The lack of available finance in the economy has meant that businesses are increasingly looking to their suppliers for credit. 

The result of this for many SME’s is a build of trade debtors (and a wide range of excuses given to their credit controller). With this backdrop, it is fundamental for SME businesses to recognise the early warning signs of debtor problems – for example:

• industry rumours that the debtor is experiencing financial difficulties
• debtor’s sector adversely affected by macro-economic trends (such as those experienced by retailers over the last year)
• payment terms change/payments are missed
• management at the debtor become elusive and do not return calls/other correspondence.

Late invoices should be flagged to senior management as soon as they become overdue. Unless it is an immaterial figure, the account should then be reviewed weekly – the likelihood of collecting an account reduces as each day passes.

In my next blog I will provide some ‘best practice’ guidance on how to manage slow paying accounts.

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

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National minimum wage is set to increase to £5.80 per hour with effect from October 2009. The rate for 18 to 21 year olds will rise to £4.83, and for 16 and 17 year olds to £3.53.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me. 

Cathy Corns is a Tax partner at Mercer & Hole. 

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Under the 1985 Companies Act, medium sized groups were exempt from preparing consolidated accounts. This exemption has been abolished in the 2006 Companies Act – effective for accounting periods beginning 6 April 2008.

This means that a time consuming consolidation process needs to be undertaken for a new tranche of companies, causing more accountants in the UK to experience the usual problems with goodwill calculations, intra-group trading, translation differences etc.

As a reminder, the size parameters for medium groups were changed to:

Net turnover - £6.5m to £25.9m
Gross turnover - £7.8m to £31.1m
Net balance sheet - £3.26m to £12.9m
Gross balance sheet - £3.9m to £15.5m

Any businesses which have subsidiaries should review this situation – it can be worth restructuring the group to avoid incurring the time and costs involved in the consolidation procedure.

Paul Maberly is a partner at Mercer & Hole – please click here for contact details.

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The credit crunch has reduced the availability of traditional funding sources for all businesses.

The Government has attempted to counteract this by introducing the EFG scheme for SMEs, and also the working capital scheme (a 50% guarantee to lenders on their working capital loan portfolios) and the capital for enterprise fund – a quasi venture capital fund providing equity of £250,000 to £2m for SMEs.

There are also various regional bodies that provide support and funding for SMEs. I recently attended a seminar, hosted by the ICAEW and Finance South East (FSE). FSE, which is financed by the South East England Development Agency provide a suite of funding options aimed at SMEs, such as:

• Grants – available for R&D, up to a maximum of £500,000, but typically much lower than this
• Commercialisation loans – up to £60,000 for pre-revenue businesses with a clear USP, repayable on basis of future income 
• Seed fund – venture capital fund which requires matching private investment, up to £250,000 of capital for ambitious, growing businesses
• Accelerator loans – up to £100,000 to fund expansion for high growth potential businesses (not for working capital)

These funding sources can offer critical support for SMEs, and it is worth considering if your business could qualify.

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HMRC is proposing to outsource some of its debt collection service to private-sector suppliers. It plans to run pilot schemes, including outsourcing debt collection, to low-value debt specialists and selling debts deemed irrecoverable as part of an assessment on how debt could be managed more effectively.

The Federation of Small Businesses has expressed concerns that the sympathetic stance taken by HMRC on the plight of small businesses during the economic downturn could stop with outsourced collection.

HMRC reject this view, stating that the collectors will have to work to HMRC’s standards. People will be expected to behave well and treat debt respectfully.

Time will tell …

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As mentioned in earlier blogs, this year’s Budget will be given by the Chancellor on 22 April 2009 – it has been delayed until after the G20 summit, which is then immediately followed by the Easter recess.

At this time of year many tax professionals try to second-guess what the Chancellor may announce in his Budget. Turmoil in the world’s markets makes these predictions harder than ever – he needs to increase the tax take, but will higher taxes cripple an already weakened economy?

We do know that the rate of VAT is set to revert to 17.5% on 1 January 2010. There are already cries for the 15% to be retained, but if it does go up next year would he be tempted to fix the rate at 20%?

Scrapping higher rate tax relief on pension contributions has often been put forward as something the Chancellor might consider – will this be the year that it happens?

As usual, we will just have to wait and see! 

We will be blogging on Tax Plus Blog and SME Plus Blog on Budget day.  If you do not already subscribe to our blogs click here for Tax Plus Blog or here for SME Plus Blog to ensure you get our comment and analysis as and when it happens.

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In my last posting I gave the first 5 tips, which covered the stage before an offer for a business had been made. My next tips pick up after the offer is accepted.

During Due Diligence :

This is the stage where you test the assumptions you made when you put together your offer.

6. Appoint a good accountant and lawyer. The potential long term costs of not taking appropriate advice should be considered very carefully!

7. Go back to your offer and the assumptions you made. Ensure the information provided by the vendor can be verified and corroborated by other data.

8. Consider the earnings figure you were presented with when you made your offer. Is it really sustainable? Will it be affected by exchange rate movements? Are contract terms due to change, will cost rises be matched by increases in revenue?

9. If you are acquiring shares, consider the potential for hidden liabilities. The most common are taxes – including corporation tax, VAT, PAYE, National Insurance etc. Also look at ongoing litigation, bonus arrangements, customer overpayments and any other matters appropriate to the business.

10. Spend a lot of time on your financial projections. Assess the impact of potential problems (reduced sales, lower margins etc) in a sensitivity analysis, paying particular attention to cashflow. Consider whether the budget complies with covenants set by the bank, and the amount of head room you have.

As I said in the last post, the priorities in an acquisition differ, dependent upon its nature – there are many other risks which should be considered in making an acquisition decision.

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It is an old adage but a good one: valuing a private company is an ‘art and not a science’. Given the same set of figures, it is very possible that all 20 Mercer & Hole partners would provide a slightly different valuation. 

My tips for preparing a valuation, which should be accepted by both parties in a jointly appointed expert witness case, are: 

• Use your experience of the SME market – It is no use trying to directly apply stock exchange multiples to private companies. Recent business sales in the local market should be used as a benchmark, to compare against discounted FTSE multiples.
• Use sector knowledge – it is useful to talk to my partners that have particular sector expertise (for example in construction, logistics, retail etc). This way you can identify the trends, valuation bases, recent transactions and other pertinent matters that will affect your opinion.
• Utilise the different disciplines within the practice – I often talk to my colleagues in our tax, transaction services and insolvency departments. Drawing on their experience adds a different dimension to the report.
• Apply several different valuation bases – consider earnings, net asset, dividend, discounted cash flow and any other relevant methodologies. This way a balanced opinion is given.
• Make the valuation understandable to others. It is good to avoid lengthy reports, but it is very helpful if both parties in the dispute can understand how the figures are arrived at. If one party feels the valuation is difficult to understand, it is more likely to lead to a prolonged and unnecessary dispute.

