PSC Engagement Letter
Thank you for engaging us as your accountants. This letter and the attached schedule of service together with our terms of business set out the basis on which we are to provide services as accountants and your and our respective responsibilities.
1 SCOPE OF SERVICES
We have listed below the work which you have instructed us to carry out, the detail of which is contained in these terms of engagement. These state your and our responsibilities in relation to the work to be carried out. Only the services which are listed in these terms of engagement are included within the scope of our instructions. If there is additional work that you wish us to carry out which is not listed in this document, please let us know and we will discuss with you whether they can be included in the scope of our work.
Prior to conducting any work under this engagement, Workwell must undertake an identity check on all of the directors of the company.
3 AREAS OF ENGAGEMENT
Workwell are engaged for the following services;
a) Preparation of statutory financial statements;
b) Preparation and maintenance of accounting records;
c) Taxation services.
4 ETHICAL AND PRACTICE GUIDELINES
We will observe the ethical guidelines of the Institute of Chartered Accountants in England and Wales and accept instructions to act for you on the basis that we will act in accordance with those guidelines. These provide for honest and professionally responsible conduct including reporting and correction of identified fiscal errors or omissions. A copy of these guidelines will be supplied to you on request.
As part of our ongoing commitment to providing a quality service, our files are periodically subject to an independent regulatory or quality control review. Our reviewers are highly experienced and professional people and, of course, are bound by the same requirements for confidentiality as our partners and staff.
Communication between us is confidential and we shall take all reasonable steps to keep confidential your information except where we are required to disclose it by law, by regulatory bodies, by our insurers or as part of an external peer review. Unless we are authorised by you to disclose information on your behalf this undertaking will apply during and after this engagement.
We may, on occasions, subcontract work on your affairs to other tax or accounting professionals. The subcontractors will be bound by our client confidentiality terms.
We reserve the right, for the purpose of promotional activity, training or for other business purpose, to mention that you are a client. As stated above we will not disclose any confidential information.
6 COMMISSIONS OR OTHER BENEFITS
In some circumstances, commissions or other benefits may become payable to us or to one of our associates in respect of introductions to other professionals or transactions we or such associates arrange for you arising from business requirements identified during our work. For example, should you wish Workwell to introduce you to Cater Allen Business Bank who will in turn arrange your business banking requirements, commission may then become payable to Workwell. As these will usually arise from proactive services outside the scope of this engagement, the fees that would otherwise be payable by you as described below will not be abated by such amounts and you consent to such commission or other benefits being retained by us or, our associates without being liable to account to you for any such amounts.
7 RETENTION OF RECORDS AND FILE DESTRUCTION
During the course of our work we will collect information from you and others acting on your behalf and will return any original documents to you. You should retain them for six years following the end of the accounting year.
Whilst certain documents may legally belong to you, unless you tell us not to, we intend to destroy correspondence and other papers that we store, which are more than seven years old, other than documents which we think may be of continuing significance to our work.
We wish to provide a high quality of service at all times. If at any time you would like to discuss with us how our service could be improved or if you are dissatisfied with the service you are receiving please let us know by initially contacting us on 0800 25 26 40. We undertake to look into any complaint carefully and promptly and to do all we can to explain the position to you. If we have given you a less than satisfactory service we undertake to do everything reasonable to put it right. If you are still not satisfied you may of course refer the matter to one of our Directors. Where requested, a copy of the Complaints Procedure will be sent to you.
Our annual fees have been agreed with you at the commencement of this engagement and will be spread over 12 equal instalments for your added convenience. Workwell reserve the right to review your fee on a periodic basis and will notify you within 30 days of any intended changes. If it is necessary to carry out work outside the responsibilities outlined in this letter this will involve additional fees particularly for instance, where your records are not completed to the agreed stage prior to preparing each year’s accounts. Our fees will be billed monthly or at our discretion other appropriate intervals during the year and will be payable on presentation. Additional time costs, where appropriate, will be computed on the basis of the time spent on your affairs by the principals, staff and agents and on the levels of skill or responsibility involved.
