Gift Aid is a very important component of the finances of many charities. Provided that they have clear evidence of the donations, it is currently possible for charities to claim tax on gift aided donation for up to six back years. Some charities word gift aid declarations to this effect.

Widespread changes are being made to all tax time limits on 1 April 2010 and this will affect gift aid claims. The basic time limit for gift aid claims will now be four years after the end of the tax year in which the donation was received. The change will happen immediately on 1 April and will directly affect two tax years where charities may think they have more time to make claims.

• Under the old rule claims for 2004/05 would have had a time limit of 31 January 2011. Under the new rule the time limit for that year will run out on 31 March 2010 because from 1 April 2010 any claim would be out of date because the new time limit (four years from the end of the tax year) would have expired on 5 April 2009.
• Similarly under the old rule claims for 2005/06 could have been made until 31 January 2012. The new time limit means that four years from the end of the tax year will be 5 April 2010 and that is the date by which claims need to be made.

Comment on charities and gift aid claims - changing times limits in the space provided below, or visit my profile for details of how to contact me. 

Wendy Bambrick is a charities expert and a senior manager at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Wendy you can call her on 01727 869141. 

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One of the many victims of the credit crunch and the resultant trading recession were the frequent Management Buy Outs (MBOs) that we had seen in the preceding years.

In theory MBOs are a ‘safe bet’ – management know the business well and should up their game with the added incentive of equity.

One of the features of MBOs before the credit crunch of 2008 was the increasing debt levels – particularly seen in the upper end of the sector. This meant that small reductions in profit and cash-flow, created substantial problems. In the last couple of years there have been some notable MBO collapses – including the high street store Zavvi.

MBOs in the current climate, generally involve reduced multiples and a larger ongoing financial involvement for the original owner of the business. This involvement can be an ongoing debt from the owner (usually known as vendor loan note which ranks behind other debt) or through the retention of an equity stake. During 2009, venture capital and private equity funds also funded some transactions which would historically have been backed by a bank.

Mercer & Hole have seen a couple of MBOs complete in recent months. Various banks are also making noises that they intend to focus on this area in 2010 – a position encouraged by government lending targets. For MBOs at the smaller end, the EFG scheme is available where raising finance becomes difficult.

Loans for management buy outs are available, and speaking to the right person at the right bank is fundamental to ensuring the credit application process is successful. As always, please do call or email me if you would like a steer on the right bank (or equity fund) to talk to you for your funding requirements.

Julian Dobbin is a partner at Mercer & Hole. The views given in this blog are personal to the author.

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I have previously talked about the risks and potential benefits of buying a distressed company from an administrator. Such opportunities can generate substantial value for a buyer. Over the next year or so, you may be presented with opportunities to buy a business from administration. This could be a competitor, customer, supplier or a business with no connection to you.

When an administrator is appointed to a company, he is obligated to maximise the cash realised for the assets available and must act in the interests of the creditors at all times. Due to the very fact that the company is in administration, those assets are usually sold at a substantial discount to normal value, offering a good opportunity for buyers, albeit usually with no warranties or guarantees. However the acquirer will need to move very quickly, and whilst there is not time to undertake all the rigorous checks applied to a normal transaction, there is a minimum which should be undertaken:

• meetings with management/key staff to assess their strengths, weaknesses and intentions
• discussions with key customers, and other stakeholders such as landlords/suppliers
• some brief due diligence – focused on key areas
• consideration of retention of title issues, ransom payments, ongoing contractual obligations
• establishing profit viability and evaluation of working capital requirements
• consideration of Transfer of Undertakings (Protection of Employment) Regulations (TUPE)
• devising an offer and negotiating with the administrator/management team.

It is also important that the buyer can also devote time immediately after the acquisition, otherwise the business can easily hit the same problems that put it in a distressed position.

The earlier that dialogue is begun with a distressed business – even before administration – the better.

I would also recommend that you only consider investing time and money in a distressed business where you have knowledge of the sector. There is no time to gain an understanding of the area of business, given the time pressures involved in a distressed transaction.

Julian Dobbin is a partner at Mercer & Hole. The views given in this blog are personal to the author.

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Just a reminder that the VAT rate reverted back to 17.5% on 1 January. As outlined in my previous blog, special transitional rules apply to supplies spanning that date.

If you supply or receive cross border services, you may be affected by the new rules introduced on 1 January. Changes have been made to the place and time of supply of certain services, there is a new EC Sales List for services and changes have been made to the EC Sales Lists for goods. There is also a new electronic overseas VAT refund procedure.

Last but not least, HMRC have begun to issue letters regarding the compulsory online filing of VAT returns for certain businesses with effect from 1 April 2010. If your turnover exceeded £100,000 in the 12 month period to 31 December 2009, or you register for VAT after 1 April 2010, you will have to file VAT returns online and pay VAT by electronic means.

Jane Stacey is a VAT adviser and a senior manager at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Jane you can call her on 01727 869141.

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For rental properties, particularly with the higher rates of tax next year, joint ownership may be more tax beneficial.

So how can this be done? One way is to transfer both the legal and beneficial title to a spouse.  Another option is to simply transfer only the beneficial ownership by executing a declaration of trust. The latter may well be simpler.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552. 
 

