Accounting Laws And Regulations

The nature of the work that you do requires that the accountancy sector is highly regulated and that there are a wide range of laws that those in the profession must abide by. Understanding these requirements takes time and effort – but is essential for maintaining regulatory and legal compliance, and for allowing you to continue practising.

Read on for our guide to accounting laws and regulations in the UK, including compliance requirements, reporting standards, and legal frameworks impacting UK accounting practices.

Overview of UK Accounting Laws and Regulations

The UK accounting regulatory environment comprises a wide range of laws, regulations, standards and legal frameworks, issued by a number of different organisations.

These include:

• The Financial Reporting Standards (FRS) issued by the Financial Reporting Council. These ensure that company financial statements are transparent and consistent, and can easily be compared across the globe.
• The Companies Act 2006, which governs companies’ operational and financial activities. It includes duties for company directors, shareholder rights and financial reporting obligations.

In addition, accounting laws and regulations in the UK include those issued by HM Revenue & Customs (HMRC) and Companies House. The former issues requirements for all things relating to taxation, while the latter is concerned with incorporating and dissolving businesses, as well as receiving and publishing companies’ annual accounts.

Compliance Requirements for Accountants and Accounting Firms

Annual account filing requirements depend on the type of entity.

• Sole traders must file an annual Self Assessment tax return with HMRC before the January 31st deadline each year.
• Partnerships must file a separate Self Assessment tax return with HMRC for each partner, as well as an SA800 Partnership Tax Return.
• Limited companies must submit their annual accounts, as well as corporation tax returns and VAT/PAYE returns (if relevant) to HMRC each year.

For accountants, the Financial Reporting Council (FRC) produces various auditing standards that must be adhered to. These include:

• International Standards on Auditing (UK). These feature standards to which all auditors must adhere, as well as interpreting and applying the guidance to meet objectives.
• International Standards on Quality Management (UK). These focus on creating a quality management system for auditing, with objectives, requirements and guidance included.
• Ethical Standard. This specifies ethical provisions for auditing financial statements, as well as requirements that apply in specific circumstances.

Because of the nature of their work, accountants must also comply with the Money Laundering Regulations. They must implement procedures to minimise the risk of money laundering, including customer due diligence, transaction monitoring, and reporting suspicious activity to the National Crime Agency.

Furthermore, compliance with the Data Protection Act – including GDPR – is required to protect sensitive client data.

Statutory Obligations and Reporting Standards

Statutory reporting requirements vary depending on whether the entity is a sole trader, a partnership or a limited company.

• Sole traders are not required to register with Companies House. Each year they must submit a Self Assessment tax return showing profits and losses to HMRC to calculate their National Insurance and tax liability.
• Partnerships must file a Partnerships tax return to HMRC each year to report income, expenses and other relevant financial information.
• Limited companies, by law, must submit an annual confirmation statement to Companies House to confirm that their company details are still correct. They must also submit their annual accounts to HMRC, as well as corporation tax returns, VAT returns (if VAT-registered), any employer (PAYE) returns if staff are employed.

All financial statements and annual accounts must meet certain reporting standards. In the UK, these include the Generally Accepted Accounting Principles (GAAP), as well as the International Financial Reporting Standards (IFRS).

GAAP standards are designed to ensure that all British businesses produce their financial statements in a way that is open, comparable and consistent. FRS, meanwhile, clarifies how businesses should account for specific transactions under UK GAAP.

In addition, certain industries, such as banking, insurance and charities, will have their own specific reporting standards that they must follow. These include, for example, the provision of information to the Financial Conduct Authority and the Prudential Regulatory Authority (PRA) for firms in the banking and insurance sectors, while charities must submit an annual return to the Charity Commission.

Legal Frameworks Impacting Accounting Practices

Accounting laws and regulations in the UK also include specific company law provisions, such as the Companies Act 2006. As well as laying out the legal requirements for the formation, operation and dissolution of businesses, it also includes elements relating to directors’ duties, shareholder rights and financial reporting obligations that accountants must adhere to.

Changes to tax legislation in the UK are relatively frequent and can impact both accounting treatments and reporting requirements. As such, it is vital that accountants stay up-to-date with any legislative changes.

