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On the latest ICAEW Insights podcast, we discuss the month’s key developments in accountancy.


Philippa Lamb


  • Ed Saltmarsh, Technical Manager
  • Christopher Greenhalgh, Manager, Quality Assurance Department
  • Anita Monteith, Head of Tax Policy


Natalie Chisholm


Hello, and welcome back to the Insights podcast. I’m Philippa Lamb. And as usual in this podcast we’ll be discussing the month’s key developments in accountancy. At the top of the list, we’re marking the 50th birthday for VAT, discussing the announcements from Tax Administration and Maintenance Day, and looking at new changes to the ICAEW statement on engaging in public practice.

Here with me, I’m very pleased to have ICAEW Technical Manager Ed Saltmarsh; Professional Standards Manager Chris Greenhalgh is joining us down the line; and Head of Tax Policy Anita Monteith is here with me. Hello, everyone. Thanks for being here.

Philippa Lamb So Ed, VAT is 50. Remind us how it came to be introduced in the UK.

Ed Saltmarsh A very exciting year for VAT. It was originally devised, actually, over 100 years ago by a German businessman called Wilhelm von Siemens of the Siemens company that we all know. He was trying to improve upon Germany’s tax systems. But it didn’t actually get introduced anywhere until 1954, when France introduced it, and then later it was adopted across what was then the European Economic Community – now – the EU, in 1967. Then when the UK joined that six years later, or five years later, we had to introduce that as a condition of joining.

PL What’s your sense – has it worked well? It’s sometimes condemned as regressive, isn’t it?

ES It is sometimes said to be regressive, although there is some evidence that actually, depending on how you measure it, it can be seen to be mildly progressive. If you measured it as spending as a portion of a person’s consumption, then it’s more progressive, because people who spend more pay more VAT. But it’s a very important tax in the UK – it raises over £150bn a year. It’s third only to income tax and national insurance contributions in terms of revenue for the UK government.

PL So it’s highly significant. There’ve been some well-known issues around definitions – I think everyone knows the Jaffa Cake story, don’t they? Cake or biscuit?

ES Yes, Jaffa Cakes is the famous one – whether they should be zero rated, because are they chocolate-covered biscuits or chocolate-covered cakes? The answer is that they are cakes so they are zero rated. But we’ve had a whole host of food cases. Recently, we had one about giant marshmallows – the court had to decide whether they were big enough to no longer be considered confectionery, and they considered the fact that you roast them over a barbecue on a skewer rather than eating them with your fingers. All that affects the VAT liability of marshmallows.

They decided in the end that they could be zero rated because they were intended for roasting – they were held out as an ingredient for food. But if they had been slightly smaller, they would have been confectionery and standard rated. But it goes the other way on the marshmallow scale, because smaller marshmallows can also sometimes be zero rated – like the ones that go on top of drinks – because they can be an ingredient in baking. It can sound flippant, when you talk about VAT on food, actually, but it’s really important because these businesses and HMRC spend so much time and money litigating these cases, paying advisers to advise on their new food product, and whether that’s zero rated or not.

PL As you say, it plays into this idea that VAT is constantly evolving?

ES Yes. Food is an easy one to demonstrate that with, because every time there is a new food product, they have to work out whether it’s zero rated or not. But you can expand that to other zero rates, reduced rates, exemptions. So, for example, the finance exemption at the moment that’s being considered, because there are new finance products always being invented and you need to look at the VAT liability of those. It can get very complex.

PL A further thought on VAT digitisation – that’s been a that’s been a big one, hasn’t it? How’s it progressing?

ES Sometimes a bit of a sore subject. HMRC did introduce Making Tax Digital VAT. It was the first tax to be subject to the Making Tax Digital treatment, and as far as HMRC are concerned, that is now business as usual. But what we have in UK is still lagging behind other countries in the world. Many countries already have e-invoicing, digital real-time reporting, which are that step further from MTD for VAT. The EU is currently trying to pass proposals to harmonise invoicing and real-time reporting rules across the EU by 2028. And we’ve heard from HMRC that they would like to have real-time reporting by 2030. but we haven’t heard much more than that. I think we do need to start thinking about plans for that.

