Partial exemption and ability to adjust for COVID-19

The VAT year end has now passed for most Financial Services businesses (in either March, April or May) and it is important to remember that the VAT year end is not necessarily the same as the financial year end. Following the VAT year end there are annual filing requirements that apply to all partly exempt businesses, which are summarised below:

  • Annual adjustment: all partly exempt businesses are required to carry out an annual adjustment each VAT year which needs to be included. The VAT year end is an ideal time to review the year’s VAT accounting, particularly if your income levels were affected by COVID-19 (ie as a result of different business practices being in place pre and post COVID-19).
  • Capital Goods Scheme adjustment: any VAT that has been reclaimed on capital assets must be adjusted annually for the life of the asset after the VAT year end. For VAT purposes, capital assets include commercial property costing over £250,000 (purchase and/or refurbishment) and computer hardware costing over £50,000 (which is more or less redundant nowadays). For all commercial property, the life of the asset is considered to be 10 years.

Last chance to adjust for potential COVID-19 impact

Last year HMRC published Revenue and Customs Brief 4/21 in which they announced that businesses could request temporary alterations to their partial exemption methods if the business was affected by COVID-19. This allowed for the changes to be applied from 2020 onwards and could be applied until the end of the current VAT year (ending in 2022) as long as your business was still affected throughout.

Therefore, the current annual adjustment period is the last opportunity to take advantage of these special measures by HMRC. When you review your annual adjustment calculations for the year, and if you find that your income levels and partial exemption recovery percentage has been affected by COVID-19, then there is potential scope to submit a request and make a claim to HMRC based on an alternative method. HMRC will only accept a single request to use an alternative method, so it is important to consider all years that may have been impacted if you have not already made an application to use an alternative method.

The VAT year end is the best time to review your VAT position and consider whether any improvements could be made to your VAT recovery. Even if you have agreed on a special method with HMRC it can often be worth reviewing the application of the method and whether it is still fair and reasonable for the business. Often the method will have been agreed with HMRC some time ago after which business operations may have changed significantly, especially in light of the changes businesses have gone through as a result of COVID-19.

What now?

We would recommend that your partial exemption position is reviewed to ensure you are carrying out the necessary requirements correctly and are maximising your potential VAT recovery. This is especially relevant this year because it is the last opportunity to take advantage of the special measures introduced by HMRC for businesses affected by COVID-19.

Our VAT team are experts in this area and can help you with your partial exemption requirements and establishing whether any improvements can be made to your VAT position. If you would like to discuss any of these issues further, please contact Kamlesh Chauhan, VAT Director, in our Financial Services team.

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • haysmacintyre’s new Managing Partner
  • Government pulls plug on PiCG
  • Property register progresses
  • Digital reporting delayed by a year
  • IOD looks to improve innovation
  • Government delays minimum tax rate
  • FRC updates Strategic Report guidance
  • And finally… low MTD awareness

Click the button below to download this week’s edition, or read our previous editions here.


IPSX – A new way to invest in real estate

What is IPSX?

The International Properties Security Exchange (IPSX) is the world’s first regulated stock exchange that is wholly dedicated to commercial real estate assets. haysmacintyre is proud to have acted as reporting accountants to one of the first companies to have been listed on IPSX.

IPSX intends to transform real estate investment, facilitating direct investment in commercial property via a public market, and providing flexibility and liquidity for both real estate owners and investors. Historically, real estate investment has been based on investing in listed property companies with multiple assets where the investor is forced to invest indirectly in the entire portfolio rather than specific asset or assets.

IPSX markets

IPSX received Financial Conduct Authority (FCA) approval in 2019, becoming the first recognised investment exchange market to open in the UK in almost ten years.

IPSX operate two markets: IPSX Prime and IPSX Wholesale. IPSX Prime is included in the Financial Services Register as a regulated market, whilst IPSX Wholesale is included in the Data Reporting Services Providers (DRSP), Multilateral Trading Facility (MTF), Organised Trading Facilities (OTF) and Source Index (SI) Register. IPSX is regulated by the FCA which provides protection for investors.

IPSX Prime is the principal market for Initial Public Offering (IPO) of shares in a company owning single (or a small group of similar) commercial property assets, offering a source of capital in a regulated market.

