RMA B: Profit and loss account
Q: Does profit and loss need to be reported on a cumulative basis?
A: Yes, unlike other RMA data items, the profit and loss (P&L) data item requires firms to submit cumulative (year to date) data throughout the firm's current financial year (as opposed to just between the start and end reporting period dates) with reference to a firm's accounting reference date.
This means that firms submitting half yearly should report income over six months on the first half year return and 12 months income on the end of year return.
Similarly, if the firm is submitting quarterly, the firm should report 3 month income figures on the first quarter and then 6, 9 and 12 months income figures on subsequent returns.
The year end return should be the total regulated business revenue for the whole year and therefore is expected to be greater that the value entered on previous submission for the same financial year.
If you are reporting over £5m regulated business revenue over the financial year, the reporting of most data items will become more frequent, ie instead of reporting twice a year you will be reporting every quarter.
Q: What is the difference between gross and net commission?
A: Gross commission is the total amount received by the firm. If the firm passes on some of that commission to any other persons (excluding its appointed representatives) the amount retained is the net commission.
Q: What is my base requirement?
A: If your firm does not hold client money, the base requirement is the higher of:
- £5,000
- 2.5% of the annual income from your insurance distribution activity or home finance mediation activity (or both)
If your firm holds client money and operates a statutory trust, the base requirement is the higher of:
- £10,000
- 5% of the annual income from your insurance distribution activity or home finance mediation activity (or both)
Q: How should partnerships account for taxation? (Given the fact that the company itself does not pay tax).
A: The firm should estimate the tax that will be payable on the profits of the business and provide for that in its accounts.
Q: Should profit and loss be reported on a cash or accruals basis?
A: It should be reported in line with UK GAAP or IAS on an accruals basis.
Q: If my firm has Appointed Representatives (ARs), should their income be reported in RMA-B1?
A: Yes. Appointed Representatives are not authorised entities and business undertaken by them remains the responsibility of the principal firm. So we would expect such firms to be requiring their ARs to report their income to the principal and to be maintaining appropriate records.
To be clear: income from Appointed Representatives (ARs) should only be included in RMA-B1 – Regulated Business Revenue, not in RMA-B2 Other P&L.
Q: Where trail commission is received from provider firms, the type of business it relates to cannot usually be identified from the statement. In these circumstances, can firms estimate the income split, e.g. between investment and insurance business?
A: Yes, if the exact income figures are not identifiable. The overall income figure is most important, but we still need the split to be as accurate as possible, so we would expect firms to have a sound basis for any estimates they make.
Q: My accounts do not identify between income from fees and income from commission. Why do I have to provide this information in such detail?
A: We use this information to identify trends in the market between fees and commission. If your firm does not have precise figures for this, an estimate is acceptable.
Q: What is the purpose of the half-year tax figure?
A: This is likely to be an estimate, but is still a valid component of the half year P&L.
Q: Should I deduct claw back from my regulatory income figure?
A: No, any unpaid commission or Claw backs need to be reflected in RMA-A under other liabilities. They should not be deducted from the firm’s regulated business revenue figure in RMA-B.
Q: Please explain some of the key terms on the RMA-B
A: 'Gross' and 'Net' figures:
- For regulated and second (or subsequent) charge mortgage and general insurance business, firms must add their 'gross' commissions to their 'fees' and 'other income'.
- For investment business, firms need to add their 'net' commissions to their 'fees' and 'other income'.
'Other income (regulated activities)' = any income that has derived from the relevant regulated activities, which has not been recorded under commissions or fees. For example, interest on client money or payments made by product providers other than fees or commissions.
'Other revenue (income from non-regulated activities)' Gross revenue arising from the firm's non-regulated activities, if any, should be entered here.