With the onset of the new year, many professional services firms will be hitting the ground running with client work after some downtime during the festive period.
However, before becoming entirely inundated with client work, those in management and compliance roles should bear in mind some key dates and deadlines for the first quarter.
1. Law firms – check your authorisation before 29 January
In our recent newsletter, we noted the risks to firms which are posed by section 18(3) of the Legal Services Act 2007, which means that failing to ensure that every partner renews their SRA registration on time can lead to loss of the firm’s authorisation.
If an SRA-authorised firm which is a recognised body (as most law firms are) fails to renew the practising certificates or registered foreign lawyer (RFL) registrations of all its partners, it will automatically lose its SRA authorisation after 90 days of the failure persisting.
Since the practising year ends on 31 October, any firms that are recognised bodies that inadvertently have one or more partners who fail to renew their practising certificates or RFL registrations will lose their authorisation after 29 January.
It is unfortunately all too common for individual lawyers to be left off the firm’s bulk renewal process or for other clerical errors to arise, so we recommend all law firms double-check their entire population of partners (in every office) to ensure that all of them have been renewed for the current practising year.
Particular focus should be given to those promoted or hired within recent years to ensure that they have been included in bulk renewal or have otherwise renewed their practising certificate on an individual basis.
Otherwise, firms face losing their authorisation, which could have serious consequences such as an inability to practise in certain areas of law, reputational damage, and potential repercussions for clients and professional indemnity insurance.
These checks should ideally be completed ahead of 29 January since time should be allowed to submit and process any missing renewals. RFL registrations could take around 30 days or more to process and cannot be submitted until the individual has obtained certificates of good standing from their local bar associations. If this cannot be completed in time, the relevant partners should be removed from the partnership or LLP until they have the necessary approvals to re-admit.
2. Overseas LLPs – file your returns this month
As a transparency and anti-financial crime measure, overseas LLPs holding certain interests in UK real estate were required to register information regarding their beneficial owners under the Economic Crime (Transparency and Enforcement) Act 2022. We discuss these obligations in our recent article here.
As part of the regime, a registered overseas entity has a duty to ensure the information it has submitted to Companies House remains accurate.
Each registered entity will also need to update the registrar of companies on an annual basis, no later than 14 days after the anniversary of the date on which it first registered.
Since the deadline for first registration was 31 January last year, it is likely that most firms will now need to make their first annual return to the registrar regarding any changes to its registration or beneficial owners or confirmation that the entity has no reasonable cause to believe that anyone has become or ceased to be a registrable beneficial owner during the previous 12 months.
All registered overseas entities should ensure that they submit this return promptly.
3. Data transfers outside of the UK – check your documentation in good time before 21 March 2024
Clients instructing global law and accountancy firms to advise on cross-border transactions or other matters will expect a seamless service, irrespective of who is working on the case and where.
However, there is a complex web of legal and regulatory restrictions on moving client information from one group entity to another, especially across national borders.
For firms with offices or group entities outside the UK, 21 March 2024 represents a key deadline for ensuring that its data protection documents comply with the UK General Data Protection Regulation.
From that date, firms can no longer rely on the old EU standard contractual clauses issued by the European Commission under the old Data Protection Directive as a lawful basis for transferring data outside of the UK to non-EU countries.
Therefore, US firms and others should check their data protection documentation to ensure that they have a lawful basis to transfer employee and client data out of the UK, such as the International Data Transfer Agreement clauses produced by the UK Information Commissioner’s Office. Firms should also carry out a “transfer impact assessment” before this deadline.
These data protection requirements are separate from legal and regulatory confidentiality obligations, which also apply to firms transferring client and employee information and documents from one entity to another.
4. New tax year – 6 April 2024
A. Basis period reform
The end of the current tax year in April marks the end of the transition period for the change to the basis periods of all partnerships and LLPs, which will be aligned to the tax year, irrespective of when the firm’s accounting reference date falls.
During this tax year, the basis period is 12 months from the end of the firm’s basis period for 2022/23, plus the additional time to 5 April 2024 following the end of such period.
The firm is required to apportion profits from the two different accounting periods to produce a profits figure on a tax year basis and initially file tax returns based on provisional figures, with amendments to be made in re-filed returns the following year.
As we discussed in our recent newsletter article, this will mean that many firm’s partners will be taxed on nearly two years’ profits rather than one. The additional taxable profits can be spread over a period of five years, which will mitigate the cashflow consequences of the change, but some pain is to be expected and should be planned for.
B. Salaried members’ rules
At the beginning of each tax year on 6 April, UK LLPs are required to assess whether their members should be taxed as employees or as self-employed. This in part depends on how much of their remuneration represents “disguised salary” under the legislation known as the “salaried members rules”.
Firms that assess remuneration on a calendar year basis may now be reviewing remuneration and so trigger a test date imminently.
UK LLPs should, therefore, start thinking about assessing their membership against the three tests set out in the rules, which we discuss here.
5. Policies and risk assessments
There are other important tasks and matters without fixed deadlines which firms should keep under review and revisit annually.
For example, a firm’s practice-wide risk assessment, as required under regulations 18 and 18A of the anti-money laundering regulations, should be reviewed and updated frequently (it is a key document that the SRA will look at when carrying out an AML inspection). It is recommended that this be reviewed on an annual basis and the most recent review is likely to have been around a year ago, to take account of the need to factor in proliferation financing in 2023.
Other policies and procedures should also be considered, for example, to take into account recent changes to the SRA’s Code of Conduct or where policies state they are to be reviewed annually.
If you have any questions about these issues in relation to your own organisation, please contact a member of the professional services team or speak to your usual Fox Williams contact.
Need more information about the above people and legal expertise? Talk to one of our lawyers: +44 (0)20 7628 2000
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