Mercer & Hole’s Business blog - Accounts & Audit

In a recent tax case (Goodtime Print & Design Ltd v HMRC), a company submitted accounts without including a directors’ report.  HMRC imposed penalties on the basis that the company’s accounts failed to comply with the Companies Act.   HMRC may require accounts to be accompanied by ‘such documents as are required to be prepared under the Companies Act’.  This includes a directors’ report, the preparation of which is required by the Companies Act even for small companies which are not required to file such reports with the Registrar of Companies. ...

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We have all got used to excluding from subsidiary company accounts the related party transactions where the group controls 90% or more of the voting rights of the subsidiary . Watch out as FRS8 revised now requires a 100% holding to get the exemption.   Gary Farnes is a General Practice partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Gary you can call him on 01908 605552. Email Gary Farnes  ...

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I blogged recently on disclosing dividends to directors when material. However, beware on what is material. FRS 8 requires you to consider whether material to the company and the director whilst the FRSSE only requires consideration of materiality to the company.  ...

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There has been much discussion over whether a dividend paid to a shareholder who is also a director should be disclosed as a 'related party transaction'. Historically, the shareholding of a director was required to be disclosed in the Directors’ Report so a reader of the financial statements could work out what level of dividend they received, however, now that the shareholding disclosure is no longer required this is not possible. Therefore the guidance is that the dividend should be disclosed within the Related Parties note (assuming it is material).   Gary Farnes is a General Practice partner...

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With the recent announcement of the changes to the corporate tax rates, the rate at which to calculate deferred tax has got more complicated. However, don’t forget the rates to consider are only those where the law has been substantively enacted at the relevant balance sheet date so you will need to look at the content of each Finance Act. It may also mean there is a requirement to disclose a non-adjusting post balance sheet event (FRS 21).    Gary Farnes is a General Practice partner at Mercer & Hole. The views given in this blog are...

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Since the introduction of the Companies Act 2006, medium sized companies have no longer been able to avoid disclosing their turnover by submitting abbreviated accounts at Companies House. However, don’t forget a medium sized company can omit the turnover analysis by geographical location and class of business which could be helpful.   Gary Farnes is a General Practice partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Gary you can call him on 01908 605552. Email Gary Farnes ...

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The Companies Act 2006 allows a corporate entity to reduce its share capital without court approval. This relaxation in the legislation may benefit a stand alone corporate entity but is most likely to appeal to group structures where companies have remained inactive following the transfer of trade to another group company. Before deciding the most appropriate route to remove a company it may be advantageous to tidy up the balance sheet and distribute any available reserves. Depending on the balance sheet the reduction of share capital may result in the distributable reserves being increased. The share capital reduction procedure (without court...

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One area of accounting that regularly causes much procrastination and soul searching amongst our profession was the accounting treatment of a purchase of own shares out of capital under the 1985 Companies Act. I am not surprised to report that the 2006 Companies Act does not exactly clear this matter up. The new act includes over 20 pages of narrative on the matter.  The guidance has not changed particularly, and the accounting treatment is given in section 734. In very simple terms: If the permissible capital payment is less than the nominal amount of the shares, the difference must be transferred...

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In the current economic climate, late payers are commonplace. When late payers turn into bad debts, it can put huge financial stress on a business.  I have talked in previous blogs about how to spot potential bad debt, and how to manage debtors more effectively to free cashflow.  If a debt does become unrecoverable, tax relief is obtained for bad debt when it is deducted against the trading profits of a business. A reduced profit produces a lower tax bill, and it is important that businesses are aware of the point at which bad debts can...

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In my last blog entry, I talked about the ‘early warning’ signs for bad debts. In this blog I will provide some tips on how to manage debtors: Devise and document a formal invoicing/credit control policy, which staff are trained to adhere to. Issue invoices as soon as possible - customers are more likely to pay on time if invoices are raised promptly. Send statements each month, identifying any overdue invoices. Please note that this can not be relied upon in isolation – a co-ordinated strategy is a necessity – perhaps involving calls, emails and...

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