The production of an objective valuation which is accepted by both parties ‘first time round’ is our goal. This saves the time and money spent on protracted disputes over the valuation.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me.

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There is much confusion over the requirement for guarantees under the Enterprise Finance Guarantee (EFG) scheme.

The Bank must be satisfied that all available personal assets have been pledged, before lending under the EFG scheme. However it is at the banks discretion to determine whether:

• Personal assets may be considered ‘available’ as security (see below)
• The applicant is personally committed to the venture
• The applicant is using the EFG solely to avoid pledging personal assets.

The EFG is new ground for all of us. Good luck, and please leave comments if you have any interesting observations on the application process.
 

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It was in his Pre-budget report last November that the Chancellor, Alistair Darling, announced the creation of the Business Payment Support Service (BPSS). This is a telephone helpline (0845 302 1435) that companies and business owners can ring to negotiate extra time to pay tax.

As the January deadline for paying self-assessment income tax approached, several of our clients made use of this service and were able to agree 3, 6 or sometimes more than 12 months in which to settle their tax bills. The whole process took only a few minutes.

It would appear, however, that this initial burst of enthusiasm at HM Revenue & Customs has worn off and it is now much harder to agree more than a 3 month delay on the telephone. Anything longer than that is likely to be passed to a local manager for review and may also require more detailed information such as cash-flow forecasts and management accounts.
 

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HM Revenue & Customs (HMRC) has announced the latest interest rates charged on late payments of and paid on overpayments of tax.

The reduced rates that cover quarterly instalment payments of Corporation Tax take effect from 16 March 2009. The rates for all other direct and indirect taxes, including National Insurance contributions paid, take effect from 24 March 2009. The rate of interest:

• On late payments of Income Tax, National Insurance contributions, Capital Gains Tax, Stamp Duty, etc. changes from 3.5% to 2.5%, while on overpayments of these taxes interest remains at 0%.
• On late payments or repayments of Inheritance Tax changes from 1% to 0%.
• On underpaid instalment payments of Corporation Tax changes from 2% to 1.5 % while on overpaid instalment payments of Corporation Tax, and on Corporation Tax paid early (but not due by instalments) the rate changes from 0.75% to 0.25%.
• On unpaid Corporation Tax changes from 3.5% to 2.5% and on overpaid corporation tax remains at 0%.
• On under-declared or over-repayments of VAT, Air Passenger Duty, Insurance Premium Tax, Landfill Tax, Climate Change Levy, Aggregates Levy changes from 3.5%to 2.5%.

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The credit crunch is having an affect on all asset prices, and this is bringing some first time buyers/investors into the private SME market. With this in mind, I thought I would ‘blog’ some tips for SME acquisitions.

Prior to an offer being made :

1. Buy the trade / assets, and not the shares. With a company you inherit its problems and therefore potential liabilities. There are also tax advantages to buying the trade and assets. This is particularly important for ‘distressed’ acquisitions.
2. When reviewing profits for valuation purposes watch out for shareholders / directors remuneration. If the costs of their input to the business are not in the P&L, the valuation will be inflated.
3. Consider other missing costs. This is particularly relevant where a seller has more than one business - is rent correctly allocated? Which company does the accountant charge? etc
4. Customers. Reliance on a smaller number of large customers is a risk. The health of the customer base in the current economic climate is crucial. Ask the seller for outline details of clients – their size, sector etc and review the level of their own personal contact with customers. Consider what protection should be added into the offer – such as an ‘earn out’ for the seller.
5. In your offer be careful to clarify the assumptions you have made, and the conditions attached. This will make it easier to renegotiate the price should issues be identified during Due Diligence.

I will cover the 2^nd set of five tips in my next post.

Please note that the tips differ, dependent on the nature of the acquisition. I have been very general here and there are many other risks which should be considered in making an acquisition decision.

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This scheme will support bank lending, of 3 months to 10 year maturity, to UK businesses with a turnover of up to £25 million who are not able to access the finance they need. It will provide loans of between £1,000 and £1 million and is currently available until March 2010.

The guarantee can support new loans, refinance existing debt, or conversions of existing overdrafts into loans to release capacity to meet working capital requirements.

It is a very flexible tool in comparison to the previous scheme – the parameters in size have been widened significantly, and an interesting new feature is the flexibility to use the EFG in 'share' transactions.

Only time will tell whether the EFG will be a success. The decisions to lend are delegated to the banks, who will apply their own criteria. However it appears to be a step in the right direction, and I for one hope that the EFG scheme will provide a lifeline for the many viable, but cashflow pressurised, SME’s in the UK.

See guidance from Business Link by clicking here.

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The Chancellor will make his Budget statement on Wednesday 22 April 2009.  We will be providing analysis of Budget announcements on the day.
 

 

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HMRC has announced revised guidance on Land Remediation Relief (Brief 62/2008 - http://www.hmrc.gov.uk/briefs/company-tax/brief6208.htm).

The new guidance states:

             “A substance means any natural or artificial substance, whether in solid or liquid form or in the form of a gas or vapour. Previously, we have taken the view that the term “substance” could not include a life-form. We now accept that a plant can be a substance for the purposes of Land Remediation Relief.”

A specific section will be included on Japanese Knotweed.

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When buying property abroad it is often necessary to set up a company to own that property – either because non-residents are not allowed to own property in a particular country, or to avoid unwelcome inheritance issues.

In the past this has often given rise to additional tax. The owner was likely to be a director, or deemed to be a shadow director, of the company and so taxable under the benefits-in-kind rules on accommodation. Sometimes it was possible to argue that the company was holding the property only as nominee for the individual and effectively “look through” the company, but this was generally more difficult if the property was being let out to other people for part of the year.

The legislation was changed this year to prevent a tax charge arising in certain circumstances. It is important, however, to check that your situation is specifically covered by the new legislation:

• The company must be owned by individuals.
• The company must, broadly, have owned the property all the time since the individuals acquired the company. 
• The property must be the main or only asset of the company.
• The activities of the company must relate almost wholly to the ownership of that property. 
• The company can be the subsidiary of another company as long as the holding company does nothing other than own the subsidiary.

