know for definite is that this too shall pass. What I know for definite is there is going to be businesses in the future on there is going to be a boom in the future.
At some point in time with businesses in the future, they’re going to continue to need accountants. What do we know from the last global recession? Well, what we know from the last global recession on let’s be really, really honest here. And Ireland got a really bad hit, So Ireland got a really bad hit. Our recession didn’t last in weeks or months. Are recession here in Ireland lasted in years. So a lot of lessons from the recession when we look back at our customer lists before the recession and after the recession.
So we look at the two thousand eight customer list on we lend. Look at the two thousand fourteen customer list. You know what everybody? That was customers before they were still in business afterwards. So accountants and the need for accountants were one of the lucky businesses that despite the issues, there’s going to be a huge need for accountants in the future. On businesses, we’re gonna need to be supported. Theis, you that we have here really is the next two week window, four week window, six week window is going to be a three month window.
You are the second line of defence and you are now being called upon and you’re being called in to action. First, I want to read you with statement and okay, so there’s been some difficulty with downloads. I think the website had some difficulties that when everybody went, everybody went to go do a download and that I had some some difficulties. So the guys have put up a link there now and you should be able to access your downloads. So here’s Here’s a statement. Okay, the Covid-19 crisis is unlike any previous crisis.
Traditional crisis response approaches will not be sufficient. The process of containment and slowing the spread that is phasing in country by country will create major disruption in itself, irrespective of the seriousness of the virus spread. Prepare for the worst and be thankful it doesn’t eventuate. The wait and see approach is a non starter here. There’s a high likelihood of a substantial revenue disruption, leading to a potential liquidity crisis. For many, the recovery may not be a quick bounce back and business owners need to plan for multiple quarters of lower revenue.
In the face of a global recession, employees and customers are likely experiencing fear and panic. Businesses need to appoint a dedicated covert war room team that focuses on this every day. We have to have a planned cascade of possible actions. It is not just one decision is what if we do this, then we do this, then we do this. But if this happens, well, then we need to do this. This this here’s a listen to this. Customers will change behaviour in non reversible ways. Accelerating prior trends.
Bold action now consent you up for success through the downturn on beyond. That’s not my statement. That’s a statement from Bain and Company being a company or one of the biggest global consulting companies. This statement was released by Bain in the last couple of days. I don’t have all the answers to the Corona virus question, but I have spent some time studying what the global experts are saying and doing. You don’t necessarily have time to be a global Corona virus expert tighter, but you do need to ensure that you have appropriate information to give informed advice to give informed insights.
The one thing I would say to you, we have experienced this from the time that we set up to do this. Webinar. We created a whole lot of documents last week in relation to HR policies and procedures on DS stuff to give team members on about E working. We had to scrap them all this morning because basically they were now five days later, totally out of date, our HR adviser sent to us. Well, I I don’t think you can publish those because this situation is so fluid. So wait and see.
Approach here is a nonstarter. We need to take action and I want to talk for a second. I want to talk for a second in relation to what I call the Corona virus. Iceberg him. This iceberg came out of nowhere and has rocked the world. And think about it this way. Imagine that you have three lifeboats. Okay? You’re three lifeboats. One lifeboat is for you and your family. One lifeboat is for your team,
and the other lifeboat is for your customers. Now, first things first. We need to get you on your family into the lifeboat,
this for you guys, and you need to put yourself first on. I’m going to come back to one of the things that I have seen as a huge mistake that the accountancy profession makes again and again and again.
I will come back to the first lifeboat. But the second lifeboat is about your team members. What I often classified as the most valuable resource and assets that any firm has.
Really? What? Our accountancy firms, accountancy firms, We’ve got customers over here who have wants and needs,
and the accountancy firm brings together the resources to deliver what the customer wants and needs. But basically, our job is to bring together these people.
Your team and your resources are your most valuable asset, but your customers are a truly valuable asset. Well,
now here’s the situation right here. Right now, many of us are in the water. You can’t save everybody.
Okay? So you can’t save everybody. Definitely with customers. You can’t save everybody. So think about the lifeboats now.
The other thing that I want to talk about is the ten X View versus the three to six months view.
I know this is particularly challenging and again, it’s a threat for me. It’s a danger. It’s a trap that people could fall into.
Okay, if we look at the Corona virus on what date is today, today is the nineteenth of March twenty twenty,
the nineteenth of March twenty twenty. If we look at the crown of ours on, we take a ten x ten year view.
Okay, so if we take a ten x ten year view ten years from now, what is possible in your business.
Well, you know, and you’ve definitely heard me say this before. Bill Gates always says people overestimate what they can achieve in twelve months and underestimate what they can achieve in ten years and look internally at our accountancy profession within within the accountancy profession.
And, you know, the likes of zero zero is just over ten years old. It did. It didn’t exist.
Then it became this global Bahamas. So if we took a ten year, ten eggs view of your business notwithstanding what the situation we’re in right now,
anything is possible. Anything is possible in the future. And here’s the other thing. If we took a ten x ten year view so a ten year view was one hundred and twenty months now,
it doesn’t matter really what happens in the first three to six months as long as you are crystal clear on what’s going to happen in the next hundred and fourteen to one hundred and seventeen months.
So if we take a ten IX view right here right now, well, if we link it out the view if all we’re looking at is the next week,
the next two weeks, the next three weeks. The next four weeks. If that’s all we’re looking at,
well, then it looks very, very bleak. We have to be realists on. Look at what’s happening now,
but we also have to think about life after Corona virus. Now I just want to talk about one thing and so looking at what is happening around the world.
And so the initial locked down on the assumption of most of you here with me are in Ireland and the UK on the initial locked down,
they talked about the twenty ninth of March. Now the reality is, if you listen to if you listen to government pronouncements,
they are clearly saying this is boarding a two week locked down and again without be negative. But being realistic,
the likes of the moves by HMRC and the likes of revenue in terms of putting out a message that if you can’t pay your tax bill,
pick up the phone to us on the cessation of interesting penalties and enforcement, that’s a big move by the tax authorities.
You then look at the government’s. They’re talking about financial packages. They’re seeking financial support. They’re talking about getting the banks to give mortgage Hollis.
There could be a miracle there could be America. They talk about past flu pandemics that as the year got hotter and as we moved on in the seasons,
the flu disappears as quickly as it ever arrived. That could happen this week or next week. But you gotta look at what society is saying.
You’ve got to look at what the government has seen. You’ve got to look at what experts like Bain and Company global McKinsey.
What they’re all saying is they’re saying This is not going to be two weeks. This is a longer term view.
And so let’s look at taking the longer term view here and so So I’m going in the wrong direction.
So I want to first talk about team and your team is obviously your key priority on dear. Safety comes first.
Protecting them comes first. Now what we’ve seen in the last week, two weeks. We basically issued communications to our team.
Back to three weeks ago, we began moving everybody towards the working and we began communicating with people in relation to the working.
We began communicating with people in relation to well, if you have If you have a interaction with somebody who’s been to one of the hot spots or if you have at home,
how is this going to work on? We’re now in a situation where basically, there’s nobody here in the office.
Everybody at this stage is remote and were able to were able to work remotely. But we had to make a big call because the government is not telling us to shut down.
The government is not. They haven’t passed and the likes of the the the emergency state of emergency that it is muted that Portugal is going to enact at some stage in the next twenty four hours,
where literally were on total lock down and in our own homes. And but we had the experience. We’re out of a team of twenty five.
Four of our people have now had family members are themselves be tested for the virus. So our first responsibility Woz to our team,
the policies and procedures and part of the difficulty with policies and procedures on. Hopefully we get to share them with you at some point in time in the future,
but the policies and procedures that we had created was about. You know what to do in the event of this,
What to do in the event of that? Now we do have as one of your downloads here we have,
and we have got acuity, acuity for employees, so I could see the vast majority of people have downloaded the links.
Just one thing, folks, that we’re finding a lot with accountants. Internet explorers no longer supported. So if any of you are using Internet Explorer and chances are you’re going to have difficulty accessing the documents if you try of chrome or safari,
and you should be able to. So if you copy and paste the links in and but the policies and procedures,
the E working, the flexible working one of the things that we’re looking at is we’re looking at getting in a sort of a flexible working expert in for a webinar next week to talk to us about how to manage remote teams on how to work differently with remote teams.
We are extremely glad that we took proactive steps over the last two to three weeks because if we hadn’t taken those proactive steps as soon as one of our team members comes back as a confirmed Corolla virus,
which is a highly likely possibility Now we would all have to self isolate if you have not taken the steps yet to facilitate the working.
I suggest that you move straight away and another one of the providers that we hope to have on a webinar Sunday next week are in our Facebook group.
And we’re going to open up a free Facebook group specifically for accountants and specifically for this time of Corona virus.
And we’ve been speaking to firms this morning. Even though farmers may not have fully working set ups, there is work arounds on ways of allowing people work.
One of the things that you’ve probably heard me say in the past is innovator die. And one of the things that we’re seeing,
you know, they thought making tax digital was going to do it. They taught to they talked to,
You know that, you know, cloud accounting was going to do it. They thought that, you know when there was APS not everybody has moved to an Elektronik working environment.
And this is one of the innovations that we’re seeing. I’m not suggesting you do this right now by any manner means but one of the things that we can already see the accountants who are not set up for the working,
not set up for the flexible working, not set up for the short term working. They’re struggling and they’re scrambling a digital business and a digital firm is one of the things that I think we absolutely need to be focused on at the end of this process.
In terms of your team, you’ve got to think about it from their perspective, open and frequent communication.
There will be some people on your team who will be very matter of fact. OK, sure, whatever is happening is happening.
Let’s go. Let’s just get it sorted one day at a time, type people. But then there are other people who are deeper thinkers on aunt.
One day at a time. You’ve got to try and understand what type of a person are you. But looking at this from a leadership perspective,
you’ve got, you’ve got to look and see, and you’ve got to look and see why. How what type of communication you need to give to lead.
Just looking at some of the questions in here. So there’s a question in in relation to What’s the Irish Sea Roo doing and,
you know, submission deadlines. And obviously there’s a significant difference between the UK system and the Irish system and the the Irish system.
We have this crazy scenario whereby if you filed late, you lose your audit exemption and I’ll be honest.
Guys, I’ll be honest. It’s the C R O is not really very, very high. And late filing is not very high on a national perspective.
The Department of Enterprise on Innovation obviously has a significant amount of things on the agenda. People have asked us to run petitions to lobby to do the whole lot.
Look, you know, we make contact with CR Oh, and I hope that sense will prevail. But it’s hard to know right now.
I have no answers for you if you’re Irish accountant, if there is answers in relation to that and we will communicate them into our into our free Facebook group as soon as we get it up and running.
And so if an employer pays an employee, say five hundred, can they still claim back to two or three and okay,
so that question there and the thief employee. Rapid unemployment benefit incentives around cold with nineteen Whether they have to go self quarantine because they’ve been tested positive are just because they’re in short term layoffs.
Currently, the employment legislation, the way its word it is, you can’t give somebody social welfare and top it up.
This is for people who are not working due to the Covid-19 crisis. And now I have been lobbying. I have been communicating with politicians in relation to this to see Is there another way and okay,
one other question there is. Okay, so So I tell you what. I tell you what the problem here is.
The problem is that the zoom we’ve been in touch with them over the past twenty four hours to try and get more seats on this webinar.
And but Zoom has locked us out at five hundred. And so we know that there’s there’s another six or seven hundred people trying to get on here.
And so just don’t worry. Don’t worry if you can’t get the downloads because UMA’s having difficulties. If you can’t,
we will send you the downloads after the event. So if you’re having problems with the downloads. Don’t worry,
we will get you sorted and the team comes first. But then there’s customers and customers safety first for Damon,
their business. And so there’s a couple of elements here. There’s your business. And then there’s your civic duty.
I do think that you need to start having conversations, which our customers, in terms of them and their business on that they need to adopt the safety first policy.
And I’ve created what I call a covert customer classification. Now I’m obviously going to be producing significant amounts of material in the coming weeks,
and but I just want you to go in here on look at the customer classifications and so the customer a classification,
right? So this is part of our covert fast action plan. And now I think from a customer classification,
any of you who have done profit pro programmes with us and any of you who have done profit pro programmes with us,
we’ll have come across our customer classification matrix where we castle there climbs into a B, C’s and D’s.
I’m suggesting that the traditional customer classification model it needs to go out through the window. I’m suggesting that we need to take a different approach.
And so this is the checklist that some of you have downloaded and that some of you have downloaded. But,
you know, if you can’t access it, we get this tea afterwards. I think that now you need to classify our customers a little bit differently.
We need to classify. The customers were going to try Eve during this period, and they would definitely be a great customers.
The customers that may have some difficulties. We’re going to try after the Covid-19 crisis period. And then there’s the customers who always survive.
Okay, so so there’s some of these businesses. They’re just really resilient that no matter what’s thrown at them,
they will keep going. Then you have the customers that would survive but will really struggle after the Covid-19 crisis period.
And then we have the customers that we already know might survive for a couple of months but ultimately going to fail.
And then you have what I call the degrade customers the degrade customers. They’re going to fail no matter what.
Now there’s an underpinning classification that underpins these customer types. We need to be focusing on the customers that can and will pay.
This is back to the lifeboat you have to accept now. For the vast majority of accountancy firms, they had too many clients.
Too many customers. Coming into this having too many customers and not having enough ideal customers is what causes the stress.
It’s what causes the overwork. What causes the workflow pressures of what causes all of the problems. There’s people in the water.
You can’t save them all. And I talked at the start of this session I talked about. I talked about the the medical front lines.
You know, one of the challenges that the medical front lines have. Andre. They only see this in war times.
What? The medical front lines. Now they have a situation where three people present themselves with the Corona virus and all three of them need a ventilator or they need a nice see you bed on.
The concerns that the medical profession have is they’ve only got one medic, one bed, and they’ve got three people,
and they’re effectively deciding with people’s lives. Well, you know this person. We don’t believe they’re going to make it,
so I want to send them home. That type of a triage approach is what we need to do now with our customers,
and that’s that’s what we need to do. We need to triage our customers. We need to break them down into a B,
C’s and D’s on. Then what we need to do is we need to focus on the A’s and B’s on Give the right energy effort and attention to those A’s and B’s.
We need to create a targeted prioritised communication plan and on do reclassify service levels. You know that way can’t like I’ve seen it already this morning and,
you know, accountants. I was I was on a phone call to a guy from ten o’clock and his phone was ringing Non stop.
When we classifier clients, we need to look at our service levels and who’s going to be the portfolio manager?
If you want to put this up on screen hero, even. Is it going to be who’s going to have partner access?
Who’s gonna have manager access? Who’s going to have team access on who’s going to have leveraged access? I would be suggesting that you’re seeing degrade customers and when go for the leveraged access,
maybe the sea great customers, depending on how big and what scope you have in terms your team, well,
maybe the secret customers will have team access. But who’s going to have you? Who is going to have you?
And I see there’s Mawr questions here about Mork questions in relation to in relation to zero and look, we will put whatever pressure we can to solve this problem of late filing.
But I I think you was accountants. You need to take this up with your institutes. The institute’s need to lead here is well on.
Dis is one of the areas where they can apply. They can apply the appropriate pressure and probably get this sorted in a matter of hours.
Your people, your customers, not all of them are going to make it. You need to make sure that you’re working with ones who are to help them preserve their business.
But in doing so to also preserve yours and to save yours, him, the support services so support services like cash flows and scenarios,
and I think that people now may just need somebody to talk to. They may just need somebody to talk to them.
They need somebody to allay their fears. But we very quickly here are moving into crisis mode and that’s going to require cash flows and scenarios.
We’re going to have to be there to help with short term challenges. We’re going to have to distinguish and differentiate what are the short term challenges?
What are the medium term opportunities? Here is the one thing that Corona virus is going to do for the accountancy profession.
The Corona virus for the accountancy profession is going to drive innovation. It’s going to drive innovation. And if you look at it and if you look at the Fortune five hundred are the Standard and Poor’s index Of the top five hundred companies listed on that exchange,
a tiny percentage of the ones who existed forty years ago still exist today. Innovation is going to happen.
Your customers are going to change what they want. They’re going to change in terms of the services they want,
how they want the services. This is inevitable. Everybody is going to learn and develop on innovate arising out of this situation him from a your business perspective.
Well, to be honest with you, this checklist that we have here okay, so this checklist that we’re looking at on screen now.
This is the fast acting plan. This is protect you, protect your team protector customers, create a covert border response team and internally here we now have daily meetings we now have daily meetings on.
We’re having daily meetings because it’s myself. Me, Holland, Caroline and its way reach out into the team.
We’re having huddles, but basically called with his top of our agenda. Right now, it’s top for agenda,
and I’m saying for you in your business, there’s two levels of cash flow modelling. I’m suggesting that you do a cash flow model for the next three to six months and that your cash flow model is bad,
worse and extreme on. Did you look at the variables in your cash flow models? You look at the variables like activity receipts,
length of time, and we talked about the customer classification peace and a targeted prioritised communication plan. Once we have classified the customers and reclassify your service levels in your portfolio managers,
this is who gets partner access. Who gets manager access? Who gets team access? Who gets leverage,
access. I’m going to come back to leverage access in the second. We look at the organisation structure,
so your organisation structure right now and then We’ve basically got a look at what’s the organisation structure that we can survive with?
What’s the organisation structure? We can survive it. Look, somebody in here is put in a common saying days.
You’re being very, very negative and they’re a little bit surprised that me being negative folks, I am being realistic.
I’m being realistic based on what I am seeing right here right now, talking to accountants in Ireland, talking to accountants in the UK there is no question it appears that there is a significant leg in terms of what’s happening in the UK and there’s a significant lag now.
It’s only seven days of a leg in reality because they’re shutting the schools from this week. But it is a significant leg and we’re seeing it really happening here.
We’re seeing it really happening. We have some account listener rubbing their hands. They’re rubbing their hands because they have the cash.
They have the resources, they have the client list. They know they’re going to get true. We have some accounts of rubbing their hands are saying Well,
brilliant. What is this going to look like? And three to six months I’m going to be able to become king or queen of the world here.
That is true. And then there are other people where their circumstances or scenarios a little bit different. I think you need to look at your organisation three months from now on.
Then we need to do this. Ten X thinking where we look at five, ten years from now.
Why am I doing that? I’m doing that because we may have a short term cash flow issue. But we’ve got to have a strategy around every single team member as who can.
If we work on the basis that some of us are going to save more, some people are not going to be able to save them all.
So who do we have to have onboard three months from now? If we assume that that is when this is going to lift on,
things are gonna start coming back now. I sincerely hope I’m wrong. I’m sincerely hope that the twenty ninth of march on this is all behind us on.
People will look back on this weapon and say Jesus That was a great our webinar. But you know,
he was all TT. I hope that I am o T t. I really, really hope I m o t t There’s just a There’s just more questions in here.
More questions about institutes. Look, it’s we’re not an institute. We do not have membership subs. We do not have membership fees,
but basically what we’re looking at here is we’re looking at Well, the accountancy profession wants to give leadership on the accounting profession,
wants to stand up and be counted. So if we can help you do that, well, that’s what we’re going to do s o.
So thank you very much. And Paula for for acknowledging and that we are doing on going a little bit further.
And I talked about cash flows. Let’s bring this back up on screen, hero. Even we talked about cash flows.
I think we need to do the short term cash flows, and then we need to do the long term cash flows.
So I want to keep you in this long term mode. I want to keep you in this. Okay?
We’ve got this period of uncertainty now, but what does business look like in two three years time, We got a plan to who’s who do we need?
Short term? Long term on what are the team and resource actions? We gotta cut the costs and conserve cash.
What am I talking about here? In terms of cutting the costs and conserve cash, I think we need to break down our costs and our outflows.
What’s? So we deal with the team, we then look at our costs on her outflows. So what are the critical and highly valuable services?
What are the ones that are highly valued but not mission critical on what are the ones that are not mission critical and low value?
Because obviously, then way we’re going to know where to cut. If we castle a them on those three basis,
I think that you need to go down the road of direct outreach to your key suppliers on begin having conversations with them.
Now somebody is asking What do we do for our clients? What? This checklist here. We’ve basically created this for you.
But what we’ve also done is we’ve created a ward version of this so that you could put your own logo your own name on it.
If you want to go down the process of having an initial communication, I think we need to remodel our business services.
Now, what do people want during the Covid-19 crisis and the future? What do they need after this Covid-19 crisis?
I think we need to look at our systems and procedures. I think again, we’ve got to prioritise here.
But here’s one the opportunities. I see that we can use this to leverage our I, t and automation.
We can use this experience to document operating systems and procedures that maybe we never got around to before stepped fourteen here in our checklist and step fourteen and a checklist.
Sorry, I’m jumping around. And step fourteen here is a coordinated customer outreach based on the covert customer classifications.
What we’ve got to do now is we’ve got to protect revenues. We’ve gotta preserve revenues. How do you preserve revenues?
You classify them, you give them portfolio managers and then you reach out and you may contact. You see,
from my perspective, from my perspective and this doesn’t count for every accountant. Okay, so this doesn’t count for every account,
but now your customers need you more. Never before. I’m not talking about the people who just get a tax return done.
I’m talking about customers who have businesses. They need you more than they ever need you before during this Covid-19 crisis,
how many people are going to stop paying their electricity bill? How many people are going to stop paying their phone bill?
Actually, during this Covid-19 crisis, how many people are going to stop paying for Netflix, Disney plus Amazon Prime?
You are a vital service. We’re going to have to have some difficult conversations. We’re going to have to have some difficult conversations on myself in Carolina going to run a webinar on that or a live stream in the Facebook group.
And next week, in terms of having crucial conversations with people we can’t do free. We can’t revert to a free model if we put free people into the lifeboat.
We’re going over, fill it and we won’t fail to save all the people that we need to save that way need to make that difficult conference.
We need to make that difficult decision and have that difficult conversation. Already, I have started working with firms already.
I have started working with firms on bond. We’re working to avoid the next crash to see here. Step seventeen for some of you.
You probably wish I got to this sooner. Because if you’re looking at this is an opportunity. Well,
this is where it is. But you see this checklist here. This is not just for you. This is something for your clients as well.
This is something for your customers to avoid the next crash. Well, let’s start looking. Akash buffers straightaway.
The businesses that have cash buffers, the accounts I’m talking to have cash buffers that I carried him for two,
three, four, six months. It’s a whole different conversation than the people who are looking at things getting tight straight away.
Reduced costs reduce costs by embracing technology, embracing automation, offshoring, flexible working and assets Build assets. Your team,
your process procedures your intellectual property. Standout. Standout. Identify who your idea customers are picking each during this Grow your business,
grow your business during this Covid-19 crisis. Go looking for refers. Actually help people actually help people Give them what they need.
Listen to what they’re saying and give them the support that they need. Help yourself. Help others Him.
You know, from from a service’s perspective again, I really love the conversations I’m having with our prophet pro members.
I am because our prophet pro members you know, part of the role that accountants play is the external voice of reason.
The external expert, the coach. You know, the coach that the person who sees things a little bit differently on can come up with better answers.
So the issue I have what’s happening now is, well, clients are coming seeking this. It’s how we package this service on degree,
the pricing on this service. So So there’s remodelling is happening right now on. Then there’s gonna be remodelling in the future,
your delivery methodology, how you deliver your services and, you know, like this is a time to look at.
How can we make it easier and simpler for our customers to interact with us? Here’s a question for you.
How do you think the firms that have moved to the subscription model are fearing versus those that were on the traditional historic retrospective time based building model people around the subscription model?
Yeah, it’s true if businesses run out of money and they don’t have money in the bank account. Well,
then, the monthly D D is not going to come in. But people who are on the monthly recurring subscription model again a total difference.
Talking to people who are on the subscription model versus people have it all tied up with work in progress and debtors.
And now the cash is drying up because they are just not spend. They’re just not issuing cheques. They’re not making payments because there’s so much uncertainty.
Who do you think it’s faring better and technology automation outsourcing Now, with time to make shifts and changes,
Maybe not now in the next week or the next two weeks for the next three weeks. But you see,
at the end of this, you know, and I know I look. Some accountants experienced extreme hardship in the recession two thousand eight,
but the vast majority of them are still in business. You know you’re going to still be in business.
Let’s come out of this thriving by keeping an eye on stuff like this. And I just want to talk about some technical innovations right now.
Okay? And Ada’s meetings air dropping as meetings airdropping. Get onto Zoom. Now you’ve seen our own problems here with Zoom.
I think we had twelve hundred people registered. Only five hundred could get on the could get on the Web in our witness.
And so there’s seven hundred people are just blowing up reception given out they can’t get onto the webinar. And for those of you who couldn’t get into the weapon,
our sincere apologies. Here’s what happened with Zoom, and we saw the number of raising on this, and we always had a five hundred licence.
When we want to go upgraded to a thousand or two thousand, you know me. Hall was customer number two hundred and eighty two and Q.
And yesterday morning. But right now, zoom for face to face meetings. There is a free version of Zoom.
Let’s just go in here and have a quick look at this. And so there’s a free version of Zoom,
a basic version of Zoom Recon do personal meetings on Did you know it sets up the meeting. It gives the access.
It does the whole lot. So Zoom is a tool that if you’re not using it right now, there’s a great opportunity on me.
Ha has put the link into zoom in there in the chat box just as I’m speaking. And the second thing that I want to draw your attention to is a nap.
Call Callen Lee Callin Lee. This is something that basically it allows you to schedule appointments automatically so it allows you schedule appointments automatically,
and you could get this. So, in other words, you can set out a day next week on.
You could send an email to your client saying, Okay, I’m available for half our calls on such and such a date.
If you have any issues, let’s schedule the call on you. Set aside your dear your half day.
They click on the link. They come in the call of set up all the appointment pieces done without any admission,
and the next tool that we’re looking at here is a tool called Loom Loom basically is a video video screening screen tool where it captures what you’re doing.
We use this for internal processes and procedures, but we’re now seeing one of the things that Mi Ho is going to do is me haul.
In the coming days, it is going to bring you true, set up of certain things he’s going to use Loom to do that and drift.
Here’s another one and drift. So people want support right now. But what we can’t have is we can’t have and the phone constantly ringing email constant ringing.
So down in the chat box, me, Holly is putting in the links expense. Okay, so meet me house shouting across the room at me,
saying there’s a free version s so there is a free version of drift, but this is a ticketing system.
We’re finding this a problem because emails are coming in centrally here on some people are in isolation and are sick,
and then other people are working. Basically, what we’re using is we’re using drift to amalgamate all the questions inquiries,
so that way can pick them off. So we’ve got team members in killdeer. We’ve got team members in port leash.
We’ve got team members of Wexford. We’ve got team members all over, but basically they could pick up the queries and help the customers using drift.
And the other thing that I want to talk to you about is I want to talk to you about serving everybody.
Okay. What this here is is an accountant’s Facebook group. Okay, so me ha has put up this accountants Facebook group in the chat box.
If you want to join this group, it is free. Okay, it is free. So the very same way as I am suggesting okay and that we have our top thirty customers on my job now is well,
I’m going to have to I’m going to have to create the time to look after those thirty customers were now allocating our client base out among the team.
But there’s a certain number of customers that we don’t necessarily get to spend a significant amount of time with because we’re focusing on our paying customers over here.
So what we’re doing is we’re setting up a Facebook group, which we’re going to create a community of accountants to get through this Covid-19 crisis on in here.
We’re going to be providing daily updates, daily support, live streams on all of that. On what I’m suggesting is one of the things and we’re already working with our first accountant on this.
One of the things that we can do is set up, and that you could do is set up a Facebook group for your clients.
Remember, I had the A, B, C and D customers. Well, you might put your C and D customers who who basically they’re not paying enough are unlikely to pay enough for you to serve them.
But you can’t just turn them away. We got to help people and on. And here’s the thing In the coming days,
weeks and months, we’ve already got a schedule. I’ve got a whiteboard set of upstairs. We’ve got lists and lists of documents that we need to create to tackle this groan of ours.
We’re going to be dropping those documents in here into this free Facebook group. So please click on the link,
joined the Facebook group. And and here’s the thing about Facebook, right? I am not a significant Facebook user,
but I was introduced to Facebook groups for business three or four years ago in a group I was in on.
My Facebook groups are the most valuable resource I have in my phone. There’s some of the groups that I have in there.
Where there’s people who are on the same journey is me having the same challenges as me and the sense of support and community that comes out.
This is a support group for accountants were going to be in there. You’re going to be in there.
Some of the questions here, to be honest, which is the questions that times came up so quick and fast.
I couldn’t answer them today. I’m not sure what they’re lads got to answer them. But those types of questions,
I guarantee you, if you post those questions in this Facebook group and we get people in here interacting,
you’re going to have people are going to have the answers and we’re going to share knowledge Facebook groups for you.
But I also believe Facebook groups that you can use with your customers him six steps to success. OK,
so for those of you who are looking to get ahead, we have a download in here, which was part of a recent masterclass that we did.
Okay, so we did a recent masterclass on DNA. First thing it does is it asks you will where are you now and gives accountants of field for where they are on having identified where you are.
What we gain in this handout do is we give you our six steps to success now the six steps to success the six steps to success is the basis for is the basis for solving the problems that we currently face.
And so even there’s a request there to blow up the downloads, the downloads again. And can you put up the downloads again?
