Dear Director(s),

The purpose of this letter is to set out the basis on which we are engaged to:

(a)  act as accountants to prepare the company’s statutory financial statements;
(b)  complete corporate tax returns;
(c)  prepare VAT returns;
(d)  provide bookkeeping services;
(e)  process payroll;
(f)   provide company secretarial work;
(g)  provide other professional services to the company.

And to set out the respective responsibilities of the directors and ourselves.

1.    Responsibilities of directors and accountants

a.    As directors of the company you are responsible for maintaining proper accounting records and for preparing accounts which give a true and fair view and which have been prepared in accordance with the Companies Act 2006 (the “Act”), and for statutory returns for taxation purposes.

b.    You are responsible for determining whether, in respect of each financial period, the company meets the conditions for exemption from an audit as set out in section 477 or 479A or 480 of the Act and for determining whether, in respect of each financial period, the exemption is not available for any of the reasons set out in sections 478, 479 and 479B of the Act.

c.    You are responsible for keeping adequate accounting records that set out with reasonable accuracy at any time the company’s financial position, and for ensuring that the financial statements comply with United Kingdom Accounting Standards.

d.    Should you instruct us to carry out an audit, then a separate letter of engagement will be required.

e.    We do not have any responsibility to report whether any shareholder of the company has notified the company that he or she requires an audit, consequently we have no responsibility to carry out any work in respect of this matter.

f.     Our appointment does not exonerate you from your legal responsibilities. Failure to do so may lead to automatic penalties, surcharges and or interest. The person approving any returns or documents cannot delegate their legal responsibility to others. The person approving any returns or documents agrees to check such are accurate and complete before they approve it.

g.    You will keep us informed of material changes in circumstances that could affect the tax liabilities of the company. If you are unsure whether the change is material or not please let us know so that we can assess its significance.

h.    You have undertaken to make available to us, as and when required, all the company's accounting records and related financial information, including minutes of management and shareholders' meetings necessary for the compilation of the financial statements. You will make full disclosure to us of all relevant information that we need to do our work.

i.     Should our work indicate that the company is not entitled to exemption from an audit of the accounts, we will let you know. In such circumstances, we will not issue any report and will withdraw from the engagement to prepare an accountants report. We will notify you in writing of the reasons. In these circumstances, if appropriate, we will discuss with you the need to appoint an auditor.

j.     We have a professional responsibility not to allow our name to be associated with accounts that may be misleading. Therefore, although we are not required to search for such matters, should we become aware that the accounts may be misleading we will not issue any form of report and will notify you in writing of the reasons.

k.    As part of our normal procedures, we may request you to provide written confirmation of any information or explanations given by you orally during the course of our work. In carrying out our work we shall rely on the source records produced to us by the company and directors. Our work will be carried out in accordance with the requirements of the Companies Acts and appropriate professional procedures.

l.     You will forward to us HMRC statements of account, copies of notices of assessment, letters and other communications received from HMRC in time to enable us to deal with them as may be necessary within the statutory time limits. Although HMRC have the authority to communicate with us when form 64-8 has been signed and submitted it is essential that you let us have copies of any correspondence received because HMRC are not obliged to send us copies of all communications issued to you.

 

2.    Scope of our work

a.    FINANCIAL STATEMENTS

You have asked us to assist you in the preparation of the financial statements in accordance with the requirements of the Act. We will compile the annual financial statements based on the accounting records maintained by you and the information and explanations given to us by you. We shall prepare draft annual financial statements for your approval. We shall plan our work on the basis that no report on the financial statements is required by statute or regulation for the period, unless you inform us in writing to the contrary. In carrying out our engagement we will make enquiries of management and undertake any procedures that we judge appropriate but are under no obligation to perform procedures that may be required for assurance engagements such as audits and other assurance assignments.

Our work as the compilers of the annual financial statements will not be an audit of the financial statements in accordance with International Standards on Auditing (UK). Consequently, our work will not provide assurance that the accounting records or the financial statements are free from material misstatement, whether caused by fraud, other irregularities or error.

Since we have not carried out an audit, nor confirmed in any way the accuracy or reasonableness of the accounting records maintained by the company, we are unable to provide assurance as to whether the financial statements we prepare from those records present a true and fair view.

In accordance with best practice guidance issued by our regulatory body we shall report to the directors, with any modifications that we consider may be necessary.