The legislation was, unusually, wholly retrospective in effect so if you need to revise a return for an earlier year you will need to act quickly. The deadline for amending a 2006/07 return expires on 31 January 2009.
 

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Apparently MPs are considering offering buy-to-let landlords the chance to make up for evading taxes by paying in full during an amnesty rather than facing financial penalties or legal action from the Revenue. If this were to happen, the amnesty would coincide with an information campaign, explaining to by-to-let landlords why paying taxes is crucial and outlining the consequences they face if they fail to submit a complete return.

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According to the Daily Telegraph more than 2,200 small businesses have asked HMRC for more time to pay their tax bills, and some have been given several months to pay off their bills.

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The Government has issued details of the new “Saving Gateway” initiative that it hopes will encourage people on low incomes to save for the future.

From 2010, accounts will be available to people receiving a range of benefits and allowances; those who are eligible to open an account will be sent details and an application form, in time for it becoming available.

The amounts that may be saved are modest – the maximum monthly contribution is £25 per account.

The Government has undertaken to contribute 50p for every £1 saved, after two years, which presumably means that the maximum Government incentive will be £300 per account.

The initiative is certainly laudable. What is questionable is the amount of bureaucracy that will undoubtedly be involved for what will be very modest sums.
 

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There have been a lot of cases recently, the most well-known being Dragonfly, and the question as to whether or not individuals are employed or not now seems to be even less clear cut.

There are several key aspects to consider, including:

1. Is there a formal contract in place? Does it set out who is responsible for what, reporting to whom, and at what price?
2. Does the engager actually want the specific worker with whom the contract is entered into? If any person with the right skill set would do, that may be a different position.
3. Who controls what is happening? The key area tends to be whether there is control over what is being done as opposed to how it is being done.
4. Factors that point to non-employment include matters such as commercial risks, investment in equipment, fixed price contracting and reparation for unsatisfactory work.
    

If you are a contractor or you have contracted staff and you are concerned that this may be an issue, it may be worth having a health check undertaken in some way, shape or form. If not, the cost could be significant.
 

 

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The Special Commissioners have found that a dividend waiver by a husband, which resulted in his wife receiving all of the distribution from the company was a "bounteous settlement" the net effect of which was to treat the income as his. It is not clear at the moment precisely which factor was conclusive in this case but the following points may have been relevant:

1. The husband held 9,999 of the 10,000 shares issued.
2. The waiver took place two years in succession.
3. The dividends paid to the wife were very similar to the company's distributable reserves - so the same amount per share could not have been paid on each share.

The Special Commissioner made a number of interesting observations, including saying that there was no commercial purpose for either of the waivers and that neither would have taken place on an arm's length basis.

So it seems that dividend waivers can still be used - but it is probably safe to assume that the Revenue will want to challenge situations similar to those in this case.

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In a recent case, the Special Commissioners decided that a couple who allowed their three young daughters to acquire shares in the parents’ company at less than market value, should be taxable on dividends paid on the daughters’ shares.

The circumstances of the case were not straightforward, as the parents claimed (but failed to prove) that the share purchase was in some way linked to a loan made to the company but the facts appear to be:-

1. The parents set up a new company in which each subscribed £1 for one ordinary share.
2. Some months later, when the company was trading profitably, a further 98 ordinary shares were issued for £98 to both parents (19 shares each) and the three daughters (20 shares each).
3.  Each year until the company ceased trading, dividends were paid on the 100 issued shares.

Where children under 18 have income of more than £100 that stems from gifts from their parents, the income is treated for tax purposes as belonging to the parents.

In this case, the Special Commissioners decided that the parents had effectively gifted the right to dividends to their daughters (and would not have done the same for a third party) and that the income therefore belonged to the former.

Had the parents been able to show a commercial link between the loan and the issue of the shares, it is quite possible that the outcome would have been different. Yet further proof that documenting what you are doing – and why – is of paramount importance when dealing with the Revenue.

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HM Revenue’s change of view regarding research and development (“R&D”) allowances available to companies that become large after the end of this month also applies to companies claiming Vaccine Research Relief (“VRR”).

Though VRR is less commonly used than R&D allowances, it can be a valuable relief to those companies eligible to claim it.

If you would like to discuss how the Revenue’s change of heart might affect you, please contact Cathy Corns or me.

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The Chancellor delivered his Pre-Budget Report on 24th November 2008. Our Partners and Managers posted a number of blogs in relation to the 2008 Budget announcement – on both SME Plus blog and Tax Plus blog.

For concise, up-to-date and easy to digest Pre-Budget information please find below a list of the respective blogs posted: 

SME Plus 

Pre-Budget Report 2008 - VAT

Pre-Budget Report 2008 - Plant and machinery leasing

Pre-Budget Report 2008 - Income tax...relief for trading losses

Pre-Budget Report 2008 - Tax relief for business expenditure on cars

Pre-Budget Report 2008 - Corporation tax...small companies rate

Pre-Budget Report 2008 - Corporation tax...tax relief for trading losses

Pre-Budget Report 2008 - Empty property relief

Pre-Budget Report 2008 - Taxation of foreign profits

Pre-Budget Report 2008 - HMRC Business Payment Support

Tax Plus 

Pre-Budget Report 2008 - Non doms update

Pre-Budget Report 2008 - Income Shifting Rules...the dog that didn't bark!

Pre-Budget Report 2008 - Top rate of income tax to be increased to 45%

Pre-Budget Report 2008 - National Insurance to be increased

Pre-Budget Report 2008 - Consultation documents

Pre-Budget Report 2008 - VAT

Pre-Budget Report 2008 - Compensation for the loss of 10% band made permanent

Pre-Budget Report 2008 - Tax rate for trusts to be increased

Pre-Budget Report 2008 - Pension tax telief...freeze on limits

Pre-Budget Report 2008 - Changes to trusts...trust Darling!

Pre-Budget Report 2008 - Penalties for late tax returns

To receive our blogs direct to your inbox visit http://www.mercerhole.co.uk/news, click on the blog of your interest and follow a few simple subscription directions.

 

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The good news is that for expenditure incurred on or after 1 April 2008, for companies, and 6 April 2008 for sole traders, partnerships and some landlords, plant and machinery allowances are extended to cover expenditure on the addition of thermal insulation to all existing buildings used for trading purposes or let as commercial property.

Residential property businesses may instead qualify for the £1,500 per dwelling-house, landlord’s energy saving allowance to cover cavity wall, loft, solid wall, hot water system, draft proofing and floor insulation.

