12 minute read
COODEN TAX CONSULTING
2020: The year of the emergency cashflow forecast
Well, nobody expected a year quite like that one. I doff my cap to those of you in the profession who have supported your clients throughout the year with all of the new terms and rules that have come into play with Furlough, CBILS, BBLS, SEISS or any of the other myriad of schemes that have been put in place to support businesses and their employees.
Advertisement
It may well be the first year on record where a majority of the profession spent more of their time in the present and the future rather than the past. Our clients wanted up to the minute bookkeeping, they wanted to know when they would see the cash from any work they were still doing or when the furlough funds might arrive and when their loan would arrive and whether they would make it through.
Your Support
It became the year to find support with things! Hopefully, you found useful tools like Capitalise to compare and find funding across a broad spectrum of lenders with BBLS, CBILS and more traditional funding for those businesses that bucked the trend, or perhaps you bubbled up with a finance broker who supported your clients.
You might have also sought out Futrli or Float to support with cashflow forecasting, especially if your clients have made the jump to cloud accounting, These newer entrants to the market will have certainly seen their market access plans getting a re-write during the year. Or you may have dusted off your old excel spreadsheets and just gave them the quick once over before setting them to work a new.
Whatever you did, you clearly did it well for the majority of businesses. Outside of those in food and beverage and entertainment industries, most businesses have managed to plod along and survive through this awful year and into 2021, despite the first two lockdowns and in spite of this new lockdown 3.0.
The Next Funding Squeeze
Will there be another squeeze on finances ahead? I suspect so, BBLS and CBILS will soon have to begin repayments when the government stops paying the interest in Q2 this year. How will you be able to support your clients then? Well perhaps they might be able to extend their BBLS or CBILS loan to the maximum if they haven’t already done so, or convert their BBLS loan to a CBILS loan before the end of March if the scheme isn’t extended further.
Or is there another way? Tax Reliefs, particularly R&D Tax Relief, remain significantly misunderstood. The scope for claiming is huge, and whilst it won’t be of benefit to a majority of your limited company clients, it would probably benefit between 5% and 20% of them.
Over the last 8 years we have worked with a number of diverse companies to support them with claims, from a small company developing a range of Green Tea, to a medium-sized debt collection business that bought up bad debts from Wonga at a very low price and sought to obtain repayments at a manageable rate. From a start-up designing a new range of organic cosmetics, to a global business that processes hops, to a company developing online school diaries as an EdTech solution, to a company developing a new range of papers manufactured from agricultural waste, to a company designing food dryers, we’ve seen most things.
The Dilemma
Unlike the pandemic, the Tax Relief has been available to SMEs since 2000. It has only really been over the last couple of years that many businesses have begun to understand its benefit, so If you don’t know by now that R&D Tax Relief can help your clients’ significantly boost their cashflow by reducing their tax liability or offering a R&D Tax Credit, payable in Cash, if they surrender their losses, then read on.
If you do know, I am sure the question you may have been asking yourself on several occasions over the last 5 years is “how do I sell R&D Tax Relief to a client that may have been doing R&D for several years?”
The Solution
Whether you know about R&D Tax Relief or not, bringing in an external expert is a great solution! We work directly with businesses but also partner with a number of Accountants who refer their clients to us or who we support by reviewing claims and technical reports.
We can work with you to identify those clients, either through direct intervention and a targeted marketing campaign or through a more generic series of communications. We will work with you as an external expert to help your clients secure probably the most rewarding Tax Relief on the statute books and pay you a handsome referral fee. By telling your clients that you have brought in an expert to support you, you are providing them with peace of mind.
The last accountant we partnered with went through their entire client list with us and we identified around 20 businesses that had potential. We have now prepared claims for 9 of them, one wasn’t sure, and one had been doing R&D 5 years ago, when they talked to the accountant about it, but no claim was ever submitted, the other 9, when we approached them to establish what they were doing in more detail weren’t actually doing any R&D, but were glad we had informed them about it.
Our Expertise
I am an accountant professionally, I spent 10 years in practice predominantly for a large regional firm in West Kent, where I first came across R&D Tax Relief and worked with a client who was developing large scale water purification systems that the MOD purchased. I moved into industry in 2006 and spent 6 years in Clinical Research and then after redundancy spent 14 months at a World Championship winning Motorsport team. Whilst my principle roles in those two businesses were financial reporting, both were R&D intensive businesses, so I made it my mission to develop my expertise in this area and obtain as much Tax Relief as I could for them.
In September 2013, after a little bit of moonlighting, and having honed my skills, I started working full time in Cooden Tax Consulting and haven’t look back. We are a niche tax consultancy and only work with companies who may be able to claim R&D Tax Relief, Video Games Tax Relief or Patent Box. The business has evolved into a team of 4 now and is looking to grow further. We are also hoping that during 2021, we will be adding a grant writing service to support our clients with applications to Innovate and other funders.
The First Step
If you’d like to talk to us in more detail about our range of services to help you support your clients, you can arrange an initial discussion with me through Calendly, you can book some time with me at www.calendly.com/simonbulteel for a time that suits you, alternatively you can contact Simon Bulteel at Cooden Tax Consulting on
01424 225345.
Access grant funding
27th April 2021 13.00 - 14.00
Virtual
Book here
This workshop will give you a solid understanding of the grant funding landscape and insight into the mindset that is required for successful applications.
Essentials Virtual CPD 2021 Programme
Key technical topics and updates covering a wide variety of titles. Available live or on-demand.
Find out more and book.
Business Confidence Monitor: regional
How have business's performance been affected? Find out how your region is affected.
Find out more and book.