Where our services are anticipated to extend over more than one month at the outset or where otherwise agreed, it is our normal practice to request that clients make arrangements to pay an estimate of their fee on a monthly direct debit. These direct debits will be applied to actual fees arising from work agreed in this letter of engagement for the current and ensuing years. Once we have been able to assess the actual amount of work and time involved we would report these to you at regular intervals and present the fees for payment of the remaining balance.
In the event of non-payment within our normal payment terms, we reserve the right to charge interest at 3% for the time being over base rate calculated on the previous month end balance. We also reserve the right not to undertake any further work on your behalf and exercise a general lien over the property in our possession until the outstanding fees and interest are settled in full. In this event, you will be advised accordingly.
Where the engagement is suspended or terminated for whatever cause all unbilled work in progress will become billable and all outstanding fees payable at that time without abatement or offset for whatever reason.
10 APPLICABLE LAW
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 the engagement letter and any matter arising from it. Each party irrevocably waives any right it may have to object to any action being brought in those courts, to claim that the action has been brought in any inconvenient forum, or to claim that those Courts do not have jurisdiction.
11 LIMITATIONS OF LIABILITY
We will provide services as outlined in this letter with reasonable care and skill. Our liability to you is limited to losses, damages, costs and expenses caused by our negligence or wilful default. However, to the fullest extent permitted by law, we will not be responsible for any losses, [penalties, surcharges, interest or additional tax liabilities] where you or others supply incorrect or incomplete information, or fail to supply any appropriate information or where you fail to act on our advice or respond promptly to communications from us [or the tax authorities].
You will not hold us, our directors and staff, responsible, to the fullest extent permitted by law, for any loss suffered by you arising from any misrepresentation (intentional or unintentional) supplied to us 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 partners or employees personally.
Our work is not, unless there is a legal or regulatory requirement, to be made available to third parties without our written permission and we will accept no responsibility to third parties for any aspect of our professional services or work that is made available to them.
12 ANNUAL PROFESSIONAL SERVICES
12.1 Preparation of Accounts
Our responsibilities for the preparation of accounts
We will compile your annual accounts based on the accounting records maintained by you and the information and explanations given to us by you. We shall prepare draft annual accounts for your approval.
We will advise you as to the adequacy of your records for preparation of the annual accounts and make recommendations for improvements, which we consider necessary. We shall not be responsible if, as a result of you not taking our advice, you incur losses or penalties.
We will use reasonable skill and care in the preparation of your accounts but will not be responsible for errors arising from incorrect information supplied by you.
We will report, with any variations that we consider may be necessary, that in accordance with your instructions and in order to assist you to fulfil your responsibilities, we have compiled, without carrying out an audit, the accounts from your accounting records and from the information and explanations supplied to us.
We have a professional duty to compile accounts, which conform to generally accepted accounting principles. Furthermore, the accounts of a limited company are required to comply with the Companies Act 2006 and applicable accounting standards. Where we identify that the accounts do not conform to accepted accounting principles, or if the accounting policies adopted are not immediately apparent, this will be made clear in our report, if it is not clear in the accounts.
As part of our normal procedures we may request you to provide written confirmation of any information or explanations given to us orally during the course of our work.
12.2 Director’s responsibilities
As directors of the company, you are responsible for ensuring that the company maintains 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. You are responsible for ensuring that, to the best of your knowledge and belief, financial information, whether used by the company or for the accounts is reliable.
You are also responsible for determining whether, in respect of the year, the company meets the conditions for exemption from an audit of the accounts set out in section 477 of the Act, and for determining whether, in respect of the year, the exemption is not available for any of the reasons set out in the Act.
You are responsible for ensuring that the activities of the company are conducted honestly and that its assets are safeguarded, and for establishing arrangements designed to deter fraudulent or other dishonest conduct and to detect any that occurs.
You are responsible for ensuring that the company complies with laws and regulations applicable to its activities, and for establishing arrangements designed to prevent any non-compliance with laws and regulations and to detect any that occur.
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 accounts. You will make full disclosure to us of all relevant information.
You are also responsible for ensuring due diligence in respect of IR35 and whether any contracts fall inside or outside of the legislation.
You are also responsible for determining any remuneration levels, including salary and where applicable, dividend distributions and will ensure proper accounting records are maintained, including but not limited to dividend declarations and board minutes to support any dividend distributions that take place in the accounting period.