PL Now, the VAT at 50 conference crops up later this month, doesn’t it – May 22. There are some very interesting sessions there. One that particularly caught my eye is around the area of sustainability and using VAT as a lever for change in that arena. Tell us a bit about that.

ES I think governments are often tempted to use VAT to try and drive behavioural change – because you can change the rates on certain products. So at the moment, there is a consultation on extending the zero rate on certain energy-saving materials. The government is trying to encourage people to instal solar panels or wind turbines or insulation, by making the products cheaper by introducing – well, there already is a zero rate on some of them, and they’re trying to see whether they should expand that. But I think it’s always a bit of a risk using VAT to try and achieve policy goals. As we saw with women’s sanitary products, when they removed the reduced rate and made them zero rated, the saving didn’t get passed on to consumers.

PL Is there an argument for saying that you nonetheless boost the chances of enhanced competition in the market if the profits rise?

ES Absolutely, yes. If the government is trying to support businesses in that sector, then actually making it a zero rate might be effective. But I think you just have to weigh up different policy goals and actually understand that it’s not as simple as changing a rate.

PL So what else is going to be cropping up in the conference?

ES We have some great speakers at the VAT conference. We have the head of HMRC, Jim Harra, and we have Professor Rita de la Feria, who has done lots of work on VAT rates and comparing different VAT systems around the world. Jim will be speaking about HMRC’s perspective of VAT. Rita, I think, will be talking a lot more about what’s going well with UK VAT. There are a few things going well, but actually, what needs to change – she has lots of big ideas about that. And I think that it’ll be really exciting to get everyone engaged in that conversation.

PL And if people listening to this are thinking, actually, I’d like to go, how do they do that?

ES Anyone can book on the ICAEW website, Monday, 22 May, and we’d be delighted to have you

PL If people aren’t able to come along to the conference, Ed, presumably you’ll be writing about what comes out of it afterwards?

ES Yes, there’ll be lots of follow-up articles, we will be filming some of the day, and there will be some short videos showing the best bits from the conference. So people should definitely keep an eye on it, regardless of whether they can come or not.

PL That’s great. Thank you very much Ed. Anita, let’s move on to Tax Administration and Maintenance Day. This was April 27, wasn’t it? What exactly is a TAM day?

Anita Monteith It’s a way of dealing with the perhaps slightly less sexy side of tax change. It’s only the second TAM day, and it’s about change that is needed to make the tax system run more smoothly. I suppose the best way of looking at it is to look at some of the consultation announcements that have been made – the promises that will simplify things, some of the aspects to what is seen as tax avoidance that is unacceptable and what’s going to change there – it gives you some warning of what’s coming.

PL OK, so this isn’t about policy announcements, just to be clear?

AM No, it isn’t. There are one or two little bits that I do think sort of sneak into the policy camp a little bit, but we’ll come on to those I’m sure.

PL So the key announcements?

AM Well, the theme was clear. It’s simplification, modernisation and tackling the tax gap. But there is a lot in it. And there are several things that we’ve been talking with HMRC about for years now. I think for me, the two big headline announcements were, first of all, the one that tackles child benefit, the high income child benefit charge and the link to the state pension entitlement. For a long time, there has been a problem here, that in order to qualify for a full state pension, you need to have enough qualifying years. Now, you get a qualifying year if you’re paying national insurance. But of course, if you don’t work, then you’re not paying NI. So looking in particular, I guess, at women rather than men, who have children, the scheme was put together so that if you claim child benefit, that will entitle you to a qualifying year, even if you’re not working. So you can tick the box. There is a problem that if you earn more than £100,000, or if the person you live with earns more than £100,000, that begins to be clawed back.

PL So you won’t be claiming child benefit?

AM A number of people decided that they wouldn’t claim child benefit, because they would end up just paying it back, and they may have to do a tax return to do that, that they wouldn’t otherwise have to do. So a load of admin you don’t want – this is about admin. So people didn’t claim child benefit, didn’t qualify for those years, and therefore they’re missing out on the state pension. So we are now told that, in due course, we will find out what steps will be taken to help you fill in the gaps in your pension entitlement record.