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Employers and employees need to watch out for the new provisions on pension contributions tax trap when negotiating redundancy arrangements, if (broadly) taxable income exceeds £130,000.

Once the £130,000 limit is reached then any sacrifice for pension contributions could result in an unexpected tax bill.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.

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HMRC has just announced yet another phishing attempt using its name to try and obtain personal details. The list of such attempts is now quite long but I would urge you just to have a quick look to make sure you are forewarned. Details of the current and past scams can be found here.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.

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HMRC has now published a factsheet setting out to whom the new late payment penalties, starting 6 April 2010, will apply, how much they will be and when they will be issued.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552. 
 

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1. Budget. Review your income and outgoings by listing your direct debits and see where you are losing out. Look at comparison sites such as www.uswitch.com and  www.moneysupermarket.com to see if you can get a better deal or renegotiate with your current provider. This goes for utilities, your banking, gym membership, mobile contracts, broadband, TV etc. 
2. Review your mortgage. This is likely to be your largest expense. Can you save on your current bank? Are there penalties for moving? If you are on a tracker rate, are you saving some of that money for when rates increase again? It might not be in the next 6 to 12 months but it’s going to happen. Have you considered an offset mortgage? If you’ve got savings you could use them to reduce your mortgage term. 
3. Use your ISA allowances. Make sure you use your ISA allowances. You can invest £7,200 this tax year, £10,200 if you over 50. The maximum you can save in cash is £3,600 or £5,100 if you’re over 50. If you’ve only been making use of the cash option, consider maxing out your allowance by investing in stocks and shares ISA. This doesn’t have to be invested in the stock market if you are of a cautious disposition, although this is where you will get the best return long term.
4. Review your retirement planning. At today’s pension annuity rates, an individual would require a pension fund of more than £340,000 to generate a pension income equal to £25,000 a year. As general rule of thumb you need to invest 15% of your gross income throughout your working life to provide a pension of two thirds of your employment income. Check the FSA pension calculator to review your current provision http://www.moneymadeclear.fsa.gov.uk/tools/pension_calculator.html. 90% of pension savers originally invested in a managed fund and have never reviewed their choice since they started their policy. Now would be a good time to look at your current fund choices. Global and emerging market equities are likely to be the long term winners so make sure you have some exposure within your pension funds. Investment in with-profit funds is another key area to review.
5. Check your cash deposits. You should have a cash emergency fund and any money required for spending that will not come from income in the short to medium term. Cash above and beyond that you should consider for investment. Again check the current rate of interest you are receiving on your savings currently and keep up to date with comparison websites, http://www.moneysavingexpert.com/savings/savings-accounts-best-interest keeps up to date with the best rates. If you don’t want to keep chopping and changing Investec offer a good option for balances of £25k + http://www.investechigh5.co.uk/?gclid=CNHuuK2hl58CFYIA4wodeheGHQ
6. Check you have adequate insurance. Review your levels of cover in relation to life cover and that any benefits are in trust to ensure they are paid to the right person and promptly. Many people are underinsured. Death in Service is not enough if you have a partner and children dependent on your income. Make sure you have cover above and beyond your mortgage being paid off.  Also see what you might receive in the event of ill health, don’t assume that your employer will pay for extended sickness - ill health can be more devastating financially than death.
7. Make a will. Over half the population have not made a will. If you have not made a will your spouse will not automatically inherit everything. If you die intestate (without a will) then your estate is distributed as per the laws in intestacy. HMRC http://www.hmrc.gov.uk/cto/customerguide/page14-1.htm provides further information on how your estate will be distributed. All sorts of unpleasant situations can occur after someone has died so make your wishes known.  If you have children you should record who you want to look after them in event of both their parents dying.
8. Inheritance Tax (IHT). There are lots of different ways of mitigating IHT, and this is not just a tax on the rich. Each individual can leave £325,000 tax fee, a married couple £650,000. If you think that a family home is likely to take up the bulk of this allowance then it is always good to look at the options. On an estate of £1,000,000, there would be a tax bill of £140,000. It took a while to earn that money so perhaps you might like it to go to your family or the charity you chose as opposed to the Exchequer. Take advice from a reputable, independent specialist about your options.
9. Pay off expensive debt. The average interest rate on overdrafts and credit cards is a whopping 18%. If you have money laying in savings earning 3-4% and debt at 18%, use the savings to pay off it off eg £5,000 in savings at 3% will earn £150 per annum vs £5000 credit card debt at 18% will cost £900 per annum.  The following website http://debt-obesity-scale.realise.com will give you an indication of whether your debt is reaching critical levels.
10. Take Independent Advice.  A Financial Planner can help you establish where you are currently, where you want to get to and a plan to take you there, which should be reviewed over the longer term. This might involve restructuring your current arrangements, pointing out potential risks, saving tax, and liaising with other professionals. See http://www.financialplanning.org.uk/consumers/index.cfm for further information. Be clear on the options for and how you are paying for your advice.

Anne McClean is a senior Financial Advisor at Nightingale Associates. The views given in this blog are personal to the author.

M&H LLP trading as Nightingale Associates is authorised and regulated by the Financial Services Authority.
 

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