The allowance on insulation is restricted to the 10% rate but it is better than nothing.
 

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HMRC is being given the power to set out what records should be kept and preserved. For these purposes, the records extend to include supporting documents such as vouchers and receipts, and the list can be extended to items specified in any notice published by HMRC.

However, HMRC has stated it does not want to introduce mandatory record keeping requirements that impose extra burdens on business. Additionally, HMRC has the power to look at records in ‘real time’, i.e. before a return has been filed. This seems a particularly wide-ranging power and could waste a lot of time.

There has been some consultation on standardising time limits. The downside is that this is being introduced without any transitional provisions and as, generally, the time limits for claims are being reduced this may lead to missed opportunities.

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HMRC has now published its Freedom of Information guidance setting out what you can (and cannot) ask them for. Interesting!

The details are available at http://www.hmrc.gov.uk/freedom/foi-index.htm

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The changes in the Finance Bill will preclude many companies that currently qualify for EMI from benefiting in the future. This will not apply to options granted prior to the date of Royal Assent. As this change is likely to take effect from mid-July, this is a one-off opportunity that should not be missed.

After Royal Assent, companies (or groups) will not be able to grant options unless, on the date of grant, they have fewer than 250 employees.

Companies affected by this change who want an EMI scheme, or want to issue further options under an existing scheme, must take speedy action to ensure that they are not too late.

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Loan accounts are increasingly being looked at by HMRC with a view to collecting national insurance contributions (NIC).

Often a director operates his loan account such that regular amounts are debited to the accounts to meet his mortgage, school fees or other living expenses; the amount overdrawn is subsequently cleared by voting a bonus to bring the account back into balance. In HMRC’s view in this situation the director is receiving an advance of his remuneration and so there is a payment of earnings.
HMRC’s view is that NIC liabilities for company directors arise at the earlier of payment or entitlement. This should not increase the NIC due but requires the payment to HMRC to be made earlier.

There are also occasions where a director operates a loan account but on the understanding that he will clear the overdrawn amount by either introducing some of his own income or he will give up or repay a dividend. These overdrawn amounts are not in anticipation of future remuneration and NIC liabilities will only arise if the amount overdrawn is not cleared in full and the balance is written off. Such written off amounts attract liability.

Remember also to Class 1A NIC liability which will arise on the benefit of the loan.

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There was general rejoicing when the Chancellor announced that the Income Shifting provisions would not be introduced from 6 April. However, at least for the moment this is a postponement and not a cancellation. The Red Book shows that the Government intends to raise significant amounts of revenue from income shifting legislation from 2009 onwards. This is unlikely to go away so we must make the best of the opportunity that we have been given and sort things out over the next year.

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This is a perennial question – should I take additional income from my private company in the form of a bonus or a dividend? From 1 April 2008 the answer to this question may have changed for some people.

Prior to 1 April 2008 it was preferable to declare a dividend if the company was paying tax at the small company rate or at the full rate of corporation tax. If profits fell into the marginal rate band then a bonus was more cost effective. On 1 April the marginal rate fell to 29.75% and so, from a tax perspective alone, dividends will now be preferred regardless of the level of company profits. There may of course be other factors to consider, such as pension contributions and minimum wage legislation but, provided these are factored in, paying dividends is likely to give a lower overall tax bill.

Companies with accounting periods straddling 1 April will have to calculate their own marginal tax rate for that period but, as a general rule of thumb, if the rate is 30% or lower then dividends will be the answer.

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For most self-employed people there is usually some use of their home for business purposes. You are then entitled to a tax deduction for the proportion of household expenditure relevant to the business use.

The Revenue has recently issued guidance to “clarify” the calculation of deductions. This suggests that the costs should be apportioned on the bases of:

• area of the total property used in the business;
• usage;
• time the area is used for business use as opposed to any other use.
  

However, where this will not work the Revenue should accept claims made on any reasonable basis.

So how do you apportion home costs?

The Revenue gives several examples of the approach it recommends.

Mortgage interest: The interest may be split where there is a substantial use of part of the property for business purposes.

Insurance: An apportionment of the total premium calculated for usage and area, etc.
Repairs and maintenance: General household repairs are allowable in line with the proportion of business use.

Telecoms/internet broadband, etc: The Revenue’s previous view was that line rental was not allowable. This has now changed, and a proportion of rental and calls is allowed on a reasonable basis; this should be supported by itemised bills.

The guidance includes a number of specific examples, which can be found by clicking here.

One thing to remember is that an individual’s main residence is exempt from capital gains tax on disposal provided it has been used as the main residence throughout ownership. Provided that no room is used exclusively for business purposes, there should be no restriction on the availability of the main residence exemption from CGT.

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The Government has recently announced the annual increase to the National Minimum Wage to apply from 1 October 2008:

The proposed increases to the current rates are as follows: 

	CURRENT	PROPOSED
ADULT	£5.52	£5.73
18-21 year olds	£4.60	£4.77
16-17 year olds	£3.40	£3.53

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Over the last 24 hours there have been a number of blogs posted in relation to the 2008 Budget announcement – on both SME Plus blog and our sister blog Tax Plus blog.

For your reference and convenience please find below a list of the respective blogs posted:

SME Plus

Budget 2008 - Pension Tax Relief
Budget 2008 - Capital Allowances
Budget 2008 - Enterprise management incentives ("EMI") share options
Budget 2008 - VAT
Budget 2008 - Trade losses for individuals...
Budget 2008 - Pensions
Budget 2008 - Associated companies
Budget 2008 - ISAs
Budget 2008 - Income shifting
Budget 2008 - Corporation tax simplification...
Budget 2008 - Enterprise Investment Scheme
Budget 2008 - Previously announced

Tax Plus

Budget 2008 - All Settled Offshore?
Budget 2008 - The Remittance Basis - Offshore Mortgages
Budget 2008 - Non Doms and Capital Losses
Budget 2008 - Personal allowances and the remittance basis
Budget 2008 - Non Doms and the £30,000 charge for the remittance basis
Budget 2008 - VAT
Budget 2008 - Changes to taxation of foreign dividends
Budget 2008 - Relaxation on Residence Test and Day Counting Rules

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The previously announced reduction in basic rate income tax from 22% to 20% from 6th April created concerns for 2 sectors.

Firstly, charities were concerned that they would lose out because Gift Aid donations would only benefit from 20% income tax relief with a resulting reduction in the gross donation.