IPSX Wholesale is focused on providing real estate owners with an onshore market to accommodate a variety of corporate structures in a flexible regulatory environment. In addition to stabilised assets, IPSX Wholesale allows real estate owners intending to develop, redevelop or repurpose access to funding, provided that within five years the asset is expected to become stabilised and income-generating.

For IPSX Prime and Wholesale, assets must generally have a minimum market value of £50 million with the maximum loan-to-value of IPSX Prime being 40%, compared to 80% for IPSX Wholesale.

Opportunities of IPSX

The IPSX Prime market allows retail, individual or non-professional investors to purchase shares in single market assets, thus allowing these investors to access a previously restricted commercial real estate market. Real estate has historically been an investment option limited to large investors acquiring whole properties, with restricted access to smaller investors.

On the other hand, IPSX Wholesale restricts investment to professional investors. Existing companies listed on IPSX Wholesale have shareholders ranging from domestic institutions to high-net-worth individuals and international funds.

For asset owners and developers, an IPSX listing offers an alternative to a sale process. On offering, a proportion of the shares are listed, and the remaining are retained by the existing owner. For IPSX Prime, 25% of shares must be ‘free-float’ (i.e. in public hands) but for IPSX Wholesale less than a 10% free-float is possible, subject to meeting certain criteria. This creates an immediate financing option for the asset owner, whilst maintaining significant control of the asset. Further to this, IPSX allows industrial owner-occupiers to list a portion of their asset rather than doing a sale-and-leaseback, avoiding them taking on long-term debt. Moreover, the owner-occupier maintains exposure to any future appreciation in the property value that they have retained.

REIT structure

For asset owners, IPSX companies are expected to qualify as Real Estate Investment Trusts (REITs) and benefit from the advantageous tax regime afforded to having REIT status. REITs mimic direct investment in UK property, and therefore avoid taxes that can otherwise occur when investing in a corporate structure.

  • Benefits of the REIT status include:
  • Exemption from Corporation Tax, on both gains on sales of investment properties and shares in property investment companies
  • Attracting international capital with there being significant investment pools designated for investment in REITs
  • Lower transaction costs and less stamp duty on purchase of shares compared to stamp duty land tax on a property purchase

There are however significant factors and requirements to consider before deciding whether REIT status is appropriate for a company, such as the requirement for a REIT to distribute 90% or more of its tax-exempt income profits as well as the costs of complying with REIT status.

haysmacintyre are specialist service providers to the International Properties Security Exchange and are actively involved in the IPSX community. We work as the reporting accountant during IPOs to IPSX and audit entities listed on the IPSX market.

Getting tough on share sales – latest HMRC action incoming

The Chartered Institute of Taxation (CIOT) have published details of an HMRC briefing stating that they have undertaken a project reviewing declared proceeds from share sales in 2019/20 Self-Assessment tax returns, against the values declared by purchasing companies. This is seen as an area of tax risk by HMRC, and they have the information available to investigate and challenge the declared values of share sale proceeds.

HMRC will be sending ‘nudge letters’ to those where a discrepancy is identified, as part of its one-to-many strategy. HMRC receives data from a vast number of sources and believe that the use of nudge letters provides it with a cost-effective approach to communicate with many taxpayers.

Nudge letters are a targeted communication from HMRC to a large group of taxpayers. HMRC’s nudge letters to date have either identified a potential loss of tax or, more broadly, are used as an educational exercise.

It is worth noting that representatives do not always receive a copy of these communications from HMRC. The communications are aimed at encouraging taxpayers to review their own tax affairs and voluntarily correct any errors or omissions. Our experience has shown that there can be inaccuracies with some of the information held by HMRC, or it has been interpreted incorrectly.

This latest HMRC nudge letter will contain an invitation to make a disclosure for those who agree that the tax return contains an inaccuracy, or a written response from those who are happy the information in their tax return is correct. Caution is advised here: if an error is found later, HMRC may use the written confirmation as evidence of deliberate or fraudulent behaviour in penalty negotiations.

HMRC is expected to take further action against those who do not respond, which may include discovery assessments or other compliance action, and could carry higher penalties.

We recommend reviewing declared share sales in 2019/20 and seeking professional advice should there be a discrepancy. A voluntary unprompted disclosure, ahead of the receipt of any letter, would benefit from the lowest available penalties. We expect HMRC to undertake similar projects in tax years going forward.