Accounting firms should also take into account employment law considerations. This legislation covers elements like contracts, employee rights, holiday pay, benefits and off-payroll labour which could impact accounts submissions.

Importance of Adhering to Accounting Laws and Regulations

As an accountant, you have an obligation to maintain integrity and transparency in financial reporting at all times. Your affiliation with professional bodies depends on it – and without this focus on doing the right thing, you would be failing to meet your professional requirements.

What’s more, non-compliance with accounting laws and regulations can have severe consequences. Failing to comply with accounting legislation and regulations could not only destroy your practice’s reputation, but it could also see you land with a hefty fine, penalties imposed by industry bodies, or even legal action.

As such, it’s vital that you stay up-to-date with any changes to accounting laws and regulations in the UK (and overseas, if applicable to your client base). This can seem like a daunting task on top of your day job – but the ICPA is here to help.

Why Join ICPA: Benefits and Resources for Accounting Professionals

At the ICPA, we are dedicated to making our members’ lives easier. We provide a wide variety of benefits to our community of accountants and bookkeepers, including advice lines, technical resources, insurance, industry discounts, training programs and a whole host of regular networking opportunities.

“If I want some advice, it’s nice to know I’m part of a network that’s able to help”, says accountant and ICPA member, Lucinda O’Reilly. “Since I became a member of the ICPA in 2012, I’ve never looked back!”, adds fellow member, Eleanor Greene.
Created by accountants, for accountants, the ICPA is passionate about helping to make your accountancy practice the best it can possibly be. Click here to see our full list of member benefits.

How can ICPA membership support me in staying updated with regulatory changes?

When regulatory or legislative changes happen, accountants need to familiarise themselves with the changes, the deadlines and the actions they need to take to avoid non-compliance. For this reason, you need to ensure that the information you have is both timely and accurate.
At the ICPA, our newsletters detail any such changes to our members. Membership also includes a number of other resources, like Tolley’s Tax Library access and professional helplines, that can keep you up-to-date.

Find out more about ICPA membership benefits here.

FAQs on Accounting Laws and Regulations

What are the key accounting regulations in the UK that every accountant should be aware of?

The key accounting laws and regulations in the UK include the Financial Reporting Standards, the Companies Act, the International Financial Reporting Standards, as well as tax legislation including the Income Tax Act and the Corporation Tax Act.

How often do accounting laws and regulations in the UK change, and how can we stay updated?

UK accounting laws and regulations have no set times for change. Changes can happen from time to time as a result of regulatory reforms or legislative updates. Newsletters from regulatory bodies like HMRC, or professional bodies like the ICPA, can help accountants stay up-to-date.

What are the filing requirements for annual accounts for different types of entities in the UK?

Annual account filing requirements vary depending on the type of entity. For example, limited companies are required to file their annual accounts with Companies House within nine months of the accounting reference date. Sole traders and partnerships may have different deadlines.

Are there specific auditing standards that accounting firms need to adhere to in the UK?

Yes. UK accounting firms must adhere to auditing standards – such as the International Standards on Auditing (UK) – set by the Financial Reporting Council.

What are the penalties for non-compliance with accounting laws and regulations in the UK?

Penalties for non-compliance can vary depending on the severity of the case. They could include reputational damage or financial penalties – and serious breaches could result in legal action or disqualification from practising as an accountant.

How does the Money Laundering Regulations impact accounting practices in the UK?

The Money Laundering Regulations require that UK accounting firms implement anti-money laundering procedures. These include customer due diligence, and reporting any suspicious activity to relevant authorities like the National Crime Agency (NCA).

What data protection requirements do accounting firms need to comply with in the UK?

Accounting firms must comply with the General Data Protection Regulation (GDPR) when handling personal data. This includes obtaining consent for data procession, ensuring data security, and responding to data subject access requests.

Can you provide an overview of the Companies Act and its implications for accounting practices?

The Companies Act lays out the legal requirements for the formation, operation and dissolution of companies in the UK. It includes a number of elements, such as shareholder rights, directors’ duties and financial reporting obligations.

If you would like to find out more, simply contact one of our friendly staff at ICPA, and we will respond as soon as possible.