Secondly individuals making personal pension contributions would only benefit from 20% tax relief at source instead of 22%. For instance a personal pension contribution of £78 would be worth £100 after basic rate tax relief in 2007/08. After 6th April the same £78 contribution becomes £97.50 after basic rate tax relief. This represents a small but significant reduction in your pension fund. Higher rate tax payers can claim back a further 20% through self assessment, increased from the previous 18% but the gross pension premium is still reduced for the same initial investment.

It was pleasing to see the Chancellor act on the concerns of charities and add 2% relief to Gift Aid donations for a transitional period.

It was a shame that the same generosity was not extended to the millions of us trying to save for our retirement.

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Although most of the changes on capital allowances have been known about for several months, there are a couple of minor tweaks announced today.

• The 100% first year allowance on cars with very low CO2 emissions will continue for an additional five years, until 31 March 2013, but the qualifying emissions threshold will be reduced from 120g/km to 110g/km driven 
•  Small balances left on capital allowances pools will be able to be written off where the balance has been reduced to £1,000
  

In addition, there is confirmation of new rules to allow companies (not unincorporated businesses) to surrender losses in return for a cash repayment from HMRC. This will apply to losses created by claims to 100% first year allowances on certain energy-saving or environmentally-beneficial plant & machinery, It will not be available where those losses could be used in some other way, for example against other taxable income or surrendered as group relief.

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Companies thinking of offering EMI share options to employees will have three new factors to consider: 

•  the market value (at the date of grant) of the shares covered by the option is to increase to £120,000; 
• the company offering the option must have fewer than 250 employees; and
• new restrictions are being placed on the company’s activities.
  

The last of these is unlikely to affect most companies (as shipbuilding, coal and steel production tend not to be that prevalent in the SME market) but the first two are potentially of greater relevance.

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When looking at whether companies are “associated”, the Revenue has historically been able to include the rights of people in partnership. This has meant that two companies, controlled by people in partnership – but with no other link to one another – could be treated as associated and find that their tax bills rose as a result.

With effect from 1 April 2008, the definition of common control will be revised, so that business partners will only be taken into account where “relevant tax planning arrangements” (put in place to reduce tax liabilities) are in place.

Further detail is awaited, but this presumably means that individuals in “genuine” partnerships will no longer have to include companies owned by their fellow partners when counting the number of associates for their own companies if there is no other commercial connection. If this proves to be the case, it will be a very welcome change.

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Legislation and consequently its introduction is being delayed for 12 months – party time!

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The 2008 budget included possible incentives for individual savers and investors at two opposite extremes of the market.

Firstly the announcement of more consultation on the Savings Gateway to encourage lower income individuals to save regularly in deposit accounts. This was originally consulted on in 2001 and has been trialed since. We shall wait and see whether a scheme whereby the government matches an individuals savings will actually be implemented.

Secondly the governments want to simplify the Enterprise Investment Scheme (EIS) to encourage investment in smaller, high-risk trading companies. These schemes allow an investor to benefit from 20% income tax relief as well as CGT deferral for reinvestments and gains free of CGT where income tax relief has applied. The government wants to increase the limit for income tax relief from £400,000 to £500,000 for 2008/09. This will be subject to State aid approval. In addition a consultation to try to encourage more investment is to be undertaken. This consultation will focus on various matters but will include how to increase awareness of these schemes amongst investors as well as the possibility of carrying back tax relief being extended to carry forward.

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…but don’t hold your breath; the proposals, when formulated, will only apply to companies with less than 10 employees and turnover under £750,000. This may not be quite what most SMEs were hoping for.

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The Chancellor has today announced an increase in the individual investor limit from £400,000 to £500,000 – subject to EU State Aid approval. The detailed tests for companies and investors otherwise appear to remain unchanged.

Whilst this is good news for companies seeking to raise funds – one word of warning. State Aid approval can take a long time to come through.

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HMRC has the power to arrest, and as of this month is now also able to intercept phone calls, emails and letters, and “bug” residential premises and private vehicles.

The powers were granted to HMRC in the Serious Crime Act, which gained Royal Assent in October, but did not come into force until the relevant statutory instrument was issued earlier this month.

Basically Customs officers had these powers because of their criminal investigations into drugs and smuggling, but now they have been granted across the board for HMRC.
The question is – what will happen in practice?

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Chancellor Alistair Darling will deliver his first full Budget on Wednesday 12 March 2008. The 2008 Budget comes amid the gloomiest economic situation for more than a decade, with volatile financial markets, a credit crunch and falling house prices.

Mr Darling will present the Budget to the House of Commons at 12.30pm and we will of course be blogging on SME Plus Blog and Tax Plus Blog during the course of the afternoon, providing analysis on the key highlights.

If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens.

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The Times online had a somewhat worrying story ; it appears that HMRC have allegedly paid a substantial sum of money to an ex-employee for stolen information on UK residents with foreign bank accounts. I do feel this raises some interesting ethical questions about ways of obtaining information but also sets a bench mark for potential informants in terms of price for value! It may well be of course that a number of the individuals with the bank accounts have nothing to hide and have made proper returns. What is certain though is that they are now going to have to prove it. This will almost certainly be a case of guilty until proven innocent. Continue Reading...

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The Revenue has won the case against music agent Lee Barrett, who was claiming that he was not liable for tax on income received in a year when he was not UK resident. Continue Reading...

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In the Pre-Budget Report the Chancellor announced that the Planning Gain Supplement (PGS) would no longer be introduced. Instead local authorities are to be given the power to apply a new planning charge, the Community Infrastructure Levy (CIL). Continue Reading...

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In his Spring 2007 Budget, the Chancellor (who at that point was still Gordon Brown) announced changes to the capital allowances regime, without giving more than the most rudimentary detail.

A lengthy consultation period followed and it is only now that HM Revenue & Customs have published draft legislation. The document runs to 91 pages(!) with the most important changes being:

Continue Reading...

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Given the Revenue’s dummy spitting response to the House of Lords’ judgement in the Jones v Garnett (Arctic Systems Limited) case, it was a safe bet that any attempt to stop husband-and-wife businesses shifting income between spouses would be hard hitting and wide ranging. Continue Reading...

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I am sure you already know this – but just in case – HMRC allows companies to spend £150 per head per year on staff parties, tax-free for the employees. This total should not only cover food and drink, but also accommodation and transport if the employer pays for these, plus VAT, divided by the total number of guests. The number of guests should include non-employees.

A few important points to remember:

• The limit applies for a tax year, so if you give a Summer and a Christmas party that together cost less than £150 per head, both will be tax free for employees
• The £150 is per head not per employee – which helps if partners are invited
• But the £150 is the total cost including not only food and drink but also travel and accommodation.
  