Just to just to see now? I don’t have time to go through the six steps to success today,
but for those of you who are focusing on what happens next, where do we go with this? It brings you through the process,
and you think this process here. So whether it is a Corona virus covert nineteen situation or whether this is a planning for the long term future,
these six steps to success could do it for you. I want to talk about opportunity. I’ve spoken about enough negative things.
There’s huge opportunity here. There’s opportunity for your accounting business. There’s going to be business opportunities, terms your accounting business.
Well, things were going to change. Things are going to change. So maybe now was an opportunity for things to change.
There’s going to be business opportunities for you and for your customers. The people that have cash there’s gonna be significant opportunity when this is over,
because when this is over, one thing is for certain, we’re going to be in a different world.
The opportunity, The reason why I shared a six steps to success with you is this is what we’re working through,
whether accountants, growth, formula members. Now, this is what we’re working through with our prophet pro tribe members.
Now you see, what we’re working through is we’re getting them to keep a focus on the horizon and keep a focus on the future.
And then we come back. We deal with the challenges day today, but we keep this focus. Strategy has never been more important,
and I don’t care what hurdles you’re faced with. The key of leadership is holding your head when all those around you lose theirs.
Sometimes that’s why people need to be part of a community. Sometimes that’s why people need an external voice.
That’s why your business owners, your business owners, some of them it is going to be making failure as comfortable as possible without it costing you,
whereas mawr of them, it is going to be how do we innovate and develop this opportunity on for everybody,
for everybody. They said that this things go in ten years cycles. Nobody saw the Corona over spin The cause it was Brexit was going to be the cause.
The instability in the U. S. Market was going to be the cause. We’re going to have crash when this one’s over.
We’re going to have another one. Could be five years. Could be ten years. It could be longer,
but you could be guaranteed. Do not waste a good crisis. I know that. I will see all of you at the end of this.
I know I will see all of you on the far side of this. Don’t waste a good crisis,
Okay? Just some quick things before we finish up. Float. Okay. Float are an app that provide cash flow on basically projections for businesses and me.
Hall is going to put up a link for float. There’s two floats. There’s the float for accountants and bookkeepers.
And then there’s the float for business owners. If you click on this link, you can get float for free for the next three months.
Float have stood up, they’ve stepped in and they said, We’ve got a product can help here. Take it for free for the next three months.
So I would strongly encourage you to click on the link somehow has it down the chat box. Click on the link.
Now, what me all is going to do at the end of this session will send out a recording because there was some difficulties because there were some difficulties in relation to the downloads.
He’s going to send you the downloads. He will also send you this link to float. And so Paula has just come in their photos.
Amazing. Everybody needs this. Okay, so that’s one of your fellow accountants. That’s their experience of float.
And this automatically integrates with zero on QuickBooks. So just get in there and get float. This is critically important when I’m going to cover next.
I’m already seeing this happening. I saw this happening in two thousand on eight, nine, ten. I see it happening all the time on.
I’m already seeing it in the faces of the accountants that I am working with and profit pro thrive. You’ve got to save on protect the golden goose.
You come first. You know what? The most worrying thing for me talking to accountants over the last two weeks.
All accountants, they’re talking about all with business interruption and looking after our clients and doing this and what’s going to happen over here.
And do we get them not to pay taxes? What do we could cost on? So I’m asking accounts.
Do you have any concern about what’s happening? And they go on No, no, no. She was just a flu.
Sure, if I get it, I’ll be fine. Are they are they say things like, Well,
look, I’m fit and healthy. That first lifeboat that I talked about is you and your family. Get you and your family into that lifeboat and do it now.
Do it now. We have, unfortunately, seen people that didn’t take precautions that have left it too late.
That now have Corona verse. You’ve got to protect the golden goose, so there’s the cruel of iris stage.
And then there is the recovery stage in terms of dealing with the aftermath. During the crawl of our stage,
it’s all about inflammation. I’m not a medical expert. It’s all about inflammation. Stress creates inflammation. Lack of sleep creates inflammation and,
you know you’ve got to create routines. I don’t care whether you’re the healthiest accountant I’ve ever met. Or maybe you’re somebody like me that has has more than a few pounds to lose.
You need to take action on your health. Right now. We need to manage the stress we need to manage your energy.
We need a manager, energy, four types of energy, physical energy, mental energy, emotional energy and what I call purpose energy.
We’ve got to watch this. I’m talking about sleep. I might I might actually do a Facebook live on it next week.
And I came across this guy last year called Win Half, and it’s all about a very basic breathing exercise.
But, you know, I do win half every morning to protect my immune system to give me more energy.
I take a nice bath or a cold shower every morning because again, the physiological benefits, but also the psychological benefits by God.
If I could face that cold shower, there is no challenge that you were going to throw at me during the day that is going to throw me if I get into that ice back in the morning for even just three four minutes There is no challenge that you control me.
Whatever the thing is for you, Maybe it’s meditation, but watch your nutrition. Watch your exercise Like I was talking to somebody this morning.
They had built this habit of going swimming leam. They go swimming every lunchtime on Daz, he says.
They work in the morning, longstanding. Go swimming, they come back. It’s like it’s like they’re starting to date again from fresh.
They started off with him in a couple of links. Now this one twenty, thirty lengths at lunchtime.
Hop in, hop out, swim, Come back, A new person. And Liam, I hope you don’t mind me sharing this if you’re on the webinar.
Leam. The office is very close to his parent’s home, so he used to do that There was swimming and then go visit his parents.
He couldn’t visit his parents because they had to be isolated on Ben. He stopped doing swimming because the swimming pool was shot.
I guess what? Lien doesn’t feel as well this week as he always does. Protect you, protect you from the virus,
protect your family, and then, as we navigate through this Covid-19 crisis, if you overdo it, you’re not going to be any good to anybody,
so protect the going ghosts. Okay, What’s up? Next steps. S o me. Hall has the link there for float.
There’s one for APS on there’s one down the chat box And then there’s one for accountants on. It’s free and I invite you to join our Facebook group and we’re gonna have more free webinars next week.
And so on Monday at three o’clock, we have a hey char expert who was going to talk to us about the conversations were having with team members,
and we’re hoping on Wednesday to have a remote working expert on Friday will probably have. We will probably have somebody from a nightie perspective.
And we do have a limited number of places for accountants in our groups s so anybody who wants Mawr one to one support,
we’re going to give you the Facebook group that anybody who wants more one to one support our thrive. We have two places left in thrive on.
We have a small number of places left in our accountants growth formula programme. So if you’re interested in any of those,
please just email in to me, haul myself or Caroline on. We can set up a call to see.
Where are you? What do you need on how best can we help? And we’re going to produce Mawr information,
Mawr documentation and mawr guidance in the Facebook group in coming days and weeks, our team here is basically committed to pulling together resources,
creating resources, getting them in. Obviously we’re going all in behind our tribe members, all in behind her accounts,
growth formula, members. But way want to support you guys too. We want to get through this because you are the people who were going to put this back together again when it’s all over.
Thank you for joining me here today. Thank you for Thank you for attending. And thank you for giving me your time.
And we’re going to try to get our our webinar authorisation up to two thousand people. And But when we launch the next webinar,
the best way to do it is just if you book early, if you book early and get your place guaranteed well,
then we can We can close it off, but we’ll have recordings will have everything. So thank you very much for today and I’m going to leave you on one thought one thought,
and this is possibly a daily exercise for you about what’s the one thing you can do today, In other words,
is within your control. What’s the one thing you can do such that by doing it will make everything else easier,
are unnecessary. What’s the one thing you can do? That’s what you need to do today. I talk to you soon signing off on covert nineteen Women are for accountants.
I see you again. Let’s get it done.the
Accountancy Firm Owners - How To Respond To The C19 Crisis
This transcript on how to respond to the C19 crisis was created using AI and may contain some mistakes.
hello, welcome to our Tuesday C19 Crisis Series for the last two to three weeks as Corona Virus came on the horizon on, then came into reality for day to day. Business is, we’ve worked a lot with accountants in the whole area of dealing with the technical issues and dealing with the client issues. But today’s session is a little bit different because Corona Virus does present an opportunity for accountants and accountancy businesses. So today I’m joined by Carrie Reader and an internationally acclaimed accountancy firm owner and but also a business advisor and a multi published author with another book in the pipeline.
And so card is going to share with us today his insights into Corona virus we’re going to look at, Well, you know, the short term, what should what should we be looking at now on what our other people looking at now? But then also looking at, Well, what does the future look like? And Carol is going to share his expert insights and as a firm owner and as well as a visionary on a significant influence on the accounting profession. So, first of all, I just want to welcome Carol Carol.
Thank you so much for coming on with us today. No deaths. Thank you so much for inviting me. It’s an absolute privilege. And Carol e. I see you’re working from home. That’s not your your normal domain. So, like, like a lot of, like, a lot of the world, and you’ve got a slightly different backdrop today and what you usually have. Yes. So, I mean, to be fair, I actually work. I personally have worked from home a lot more than my team half,
But it’s been a change for all of us, hasn’t it? You know, for May I would normally be out and about. So I’m a people person. I like meeting people face to face, but yeah, I’m stuck in this little, so back into my house. Makeshift home office. Excellent. Excellent. And Carrie, what are you What are you seeing happening out there on DWhite? Are you saying that that that the focus should be I kind of have described this that the first couple of weeks of crone of ours were dealing with the shock on dth e implementation,
the remote working, the dealing with the clients. And I think the first wave has no past by we’re kind of in the eye of the storm here at the moment. What as people emerge now and begin to look and really assess their business as accountants, their clients, businesses and what they need What? Where is the starting point? Do you think? Okay, so I messed It must report questions. We’ll try todo couple of every part of it. A to first. You asked to where we are on.
I think you’re absolutely right that we’ve we’ve gone past, be initial fear and panic now at least are certainly home. Um, you know, I think that for me, this process for accounting firms could be broken down into four key areas. So the first area was given panic on fear and panic really kicked in, I would say the second week of March on the second week of March. The reason I say that is it was my wife’s birthday. We were on bond. People were coughing near us on.
Do you know what it twisted her mind home? Do we want to be sat next to these people? That a coffee? And that’s the first time. But we’ve ever been conscious of on external health issue that could be transmitted in the same way that a virus can. You know, normally, if it’s a cold or flu, you wouldn’t think about it. But that Max when the reality here I also had a speaking stopped from the enough. My last speaking suffer I had done aan de hand sanitizers abound,
and the conversation was was all around the virus. It was around. How are you washing your hands for and so on? So is at that point that fear and panic kicked in on DS. The UK measures certainly took place at the end of that week. Start the next week. Ondo Accountancy firms have been in that stage, I would say for about two or three weeks, where now hit in the point of reflection of empathy and being there for clients. So, as you say, the eye of a storm,
the worst has happened insofar as the stock markets into powers Theo, economic shock and so on, without the point of being able to calmly reflect on what’s happening on making sure that we help our clients as much as possible. I think we thing got the next stage which is going to be a slow down. I think that slow down will be the natural impact of the lock down on the fact that businesses have stopped trading on Ben afterwards. We’ve got to deal with the growth of the resurgence because whilst this is being called of the session,
you know it’s been referred to as a recession in the media. It’s not like the other recession in that the economic fundamentals before we went into this were actually pretty sound, you know, we were we were in a pretty good place. It wasn’t like two thousand seven two thousand eight, where the financial institutions were carrying a lot of bad debt on DS over inflated property markets and so on. Instead, the fundamentals were good, but it was an external event What is known as a black swan that caused best onboard.
It’s probably more akin to a wartime scenario where the announcement of war’s taken place but fear and panic has subsided to some extent. We’re now dealing with the fallout, but there should be a resurgence coming up in, I don’t know, maybe three, maybe six, maybe nine months. We don’t know how long this will be a Yeah. I like that fear and panic reflection and empathy and slow down growth and resurgence. It’s very, very clear. Very succinct. Yeah. Now I think the challenge for accountancy firm owners.
He wants to pick out some challenges here. I think there’s been some massive opportunities. However, the challenge, but I’m seeing is but firm owners haven’t necessarily correlated. But the slow down is going to happen. If I haven’t seen already, it will kick in soon because the let’s be honest stairs. If your clients have shut down, they’ve closed the doors for three months. They don’t care about filing tax returns or completely Mary camps on. We’re going to find what is already a fairly seasonal business is going to have the seasonality enhanced on.
We’re going to have a time. We’re twittering our funds in a month or two. Remember gonna find huge workload as that work actually needs to be done. At some point on. That’s the That’s the big alarm bells ringing to me, but I don’t see others unnecessarily reacting to. Yeah, we’ve talked about this with our our prophet pro members that it’s it’s looking at how this short term is handled because the same work is going to be need to be done on. Maybe there will be an adjustment of tax deadlines,
but I’m not sure whether I’m not sure whether whether, whether either the UK are the Irish government well, really want that. But it’s there’s going to be this massive amount of work to be done. We’re seeing some people know where, as part of their, you know, the UK for low plan the Irish subsidy scheme are different. But just factoring in things like annual leave like you don’t want to everybody coming back. And now we’re going to have we’re going to have. So let me show you what we’ve done in our firm.
I can I can talk in more detail about my firm, and I can talk anecdotally about other firms. But we furloughed. I’m going t o guest when chips and about staff valley ality is. But that might need to be closer to thirty pretty quickly. That might need to even go up to potentially fifty, depending on how intense for slow down is love of them. The details of one we fellow in the important thing here is We’ve been very clear on the groupings of staff members that need to be furloughed on DS were able to move quite nimbly.
We’ve made all staff members aware of the litter process we’re going through on do we to begin with, we started with from a remote work in perspective, very non core staff. So what I mean by that is our receptionist who Yes, she could be redeployed. But actually her job is genuinely not needed in the same way, because there’s nobody walking through the door. One of our new business executives who was focus solely on new franchisees Recruitment Franchisee recruitment has slowed down across the UK. So s so. She had been furloughed.
Andre, the most junior apprentice who needed pretty much data they hand holding. We’ve been expanded out, get to the twenty percent wave and team members who had non critical roles at that point, critical not being critical. Winter flowers business as usual. But political winter fathers can may help how clients get through the next three months and keep the lights on. So that’s really how we’re looking at it now. Other steps. But we’ve taken we’ve mandated, but our teams take at least half of that and you leave before the end of June.
So so they’re all required to take half of them annually pra vision between now and June. What that does is it means that we’re not so impacted when things get busier afterwards. Because the natural temptation for team members is that you know what they don’t want to go on holiday at the moment because they’re just going to sit in the garden like making your weekend. Let’s save up till July August and have a holiday in the sun. Bat’s gonna cause us some massive pain in our business, so we’ve had to limit the risk of that.
We’ve also made sure that so Ben and I be to co owners of a practise. We’ve decided effectively to furlough ourselves in terms of payments. So whilst we’re doing more than we have done for a long time, we’ve reduced our own payments to eighty percent. The reason, but we’ve done that is not so much from a cash flow perspective because the reality of the pounds and pence of actors it doesn’t touch for sites of our business and our usual cash collections out. Dividends are minimal. Really. Bullet gives be right signal of intent.
If everyone staff member asks us what we did or if we ever need to go to the bank to ask for extra funding, we can hand on heart say, Look, we followed what? People across the country have done so, so very first steps. But we’ve taken initially. But the key to this, I think it’s about being flexible as well. It’s about being able todo to turn the tap on and off as quickly as possible because we don’t know quite when the slow down will happen. If it will happen.
Yeah, that’s just my crystal ball at the moment. We don’t know how long this will stretch out for. Yeah, on d Think that’s important car like it’s planning for a worst case scenario and hope it doesn’t happen. Absolutely. Plan for the plan for the worst case scenario on Ben. Hopefully we will get a different result in terms of teams. Carol, Like the approach that we took internal Iwas from the from the start of March we have we’re having full team meetings, all hand meetings. We’ve been clear and transparent.
How do you feel the teams are taking these changes on what would your advice having gone through the process yourself off of following and reducing Andre and putting every too remote? How have you handled the communication? Okay, so I have not been done it involved in communications. But I can’t feed back what I’ve heard on the ground. So the communications were primarily through our executive board, so I’m not actively involved in the business. But the executive board of S O. The executive board were communicating these Hoover daily huddles,
but we’ve been running them only on very include one to one conversations with the individuals involved. I don’t believe Violet would have come as much of supplies because the reality is for our team members. They know people who’ve been laid off more to the point, they’ll know people who have been furloughed but aren’t being paid. You know where very employers are waiting for the government to pay or similar scenarios. They all know people who’ve lost their job and haven’t been furloughed. They’ve just been literally made redundant.
So actually, we’ve been able to demonstrate that we’re doing it in the best way possible. You know,
we’re not doing it over the aggressively. I’ve heard some. I’ve heard some holler storeys days now. I don’t know names.
I don’t want to know names, but I know a firms who are furloughed staff and ordered them laptops to work from home at the same time,
which is called You cannot do that. We’ve made sure that we’ve done everything because ethically as we can,
we’ve made sure that if a team member has been furloughed, he’s been done with as much empathy as possible as well,
on also with a real clarity. The reason for this is to protect the business longer term on and,
you know, ever bear to make the most of this time personally as well. Yeah, yeah, And you see that everything here is that the teams that we’re talking about,
the teams in my office, the teams in your office that the teams in your office to see over joining us,
it’s they’re accountants. They know they understand, you know, they know they understand. They they appreciate what’s happening.
So transparency, transparency is, I think it’s critical. Absolutely. The reality here is accountant can sometimes certainly accounting practise owners,
and I hope you don’t mind me upset and four hundred and fifty of among Miss Cole. But accountancy practise.
Owners can sometimes believe I need to keep things confidential on the books. Lied to be hidden. But look,
team members know when clients are phoning from up, saying they shutting the doors. And can you help You have a team?
Members know what’s going on on. It doesn’t take too much intelligence to work out, but whilst they might stay as a client,
they might stay open. Is a business longer term in the short term bears the very real risk. But instead of paying within fourteen days,
they might take three months to pay. Cash flow could potentially be a real impact. So, you know,
I think members aren’t sheep. If they see what’s going on ever wider. Well, they see that businesses are closing on.
They realised a little have a knock on effect. So the while she is important as a leader to keep the troops motivated,
it’s also important to be very honest about what you know, and also what you don’t know. Yeah,
just one thing. I forgot to say the start, folks, and obviously those of you who are here live on the Web in our witness.
If you want to go down to the chat box or into the Q and A box and putting your questions,
YouTube. If you put your comments into the box below, put your questions into the common box. The team here will transfer them through to us,
and there’s just a couple of quick questions in their car. And can you explain what what followed Means?
And Michael? There’s the Irish subsidy scheme. And then there’s the UK subsidy scheme on one of the one of the key components of the UK subsidy scheme.
Is this furlough, which is like a short term layoff? Absolutely so. So. Furlough is a American place for lonely came into usage in Vuk three weeks ago.
Way all have to work out how how it was spelled, how it was pronounced. It was a completely new concept to us,
but it is exactly as they’re says. It’s a short term lay off where the government subsidised eighty percent of employees wage up to two thousand five hundred pounds.
The obligation of employment sticks with the employer, not the government. So it’s effectively a subsidy, not a dialect benefit to be employee.
And so what answer you seeing out of the ground, Carol outside of your own firm? In terms of things that are happening that either you’re looking at them going up,
that’s a good idea. Or actually, that doesn’t look like such a good idea. Okay, so I get a bit of insight of involved in a couple of industry groups.
Welcome. Discuss were fellow firm owners. I’m also I also served as head of accounting for practise ignition.
So food I’ll get to see some macro trends on get to see what’s going on across be accounting landscape not just in the UK,
but globally. So I guess the first coming is I’ve noticed but firms But her deducted monthly payment models are securing their cash flow and revenue a whole lot better than firms who on so firms who are expecting cash collections,
votes, cash collections are drying up. We noticed a very dramatic drying up of cash collections for week after lock down.
We’ve n noticed they’ve picked up again they’re not back to where they need to bay, but they’ve certainly picked up compared to where they were.
Returns of noting about thirty percent furlough seems to be accurate for firm owners. That’s what people are saying.
They’ve either done or will do. Twenty Tim production in partner drawings or dividends. A game seems to be quite common,
I’ve noticed, but some firms have already closed the doors over to new business or to their firm altogether on.
That’s been a very unfortunate knock on effect of child care, where husband and wife for work in one of the moments for practise,
the other one needs todo juggle the home schooling and so on. So So, yeah, there’s been some challenges,
but I I would say that accountant up until now have been busier than ever before. But going forwards that’s going to change.
What? There’s a question here that it feeds into this from Barry. How are you, Barry? And what’s your view?
Carol, On people taking a pay reduction whilst the workload increases? How does the firm owner motivate staff?
So the subsidy scheme in Ireland there’s a little bit different s Oh, it’s, you know, people at certain points end up taking homeless.
But what Irish accountants are experiencing now is due to a combination of existing work flows coming through the door,
the increased advisory requirement in the short term and combined with the working, slowing down production. It’s a great question.
How do you How do you motivate the team and what are you doing in that regard? Okay, so I need todo I need to pick up on a couple of bits.
I mean, first of all, the UK scheme is very different, So the pay reduction is only between myself and Ben,
my shareholders, and that was a fairly easy conversation. We both knew deep down we needed to do that with the team members.
If they’re furloughed, they get eighty ten pay. But they are not allowed to even open their email.
They’re not allowed to do a thing, so it’s very different. Why I can’t talk from experience with exactly that situation.
But what I can’t well, I can share is first of all week. We’ve actually found that remote working has included with activity,
which seems like madness, but I think bullets down to the reduced commuting times and so on. We found the team members are looking on at the time.
They would normally lead but work well in the time they would get in. We’ve also found, but we’ve been able to really build a a bit of team spirit around this.
Part of that is coming from client feedback. We found that our clients have been extremely supportive because we’ve been supportive to them on that.
Support has really resonated with the team members who wouldn’t necessarily Herve immediately dived in to advisory work so I can let first exposure of a very real thank you from the client on bond is actually the higher stop.
It’s motivating number of the pay packet right now. Where does that leave us in twelve months time? You know,
that’s possible big question, because maintaining a wartime team spirit is going to be very difficult. So I guess if this is all over on,
the lock down is relaxed within four weeks, which is best case scenario will be okay. But if we carry on for,
let’s say, six months, it could be very different. Yeah, I don’t think I don’t think anybody is.
I know I’m all for forward thinking in scenarios, and I haven’t got to six months in my scenarios.
Yes, I’ve I’ve got I’ve got two, three months, a question that that that keeps being asked.
Carol. So team costs are not going to drop. Okay? Operating costs are not going to drop for accountants.
They’re not. But yet our businesses and business owners are going to be smaller on maybe under cash flow pressure.
So inevitably, there’s going to be this focus on fees and downward feed pressure. Absolutely. So So So So So So what’s What’s your thoughts on that?
Yes. So our worst case scenario planning is for twenty five percent cut in turnover, despite the fact that we have not lost a single client.
Get so that’s how worse case baseline projections but we’re doing on what’s happened is by doing that, we Yeah,
we’ve got an end profit figure, but we need to make on that in profit figure is made up of INBio Deputy Payment,
plus Thebes dividends for myself, for my co shareholder to maintain, maintain quality of life so I’m not taking out anything,
goes and above. So what forces us to do is to say that This is the profit we need to make because it pays the household bills and being bov payment.
Here’s for worst case. Turn over. How do we fix for bit in between your How do we fix be costs of the business to make this equation work on?
Surprisingly, we actually made it work, but we had to think of things I do. We need an office,
you know? Do we really need to be spending a six figure sum on physical offices when we’re just have productive remotely we thought about?
Do we need to look at our Southwest description? Do we need to go back to a guerrilla marketing campaign like we used to do love oven spending a hundred and fifty grand a year on marketing?
Yeah, we were thinking about all of the big items in our P N L. Do we need to spend vote on what it’s done is it’s It’s really helped to sharpen our views on what we need to be spending as a business.
Now the reality is, but we probably won’t have a twenty five cent cut in turnover. I believe that on average,
case scenario first, given our growth rate and what we what we typically take on organically is we’ll probably fat line.
So we’ve done growth as usual, flatlining as a reasonable case scenario on Ben, twenty five percent flatlining is,
I believe, the most likely if a fee outcomes. I don’t believe we’re going to continue growing this we have done in the past,
but we are planning for the worst case of twenty five cent tip. We’ve also planning for the worst case of working conditions and cash flow,
which means longer locked down on someone so that we can a drop of a hat get extra funding if we need it,
and so on. You know, we’re making sure that we planned for the worst, But where were acting on going out with intention for normal to best case?
Two quick questions. When you talk about twenty five percent revenue drop, are you splitting that twenty five percent into last clients reduced fees?
Or are you just taking that as one lone figure? There’s a combination of both which I will take that as one lone figure.
Okay, Yeah, so normally out she earned a za practise would be it’s been higher in recent years because we’ve noticed quite to become more transition but hovers around eight percent on.
We believe that there is a risk you’re not not necessary a massive risk for a risk of fracture and being increased.
But also they’re being potentially down with FIFA Chef Carol. I have to be careful what I say because we’ve,
however, many were heading for five hundred on the Web in there. I don’t know how many are watching online and live on.
I don’t know, many we’re going to watch the recordings on. I’ve become very conscious over the last two weeks that as different people are in different places on their own personal and business journey through this,
that sometimes talking about opportunity and showing too much optimism can Concrete’s a negative reaction. So I’m using the opportunity word cautiously,
but I do believe that Corona, one of the Corona virus gifts, is the opportunity to remodel our businesses because because far too often I think accountancy firms have grown way.
Hire that person they charge so many hours at this race on. But that’s how it’s built up. But this is an opportunity to rebuild the business from the foundations the C19 crisis is giving us so many opportunities.
You know, I don’t say it, you know, we live in deer or whatever, but I like business.
I enjoy business. This morning I was mapping out a couple of new business ideas. You know, I totally outside of accountancy.
But the first one was the Netflix for education and health. You know, take the job which model on bone out next Netflix subscription,
with country classes, baking classes on as we’ve all got used to have a simpler life of being a home.
But there’s a load of opportunity, and we’re naive to think they won’t be opportunity out of it for proving it to accounting firms.
I think they’re huge opportunities in review in what we do is a practise internally and what we do externally.
So internally, we’ve got a great opportunity todo transform our business from the legacy business. But it once watts and take a blank canvas approach so that could be implementing practise management systems that could be even so far was wholesale changes like scrapping the office and someone but externally as well.
They’re huge opportunities because most lots of us go down talking about advisory. Very few actually practise what they preach.
Advisory is for Stop that they do anyway, but they don’t necessarily call it advisory, but there’s no proactive advisory over and above the compliance functions that leads to it for many firms.
Now, what happened with groaner violence? We’ve all accidentally become advisers. We started speaking to our clients.
We started talking about future above historic. We’ve started paying cash flow forecast. We started helping them to apply for funding.
We’ve, you know, we’ve been doing lots of things to help them keep the lights on. We haven’t necessarily charged for those games,
but there’s a real key here. Dez, we’ve got past the barrier of client saying no, because for clients need it on,
we needed to keep our clients in business. Now the opportunity that that brings us is that we now have team members who can’t say I don’t know how to do this because they’ve done it.
They picked up the phone. I’ve spoken to a client. So accountant truly have had a catalyst now to get into becoming through business advisors.
Yeah, you see, And you know, I’ve always believed that accountants were the advisers of choice that accountants were the people in the position.
But the advisory conversation part of I think what’s happened over the years is accountants all believe they give advisory because that’s the chats.
That’s the value peace. But there’s two pieces around advisory. It’s about putting a structure on it. That structure is theirs to fold.
The structure is to keep the firm delivering the advisory on track and then having the structure to keep the client on track,
because when when it’s not a process, it’s just ad hoc. It doesn’t get the results. Once you put it in to a process,
you get exponentially better results, more tangible benefits on a service that you can actually package, and firm owners have got the great advantage of a slow down that’s coming up.
There will be a slow down in a couple of weeks. I don’t care what anybody says there will be a slow down.
There will be a point where the client phone calls about How do I claim my government glove or whatever will dry up because it’s very time down,
very intensive now, I mentioned. But we got time to focus on both internal and external stuff, the external stuff.
It’s the advisory. But we can build our internal systems to facilitate us doing this and commercialise it. Yeah,
on it. Part of part of, I think, what advisory is confidence. Like if you if you look at the firm’s who do advisory and truly do advisory?
A lot of it comes down to the confidence of one individual at a point in time. And I think every accountant could do it.
And this what you just said. Every accountant has demonstrated their advisory capabilities over the last two or three weeks.
So so now it’s just a question of maintaining the momentum on that confidence bond. Rolling it out absolutely by now,
I think that this brings us very nicely dead into a guess of you on. However, practise landscape is gonna change after this as well,
because I think that there will be some legacy old firms who still don’t allow their team members to have true engagement with their clients on bond.
It’s still very partner lead. I believe that they will be suffering through this because the partners would be working harder than ever.
But the team members will have less and less work to do. But there’ll be some boutique firms who have really stepped up on you.
I think we’re going to see on evolution of the type of firms. But succeeding on its fur stuck up,
we could see happening before It’s just we’ve now got an external catalyst to really drive through these changes. Yeah,
because because because people people often ask me like, Well, what does what does the firm look like?
And I described the firmas It’s an accountancy firm. They’ve they’ve structured how they delivered our products and services you talked about.
You know what? The biggest, most notable differences for me over the last three weeks. Carol is well,
I have zoom calls, and I have other groups of accountants, and everybody’s looking at me are dealing one to one you mentioned about DDS on.