12.3 Company Secretarial
A private company is required to file its accounts at Companies House within nine months of the year-end or within twenty one months of the date of incorporation. The company will be liable to a fine if it fails to do so. In order to avoid this we will produce statutory accounts, suitable for filing, within the required period provided all your records are complete and presented to us within five months of the year end, and all subsequent queries are promptly and satisfactorily answered.
We have agreed to:
a) Submit the accounts to the Registrar of Companies;
b) Complete and submit the company's Annual returns forwarded to us for preparation;
c) On specific written request, complete and submit any other forms which are required by law to be filed at Companies House, provided that you keep us fully informed of any relevant changes or events which are required to be notified to Companies House, within one week of the change or event.
12.4 Tax Compliance
Our responsibilities as tax agents and advisers
We will prepare the company’s corporation tax computations and return based on the accounts that we have prepared, together with additional information provided by you.
We will forward to you the tax return for your approval and signature. Once the return has been approved, signed and returned to us, we will submit it online together with the IXBRL accounts and computations, to HM Revenue & Customs. You understand that the filing of the return creates a legal charge without further action by HM Revenue & Customs.
We will advise as to amounts of corporation tax to be paid and the dates by which the company should make the payments, including payments on account and the balancing payment based on our computations. If appropriate we will initiate repayment claims when tax appears to have been overpaid. You should not make payments to HM Revenue & Customs without first referring to ourselves to confirm whether a payment is required.
We will advise as to possible claims and elections arising from the tax return and from information supplied by you and, where instructed by you, we will make such claims and elections in the form and manner required by HM Revenue & Customs.
We will deal with all communications relating to the company’s return addressed to us by HM Revenue & Customs or passed to us by the company.
However, if HM Revenue & Customs choose the tax return for enquiry this work will be the subject of a separately chargeable assignment and we will seek further instructions from you. We will then agree with HM Revenue & Customs the company’s liability to corporation tax should the corporation self assessment tax return be challenged and attend to notices of assessment lodging appeals against incorrect assessments as appropriate deal with HM Revenue & Customs regarding amendments required to your return and prepare any amended returns which may be required
Your responsibilities for the provision of information for tax purposes
The company is legally responsible for making correct returns and for payment of tax on time for which there are strict time limits. Failure to meet the deadlines may result in automatic penalties, surcharges and/or interest.
Where the company has made a loan to a participator such as a shareholder, tax is payable. We can be responsible for advising you of the tax payable only if you notify us of details of such loans before the end of the relevant accounting period.
To enable us to carry out our work you agree:
a)to make a full disclosure to us of all sources of income, charges, allowances and capital transactions and to provide full information necessary for dealing with the company’s affairs: we will rely on the information and documents being true, correct and complete and will not audit the information or those documents unless we consider it necessary;
b)to respond quickly within the month or such shorter time as we advise will be necessary and fully to our requests for information and to other communications from us relevant to the engagement;
c)to provide us with information in sufficient time for your company’s tax returns to be completed and submitted by the ninth month following the end of the accounting period. In order to do this, we need to receive all relevant information to complete the underlying accounts by the fifth month following the end of the year end; and
d)to forward to us on receipt copies of all HM Revenue & Customs statements of account, letters and other communications received from HM Revenue & Customs to enable us to deal with them as may be necessary within the statutory time limits.
We reserve the right to end this agreement without notice and to cease acting for you immediately if you do not comply with this clause 12.4. In those circumstances any fees for any period up to and including the point at which we ended this agreement and ceased acting will remain payable, but we will not carry out any further work and you will immediately assume full responsibility for compliance with all statutory, regulatory and other matters that are detailed throughout this agreement. We do not intend to use this clause unreasonably.
You are responsible for ensuring the expenses claimed through the company are wholly and exclusively for the purposes of the business. Where this is not the case we will add back the costs to profit for corporation tax purposes. In addition, you must ensure where expenses are paid to employees or directors you consider the tax position of each payment. Expenses can be reimbursed to employees or directors without the operation of PAYE where they have been incurred wholly, exclusively and necessarily for the duties of the employee’s or director’s employment. It is your responsibility to assess whether the expense claimed meets this test. A guide to such expenses is set out on the Workwell website www.workwellsolutions.com/accountancy. Where the appropriate test is not met there will be a tax liability.
12.6 Provision of information by third parties
You agree that we can approach such third parties as may be appropriate for information that we consider necessary to deal with the company’s affairs.
We will apply for agent authority via HMRC’s online portal. This will allow HMRC to liaise with us directly regarding your tax affairs; it is your responsibility to forward the appropriate verification code to us as soon as it is received from HMRC. Alternatively, we request that you approve forms 64-8 which authorise HM Revenue & Customs to send us copies of formal notices.
In practice HM Revenue & Customs will treat this as authority to correspond with us, in which case they will not correspond with the company except to the extent that they are formally required to do so. However, this authority does not apply to all HM Revenue & Customs correspondence and, even where it does, HM Revenue & Customs may sometimes overlook it. You should therefore always send us the originals or copies of all communications you receive from HM Revenue & Customs.
12.7 Period of engagement
Unless otherwise agreed in writing, this engagement will commence from incorporation of your company where Workwell undertake this process or from the effective date Workwell are to act from.
Where matters arise in respect of previous years, this work will be the subject of a separately chargeable assignment and we will seek further instructions from you in dealing with outstanding returns, assessments and other matters relating to earlier periods in agreeing the position with the tax authorities.
12.8 General tax advice
We will be pleased to assist the company generally in tax matters if you advise us in good time of any proposed transactions and request advice. We would, however, warn you that because tax rules change frequently you must ask us to review any advice already given if a transaction is delayed, or if an apparently similar transaction is to be undertaken.
12.9 P11d Expense and Benefit Returns
We will complete forms P11D for the directors and company higher-paid employees for your approval which we will then submit electronically to HM Revenue & Customs. You will supply the form P11D information to your employees by the due date.
You agree to supply us with complete and accurate details of all benefits and expenses received by the directors and higher paid employees for the tax year (not the accounts year) within 14 days of the end of the tax year. (Note: A higher paid employee is someone who receives (at the current level) £8,500 pa including the taxable value of benefits).
There are penalties for the late submission of and incorrect information on form P11D. In order to avoid these, you must ensure that we receive complete, accurate and timely information by 30th April of each year.
12.10 IR35 Computations
We will provide a professional opinion on whether the company is subject to the personal services legislation on a contract-by-contract basis. You are advised to submit each contract to us for review to ensure compliance. In the absence of a written contract, working practices will be reviewed. If there are contracts that are considered within IR35 we offer a chargeable deemed salary calculation service advising you how much tax and national insurance to pay and by when.
Where no request is received for an IR35 review, written confirmation from yourself as the director will be required to confirm whether the contract falls inside or outside of the legislation.
We will prepare the corporation tax computations using the prescribed method and prepare and submit the P35, P14 and supplementary returns arising from the clarification of previous estimates made incorporating such liabilities.
13 PERIODIC PROFESSIONAL SERVICES
13.1 Accounting Records
Preparation and maintenance of accounting records
It was agreed that we should carry out the following accounting and other services on your behalf:
a) Make any necessary journal adjustments;
b) Complete the postings to the nominal ledger;
c) Reconcile balances with the bank statements;
d) Provide you with a quarterly report and management accounts.
We understand that you have agreed that you or your staff will:
a) Keep the records of receipts and payments;
b) Record expenses, purchases and sales;
c) Prepare a detailed list of creditors and debtors;
d) (where applicable) prepare details of the annual stocktaking of any goods for sale, suitably priced and extended in a form which will enable us to verify the prices readily by reference to suppliers' invoices; and
e) Prepare details of work-in-progress at the accounting date and billed after date and make available to us the documents and other information from which the statement is compiled.
13.2 VAT Returns
Responsibilities for the preparation of VAT returns
You are legally responsible for making a correct VAT return, and for payment of VAT on time. It is therefore essential that we are supplied with all relevant information in the time scale outlined in this letter so that we can complete the return on your behalf.
We will prepare return form VAT 100 from the records of your company and send for your approval and informing you of any liability or refund due. It is your responsibility to arrange payment to HM Revenue & Customs for any due liability. Once approved, the VAT return will be filed online with HM Revenue & Customs.
We can accept no responsibility for any default surcharge that may arise if the books and records are not available to us within 10 days after the return period ends or the books and records prove to be incomplete or unclear, and in particular are not written up to the end of the period, thereby delaying the preparation and submission of the VAT return, or you fail to respond to our enquiries by the following working day or as advised in the circumstances.
Further, as the returns are prepared solely on the basis of information provided by you, we can accept no responsibility for any VAT liabilities arising due to inaccuracies or omissions in your accounting procedures which may lead to a miss-declaration whether or not it is one on which penalties and interest may arise.
13.3 Payroll administration
a) Maintain your payroll records: including calculating the PAYE deductions, employee’s national insurance deductions, employer’s NIC liabilities, statutory payments (e.g. SSP, SMP, etc.) any other non-statutory deductions.
b) Prepare and send to you for approval: payroll summary showing the various calculations, Full Payment Submission (FPS), Employer Payment Summary (EPS) and any year end summaries.
c) Arrange for the submission of your FPS once you have approved the return for submission (FPS must reach HMRC on or before payment).
d) Arrange for the submission of your EPS once you have approved the submission. The EPS will be prepared from the information that you provide to us and is due for submission by 19th of the month following the tax month to which they relate.
e) In the event you require the preparation of your payroll summary, and therefore the submission of the FPS and EPS in shorter than monthly intervals, Workwell reserve the right to charge additional fees which will be communicated to you at the commencement of this engagement, or upon request by you during the term of the engagement for Workwell to prepare your payroll summary in shorter than monthly intervals.
f) At the end of the payroll year we will prepare the final FPS (or EPS) including annual declarations and submit this to HMRC following your approval (the final FPS (or EPS) for the year must reach HMRC by 19th April following the end of the tax year).
g) Supply you with completed payslips for each pay period for you to pass to employees with their net of tax salary for you to pay,
h) Complete your year-end return form P35 and P14 electronically and P60. Supply you with the summary completed P35 information and P60 employee wage summaries, which you should pass to each employee.
In order for us to process your payroll accurately we will require the following information.
Note – any changes to this information needs to be informed to Workwell in writing no later than the 15th of the month the change is effective from:
a) Personal details of ALL employees (i.e., name, date of birth NI number, home address);
b) All P45/P46 forms received by you for new employees;
c) If any casual labour is taken on, you are required to operate P46 procedures. The completed P46 form should be passed to us for processing;
d) Immediate notification of any employee who is sick for four or more calendar days, including weekends, bank holidays. This will enable us to operate Statutory Sick pay for you;
e) Notification of any employee who becomes pregnant. This will enable us to operate Statutory Maternity pay;
f) Notification of any employee intending to take leave entitling them to any other form of statutory payment not mentioned above;
g) Details of any money or benefits made available to employees by you or by a third party through you;
h) Notification of employees engaged by you or leaving your employment.
i) all changes to remuneration packages;
j) all pension scheme changes;
k) any changes to the employees’ bank accounts;
l) irregular and/or ad hoc payments and the dates to be paid.
To enable us to carry out our work you agree:
a) That all information required to be delivered online is submitted on the basis of full disclosure;
b) To provide full information necessary for dealing with your payroll affairs: we will rely on the information and documents being true, correct and complete and will not audit the information or those documents;
c) To advise us in writing of changes of payroll pay dates.
You are legally responsible for:
a) Ensuring that the data in your payroll submissions is correct and complete;
b) Making any submissions by the due date; and
c) Making payment of tax and NIC on time.
Failure to do this may lead to automatic penalties, surcharges and/or interest.
Employers cannot delegate this legal responsibility to others. You agree to check that submissions that we have prepared for you are correct and complete before you approve them.
On this basis you agree to provide information in a timely manner and approve all returns that we send to you promptly and prior to the deadline for submission.