  

Have fun!

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Now that the dust has settled over the pre-budget report, it is an ideal time to consider the implication it will have on company sales in the SME market. Continue Reading...

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Just in case you’re not sure if you have one or not – an earn-out arises when a business is sold and part of the purchase price is deferred, usually until the results of the current, and sometimes some of the future, trading periods are known. In many cases, the amount finally payable will vary according to the business’ results. Continue Reading...

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In his address to the CBI conference earlier this week Alistair Darling announced that he does listen to businesses and intends to publish his final capital gains tax proposals "in the next three weeks". Continue Reading...

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The Court of Appeal has found that HM Revenue and Customs owes a duty of care to a taxpayer if they make mistakes. Following the decision in Neil Martin v Commissioners for HMRC [2007] EWCA Civ 1041, it appears that, in certain circumstances, taxpayers can sue HMRC for damages. Continue Reading...

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Client A recently asked me for advice on this...

A planned to set up a company, A Ltd. The company is being set up specifically to undertake a property development. The anticipated profit is £200,000. A is a higher rate taxpayer and would have paid £82,000 tax and NIC on the profits arising had he undertaken the development personally. By using A Ltd the tax on the profit reduces to £40,000. If this is reinvested in the next project that is a tax saving at this stage of £42,000. However, if the funds are extracted as capital (by way of, say, a liquidation) this will, after April next year, be taxed at an effective rate of 18% (rather than 10%). The overall tax charge, through the use of the company rises to around 37%. There is still a tax advantage in using a company but the overall costs need to be weighed up as well as the commercial considerations.
Continue Reading...

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Do you use business assets for private or non business purposes (e.g. a yacht/aircraft/computer)? Are you aware that you have a choice as to how the VAT paid on the purchase of such assets is treated? Continue Reading...

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Some years ago I was involved, in a minor way, in the writing of a Government report on the merging of PAYE and National Insurance. If my memory serves, the report highlighted 5 major (i.e. politically sensitive) hurdles to the merger of these two “taxes”. Continue Reading...

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Below is an article I wrote for Tax Plus Blog (for which I also contribute) and thought would be of interest...

As the 26 November deadline for making disclosures under the Offshore Disclosure Facility approaches it has was reported last week that HM Revenue & Customs are considering a second “tax amnesty”. An HMRC spokesperson has confirmed that plans are being put in place to repeat the ‘amnesty’ that was carried out earlier in the year.

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Audit and independent examinations

The audit threshold for unincorporated charities has increased!
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In the Queen’s Speech this week - Gordon Brown's first as Prime Minister - the government has promised a new bill to reduce the regulatory burden on businesses (a new Regulatory enforcement and sanctions bill – which actually sounds quite daunting itself!).

Worryingly bearing in mind its aim, it is apparently one of 22 Bills and seven draft bills in the legislative programme.

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Charitable Incorporated Organisations

Did you know incorporated charities have to comply with the requirements of both the Charities Commission and Companies House?

Continue Reading...

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Extended exemptions for certain medium-sized companies

With the accounting environment currently buzzing with talk of deregulation, the new Companies Act 2006 and lower compliance costs, the European Commission have also joined the band-wagon.
Continue Reading...

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This blog follows on from my last post.

As companies move between SME accounting thresholds, the reporting structure and contents of financial statements changes.
Continue Reading...

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The European Commission have recently published some documentation that is aimed to significantly simplify the business environment that EU companies face. They revolve around reducing reporting and auditing requirements for SMEs, simplifying disclosure requirements, and convergence. Continue Reading...

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There are some important changes to the Construction Industry Scheme (CIS) starting this month:- Continue Reading...

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Companies pay corporation tax at 20% on the first £300,000, right? Wrong! A company pays at 20% of the first £300,000 divided equally between it and its associates.

Companies are associated where:

·         one of the companies has control of the other, or

·         both of the companies are under the control of the same person(s).

A person controls a company if he is entitled to >50% of:

·         the share capital, or votes;

·         the distributions to shareholders;

·         the assets on winding up (this includes loan creditors).

The problem is that when looking at control you have to take account of a person’s associates. These are:

·         spouse (includes separated, but not divorced) and civil partner

·         parents, grand parents and remoter forebear

·         brother or sister, including half siblings (but not step, aunts, uncles or cousins)

·         partner (as in a business partnership)

·         settlements and will trust associates; - trustees are associated where the individual, or any living or dead relative is or was the settler; and where the individual is interested in a settlement, then beneficiaries, remainder men and trustees are associates.

Under self-assessment it is your responsibility to make sure your company pays the right amount of tax.

So – are you sure you know all your company’s associates?

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Are you involved in sales promotion schemes? If so, you may be interested to hear of two recent Court of Appeal decisions which will affect the VAT treatment. These cases are the latest in a long line of cases dealing with business promotion schemes. Continue Reading...

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A number of regulatory changes are to come into effect on the back of Companies Act 2006. The most interesting issues, that are being implemented with effect this month, are outlined below.

• Directors’ duties are in statute now

If you are a company director you will need to know and adhere to your obligations under company law. Previously a recommended practice, your obligations to prepare financial statements, safeguard assets, implement controls etc are now part of the law! Of course you are likely to undertake these as part of your day to day running of the company, but you should be aware of the change in status of these obligations.

• No need for company AGM’s (part 13)

There is no longer a legal requirement for private companies to hold an AGM. For most owner managed business this is a welcome move, the benefits rarely exceed the costs. However note that 10% (5% in some circumstances) of the shareholders can demand an AGM. As a result of no longer requiring an audit, there are a few ‘knock on changes such as the automatic re-appointment of auditors in private companies.

• The business review (S417)

Of late the ASB has encouraged a more ‘chatty’ approach to the Business review in the directors’ report, emphasising more commentary on non financial factors, including KPIs, internal management processes, and industry performance (small entities are exempt). The ASB have further iterated the importance of the business review, and the director’s accountability to the company’s shareholders. There is a reluctance for directors to get too ‘close and personal’ with the Business review, as they are ever cautious about divulging information in an increasingly competitive business environment. The key is balance… the business review needs to meet its objective of informing the readers of the annual accounts, of the financial performance and position of the company. Despite the reluctance of many directors, you must remember you are not the only one out there facing the same dilemma!

For more information on the new companies act 2006, follow the links below…

http://www.berr.gov.uk/bbf/co-act-2006/index.html

ICAEW

alternatively please feel free to contact us directly.