People are collecting by direct debit rather than that, the historic old retrospective building model that they’ve got to build up a debtor’s those people who are on DVDs,
they’re experienced. This is fundamentally different. So technology enable firm’s ability to interact like Joe. Every account in the world has heard about that.
You know the cloud accounting model. It’s so it’s not actually necessarily going to be this fundamentally different firm.
Like I have personal beliefs around the subscription model. I have personal beliefs around embedded advisory. I have personal beliefs around levels of advisory in terms of the basic fundamentals,
but then more advanced advisory. But a lot of the these firms exist out there at the moment, so really the C19 crisis is a catalyst.
Firms will change, but I think it’s a catalyst that the middle market is going is going to need to move forward or be left behind.
Absolutely. So I think it’s very similar to making tax ditch tool here on how making tax digital had really ramped up the adoption of online accounting.
You know, online accounting wasn’t new. We’re doing it back in two thousand two. We was zero’s first partner outside in New Zealand in two thousand seven.
You know, we were I think it’s safe to stay ahead of the curve on that stuff. But the reality is,
but the mass adoption only took place when making tax to store became real. Not just an announcement, but actually it became a all Michael,
this is really happening. Okay, now, unfortunately, is a profession. We tend to need external catalysts to really drive change on believed that this is another one of those external catalysts,
but is going to drive change in how we do. Things can only be a positive thing. Dez.
Yeah, well, it’s it’s it’s changing everything. It’s it’s changing. And it’s not just changing. How we operate is changing.
How business happens is changing how people interact. It’s changing people’s values. It’s on. It’s not that is changing their values,
but it’s uncovering people’s values as firm owners, as accounting firm teens, business owners. And I think something that you said in there,
Carol, that the change process accountants don’t need to be told the changes, not their forte, but but But I just see now was really a time to lean in and trying to lean in on,
decide a little bit like you can start with your blank sheet. Well, here’s the Here’s the prophet that we need and want.
Here’s where we believe our turnover is what goes in the middle. Well, now is the time to take a look at our entire business and our entire firms and say Okay,
what’s in here that’s absolutely working. Here’s the bottom line results we want and here’s what we want to be and what we want to deliver on.
This gives us the freedom to make decisions, to cut out the bits that aren’t working and move to the model that we know does work.
Definitely. And I think we need to be conscious and this might seem a bit blue sky or whether faces now,
this might seem a bit out there, but we need to think about what the longer term impact of this fire this is on society as well,
because I think it will impact the way we do things and the way that we as humans act as well.
So if we look at, for example, the customer, the average customer desire over time, and it’s been a very gradual shift,
we’ve gone for wanting more stuff to actually want in time health. We’ve wanted luxury and service on. We’ve wanted novelty,
but we can share on Instagram. That’s kind of where we are now. People value experience over material items on.
There’s been a gradual shift over time, and I think that what we’re going to sit this bio, this is it’s going to really bring home the value of time,
the value of health. You know, some of the simpler things in life. There’s an argument to save.
It’s the way we should have all been living. But I think that yeah, the guard bliss of how well put together you feel you are how well your mindset is adapted to this stuff.
We’ve all been anxious about this. We’ve all had fear. We’ve all looked at this bios and for all No.
Am I gonna catch it in my family going to catch it? We’ve all So we’ve all been through panic and fear.
We’ve all been through a state of acceptance and I believe we’ve all been proved to whatever extent a state of growth as well.
But as a community and to society as a whole, we have all gonna change afterwards as well, and I think it’s really important to remember that.
But what our clients one, when we come out of this might be very different to our clients wanted when they came into it,
they might value different drivers. We don’t know what those drivers all leave is going to pay you see you see.
But this is looping back to your earlier point around advisory, right? So we can’t say for definite what business owners are going to want to the end of this.
There’s a couple of things we can say for definite. And some of these, we could say for definite is businesses that are online have fared much better through this than businesses that are not online.
So every business owner the future is going to want our should focus on developing some form of online capabilities.
Now, with developing online capabilities there become structures and processes on. I think accountants general need need to be conscious of that.
Now. The fundamental thing here is the fear. So the fear. There’s an awful lot of business owners around the world now who are wishing they had done things a little bit differently there,
wishing they had listened to their accountants. They’re SEPA, whoever it is on. You know, the the accounts on the statutory work that needs to be done.
It’s still going to need to be done, but I think this has opened every business owner in the world now,
whether they make if true, this or not, there’s going to be businesses, and there’s going to be there’s going to be growth when this is over.
And so there may be new businesses. Absolutely, Because things comes back to the coughing that I mentioned death.
We went into this with sound economic fundamentals. We haven’t got into this in a state of possession. It’s of the session caused by a black swan event.
No, no, a recession, but was bound to happen, something t over. So from that perspective,
it’s reasonable to presume that there will be casualties. But those casualties in business will be replaced over time.
Verbally from the latest economic report alive late last night is that GDP will return to normality. When I say normality,
I mean not back to where it where it wasthe the day before lock down. But I mean normality ist where it would have been had been ordinary levels of growth by the end of twenty twenty one.
Now, that’s not a long period of time. Okay, a match we take into account the huge government subsidies and so on.
There’s been a huge tip, but then an even bigger rise to bring back to normality. So from that perspective,
death we need to remember for actually visit temporary onboard, be actions. But we take now in terms of climbing our business internally and solidifying our client relationships will tears up going forward.
What? One of the other things. And I know this is diving back in to a practical point of what we’ve done.
One of things. We’ve been very clear on doing that. Dante is focusing on client attention on DK Lime advocacy more than anything else,
because I think invest scenario, there’s a number of different levels for firm owners can focus on. They can focus on some really easy,
short term opportunistic stuff. So perhaps the easiest, most short term, most opportunistic thing, but you could do is a firm owner is to charge more for the existing stuff that you do.
The second level is to charge more for new stuff. We’ve actually decided our buyers. We will be free of charge.
Over this time on, we won’t a email with some heartfelt semper fi twelve clients. Just a look.
This is what we’re doing. We put putting aside all of our billable work. We’re focusing on this emergency.
Yeah, we are your emergency services during this time and we don’t want you to feel as a clock tick in.
We would hate you to be suffering his silence of Please phone us. So we way set the landscape for we’ve had more positive feedback from our client of the last three weeks.
But we’ve had for years we’ve had Mawr team advocacy based on that feedback from we’ve had for years, I would wager if we did on NPS and Net promoter score on our clients about staff will be higher than ever,
and the beauty of that is, but we’re building waving fans who are business so both waving fans. But it might not put more pounds in our pocket now,
but just wait. Just give it. You know, a year or two, they’ll be recommending their friends,
their family. The team members will be recommending their flint to come and work for us because such a rewarding place to work and all of our stuff on dit will help us set ourselves apart where the opportunity is about the growth S o.
I think that’s another fine balance, but also an opportunity for firms to think about the first thing that comes into my head When you describe that Carol,
I call it the Accountants Growth Loop and the accountants Growth group. You start at the top and you have a client and if you get that kind of result well,
when you get that kind of result now that client has a storey. Now when that client has a storey and your team are the same when they have a storey,
if you can frame that storey for them on asked them to share that storey. So rather than just letting the being ad hoc ward amount referrals that we actually frame the storey get the claim to understand the winds they have had they asked them to consciously share the storey.
But even if not juvenile opportunity to share Storey the the second thing, the second thing that I’m seeing there Carol is like it’s you’re almost describing what I would call a Freemium model.
Okay, so so right When the clients have their greatest need, you’re reaching out to them and saying,
Look, we’re here to help and you’re introducing them to the concept of advisory. So when the time comes,
we’ll then it makes it easier for you to lead them they’ve experienced. It makes it easier for you to lead them as an appropriate time into into a model.
And one of the concerns that I do have is I do have concerns about accountants who unconsciously doing it that way because the danger,
then, is if this becomes the norm, Are we giving away free service? So I think it’s very,
very important that that firms who if they follow in your footsteps that they structure and they think about the long game like Freemium is a way of attracting new customers.
And but like like like the whole thing is on. I love what you’re saying. Do we focus on Where’s the opportunity?
Where’s the quick winds? Will? Actually, where is the best platform to grow your business? The best back from grow your business?
Is your existing customers on your team completely completely? Because that were very conscious that there’s going to be a couple of challenges this year?
First of all, new business is going to be harder to come by now. The reality is, but business formation certainly in the UK,
have dropped, but not massively. There’s you know, there’s still a tremendous number of businesses being formed every day on both businesses have been formed with new directors were not just Felix companies,
so that’s a positive. But yeah, we specialising Franchising franchise recruitment, take her here. So anything we could do to make future recruitment over the next year easier is a plus for us on DWI found that our franchisees,
but we working we have have reported back to their franchise all about how we’ve helped them so much so that increases the efficacy of monks down with furthers as well,
Which is critical, S. O. C. That’s important. But then the other side of it is we’re gonna need to ramp up our staff pretty quickly at the end of us because the seasonality is going to be magnified.
I think I mentioned ever start, but where we’re going to see the normal seasonality times three, because we’ve got enforced downtime now that means we’re likely tack to recruit staff at the end of the year.
First, Agassi choices around outsourcing versus recruitment bows, his temps and so on. But whatever way we d’oh,
I’m sure recruitment agencies be rubbing their hands with glee because actually, it’s going to become a candidate’s market because we’re not the only ones facing the seasonality.
Every other firm is onboard. Anything we could do to put ourselves at an advantage from the recruiting expected to get the best talent is vital.
We can only slave receipts for that Now on. It will pay itself down the line. But in the rather than spending that,
say, an extra five grand on a member of staff to secure the best staff. Instead, we can secure the best staff through a little wish to work a day and onder the situation in Ireland.
Carol is a little bit different because recruiting into accountancy firms in Ireland has been impossible and it’s been virtually impossible.
So I think the market will open up a little bit. But But again, I think there’s a huge advantage for those firms who have embraced remote working and are going are going down that route.
I just haven’t gone back to your point and go back to your point about about firms and client acquisition and reduced clients.
Okay, so if we work on the assumption there’s going to be reduced businesses at the end of this.
But if you look back through all the recession’s accountants don’t go bust in general accounts, don’t go bust.
Okay, so let’s assume there’s gonna be the same number of accountants, possibly a little bit Mawr, because some of the furloughed people in late of people are going to start up.
So the same number of accountants, less businesses. So So I see an opportunity here, Carrie. Right?
So here’s leading edge here is leading edge now. Now Bleeding edge is just out a little bit further.
But here’s the leading edge firms, and then every firm needs to look at where they are on the spectrum all the way back to the people that are still working like the eighties in the nineties on,
I think, part of the approach to positioning and winning new business. To add on top of what you’re saying,
Well, let’s focus on our existing clients on really, really, really, really delivered for them. Let’s focus on our team,
make this a really good place to work on a town a staff. But there’s also an opportunity carried by moving yourself up the spectrum towards the leading edge s o.
This again goes back to your point on advisory technology, pricing, methodologies, collection methodologies and serves. The firm’s will go up here.
The firm’s closer to the forefront, are going to be more attractive. And I think there’s going to be Some firms are going to see massive clean glasses at the end of this.
Yeah, I just want todo caveat. What you’ve said, I think that this is very different. Previous recessions.
I don’t put too much of a dampener on things, but certainly for May. You know always. I was working as a employee in two thousand and one when we had September eleven from the dot com bust.
Do you know what firms in the U. K. Didn’t really feel that? To be honest, it kind of happened,
but it is very theoretical. Same goes for two thousand seven. Two thousand eight. It was a theoretical recession,
but we noticed or no numbers in two thousand ten, but it was very delayed. It were. It didn’t really impact us.
Affirm. I’m actually gonna content the accounting firms will go bust. I think that there will be casualties ofhis on guy think that that’s unfortunately a trap that some are falling into that.
They believe that they’re immune from it. I think that this is probably more, much more work if we need to change our mind set pieces in a recession.
This is a war and it just so happens that there’s a recession following on from it. And on that basis I think that what I’m saying is,
but there will be Cem sole practitioners who decide for business too much for them. You know, they particularly if they ever light on the physical work that they do for their income,
they will find that they just simply can’t make ends me on because this is the first time. Certainly in the UK,
I have known of businesses just shutting their doors on. So So, yeah, I’m not confident about the about the fact that will come out with the same if not more,
firms. I think that we will take a hit in the number of firms out, something that will be a deep.
But then I do think there will be growth in the number of firms over, Let’s say three to five years.
Okay, Yeah, it’s interesting what you say. The Irish experience of the two thousand seven two thousand eight recession and was very different for the UK It was it was much more deeper,
much more impactful. Yes, I remember dumpling House prices were sky high at the time, Weren’t May.
Yeah, there was a total a total a total property, a total property price collapse. And there’s just a couple of questions here,
Carrie, before we go into the final stage. And okay, so there’s a question here. While there’s general acceptance that fees will shrink in the short term and has said and expected twenty five percent and firm owners won’t necessarily want to volunteer and discount reduced fee to their clients.
And presently most of us are working free in charge in order to build goodwill. Should we look at building over a two three year period in order to maintain fees with some kind of growth built in?
And I think you’ve kind of answered the feed question a little bit by flipping the business model on. It’s not that we’re saying there’s not going to be discounting fees,
but there needs to be a reassessment on a client by claim basis. Absolutely. So I think now is the time on unashamedly blowing the perhaps ignition trumpets for time to get firm agreement with your client on what the fees are going forwards on.
There’s two ways of doing this. You’re varies for discounting of fees. But there is another approach, which is to offer more for the same amount of money.
So you know, very is there’s quite a value proposition of saying, Look, we really appreciate your business.
Whoever business tomb. We can’t absorb any discounting of our fees. However, what we would like to do is to extend an offer of a free of charge,
short term cash flow projection or something that helps them stay in business. That could be a A very real win win S.
O B. Two options. You can discount your fees. I’m always hesitant about out discounting because it implies that there was that legal boom in your fee anyway.
Or you can offer more services as a value add. So yeah, in terms of whether twenty five think comes from unseen,
back primarily is churned rather than discounting. Okay, okay. And there’s a couple of questions in here in relation to audit and signing of audit reports and we’re not going to go into.
We’re not going to go in to audits today. Pork and we did a financial reporting. Webinars should be in the resource centre there for you to see which dealt with the signing of a financial statements and other reports.
And we do have a dedicated one hour technical webinar and coming up later in the week, which will deal with that.
There’s even superbly for my face, but I don’t have to answer no dick question. And so so so So Carol,
your final two. Three points of wisdom. What if you’re talking to the accountancy firm owners that are on with us live now or watching the recording?
What are your two three pieces of critical advice for them right now? Okay, so my very first piece of advice is to keep a calm head to keep a level head.
Your clients are expecting you to be the trusted advisor. Now, to be a trusted advisor, you need to approach things pragmatically,
prudently but without fear, without without exaggeration on DS, with our media hype. So you need to keep a calm,
collected approach with all of your clients and to be realistic. Which men feeds me into my second advice,
which I’ve covered in more detail earlier, which is to plan for the worst but make but also have a focus on average and best case scenario.
My belief is that a firm owners were growing before continue their activity, but he should flat by, and that should be a realistic scenario over could be aimed for.
But you absolutely need to plan for the worst. What what could happen should look down, be increased,
which in turn might mean that your clients to site not to be opened the doors. What were you doing that scenario?
Carol, I’m going to I’m going to flip my next question Now. I’m going to put your other hat on and not necessarily is a firm owner and not necessarily is an adviser to accountants,
but what as a significant business influence or in the UK, a lot of people look to you and and and count on what you say and trust what you say.
What about from a business owners perspective? What are what are the three things you’re saying? The business owners are Are they the same things pretty much the same thing.
So certainly keeping become head is vital on do the planning side of things as well. You know, there are a lot of things,
but we should do day to day business anyway. It’s just that the C19 crisis has perhaps magnified the need for these good practise.
But there’s a third thing for small business owners. Which again, could it could naturally apply to accountants,
which is that they need to really take this time. There’s a lot of them bare amount of have gotten enforced holiday,
you know, accountants still working, but lot business owners actually are doing what they do day to day anymore.
Used this time to think about how your business looks in ten, twenty, thirty years time, you know,
will people still need your gardening services? Will people still need whatever it is you do? Can you look to evolve with the times?
What can you do differently? Todo stay ahead of political economical societal technological changes. How can you really in place the future?
Because I think that one thing is gonna come out of this. Is that the increasing pace of evolution?
But we’ve had in the world, you know, if we look and changes up to. Let’s save the nineteen eighties were fairly slow.
Eighties to nineties went up nineties two thousand after people mawr bang, we’re in a really rapid pace of change Now.
I believe that what’s going on now is only going to increase the pace of change. So for any business owner,
accountants included, how are you going to embrace that pace of change on how you’re going to look for where the second bounce of the ball is?
Yeah, because I suppose the we talked about changing, we talked about change in the context of accountants and external change.
Being a key driver, what the business world and how it operates has been accelerating in change for for a long time.
But like everything, this is just accelerating, it’s putting it to warp speed completely. Let me give you a case study dead.
I don’t want todo ramble on for too long. I’m conscious of every attendees time, but my local butcher previously are paying cash and he’d give me may Okay,
doing the lock down. We’ve got to a position now where he’s concerned card payments over the phone and he’s got a delivery service,
so he’s had to make some very immediate changes to his business. Now really, he’s going to make future changes as well.
You know there’s going to be stuffing who need to do to embrace for future. So it might be that people don’t want to walk around all the shops.
But there might be a collective of local independence who offer a drive thru collection service where they come to get by bio website.
You order from your butcher’s you’re bakers your farm shut your you want of a bitch. You walked from independent shuts up supermarket.
You drive through a collector. That might be the next determination, but this is the ideal time for those businesses.
Now they would be going through a severe Piver to think that actually that pivot was forced. But what further pivots can we do that will actually help our business?
Because the fear of train and should be overcome now as well? There’s a There’s a book Carol that I recommend everybody watching should read on.
Do you know this book is essentially a copy of it? It’s the book called Simplify on It’s About.
It’s about making us as business is easier to use, making us more valuable. And on Ben the experience.
Peace on guy. Just think that there’s a global change in business happening on the accountancy profession needs to need.
Tiu needs to keep up and get ahead. Absolutely. Where businesses after all. Carol, I just want to thank you very much for your time today,
and we have a couple of questions in here. We are running the free audit Webinar, specifically dealing with covert nineteen issues here at fourteen hundred tomorrow.
And so you will be able to get access to that free webinar if you’re on our list or put a comment in under today.
Carol, thank you so much for your time. Everybody who’s on with us. Thank you for your time today.
Thank you for your attention. Thank you for your interaction. And we’re here to do anything that we can during this time to get you on the best possible route on road out of this.
So stay safe. Probably see you again. Let’s get it done.
Transcript of Video - C-19 Series - Financial Reporting Issues
This transcript about C-19 related financial reporting issues was created using AI and may contain some mistakes.
Hello and welcome to today’s Webinar, where we’re looking at the financial reporting implications of Covid Nineteen from speaking to accountants in the last week for the questions that you have been submitting from our weekly Monday morning session with our prophet pro members. My feeling of where things are at right now is that we’ve gone through the shock face. We’ve gone through the phase of not having a role of Iris and and having cruel overs. I think the last couple of weeks have been particularly trying on the last couple of weeks.
Now as teams had to move remotely as Ireland in the UK went deeper levels of locked down. Where I believe we are right now is I believe we’re at the stage where Okay, the initial shock. The initial wave has come. But now business business needs to go on in the new normal. And I hope that the subsidy schemes the wage schemes, the government and sentence that the detail on those on the business owners are getting a better grip. But from talking to accountants, it’s very much that we need to look now at the day to day Business is well,
we can’t forget that s o the purpose of this webinar Mike has looked at financial reporting issues and he’s looked at what are the key problems that the impacting on financial statements. So the day to day work that we’re doing like I do have concerns talking to accountants who are signing of financial statements. It’s great that we have the work signing off our bits, but we now I think today we want to look here financial statements. We want to look at what the key issues and problems are, and that’s what Mike is going to go through for us.
So, like, I hand it over to you and just obviously, like you’ve been working on this presentation over the last week, you’ve been working the issues. You’ve been answering questions, solving problems. But do you have anything to add Mike in terms of an initial introduction? No, no, we’ve Look, I suppose ask couple of weeks. It’s just been all about uncertainty, and it was initially about the wage support scheme on Bo’s thing. The questions that we have now been getting lately. It’s kind of moved back towards your traditional financial reporting issues,
auditing issues that column was going to be covering in the next couple of days, so I mean, yeah, I mean, look, we’re going to try and do today is just address the kind of key topics that have been coming in to us. What I would say is, please do engagement. If you’ve any queries, any observations and he points to raise, please interact with us in the chapel box on. Just to be clear, we again. We have huge numbers attending today’s weather there, and so,
just to be clear, we’re not going to have to answer every question but what we’ve been doing in all our other. Webinars is pleased to ask the question, and if we can answer the question, we will put it out your questions. If you don’t get to answer that in this session, this gives us the materials. Answer the questions for our next session with you, so please don’t do the chat box or in the Q and a box if you answer your questions. But Michael myself can see them here,
and we will answer any questions we can as we go through the session. But if we don’t answer him today, we definitely will answer them for you. We have some handouts of supporting material. And so, Jonathan, perhaps you could put the lake up to the handouts. So that’s down in the chat box, and you will get They are basic overview financial statement checklists. You will get our slide deck from to the public has also created the guy was talking today in terms of sample paragraph, sample wording.
And so you get those Get that material Johnson has put it down below. If you’re watching this on your on the zone, whether our witness, we get it down below. If you’re watching this twenty of our live stream channels and Jonathan and putting in the accounts, I hand it over to you, Mike. Yeah. So I have some slides here, so I’m just gonna just gonna share them up on the screen. Yeah. So hopefully you condone. See, that way we can see that Mikey just need until into into into show view.
Here we go. So, as I said, we’re going to be covering today some of the main financial reporting issues that we’ve encountered over the last week. We’ve broken it down into five sub topics, so the first area we’re going to cover is Theo area of post Balanchine events. Covert nineteen kind of presents, maybe unprecedented challenge that maybe we’re not used to see. And, you know, we’re used to the typical textbook post Balanchine events, like a credit, are a debtor going out of business under under normal circumstances?
There are things like that. So called the nineteen kind of presents a different challenge. Aspires. Impairment of assets go. You know it. It’s Z impairment of assets is definitely back, and it will be back in the in the coming in the coming months. You know, there will be a man increased amount of circumstances where there’s indicators of impairments and obviously where that occurs will have to do unpaid mint review. The next area we’re going to discuss is going concern that’s going to affect Anaugh. For a lot of companies,
there’ll be very few companies that from a you know, even if there are no very obvious going concern issues, it’ll still be a consideration just giving. Given where we are at the moment for topic, we’re going to address our your directors of court disclosures, so obviously just to incorporate things like your principal risks and uncertainties. Future developments, events since the year end, etc. On the last time we were going to cover is just your judgments and key sources of estimation, uncertainty that’s required for companies of playing full efforts one or two.
So there’s just before you go any further, like there’s just a few questions in there, folks in front of downloads. Yet the downloads are walking and so so Cage has gone down. We think the number of people who tried to access at one time and so we’re working on a fix on. If we don’t have the handouts here right now, well, I’m sure the technical team will find a way of getting the handouts to you. And in the next five minutes, or keeping eye on the chat box,
I let you know when the handouts and they found a workaround, but it looks like the pages crashed with too many clicks. All of the one time Mike, can you go? Yeah, So, as I said, the first, the first area we’re going to deal with is post Balanchine events. So obviously that’s that’s driven by by Section thirty two were meant for us one or two. ThinkI consideration here is as to whether, when does the event become adjusting or non adjusting? And you know, I go through the timeline.
A Zoe go through the slides. They’re the little a certain degree of judgement required asses to weather. You know, I think the guidance that we seem to be getting at the moment is thirty first. December nineteen. It’s likely not going to be an adjusting event on DSS subsequent to that we have to you have to consider, and we’ll have to use judgement to consider whether events are adjusting or non adjusting. Another point on post Balanchine events. You know there’s interaction with other areas of rest one or two,
so we have to consider it in accordance with impairment. So under imposed balance sheet events that the receipt of information after the end of the reporting period indication best in asset was appeared at the end of the reporting period. That’s an external indicator of impairments that we need to consider. So where we have external indicators, we need to consider weed to carry out in Fairmont Review to determine if the acid impaired below it’s carrying value and as well as that. We need to just just to delve into that a little bit.
Mawr. So obviously there’s adjusting versus not adjusting events. You’ve clarified that and from a Section twenty seven perspective, So our thirty first of December twenty nineteen year ends, given the circumstances, Mike that have evolved and on, given the fact that there is a potential argument that Corona virus Woz and in existence, the first case was reported in Ireland, the twenty eighth of February. But it’s becoming abundantly clear now that actually well, the circumstances were in the country on the circumstances definitely were globally before the third fourth December people that have assets on the balance sheet and basically assets like property equipment,
intangible assets for businesses that are now mothballed down. You know, the impairment circumstances and indicators. Is there any different treatment in terms of impairment being in adjusting inventive person on adjusting event or there’s a all fall under Section thirty two over for its Final Two Ultimate Well, it Z, your question is kind of as todo as to be. The timing is the thirty first since the impairment peace. I am saying now that there there are entities that, as at thirty first, December twenty nineteen impairment wasn’t a consideration for them.
But now, when the financial statements are being signed off in March, April, May twenty twenty, do we apply that first rule of Section thirty two? It’s either and adjusting or a non adjusting event on. Does that supersede the requirements in Section twenty seven or Construction twenty seven and impairment? Going to play on their own? Well, like the starting point is to look at, whether it Zen adjusting or non adjusting event. I mean, you know, if it’s a significant deterioration in the asset value,
we’d be looking at a disclosure at a disclosure in the in the financial statements on Obviously, you know, you can have a non adjusting event that has has had a very significant impact on the figures. Okay, so so so your first your your first fitter. And the first thing you have to look at is section thirty two of efforts to is it opposed by machine event on. Then they’re after you go into the individual camping standards. Okay? It’s either adjusting or not just being if it is, if it is not adjusting its disclosure only on the imperative right down will happen in subsequent periods.
Explosive, but in parent, right down subsequent Exactly on D. U S O thing. This here is an extract of their first one or two. So I mean, I’m not going to read it back. We’ve discussed it already just to distinguish that there are adjusting events and non adjusting events. And three key area is, you know, did the conditions exist at the year end. So a ZAY said the FRC, you’re kind of going frc of guidance out. I think in March on they’re going down the route that it’s unlikely that any company will It’ll be considered to be in adjusting event as at the thirty first of December.
And I think the reason they’re going down that route is that they’re dealing the issue to be the kind of human to human spread of the virus has opposed to the fact that the virus was there in the first case. So essentially, what you’re saying is the FRC have made a call for us that they’re dealing this based on their guidance. They’re deeming this not to be not to be in adjusting event to be a disclosure only. Yeah. And I suppose you also have to think, too, that the event isn’t necessarily the virus.
The event is your debtor That’s gone out of business or you’re property that’s gone down in value. So I suppose. What? Why did your debtor go out of business? It was probably more to do with the response to the fact that the virus was present in the country more soul than the fact that it was contained in a region in China back in December. I think that’s I think that’s through that they’re going down, S O, I suppose. Look, when When we do look at whether something is an adjusting or a non adjusting event,
you hear some key dates. So, you know, on the seventh of December, I think that’s when the first case was confirmed in China on the thirty first of December. That’s I think there’s about maybe ten thousand cases in China and the World Health Organisation have been notified so again, still still contained within China. On the thirty first of December on the twenty fourth of January, first couple of cases reported in France the month at the end of the month of January, there were several new cases in China.
Sorry I quoted the round figure there in December. It was significantly fewer cases in China at the end of December, ten thousand by the end of the month of January, and that’s reported cases. Sena. I think we’ve kind of we can take some some things we can take those of the pinch of salt, that the actual cases were probably a lot higher. Ben the month of February twenty twenty. There were several new cases in Europe during the month on board, eleven hundred cases reported initially by the end of the month,
and it was probably a key one from an Irish point of view on the twenty ninth of February, the first case in Ireland and then with the government restrictions from the twelfth of March to the twenty seventh of March. So the schools colleges closed on the on the twelfth on the fifty of the marriage pubs, the hotel’s closed, and on the twenty seventh of March, we had our what we might call our lock down. So I suppose we need to consider thes key dates when we’re looking at something. So So you know,
if if we had I don’t. We had a shop with stock and the stock was impaired as a result of one of the shutdowns. Okay, well, that’s probably the events that caused the stop to be impaired. So it’s those type of considerations that that way that we need and you’re gonna come in there? Yeah, Yeah, I suppose like what was going through my head and I was going to leave because you probably covered later in the session, but it’s to have the jewel focus of thirty first of December year ends.
But then you’ve also look at your job, and I know they’re not very common year and dates, but for companies, But January February March here ends the on each file that people need to document their decision as to whether it isn’t adjusting event or not, using timelines and using timelines like basically my created this late on the basis. Well, here’s Here’s just a over your timing, but for he to create your own timelines that are relevant to to your specific business on, I suppose, look, it’s worth saying here that there is no probably no perfect answer,
either. All you can do is you can apply judgement and you can. You can apply all that events. There’s not much else you can do because there’s no there’s no textbook answer to this S o. This is an extract from the FRC guidance that was issued in March twenty twenty on again. This is in the context of his ten, but obviously I as tenant difference one or two, they’re they’re more or less more or less the same. So just the second paragraph here. So what the FRC are saying is there is the general consensus that the outbreak of covert nineteen and twenty twenty was a non adjusting event for the vast majority of UK companies preparing financial statements.
