Online fraud accounts for 40% of all crimes reported in England and Wales, with the majority of incidents happening online
Ofcom found that nine out of 10 adults in the UK think they have come across content connected with a scam and 25% admitted to losing money as a result. Many victims said it not only impacted their wallets but also their mental health.
As the online safety regulator, Ofcom has issued a revised Code of Practice to support the Online Safety Act that was passed last month.
The online safety rules ‘make it harder for fraudsters to operate online’ by making online service providers assess the risks of the user being harmed while using their platforms.
With the rate technology is advancing fraudsters are always adapting with the advancements, implementing social media and artificial intelligence (AI) to scam victims into sharing personal details, such as bank account details and addresses.
Under the new guidance, Ofcom has suggested measures for larger service providers that attract a greater level of risk, including the implementation of an automatic keyword search, employing an expert reporting system to contact regulators and law enforcement more easily, and installing a verification system for users.
They should also have to name an accountable person as a user, provide extensive training to content teams to recognise illegal activities, introduce a method of easy reporting for users and safety test recommended content.
The main attention is focused on protecting children against scams. Dame Melanie Dawes, Ofcom’s chief executive said: ‘Regulation is here, and we’re wasting no time in setting out how we expect tech firms to protect people from illegal harm online, while upholding freedom of expression. Children have told us about the dangers they face, and we’re determined to create a safer life online for young people in particular.’
Ofcom are planning on publishing a consultation on online fraud in January.
Michelle Donelan, science, innovation and technology secretary said: ‘Before the Bill became law, we worked with Ofcom to make sure they could act swiftly to tackle the most harmful illegal content first. By working with companies to set out how they can comply with these duties, the first of their kind anywhere in the world, the process of implementation starts today.’
HMRC will be scrapping paper VAT registrations and mandating online only sign-ups next week
The new rules will come into effect from 13 November as part of HMRC’s Making Tax Digital (MTD) strategy.
Taxpayers will have to register for VAT through the online VAT Registration Service using their Government Gateway account. However, some types of business will not be able to use the service as the online service still needs to be expanded to cover businesses joining the agricultural flat rate scheme, overseas partnerships and entities without a unique tax reference (UTR) number.
It is important to note that if a taxpayer has a particular exemption, they will have to contact HMRC by phone to request a paper form which will then be posted to them for completion. Paper applications take up to 40 days to process.
Taxpayers will have to ask for a VAT1 form to get online exemption by calling the VAT Helpline on 0300 200 3700 and ‘they will have to justify why they are unable to register online’, HMRC said.
While 95% of firms are already registering for VAT online, next week’s change could be daunting for the 5% that have not completed it this way before.
Mariana Príncipe, head of VAT compliance at Ryan, said: ‘There are three key advantages to digital-only VAT registrations that will benefit both HMRC and businesses, including faster turnarounds for VAT numbers as there should be less of a wait to get VAT numbers, a reduction in the amount of paperwork and it will be a more secure process.
‘VAT registration in the UK requires highly sensitive information, including the passport details of the legal representative and the trade register. This information could be intercepted if sent by post, and emails can also be hacked easily. By completing the registration through HMRC’s secure online portal, the risk of private information falling into the wrong hands is reduced significantly.’
The move is part of HMRC’s plan to move all tax transactions online to cut costs and reduce use of call centre advisers by 30% by the end of 2024.
HMRC told stakeholders: ‘Supporting our customers is a priority for us and online applications for VAT registrations aligns with our ambition to increase the use of digital channels.
‘For customers that are unable to access and use our digital channels, we’ll always provide a service to meet their needs. We continue to offer support through non digital channels such as via telephone, including our extra support service.’
With the push to digital filing and reduction in phone support, HMRC will have to invest heavily in existing IT systems to ensure they can be used for specialist services.
Príncipe added: ‘HMRC is making fantastic strides on its MTD strategy, especially compared to other European countries. In Spain, for example, to perform a VAT registration, it still requires an individual to book a meeting at a tax office and physically bring in the paperwork.
‘Coming up next, all eyes should be on the Form VAT652. This is the form that you have to complete if you are making a correction to your VAT return. At the moment, you can complete this form online or via a paper form, but I am sure it won’t be long before the paper option will be removed.’
Directors trying to dissolve their own companies to avoid paying debts and tax bills have seen a threefold increase in objections by creditors in the past two years
The number of objections to company strike offs at Companies House was 590,063 in 2022/23, more than double the figure just two years ago when there were 203,613 rejections in 2020/21. In the last year alone there has been a 30% increase to 452,209 in 2021/22, found analysis by Price Bailey.
This shows the spike in companies requesting dissolution when they have unpaid tax bills or bounce back loans issued during the pandemic, which means they are not eligible to stop trading.
The number of strike off applications has barely changed over the past year, and increased by just 18% over the last two years, from 280,086 in 2020/21 to 330,644 in 2022/23, indicating that a much higher proportion of strike off applications are from company directors with outstanding debts.