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Draft regulations published by BERR (did you know this is the new name for the DTI?) have outlined increases in the size criteria for audit exemption. These are proposed to be effective for financial years beginning on or after 6 April 2008

Continue Reading...

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Below is a brief update on the Arctic Systems case from Lisa Spearman, Mercer & Hole Partner and Tax Plus Blog contributor.

An announcement has been widely expected and commented on in this and other blogs following on from the Revenue’s defeat in the House of Lords. This is a case of the dog that didn’t bark or at least not yet.

Continue Reading...

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The timing of the Pre Budget Report this year has meant that there wasn’t time for the Government to reach its conclusions on a number of on-going consultations. Notable for their absence are... Continue Reading...

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In a recent article by Mike O’Brien, the current Minister for Pensions Reform, on the Department for Work and Pensions’ website, some further details on the proposed changes to pensions in 2012 were outlined.

Essentially the Government’s view is that people are not saving enough for when they retire.

To tackle the problem of under-saving, from 2012, millions of people will be Continue Reading...

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The Chancellor of the Exchequer, Alistair Darling, will be presenting his 2007 Pre-Budget Report and the outcome of the Comprehensive Spending Review on the afternoon of Tuesday 9th October.

I will post details of important announcements here shortly after the end of his speech.

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According to Bank of Scotland’s latest SME confidence index, almost three quarters of respondents believe that their struggles with legislation will heighten over the next three years.

Additionally, more than half of SME owners believed the need to comply with regulation is hampering their company’s performance intensely.  The majority also believe that the UK implements EU law more aggressively than it needs to.

Continue Reading...

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Following the original article on the BBC website and covered  by my colleague Lisa Spearman on  Tax Plus Blog.

A bigger picture is being uncovered with many more articles appearing on the Internet and you can read a selection of other professional opinions by clicking on the links below.

 

http://www.accountancyage.com/accountancyage/news/2199454/hmrc-considers-plan-access

 

http://ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=469687

 

http://www.ft.com/cms/s/0/f2cb6c44-6bc9-11dc-863b-0000779fd2ac.html

 

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The Institute of Directors recently unveiled a policy paper ‘The SME Glass Ceiling – Growth Obstacles in 2007’, which identified a series of priority issues for government action.

Apparently regulation, taxation and education are (and were) of concern to businesses of all sizes. The report identifies five issues that are highlighted specifically by small and medium-sized enterprises (SMEs).

Continue Reading...

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I do not normally talk about economic matters on this blog, but the Sub-prime problems in the US could have an implication on the SME transactions market.

I will try to describe the problem in layman's terms (i.e. those that I can understand!!)

 

Continue Reading...

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There has been a lot of press speculation recently that, following the calls for a shake up in the tax breaks enjoyed by the private equity industry, the Chancellor may change capital gains tax for everyone. Continue Reading...

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Now that all the hassle is over I took some time to reflect on the pressures applied to business by the Revenue. I know the returns of benefits (forms P11d) have been around for years but so has the old “higher-paid” limit of £8,500. So employers have to fill a form in for anyone paid the minimum wage who receives any benefit at all.

Sure dispensations can help but actually getting one out of the Revenue is not always as easy as one would hope.

Continue Reading...

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A further ramification of the well publicised ‘carousel fraud’ has led to many SME clients facing long delays in routine VAT registrations.


Continue Reading...

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I was asked recently for advice by a client, a 40% taxpayer. He wanted to make a substantial donation to charity, funded by the sale of an investment property. The property had a market value of £100,000 and the cost was £20,000.

Basically he had two choices : gift cash, or gift the property.

If he sold the property and gifted the funds to charity the position would be: Continue Reading...

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The long awaited decision on Arctic Systems

This all seems to have been going on for so long you may need reminding of what all the fuss is about; so

- Mr and Mrs Jones ran a small IT company of which Mr Jones was the sole director. They each owned one share in the company took a small salary and extracted the majority of their required funds by way of dividend. These, of course, were paid in line with the shareholdings, on a 50:50 basis.

Nothing out of the ordinary there so what was the problem? It seems to be that Mr Jones paid tax at higher rates and Mrs Jones did not. HM Revenue & Customs (HMRC) argued that the settlements legislation should apply to the dividends paid to Mrs Jones such that they should actually be taxed (at the higher rate) on Mr Jones.

The Special Commissioners and the High Court (April 2005) agreed with HMRC, however the Court of Appeal (December 2005) rejected HMRC’s argument.

The result of all this is that there has been significant doubt about the correct tax treatment and obligations to report income and dividends in such circumstances.

The House of Lords unanimously decided in favour of the taxpayer. The key issue appears to be that an ordinary share is not “wholly … a right to income” and therefore the dividends are not caught by the settlements legislation.

This represents a resounding success for taxpayers and gives them back the right properly to plan their affairs in companies and partnerships.

If you were waiting for this judgement to instigate any planning or indeed need help on amending returns for earlier years, please contact any member of our tax team

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HMRC has recently set out its strategy on tax litigation and settlement - what does this mean for your business?

Following the merger of HM Revenue & Customs, the old Inland Revenue appears keen to get its hands on the extra powers previously enjoyed by Customs and Excise. This is clear from HMRC’s latest guidance on its “Settlements and Litigation Strategy”.

This sets out the principles HMRC aims to follow for avoiding tax disputes and

Continue Reading...

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I have been reading the latest batch of consultative documents and finally reached the stage of deciding enough is enough. The paper that tipped the scales was the Discussion Document on the Taxation of Foreign Profits (comments on this will follow separately). Ignoring the “use” of English worthy of Big Brother (the original not Channel 4 version!) the content is also unhelpful.

The introduction was, shall I say, interesting – it referred to the Budget 2007 reforms and other proposed measures as “refocusing the tax system’s support for small businesses.” Forgive me, but how does increasing the rate of corporation tax for small companies and decreasing capital allowance rates show support? Is it that the support is being refocused away from small business?
Continue Reading...

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After the media reports that around a million people are paying the wrong amount of tax this may not be the perfect time for HMRC to propose they are given an automatic right to collect unpaid (in their opinion!) tax by various measures including offset from other tax credits or repayments; direct from bank accounts; or by set off from salary - all without the need for any court order. Apparently, they say, this will reduce collection costs and bring forward payment dates. I have to say I believe that statement is accurate. I do also have to say that without a hearing you – the taxpayer – will have no right to defend your position.