For period ended thirty one December nineteen, companies will need to judge how much of the of the impact of Covert nineteen should be considered to arise from man adjusting. Events are for subsequent reporting dates. This will be highly dependent on the reporting date, the specific circumstances of company’s operations and the particular events under consideration. I’m not I’m not sure if the I’m not aware of I asked, issuing any similar guidance, but generally one, guidance would tend to flow from front from one to the other. That Zoe’s that’s that’s useful,
useful guidance there. Yeah, well, it Z, I suppose it’s It’s helpful, Mike, because it’s taking the accounting standard on it, saying, Well, here’s Here’s what our opinion is. You will notice folks that in the FRC language, and there’s a lot of general words used in judgement words. So I would read this guidance and I would say, Yeah, this is good guidance. It’s helpful guidance, but they’re very much you need to exercise your professional judgement on the most important thing from my perspective and you exercising your professional judgement,
assisting the directors to exercise There’s but it’s documented and that it is documented and issues like this. I believe it were into a time now, when director’s involvement in the approval of financial statements they had their responsibilities as company directors under company law that they need to produce them after statements to get a true fairview.
But way all know that most company directors, why they engage accountants, just thank you is because they don’t understand all the financial reporting stuff.
But I think we need to go through a process here of communicating with plants as thing the issues and considerations.
These directors make the decision in approving the find statements, and then it’s up to the accountant to consider in their accountants reporter there.
Auditor’s report. The implication of the director’s decision. So we’re exercising judgement. TFRC is saying You need extras judgement.
You need exercise judgement. Well, how you communicate this is critically important. The directors of the company are the first people who need to exercise the judgement,
and you have to communicate with them in a way so that they understand that on B Did you give them the information they need to make an informed decision to part of their director’s responsibility?
Okay, so I’ve kind of put together just this very basic case study. And again, there’s no no particular right or wrong answer here.
But just it’s more just for discussion and observation. So and situation So X Limited prepares financial statements to thirty one December nineteen.
X Limited has customers in the hospitality sector, including customer A, who owns the hotel. In March twenty twenty.
Customer A permanently goes out of business as a result of the restrictions place standard from Covert nineteen and debt of ten K won’t be recovered.
So the first question there doesn’t adjusting. Event. Of course, the financial statements of X Limited for the December year end was based on the FRC guidance.
I think we’re looking at Well, no, it’s it’s likely that’s in adjusting events doesn’t occur here, but it will be a non adjusting events that we would be required to disclose in a note to the financial statements.
So then the next question. You know what if we were to apply the same circumstances to a January,
February and March twenty twenty year end? And this is where the point of about judgments comes in about,
well, document documentary reasons Why So I mean January twenty twenty. We need to consider you know where there are enough circumstances in place at the thirty first two January for it to be in adjusting event a bit of a grey area there,
probably by February. The fact that the case had got to Ireland and it was wide spread around Europe,
you’re probably into the into the zone of arguing that it is an adjusting event on, probably from March onwards,
There there is, there’s no there’s no doubt it’s there. So again, again, there’s no I wouldn’t say there’s any particular right or wrong answer their butts.
That’s kind of maybe the trail I thought that you might use when you’re arriving at your decision. But then I know you’re going to talk about this a little bit later on,
but you have seen some insights into P. L. C s who have signed off on it opinions in February and those PFCs opposite,
I think, for they are they are making disclosures for December, your ends, everything. They are making disclosures.
Now again, I suppose one of the things and we’ll be talking about it as we go along. It’s kind of hard enough to get any,
you know, to get recent examples, because I don’t think there’s not been signed at the moment. So I mean,
it’s, you know, and you know it’s hard enough to get get up to date material. But yeah,
there are, There are disclosure is going in for for those types of events, all be is that in the last couple of weeks it slowed down.
As to accounts that have been signed off That was the final question here. What if the customer went out of business in January twenty twenty?
What’s the December year and implications? I suppose the question you need to be looking at here is, well,
did the customer go out of business because of covert nineteen? Or was it just your standards, your standard liquidation?
So if it’s for reasons other than Colvin, nineteen, and if they did go out of business in January twenty twenty,
it’s likely that it was for other reasons. You’ll be going back and your standards. Debtors post balance sheet events whereby,
you know it’s usually an adjusting event because the conditions would be deemed to exist at the year end date.
So again, this is kind of just a couple of general points, so document documentation. And again,
this is more of an auditing point. That column will be covering on Wednesday S. A documentation of post Balanchine events to support the disclosures is key.
Given the changeable nature of the pandemic, it’s more important than ever to consider post Balanchine events right up to the date of sign off.
So that’s it. That’s a huge point, because I think now, more than ever. Things are things are nearly changing on a day by day,
week by week basis. So it’s it’s important to consider any any changes right up to the data sign off on Ben.
That’s just twenty nineteen year ends will likely not be in adjusting event. Substantial chill information about the virus didn’t emerge until twenty twenty,
and then twenty twenty years. It’ll require higher degree of judgement. So here, a couple of of circumstances where you might have adjusting post Balanchine events.
So post year end an RV issues as a result of covert nineteen. So is the recoverable amount nest in the carrying amount?
So then you might have that situation whereby no, your heads goods with stock that’s that’ll go obsolete for business will close.
So, for example, your flower shop or some someone like that who had a stock stock of writers and then had to close debtor has gone out of business property impairments.
That could be a difficult one at the moment, because I don’t think there’s much property changing hands, so it’s kind of property area.
It’s there’s no real live data to see how far properties can be impaired until be gift until we get more transactions happening.
Changes in accounting estimates and you know anything held it fair value as well. So you know, and we’ll be talking about that when we go into into impairment.
So what’s required from the disclosure point of view? So if we have a non adjusting event, so there’s no adjustment required to reflect the events since the year end,
the nature of the event should be disclosed. Andan estimate of the financial effect or a statement that such an estimate cannot be made.
What was that Z? That can be a difficult one because, you know, it’s kind of certainly,
if you’re signing off something today, it can be difficult to quantify. Well, what’s the actual financial effect on the year end balance sheet figures,
Because, you know, at the moment, every place where is closed down on, do you know that might be generous,
that we think of recoverable that aren’t recoverable and so on. Mike, obviously we’re working towards a point here where we have a Siri’s of of generic disclosures,
but I think that I think the most important thing here is that I don’t know whether generic disclosures were going to cover this on doll can’t was hate to hear this,
and it sounds like something that you might hear from. I don’t know the length of the institute’s well.
You have to exercise your professional judgement. You have to exercise your professional judgement. But right now, Mike,
there’s nothing. There’s nothing we have addressed that it’s there’s no one size fits all here. So you’re giving us the principles of the concepts you’re giving us,
what the standard say. But it’s way got so many unknowns, an estimate of the financial effect or a statement of such an estimate cannot be made.
It feels like for some businesses and that they’re going to they’re going to have to make a general a general statement that estimates cannot be made right now because we can’t Yeah,
like I’d be in agreement with that. I mean, yeah, I just saw your point about the general general generality of disclosures.
You know, things have to be specific and everything it be be different based on the company that you’re doing the type of sector that it operates in geographical region that it operates in and so on.
So I mean we have. We have some handouts there today with some illustrative examples. Obviously, they are what they are.
They’re illustrative examples, and they’ll be It could be tailored. They could be used. They could be amended as according as appropriately so.
But yeah, I mean, disclosures will be need to be tailored quite a bit, particularly in the directors,
of course. Going concern, notes, etc. A swell as most balance sheet events. So onto your adjusting events.
So straightforward enough adjustment is required for the amounts recognised in the financial statements, including related disclosures to reflect the adjustments.
So that’s that is what it is. We have to adjust it and just thank me. And even in terms of adjusting events,
might I presume from accounting perspective that the directors need to make the disclosure around the adjusting event when they when they’re doing the just adjusting event.
But they’re still going to be uncertainty in that so it’s going to be here could be adjusting event that now they’re still uncertain.
Then, in an accountant’s report, it may be okay, but in another report, well, then you’re probably looking here at an a a meeting woman on other matters paragraph or an emphasis on paragraph drawing attention to the uncertainty.
Yeah, absolutely. And I mean as well as that. You’re probably looking at disclosures within your judgments and key sources of estimation on certainty,
paragraphs and then in your director support. Then you’re probably looking at, you know, principal risks uncertainties on all that that comes with it.
But it’s ah. I mean, some of these will be unquantifiable for for six, twelve months until things settle down and be kind of you can see what we’re left with.
S O. I suppose the next topic to move on to then is just the area of impairment on.
I suppose impairment has been there for, you know, since Africa. Since pre efforts one or two,
it has been impressed one or two, but it’s kind of e wouldn’t say it’s been used whole amount in the last couple of years.
But you know, in light of the recent events, you know, impairment will creep into nearly the majority of sets of financial statements,
particularly if you have property potential equipments. If you’ve got debtors exposure stock, it’s untraceable assets, absolutely centuries.
Investments that may not be necessarily listed. Investments intercompany loans. And it’s like there’s a huge list. Falls under the topic of impairment.
Yes, So there will be. Well, you’d expect that Alan Sheets will take a good hit a za result of covert nineteen.
Because I suppose, you know, like the things we can expect significant, significant negative impact on our asset violence is on the balance sheet.
And that’s no matter how quick the recovery is afterwards might be fair. Yeah, that zte true s,
I suppose, onto section twenty seven of F s one or two. So one of the external indicators of a parent is that significant changes with an adverse effect on the entity have taken place during the period or will take place in the near future.
The technological America’s economic or legal environment in which the entity operates. So, I mean, you know,
covert nineteen were kind of looking at potential impact the Marcus, and certainly an impact to the economy on also another indicator of impairment is where evidence is available,
obsolescence or physical damage of an asset. So, again, there, that’s your issue. As regards stock in less than it’s an RV.
So I mean, this is this isn’t by any means. A complete list. But, you know,
areas that might show signs of impairment. So you have a nice year. Debtors S o R. Det has gone out of business.
Are you reach of settlements with your debtors that you’re not going to recover the full amount on stock? Are there any stock cost?
An RV issues property. So is are you carrying your property at above Above? It’s recoverable amount. Good.
Well, are there signs of impairment on this investment in subsidiaries that does your company on subsidiaries that have reducing value as a result of Corbett nineteen on group loans?
You know, are you are you all the rounds from groups that since covert nineteen are no showing signs of impairment?
S o what we were? What? Disclosure requirements in relation to a parent S o. We were required to disclose thea amount of the impairment losses recognised,
reversed in the period and the circumstances leading to it Andre recognise and parents in the penal unless it’s raised to a re valued asset.
In which case we recognise is in our statement of other comprehensive income, I suppose, obviously regulating impairment in the PML.
So for re valued asset. You recognise your reverse the revaluation down to the original level. And if the impairment exceeds that,
then you could potentially in a situation where you’re recognised the piano on the reversal of the revaluation. So depending on the level of impairment,
you could have a jewel a jewel adjustment there. Yeah, right. So when we’re looking at in the impairment calculations,
we take the higher value of fair value, less cost to sell and value in use. That gives us our recoverable amount.
Um, so then way. Look at it. We might have a situation whereby we have relied. We’ve had to have an asset that it’s fair value might be less.
And then we’ve calculated its value in use. And that’s been used as the basis of establishing the recoverable amount.
Obviously, your value in use is going to be based on on cash flows on bond with covert nineteen we can expect to cash flows are projected future cash flows tiu reduce.
So I think any assets that’s kind of been held on the basis of value in use could potentially be in trouble as a result of court with nineteen value and uses the future discounted cash flow derived from an asset,
our cash generating units. So we then compare recover recoverable amount to carrying amount. And if our comfortable amount is less than are carrying amounts,
then we need to appear. And one of the issues like which you’ve alluded to is. And one of the big saving grace is that was used in the last recession was when property values were impaired.
And if the director’s could produce Castro’s and projections that demonstrated the value in use was hiring the carrying amount that became the solution for a lot of people.
Okay, so obviously that still is a solution. But now we’ve got a double whammy, because now there’s such uncertainty in the short term over the next three to six months that the assumptions underpinning cash flow projections will be highly subjective.
Oh, I just want to highlight this one thing. This makes a significant difference if you are putting on accountants report versus another report.
Because if you’re putting on another report on bond, the assumptions that are underpinning and this could result in a modified opinion from another perspective,
even where people have used the value news calculations so the basis and estimates behind the value news calculation it comes something that needs to be heavily.
If you’re doing an audit of set of financial statements on, it needs to assess the value in use calculations.
And if it’s an accountant’s report that you’re signing under issues forty four ten, the exempt accounts report and here’s the reality again,
we have to be careful of impairment is really it’s The accountant has explained this to the point and then telling,
telling the vast majority of SM he claims to go off and do a discounted value in use calculations, probably double Dutch to them.
So whether you’re an accountant or non ITER, don’t have you going to be instrumental in facilitating this regulation and facilitating and the assessment of impairment.
Very, very careful Did you know across the line? And you don’t cross the line between the wreckers responsibilities and Truman strong average of responsibilities.
Obviously, editors have a much bigger implications from an ethical standards perspective. Yeah, and it was a big one there,
too. You could have like the lights for factory or something like that. That’s your cash generating unit.
We’re looking at value and use. You know where you were using this kind of cash flows. If the factory is closed.
Well, then that just that that creates an issue from a from a cash point of view that it can be very difficult todo to look a value in use.
Calculations that way probably would have to go back to the fair value and take the hit there. This was the next topic to move on to Is going Concern Way.
Haven’t we have a question here? Okay, so there’s a question from David just to be clear. Are we saying that for thirty first,
seventh, nineteen years? Although Cove in nineteen itself is not in adjusting its effects on debtors and impairments in early mid twenty twenty,
maybe adjusting items or does that only apply from the thirty first of March twenty twenty onwards? Your INS only.
And so so. So Mike, like your take on that is the FRC have come out. They have given guidance that for the vast majority of cases,
thirty first of December hearings. It’s not in adjusting item. Okay, so it’s a non adjusting item.
It may need to consider it and disclose it, but then deal with what we’re saying is absolutely based on the timelines that might put up considering your attorney.
First. December nineteen year ends thirty first of January that there wa s’more signs of this. But once we get into February for UK and Irish accountants,
once we get the February out clearly assigns match. Absolutely so. Thirty first. Match your ends. There is no I don’t think there’s much the base and when you’re cool with nineteen isn’t adjusting or another just like him covered.
Nineteen. And for the vast majority of businesses do this wasa circumstances of event is definitely considering your turn First of March hearings,
but probably you want to look at it from your February your ends as well. And what we do think alike.
Yeah, no, I’d agree with that. Like I mean, based on the FRC guidance there, we’re going to take that December is not adjusting on.
Then it’s It’s based on judgement. They’re after us to as to where does the point come that it does become adjusting.
So like you said, it’s January question mark. February probably March definitely would be my thought process, but it does depend on the on the individual circumstances.
I mean, for example, if you have a debtor in China the day it might appear a busy earlier than if you had only debtor in Ireland that that went out of business again.
You have to kind of you have to base it on the circumstances that play as well as just looking at the timeline.
Yeah, so So So, for example, just looking at the basic timeline. The Jupiter, like,
you know, there was announced cases in France, so anybody that has group operations or significant customers are significant business in France or in Italy.
It’s going to be in adjusting event there, clear early, defined the adjusting event there earlier been necessarily Irish UK,
where it was later reported. Yeah, exactly. And it’s like I said, it’s the circumstances of play on that We need to look at there.
I suppose I’m going to move on to Topic three, which is three area of going concerns. So again,
this is going to impact impact hugely on a Zoe was spoken about last week like those companies that we would have cost,
you know, there’s no issues here, John Proof bulletproof. You know, if we were to look at the set of financial statements at the start of February on the same company in the middle of March.
Circumstances have changed massively. A company that is a huge assets on the balance sheet that was trading Well,
all of a sudden they’re they’re they’re shut down temporarily on your cash flow can potentially be a huge issue that down the line.
So we need t o have you have a lot of consideration relation to going concern for all of the companies.
Now we also need to look at, well, the appropriateness of the going concern basis. So I mean way kind of have to take it for granted.
Things have been who wants a positive? But there’s been a certain amount of goodwill in the last couple of weeks,
but we have to take it for granted that the companies will fail as a result of covert nineteen and there will be liquidations and there will be cos that go out of business.
So we need to look at well, okay, well, the appropriates of the going concern basis is the only realistic alternative available to management that will make today’s or that they’re permanently cease trading?
Yes. So some some companies Mike, we’re going to see what we’re going to see. Some companies who will be on a not going concern basis and obviously liquidation comes for companies that are on a not going concern basis.
Usually, but accounts be prepared on that. One concern basis is one consideration, but benders the people who will prepare accounts,
ongoing concern basis that are in trouble. And then there’s of trouble strong companies that irrespective how strong they are,
that they have to take the concepts of ice a five seventy going concern. They have to take the concepts contained in efforts one or two and look at Is that going to serve basis and being adopted?
Appropriate O R. Do they need to make disclosures and then, like, you know, obviously this is all new.
This is all happening. There’s not a huge amount of guidance coming from the FRC. They’re doing some stuff.
There’s no definitive guidance coming from any of the accounts. The institute’s right now for me, the going concern disclosure piece,
from a director’s perspective and in the North to the accounts like the scope, a level of detail in the going concern disclosure really needs to reflect the unique situation of each company.
So So? So obviously we can’t say universal everybody, but even strong cos we’re going to be affected on depending on the seriousness.
Three approaching the wording here. But we could give you an overall structure approaching the wording. Those need to be tailored for individual certain.
Yeah. No, that’s that’s for sure. And again, you do need to consider Okay, Well,
what what are the company doing to address the going concern issues? Because you could have a company that’s being mothballed.
That’s okay. Well, they were trading profitably. They say, I don’t know, a pope or something like that were trading profitably.
The restrictions came in probably around the whatever thirteenth or fourteenth march, and as a result, they’re not trading anymore.
So we’ve let staff go. We’ve we’ve cut staff. Hey, if there’s if there’s any staff required to do sort of maintenance work or any any of that kind of stuff and you need to kind of get into the nitty gritty of what are you doing to address the growing concern situation?
No, because I mean the big issue for the likes of those is that they’ll have a period of three,
four months or whatever the case may be whereby they’ll be generating no sales when they come back. What kind of an environment that they’re coming back into?
Are they coming back into a recessionary environment whereby you know this question? We spend his down. Economic sentiment is down as,
and as a result, sales are down. So things like that we need to be factored into their going concern workings.
I mean, one of the things that we’re seeing in the last few weeks is that there’s very few others actually been signed.
And I think it’s for this very reason that they’re not being signed because, you know, how can you rely on a budget or a cash flow at the moment?
Because we don’t even know where we are. Don’t know how long a lock down will last. We don’t know,
you know. So I mean, obviously, obviously, audits are one thing, and but what we look at company accounts there are exempt like is it feasible for directors in politics and companies to fulfil their directors duties to fulfil their responsibilities?
And for accountants too obviously no accountant. Every accountant cast to sign a report under its was forty four ten,
and every account has to assess whether friend state was getting thrown for review. Do you have any inkling of the moment,
or is it too early? Mike T say, Well, okay, out of the exempt accounts. If you put in really strong disclosures,
we don’t have the formal opinion on it. The barrier in relation to a sufficiency inappropriateness about what evidence is gone.
And it is a too early to talk about non our company’s signing off and directors reports, putting in very strong,
so cocksure, ongoing concern. Well, you have to look at while what’s their their their duty is to prepare accounts that give a true in Fairview.
And I mean, if you have serious going concern issues, you know you need those disclosures there. Obviously,
the fact that it’s not all just there’s there’s less of a requirement. But in order to show a true in Fairview,
you know you should be putting in disclosures because disclosures like that would be fundamental to the user’s understanding of the financial statements on our concern.
Right now, folks is even though there’s a significant lower barrier as I demonstrated that our concern is that will could the directors,
they asked. So so so whether there are exempt insolvency events and considering whether directors have fulfilled our fiduciary duties,
whether they’re compliant with the law but in the final statements. But there’s really what I’m trying to do here to emphasise there is a significant requirement here for the directors if they’re producing financial statements that there signing off and they’re saying,
yes, these accounts were prepared in accordance with applicable financial reporting framework. There still is a significant requirement,
audit or not, for the directors to be careful from their own perspective and then for you was to compiling accountants.
In the case of mono exempt status statements, consider those implications relieving. Yeah, and obviously you don’t want your name to be associated with the cancer or misleading.
I mean, if it’s obvious that there’s going concern issues, you don’t want to be signing off on something that’s that is effectively,
effectively misleading. Just on the third bullet point there, so theatrical sea of disclosures we’ve addressed that on Do you know,
I think I think there’s going to be a greater focus on adequacy of disclosures. Also, we’re going to discuss a fresh one or five as well.
So way get that’s in one of the one of the next slides. So this is just I’m not going to read this back,
that this is just a extract of section eight, section three point eight and three point nine of F S one or two that explains that the entity will prepare accounts on a going concern basis unless the only realistic alternative is to liquidate or cease trading.
And if if we’re doing the break up basis, if we’re not doing the going concern basis, we prepare them on the break up basis.
I was. I’ve had a sub categorised going concern into four categories. So and I think it’s important to consider from a company point of view and also,
from an auditor’s point of view, what category does the company fit into? So I suppose the best companies not affected by covert nineteen or will perform better as a result of us.
I suppose that there is not too many companies in this category, but there are a few. I mean,
if you’re if you’re in food retail. In the last couple of weeks, things have been looking fairly good.
If you’re in pharmacy, you know that things have been having looking quite good, too. So that’s what that’s one category,
the next category down, so affected by cold with nineteen. But the directors are satisfied that no material uncertainty exists.
So what you might have there is a company that it’s trading. Well, maybe there’s a knish and initial slow down staff are working from home.
Was things were continuing as normal? But there is a bit of an effect. Why, of course,
nineteen. Then you have your in that second scenario, Mike, we’re saying that a minimum mentioning it in the director’s report and referring it to the director’s report and in the notes to the financial statements.
Yeah, yeah, I I’d be in agreement with that now. Yeah, and I suppose it would also depend on the circumstances to a za general rule.
I think that za about right the third category down, affected by cold at nineteen, and the directors believe that the material uncertainty exists so again these air the next year cos that maybe have been shut down overnight for a temp temporarily shut down overnight while that while the lock down continues.
So in that situation, you know, e mean you might categorise your hotels, your pub’s anyone in the hospitality tourism industry that the likes of those kind of cos there because there’s a material uncertainty relating to its ability to continue as a going concern.
So, you know, you have to have a nose in there maybe explaining the situation, explaining the material uncertainty.
And so I have an example as we as we go through the slides on the final category and again,
I don’t know, I don’t want for their or we won’t be there yet was cos severely affected by Cold with nineteen,
and the directors needs to consider it. Liquidation is the only realistic option on again. We might not see too many of these in the initial stages.
Push. You can expect to see them ast time passes. I suppose one of the one of the key things is you know there’s going to be a huge no credit squeeze in the next couple of months and you know something?
He’s just just one survived that, folks just in terms of a very practical question. We’re getting our own financial reporting.
So what if you have somebody who perhaps falls into the third or fourth category and Mike Slide? Well,
if somebody thought of that before category on Mike Slide and like just whether it’s on a drama exempt. Obviously,
the bars much lore for are exempt, but directors rushing the saint of financial statements that are in a compromised position.
Accounts are kind of going, but there’s we don’t work. We need to get the accounts out to issue the bill,
and I would suggest that you issue draught accounts and you issue the intern Millar progress bill. And because,
you know, I understand that you want to keep your work flows going. I understand you want to keep your building going on and on,
and you’re looking at some of these companies that you don’t think it’s going to be around later in the year.
We’re going to get the bill out, get paid well, that’s where that’s where I would if they’re not on a subscription model already.
That’s where I would look at that look at intern bills, get the accounts out, issued them and draught format,
but highlighting to the director’s implications from an insolvency perspective. Obviously, the four point is severely affected ones they need t o look at.
Well, okay, what are the implications here, then? Having a draught sort of accounts to help them make informed decisions as part of their directors responsibilities on.
Just make sure that you raise the building, you get paid. And because these people, if we were if we were on a different kind of focus here,
these people were severely affected, and I want to. A liberation may be the only realistic option, but these people are not gonna pay you in your business.
So we just way want to make sure that we get paid on. We get paid on a progress basis if we continue to invite them.
Yeah, so again, just to look at the four categories. So your top categories, which I think way said we’re kind of the likes of Maybe your food retailers are pharmacies.
So possibly no disclosure required from going concern point. That’s depending on the circumstances. Obviously, if there’s anything that means the disclosures required,
then that should be considered on probably no immediate issues. You know, any long term issues or anything like,
you know, property values in the balance sheets, things like that that you that you need to consider us.
Generally, there probably won’t be too many going concern issues in that top band of companies. Your next company then.
So these are your company’s, where you’re satisfied that there’s no material uncertainty. So so the companies with an initial slow down,
but the directors believe that this is short term. They will return to normal once the period passes. To return to normal.
Return to something that resembles normalcy is probably a more appropriate comments. So you possibly needed a going concern note explaining why there’s no material uncertainty there.
And then you’ll also need to factor that you need to consider in your budgets as well. Wait, there’s no material uncertainty.
And why you think that that Corbett nineteen, doesn’t cause the material uncertainty to exist? Then you’re to more severe categories.
So these are your companies that have been hit hard by cold, with nineteen temporarily shut down Well, just indicate that it would be a difficult trading period.
Costs have been caught as much as possible to keep the business alive during that period on. Do they believe that the going concern basis is appropriate for the material uncertainty exists in this situation?
You’re likely when I need it when you will need a going concern. Noting your financials, explaining that the material uncertainty exists possibly also need to consider putting a going concern.
Note our reference to the growing concern issues in the director’s report. Also, because you know it Z explaining that business.
And it’s it’s principal uncertainties on then your your final bands. So where the only realistic option is to consider is too permanently cease trading or liquidation?
So that’s where the company plans to be liquidated or permanently ceased in the next twelve months. We’re looking at the break up basis.
We need to disclose that fact in the financial statements and the state assets to get realizable value so any fixed assets become current assets and so on.
And let’s just be clear to go back up that slave, like a company that plans to liquidate are permanently cease trading.
Sometimes we will practically see knees within group structures, or there is a strategic decision to cease this company trading and the accounts will be prepared on not going concern basis.
We see them in J V’s, but we tend not to see them and companies who are actually going to liquid it cos they’re actually going to liquidate.
That last set of financial statements is often not necessarily approved and submitted. And so I needed have very early signs of severe distress on There’s not a visible way out.
This is going back to my point of Joe rather than making they accounts and finalising them on a not going concern basis.
If something is going to happen in the coming months that maybe they need to get some insolvency advice now before approving financial statement so they have nothing,
they will come back and put them in the ass later stage. Yeah, so the next section just is what should a going concern note with the material uncertainty look like?
And you see that part of this is shaded because a lot of the requirements for going concern notes are driven by eyes of five seventy.
So if if you’ve unaudited set of financial statements, those disclosures would be would also be driven by Eyes of five seventy so that the auditor is happy that those items have been have been disclosed.
So what should it includes? So details of the uncertainty, including a description of the events or conditions casting doubt on the entities ability to continue as a going concern Management’s plans to deal with these events clear this look.
Closure that there is a material uncertainty which may cast significant doubt on the entities ability to continue as a going concern in a statement that it may be unable to realise its assets and discharges liabilities in the normal course of business.
So, back to your point earlier days, you know, the likes of this needs to be quite tailors to the company.
I mean, there’s no probably no off the shelf disclosure that’ll fit. I mean, you know, we need to describe the events in conditions because it’s it’s in this situation.
It’s sectoral, It’s different, it’s it’s global, it’s different. It’s each individual company, depending on their balance sheets,
and they’re trading circumstances. It’s not even sector on that situation, so it’s not where we are right now,
and I assume Mike the best practise will development involving. Obviously we want to try and leave that to give you the answer straight away.
And what in a vacuum of knowledge, and it’s very difficult to create pro forma disclosures. Mike does have one of the handouts did you got for this session?
Mike has got a whole Siri’s of sample disclosures the way produced for you’re right now. So it’s not that we’re saying,
Well, there’s nothing available but just thistle thing at the bottom. Mike has driven by Isil five seventy.
Okay, so So So when you look at efforts to you’ve got to put in details of the uncertainty I supplied seventy clearly applies to bits.
But from our perspective, if it applies to audits and you know this disclosure structure by Sav, it’s even though you’re not doing a novice,
that’s still best practise in terms of the disclosure and in none of that s O, then what? Then we move on to F s won all five.
So obviously first one on five, we’re not dealing with the fair presentation framework. We’re dealing with compliance framework.
So in the majority of instances where you’re where you’re, you’re using your religious exemption on drift under, but you’re small companies regime.
There’ll be very little disclosures required from NFS one or five point of view where things become a bit more more.
Where there’s a bit more disclosure required is where we have unaudited set of that first one oh five accounts Esso Eyes of five seventy.