Should you require any professional advice please contact our head of tax disputes and resolutions, Danielle Ford.

The full publication can be found here.

Hospitality Snapshot Survey May 2022

Our findings revealed that although a significant number of businesses are currently trading at 2019 levels or above (pre-COVID-19), their optimism for their future prospects has decreased over the last six months. This is likely to be attributed to the current economic uncertainty, which has in turn attributed to a negative outlook on the hospitality industry as a whole.

Lastly, we offer insight on operators’ strategic priorities for the coming months to tackle the impact of rising costs across the nation.

To read the full report, please click below.

haysmacintyre appoints Natasha Frangos as first female Managing Partner

Taking over the role from Jeremy Beard, who has led the firm for the past three years, Natasha’s appointment sees her become the first female Managing Partner of haysmacintyre – one of only a few Top 30 accountancy firms which currently have a woman in this position. Having been a Partner for 13 years, Natasha currently sits on haysmacintyre’s Management Board as the firm’s Head of Corporate, a role she has held since 2019. Previously, she held the position of Head of Creative, Media and Technology for nine years.

Natasha joined haysmacintyre as a trainee in September 2000 and has since become a champion of development and diversity within the firm, from acting as a mentor to many of her colleagues to driving an expansion of the firm’s maternity policy to include Partners. Natasha’s appointment demonstrates haysmacintyre’s inward talent investment strategy, further underlined by 54% of current Partners having qualified at the firm.

Commenting on her appointment, Natasha Frangos said:

I’m thrilled to be taking on the Managing Partner role at haysmacintyre to lead the firm into its next stage of growth. Jeremy’s leadership has helped the firm mitigate a tumultuous three years, and his resolve has undoubtedly put haysmacintyre in a strong position for the future.

Having previously held a range of management positions, I am looking forward to building upon the robust foundations established by Jeremy to continue to enhance our market leading and forward-thinking firm so that we can flourish sustainably and develop our people to the best of their ability.

In alignment with our strategy, my key focus areas are attracting, developing and retaining talent, the continuous development of our Partners, along with delivering initiatives that will increase efficiencies and profitability and help us adapt to the evolving landscape we now face, ensuring we remain continuously relevant and enticing to our clients.”

Jeremy Beard added:

“I am delighted that Natasha has been appointed as Managing Partner of haysmacintyre. Her appointment demonstrates the Firm’s commitment over many years to developing and promoting the next generation of leaders.

 Leading the firm over the past three years has been an incredibly rewarding experience and a real privilege, and I am proud to now be passing on the baton to Natasha. I have no doubt that Natasha will drive the firm forward with great skill, enthusiasm and commitment and I look forward to seeing her build upon her successes as she leads haysmacintyre into the next stage of growth.”

FCA proposes stronger requirements on oversight of the Appointed Representative regime

In December 2021, the Financial Conduct Authority (FCA), released Consultation Paper (CP) 21/34 on ’Improving the Appointed Representatives (AR) Regime’. This CP was released in the context of the Treasury’s ’call for evidence’ paper (also released in December 2021) on how market participants use the AR regime, how effectively the regime works in practice, potential challenges to the safe operation of the regime and possible future reforms.

The AR regime was introduced through primary legislation in 1986. An AR is a firm or person who carries on regulated activity on behalf, and under the responsibility of, an authorised firm (the principal). When appointing an AR, the principal assumes responsibility for the regulated activities the AR carries on.

The reforms were initiated after the well-publicised collapse of Greensill Capital (Greensill) and David Cameron lobbying scandal in 2021 – Greensill being an AR rather than directly authorised by the FCA brought the AR regime significantly into the spotlight.

CP21/34 is consulting on two main areas of change:

  1. Additional information on ARs and notification requirements for principals to allow the FCA to identify potential risks more easily within principals and ARs. It will also help assess whether the principal has the expertise, systems and controls to effectively oversee its ARs and to target supervisory interventions more effectively.
  2. Additional guidance for principals on their responsibilities, and how they should act and oversee their ARs which will clarify and strengthen the responsibilities and expectations of principal firms.

