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RICHARD TARR & Co


Wood Park East Down Barnstaple Devon EX31 4LZ Telephone : 01271 850431


TERMS OF ENGAGEMENT (from 1/1/06 )


This sets out the basis on which we are to act as accountants, tax agents and advisers, together with your and our respective responsibilities.


•  RESPONSIBILITIES AND SCOPE FOR ACCOUNTING AND TAX COMPLIANCE SERVICES


CORPORATE CLIENTS


•  Your responsibilities as directors


•  As directors of the company, you are responsible for maintaining proper accounting records and for preparing financial statements which give a true and fair view and which have been prepared in accordance with the Companies Act 2006 (the Act).


•  In preparing the financial statements, you are required to:


•  Select suitable accounting policies and then apply them consistently;


•  Make judgements and estimates that are reasonable and prudent; and


•  Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.


•  You are responsible for keeping proper accounting records that set out with reasonable accuracy ant any time the company's financial position and for ensuring that the financial statements comply with the Act. You are also responsible for safeguarding the assets of the company and hence for taking reasonable steps to prevent and detect fraud and other irregularities.


•  You are also responsible to deciding whether, in each financial year, the company meets the conditions for exemption from audit, as set out in section 249A (or 249AA) of the Act, and for deciding whether, the exemption cannot be claimed for that year for any of the reasons set out in section 249B.


•  You are responsible for ensuring that the company complies with laws and regulations that apply to its activities, and for preventing non-compliance and detecting any that occurs.


•  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 other meetings, that we need to do our work. You will disclose to us all relevant information in full.


•  If financial information is published, which includes a report by us or is otherwise connected to us, on the company's website or by other electronic means, you must inform us of the electronic publication and get our consent before it occurs and ensure that it presents the financial information and Chartered Accountants report properly. We have the right to withhold consent to the electronic publication of our report or the financial statements if they are to be published in an inappropriate manner.


•  You must set up controls to prevent or detect quickly any changes to electronically published information. We are not responsible for reviewing these controls or for keeping the information under review after it is first published. You are responsible for the maintenance and integrity of electronically published information and we accept no responsibility for changes made to information after it is first posted.


ACCOUNTING


NON CORPORATE CLIENTS


•  Your responsibility for the preparation of financial statements


•  You have undertaken to make available to us, as and when required, all the accounting records and related financial information, including minutes of management meetings, that we need to do our work. You will provide us with all information and explanations relevant to the purpose and compilation of the financial statements and you will disclose to us all relevant information in full.


•  You are responsible for ensuring that, to the best of your knowledge and belief, financial information, whether used by the business or for the financial statements is reliable. You are also responsible for ensuring that the activities of the business are conducted honestly and for safeguarding the assets of the business and for taking reasonable steps to prevent and detect fraud and other irregularities.


•  You will approve and sign the financial information to acknowledge responsibility for it, including the appropriateness of the accounting basis and for providing us with all information and explanations necessary for its compilation.


•  You are responsible for ensuring that the business complies with laws and regulations that apply to its activities, and for preventing non-compliance and detecting any that occurs.


CORPORATE AND NON CORPORATE CLIENTS


•  Our responsibilities as accountants


•  You have asked us to help you prepare the financial statements [in accordance with the requirements of the Companies Act 2006] [to enable profits to be calculated to meet the requirements of section 42 of the Finance Act 1998, as amended by the Finance Act 2002 and provide sufficient and relevant information to complete a tax return]. We will compile the financial statements for your approval based on the accounting records that you maintain and the information and explanations that you give to us.


•  We shall plan our work on the basis that no report is required by statute or regulation for the year, unless you inform us in writing to the contrary. We will make enquiries of management and undertake any procedures that we judge appropriate.


•  Corporate non-audit clients You have told us that the company is exempt from an audit of the financial statements. We will not check whether this is the case. However if we find that the company is not entitled to the exemption, we will inform you of this.


•  Non-audit clients Our work will not be an audit of the financial statements in accordance with United Kingdom Auditing Standards. So we will not be able to assure you that the accounting records or the financial statements are free from material misstatement, whether caused by fraud, other irregularities or error nor to identify weaknesses in internal controls.


•  Non-audit clients Since we have not carried out an audit, nor confirmed in any way the accuracy or reasonableness of the accounting records, we cannot assure you whether the financial statements that we prepare from those records present a true and fair view.