It deals with the whole issue of financial statements being prepared under a fair presentation framework and a compliance framework.
And the compliance framework is obviously referencing to efforts one o five. And if we are doing accounts on the reference one or five are north,
would need to look something along the lines of This is, well that the requirements, driven by eyes of five seventy,
will carry through in to NFS one or five set of financial statements. So the number of efforts from all five sets of financial statements being office and obviously is minimal.
And there’s a sort of a flaw on Irish legislation which allows for micro entities being admitted because we have have laid filing,
so this doesn’t really apply in the UK it would be just that they’re like the other. Having an efforts will find set of plants status of is negligible in an Irish context.
You may find it more often and so on were quoting the relevant section of legislation there if you’re doing an Irish of it.
So just to be clear on the first one to five, if we’re doing accounts compilation Z, we’re working within a compliance free work.
So for a small fund is very, very limited in terms of everything we’re talking about today. Yeah,
absolutely. Andre. Yes. Oh, it’s when it’s when it becomes audited that the issues arise on board,
I suppose again, it’s one for Wednesday, But But from an auditor’s perspective, there’s a requirement on referenced one of five that the accounts aren’t misleading as it goes to positive statement to say that they showed through in Fairview.
So again that Z just to make the distinction between what is that an audit? Exempt Accounts and Reference one.
Oh five. Okay, Mike, just when we’re as you’re transitioning onto directors reports there, there’s a question in from Billy,
and the question is, if you have a credit goes out of business, how do you reflect that pension game that opposite to impair of assets?
So So, Billy, I suppose the first thing is, if you have a creditor is a stay and if it is a limited company,
well, that money is still old. If it was legally owned before they went out of business, it’s still asking that kind of business.
So until such time as the company is fully liquidated, I don’t think you’re in a position there like that off.
And it is a sole trader who was shut up there, George. And on the game they set up their doors and they want to wonder.
Resurfaced sometime in the future. And if if they’re old money now and on there legally, all that money,
I think that might be a little bit early in most practical circumstances. If I could think of On My Feet Billy the right,
that back, Yeah, I agree with that again. If it’s a company, I would imagine the liquidator will pursue it.
If it’s an individual that imagine legally, that right is still there. So onto the four topics. So directors report.
So again, there’s a few areas where we require a bit of disclosure around Cove in nineteen. So I’ve picked off five areas.
They’re so principal risks and uncertainties. Future developments, particulars of events since the year end going concern disclosures potentially and then press one or two.
Actually, that should be the small companies regime versus the versus Company. That’s not small. So obviously,
if you’re if you’re a small company, you’re disclosures that reduced. Although you may wish to maybe volunteer some of the information given given the circumstances and so that this is just a selection of the director’s report.
So directors of port should include a fair review of the business of the company on the Prince description of the principal risks and uncertainties facing the company.
And then there’s this other subsections beneath that place requirements on again. The company that applies for the small companies regime is exempt from the requirements of subsection one,
so principal risks and uncertainties. So it’s required for companies not availing of small companies regime. Given the rapid emergence and spreading of the virus,
the required disclosures were will change over time as the pandemic develops across the region’s. I will come back to that point of a slide just under Honda next lie just to speak about that,
and so the risks and uncertainties they should be specific to the company and consider the specific issues. So for example,
Have you got companies with debtors? So have you got a credit, credit risk or exposure on your on your debtors?
Ledger left. Letters that you thought were recoverable may not be recoverable, given that given the circumstances, companies in the hospitality sector so are we.
Ari. In an industry where by we’re reliant on consumer sentiments and discretionary spends and, you know, the economy prospering because then there could be an economic risk there.
When, when restrictions do end, then companies trading in in highly affected countries now adore how relevant this is.
But hopefully, you know, fairness. Our government seem to be taken simply quite proactive in their approach,
so hopefully we’ll be out of this as soon as we can be. But when we do get out,
what are they going to be? Other countries that are still involved that are highly affected? And does our trade with those countries get?
Is that going to be effective in future? So it’s not just were not just when we’re looking at principalists uncertainties your mike,
we’re not just looking at National Economies National Impact Training International. We have to look at where we’re trading into and where our food supply chain is up.
Yeah, exactly. I mean, I suppose looking if you were if you were trading with America at the moment,
obviously, it looks to be developing at a rapid rate there. So you may wish to look at your market there and see well,
is there is a risk associated with that. That’s what I have in front of me here is in preparation for this.
I was just trying to get example disclosures that air kind of on live sets of financial statements. So there’s very few s enemies that we could find with disclosures.
But this first one here is this is the latter. So the hotel group s O on the putting on the twenty fourth of February.
They approved their financial statements on I just kind of went through. Just see. Okay, Well, how was Corona virus impacted on that unfairness on the twenty fourth of February?
I didn’t have a huge consciousness about Corona virus, you know, I knew it was there, and it was potentially an issue,
But it wasn’t a huge deal in my world. Probably not sure what it was like in yours days,
but, you know, It probably wasn’t at the forefront of everyone’s thoughts, I think until the until the rugby match has been cancelled.
Yeah, but like I think that I think it is very, very important here that that on what you’re expressing is yes,
this is a real leave directors report. This is a real live directors report was signed off. But the world we lived in on the twenty fourth of February versus the world we live in on the sixth of April,
six weeks later is a whole different world. And you know, there’s not significant numbers of financial statements being signed off.
So it’s just the timing in the context of this report is critically important. Oh, yeah, and I suppose he had just to clarify.
I’m not saying that there’s any any incorrect disclosures. All I’m saying is that deals with the risks that were present on the twenty fourth of February on.
Do you know, if you were to look at the same set of financial statements a few weeks later,
you know the risk will have evolved as the time passes. So again, this kind of reflects where the risks were on the twenty fourth they re so.
It was kind of a commentary saying OK, we’re aware of the risk of Brexit were aware of the risk of Corona virus.
We’re monitoring it and we continue to monitor it on Do you know, obviously a hotel group. I think within ten or twelve days,
probably all the hotels close their doors on. Do you know if you were looking at the risks ten or twelve days later,
it’s just a Corona virus just took hold on the risk involved. And, you know, I think from from what would we would have seen,
I think it was a baby pennies back in February. I think they released a statement just commenting on the risk of Corona virus and that it was a supply chain risk and that,
you know, it could potentially impact their their supply chain in China and again for the likes of pennies of shops closed now.
So that’s the risk that was present in the middle of February is a different risk that’s present now. So I mean,
I just make the point to kind of what’s relevant now might be relevant tomorrow, and it might have evolved into a different risk So again,
that’s just that’s just a sample of what was on the DL ASA annual return. Then we have I think this is gonna be a So again,
this. This assumed this was signed maybe earlier in February because it’s commenting on the supply chain risk. And I know all that.
And then health and safety saw things making a comment on its its workforce and think it mentions about the potential for factories closing and things like that s so again,
this is G S K. That’s a Smith trying S o attention impacts. It remains uncertain. So up to the date of the report,
the outbreak hasn’t had a material impact on the trading results of the group. However, continuing to monitor the situation,
I suppose the first examples that would be that would be interesting are the ones that maybe have been signs kind of towards the end of March,
because then they’ll be dealing with Maybe real risks are really impactful risks. So it’ll be interesting to see what’s what signed on those financial statements.
S o. The next section on the director’s reports just deals with future developments. So again, future developments is kind of one of these disclosures.
That’s just kind of a generic off the shelf, one nearly rolled out for for a lot of companies.
And it’s usually in the kind of context of we continue to develop. The activities of the company are,
you know, well, you know, it’s kind of general positive commentary just to say that there were no significant changes,
a etc. A suppose we kind of have to incorporate Covert nineteen into that. Because although companies might intend on trading,
you know, well into the future and improving things, we have an initial hurdle that we have to we have to deal with before we kind of get back on our feet.
That’s assuming that we’re dealing with a company that’s been impacted by cold the nineteen. So again, I think this is one of the disclosure that would have made it into the handout.
So So you want to just bring up the handout? My just to show people what’s in it for a minute.
I know that will not go through every paragraph of it. Yeah, give me. Give me one second there.
Obviously, I sprung that one on your little bit. Mike today Yeah, it wasn’t expecting that one.
No does. But we’re nearly there now. It takes it, takes a while to find all the sheets and then find out when you want to share.
Yeah, and, of course, when everybody is watching and it takes even longer of this. Now here we go.
Hopefully, hopefully, you can see that now. Yeah, that’s that’s actually the disclosure checklist. Email On second.
It’s the tabby side. I think Mike is straight of paragraphs. That’s the one. Yes, so again,
there’s no one size fits all our example here, but these are things you might wish to put in.
So we’ve gone through each individual sections. Hold, for example, with the director’s report here. So future development paragraphs on.
But I’ve also put in kind of examples. Okay, if you have been mildly affected by covert nineteen,
that’s maybe an example and an illustration. Paragraph. If you’ve been significantly affected by covert nineteen. So if your business that’s kind of been shut down our mothballed,
that might be kind of the wording you might consider going with principal risks and uncertainties. So that’s a general commentary on the outbreak of covert nineteen on and then the same to say that the effects can be fully determined.
What we believe the following That’s the main risks associated with it. Our initial slow down and trading a trick activity during the period of temporary closure,
a prolonged period of government recommendations and restrictions on the movement of people to contain the virus. A potential production in economic activity following the recommenced of trading,
which may result, gives super spending and demand and the reduction in asset values. And again, that’s something that could be Taylor’s.
Taylor’s two suits The company’s needs eyes. Obviously, every company is going to be different, since you can’t roll out the same point for each individual company.
So I want to be. This is still in the director’s reports of events after the band she dates.
So again we’ve these disclosures there, just commenting on what’s happened since the since the balance she dates have commented on the temporary closure of the business on the twenty eighth of March,
which commented on what the director, what did the director’s intend to do during the periods to kind of keep the cost based because presumably a lot of companies okay,
well, staff will be laid off and costs would be trying trying keep the costs as long as we possibly can during the period of restriction.
And then this’d an example of events since the balance she did. Whereby company is continuing to trade during the black down period.
But they’re operating at a reduced level, then no disclosures. So going concern have a couple of examples.
And again, I’ve tried to follow the four categories of slide. So I’m not gonna go down through through all of them but even say,
if we go down through the most severe one s o during the first quarter twenty twenty, the covert nineteen pandemic has spread initially from Asia to Europe and subsequently worldwide.
The initial economic effect of this has been a worldwide slowdown in economic activity and the loss of jobs across many businesses.
In Ireland. There are restrictions placed on nonessential businesses, which has resulted in many businesses temporarily closing and measures designed to restrict the movement of people to slow down the spread of the virus.
Like many businesses, it’s just would have called us because that’s what our pro forma cos. Is called.
Sample Company is exposed to the effects of cold with nineteen pandemic match twenty twenty. As a result of the reduction in the economic activity and the recommendations and restrictions placed on business is the company decided to temporarily ceased trading during this period.
The company has laid off staff reduced working hours for staff who have maintained other costs have also been reduced during non trading period where possible and the company will use government grants.
Government supports providers to businesses during this time based on the measures taken to reduce costs. Directors believe that the company is well positioned to return to full trading capacity once the period of uncertainty passes.
However, the directors believe that the above circumstances represent material uncertainty, which make has significant out on the company’s ability to continue as a going concern.
Therefore, it may be unable to realise its assets and discharges liabilities in the normal course of business. So the idea I suppose,
folks, the idea behind this document, you want to go back to the slides there, Mike on way finish off and we’ll finish off the last Vestiges and on judgments and estimation uncertainty.
But so we’ve created these paragraphs to give you something and obviously we’re watching. Every day we’re watching the market,
we’re developing mawr. The questions were getting based on the questions were getting him based on what people are asking us,
but we’re updating these on an ongoing basis. So this is a starting point. This is not the end point.
This is a starting point, as at the sixth of April and twenty twenty, and how we believe it gives a good starting point.
And but it’s just we need to stay brief. That was, like everything to know rollovers. It’s it’s we need to take it day by day,
keep up in the long term, but deal with it day by day and in the short term. And Mike,
the last topic for our session that you wanted the cover on was and judgments and key sources of estimation,
uncertainty. And obviously this does not apply to Section one a small too small companies. This is only for your large companies,
you know, for your large companies and for those large companies, it’s going to be an out of elements here.
But the judgments a key source of estimation certainly Mike, how we were talking before he came on is that it’s not when you deal with this issue and you deal with this issue to deal with this standard.
All of these standards intertwined what you’ve said in the director’s report. What you build from a judgement perspective,
innovation, a going concern everything needs that needs to stack in. Yeah, And I suppose now, more than ever will be using will be using judgments,
but certainly Well, while this period continues of Lock Down S O. I mean, yeah, we need to disclose judgments,
assumptions and key sources of estimation, uncertainty and that would be impacted by a lot of areas on a lot of areas.
In our financial statements, I mean, are going concern assumption. You know what? If we want to be based on projections on how we help you determined future cash bubbles how we determined that where we’ll be in the next six months if you know,
considering where we currently are. So, like No, no one has a crystal ball here. All we can use is our judgement.
And make sure that Z it was sound Azeris nable a zit possibly can be on, you know, So like the areas that that are likely to be affected by this.
You know, pretty much everything that we discussed so far. Exactly. Exactly. So going. Concern Future cash flow,
property values again. You know, a huge amount of judgments. If you’re looking at something like that at the moment in,
I don’t think we’ll see a huge amount of property transactions and the next the next little while. So you know,
what can we use? We don’t have a market based data. You probably just You could just use our judgement how good that’ll be.
I don’t know. I mean, and that’s one of the reasons why audit opinions, but not a huge amount of being signed at the moment.
Because on certain certainties like that, you know, if things like impairments what Children to be used when we’ve considered whether assets need to be appeared or what judgments have we used when in hearing assets stock provisioning?
Here’s another postman. She’s events. You know what assumptions have we used when considering whether an event was adjusting or Nana Justin?
So if we were looking at that timeline, if something kind of fell in the in the kind of grey area,
what condition assumptions have we used in establishing whether it’s adjusting or not adjusting, and also what one of my basic concerns here.
My God, I know this is a very, very fundamental concern when it comes to the judgments, a key source of estimation,
uncertainty and the accounts production software providers will have given pro forma paragraphs and then given perform paragraphs or people go click,
click, click include that include that. Until that. And but it’s now all of those pro former wordings are kind of kind of gone.
Yeah, we’re going to develop warnings for them, but your accounts purchase offer, possibly an anus. You have one of the really practise providers won’t have updated for these.
So it’s down to you, the complaining accountant, you the auditor and you know that you can you can do work with them on.
Did you Taylor these on a case by case basis? Yeah, like there’s no off the shelf. Well,
you can take her off the shelf packages, but you have to you have to introduce a Bill Taylor in yourself because,
like I said, there’s probably no two companies in the exact same situation. You need to factor in the individual circumstances into into all of those.
Okay, way had a fair idea that we weren’t going to get through all the material in sixty minutes.
But I do want to wrap it up. People get back to their day and we have this like here.
We do have our webinar serious and which were which were running throughout the week. And so we do have a weapon,
are serious running throughout the week. And there’s a lot the dates and you can find everything that we’re doing on seeking the store that come to access our webinars just to let you know if you found it,
they’ll benefit. We do have our financial reporting conference. Obviously believe conferences aren’t happening. So rather than having you guys sitting in for our conference,
but we don’t have taken our life. Financial reporting conference on. We’ve seen running out over two weeks and so keep an eye out during the week for our financial reporting conference.
The whole conference, we had a conference schedule, we tore it up. What, what? What This happened.
And then we created a financial reporting conference two weeks ago when we had to tear that up. So we’re literally creating a financial important conference that we might as well call it the Corona Financial Reporting Conference because we’re going to focus and go into in depth on all the areas on all the topics to want to wrap up right now.
Thank you very much for joining us here today on this on this free weather there. And please do cheque out.
We have our accounts for those Facebook group we’re sending up on our covert resource centre within it within our knowledge hub.
So we were putting together everything that we’ve created over the last two weeks and everything we want to create the next two weeks you built to access that in in the knowledge Hope so kindly very much for joining us today.
And if they see you again, let’s focus on the priorities one thing at a time. What’s the next most important thing to do and let’s get out there and help our clients and let’s get it done and stay safe.
Thank you very much.
Proactive Tax Advice Spring 2020
This transcript about proactive tax advice in spring 2020 was created using AI and may contain some mistakes.
Hello, and welcome to this afternoon’s webinar where we’re looking at providing proactive tax advice in spring 2020 and proactive tax advice has changed because obviously Corona virus has changed so much today. I am joined by Simon Britton of quantify to look at proactive tax advice in the face of grown arts. So welcome to everybody who’s joining us here. And to those of you who are joining us on zoom.
And, but also those of you who are joining us as we stream, leave into Facebook, YouTube, LinkedIn, and Twitter. So if you’re joining us here, you’ve please. If you have questions as we go through this session, if you have questions, please ask them below in the chat box. If you’re joining us on any of the other platforms,
Simon has a very detailed, comprehensive presentation, prepared, have allowed some time for questions and answers. And if questions come in during the session, irrelevant Simon and myself, see them here. So we can have a conversation with Simon and I ask the questions for you. So if you’re elave here in the webinar with us, but if you’re any part of watching,
just put your comments, your questions into the comment box and the team are going to pick them up here. Now, the next thing is the presentation for this session and the slaves to Gord this session. So again, Jonathan is posting a link at the bottom of the page, either in the chat box or in the comments so that you can access your downloads and material.
And some of the questions we may leave to the end, but please ask the questions as they arise for you. What are the huge values of something like this is Simon is unquestionably a category of Harley Simon as a tax expert. You have somebody here as a captive audience, a captive expert. So Simon can answer your questions. When you ask a question,
everybody benefits Simon. Welcome to our webinar today. Simon, can you introduce a little bit about yourself first before we get stuck into the material and why people should listen to you? What does Simon Britton have? There’s going to be a benefit to accountants and firm owners. Yeah. Hi Daz. Uh, thanks for, thanks for having me and, uh,
hello everyone. I hope everyone’s, um, uh, not, not struggling too much with, uh, with lockdown and, uh, looking forward to getting back to work. Um, so yeah, so I’m, I’m Simon Britton and, uh, and so today I’m, um, uh, talking about tax advice and what we can do proactively to help our clients in the,
in the current environment. My background, I’m actually a, um, I’ve got a far too many qualifications that my CV reads like a sign of a waste of youth. Um, so I’m a ATT CTA solicitor as well. Um, so I’ve spent, uh, far too long specializing just in the world of tax and, um, and, uh,
in particular, in proactive planning, helping people, uh, generally or MBAs, um, look at their circumstances, look at the family or the business, and let’s, let’s make sure that we can get all of the, the various taxes that, uh, that come into play and get them all in sync. And so I’ve picked out a couple of a couple of the juiciest bits that,
uh, that I think that as a profession we can take to our clients at the moment and really be on the front foot. So Simon, you mentioned in there that you’ve also qualified as a solicitor and a very interesting combination. Did you spend long practicing as a solicitor or was another string to your tactics? Um, so yeah, I’ve, I’ve been,
uh, practicing as a, as a solicitor for, um, about 15 years of, of the last 20. So I’ve spent some, some time purely an accountancy firms sometime just in tax other times, uh, just in law firms. But, um, what I find this as a big disconnect between, um, the, the accountancy profession and lawyers.
And so I try and bridge that gap. And so when we’ve got tax tax thinking that needs to be implemented, that’s really where I come in and just make sure that, uh, that the legal work that’s done really sort of ties in with that. But then on the other hand as well, uh, I’m kind of also, uh, reinventing R and D tax services as a software driven,
uh, thing as well. So I’m doing too many things, Not at all. And it’s like the sign of the sign of an expert and an inquisitive mind. Um, and, and that’s what we want when it comes to tax advice, inquisitive minds. So folks, anybody who came in late and in the comments below are in the chat box below Jonathan has grouped the downloads for today’s session.
We’re just kicking off we’ve, we’ve just finished our introduction and we’re now moving on to the teaching space and which Simon is going to bring this show in the next 45 to 50 minutes through his material. And then we will wrap up the session. So Simon over to you, if you want to bring up your presentation and share your screen, Alright, let’s do that.
Um, so, um, uh, you know what, uh, if jr, if you’re still there, if you could enable screen-sharing, that would, that would be a big help That, that, that would be, that would be a big help. Um, so hopefully you should be able to do it there now. Yep. That’s the one excellent New features appearing every day on zoom and there’s new download.
So, so, so our standard operating procedures from yesterday are possibly redundant by today. Yeah. It seems that ties in with the government advice around, around handling with Corona virus just every day is different, but, uh, great. So, uh, so yeah, so, so we’re going to be talking to practice tax planning, uh, in,
in, in the current time. And, um, I flicked through far too many of the slides. Let’s just see if I can get back to number one. Uh, sorry. Right. Number two. Here we go. Um, brilliant. So let’s dive in. Um, so what I’ve, what I’ve done today is I’ve tried to pick up,
um, two areas that are really going to help your clients get money into their businesses. That’s gotta be the absolute top priority at the moment is how do we get money into businesses? Where, where people have had so much disruption through, uh, through the Corolla virus. Um, and, and I think overwhelmingly a lot of the businesses that I talk to say that they see the current,
the current time as a blip, they expect in six months, nine months a year for the world to sort of write itself and for it to be to an extent business as usual again. So what they need to do, uh, to, to bridge that gap is get some more money into the business and money, money that perhaps wasn’t in their forecasts,
uh, before the coronavirus yet. So we’re going to look at a couple of ways of potentially doing that. Um, what I really want to emphasize is all the Corona support that accounts are doing at the moment. It’s great. And, and definitely stick with that, do that first. Um, the, the government supports been, been very good.
Some of it’s been a bit clumsy and in terms of the implementation, but generally what they’re doing is, uh, absolutely should be the top priority. So, so what I’m going to talk about is what to do next, when you’ve done that, what do you, what do you do next? And it’s good to know that you’ve got a couple of things in there in the bank on the agenda to speak to clients about.
So we’re going to talk about suspensions, um, and then we’re not going to go too heavy. So it’s, don’t, don’t be too worried about that. And R and D claims, um, both of which are great ways of getting some money into businesses. Um, so yeah, Anybody that’s joining us here live on zoom folks, you can adjust your screen view options.
You can adjust your screen view options to make the slides bigger, to have Simon, to do a gallery view. So make sure I’m playing with your settings for every, or watching to get the view that you want. Great. Great. Um, yeah, so, so SASA is the first topic that we’re going to tackle. Um, this one is,
uh, it’s about business pensions, and so they’re really designed for MBS. Uh, so, so the maximum number of members that you can have in one of these is 11 members. So it’s, it’s, it’s designed for, for that smaller, uh, smaller type of business. Um, not for a fee, a huge client. Uh, there are other things that we can look at there,
but this is really good for most of the businesses that we tend to be dealing with. Um, uh, SAS, uh, just to explain with the terminology that stands for a small self-administered scheme and it’s different to a personal pension. Um, so a personal pension is, is heavily regulated, um, as it, as it should be by the financial conduct authority and all of the rules around personal pension relate to,
to the, the fact that it is an individual pension, one size has to fit all. And so, so there’s blanket regulation across, uh, across how they operate with the SAS, which is this small self-administered scheme, because that’s a business pension designed for MBS. It’s really, it’s designed to be handled by entrepreneurs. And so that, so there’s a different balance of risk and reward than you would have for,
uh, for just the one size fits all available to every member of the public type, uh, uh, personal pension. So a business pension, uh, has a couple of key features that, uh, that, that are really important for the type of planning that we’re going to talk about. Um, the first one is you can borrow 50% of your pension fund from a SAS,
and because they’re the people in this fast, the members also the trustees and they’re, so, so it’s the same person who runs the company is in charge of the pension and will benefit from the pension. Then the regulation here just allows you to sort of take, take more of a balanced risk and reward approach, and to look at your own business and think,
well, you know what, I’m going to lend half of my pension to my business because I backed myself to be able to make money using my pension fund. I’m going to make more money doing that than I am by investing in stocks and shares or whatever else. And, um, and so there were a lot of rules around what this loan has to look like.
And we’ll talk through those in a little bit more detail later on, but the other thing that you can do as well, that we’re going to touch on today is contributing a commercial property into the pension, and that’s a fantastically tax efficient thing to do. But the other thing that, uh, that’s really pushing this up, the agenda for people at the moment is that once a commercial property is outside of your company,
then in a pension it’s secured. And I cannot trust the environment if there were to be financial problems with the company in the next sort of, you know, two years, three years, however long, um, the, the property is actually safe when it’s outside of the company and then the pension it’s outside of the reach of crevice. So it’s,
that’s an important point that a lot of a lot of clients are quite reasonably concerned about just asset protection at the moment. And the SAS can help with that as well as giving it great cash boost and some tax benefits as well. So we’ll talk through, talk through those in a little bit more detail now. So, um, so I’ve put this up,
but accessing your existing pension funds, um, now accessing pension funds, this is a world away from liberation. We’re not talking about, uh, about pension liberation. We’re not trying to permanently strip money out of a pension. What we’re saying here is, is, um, that the money that’s sat in the pension, you can actually use that as work and capital in your business,
not all of it. So 50% you do have to still make sure that the pension is, uh, is well provided for, um, but, uh, uh, 50% of what’s in your pension pot, um, can, can be used in the business. And, um, excuse me, if you, if you look at, um, a typical situation might be that someone,
an owner manager might have a, have a business that’s out there. They might have squirreled away say 200,000 pound Indigo into a pension pot that sat there with the money being, uh, being managed by a financial advisor, and they’re getting a return on it. But, uh, but they’re not, they’re not using that money. And then, and typically people aren’t that excited about what whatever’s going on with their money so long as they’re going a return and the kept kind of up to speed on that.
Um, then, then yeah, then they forget about that money. But what they could be doing is accessing that. So if someone’s got that 200,000 pound, then this is way of them getting a hundred thousand pounds of it into their businesses. Working capital has to be repaired back into the pension, but, um, uh, over typically over a five year period,
but when the money goes back into the pension, the end of the they’ve lost nothing, uh, in terms of the value of the pension, but, uh, but they’ve had the benefit of that effective and very cheap money, um, in the, in the meantime and, uh, and money where they’re not having to go to the bank, they’re not having to explain their,
their business proposition and to cash flows and all that sort of thing, because they’re effectively both borrower and lender. It makes it very easy. So what I’ve sketched out Simon, does that need to be carried out by somebody independent are, if I’m the accountant to my client, is it appropriate for me to do that valuation? And those there needs to be a formal process and formal report here?
Absolutely. It’s a, the valuation, um, is that that’s something where I would actually encourage the, uh, the accountant that, uh, that’s dealing with the client here to be the one that puts that valuation together. It doesn’t have to be independent. Um, it does have to, has to have some substance to it, of course. Um,
but what we’re trying to do is, excuse me, just make sure that, uh, that the value of the, of the company’s shares typically would be the company shares that, uh, that there’s some security taken over for the, uh, for the pension, um, just at the Valley, at least exceeds the amount that that’s going to be borrowed.
So if someone, yeah, if someone in a typical scenario, I might have 200,000 pounds at a pension wanting to borrow a hundred thousand, we need to have a valuation that says that the shares are worth at least a hundred thousand. So it’s a, it’s not a, it’s not the sort of very far reaching valuation exercise that, uh, then sometimes needed.
Um, this is one that, that really, um, can be done by someone that knows the business very well and follows a sort of fairly standard methodology and putting that together. So, yeah, so, uh, but the very steps involved, um, the, the longest part is getting the stuff set up. So that’s something that the company needs to,
um, engage SASA advisor to, to, uh, to set that up typically takes three to six weeks. Um, a lot of that just depends on how complex the, uh, the applicant’s tax affairs are, but if you’ve got a fairly straightforward a tax record, then yeah, we would expect, uh, to, uh, pretty quickly at the moment the revenue doing these sort of three to four weeks,
sometimes it does stretch out a bit longer, uh, and, and odd cases sort of history, then, you know, it can take sort of a couple of months, maybe three, but that, uh, that sort of time period is, um, is what we usually say for people to budget towards. Um, so, so if you are looking to get corporation tax deduction on,
on pension contributions, um, then you need to factor in that sort of gap and they start this process a good couple of months before the year end. Um, but yeah, so, so sending assassin is reasonably straightforward, not massively expensive. Um, that’s something that, uh, that, um, uh, my business can, can help with,
um, uh, taking me through that process. And also most of the rest of the implementation of this, um, sasses are often something that it’s in that sort of dark spot where people are aware of it and probably did some of it in their exam. We’ll have read some articles on it, but actually implementing these things. Isn’t something that many of us as,
as advisors, um, do you want a day to day basis? So a really, that’s a, that’s where sort of sass floor, the, uh, one of the hats that I’m wearing today, um, the that’s the one that, um, sort of, uh, implements this everyday as, and can make this really smooth package. Um,
so once the SAS is set up, then it can get a bank account, um, that, that usually takes a week or two. So again, that’s sort of just slows the process down a little bit. Um, and then once the bank accounts set up the personal pension, so if people have got money just in a normal pension or in a sip or something like that,
um, if that’s the funds that they want to access, we can move the personal pension funds into the SAS. And at that point, you’ve got this ability to lend it into your own company and also make whatever other investment decisions you want within the bounds of the regulation. Um, but, uh, but it’s the, the owner manager themselves that would be the trustee and would be able to direct their investment strategy,
which might well be that I’m going to borrow half of the money back out in my own business. And the rest of it’s just going to get reinvested where it was. And that’s, that’s fine, um, to allow the loan to take place, there needs to be some security. Um, typically that’s sort of the shares, but it might bill for a property.