 

b.    CORPORATE TAX RETURNS

To enable us to carry out our work that you agree:

·         that all returns are to be made on the basis of full disclosure;

·         that you are responsible for ensuring that the information provide to us, is to the best of your knowledge, accurate and complete;

·         that we are authorised to approach such third parties as may be appropriate for information that we consider necessary to deal with the company’s corporation tax affairs;

·         to provide us with information in sufficient time for the company's tax return to be completed and submitted by the due date of 9 months and 1 day following the end of the financial accounting period. In order that we can do this, we need to receive all relevant information by the latest 1 month prior to the filing date. Where feasible we may agree to complete your return within a shorter period but may charge an additional fee of £250 for doing so;

·         to provide information on matters affecting the company’s tax liability for the accounting period in respect of which instalments are due at least four weeks before the due date of each instalment. This information should include details of trading profits and other taxable activities up to the date the information is provided, together with estimates to the end of the accounting period; and

·         to provide us with information on advances or loans made to directors, shareholders or their associates during an accounting period and any repayments made or write offs authorised at least within three months of the end of the relevant accounting period.

We will prepare the corporation tax computation and supporting schedules required for the preparation of the company’s corporate tax return from the financial statements, information and explanations provided to us on your behalf.

After obtaining the approval of an authorised nominated director, we will submit the company’s corporate tax return to HMRC. We will not accept liability for any financial penalty or loss or other damage arising from any rejection of the iXBRL financial statements by HMRC or otherwise as a result of incorrect or inappropriate tagging.

We will tell you how much tax the company should pay and when. Where appropriate, we will initiate repayment claims when tax has been overpaid. We will advise on the interest and penalty implications if corporation tax is paid late.

We will inform you if instalment payments of corporation tax are due for an accounting period and the dates they are payable. We will calculate the quarterly instalments which should be made on the basis of information supplied by you by the date agreed.

We will advise you as to possible tax return-related claims and elections arising from information supplied by you. If instructed by you, we will make such claims and elections in the form and manner required by HMRC.

We will deal with all communications relating to the company’s tax return addressed to us by HMRC or passed to us by the company. However, if HMRC choose your return for enquiry this work may need to be the subject of a separate assignment in which case we will seek further instructions from you.

 

c.    VAT

We have agreed to prepare VAT reporting and to submit VAT returns on your behalf on the basis of the information and explanations supplied by you.

We will tell you how much VAT you should pay and when. If appropriate we will initiate repayment claims where VAT has been overpaid. We will advise on the interest and penalty implications where VAT is paid late.

We will submit the MTDfV returns online to HMRC after the date to be included therein has been approved by you.

We will deal with all communications relating to your VAT return addressed to us by HMRC or passed to us by you. However, if HMRC choose your return for enquiry this work may need to be the subject of a separate assignment in which case we will seek further instructions from you.

 

d.    BOOKKEEPING

You have asked us to assist you in fulfilling the duty of keeping adequate accounting records. We will advise you as to the adequacy of any accounting that you have maintained and make recommendations for improvements.

We have agreed to provide you with bookkeeping services which may include:

·         keep a record or all receipts (bank and cash), payments (bank and cash), purchases and sales (including orders, invoices and statements);

·         maintain a cash book;

·         maintain a petty cash book;

·         maintain a sales day book and a sales ledger;

·         maintain a purchase day book and a purchase ledger;

·         analyse and post the company credit card(s);

·         reconcile the petty cash to the cash tin;

·         reconcile the bank account(s);

·         reconcile the sales ledger to the sales ledger control account;

·         reconcile the purchase ledger to the purchase ledger control account;

·         reconcile individual purchase ledger balances to any supplier statements received;

·         review and investigate any credit balances on the sales ledger and debit balances on the purchase ledger;

·         downloading and storing digital import certificates;

·         review and clear any suspense accounts;

·         update the tangible fixed assets register, including providing for appropriate depreciation;

·         produce a list of stock/work in progress/amounts recoverable on contracts;

·         value items on the stock list;

·         import the payroll information;

·         reconcile the gross wages/net wages/PAYE NI control accounts;

·         reconcile the VAT account;

·         calculate and post accruals and prepayments;

·         calculate and post accrued and deferred income;

·         post provisions for tax and deferred tax;

·         produce a nominal ledger and trial balance.

 

e.    PAYROLL

We will prepare your UK payroll for each payroll period to meet UK employment tax requirements. If the information required to complete the payroll services is received less than 2 working days before the payroll date we will still endeavour to process the payroll and returns to meet the agreed payroll date and filing deadlines but we will not be liable for any costs or other losses arising if the payroll is late in these circumstances. We may charge an additional fee of £50 for work carried out in a shorter time period.