•  We will advise you on whether your records are adequate for preparation of the financial statements and recommend improvements. We are not responsible for losses or penalties you may incur through not taking our advice.


•  We have a professional duty to compile financial statements that conform with generally accepted accounting principles from the accounting records and information and explanations given to us. [ Corporate clients only Furthermore, as directors you have a duty to prepare financial statements that comply with the Companies Act 2006 and applicable accounting standards.] If we find that the financial statements do not conform to accepted accounting principles, or if the accounting policies adopted are not immediately apparent, we must disclose this in the financial statements.


•  Non-audit clients As part of our normal procedures we may ask you to confirm in writing any information or explanations given to us orally during our work.


•  Form of the accountants' report . There is no obligation on an accountant to provide a report on financial information or statements compiled by them. The accountants report helps users derive comfort from the involvement of Chartered Accountants who are subject to the ethical and other guidance issued by the Institute in relation to the preparation of the financial information or statements. It also helps prevent users from deriving unwarranted assurance from the financial information or statements where no audit or assurance work has been performed and no opinion is expressed by the accountants.


•  Non-audit clients We will report to the Board of Directors or you, as appropriate, that in accordance with this engagement letter [ Corporate clients only and to assist you to fulfil your responsibilities], we have not carried out an audit but have compiled the financial statements from the accounting records and from the information and explanations supplied to us. The report should not be used for any purpose other than as set out in this engagement letter.


•  Preparation and maintenance of accounting records *Include under 1.7.1 if accepting responsibility and 1.7.2 if the client is preparing as appropriate .


Our responsibilities


•  We have agreed to carry out the following accounting and other services on your behalf:


•  write up the accounting records of the business entity and


•  complete the postings to the nominal ledger.


Your responsibilities


•  You have agreed that you and your staff will:


•  keep the records of receipts and payments;


•  reconcile the balances monthly with the bank statements;


•  post and balance the purchases and sales ledgers;


•  extract a detailed list of ledger balances;


•  prepare details of the annual stocktaking, suitably priced and extended in a form which will enable us to verify the prices readily by reference to suppliers' invoices; or provide us with a copy of the valuation report produced by your independent stocktakers; and prepare details of work-in-progress at the accounting date and make available to us the documents and other information from which the statement is compiled.


TAX COMPLIANCE


•  Our responsibilities as tax agents and advisers


•  We will prepare the income and expenditure account of your business and the income tax computations based on it from your accounting records and other information and explanations you have provided. We will advise you on the adequacy of your records for this purpose but we will not carry out an audit of those records. We will calculate all income tax, capital gains tax and corporation tax liabilities from the accounting records prepared by us and other information and explanations provided by you.


•  We will prepare your personal income tax and capital gains tax return, and the the company's corporation tax self assessment tax return with all supporting schedules and prepare and check the H M Revenue & Customs' calculation of your self assessment of tax and Class 4 national insurance contributions for each period of account ending in the return period. We will deal with the H M Revenue & Customs regarding any amendments required to the return and amend the returns as necessary.


•  We will send you the tax return, business accounts and supporting schedules for you to approve and sign. We will then submit it, with the financial statements and computations, to the H M Revenue & Customs. You authorise us to file the return electronically.


•  Partnerships only We will advise all the partners who were partners in the firm during the period of their respective shares of the firm's total income, gains, losses, tax credits and charges so that they can file their personal self-assessment tax returns within the relevant time period.


•  We will tell you the amounts of income tax, corporation tax and national insurance contributions to be paid and the dates by which you, the partnership and the company should make the payments, including payments on account and the balancing payment. [ Partnerships only To do this the partners will need to supply us with relevant information. If appropriate we will initiate repayment claims when tax and National Insurance contributions have been overpaid. Would you please ensure that no payments are made to the H M Revenue & Customs before we have confirmed that the Statements of Account are correct.


•  Companies only If the company's profits exceed 1.5 million a year, you must make quarterly instalments starting six and a half months into the accounting period. Interest will be charged on instalments paid late and credited on those paid early. If you provide appropriate management information on time, we will tell you whether you should make quarterly tax payments.


•  We will inform you of possible claims and elections arising from the tax return and from information you have supplied. If instructed by you, we will make such claims and elections in the form and manner required by the H M Revenue & Customs.


•  We will deal with all communications relating to your, the partnership and the company's tax return which the H M Revenue & Customs sends us or which you or the company pass to us. However, if the H M Revenue & Customs chooses your tax return for enquiry, this work may need to be done under a separate assignment, in which case we will seek further instructions from you.