Um, so there needs to be valuation exercise done on that just to satisfy the, the trustees that, uh, that they, uh, that the security has the valuation, uh, enough of a valuation that covered the, the extent of the loan, uh, that exercise is normally overlapped with setting up the sauce as, as it’s, um, drafting up their,
um, the pension, um, uh, loan agreement, um, which, uh, which is on fairly standard terms or the interest rate can be, can be set, um, either high or low, depending what you want to do. Typically we would suggest, um, putting it up the, the upper end of the sort of bracket of reasonable,
um, rates up because the company is going to get a tax deduction on the, on the interest and the pension’s not going to pay any tax when it receives the interest, the company grants security over chairs, which again, that’s a process that we take care of that that’s overlapped as soon as they, the loaner send it into, uh, that paperwork’s ready to go.
And that, and that can be executed at the same time. And then 50% of the pension value is transferred into the business. Um, so as soon as the money is available and the paperwork signed that bank transfer can happen same day. So actually this is pretty good, pretty quick way of getting money that into the business that, you know, you’ve,
you’ve gotten a background that’s not, not otherwise being employed in pops as, as good a way as you could. If you had it, You said something that’s really critical a few minutes ago, and it’s about, I would describe it as sticking to the knitting and sticking to what we’re good at. Um, so I accountants have core competencies. Some people are different competencies,
but knowing what our boundaries and our limits are, Yeah. Doing something like this, what are the risks? Where does this go wrong for somebody like me, who’s not an expert in SAS and hasn’t been through the process, maybe only has an academic knowledge, what are the mistakes that people make and what are the horror stories that you’ve seen? So there’s,
um, sauces are sort of fairly tightly regulated. There’s only certain types of investment that you can do with them. And, uh, and you have to make sure that, uh, they’re there that you’re sticking within the regulations. Um, if, if something goes wrong, then yeah, the penalties are Savage. Um, so, you know, there’s no,
no point pretending otherwise, um, this, this isn’t something to, to try yourself. Um, so, uh, so there, there, there, there are advisors out there myself included that can, uh, that can, uh, steer people through this. Uh, w probably the principles are great, um, but actually getting the implementation, right.
Um, that’s the, that’s sort of the best way you’re going to save yourself from ending up in hot water. Um, the w one of the, one of the, uh, areas that people fall down on a lot is with this type of arrangement where, where a is being made from the, from the pension into the company, you actually have to repair that long.
Um, it has to be done with, with an interest rate. The interest has to be paid as well. You’ve got to make at least on your repayments on that couple of, in interest to get it back. So you can’t just lift the money out of the pantry. I forget about it, uh, that it has to be, has to work through properly.
There’s lots of, of, uh, as you’d expect, uh, returns and the regulation that there needs to be met. But, um, but yeah, working with someone who does this as their day to day job, um, someone who really knows the rules inside and out, and it’s got their finger on the pulse, that’s, that’s where you stop yourself from going wrong.
Um, so say, I think it’s a case of, uh, just, you know, pulling in the right people for the right, for the right roles. And this is one of those things that if it’s not something you’re doing every day, then give it to someone who is doing it every day. Um, I think typically the way that I see,
um, um, the accountants performing best when they’re doing, um, tax planning, they involve something slightly off the beaten path. It’s really be aware of the opportunity. And then to have that relationship with the client, to be able to say, I think this could work for you. And then it brings someone in who can implement it, but to work together,
to make sure that, that, uh, that we’re not just implementing something standard, we’re implementing something that’s really just tailored to, to meet the exact needs of that client. Um, so, so, yeah, just to finish off on this slide company has to repair that loan plus interest, and that’s typically done over five years. So this one would run through an example of work example if this,
um, which, um, uh, on one take very long to, to run it through. But, um, but I think it’s useful to kind of bring it to life and illustrate a bit. So David, um, had, uh, 200,000 pounds in a personal pension, uh, in a sip. Um, and so not money, um,
sorry. Uh, his company has 75,000 pound borrowing on a machine and he’s paying 8% interest on that. Um, so that’s a pretty typical scenario. Um, so to, to tackle this, what he does is sets up the SAS moves the money from the pension and the SAS, and then lens, um, half of it there. So a hundred thousand comes from the SAS into the company,
and that’s at a 10% interest rate, which you could, it could have been higher or lower, but we could pick 10% of there just to get some money back into the SAS. So they’ve reaped, sorry. Dave’s company repays the borrowing on the machine. So that’s 75,000 pounds repaid. It’s effectively replaced the barn, the external borrowing with borrowing from his pension.
Um, so it’s that hidden trust. It’s no longer leakage that interest is now going into his pension and it’s there for the future. Um, and then he also, uh, paid himself a bonus of 25,000 pound. Um, so he’s personally, um, quite, quite happy as well. That’s taxable obviously. Um, but he can’t fund a pension contribution with that if we wanted it to.
Um, but, um, yeah, so something like this congest, uh, where, where there’s an obvious benefit for the, for the individual involved, you know, the business is going to be better off, but also, you know, if he manages to get a little bit out of it himself along the way, um, then that’s something that clients really do value in difficult times.
Um, and that, that quite often is something that could just be long back into the business to clear an overdrawn director’s loan account, or just to create a credit on a director’s loan. Um, the longest three paid over five years. So there’s 10,000 pounds worth of interest that’s paid into the, into the SAS that’s received tax free. So the sauces got that 10 grand that gets invested for the future as well.
So, so Dave’s pension cause now looking, um, has as healthy, if not more healthy than it was before the business is better off than, than he’s personally, um, had that bonus as well. So it’s a nice little love come there for everyone. And that’s something that can be, uh, set up an implement it pretty straightforwardly. Um,
When we go back to your previous slide, you’re talking about in total, in total, you’re looking at, from start to finish, you can probably get this done in 12 to 15 weeks. Yeah. I’d say the quickest that I’ve seen this particular variant implemented was probably about five weeks. Um, but then yeah. Um, Oh, the other ones,
if the revenue is slow setting up the scheme and then if the people that are the current pension provider, if they’re slow, um, allowing the transfer of money across then yeah. You can’t be looking at something like probably 15 weeks. Um, Is it beyond the scope of today’s presentation Simon to toggle it? The restrictions on the SAS in terms of general,
you said are quite tightly regulated and there’s only certain things you can invest in certain things you can do. Am I opening up a can of worms by asking that question? No, no, no. It’s um, well, yes, but so we’ll answer it briefly, but I want to give people sort of the awareness, there is an awful of,
uh, of, of, uh, subtlety and nuance to the, to the rules. But, uh, but broadly what we’re looking at is it’s gotta be a proper investment. So, um, so you, I mean, you can’t spend the money on cars and holiday homes. It’s gotta be something where it’s generating an investment return. That’s really designed to,
you know, the, the, the investment has to be something that’s designed to, uh, to provide you with a pot of money in retirement. Uh, commercial property is brilliant and we’ll talk about commercial property and the pension, uh, on the next few slides. But, um, but yeah, commercial property is a cracking investment to have in this kind of SAS.
You can’t have residential property. Um, and then, uh, the, the, the other thing that people do a lot with it, so loans to third parties. Um, so you might say you might see a third party, that’s offering an attractive interest rate. Um, and again, that’s something pretty common on property developments. Uh, stepping in with a bit of finance can often be short,
um, and generate good returns. So that’s something that, uh, that people doing a lot with this lending money in your own business. That’s fine. You are allowed to do that with the sauce. You’d never be allowed to do that with this sip, um, and some, and then investing in stocks and shares and the, in the usual way,
uh, that that’s allowed to. So yeah, it’s gotta be, gotta be a proper investment and, um, and yeah, no, no residential property in there. So it’s not by to that. Um, if you ask about the student property, that’s where we get into a kind of arms kind of area civil, we’ll leave that one for another time.
Um, but yeah, if anyone wants to sort of, you know, explore particular, um, you know, can this be invested in, cannot be invested in very happy to do that separately or afterwards? So, yeah, we’ve been through, through the examples. So the next one that I want to do to look at this is moving a commercial property into a pension.
And the aim of this, uh, is both the security aspect that I touched on earlier, um, to, to make sure that the commercial property is safe from creditors, if anything was to happen in the future in terms of the financial stability of the company, but also the, the tax relief that you can get on moving a commercial property into a pension is massive.
So, uh, so this is something that’s often awful luck. Um, if a, company’s got a commercial property in, on this balance sheet and the company, uh, then yeah, w if we move it into the, the pension, then I’m going to talk through how we, how we do that and how we get a corporation tax deduction on the value of that property.
So, again, just to start off, the company has to set up a suspension. So you’re looking at the three to six weeks, they’re going a valuation of the property that can be overlapped with that. Typically it takes two or three weeks to get, to get a valuation done. If anyone knows the value of they can do a valuation quicker than two or three weeks,
then please give them my number of valuations. D D tenants seem to take longer than necessary. Um, the, the pension makes it, uh, sorry. Uh, the company makes a pension contribution. Um, that’s equal to the property of the Valley. Now this is, this is something that, um, that there’s a prescribed methodology for making this type of,
of pension contribution, where we’re going to move the property into the pension. This is the process. So you have to do a pension pledge that’s for an amount of money equal to the property value or going above or below. But, um, but, but broadly equal to the property value. So if you’ve got, say 500,000 pounds a property, we’re going to do a 500,000 pound pledge of,
of, of money to the, to the pension. Um, but then shortly after that, the, the trust of the trustees would accept an offer of the property to satisfy that cash debt. And, uh, and so we’re not, we’re not contributing the property directly. We’re not saying that the pension, please take this property. I’m saying, please take this property to satisfy that cash debt that we owe you.
And that’s a, that’s a methodology that, uh, that, uh, is different to what’s called an in specie contribution. Um, if you, if you’ve looked at pensions over the last two or three years, you’ll have seen that in specie contributions as something that the revenue is uncomfortable with because of the valuation issues. So, uh, so the revenue has actually set out this way of doing things where we can,
uh, can transfer property into pension using using this approach. Um, and, and this says, this is, um, something that you readily accept and, and have, uh, given clearance on there that this is an appropriate method of doing it. So when you’ve done that, you’ve made a pension contribution of say 500,000 pounds. So you would then get your corporation tax deduction on that pension,
your contribution, but, um, pension contribution tax deduction is absolutely standards, nothing controversial about it at all. Um, there, there are some rules about the timing of the pension contribution, uh, sorry, the timing of the deduction that you guys, um, depending on whether you’ve made contributions to a pension over the last year, um, and depending on how,
how big it is broadly, if it’s a contribution up to the value of 500,000 pounds, then you can get all of that deduction in one year. If it exceeds that, then you might have to spread it over two or three years. If it’s a contribution of over a couple of million pounds, then yeah, you’re going to have to spread that out over three years,
but, uh, but you do get the full value of, of that, um, of that tax deduction. So, uh, typically what we find with most businesses that we do this with is the, actually the, the property, uh, Valley, um, is more, um, usually more than double the profits of the business, uh,
for the type of family managed businesses that are there, that they would turn it to deal with on this. So that means that, um, the, when the punching of contributions being made, when you get to the year end, the tax liability for the current year is going to be completely wiped out. And then you can actually carry the tax loss back in the last year and recover some tax that was paid last year.
So that will get repaired by the, by the revenue, to the company and the usual way, so that can have serious cash difference to the, to the company. And again, I, I’m sorry to come in here with the negative questions again, Simon, I do, you know, I am an accountant. I am an actual real life accountant.
So I tend to look at things from all sides. And I look okay, upside. This all sounds really positive. What’s the risks here. Like I am actually seeing a double positive here that it’s, it’s protecting. So there’s a tax saving. It’s protecting an asset in the company that may be coming into a period of distress. What is the downside that I’m not seeing?
Obviously there’s obviously there’s implications of moving a property owned by a limited company into a pension form. I’m sure there’s more restrictions on getting it out and liquidating us well, what are the other risks and what are those sites? No, yeah, you’re right. Uh, so, so they, when the property is in the pension, then, then yeah,
it’s, it’s in, it’s in a different place doing different things. Uh, the, the, the downside that you, that you’ve then got, um, is that, um, the, the company is going to have to lease that, uh, that, that property. So it wasn’t previously paying rent on the property, but it is going to have to pay market rent to the pension.
So, so you have a little bit of extra cash. It’s going to have to keep going out, but that’s cash. That’s coming out with a company and a tax deductible form and ending up in the pension where you’re not paying tax on it. So it’s, uh, I bought it. So, So, so, so, so it’s a downside,
and now we have this cash outgoing every single month, but on the upside it’s cash, that’s ultimately coming to us longterm, tax-free building the nest thing for the future. Absolutely. Absolutely. So, I mean, the, the, the other downside, the one that, uh, that we’ll need to sort of flag up, um, is the effect on the balance sheet.
You know, if you bounce sheets got a commercial property on that, then, then that’s, you know, that’s, that’s, that’s great. It’s going to boost your balance sheet. If you take that off and put it in the pension then yeah. Normal, normal scenario is that’s going to reduce your balance sheet, uh, significantly. Um, and also in the year that you make the pension contribution,
um, that, that, that gets set off against your profits, which is where the tax saving comes from. Um, but if, if in one year you’ve hit the balance sheet in a major way, and you’ve wiped out your profits, and it looks as if you’ve made a significant loss, then yeah. Cosmetically, that’s something that, uh,
that, that, you know, uh, businesses might need to, uh, to, to bear in mind how that, how that looks, uh, I mean, obviously we are just taking, uh, taking that asset and moving it from one place to another. It’s all still in the control. And so, uh, so, so commercially,
we’re not sort of significantly changing, uh, the, the position, but, um, but in terms of how the accounts look, the client needs to be really, uh, aware that, uh, that it’s gonna, it’s gonna look like they’ve had a bad year when actually what they’ve done is provided, um, provided that, um, security for the future and,
uh, and, and, uh, bought themselves a big tax benefit as well. But, so, yeah. Should we just run through an example of a little quick one just to, to, uh, sort of bring it to life a bit? So, uh, so yeah, Jeff, uh, Jeff co, um, and you can probably guess the owner of Jeff because Jeff,
uh, Jeff co owns the industrial unit that it operates from, and it’s got a current value of half a million pounds there. Um, so it starts to set up and using that methodology that I talked through earlier, uh, the, uh, pension, uh, takes the ownership of the, of the unit there. Um, and then Elise’s put in place,
um, so that the company can carry on using it. The company gets a tax deduction of half a million pound in the current year, which is on that pension contribution. Um, so his profits, um, the company’s profits will say 250,000 pound. So yeah, um, the, the current, uh, profits are completely wiped out, um,
by the, by the size of that pension contribution. So he’s going to save the, uh, the tax that he would have otherwise had to pay on that. And then he’s also got another 250,000 pounds worth of profit, sorry, tax deduction that he could carry back in the last year recover last year as tax that was paid. So not only is he not going to pay a 50,000 pounds in tax for this year,
his profits, um, it’s also getting back 50,000 pounds that he paid in tax last year. Um, and so, yeah, so, so, so that’s a really nice position to, to end up in, but, uh, but what’s even better is this next example. So a lot of, um, a lot of people, um, have been advised by their accountants,
um, and very rightly in a lot of cases, not to have the commercial property in the company, because if, if something goes wrong with the company, then the property is theoretically at risk there. So a lot of people have got the commercial property that the business trades from they’ve got that health personally. And, um, and yeah, and,
and, and that’s, it’s not, it’s not an amazingly tax efficient position to be in because if the company’s paying rent, then you’re paying income tax typically at a higher rate on the rent that you receive than the tax deduction that the company is claiming on it. So, so, but that’s usually not a big figure that, uh, that, that,
that, uh, that we worry about that, but we’ve got an opportunity in that scenario where the, whether shareholder director shareholder owns the property personally, outside the company, what we can do is actually move it into the company, then move it onto the pension. And by, by bouncing it in the company on the weight of the pension, um,
then we got w we got even more tax relief. So it, it gives us the chance to create some income tax savings, as well as that corporation tax deduction, which is the same as we just run through. In the last example of do this again, I get set up the property, valuation gets carried out. The company buys the property from the owner.
Um, and, uh, and so to do that, typically the, the company is not going to be stuck with all that money, just sat there. Um, so a director’s loan account was created where just the purchase price is left outstanding. Um, the company then follows very much the same steps as in the last example where the pension contribution has made that pledge is satisfied by the transfer of the property.
The company claims it’s big corporation tax deduction, but, uh, but then this is the sort of extra bit there there’s like downside on this route is that the owners then left with a couple of gains tax liability on the property sale. And, uh, and obviously if the, if the property is worth a lot, and there’s a big gain there,
then that can be quite a sizeable, uh, capital gains tax bill. So that would be June 31st, January in the year following the tax year in which this happens. Um, but the owner is that left with the director’s loan account. Um, they can draw on when the cash is available in the company. Um, and that’s, that’s taxed money in effect the capital gains tax that’s paid,
um, on the, on the sale of the property from the person to the company that, uh, that means that that DLA has in effect is being taxed and then loaned back to the company. So you can take it Once you, once you have, once you have the adequate cash reserves in the company to pay the capital gains tax labor, there’s the,
by the time of the applicant’s tax liability, your director’s own account then becomes a draw, but asset tax free in the hands of the directors. Yeah, yeah, absolutely. And if you, if you’re otherwise going to be taking salary or dividends, uh, from the, from the company, um, then if you, if you can replace that,
um, withdrawing on the CLA, then that actually get you paying complicates tax at a much lower rate than you otherwise would be on pulling money out of you, your company. So this works really well for companies where it’s got a, you know, small family shareholding group. Um, if you have got, if you’ve got multiple, um, shareholders,
uh, there that aren’t necessarily connected in that way, then this needs a bit more structuring, but if it is a, you know, fun family business, family group, um, shareholders, then this works really. And the other thing is the property is really just moving true live with the company because it’s amazing. It’s, it’s moving from personal ownership into,
but then it’s immediate thing of yonder the pension. So it is protected, but obviously we’re back to the same issue. It’s well, in my own name, I’ve got much more flexibility as to what I do with that property. Whereas once it’s put in the pension fund, I have limited freedom And, and less flexibility. Yeah. Um, yeah.
Well, if you wanted to do something with that, probably when it’s in the pension, then you need to make sure that you’re not sort of stripping any value out of the pension. So you could buy the property back, Alan’s a pension, but then you need to have the cash to be able to do that. Um, so see when the property’s in the pension it’s,
um, yeah, you have meant that contribution on value is locked away in the pension. And, uh, and, and you are in a more restricted environment there. One thing strikes me, Simon, as you speak, is this, I’m like, this is absolutely fabulous in terms of opportunities. It’s, you know, it’s creating options. It’s giving us opportunities that’s relevant to right now,
but it also does strike me that whatever you’re doing here really does need to be part of a bigger strategy, a bigger wealth plan. And that you’re, you’re looking at not just this move, which you’re looking at the next move of possibly to move after it, to assess the implications of the longer term plan as in the 10 50, 20 year plan.
Absolutely. And, uh, and suspensions are very good for inheritance tax planning as well. Um, so, you know, if you think very, very long term, uh, we do usually say, you know, if you can draw on your pension last, because when money’s in your pension, it’s, it’s, uh, outside of your estate for inheritance tax,
if you start pulling on your pension, you’re pulling cash into, into your estate. That’s potentially, I didn’t, I didn’t verbally that straight out because I’m not an expert in this area, Simon, but that was actually where my thought process was going. If we have a property here, and then we put it through the company creating a director’s loan accounts,
but then it goes into the pension fund. And like, obviously, no, nobody is planning their ultimate expiration, but how many, like how many years does it need to be in the pension fund before it can be passed on, like, is this something that maybe somebody who’s, who has of ill health, who kind of, they have a definitive timeframe?
Is this, is this a, another opportunity? Is this an opportunity far effective tax planning into the pension into these days? Yes. Yeah, it is. Um, if someone’s in that position, then it, it does need to be, uh, does need to be dealt with, um, you know, fairly carefully, any, any kind of,
um, know like death bed or fairly short run and planning in those sorts of circumstances needs to be dealt with really, really carefully. Um, and one of the things that we need to do is just understand the circumstance of that person and the family what’s the next generation can have kind of a need in terms of access to cash, uh, in terms of protection for the future.
So I wouldn’t say that this is necessarily the GoTo solution there. That could be all sorts of things that we need to take into account, but yeah, if you’re in that scenario, this is something that’s worth considering. And in some cases absolutely will be the right thing to do. Um, the, one of the things that I wanted to touch on with,
with S is a lot of people will have questions around the, uh, the, the personal, um, the personal pension contribution limit to 40,000 pounds per person per year is the maximum that we can put in. And then there’s also, um, a lifetime, uh, maximum amount that can go into a personal pension, which is the 1,055,000. Um,
it was don’t apply to, uh, to a SAS pension. Those are personal limits. And as I mentioned before, this is a business pension. So, um, so business pension, where it’s got more than one member, uh, can have something called a general fund. And that allows us to, to make contributions from the company into the pension,
which are held almost in a suspense account when the pension contribution has been made by the company, the corporation tax rules that allow that deduction, that tax deduction to be claimed the actual allocation of that money from the pension, um, sort of suspense account into people’s individual personal, um, allocations, that’s governed by this 40,000 pound a year car and the million pounds lifetime allowance,
but the pension itself can receive, um, a huge amount of money. And, uh, and then it can have, uh, it can have that money sat in that suspense account potentially indefinitely. Um, the, the earmarking of the fund into people’s individual accounts is capped at about 40,000 a year. So when we do this, we, we have to,
we have to bear in mind, you know, we need to make those allocations over a number of years to make sure that when people have retirement, they’ve got, they’ve got the maximum they can possibly have, uh, in the, in that pension fund. But yeah, if people are concerned about some that these limits are going to, how can you contribute a commercial property into a pension,
if you, if you’ve got that 40,000 limit, um, that limit, again, it doesn’t apply here a totally different set of rules, but, um, yeah, let’s, uh, let’s, let’s run through this example just to sort of bring that to, to excuse me, to bring that to life a little bit more. So, uh,
Vicky, either you can tell I’ve been using my imagination when I’ve named these, these companies for the example, uh, Vicky’s got a company called Vaco. And so, so she personally owns that unit. The company trades from it is 250,000 annual rent tends to be 10% of the, of the value of the property. So 25 pound annual rent. And then because she’s a high rate tax patient,
she’s paying 10,000 pound a year tax on that 10 grand a year leakage. And we’re going to try and stop that. Uh, so a company has regular profits of South hundred thousand pound a year. Um, she sets up a SAS, acquires the property transfers. Uh, the company acquires the property transfers into the SAS. Um, and that leaves her with in this,
in this example, it’s a a hundred thousand pound gain. So she’s got a 20,000 pound CGT liability. That’s the equivalent of two years, um, tax liability on the, on the rent that she’s been receiving. Um, so, so in the scheme of things, 20,000 pound tax liability, but it’s not, not that big compared to, to the tax that she has been paying on the rent.
Anyway, the company claims that at 250,000 pounds corporation tax deduction, so that reduces the current year tax liability to zero. And then she’s going to get 20,000 pounds, um, reclaim, uh, from last year. She’s also still got 10,000 pounds of tax savings next year, too. So total tax saving 15,000 pounds, the SAS then receives that market rent.
So that’s 25,000 pound, um, rent. That’s going to go into the SAS. So every year she was receiving that, and now the SAS is receiving that. So, so we need to do something to, to readdress that balance, to make sure that she’s not personally out of pocket through this, um, while building the pension pot. So what she’s going to do there is replaced the lost rental income by drawing on her director’s loan account tax free 15,000 pounds a year that lasted for the next 16 years.
So over that time, a lot of money goes into the pension and, uh, and we ended up in a really, really nice tax efficient possession. So CA if someone, if someone’s in that position where they can do this, this is a cracking Bev of planning for them. And in terms of fees, this is, this is not high watering in terms of fees either.
So, um, what I wanted to touch on next, um, is R and D claims and lockdown. Um, and, uh, I’m conscious, we’ve not got a huge amount of time. Um, so, so I’m going to hit this sort of fairly fast, and then hopefully we can deal with some questions around the, the pensions and the R and D.
Um, if anyone’s got any questions, we’ll be able to turn to those then, and sort of five, 10 minutes. Um, but yeah, so, uh, I’m sure everyone’s familiar with, uh, research and development tax relief claims. Um, they are a great source of money for innovative businesses. Um, the, the, the way it works is you identify,
uh, some, uh, scientific or technological uncertainties that our company’s been tackling as part of its business. And then we can claim a tax relief on part the cost. So in effect, it’s a, it’s a way of getting by part of those research and development costs. And it’s administered through the tax regime. The claim was actually put in on the CT 600,
which means that, although typically this might be something that you’d expect to see as, as a, as grant funding opportunity, but it’s something that as accountants, we, uh, we administer through the, through the tax regime. Um, it’s not something that I, um, I don’t actually handle people’s tax returns for that. I always think that’s best done,
um, by them, by the accountant, that’s dealing with the rest of their, of their, uh, company’s, uh, affairs. And, um, and so, yeah, just want to kind of run through a few, few points around this. Uh, there’s been quite a, quite a bit of, uh, of charts on the forums and in groups,
uh, about R and D claims being a lot harder, um, and locked down, um, because a lot of discussion of, well, you need to go and visit the client. You need to really get to know the, the, the business to be able to do one of these properly. I just want to dispel a few myths here,
um, because there’s a, a culture has been built up around R and D toxifies that, uh, that makes it seem more difficult than it, than it has to be. Um, the, the, the most important point that I want to get across to you is, um, that the quality of your records is key in the same as for any other,
um, aspect of, of tax advice or accountancy work. Um, the quality of records absolutely essential. Um, there are far too many assumptions that are made in R and D tax relief claims and, uh, and the revenue really cracking down on that. So, uh, so we want to see some really nicely presented, um, records that just establish that evidence based that,
that, that explains the claim so that, uh, so that if someone looks at the claim and in due course, then we can point back at these records and said, that’s why the claim was that, that specific figure there. And, uh, and the quality of those records is really important. The, the service that I’m going to talk about briefly as a,
as a software platform that, uh, that, uh, that I’ve built, um, while my developers have built. And, um, and that’s designed to, to get those records, um, in place really, really well. And it’s something that, uh, it’s a software as a service product. So it’s actually designed for the client to be in the driving seat of doing all that,
um, putting the data in there and, uh, making sure that we’ve got, uh, got the right records. One of the most important things would that the revenue asks about when they do a mega inquiries, is this start and end dates of you projects. So then they like to see that the companies have got a few different projects going on rather than just saying,
well, it’s 10% of everybody’s role in the business is to do some sort of, uh, that’s, that’s not good enough, never has been. Um, and, uh, and that, that sort of percentage basis that, that people use when they’re making R and D claims, it’s, uh, it’s, it’s going to come to an end.
Um, instead it’s gotta be a defined project with a start date and an end date. And if you can describe those as well, and explain why you’ve picked those dates, then that’ll go a long way to satisfying the revenue that you understand the rules and that, uh, that you’ve actually applied the proper thinking in terms of how these projects, uh,
uh, described. And the other thing, uh, that, uh, that that’s really important to explain here, as well as the revenue and looking for one or two page narratives that not looking for 20, 30, 40 pages of, of jargon and technical language that, uh, that they don’t understand, um, you know, clients don’t want to explain,
you know, the, the, the intimacies of all of their, uh, of, of all of that sort of technical knowhow to, to anyone let alone to a tax inspector through the form of this kind of report. And it’s really not necessary the revenues a view on this. Cause they’ve got a pretty simple checklist. It’s got a few things need to be text four questions on there.
And if you can’t explain why a project, much as those requirements in, in one or two pages, then that’s actually something that brings the alarm bells for the inspectors. When they’re looking at it going, what you’re trying to hide here, why have you given me 20 pages of, of stuff on this? Um, so, so yeah, if,
if you’re looking at, you know, how can we do a claim and lockdown if you think, well, I need to get one or two pages of narrative per project, then that actually that’s a lot more achievable. That means that it’s something that you can do. Um, sensitively, if you’re asking the right questions and you’re getting the right information from the client,
it’s something that can be done remotely. And, uh, and again, uh, the, the software that, uh, that, uh, I’ll talk about, that’s something that allows the client to actually input a lot of that data for you. So that the conversation that you’re having, isn’t a fishing expedition with the client, and you’re actually talking about,
you know, can, can we describe this differently? Can you give me a bit more information about that? You’re hitting the ground running in terms of that conversation, you can go back to yours. If you haven’t done an R and D claim for a client, you can go back two years and, uh, and then that can give the client really good cash boost,
uh, typical values that were there. We’re looking at 40,000 pound a year for, uh, for, for a company. If it’s companies making repeat claims, you look at more at an average of about 70,000 pound a year of, uh, of value coming back into the company. Um, if the company is profit making, then they’ll save that tax.
