- September 24, 2018
- Posted by: Stephen Coleclough
- Category: Blog
I recently received the following email from HMRC:
The document mentioned in the email can be found via this link.
My response can be found below:
Comments on discussion document on AML fees
This firm is registered with HMRC for AML.
As a general comment, it has always surprised me how the government cuts funding to the one department which brings in cash, when in the real “non-government” world, everyone invests in that area and cuts costs on the non-revenue generating parts.
I submitted my correct year’s application in December, my payment was banked 8th January 2018.
Having just checked online it is still pending.
I did call a couple of months ago and was told that applications as at October 2017 were now being looked at.
You need to bring matters up to date.
You say there should be a 45 day turnaround but this is clearly not achieved and I am now two thirds of the year gone and only 4 months away from submitting next year’s application.
The costs of bringing application up to date needs to be covered in your fee review.
No, premises is an illogical basis in today’s service economy and turnover is a better measure of risk, and is indeed what the professional indemnity insurance industry uses.
Questions 2 and 3
Yes, but that depends upon your definition of turnover.
Traditionally this includes fees received for work done by sub-contractors, which are themselves treated as costs of sale.
Using this measure would and does lead to double counting as the sub-contractors are invariably AML registered too.
The measure of my businesses actual turnover is what we call Gross Operating Profit, i.e. turnover less costs of sale (subcontractors).
I started my practice in July 2013 after retiring from a Big 4 firm.
I was also working as a volunteer for a charity so my initial fee paying business was low.
I then joined a law firm as a consultant so all my billings went to them which of course generated a lot of VAT for me to pay and for them to recover.
This ended 31 October 2015 and now I bill my clients direct.
As the work is international work, most of my clients are outside the UK, indeed outside the EU.
I work with other small boutiques (one or two partners) under a common brand and have colleagues who cover US tax, German tax and UK tax colleagues in Israel and the UK.
One of us has the engagement with the client and we sub-contract to whomever we need, which includes ICAEW firms and SRA regulated firms.
My year end is 30 April and recent numbers are:
|Cost of Sales||0||4,940||27,162||242,420||167,739|
|Gross operating profit*||231,794||432,192||450,810||509,715||371,596|
*Also known as net revenues
So, to use turnover would include an element of double counting of turnover of tax practitioners.
So net revenues is a better measure.
Questions 5 and 6
Premises are increasingly less relevant.
The so called “gig economy” is basically the economy which is permitted by the internet.
Individuals can access the information they need, and provide the services they need from anywhere which has broadband, electricity, a table chair and a coffee machine.
Meetings can be held at the client’s premises, over Skype, in hotel reception areas, airport lounges, indeed anywhere.
The need for a tax adviser to have fixed offices and a flashy reception and conference rooms has been over for five years or more.
Questions 7 and 8
A fee should be charged and logically it should escalate with the delay.
Questions 8 and 9
Fit and proper is not purely a question of the individual.
It goes to the heart of the system and to the very root of regulation.
It therefore benefits HMRC, clients, and those businesses registered with HMRC.
The cost should therefore be covered by the basic fee.
The plan is to grow the business internationally adding experts as we go along.
I would like the service to be quicker in turning applications around.
Please note we are a tax advisory firm and cannot speak for the other areas you regulate.