Technical
5 Sep 2018 03:32pm

Practice Q&A: handling conflicts of interest and updating brands

In the latest of our regular advice clinics, handling a potential conflict of interest, dealing with data, and updating the ICAEW branding on your marketing materials come under the spotlight

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Caption: How to handling conflicts of interest, deal with data, and update ICAEW branding

Q: My clients are divorcing; I act for the business and personally. Can I value the business?

A: This is a difficult situation to manage. At present you have three clients: the wife (who wants to buy the husband’s share of the business and has asked for a valuation), the husband and the business. As there is a divorce, the interests of the wife and husband are in conflict. You will need to consider whether or not that conflict is manageable.

Section 220 of the ICAEW Code of Ethics deals with conflicts of interest. This states (paragraph 220.6) that “Where a conflict of interest creates a threat to one or more of the fundamental principles… that cannot be eliminated or reduced to an acceptable level through the application of safeguards the [member] shall resign from one or more conflicting engagement.”

You also need to consider the views of a reasonable and informed third party and whether in this case they would consider that compliance with the fundamental principles is compromised. Although some conflicts may be managed (subject to informed client consent) by using different teams and effective confidentiality barriers, this is partly dependent on the size of your practice. If the conflict can’t be managed, you will need to consider which client to continue to act for and disengage from the others.

In this instance, however, you have described the divorce as “messy” and therefore the third party perception is likely to be that it would be inappropriate to continue to act for all the clients. I would therefore recommend suggesting that the client obtains an independent valuation – especially as it may be contested by the other spouse, who is likely to obtain their own valuation.

Nicky Swaisland, regulatory and ethics advice manager, ICAEW

Q: How do I determine if I am a data processor or data controller under GDPR?

A: GDPR has not changed the definitions for either a data controller or a data processor. GDPR, therefore, continues to define a data controller as an organisation or individual that determines the purposes and means of processing personal data. A data processor is merely responsible for processing personal data on behalf of a data controller.

As before, you can be a data controller for one processing activity but a data processor or even a joint controller for another – but determining this is not always straightforward. The Information Commissioner’s Office has not updated its guidance on data controllers and data processors as the definition has not changed. The ICO’s view remains that individuals and organisations such as accountants and accountancy firms who offer professional services have professional obligations which oblige them to take responsibility for the personal data they process. In other words they are data controllers.

But the ICO does allow that there may be occasions when the nature of the service provided by an accountancy firm or accountant could suggest they are acting as a data processor. This must be judged on a case by case basis. In case of doubt legal advice may be necessary. Getting this right is not just a legal nicety. The GDPR has changed the responsibilities of both and this will require action by both. Significantly both data processors and data controllers can now be held responsible for a breach and therefore subject to sanctions and/or fines.

Jane Berney, manager, business law, ICAEW

Q: I am still using the old ICAEW logo in my marketing. It has been a year since the new brand was launched – when’s the latest I should switch over?

A: ICAEW launched its new brand image in April 2017. This included updated logos for use by members and firms on their practice stationery, email footers and websites, and other promotional material and office signage. Using the logo will help you to stand out from the crowd as an ICAEW chartered accountant.

Any practice which meets the definition of a member firm is entitled to use it. For those members still using previous versions of the logo, you should now be looking at your existing stock of stationery with a view to changing over the next time you go to print – and certainly by the end of 2018. The logo can be downloaded from icaew.com/logos and is available in formats that you can use for both printed and digital channels of communication with clients.

There is also a high-resolution option that can be sent to a firm of printers if you prefer. You should bear in mind that if your stationery and online presence still includes an old version of the logo you may need to justify this at your next Practice Assurance review. If you want to find out more about the logo or you are struggling to download the new brand, you can get help from the Regulatory Information team at ICAEW on +44 (0) 1908 248 250.

Emma Thornton, regulatory information supervisor, ICAEW

Five in Brief

1. Disguised remuneration loan schemes

HMRC is encouraging those who have used disguised remuneration schemes to settle their tax before the charge comes into effect. Taxpayers must register an interest with HMRC and provide detailed information by 30 September 2018.

2. Revised corporate governance code

The revised code, which is now available, applies to premium listed companies from financial years beginning on or after 1 January 2019

3. CEO pay ratio disclosure

The Companies (Miscellaneous Reporting) Regulations 2018 have been approved. They apply to large companies (but scope varies for different provisions) from financial years beginning on or after 1 January 2019.

4. Making Tax Digital

Read VAT Notice 700/200, Making Tax Digital for VAT. HMRC has also made available a list of software suppliers it is working with and a stakeholder communications pack

5. Accounting for IR35 deductions

ICAEW has published guidance on the financial reporting implications of IR35 for personal service companies. A clear consensus has emerged that turnover recognised in the PSC’s accounts should be measured at the gross amount

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