Directors should only apply to have their companies struck off the register if they have no outstanding liabilities, such as unpaid taxes owed to HMRC, Covid-related loans or money owed to staff or suppliers.
Directors who try to have their companies dissolved without settling their debts are risking severe penalties and criminal sanctions.
William Wilson, partner at Price Bailey, said: ‘These are essentially insolvencies by the back door. A company must be solvent with no outstanding debts for the voluntary strike off process to go smoothly.
‘The surge in creditors objecting to strike offs means that directors are trying to close their companies down and walk away from unpaid debts.
‘Directors are taking huge risks by going down this path. In many cases these companies will have received bounce back loans, which may have been misused to finance the day-to-day living of directors.
‘Directors could be personally liable for the bounce back loan if misconduct is proved. HMRC can also shift liability for tax debts onto directors if they don’t adhere to their legal responsibilities.’
The rising amount of fraud from bounce back loans means that company directors are likely to be scrutinised much more closely.
He added: ‘The government has been clamping down on misconduct by directors in receipt of bounce back loans, including against directors who dissolve companies without paying off the loans. If any evidence of fraud or misconduct emerges directors can be disqualified for up to 15 years or face a prison sentence.’
Price Bailey warned that directors who pay the objecting creditor and resume the strike off process would be guilty of making a preference payment if other creditors are unpaid, which would also be a serious breach of their legal responsibilities.
William added: ‘Directors who pay a creditor in preference to others may face sanctions for wrongful or fraudulent trading. Directors could then face personal liability for company debts, disqualification or even prosecution.’
A director whose attempt to dissolve their company has been blocked should undertake a formal insolvency process known as a creditors’ voluntary liquidation (CVL). During a CVL an insolvency practitioner will be appointed. Any assets in the company will be liquidated and distributed to outstanding creditors on a proportional basis and remaining debts written off.
Wilson added: ‘A CVL will likely be the best option for most of these companies. It ensures that creditors are dealt with equitably, legal obligations fully met and, crucially, directors cannot be held personally liable for any debts for which they have not provided personal guarantees.’
The government is going ahead with plans to tighten up the accounts filing framework for small companies with mandatory profit and loss figures but has not set out implementation timetable
Under the new rules in the Economic Crime and Corporate Transparency Act 2023, small companies will be required to file a profit and loss account and directors’ report. This will ensure that key information such as turnover is available on the public register. Companies will no longer be able to file abridged accounts.
A spokesperson at the Department for Business & Trade told Accountancy Daily: ‘We have not set out a timetable for implementation of the new rules but any changes will not affect accounts due from 1 January 2024. We need to allow time for Companies House to update their systems. We will be confirming more details about the filing changes in due course.’
‘Requiring more information to be filed will reduce the risk of deliberate misuse of minimal disclosure options to hide money laundering and other fraudulent activity. Ensuring all companies report sufficient information to determine a company’s size and eligibility to file under size specific regimes will improve the value and reliability of the information,’ the government said.
Rather than detailing the filing obligations for small companies andicro-entities in the same section of Companies Act 2006, the Economic Crime and Corporate Transparency Act 2023 splits the requirements into two sections, which aims to make the filing requirements clearer for companies to understand. The new legilsation covers sections 53 to 58 [from page 47 onwards].
Under the new rules, amendments to the small companies filing requirements require the preparation of annual accounts in accordance with section 396 CA 2006.
In future, small companies will be required to file a profit and loss account, and directors’ report. This will ensure that key information such as turnover is available on the public register at Companies House. A company is defined as small if it meets two of the following criteria: turnover of less than £10.2m, £5.1m or less on balance sheet and 50 employees or fewer.
Micro-entities with turnover of less than £632,000, balance sheet of £316,000 and 10 employees or under, will be required to prepare annual accounts in accordance with the requirements of section 396 CA 2006, which requires the preparation of a profit and loss account. They will not have to produce a directors’ report.
There will no longer be an option for micro companies to prepare abridged accounts.
The government said ‘the amendments will make the filing requirements easier to understand, reduce fraud and error, and improve transparency’.
Directors who use the audit exemption rules, including dormant companies, will have to file an exemption statement, identifying the exemption being relied on and to confirm that the company qualifies for the exemption.
This additional statement is intended to act as a deterrent to criminal activity and to provide additional enforcement evidence.
The new rules are also meant to crack down on abuse of dormant company rules.
Evidence from law enforcement agencies shows that some companies file dormant company accounts and claim the dormant audit exemption, despite their bank accounts clearly showing that the company does not meet the definition of a dormant company. The additional statement is intended to act as a deterrent and help Companies House address such offences in the future.
The government plans to make further changes to reporting rules in a future amendment to the Act, including mandating digital filing, full tagging of financial information in iXBRL format, and a reduction of the number of times a company can shorten its Accounting Reference Period.