The English ICA’s recognition that the application of accounting standards to the accounts of its members who trade in partnership or as individuals could result in unfair taxation liabilities is hypocritical, revealing and naive.
That institute’s tax faculty has argued the imposition is unfair due to the additional workload it creates and because cash and accruals accounting in the long run yield the same result and so are fiscally neutral.
Personally, I think the institute should have anticipated this move by the Revenue. I, for one, predicted it when the FRSSE was put forward as the universal accounting standard to apply to the accounts of all small entities designed to show a true and fair view.
Why on earth did the institute think the accounts of its members, which in 99% of cases will be covered by the FRSSE, were exempt from this view?
Surely they realised no one would have sympathy with the profession claiming they were exempt from a standard which seeks to extend the burden of regulation on business to over three million unincorporated businesses when claiming they were exempt from such imposition on the grounds of cost of compliance?
I am not sure that hypocrisy is strong enough a word for such a claim.
The revelation is that the institute has realised the Accounting Standard Board’s brief to the FRSSE working party to presume that existing accounting standards designed for large entities were the appropriate basis for a FRSSE is a fundamentally flawed assumption. Those of us who work in small business have known that all along. It’s a pity that it’s taken self-interest to make the institute realise the truth.
The entire profession now recognises that accounting for smaller entities is not the same as accounting for other concerns. So let’s scrap the FRSSE published in November 1997 and produce a FRSSE that is understood by small businesses, and is fiscally fair. It is possible, but only if the institute can raise itself above the level of intellectual capacity it has revealed in this current debacle.
Richard Murphy is senior partner at Murphy Deeks Nolan.
A new head of solutions, Aidan Brennan, has been appointed at KPMG UK
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast