The second article on the new ICAEW CPD rules looks at categories. It will explain how to select your category.
What category of accountant are you for the new ICAEW CPD rules?
I do not mean: better, best or the greatest accountant there has ever been.
ICAEW could have labelled them ‘A lot of CPD’, ‘A bit less CPD’ or ‘really not that much CPD’ – because that summarises the new categories.
ICAEW have named the categories 1, 2 and 3. Actually there are 6 categories – keep with it. 1, 2 and 3 for those ‘working in practice’ and the same numbers for those ‘not working in practice’. It applies to members in the UK as well as those not working in the UK.
Numbers and fractions time - for members working in practice
· Category 1 is 40 CPD hours of which 30 must be verifiable – don’t panic we will look at verifiable in later articles, because it is the numero uno aspect of the new rules.
· Category 2 is 30 CPD hours of which 20 must be verifiable
· Category 3 is 20 CPD hours of which 10 must be verifiable
In brief the categories work as follows if you are not in 1 then you are in 2 and if not in 2 then you are in 3 if you work in practice.
It is easy to remember 40 / 30, then 30 / 20 and then 20 / 10. Take 10 off the numerator and denominator and you are sorted and if you did not listen in the week you did fractions at school then just deduct 10.
Remember these are the minimum not the target – you can do more. Might be worth doing a bit more to give a safety buffer if there is a strict QAD take on the rules.
Categories
Here’s the problem the categories are like the drinks bill from a Treble Winners party – it is very long so let’s cut to the bits that affect us…
Each category is broken down into paragraphs with letters – more like Countdown than you’d expect.
You need to review and read the categories. There is no way round this because everyone is different (which is a statement of the obvious)
Category 1 A to K is all Audit-y and Insolvency but what interests us is paragraph L which covers:
L) Those providing direct or indirect tax services to large companies, listed or international companies or groups, or high-net-worth individuals.
A large company follows the Companies Act definitions and net worth is assets more than £20 million in UK sterling. You will know if you are a high net worth individual (and if you are and an ICAEW member and high-net-wealth you do not care about CPD, do you?) but does the client know their wealth? You should have procedures in place to know this.
Category 2 follows a similar approach but the ones to watch are
K Probate work because tax is often intertwined
L Those with a DPB licence – I know it’s not tax but most practices have one, often for defensive reasons. You need to have a proper good look at this but it is not tax so we’ll move on
O Corporate finance work again often links with tax
This means many General Practitioners might not be in 1 but are certainly sat on the edge of 2 ready to tumble in.
But Category 2 para P is what we want and I will quote verbatim (in English not Latin)
P) Those providing direct or indirect tax services which are not limited to:
· simple income tax self-assessment returns for individuals and partnerships who are UK resident, UK domiciled, and not high-net-worth individuals; and/or
· VAT compliance (not advice) for entities that are not large companies, listed or international companies or groups; and/or
· payroll administration.
· And do not fall into CPD practice category 1(l).
As Johnny Nash would say: this raises more questions than answers. I raised a query with ICAEW about this paragraph. ICAEW responded excellently as they always do, thank you.
It is silent on corporate tax work, IHT and CGT. No definition on VAT compliance compared with advice. It is not unreasonable to assume, your honour, that completing a VAT return is compliance but is advising on the VAT treatment of a property sale or purchase advice? Well, the key word was advice.
The paragraph does say are not limited to but considering the huge number of GPs this list could have been more extensive and follow the drinks bill approach.
To clarify, after the response from ICAEW, here are some examples clarified that are Category 2.
· Corporation tax returns to companies that are not large/listed/international companies or groups
· CGT compliance (note this is compliance)
· CGT planning
· VAT advice on e.g. implications of buying a commercial property
Any how if you are not in Category 1 or 2 you, by default, jump feet first or dive headlong (you choose) into 3.
Tricky bit
ICAEW have provided one of those self-assessment tools to help you work out what sort (sorry, I mean category) of accountant you are
However, as my driving instructor used to shout (I think it was plead): ‘proceed with caution’. The tool is a nice toy but I am concerned it is not comprehensive enough. It is a bit like the IR35 self-test tool, if you do it enough times, you will get the answer you want. Yet, this will not stand up on a QAD visit.
Recommendation
· By all means use the self-test tool
· But, please read the categories in depth. I highlighted above the concerns in areas such as DPB and corporate finance. And more concerns will surely arise as we approach 31 October.
· Add to that the compliance vs advice conundrum
Now, time will reveal the answer as the rules are tested in the next couple of years.
My considered view is most partners and employees working in practice will be at least category 2, unless a really teensy-weansy practice. Employees in practice are the more likely to be category 3, but many are 2. Many practitioners will be in category 1. Remember it is your client base and the work you do not the size of your practice that determines your category.
Ultimately you need to justify you have the competence to provide the advice and that is not just based on a minimum number of hours.
The new CPD resources from ICAEW are huge with lots of case studies. But if in doubt contact ICAEW.
Justify your category
You need to justify your category in writing. If you are claiming 3 I would print off the list of headings for 2 and confirm you do not do any of those headings and sign it off. You’ll grumble now but thank me on your next QAD visit.
Members working not in practice.
Again 3 categories and you’ve guessed it they are numbered 1, 2 and 3 again, surely they should be 4,5 and 6? I wonder if you are part-time in practice and part-time not in practice can you be a 6? Don’t answer.
Now we are looking at senior roles in public interest entities, pension funds, statutory bodies, public statutory bodies as defined by ONS etc. There is no specific mention of taxes for members not in practice.
The key numbers (more fractions here, decimals do not work) are 40 / 15 then 30 / 10 and 20 / 5. It is 10 and 5 off respectively.
Some listeners will have a pure tax role and not be in practice. Many not in practice will probably be combining a regulatory role and finance function.
My advice is to read the paragraphs for categories 1 and 2 and if you are not covered you are in 3. There is less subjectivity than with members in practice.
Next article covers what is CPD and verification.