PL OK, but the problem has been identified, it’s on the table?

AM Yes, but we’ve still got the problem with high income child benefit charge. It is a dreadful problem and somebody’s going to have to tackle that with a real policy change sometime soon. Now the other one I mentioned – there are two headline changes – the other one actually affects IR35. IR35, the rules of payroll working are, I think, pretty well known. What happens, of course, is that where somebody’s employment status is challenged, and the original decision that they should be outside IR35 is challenged successfully by HMRC, then you’re in a position where quite often the worker will have paid all the tax that they should have paid under what was initially thought to be a self-employed state – they’ll have paid income tax, they’ll have paid tax on their dividends, they would also have paid corporation tax through their company. And now suddenly TopCo, the engager, the big building company at the top, whoever they are, they’re going to be charged employment taxes that should have been paid instead. Now, that’s very difficult, because you’ve got two completely different entities involved. And for several years now, we’ve been discussing with HMRC how that can be dealt with. What is going to be pursued is a form of set-off. So the taxes that have already been paid by the individual worker and their personal service company can be set against the tax that will now be due by the TopCo engager. Of course, there will need to be a repayment of some sort, or settlement of some sort, for other taxes. But that remains to be dealt with. But this is a breakthrough with a great outcome – that we can get some set-offs.

PL There’s a lot in this, obviously. But thinking about key points, what else is there that accountants and businesses need to know about right now?

AM Well, HMRC is data hungry, and they are changing their systems slowly. For example, we’re going to see the single customer account replace the personal tax account and business tax account in due course. And HMRC is going to start collecting extra data – for example, more about the dates that people start and stop self-employment, more about employee hours that have been worked, and of course that will need to be supplied by the employer. I presume that will be through the RTI system that they currently use to declare payroll data. Now, when RTI first came in, we had a lot of discussions about employee hours, because of course not all employers can easily find out what employee hours have been worked during any pay period. So it’s going to be interesting to see what happens there. Also, HMRC wants more data about dividends that have been paid by owner-managed business companies. So there’s lots and lots more data being sought.

PL So not really a simplification?

AM Well, I mean, if all this works, then – you know, tip all the data into the box and you as the taxpayer just sit there and out it comes in, it gives you the right amount of tax to pay, etc etc. But I can’t see that really happening anytime soon.

PL So more work needed?

AM We need more work on the tax system, our own tax system – the rules are too complicated. And government’s got to get to grips with that.

PL Then there’s the call for evidence on information on data powers.

AM Yes, this is more about standardising data provision as HMRC gets data provided by third parties – and a lot of this is going to be cross border as well. We need to find a way of actually handling it. And there needs to be more security around some of that. Personally, I think we’ve got some perhaps fairly easier problems that we need to solve first about, you know, this person has sold something through this website: on what date did that happen? And in which tax year should that be taxed? So never mind the data provision and the protections – we’ve got some basic building blocks to tackle first.

There’s also consultation on some crypto asset transactions, and it’s potentially likely that we could see some changes coming down the track for that one.

PL But no sense of what they might look like right now?

AM No. There’s some detailed discussion. I think there are a lot of people in the crypto world that need to actually wake up and realise that those profits they’re making are taxable.

PL What do we have from this Day on tackling the tax gap?

AM Well, we’ve got a new criminal offence for promoters of tax avoidance schemes who don’t stop, even though they’ve had a legal notice from HMRC to stop promoting a scheme. So that’s a new one. We’ve got some more details on the requirement for repayment agents to be registered with HMRC. We knew this one was on the way because it was announced back in January, and it will affect repayment claims made after 1 August 2023 – that’s the key date. We’re expecting some more discussion on the regulation of umbrellas. But these are all things we’re expecting; we haven’t actually seen them yet. And there are some changes to gross payment status tests for the construction industry scheme, so I think we’re going to see VAT being included in that test going forward.