Um, if it’s, if it’s not a profit Meghan company, then the revenue will actually pay, uh, an, an amount across to the company. They’ll write them a check, do bank transfer, and then you’ve got, it’s not, not quite the equivalent value, but, um, but you do get an awful lot of, of, of,
of the value that you would have had if you’re a profit making business. And so, and so, yeah, if you’re talking to, to businesses about R and D claims, um, and create starting points at the moment is to say, you know, how’s your business responding to all the disruption of the Corona virus? Have you had to change your products,
your processes, uh, it’s, it’s, you know, it shows that you’re interested in what the client is going through at the moment. And, uh, and also there are a lot of people out there having to, having to be innovative in the way that they do things having to respond to while we can’t get access to this material anymore. So we’re having to look at different materials that we can use,
and we’re doing things in different ways. So we need to make this safer, we need to do that differently. So it’s a great starting point for that conversation. Um, yeah. So a quick sort of run it through some lessons from the front line of R and D. I’ve been doing R and D for 20 years now, and I’ve been sort of,
you know, um, uh, doing an awful lot of it, um, over the last five years. Um, there’ve been very, very few inquiries into R and D claims. And I think, uh, you know, universally people say that that they’ve had very little experience of dealing with, uh, revenue inquiries because of their, the position I’ve got.
Um, do you end up handling quite quite a lot of revenue inquiries from accountants that have made a claim themselves, and then they’ve got sort of a juicy inquiry, so they pass it across state to be dealt with. So I’ve got some really strong experiences. And so there’s been a big change. Uh, inquiries are no longer sort of asking about the innovation in general.
You know, you genuinely doing something innovative. The inquiries are very, very much more detailed and it’s from inspectors that actually know what they’re talking about. Um, particularly in the software, uh, environment, the revenues. Now I’ve got some, uh, software experts and they’ve told the tax rules to rather than, as it was couple years ago, tax,
uh, tax inspectors that they’ve, um, tried to shoe on into looking at a software claims. And the revenue is aware that people have been pulling the wool over their eyes in terms of what’s innovative and what’s not in the world of digital and software for years. And so they’re cracking down pretty hard on that at the moment. Um, and, uh,
and the app. So the revenue target then specific sectors are getting looked at, uh, digital is, is an area that that’s going to look to our lot, uh, engineering and manufacturing as well. We’re seeing much, much more detailed, um, inquiries. They’re lots of, much into the innovation around the, uh, the client’s understanding of the rules and also into the,
the records that are being kept. Um, I’ve put on there, the death of percentage fees. Now, this is, this is something that’s, um, I can kind of separately bang on about for hours, but, um, but we’ve seen it across every other, um, every other aspect of professional services where there’s a, whether it’s a perceived risk that clients,
uh, uh, taking on too much risk, because they’re overly influenced by the percentage fees that advisors are charging, then, uh, then the regulation steps in and kills off the ability to, to charge a percentage fee or cap said we’ve seen percentage fees and R and D claims anywhere from 5%. Uh, they’re sort of very low end up to sort of,
well, 20% fairly standard, 25 30 in some cases, 35% and a half on occasion seeing, uh, seeing people charging 50% of the client’s tax refund as a, as a fee. Um, and that is that it’s just staggering. And there’s been a shift, um, in the, in the revenue and the treasury and the, with the political environment around this is now very definitely saying that,
uh, that there’s tax relief that’s meant to sustain the economy and help the economy grow. They don’t really want to be seeing on fires. There’s creaming off 30% of, of that, uh, for what should be relatively easy bit of work. Um, the there’s been an acknowledgement that actually the R and D uh, rules are poorly designed, but,
um, but the, the revenue have to work with what’s there at the moment. Um, and, uh, and really this sort of perception of percentage fees are skewing. The market is something that I think we’ll, we’ll see, um, regulators step in and start to, uh, apply some restrictions around that before too long. Um, you fix fees,
uh, really the way that, uh, that I think we should be going on R and D claims, particularly if it’s someone that’s into sort of a repeat claim scenario, if they’ve been making claims for three or four years, it’s very difficult to, to, uh, to justify to a client that, uh, that there needs to be this percentage fee to balance risk and reward.
You know, if they know that their claims going to go through, cause they’ve seen it go through three or four times before, um, then there’s this concept of a success risk-based fee is really sort of out of kilter with client expectations these days. So I thing, um, fixed fees is where we’re at, uh, on, on that going forward,
the revenue, um, always now ask about the client’s understanding of the best guidelines they wanted to speak to clients. And then they want to, to ask the client, you know, what do you understand of the base guidelines, even though they’re not actually called the biz guidelines anymore, the revenue always uses that terminology, excuse me. And if the client says like,
never heard of them, then, then you’re in bother. So, uh, so it’s a, it’s one of these things that, you know, we do try and make sure that the clients have got plenty access to, to help and guidance around that. And then there’s certain advisors that are, that are in the spotlight, um, ones that are known to base their claims on benchmarks and sort of Megan claims 10 or 10 or 15% up or down on,
on the, the benchmarks that they’ve got of revenue or aware of, of people doing that now. And, uh, and so they wanted to see, no, we’re not interested in, in assumptions of benchmarks. We want to see proper records, you know, who did, who did what work or what timeframe linking it in with the start and end date of project.
And they’re not expecting time sheets as such, but, uh, but the software that they developed does allow individual staff members to tank their time against these projects. And that is something that the revenue are now saying, given the, given that the technology is there available and easy to use, um, someone who comes along and says, well, I’ve just taken 20% of his time,
50% of hers, 35% of that person. They’re saying, look, that’s, that’s not good enough. And to be fair, it never has been good enough to, to make, um, bold assumptions like that. Um, and then also, yeah, the revenue are aware of people that, uh, that try and blind them with science, you know,
producing very thick reports, generally written by retired academics or, uh, or retired engineers. And these reports are lovely long flowing things, but don’t actually, um, don’t, don’t actually link in with the numbers. The revenue are aware of that. We’re conscious that they’re, that they want to see where the link is between the figures that go into the claim and the narrative.
And, and again, that’s something that the software really helps with. So I just want to give you a couple of really quick examples here. I’m sure everyone’s kind of aware of the benefits of R and D claims, but just to quickly illustrate this, a typical example might be someone who’s got 25 staff average salary, 25,000 pound a year said 10% of their staff time to spend on proof of concept work.
People seem to have to demonstrate their ability to solve problems to win work these days. And so if you’ve spent a hundred thousand pounds on materials on that kind of work over the year, then putting your salaries and materials together, 160,000 of qualifying costs, that’s going to give you an extra corporation tax deduction of 211,000 fair. So that translates into a 40,000 pound tax saving 160,000 pounds spent 40,000 pounds of tax saved.
So that’s an absolutely bulk standard examples that I think everyone will be familiar with. Um, what I want to do in this example is just to illustrate a slightly different angle on it. So let’s assume same scenario, but actually the company has been paid by a large company. So that’s one, that’s got more than 500 large turnover, a large balance sheet.
Um, and so that this large company has paid, um, Phil’s fabrication company to carry out some, uh, some, some work on, uh, on an RMD project for a large company. So again, I’ve kept the figures, the same hundred thousand pounds of materials, 10% of all the stuff time, uh, that’s on there. And,
and although I said, don’t use blanket assumptions, I’m using one for purposes of the example, um, in, in coming up with that 10%. Um, but yeah, putting your salaries and materials together, it’s the same quantifying cost as in the last example, but th the SME company can claim, uh, as if it was a large company.
So it’s going to claim the ARDEC tax credit rather than the, the, the, um, R and D tax relief, uh, enhanced expenditure. So that’s the above the line, um, credit, which would be 21,000 pounds in this case, that’s a taxable benefit though, taxable credit. So the net benefit is going to be 17,000 pounds. So this is,
this is one of the, a lot of people mess, which is why I wanted to highlight it. If the company has been paid to carry out that work, but it’s been paid by large company. And so long as the work was part of the large companies, R D project, your launch company can’t claim anything that it’s subcontracts out to SMEs,
but the SME can make this claim, even though it’s been paid, you can get another 17,000 pounds of benefit there by putting through a claim as though it was a large company for this. And, um, yeah, so, so that’s, that’s one that hopefully people will find useful. Um, Uh, both of them, both of them were,
were used. Um, well, I’ve taken lots of notes. Anyway, Simon, I found both parts of your session, extremely beneficial. And in terms of your subtle folk, where do, where do people contact you, or where do people find you? And if today has been of significant interest from our has rang a bell, Um, so they,
yeah, best place to get me for the, for anything to do with, um, your suspensions, um, SAS, hyphen law.com, um, and my email address, Simon dot Britt nuts. I saved from law.com. Um, that’s the, that’s the, the best way of getting ahold of me there. I work with, um, uh,
SAS, administrators, SAS trustees. What I do is the implementation. They set the SAS up. Um, I handled the implementation and the work with advisors around making sure that they’re, that the planning is, is right, and then that the implementation is right. Um, so, so if I ever wants to kick ideas around about how could we use a sauce for this client,
um, than, than yet, give me a shout. We’re very happy to, to work through examples that, and, uh, and, and develop some planet on the R and D side of things, quantified.tax is, uh, that’s, that’s where you’ll find details of the, uh, the software platform, um, that, uh, that,
that helps clients put together, um, the, the R and D clam. And, uh, and also, yeah, you can contact me. They’re more than happy day to get involved with, um, any sort of technical queries people have got around R and D. Um, and to, uh, to, uh, we, we’ve got sort of a tailored service.
If it’s a client that’s comfortable with R and D and, and wants to, uh, to manage their, their fees a bit better, um, that they can use the software themselves. Um, we, can we go from there all the way up to sort of, you know, reviewing their claims for them or giving them complete handholding consultation service for someone that’s never done a claim before.
Um, but it’s, um, but yeah, so I, either of those would be a good place to, to catch me. Um, and, um, yeah, thanks. Thanks very much for, uh, joining us Well, Simon, thank you very much. And thank you. All of those who have joined us across the various platforms where you’re plugging in.
And obviously if you found some of your benefit and what Simon has covered today, you have Steiner’s contact details there, and we’re going to continue running these webinars stroke COVID-19 and we have a full schedule of free webinars for UK accountants. So please, if you found this of benefit, pass it onto your friends, pass on the lakes link, the next email that you get,
and we’ve got to shed you where we’re developing a schedule. We’ve got some excellent speakers coming up in the month of may and beyond. So on behalf of Omnipro and our entire team, and on behalf of myself and Simon, thank you very much. Let’s stick together. I meant to get a donut.
Transcript of Video - Changes to Insolvency Framework
This transcript about changes to insolvency framework was created using AI and may contain some mistakes.
<inaudible> hello and welcome to today’s webinar, where I’m delighted to be joined by Martin Poland. Now I’ll introduce Martin in a minute and I’ll introduce what he’s going to talk about. And he introduced himself in terms of what he does and why you should listen to him. So today we’re looking at COVID-19 and we’re specifically looking at changes to the insolvency framework. And Mike is an experienced and insolvency practitioner and he’s restructured partner in FRP since 2017.
He’s a licensed insolvency practitioner, but he’s also chartered certified accountants. So like it goes without saying, when I’m talking to this audience, they’re coming out of COVID-19, we’re going to have solution on the backend. And this is where my expertise comes specifically into play. And we do our research in vending before these events, but I don’t speak into Myron.
Martin knows he knows his onions. He knows what the issues are. He knows what the practical problems are. So I’m really, really excited to hear him because I ain’t looking forward to learning from her. Okay. So just some basic housekeeping first in terms of downloads and the downloads, Jonathan has just put the downloads up with the chat box down below.
And so you can access the downloads for today’s event. If you’re on with us here, if you’re watching the recording, the demos will be over the site of the recorded webinar and you’ve had to access that material. And prior slides are exited. They’re very, very detailed in terms of going to be issues. So I’ll make sure to get your downloads.
If you’re on leave here with us, the advantage of calling on Lloyd for these events is you get to have these questions. So if you have questions, if you go down below, it’s either the checkbox or into the Q and a box, you can ask your questions. Now, if you open up the chat box, you do have two options.
You can ask a question so that it’s visible by all panelists and attendees, or you can go to the dropdown and just, you can just ask a question to panelists if it’s a private or delicate question, which sometimes can be, if you’re just getting a panelist, we won’t name you Martin. We said, we’ll see the stuff coming off. So the first thing you’d want to ask you to do folks is I’m going to ask you to go down into the chat box now and just say,
hi, where you’re from so that we know you’re there we go with the checkboxes walking. So if a few people who go in and do that, as far as we would greatly greatly appreciate this and in terms of timing, so this webinar’s kicking off at two o’clock. We have a five minute introduction. I’m going to shut up in a minute, the pastor over to America.
So he can introduce himself on FRP. And we’re going to have a 40 minute teaching space. If you ask questions in the chat box, we have to see them here. We’ve some time at the end to answer those questions, and then we would close down. But this thing is a one hour session. This is what our CPD, this is one hour of value.
We will have you here for 60 minutes. So Martin, I won’t get out of the way now and pass over to yourself. Perhaps Martin, if you could give a little bit of nice mention as to who you are, why people should listen to you, FRP, where people can find you and how you work and operate. Excellent. Okay. Well,
thank you Dez. And thank you for giving me the opportunity to speak today. So, yeah, as I said, I’m a restructuring partner within FRP based in the North of England. So I work across the tees Valley County, Durham region, Middlesborough Stockton, Darlington, and further afield. Um, I’m exclusively dealing with businesses in financial distress, as you can imagine,
over the last eight weeks, or we have been pretty busy, um, triaging clients to some extent in the first few weeks, as I’m sure many accountants on the call, where to point them in the right direction for the, you know, the government support that was out there for businesses and employees and ensure the right clients are accessing the right, uh,
information. It has been at the start, maybe a bit of a patchwork of approaches from local authorities. I think there’s a bit more uniform pharmacy now, but that at times clients have had to notify my local authorities, what support they are entitled to. So really it’s about information sharing, but from our point of view, now it’s focusing on the restart.
We’ve been through crisis management, we’ve stabilized the business through Siebel’s bounce backs, et cetera. And we’re now planning for safely restarting. Um, and me and my team are involved with a number of clients that are on that work, That stuff it’s it’s top of the moment. It’s, it’s it, it can, it’s just so challenging to see Marvin,
you know, good businesses, good people who who’ve done all the right things, maybe not trailblazers, but didn’t take any big risks. I just see good businesses and one people being decimated at the moment. It really is a travesty. And I agree when I’m dealing with clients in a normal environment, this is by no means normal clients have had, you know,
sort of days, weeks to, um, process the fact that they’re in financial difficulty, that they’ve had challenges and they come to you with, you know, um, knowledge about what their problems are and needing help. I think in this case, they have been shell shocked. Most of the clients who had fantastic businesses a few weeks ago, suddenly saw turnover,
disappear, accountants and lawyers, uh, included, uh, and you know, everyone, I want to count and describe it to me as, you know, they had to put their own mask on first. And, uh, and you know, it’s about securing their own practice, dealing with their own staff, dealing with the furlough and then planning for the future and dealing with climbing client queries.
It’s been, yeah, it’s certainly been an education for us all. I don’t want to be negative, but I think anybody who comes to an insolvency event in these times and is at least a realist it’s true, early marketing, isn’t it to say, actually, this is going to be other than we have visibility on insolvency events and you’ve got coronavirus followed by your potential Brexit impact it’s it’s is there any visibility or economists that you tap into?
Are they giving us any insights into what the future looks like and what the future six, 12, 18, 24 months time, not the near future. Yeah. Um, so far this year, we’ve actually seen while during the height of the, the kind of the crisis, should we say that we’re still not out of it, but certainly March,
April, we saw relatively benign low levels of insolvencies. And that was due to the fact that most clients or most advisors such as myself, and I’m sure people on the call, we’re working through mothballing furloughing, protecting ourselves communication with employees, creditors, um, you know, customers about what their plans were. And at that time I was talking to your colleague earlier,
does, and we were, I actually reached out to a couple of larger accountancy firms that I work with to say, look, we might need to succumb clients here. And so your staff, because we felt that the impact on business was going to be so significant that the whole of our sector let alone our practice would have struggled to deal with it.
But over time, government have the initiatives they’ve, they they’ve brought out. I describe it like a, it’s like a dam bursting. And the water was gushing from over here. Government policy was put on in this ball, water shooting, so that another policy and that patchwork of policy has, I feel supported lots of businesses that would inevitably have gone into a formal insolvency if they hadn’t have had that support.
The difficulty I see, I see is the fact that we’re now in this false covert economy. So at the moment we’ve got the support with HMRC. We’ve got deferral of payments with H with higher purchase with the bank. We’ve got a non domestic rates holidays. We’ve got grant funding, we’ve got CBLs, we’ve got bounce backs. All of that money is now that billions has been tipped into the economy and in a year’s time,
the bounce backs and the Siebel’s are going to have to start to be repaid. So it’s vital that to my mind, one of my key messages to all businesses is, you know, work with your existing advisors to get the plan ready. You know, it is not free money you’ve had there. You know, there’s some tough decisions to be made about how we’re going to pay this back and how quickly the economy is going to come back.
And I think the initiatives that government have brought in have hate to use the analogy, looking at the NHS, but kind of lowered the peak. So I do feel that there will be some inevitable insolvencies terminal insolvencies as a consequence, but I think the government initiatives do give businesses the best chance they have to try and put a plan in place. But you know,
too many, too many businesses I come across don’t access the, you know, just when they need to speak to their accountant, their solicitor have a conversation perhaps with a peer or another business owner, they shut up shop because they think it’s kind of get the trenches and they don’t reach out. And they really should because planning for the next 12 to 18 months is vital,
But that’s not just a Corolla issue in your business, in your business area. Like in solvency in the girl award is exactly as you described this, but in general, in insolvency business owners, as the shirt didn’t come down and they go with the siege mentality and they can make fatal mistakes by not talking to their accountant by not talking to somebody who can guide them through.
Yeah, that’s true. Uh, one of the messages you’ll see me mentioned today, a couple of times is, you know, early advice gives the greatest scope for a rescue. It always does, but entrepreneurs, you know, they’ve always had that locus of control close to them. You know, I got myself here, I’m going to get myself out of it,
certainly at the SMA size. Um, and you know, it’s, it’s difficult. Many with hindsight will always say, I wish I wish I’d spoken to my accountant earlier. I wish I’d spoken to you earlier, but it’s human nature. Unfortunately. Um, you know, one of the big worries when I been to many is speaking to their spouse,
let alone, you know, speaking to their staff and their managers, it’s, you know, sharing the information that life might have to change to rescue a business. And those are tough conversations to have. Okay. Martin, do you want to, do you want to share your screen there and move to the slides and tell us a little bit about first of all,
I both yourself and FRP. Okay. Fantastic. Okay. Thanks days. Okay. So, I mean, I’ll just skip through, this is the handout you will have seen, I’ll skip straight through to my slides. So today I’m going to be presenting on the changes to the insolvency framework that I think are relevant to counseling advisors. Uh, many of those have been,
uh, coming in as a consequence of COVID-19. Um, for those of you that, uh, haven’t seen the slides, uh, I’ll just pick up the agenda for today. So very brief introduction to FRP a minute or so I’m going to go through the current, uh, insolvency, uh, options and the law briefly. I know you’ll be familiar with it,
many of you, uh, but it just allows us to frame the changes that are coming. I’m going to talk about the proposed changes. I’m going to talk about directors’ duties and wrongful trading. Uh, you’ll have seen the press about it and the relaxation of those provisions for a period. And that is due to end in what a few days time,
the 1st of June as we understand it. Uh, and then there are a few of the matters that I think are directly relevant to advising accountants, uh, which I’m going to talk through towards the end of the presentation. So I far P very briefly, uh, we are a national firm with offices, uh, that the North of Scotland down to Brighton,
uh, with 53 partners and over 360 staff, we have been through our own, uh, challenges in terms of a mass migration working from home and making sure we check in on staff in various locations, uh, various, um, uh, sort of, uh, hope lives, et cetera. And I’m sure many of us have been through that,
the five pillars to our firm, I’m from the restructuring team. So I deal with businesses with, uh, with problems is the best way to put it, but we also deal with corporate finance debt advisory. Uh, we have forensic services which are nationally renowned, uh, and, uh, engaged by, uh, in many, uh, legal cases.
And by over national, uh, top four accountancy firms, um, pension advisory, Just, just to clarify Magnin, and obviously you’re on here as an insolvency expert from FRP FRP is this broader firm, but the reason why we have you on here is your work one on one with the general practitioner. You’re the insolvency brain surgeon. Obviously you’re educated here,
anybody here. So the people here are possibly insolvency experts themselves, but for general practitioners, what are your core service offerings is helping SME firms help their clients through the problems? That’s all right. I mean, we are a national firm. Yes. But, you know, I want a team of 12 based in Stockton aunties in the tees Valley. And I cover most of my,
uh, you know, most of my work, probably 95% of the work that comes to me are the clients that are referred to me, uh, come from business advisors. So it’s about 55, 60% accountants and other 20 odd percent from legal advisors. And the other is made up of maybe brokers or business angels, et cetera, that, that people that advise businesses,
uh, recommend their clients, that we build longterm relationships of trust between us and their existing advisors to bring in our expert knowledge. Cause you know, insolvencies in each area when, when they need it. The majority of the firms I work with, uh, I would say sort of three to six partner size firms of accountants. Um, and it’s usually owner managed businesses.
There are outliers on that, you know, frequently, but that’s the core of, of the clients that I work with. Okay. So the current law, I think if we’re going to talk about insolvency, I’m going to very briefly, uh, just define insolvency. I think many will be familiar with the cashflow test, the balance sheet test. And I’m going to talk briefly about the legal test.
So cashflow is, can we pay our debts as a, when they’re falling to the balance sheet, do assets equate to greater than our liabilities and the legal test is do we have an expired statutory demand that we haven’t satisfied if we fail any of those? We are technically insolvent under the insolvency act. I think I should just mention the definition that we’ve seen in the seagulls and the bounce backs,
which is the undertaking in difficulty definition, which some may be familiar is from the ISI commission’s guidance on state aid. Um, it’s effectively broadly the definition of a, of an undertaken in difficulty. Um, do we, are we part of it? And so how we submit it to an insolvency process, um, do we fit the criteria to enter into an insolvency process?
Um, I’ve more than half of our share coupled more than half of the share capital disappeared as a consequence of historic losses, et cetera. There are some, if there’s a book debt to equity ratio in any bit dire ratio, but I think the key tests accounts we’ll see is my clients are unable to pay the crown as, and when it falls to,
it’s not paid my invoice, we are now balance sheet insolvent, and it’s at that point, directors move into the so called danger zone. Okay. The current insolvency options are in front of us. Now the formula options would be at company voluntary arrangement administration. So those are rescue procedures here, and the credits is voluntary liquidation and compulsory liquidations are effectively terminal insolvency procedures.
You’ll see at the top, I’ve put in far more restructuring and that is management’s turnaround plan. And that is a big part of what I do. Uh, advisory is pre formal insolvency. I have just for the purposes of clarifying. There is another liquidation process in the UK brought in their members’ voluntary liquidations, but we’re not going to be covering that today.
Okay. So, um, it’s important to talk about, and obviously when considering the life cycle of a business and formal insolvency options, as you can see from that corporate lifecycle are relevant towards the end of the declined, uh, decline curve. And there are there’s ample opportunity to try and put in place various rescue and restructuring plans without formal insolvency, which at the moment don’t have support from legislation.
Albeit we’re going to come onto some changes that are proposed. Uh, but as you see the longer a client leaves, it typically the more likely it is a formal insolvency is required. So informal restructuring, I’m not going to spend a lot of time on this, but this is effectively any plant. The management wants to propose to their creditors to avoid a formal insolvency.
It clearly needs buy in from key stakeholders. So the bank, maybe it’s landlord, maybe a key supplier. It might be necessary to speak to a key customer, but it’s about can we massage our existing working capital through bringing forward debt to days, re rescheduling payments with suppliers, um, to try and make our existing working capital work for the business.
Um, I think the important one point I wanted to draw from this, which maybe some clients aren’t aware of, you’ll see, there’s a line that says RPO. We done in the C loan. Um, so the RPO do have it at the Regency payments office. That is the RPO. They have a financial assistance scheme. So where a company is unable to cover the cost of it to be done,
going to see. And as a consequence would inevitably be forcing to insolvency and those jobs lost the redundancy payments office can be approached and a loan can’t be given to cover the cost of redundancy. You have to have explored all of the insolvency, so all of their funding options. Um, and, uh, it is a bespoke application to the redundancy payments office.
This times are about six to eight weeks, what it is it’s, you know, it, oddly it has been a tool that I’ve used recently alongside other working capital management issues through everything evolve. This is the, basically the, the, the application of last resort. That’s right. Yeah. If we can’t refinance, we haven’t got the support from the bank stakeholders,
can’t put further funds in, have we con is it enough to just fund the redundancy costs that we need to, we know we need to restructure the business from this size down to the car, which is leading a minimum viable. How do we pay those redundancy costs? The RPO can step in What kind of an interest rate there, or does it vary?
Um, as the last time I applied, we didn’t get to, I think it is relative. I I’m trying to think. I don’t think there’s any interest on it. I can, I can confirm that I will send you an email to confirm, but I’m pretty sure it is interest free on that loan is all available on the redundancy payments office website,
by the way, super. Okay. I’m going to company voluntary arrangements. I’m not going to take you through the whole process here, but we know we need 75% of the value of secure creditors to approve, but clearly we need our secured creditors to buy into our plan because they’re the people that are providing us with invoice discounts in arrangements with our banking arrangements,
we can’t spring this plan on them. The first hurdle is always will existing funders work with us. I think the part message for company venture arrangements at the moment is that we see them very much in Vogue for retail businesses and with casual dining. Uh, they’ve hit the press over here fairly, fairly regularly. Um, and they are subject to challenge.
They, they argue used frequently to try and restructure lease obligation obligations with landlords for these multi-site operators, the appeals we’re seeing a largely on the unfair prejudice grounds as you’ll see at the bottom of that slide. And that’s where the scheme, uh, the, the creditor feels that their position individually has been unfairly prejudiced by effectively this binding of all creditors to an agreement.
Most of the time we’ve seen the court actually pushed back on that and the CVS have not been overturned, uh, material regularity. So I go on, Maybe it’s too early, maybe it’s too early. You’re looking for 75% of unsecured creditors. And in terms of agreement and is binding on all creditors, like, can you see the CDAs are going to become more problematic in this new environment for people to say,
well, fuck, like, are creditors more likely to cook their losses and just say, well, this is possibly going to be a recession, like what we’ve never seen before. And because that’s the reality is that while the recession, the global financial recession, that was an 80 2009, it definitely impacted, and it definitely impacted, but it didn’t impact all parts of the UK.
No, as hard as it did lower parts of the world and our people. Now, our creditors going to entertain this just in the hope of getting something back, our accreditor told to say, gen Y I don’t think this is workable, I think are going to see a growth in company volunteer arrangements. Um, and I think that on the basis that from the clients I’ve worked with just over the last few weeks,
there has been an understanding across the supply chain, across the business world, that we are all in this it’s affected what, 80, 85% of businesses, professional practices. Um, and you know, if there’s a process, if there is a core viable pre COVID business there that could be rescued via a restructuring of historic debt, I think clients will be relatively supportive.
So suppliers will be supportive. The key one is often the crown. So the crown as an involuntary creditor, we don’t, we don’t order that every quarter and bring up for some payers. You weren’t, they, you know, we opened the doors and we incur that debt. They normally take the pain. Most of the pain, they have a service called the Voxer management service.
And that is a team that specifically reviews voluntary arrangements day in and day out. We’re very familiar with the terms that they will propose and the initial soundings on them. I’ve got one in with them at the moment, uh, that they will be supportive. They will give businesses an opportunity to try and trade out of the COVID-19 challenges they’ve had. So I think we’ll see more,
uh, is the answer there. Um, administrations, I’m not going to spend a lot of time on, but admin is another rescue process. There’s a cascade of purposes in the UK with administrations, and we have purpose a rescue, the company purpose B can we achieve a better return for creditors than that we might otherwise have enjoyed over liquidation or purpose C is,
are we able to achieve every turn to one or more preferential and secured creditors? Um, about 5% of the administrations, uh, purpose, a focus, pretty much football clubs, because if you do not rescue the company, you lose your share and you do arrangers and you drop down to the bottom of that league pyramid. Um, I gave another presentation on administrations themselves and sip 16 compliance,
et cetera. Um, so I’m not going to go into any detail cause I want to move on to, uh, to, to changes criticism, to liquidation CBLs. Um, they have a terminal insolvency, however I’ve put end of businesses, economic life question Mark frequently with lots of the clients I’m dealing with fitting a restart of a business into the administration framework,
just isn’t cost effective sip 16 is a one size fits all, and there are ways and mechanisms of effectively rescuing a business out of liquidation. But again, we’re not here to talk about that. Um, I think it’s important to note that in liquidations and administrations, there is the director’s conduct review under the company directors disqualification act. There is no investigation into director’s conduct in a company,
voluntary arrangement, compulsory liquidation. I think the point that I wanted to raise here where, I mean, HMRC in the UK petitioned for more, uh, winding up than anyone else in the UK. I think there are about 65% of UK petitions presently, uh, and not intending to change that until the 1st of June, when it’s being reviewed, they have dropped all pending,
winding up petitions in the UK, so that as you can imagine, this freed up a lot of the insolvency cots time. Um, so, you know, clients are at risk of, of winding up proceedings in the UK. Um, I think the key point to note is if a client does receive a winding up petition, realistically at the moment it’s taking between six and seven weeks for a court hearing to be heard.