•  We will check PAYE notices of coding where such notices are forwarded to us. We will prepare the tax provisions and disclosures to be included in the partnership and the company's statutory financial statements.


•  We will observe the professional rules and practice guidelines of our professional Institute and accept instructions to act for you on the basis that we act in accordance with those guidelines. In particular you give us authority to correct H M Revenue & Customs errors.


•  Your responsibilities for the provision of information for tax purposes


•  You are legally responsible for making correct returns by the due date and for payment of tax on time. Failure to meet the deadlines may result in automatic penalties, surcharges and/or interest.


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


•  that all returns are to be made on the basis of full disclosure of all sources of income, charges, allowances and capital transactions;


•  to provide full information necessary for dealing with your, the partnership's and the company's affairs: we will rely on the information and documents being true, correct and complete;


•  to provide us with information in enough time for your, the partnership's and the company's tax return to be completed and submitted by the due date after the end of the tax year/accounting period. To do this, we need to receive all relevant information at least a month before the due date;


•  that we can approach appropriate third parties for information that we consider necessary to deal with your affairs;


•  to forward to us on receipt copies of all H M Revenue & Customs notices of assessment, letters and other communications so that we can deal with them as may be necessary within the statutory time limits; and


•  to keep us informed about significant transactions or changes in your circumstances if they are likely to affect your tax position.


•  We have submitted form 64-8 to the H M Revenue & Customs which authorises the H M Revenue & Customs to send us copies of formal notices. In practice the H M Revenue & Customs will treat this as authority to correspond with us, in which case they will not correspond with you or the partnership or the company except to the extent that they are formally required to do so. However, this authority does not apply to all H M Revenue & Customs correspondence and, even where it does, the H M Revenue & Customs sometimes overlook it. You should therefore always send us the originals or copies of all communications you receive from the H M Revenue & Customs.


•  GENERAL TAX ADVICE AND OTHER TAXATION SERVICES


•  We will be pleased to assist you generally in tax matters if you wish. To enable us to do this you will need to instruct us in good time.


•  Because tax rules often change, you must ask us to look again at the tax advice we have already given you if a transaction is delayed, or if you are to make an apparently similar transaction.


•  We will confirm in writing advice upon which you may wish to rely.


•  Excluded services


•  You will continue to deal with all matters required by law, such as:


•  Pay As You Earn including year end returns P35/P14/P60;


•  forms P11D;


•  returns for sub-contractors;


•  tax credit claims; and


•  VAT returns.


•  We will be pleased to advise on any of these or other tax matters if so requested.


•  LIMITATION OF LIABILITY


•  We act as outlined in this letter with reasonable care and skill. However, 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 agree to hold harmless and indemnify us against 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 employees personally.


•  Our work is not to be made available to third parties without our written permission and we accept no responsibility to third parties for any aspect of our professional services or work that is made available to them.


•  COMMUNICATING WITH YOU


•  We will communicate with you in relation to all accounting and tax affairs.


•  Married individuals only Your spouse is legally responsible for her own tax affairs and should be dealt with independently. However, if both spouses sign this letter you agree that we can disclose to your spouse such details of your financial affairs that are required to consider your combined tax position.


•  We may communicate with you by email. As with other means of delivery this carries with it the risk of inadvertent misdirection or non-delivery. The recipient is responsible for carrying out a virus check on attachments.


•  Internet communications may be corrupted, and, we accept no responsibility for changes to such communications after their despatch. It may therefore be advisable to get written confirmation of advice in an email. We do not accept responsibility for any errors or problems that may arise through the use of the internet, and you must accept all risks connected with sending commercially sensitive information relating to you and your affairs. If you do not accept this risk, you should notify us in writing that email is not acceptable to you.


•  AGREEMENT OF TERMS


•  Period of engagement


•  This engagement will start at the date of this letter.


•  We will deal also with matters arising in earlier years as appropriate.


•  This letter supersedes any previous engagement letter for the period covered. Once agreed, this letter will remain effective from the date of signature until it is replaced. You or we may agree to vary or terminate our authority to act on your behalf at any time without penalty. Notice of variation or termination must be given in writing.


•  Confirmation of your agreement


•  If this letter and the attached terms of business are not in accordance with your understanding of our terms of appointment, please let us know. Otherwise we will presume that the foregoing matters are accepted by you.


END OF STANDARD ENGAGEMENT LETTER