There are some plans that will help commercial landlords as well. There are also some proposals that will tighten up charity compliance, and there’s a consultation document launched there. I think the other thing that caught my eye on that one was more consultations coming, for example, on employee ownership trusts.

PL There is a lot, isn’t there? Where can listeners pick out more information on the bits that are particularly of interest to them?

AM We’ve covered this on the ICAEW website, such as we know it so far. And if you look at the ICAEW Insights homepage and follow the link to Tax News, you’ll find what we already know. In due course, we’ll publish stuff as HMRC releases it, with commentary.

PL That is really helpful. Thank you very much, Anita.

Now, finally, Christopher, there are changes in training for the public practice certificate. Can you just recap for everyone, what it is, and why we have it?

Christopher Greenhalgh What ICAEW has is a statement on engaging in public practice. And what that statement seeks to do is clarify what is meant by engaging in public practice for the purpose of holding a practising certificate. It’s the ICAEW member’s responsibility to determine whether they require a practising certificate or not. And their decision on whether they do or do not need a practising certificate is judged by reference to the statement. Now we currently have a statement in force – it was effective from 1 January 2017. Obviously, since that time, the UK has exited Europe, so we have taken the opportunity over the last 18 months to have a look at the statements and give it a refresh with that in mind.

PL So what are the changes?

CG We have obviously removed all the references to Europe in there. We’ve also had a look at aligning the statement with other regulations such as the money laundering regulations. So we have in the current statements a de minimis limit with reference to a 10% rule. And that is 10% of income from public practice. If you are over 10%, from your public practice activities, then you would require a PC. But actually, we’ve sought to remove that because it seeks to clarify and align with other regulations that are already in existence.

PL So there’s no financial floor at all now?

CG No. The other area in the current statement is that we had a £100 per assignment rule as well. So if you didn’t charge more than £100 per assignment, then you wouldn’t require a practising certificate for those activities. But we’ve removed that as well, so obviously to be clear on it, there is no de minimis in the new statements.

PL Now, what’s the timeframe on this Chris?

CG We’ve been through a governance cycle over the last 12 to 18 months. It recently got approved – the changes got approved at the ICAEW Council meeting on 29 March this year. We’re looking to roll out some communications over the next six months. And the effective date of the new statements is 1 January 2024.

PL So members need to review this and then think about it – do they need to apply if they’re not sure?

CG Indeed, yes, because there’s a number of areas we seek to clarify as well. Another area, just to mention, is those members working in the voluntary sector. So those people doing pro bono work for charities – we seek to clarify when they can do work for charities without any gain or reward and not have a requirement for a practising certificate. So people need to have a look at it, see how the changes may affect them, review that and apply for a practising certificate if they don’t already have one.

PL And I know this is a bit of a how-long-is-a-piece-of-string question, but how long is the application process, normally, Chris?

CG Typically, if you look at our website, we always give an application process timeframe of around eight to 12 weeks. Obviously, that is a bit of, you know, how long is a bit of string – it can be shorter.

PL So no need to panic. But members need to think about this. There is an amnesty, I think, as well, if they don’t get onto this perhaps as fast as they should do?

CG Correct. So when we took this paper through the governance cycle, the ICAEW regulatory board were keen to have an amnesty period whereby members wouldn’t go through the disciplinary route if they didn’t have a PC. And that amnesty period was if members apply for practising certificates before 30 April 2024, then there will be no disciplinary consequences.

PL OK. But it is worth saying that there are consequences to not having one, if you miss that deadline. What are they?

CG There are consequences, yes. Obviously, if we find a member hasn’t got a practising certificate when they require one, then they would go through our professional conduct departments, and they’re open to regulatory fines and penalties.

PL So not one to forget about. Thanks very much, Chris.

That’s a great roundup from everyone. Thank you very much.

You can find more information on all the topics we discussed today by digging into the show notes of this episode. You can also get the latest accountancy news delivered direct to your inbox by signing up to daily, weekly or indeed monthly newsletters from ICAEW Insights – whichever suits you best. We’ll have more news and accountancy updates for you in early June.