Now, the key points for our client are when that petition lands, when it’s served on them, it cannot be advertised in the London Gazette until seven days after service, but it must be advertised seven days before the hearing. So you’ve got a window there of say four or five weeks where you have got a chance to try and deal with this petition.
As soon as it is advertised, your bank account is frozen and your invoice discounting facility is frozen. And unless you’re going to go and get a validation order or suspend advertising, you know, your business then is going to struggle to function effectively at all. So it’s about if there is a petition landing, how are you going to deal with it and contact,
you know, contact? And it’s obviously practicing all the accounts as early as possible to see whether there’s a plan view. The relevant part with compulsory liquidations is the date of petition is the relevant date for void dispositions. And what that means is if a company goes into liquidation seven weeks later, anything your client has done in that seven weeks is technically void.
So if they’ve just paid your bill, unfortunately it’s obviously practice. They can ask for that back. So, you know, if a client is going to deal with this issue as well, going to carry on, regardless, anything they do in that period is going to be void, void and less validated. Okay. So moving on to the changes that we have announced,
I was hoping by today, I might be able to put a bit more meat on the bones, but we understand the, the bill will be in the house this week, but we only have what has been announced today. So that’s what I’m presenting on. So we’ve now got, we’ve talked about the administration company, voluntary arrangement that the rescue procedures,
we’ve got two liquidation procedures in the UK that the client led one, which is the CVL, which I would typically deal with the court led one, which is a compulsive process. We’ve now moving on to two more procedures, moratorium. What are the challenges I have with rescuing businesses, even though I can see there’s a viable business there. And I think we can avoid the formal insolvency,
the wolves that are already at the door. And we don’t have breathing space to allow us to put the planning in place where we can protect ourselves from maybe the landlord’s action. Maybe the HMRC are looking to take control of goods. Maybe we’ve got a County court claim that they’re looking to enforce a moratorium, which will be outside of any other insolvency process will give us a 28 day period to look at restructuring,
that business it’s going to involve the court. And the insolvency practitioner in this case will be called the IP monitor. So if you receive any correspondence about a moratorium and an IP monitor, that is this new process, the only moratoriums that are available at the moment within the UK are within insolvency processes. They’re within the pre and post appointment for an administration regime.
And they can for small companies be available in company voluntary arrangements, but this is a standalone process. Now the IP has got to be comfortable that the criteria for the moratorium is met when making the application to court creditors can challenge the moratorium. However, that can only be on the basis that the, they don’t think the conditions are met and they can prove that all that unfairly prejudice,
28 days flies in an instant. When you’re looking at crisis management and in this, the government’s proposal allows, it does propose that you can extend the moratorium for a further 28 days subject to 50% of creditors approving. So, you know, this could be a very useful tool to rescue businesses within the UK, uh, available to clients. We are just waiting to see the final detail on exactly how that’s going to be structured.
And the expectation with the moratorium is that the business will exit as alive business or Vive and insolvency process. But the hope is that this will be used to rescue businesses is a going concern outside of formal insolvency. Now where these moratoriums in place suppliers often, whenever I’m looking at a rescue, even within all the processes, suppliers seek to terminate their contracts,
most contracts within the UK, as many will be aware, have termination provisions upon insolvency events. The new supplier provisions will prevent suppliers from terminating their agreement where there’s a moratorium in place. So they have to continue to supply. So your client will call you and say, this client is not paid me, owes me X amount of pounds. And they’re telling me I’ve got to continue to pay they’re in a moratorium.
I’m not supplying them technically and legally they have to continue to do so. The challenge I see here is this is a court process. So someone’s gonna have to make an application to court to say, this supplier should supply and they haven’t sought them out. Please judge the windows we’re talking about here are so short. I can’t see it happening within the timescales that you really need.
So unless it’s a power that an a, an insolvency practitioner can literally file a notice at cart it’s stamped. And then it goes out to the supplier. You know, if you’ve got an it business that has, it’s it shut off on a Monday, but you can’t get in carts or next Tuesday your business has gone. Um, so we will see how that goes.
The clients, In fairness, though, we need to think about that practically. I do appreciate that, that the proposed legislation has focused on protecting the business, particularly the national economy, but really am I going to keep pouring money into a black hole now that there’s, I’m on notice that it’s probably not going to come back to me and we all need to pull on our national Jersey.
I’m pulled together because we’re all in this together, but I can see how I can see the challenges with this. I am not being able to force suppliers to keep playing. It’s, it’s, it’s a basic concept of limited liability protection, um, and the right to choose. Oh yeah, there are some protections. So within that moratorium period, the company must pay for the services that have been provided within that period.
Now, a creditor can apply to court on the basis that it puts upon them. Why don’t you financial hardship, perhaps to continue to supply in various circumstances. But, and also if that company doesn’t pay for those services, then they can’t be terminated. If the contract would automatically have come to its end within this window, it will end. Um,
in my opinion, we will continue to, in most cases, deal with these things by commercial city and by discussion and by, by cooperation. And perhaps there might have to be some months and payments paid, but I think time will always be the most critical factor. And to my mind, the, the, the thought behind this and the purpose is trying to achieve is fantastic.
I’m just not sure the courts are gonna be able to act quick enough to deal with this. Um, Go back completely slate. There is a level of protection for the supplier, because this is the business. They get the moratorium. It has said, well, they’re distressed, but they’re valuable. They do exhibition concentrate. It’s bigger picture stuff. So in theory,
it should work, but in three verses in the reality, it’s True. Yeah. I mean, it should pay for these services within the moratorium period. Um, time will tell, uh, well, we’ll see the final detail and then we’ll see practically whether it will work in the real world. Okay. And then finally, just on the pure insolvency processes,
being new restructuring scheme, um, you may be familiar with the scheme of arrangement that’s available under the companies act, um, which can happen outside of the fall, but insolvency, I’m not going to speak to speak about that here. The new strict restructuring regime is an attempt to try and replicate something similar to the American chapter 11 process. Um, we’ve been consulting on this since 2016,
again, in 2019. And given COVID-19, the government have brought this back on the agenda with a view to this being law very, very quickly. Um, it, a new restructuring raising will be independent of a moratorium with a two state court process. And the court will have the power to kind of settle a meeting to discuss, uh, to,
to, to, to put an agreement in place and the power to bind descending credit dissenting creditors creditors will have an opportunity as they were opposing the U S to counter propose. So if they’ve had a look at the plant and they want to make changes, if they can’t by application to cart, how that will be managed and who would lead creditors in that way,
I’m not yet sure whether creditors will come together via body. Uh, I’m not sure. Um, it’s, it’s, it’s, it’s a relatively longterm it’s. I said it’s a, it’s a concept that’s been around in the U S for some considerable time. And it’s a concept that we’ve not had here in the UK. We will see, I will see many situations that will fit the criteria here.
It will come down to, I think in some cases, the cost of actually having to involve the court and a barrister to put these things in place, they are hugely costly in the U S maybe they will be more suitable for larger, larger businesses. Um, time will tell It’s obviously that the whole concept and you’re coming on to director’s duties around full trading I’m director of responsibilities,
but we see it practically on an ongoing basis, the option, or would administration, or the option of some kind of an arrangement that actually the money that it costs to invest to get that result. That sometimes it’s you just wonder, okay, let this thing go and put the money in over here. And it does the cost of the tipping points.
I mean, all the legislators have a very difficult job, and because they’ve had to produce legislation that’s fair and it’s equitable, but sometimes the legal costs from these process, you just wish there was a cheaper, easier way that didn’t require a senior center. Yeah. And I think with this, and with company voluntary arrangements, the biggest challenge is always the impact on relationships with customers.
So in principle, you think this is fantastic. We’ll we’ll ring fence, all our historic debts. We’ll go from paying what we are required to pay to what we can afford to pay, and we’ll trade ourselves out of this situation. But that doesn’t change the fact that you are now in a rescue process. Your, you know, if you’re tendering for work contracting businesses,
you tend to be alongside someone who’s not in a rescue process. You’ve got a competitive disadvantage. If you’ve got key supplier relationships, they will, they may change terms and conditions in terms of costs going forward. It’s the, it’s the intangible impact of going through a rescue and the perception in the marketplace that often are the biggest challenge. And it’s the defect.
It’s the most difficult impact upon a cashflow to try and predict, okay. Um, administrations, our administrations, there is only one process, but light touch admin is a, is a term that’s been bandied around over the last few weeks. Um, the recent example is my phone been appointed as administrators over Debbie Adams, uh, may be aware that we also been appointed over,
um, Carluccio’s and these businesses I’ve gone from, you know, basically shrunk down to zero turnover overnight, like many businesses did, it needs a protective of, of a moratorium and administration. So the court step in, um, either in this case, I believe it was a director led appointment with the bank support. The administration is live, the moratorium is in place.
And typically step in on day one, put management controls in place, authorizing all payments, lot of management, uh, removed, and you are looking to try and find a buyer for the business. I’ll trade what you can. Well, there’s no trading here. And the cost of an administrator dropping in on a case like this could be significant when there’s no income,
light touch, pretty much he’s referring to the fact that management are left with a huge degree of authority. So the administrator grants powers back to management that typically wouldn’t have it. And it’s to an attempt to try and multiple operations with as little cost as possible with as little risk as possible with the hope that a buyer will come forward, or there’s an opportunity to recapitalize.
Once there is clear visibility on what the future of trading conditions will look like. Um, so light touch out men is it’s, we’ve got the moratorium in place and the plans are being put in place alongside perhaps well, alongside a confidential marketing process to bounce the business back, which might exit via company voluntary arrangement, you know, into admin. We’ve got the protection,
we come out via CVA, but it’s a new concept. And there’s been a bit of press coverage about that director’s duties and wrongful trading. So we went into the last few minutes here. Um, what is wrongful trading? Well, wrongful trading is when a reasonable person should have formed the opinion that a business cannot be rescued, but the director continues anyway,
if you continue anyway, the extent to which the business loses Mar muddy from that point to the point of insolvency is the extent to which a director can be asked to contribute to the assets of a company in the UK. At the moment, the government has suspended the wrongful table provisions until the 1st of June. That may well be extended. I think it’s important to note that the burden that the reasonable person should form the opinion definition doesn’t apply,
where if you are a qualified accountant and you are a director of a company, then that’s burden of responsibility. You know, you’re held to a higher standard. So you are, you, you should have been aware probably earlier than they be the standard director. So just, just be aware of that. My argument is overly simplistic to suggest that director’s minutes director’s meetings can demonstrates the basis for decision making at the time was the right one.
Is, is that an overly simplistic solution? I am that stair the solution. No, I am going to come onto mitigation techniques and absolutely documented decisions is, is center of all of that. And it’s the advice we gave on accountants give time after time. It’s the easiest thing to do to get those forecasts independently prepared, put your plan together, bullet point those minutes,
keep that documentation. And if the plan doesn’t work, at least you’ve got a document that was put together with your accountant’s assistance. At the time to say, look, we had a plan and it would work the position wasn’t going to deteriorate that not the point of no return, but this event happened, you know, three months later, two weeks later,
whatever it might be and documenting decisions is is, is vital. So yeah, absolutely is important because if to the outside world, it looks like, well, hang on, you stop paying your crown three months ago that creditor started a County court claim proceedings. Clearly you’re insolvent then. Well, there might be circumstances that would give rise to the, to an opinion that will actually,
there was a way back. There was a plan. So yeah, absolutely documenting is, is, is critical despite them, um, effectively relaxing wrongful trading, all of these misfeasance provisions are there, these antecedent transactions, um, transaction defaulting, creditors, fraudulent trading, et cetera. The key, whenever there’s evidence of insolvency from a director’s point of view is making all decisions in the best interest of creditors as a whole.
If you do that, then you’re going to mitigate your position, you know, should I continue to declare dividends to myself? Is that in the best interest of my crepitus as a whole And the decision making process Martin, it is okay to be in a position where I actually visit going to get worse before it gets better. As long as the decision is made.
Well, we’re going to turn the corner here at a point. Yeah. I mean, you know, there are, well, right now, there are tens of thousands of, uh, companies in the UK and businesses that will be trading whilst they are technically insolvent. And the key is, you know, if they avoid the formal insolvency, no offense has been committed.
If however, they ultimately end up in a formal insolvency provision position, it will depend upon the actions management have taken within that intervening period that will determine whether they have a risk or not. So documented decisions. Decisions is vital, but I think the relaxation of wrongful trading shouldn’t be seen as a complete carte blanche to do whatever you want. It is still important that there is a viable business at its core.
I think given we’ve got accountants on the line and they will, there’ll be many LLPs in there. There is section two, one, four eight, which amends the insolvency act under the LLP provisions and that very much mirrors wrongful trading for LLPs. And that is where if a reasonable, a person should have formed the opinion that the business was insolvent. So we’ve got evidence of insolvency.
Any money is taken out of that LLP from that point to the date of a formal insolvency can be clawed back. So repayments on current accounts, paying for your, the higher purchase on the car, pay the credit card off, whatever it is, they can be clawed back. And there’s no relaxation of that. So just be aware, okay, but you mentioned here Dez about,
you know, what, what should we be doing? Well, you know, acting in good faith, implement good management practices. You know, if we only have a board meeting, once every blue moon, then let’s have them, you know, once we in crisis, let’s have them every week, let’s have them every two weeks. If we need to,
let’s show that we’re doing something different to take this crisis seriously. Um, maintaining upstate financial information, you know, having a 13 rolling cashflow right now is I think one of the best tools most businesses can have particularly SMEs gives them visibility. And they’ve got that document there that they’re updating every week that they’re just ready to drop the turnover in. You know,
some of them might have some level of, of, of trading now already, but having that decision making tool to give yourself, you know, forward-looking financial function right now is vital because businesses have got to be able to react quickly without it you’re flying blind, in my opinion. Okay. Document meetings. You mentioned that does, um, it’s about communication.
You know, businesses I’ve since 2008, 2009, I’ve seen supply chains work with each of them more than I’ve ever seen them do before. And there is a willingness to support businesses rather than them going into a formal insolvency and communication is at the core of that utilize government support goes without saying and take professional advice. Okay. There’s a few key changes.
I’ve just been pulling together over the past few weeks, which I think are relevant to everyone on this webinar. Um, company directors, disqualification act, these old companies at the moment in the UK are a, they slipped through the cracks. I have a, probably seven, eight times a year. I get approached by an accountant with an aggrieved client.
Who’s owed money by a company that seems to have been dissolved, struck off a non filing, or the directors have absolutely committed an offense by striking them off. There’s a consultation at the moment and we’re anticipating it being brought into law that the official receiver will have the powers to investigate the conduct of directors of dissolves companies. They will have the powers to demand the documents for that dissolved company.
Um, and it won’t require the restoration when clients are coming to me to ask about this. I, you know, when accountants are coming to me, the difficulty or the barrier to justice here is often the cost of restoring that company to the register with these powers that is no longer necessary. So the investigation could happen whilst it’s dissolved. So it should no longer be an easy way out for a number of a number of dodgy directors.
Should I say HMRC? So if you’ve got clients with tax payer arrangements, I’m sure many accountants have approached HMRC. They are agreeing to suspend suspend payments and have pretty much on the three calls I’ve had used the same phrase so that most of them must be using it. They’ve said we’re all in this together. Call me back in June. Um, they’ve paused any insolvency activity,
as I mentioned earlier. And even though you’re in an existing time to pay, you can still defer your current fats and ring up about different current pay as you earn. And we understand that the intention will probably be to bind them into a new arrangement in June. If you are just looking to defer the current tax that you’ve accrued, whether it DEFAT or pay pays you earn or CIS,
you will be aware of. I believe HMRC I’ve pushed out now that they are expecting that tax that we aren’t paying in this period to be paid in the current tax year. I do think that if you have got a tank to pay arrangement and you’ve deferred current tax compliance historically will be key for HMRC. You know, if you’ve been habitually poor at maintaining your tax affairs,
will they really give you a time to pay arrangement and roll additional debt into it? I’m not sure. Is there any, is there any true Martin in the perception that somebody like you who’s the hairless end of the scale gets a better result in dealing with HMRC than the entity themselves? Are there accountants like w w when somebody, like you goes on,
they go, okay, who’s this guy. Oh, all right. Back on the Saudi C D do you, do you negotiate a better deal of art? Is that just the policy? Um, I would say it depends on who you ring so I can have the same call that you could, and I could get someone at HMRC that will agree my deal,
and they would reject yours and you think, wow, hasn’t Martin done a fantastic job. And the next one I’ll ring up and they’ll say no, when you’re living back at someone different and you’ll get the deal through. So if HMRC say no, um, I always, you know, before I get anything into too much detail, if I can tell whoever it is is going to say,
no, I’ll put the phone down and I’ll call back again. Um, there are circumstances where the tax is of a greater value, so significant, outstanding balances. Yes. We have had success where accountants and clients haven’t managed to, um, and whether that’s a different day, a different time, um, or whether it’s just the fact that they know that we’ll look,
this is going to be a liquidation and they’re going to get nothing, or we’re doing this deal. I would always back my, you know, that’s what I do. I do deals. I would always back myself to get something through. But if you’ve got significant historic noncompliance, you know, the best deal in the world will pretty much, in most cases,
not gay to Marcy to come on board. It, it is a, it’s a huge challenge. I can just picture, you know, Martin. Okay. Yeah. We don’t care what they have or what they don’t have. Um, yeah. I don’t think we’re going to do the mangoes. I’ve gone into a tunnel. I’m taking a break and I’m really laughing at that because that’s what we,
that’s what we see some people doing here in an Irish context. If you get the wrong person on the phone, it doesn’t matter. It just doesn’t matter. I hope you go again, put it back the next day. Uh, yeah. I’ve had clients who’ve had significant noncompliance and significant balances outstanding. And they said, well, I’m going to bring HMRC.
You know what I’m saying? Yeah, absolutely fine. But these are the steps we’ll take. If they say no, and I’m amazed. I said, well, it took me 10 minutes. I’ve not had to give them any cash flows and they’ve agreed it I’ve got 12 months. And so it is, you know, if it’s the first issue,
it’s the first challenge. You are pretty much going to get a time to pay arrangement, Do the HMRC, um, place a different emphasis and value on the payment of Poe versus backs. And they, in an Irish context that they didn’t do is if Poe is not paid, they can actually patch that to the directors and the basis that’s employee tax.
And whereas with, with, with vacuum, or like to get a deal, some guidance for a lot of us policy practitioners in these pay your PA. If you’re going to pay one thing, obviously we’re in a different time now, but prioritize your Poe and have your back and your other sets because you have more leniency and they’ve got more school models.
That’s obviously not the case in the UK in your experience. It depends what stage it’s at with the UK. So we’ve got obviously the local debt management teams, we’ve got late stage debt payment. We’ve got the kind of less chance saloons of the insolvency team in Worthing and the advancement team in Cardiff. So it will depend on where it is when it gets passed out to their field force team,
which are the agents that work from home and jump in the car and I’ve got a laptop and attend premises. Um, it’s amazing some of the deals that you can literally talk them through whilst on the phone, um, complaints, history is the biggest factor, but now I don’t see the being an issue, you know, other than the penalties and interest that’s accruing and applying,
you know, uh, playing the payments against the right debt so that you, you know, minimize that accrual. I don’t see a big difference between the two at all. Okay. Um, obviously arrangement, it’s just a brief one that if any clients of yours are in company, voluntary arrangements, HMRC have said they will agree to a payment break.
And on the last one, we’ve just done that agree to six months payment break. Um, you might guess the sector, um, you know, that’s their sort of leisure and tourism. Uh, we might have to go back again and say, we need another six months. Um, in terms of the extensions, even though HMRC have agreed this,
and there might be a single biggest creditor, they, these schemes do need far more variation, tax abuse and insolvency. I think the relevant point here for accountants to note is that HMRC will be granted new powers to make directors and all the individuals jointly and severally liable for companies tax liabilities. And this is where there’s been a tax avoidance or evasion, you know,
intentional, uh, or, or repeated insolvency and nonpayment. Now that’s the new bit. There are bits of legislation within the UK that do allow the veil to be lifted, uh, but repeat insolvency and nonpayment and potential personal liability. That’s quite interesting. So we’re waiting to see the detail on that in terms of dividends. This is a question I’ve been asked repeatedly over the last few weeks.
Um, there are, you know, most clients within the UK SME owner managed businesses are going to do or against a director’s loan account with a view to declaring a dividend from distributable reserves. Um, clients may have reserves now, but that is a dangerous strategy when there is this environment at the moment that we do not know when, when the world is going to go back to anything like normal.
So if we’re, if there’s any prospect, we might erode reserves, even though distributions may be lawful. So you have sufficient distributes where reserves, if a company subsequently goes into insolvency, that dividend could still be at misfeasance, was declaiming that dividend to my shareholders in the best interests of creditors as a whole. No. So it could be clawed back.
If I would always say to directors in these circumstances, review the, you know, review the way you remunerated from the company with your accountant consider whether you should be on the pays, you won’t scheme for a commercial salary. The benefit of doing so is if the company goes into a formal insolvency, no, one’s going to ask for that money back,
it’s come through the payroll. Yes, it’s less tax efficient, but it’s yours. And another reason I’ll be, it’s not the motivating factor is, you know, when a company goes into a formal insolvency process, it’s claims that the employees claims for be dependency pay and pay in lieu of notice are based upon a 12 week average of the earnings and the government step in and pay those up to statutory maximums.
So you go from someone who’s taken 20,000 pound in dividends having to pay that back because it was a misfeasance to someone who’s drawn, okay, a net let’s say 16,000 pound salary, but they’ve accrued rights. And the government suddenly going to send them a check for a few thousand pounds for their redundancy, their paint live notice. Um, it it’s just future-proofing yourself in case there is an insolvency event We’re waiting for the last 10 minutes here.
So I know we’ve got some of you on live with us, and we have some of you in our Facebook group. And I just have a question in here for the Facebook group. Can we invite more people at my firm each through the Facebook group can invite more people, but obviously you can invite more people into the Facebook group where we will stream our webinars.
We’re going weekly at the moment twice weekly. But if, if you know of anybody, any friends, colleagues, and who would benefit from CBD from experts like marketing, and just send them the link on the email that you got and the better register and the CPD get verified CPD as part of this phone. So that the next thing is anybody who’s on here,
live with us, put your questions down the chat box, or the Q and a at the bottom of the screen. If you’re watching the live stream within the Facebook group, put your comments in there and jr was feeding into me. And so we watch for questions, but if you want to, if you want to take it home and for our last seven or eight minutes.
Yeah, no problem. Okay. Well, I think it was just really to note that I think many people feel that courts aren’t doing anything at the moment while it’s completely the opposite. They are holding virtual hearings. They’re using Skype for business at the moment to conduct hearings. So no pressure from suppliers will result in court proceedings at some point, those that have seen the provisions about the,
uh, ability of the inability to petition to, for landlords to follow the crown procedure, which is a commercial rent arrears recovery provisions, um, or at forfeit leases as a consequence of COVID-19, that protection is only in place for those winding up. And those actions from landlords, it’s likely that that are, we feel will be extended to be sector specific.
So again, leisure tourism hospitality may get some further protections there. Um, but that’s important to note, um, there is talk of a COVID-19 declaration being able to be made to give some sort of 90 day moratorium. I’m not sure that’s going to come in with the moratorium, but it’s been a, an idea that’s that’s been mooted. Um, I think the final part of this I think is relevant is crown preference.
So hate Tomasi lost their crown preference in the UK in 2003 secondary crown preference was due to come back in on the 1st of April. What does that mean? Well, if we look at the order of ranking a distribution, we can see here that we’ve got the fixed charge holder would get paid first. So that’s the bank secured on the property. Let’s say we’ve got the preferential creditors,
which at the moment are just arrears of wages up to 800 pounds per employee and accrued holiday pay. And then we’ve got the floating charge credits or the bank conduits to venture that will crystallize over the stock, the chattel assets, et cetera. Um, and then we get, if there’s any funds left, um, we’ve got something that go to the unsecured creditors.
I’m not going to go given the time and I’m not going to talk about the prescribed part. Um, but I think what is relevant is now we’ve got the bank, we’ll get it. Somebody under it’s fixed charge. So if it’s got a mortgage that will get that money, let’s say it’s still holding the owed another half, a million pounds in this plant and equipment and this stock and this cash bank,
et cetera, et cetera, what it will set off the cash at bank, but the stock and plants and equipment. Now he’s going to be first applied against the preferential creditors. So those employee claims, but now HMRC secondary reference will kick in which will be its collection of VAT. The companies pay as you earn, and the employees, national insurance contributions.
So it’s the taxes. It claims are collects on behalf of the government from third parties. And if you imagine that number’s going to be quite, it could be quite significant from a, you know, I said, it’s a big jump off the ladder of, of, of importance. And I said, we’d draw for the floating charge predators, the unsecured creditors to come in after that,
there’s no protection for creditors because somebody who’s going to go longer. It’s going to be gone in the first three that you betcha. MRC is one of my fault, everything. Yeah. And I think, and, and why is that relevant? Well, it’s relevant for not only that dividend to unsecured creditors, but its dividend it’s relevant from the bank’s position.
So I’m G to present to four different banks on the implementation of secondary preference, which has been delayed from the 1st of April to the 1st of December because the banks are lending based on their dementia, security value as they call it. And they’re having to review everyone because suddenly there’s a creditor, that’s going to jump the queue and sit in front of them. So their attitude to risk and lending is going to be,
is going to be affected by this change. Don’t take less than me when I say this. Those of you are joining me is low. You have her on the recording. And definitely don’t be less than the American, but from, from a, for the poor bank’s perspective and from a bank’s perspective. So, so the bank has this, the venture in place,
it was looking at risk one way. Now they’re going to have to review every single, guaranteed race. One of the worst times possible from a solvency and debt perspective. This is, you know, like this is, I’m totally it to, obviously I don’t mean this, but it’s all canned for the HMRC to write all the checks they are to underpin the economy.
When they’ve got this coming down, the lane, they won’t clean and the next four years anyway. But I mean back up to where they were as primary creditors. Yup. Now, and I completely agree with that sentiment. And, um, you know, there’s going to be a huge accrual of tax liability right now, which is going to affect every bank’s dimension of security.
Um, will it come in on the 1st of December as you know, so it’s been delayed to 1st of December, will it come in? I don’t know it is public policy. It is government policy. They want it to come in. I could see it being delayed, uh, but it is a big change. And right now with the banks and clients trying to plan for their huge uncertainty,
unprecedented uncertainty, um, having to deal with this at the moment, um, I just feel even by December might be, might be too great. So we shall see, but that is what’s coming to plan. No, that has brought them to secondary preference, breed, AIDS, Corolla voters, and the difficulty the government has in terms of reversing policy is,
well, we definitely can’t reverse the legislation. We don’t want to be seen to be reversing policy because one of the big global Clarion colds is don’t it out the bites this time, the businesses. So they’re there, they’re kind of cut all the way around. I’m definitely not going to express concern for the government obviously, cause that’s just not a popular thing to do,
but it’s, it’s, it’s, it’s, it’s quite a bind and they really are between a rock and a hard place here that cabinet this back slate. So there’s probably not likely to get any big announcements on there, something right at the end. So now the bites are going to be on tender hooks. Everybody’s going to be on tender hooks. It’s going to have an impact on credit,
massive impact, negative impact on credit. I agree, um, at the moment it’s due to come in, um, will it come in? I don’t know. I think, you know, the banks have got a lot of pressure at the moment. Not again, I’m not here to defend banks, but you know, if we have a look at the bounce backs and the seatbelts and the protection that the government had given,
you know, a hundred percent for bounce facts, 80% for Siebels any accountants in the room that are familiar with the enterprise finance guarantee scheme and the government support, there will be aware that when the banks tried to get those guarantees paid out by the government around 10% were paid out. So a bit like an insurance claim, the government will be looking at,
did you tick that box? Where was it an undertaken in difficulties? Should you have lent in those circumstances? Ah, well, we’re not going to support you. So the bank of balancing that, that risk of default with will ligament payout at the same time as looking at this, I think that’s a challenge That has been excellent. Where can we find you bulls that are on leave in the Facebook group,
watching the recording? Where can they find you? How can they get access to you if they found this session as an it knowledge imparting as I have. Okay. Um, so on LinkedIn, I’m there, uh, pretty regularly post on LinkedIn. I am following the government announcements. I’m following policy from our, uh, you know, professional body.
So you will see that I’m regularly on LinkedIn, uh, Twitter. I am simply at Martin Polin. Um, those are the two platforms that I use for business purposes and sharing and disseminating information. Um, my email address is very simple and it’s on our FRP website. So it’s please Martin dot email@example.com. But if you Google our website, you’ll find me,
but LinkedIn, Twitter, if there’s anything relevant, any changes on this, when it comes into law, any devil in the detail, that’s where you’ll see me pushing that through. Okay, Martin, thank you so much. I really enjoyed today and I hope that we will have you back again sometime soon. And for those of you who were giving us your time to be here today,
for those of you are watching the recording. Thank you. Yes, we are new to the UK America, but you’re going to see over the coming weeks and months, we’re rolling out a CPD model. There’s going to be a little bit different right now. It’s free. If you felt MicroStation or benefits, share with your friends, share with your colleagues,
this is pre CPD and it’s good quality. We, you will see us rolling out our model. If you have a CBD speaker that you particularly like, please do let us know or we’ll see if we can bring them here for you right now for today. I just want to thank you all for being here and Jonathan, our backgrounds, technical team to kind of American folks.
We’re in this together. As I see you again, let’s get a dog.