14 DATA PROTECTION
In this clause :
‘client personal data’ means any personal data provided to us by you, or on your behalf, for the purpose of providing our services to you, pursuant to our engagement letter with you;
‘data protection legislation’ means all applicable privacy and data protection legislation and regulations including PECR, the GDPR and any applicable national laws, regulations and secondary legislation in the UK relating to the processing of personal data and the privacy of electronic communications, as amended, replaced or updated from time to time;
‘controller’, ‘data subject’, ‘personal data’, ‘personal data breach’, ‘processor’, ‘process’ and ‘supervisory authority’ shall have the meanings given to them in the data protection legislation;
‘GDPR’ means the General Data Protection Regulation ((EU) 2016/679); and
‘PECR’ means the Privacy and Electronic Communications (EC Directive) Regulations 2003 (SI 2426/2003).
14.1 We shall both comply with all applicable requirements of the data protection legislation. This clause 14 is in addition to, and does not relieve, remove or replace, either of our obligations under the data protection legislation.
14.2 We both acknowledge that for the purposes of the data protection legislation, you are the data controller and we are the data processor. Schedule 1 sets out the scope, nature and purpose of processing by us, the duration of the processing and the types of personal data and categories of data subject.
14.3 In respect of the client personal data, unless otherwise required by applicable laws or other regulatory requirements, we shall:
a. process the client personal data only in accordance with your lawful written instructions, in order to provide you with the services pursuant to our engagement with you and in accordance with applicable data protection legislation;
b. disclose and transfer the client personal data to [members of our firm’s network,] our regulatory bodies or other third parties (for example, our professional advisors or service providers) as and to the extent necessary in order to provide you with the services pursuant to our engagement with you in relation to those services;
c. disclose the client personal data to courts, government agencies and other third parties as and to the extent required by law;
d. maintain written records of our processing activities performed on your behalf which shall include: (i) the categories of processing activities performed; (ii) details of any on cross border data transfers outside of the European Economic Area (EEA); and (iii) a general description of security measures implemented in respect of the client personal data;
e. maintain commercially reasonable and appropriate security measures, including administrative, physical and technical safeguards, to protect against unauthorised or unlawful processing of any client personal data and against accidental loss or destruction of, or damage to, such client personal data.
f. return or delete all the client personal data upon the termination of the engagement with you pursuant to which we agreed to provide the services;
g. ensure that only those personnel who need to have access to the client personal data are granted access to it and that all of the personnel authorised to process the client personal data are bound by a duty of confidentiality;
h. notify you if we appoint a sub-processor (but only if you have given us your prior written consent, such consent not to be reasonably withheld or delayed) and ensure any agreement entered into with the relevant sub-processor includes similar terms as the terms set out in this clause ;
i. where we transfer the client personal data to a country or territory outside the EEA to do so in accordance with data protection legislation;
j. notify you promptly if:
i. we receive a request, complaint or any adverse correspondence from or on behalf of a relevant data subject, to exercise their data subject rights under the data protection legislation or in respect of the client personal data; or
ii. we are served with an information or assessment notice, or receive any other material communication in respect of our processing of the client personal data from a supervisory body (for example, the Information Commissioner’s Officer);
k. notify you, without undue delay, in the event that we reasonably believe that there has been a personal data breach in respect of the client personal data;
l. at your cost and upon receipt of you prior written notice, allow you, on an annual basis and/or in the event that we notify you of personal data breach in respect of the client personal data, reasonable access to the relevant records, files, computer or other communication systems, for the purposes of reviewing our compliance with the data protection laws.
14.4 Without prejudice to the generality of clause 14.1, you will ensure that you have all necessary appropriate consents and notices in place to enable the lawful transfer of the client personal data to us.
14.5 Should you require any further details regarding our treatment of personal data, please contact our Data Protection Manager.
15 POTENTIAL SERVICES FOR WHICH WE ARE NOT CURRENTLY ENGAGED
We have agreed to the above services, however, there are many other areas where we can be of assistance and we shall be pleased to discuss any matters with you. These other services include:
(a) Reports in support of returns or claims, e.g., insurance company certificates, government grants;
(b) Self Assessment Tax Returns;
(c) Advice on financial matters;
(d) Investigations for special purposes, e.g., acquisitions of other businesses or examination of specific aspects of your business; and
(e) Advice on the selection and recruitment of staff and other human resource issues.