Are HMRC always correct in the amounts of tax they request? Patently not, but if the tax is forcibly extracted from you how hard will it actually be to get it back? I accept that legally possession is not really 9/10ths of the law but in practise possession is, even if only temporarily, 100% entitlement! HMRC say that they will employ their powers responsibly; I am tempted to point out that they would say that or they may not get them.

Just imagine Continue Reading...

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Investment trust companies (ITCs) are celebrating their victory at the European Court of Justice on 28 June when it was ruled that the term “special investment funds” can include closed-ended investment funds, such as ITCs. As a consequence they should benefit from the same exemption from VAT for fees paid for management services, as presently enjoyed by unit trusts and OEICs..

The case was brought by JP Morgan Fleming Claverhouse Investment Trust plc and The Association of Investment Companies. The Association say investment trusts have been unfairly charged VAT on management expenses since 1990 Continue Reading...

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H M Revenue & Customs have announced new advisory fuel rates which can be used by businesses to reclaim VAT on employees mileage allowances for business travel.

The new rates which apply to all journeys on or after 1 August 2007 are as follows:-
Continue Reading...

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You are probably already aware that the Revenue has strict guidelines on time limits for raising enquiries.  If a deadline has passed there has to be good reason to go back to a closed year.  However, possibly because of this, in several enquiries recently the Revenue has asked for comparative figures. Once they have the analysis for earlier years they are then using this to start an enquiry into a return that otherwise would be out of time.
 
So what do you do if you are asked for this type of information?  Firstly – do not automatically comply.  Secondly, ask for a full explanation and justification as to why the Revenue is seeking to go back to earlier years. Always point out that you are not being deliberately uncooperative but just want to be sure that the enquiry is not out of time.

 

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The Revenue has historically tended to concentrate on the usual areas - requests for analyses of repairs and renewals, fixed asset additions and professional fees. One obvious way to avoid this type of enquiry is to provide the information as a matter of course showing enough detail to make your position clear i.e. not just the name of the solicitor but a narrative e.g. “legal advice on staff contracts”.

So - what’s changed? The Revenue is now adopting publicity techniques to make all businesses aware of its focus on specific areas. One example of this is its focus on shoots where a team of specialists is operating nationally. With this approach all you can do when you are selected is make sure that your records are in order and you can demonstrate compliance.

Sadly, however, the selective approach does not mean that the “scattergun” approach has disappeared. The Revenue’s current theme is to enquire into balance sheet entries such as stock and / or provisions. Again full disclosure can pre-empt an enquiry. If there is a provision for, say, redundancy, show the details and the reason it is deductible on the computation.

New legislation creates new opportunities for business eg research and development relief but also then creates new enquiry opportunities. Again provision of full details and the back up to the claim may help.

There has been a survey of current enquiry topics – the list is, in order:

1. Associated companies – mainly generated by the targeting of investors in film partnerships.
2. Capital allowance claims – analysis and rates claimed.
3. Provisions.
4. Debtors, creditors and accruals– when looking at this remember to consider the transfer pricing regime on inter-company balances.
5. Analysis of expense items e.g. Legal and professional fees, repairs and entertaining (on the latter does the total in the accounts agree to that shown on forms P11d for example).
6. Stock – generally on valuation / provision issues.
7. Research & Development
   
   You can tell form the above list that some forethought and additional work up front can reduce the scope of the enquiry.
   

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Will your club or association start having to pay tax ?

With the withdrawal of the nil starting rate for all entities subject to Corporation Tax there has been concern that many small clubs and societies will fall into the Corporation Tax net and need to complete returns and pay corporation tax in respect of very small sums of income.

However, HMRC have announced that where the annual corporation tax bill for a club (or unincorporated association) is less than £100 and the club is run exclusively for its own members, then they will prevent the issue of a notice to file returns and treat the club as dormant, subject to a five year review.

This seems a very sensible move although, as always, the guidance is subject to a number of matters so if you are associated with a club or association you will need to look at the small print to see if it qualifies.

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Is it just me or are transactions becoming more and more leveraged? Lenders appear to be have a better appetite for lending compared to when I started in the profession. I think this is a positive change, as very few transactions I have been involved in have gone awry (it must be the excellent Due Diligence advice…..).

However could it be that lenders are misinterpreting the profit calculations? The shift in profit measures from EBT (Earnings Before Tax), EBIT (Earnings Before Interest & Tax) and EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation) have meant that the basis for earnings has increased. Could it be that the increase in the profit measure has meant that lenders continue to use the same multiple, while simultaneously providing more finance??

PS to all the bankers I deal with – only joking.

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This is a huge area and this note cannot cover all issues so I have concentrated on two: share incentives and tax effective payments and benefits.

Share Incentives

Approved share schemes can offer your employees a guaranteed right to subscribe for shares in your company at an agreed future date at today’s price. You can link the right to, among others, continuing employment, performance, or sale/flotation of the company. The latter can give employees a share in ultimate value with no cash commitment up front and no entitlement if they leave before the event but, in the meantime, no shareholder rights and all with a potential 10% tax charge.

There are various types of share scheme offering different benefits, with different qualification criteria. You should look at the rules in detail before making any decision. See also our page on Employee Share Schemes.

Tax effective payment and benefits

Set out below is a brief (and by no means comprehensive) list of some tax favoured payments:

•               Allowances for business miles in private cars,40p pm for first 10,000 miles, thereafter 25p •               Provision of workplace parking – space or cost •               Incidental overnight expenses, e.g. telephone, newspapers, etc up to £5 per night •               Works transport facilities •               Employer provided cycles and safety helmets •               Late night transport home •               Annual party – up to £150 per head

•               Childcare vouchers – £55 per week •               Mobile phones – now limited to one per employee – and extended to cover vouchers •               Reimbursement of removal costs up to £8,000 •               Pension contributions •               Provision of uniforms or protective clothing •               Canteen facilities open to all staff at that site

 

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Your focus is to grow your business profitably, so are you sometimes tempted to ignore the tax issues and leave them to your accountant to sort out at the end of the year? In the scheme of things is tax really that important?

Well, yes it is. Tax will impact on virtually every decision you make. For example:

What can I give my manager to make him stay for the long-term?

 

How can I find the extra cash to develop my product?

 

Where can I find some extra working capital?

 

It could make sense commercially to set up a manufacturing/service centre abroad – pros/cons?

 

I have found a great business to bolt on to mine that would really add value – how do I structure the acquisition?

It is not possible to cover everything you may ever need to know, so I propose to look at five key areas:

Raising additional finance

Capital spend

Product Development

Staff retention and incentives

Acquisitions

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