More from your membership
Providing exclusive yet accessible benefits -
giving you more from your membership.
Find out more and book.
How Employee Share Schemes can respond to Regional Policy
David Craddock is a recognised authority in the UK and worldwide on employee share schemes and the author of The Tolley’s Guide to Employee Share Schemes. In this article, David identifies the role that employee share schemes can play towards formulating an effective regional policy to which the current British Government is committed through its manifesto pledges.
T
he Conservative Manifesto Pledges to Regional Regeneration
The dramatic onset of Covid-19 in the early months of 2020 and the ongoing unpredictable consequences of the disease would appear to have derailed the wider ambitions and manifesto pledges of the British Government for a levelling up of the regions, notably in the North and the South West of England. With explicit reference to the General Election of 12th December, 2019, the Prime Minister has personally expressed the debt that he believes he owes to constituencies that transitioned to Conservative to give him the substantial majority in the House of Commons. Indeed, it is no coincidence that the last General Election is known as The Brexit Election, as one of the prime causes of the Brexit campaign was the demand for the levelling up of the regions that had lost much of their economic significance due to the process of increasing globalisation over the last 30 years. Addressing regional economic disparity must continue to be a priority of government and, when properly implemented it has the potential to be a significant part of the recovery from the economic devastation left in the wake of the pandemic. Simply to refer to the government funds that have been committed to the HS2 rail project is insufficient to meet the needs of regional regeneration and, in reality, a distraction from the true economic imperatives when companies have become used to meetings by Zoom and Microsoft Teams, thereby making a significant proportion of business rail travel redundant.
Part of the massive historical success of the USA in economic policy from the nineteenth century onwards has been the multitude of business centres across the 50 states, with each state engaging in its own experiment to produce excellence, the results from which all the other 49 states can learn and derive benefit. This is a stark contrast to the UK with its reliance on London and the South East, and travel to London from the regions for business. The commitment of the British Government must be to raise the major cities – Liverpool and Manchester, Leeds and Newcastle, Birmingham and Bristol – and the smaller cities also, to have a fully self-sufficient business infrastructure and reduce the dependence on London. Surely it is only with that decentralisation of economic power that the regions will have the capacity to develop and demonstrate their initiative, their innate inventiveness and their independence. Then if that regional economic regeneration is encased within a new political framework of a federal nation-state, following the USA or German model, the opportunity exists to save the union and stem the tide of separation in Scotland, Wales and Northern Ireland.
The Fallacy of “Tax-and-Spend” Strategies
The fallacy of “tax-and-spend”, whether it be of a Keynesian disposition or otherwise, becomes obvious in the light of a clear examination of the current predicament for many companies. The large corporations of big business have the cash resources and accumulated reserves to withstand the assault of Covid-19 and, provided they continue to have a market relevance, they will survive and go on to thrive once again. But for many small-to-medium size companies, the exposure to market forces and their current prospects may be very different, particularly if they are lumbered with debt repayments of their Covid-19 loans at a time when their profit margins have yet to recover. Furthermore, lockdowns act like a form of regressive taxation, impacting the worst on the poorest and most vulnerable individuals either through their employing companies or selfemployed businesses. Unfortunately, given the current aggressive nature of the virus and the emergence of even more deadly and contagious variants, there may not be an alternative to lockdowns in the short-term. So why tax these companies or individuals further or deny them existing tax reliefs when they are already strained to breaking point? Surely an increased tax burden imposed by government would make no sense whatsoever when what is really required for these companies and individuals is incentive to recover with the aid of the most friendly fiscal and monetary policies possible. The continuing tax incentives through the capital gains tax regime, notably through the tax-advantageous employee share schemes and the Business Asset Disposal Relief, previously known as Entrepreneurs Relief, is essential to ensure that businesses know that they can commit to economic growth and their owners realise benefit on retirement without the imposition of punitive taxes.
Remember, tax acts directly as a decelerator to economic growth. Furthermore, regardless of the sheer magnitude of the increase in the National Debt to fund the support during the pandemic, this is not the time to organise its repayment. The British Government is only now paying back the debt incurred to fund the operations of World War II. The key to the country’s recovery from the pandemic will be economic growth and, so long as the ratio of GDP to debt is manageable, there is no express need to raise tax rates on the false pretext of having to pay down the National Debt. At this present time, for the regions, priority should be given to attracting the outsourced businesses that are returning home as part of the process of deglobalisation, accelerated by the identification of China as the source of the virus. There is, of course, a natural alignment between the economic deglobalisation of the world, as countries organise themselves into regional trading blocs (or, as in the case of the UK through Brexit, completely decouple from the EU trading bloc) and decentralisation to the regions within the UK of both economic and political power.
So, let’s now explore the employee share scheme proposal as an alternative system of economics. The modern-day origins of employee share ownership derive from the work of Louis Kelso, an economist and lawyer working in 1956 on the West Coast of the USA to deliver an alternative economic system for the ownership of a successful newspaper company, Peninsula Newspapers, based in Palo Alto in California, whose founder and sole shareholder had decided to retire. The employee motivational basis for the employee ownership solution was that capital values rise faster than wages and, in most companies, this is dramatically apparent. The employee share ownership model, therefore, properly implemented and properly communicated to the employees, is the natural mechanism to act as an accelerator for wealth creation, i.e. for the existing shareholders and for the employee shareholders.
The requirement, therefore, for regional economic regeneration, is to establish the firm linkage between employee share schemes and regional policy. This could take the form of additional tax reliefs embedded in the employee share scheme, maybe in the form of an additional corporation tax deduction, if a company introduces an employee share scheme in a designated region. In this context,