More specific areas of change within the regime that are proposed are:

  • Principal firms would be required to submit data on complaints against their ARs on an annual basis. The data would be required to be submitted per AR and not as an aggregated number of complaints across all ARs, which is currently the case;
  • The FCA is proposing to extend the requirement for principal firms to attest to the accuracy of basic details held on their ARs on an annual basis or report any changes. This would bring the rules in line with directly authorised firms who currently attest their details are correct via the FCA Connect system annually. The details would include the activities the principal permits ARs to conduct, with any changes during the period required to be notified to the regulator using an appropriate form set out in SUP 12;
  • The FCA proposes to require principals to submit revenue data for each of their ARs, from both regulated and non-regulated activities. For existing ARs, it is proposed that principal firms provide this information annually based on their accounting reference date, with 30 working days in which to submit the return. Principals would report this using a new AR reporting form and a transitional period would apply for existing ARs so that principals provide this information for the first full year of data following the rules coming into effect.For ARs appointed after the new rules are implemented, it is proposed that principal firms provide actual figures (for example, for non-regulated business, or if regulated business was conducted under a different principal).If the data is not available, particularly when a new AR is set up and there are no revenues yet, the principal would provide a projection of the annual income of the AR (both regulated and non-regulated) at the point of appointment; and
  • The FCA proposes principals notify the regulator of an intention to begin providing regulatory hosting services and to require existing principal firms to notify the FCA if they already provide regulatory hosting services. The principal would need to make this notification at least 60 calendar days before starting to provide regulatory hosting services to allow the FCA time to assess the firm.

HM Treasury – the AR regime: call for evidence

Also in December 2021, HM Treasury released a ’call for evidence’ paper on the regulatory framework for ARs where it acknowledges that the Government, at the time the AR regime was introduced (in 1986), did not expect it to become so widespread, with the initial intention to just be for salespersons to promote and introduce customers to the principal firm. Today, there are more than 40,000 ARs and over 3,600 principal firms within a wide range of financial markets.

This call for evidence, issued in parallel with the FCA’s consultation paper, is designed as an information gathering exercise on how market participants use the AR regime and how effectively the regime works in practice. The Government wants to ensure it has a full and up-to-date understanding of how the AR regime is currently used. The call for evidence is also designed to gather views on potential challenges to the safe operation of the AR regime and possible future reforms that might be considered to address those challenges. The Government’s view is that more evidence is required before it can decide whether legislative reform, in addition to the rule changes the FCA proposes to make, is necessary.

Future changes being considered by the FCA to further strengthen the requirements within the AR regime are:

  • Limiting the maximum size of ARs before requiring them to become fully authorised in their own right;
  • Prohibiting the engagement of ARs which operate businesses that are materially distinct from that of the principal;
  • Limiting the range or scope of regulated activities that regulatory hosts can oversee and/or the number of ARs they can have;
  • Requiring principals to regularly review the relative size/scale of business carried on by their ARs and consider whether it remains appropriate; and
  • Principals are to be required to ensure that their contractual arrangement with an AR allows for termination where a principal considers it can no longer adequately oversee the AR.

Overall, the FCA’s aim is to address the perceived harm in the market while retaining the cost, competition and innovation benefits that the AR model provides. The proposed reforms have a basic goal of allowing the FCA to ’more easily identify potential risks within principals and ARs’ and ’better assess whether the principal firm has the expertise, systems and controls to effectively oversee its ARs’, rather than completely overhauling the AR model or even terminating the option for firms to become ARs at principal firms.

Should you wish to discuss any of the above in more detail, please do not hesitate to contact Gary Allan at ‘’, Compliance Consultant at ComplyCraft Consulting Ltd.

Corporate and Private Client eNews

The latest edition of our Corporate and Private Client eNews is now available and covers the following topics:

  • Government to overhaul audit market
  • HMRC pauses on some R&D repayments
  • FRC reports on discounting
  • Share sale proceeds under scrutiny
  • CCAB updates money laundering guidance
  • HMRC target umbrella company fraud
  • IFRS 17 adopted by UKEB
  • Fraudulent SDLT claim
  • No changes to FRS 101
  • FCA looks to improve UK listing attractiveness
  • FRC illustrates good practice
  • And finally… cessation of interactive P11Ds

Click the button below to download this week’s edition, or read our previous editions here.


i(x) Net Zero PLC

haysmacintyre acted as reporting accountant on the company’s admission to the AIM market

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