 

f.     COMPANY SECRETARIAL WORK

We will produce statutory financial statements, suitable for filing, within the required period. We have agreed to act as your agent and subject to you fulfilling your duties to submit the financial statements to the Registrar of Companies; complete and submit the annual confirmation statement; complete and submit any other forms required by law to be filed at Companies House; and maintain the company’s statutory books.

 

3.    Our fees

a.    Our fees are computed on the basis of the time spent on your affairs and the level of skill and responsibility involved and are excluded of any applicable taxes.

b.    Any disbursements we incur on your behalf and expenses incurred in the course of carrying out our engagement will be added to our invoices where appropriate.

c.    Unless otherwise agreed, our fees will be charged separately for each of the main classes of work, and will be billed at appropriate intervals during the course of the year.

d.    You shall pay our bill within 30 days of the date of each invoice. In the event such payment is not made within 30 days, unless you meet the definition of a consumer, we reserve the right to charge interest on overdue accounts at the current rate under the late Payment of Commercial Debts (Interest) Act 1998. We also reserve the right to terminate our engagement by giving written notice if payment of any invoice is unduly delayed. We intend to exercise these rights only where it is fair and reasonable to do so.

e.    Any payment plan intended to clear invoices in arrears must be confirmed in writing and approved by a senior manager of both parties. Such payment plan will be terminated immediately upon failure to pay a scheduled payment unless we receive a notice of delay at least 2 days before payment is due and we agree on a new payment date. If a payment plan is terminated due to lack of payment of any instalment, all pending fees and overdue invoices will become due immediately.

 

4.    Data Protection

The Data Protection Act (DPA) 2018 as amended by the Data Protection, Privacy and Electronic Communications (Amendment etc.) (EU Exit) Regulations 2019 contain a number of requirements in relation to the processing of personal data.

We take your privacy and the privacy of the information we process very seriously. We will only use your personal information and the personal information you give us access to under this engagement to administer your account and to provide the services that you have requested from us.

Any personal data received from you to comply with our obligations under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as amended (MLR 2017) will be processed only for the purposes of preventing money laundering or terrorist financing. No other use will be made of this personal data unless use of the data is permitted by or under an enactment other than the MLR 2017, or we have obtained the consent of the data subject to the proposed use of the data.

We will communicate or transfer data using the following means: post; password-protected emails; encrypted emails; portals – TaxCalc, e-sign; cloud-based software – Quickbooks, SAGE, XERO, Kashflow, etc.; emails which are neither password-protected nor encrypted; telephone.

If you require us to correspond with you by email that is neither encrypted nor password protected, you agree to accept the risks associated with this form of communication.

 

5.    General provisions

a.    Once it has been agreed, this letter will remain effective, from year to year, until it is replaced.

b.    This letter represents the entire agreement between the parties and supersedes all prior discussions, negotiations, and agreements.

c.    We will provide our professional services with reasonable care and skill. Our liability to you is limited to losses, damages, costs and expenses caused by our negligence, wilful default or breach of contract. However, to the fullest extent permitted by law, we will not be responsible for any losses, penalties, surcharges, interest or additional tax liabilities arising from the supply by you or others of incorrect or incomplete information, or yours or others’ failure to supply any appropriate information (at all or on a timely basis) or your failure to act on our advice or respond promptly to communications from us or any public sector body (such as HMRC, Companies House etc.). You agree to hold harmless and indemnify us, our principals, subcontractors, consultants, agents and staff, to the fullest extent permitted by law, for any loss suffered by you arising from any misrepresentation (intentional or unintentional) provided by you orally or in writing in connection with this agreement. You have agreed that you will not bring any claim in connection with services we provide to you against any of our principals, subcontractors, consultants, agents or staff personally.

d.    This engagement letter shall be governed by, and construed in accordance with, English law. The courts of England shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning this engagement letter and any matter arising from it. Each party irrevocably waives any right it may have to object to an action being brought in those courts, to claim that the action has been brought in an inappropriate forum, or to claim that those courts do not have jurisdiction.

e.    Either party may terminate this agreement upon giving 30 days' written notice to the other party. In the event of termination, the parties shall be released from their respective obligations, except that all payment obligations accrued prior to termination shall survive. Notwithstanding the foregoing, either party may terminate this agreement immediately upon written notice to the other party in the event of a material breach by the other party which has not been remedied within 15 days of notice.

f.     Should we cease to act for you, we will normally issue a disengagement letter to ensure that respective responsibilities of both parties are clear. This will also help in ensuring an efficient handover between professional advisers. Should we have no contact with you for a period in excess of one year we may issue a disengagement letter to your last known address and hence cease to act.