Tax Tips and More | Summer 2018 by Lauren Aston

Tax Tips and More Summer 2018

Best in Tech

The Future of SMEs

In the last few years, there have been rapid advances in cloud services, artificial intelligence, data management, IT services, and more, which can improve the efficiency of your business.

What will the future look like for SMEs? These are the five key areas that are changing for SMEs and what your business can do to prepare.

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Profit Extraction and The New Dividend Tax Arrangements Historically, incorporation became worthwhile (from a tax perspective) when profits reached ÂŁ25,000 a year. In 2018/19 this will no longer be the case. Page 10

Contents

Welcome and Partners

Special Feature Best in Tech

Property Incorporation Update – Tax Implications

London Property Investment Market

The Future of SMEs

Business Growth Tips

Profit Extraction and the New Dividend Tax Arrangements

Xero Add-On Achieve World-Class Credit Control

Businesses have Saved Over £2million in Tax and Repayments Thanks to Raffingers’ R&D Service

Raffingers Launch New Website and Knowledge Hub

Upcoming Events

Employee Spotlight

Are your overheads taking priority over your profit?

“A Little Holiday Home...”

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Welcome to our SUMMER Newsletter Summer is well and truly here and with it our Quarterly Newsletter. In our newsletters we strive to keep you updated with the latest news, as well as our tips and advice from lessons we have learned from working with businesses of all sizes. We are always looking at ways to improve our newsletters and increase the advice we deliver to you. If you do have any specific questions that need answered or advice you would like to see, please get in touch with us. Over to this edition. In this edition, we look at the best technology we are using with our clients to help save them time and make their business more efficient. There are many apps now that can streamline processes, for all sectors. To discuss any of these or for advice on the best software for your business, contact any one of us. As always, we also bring news for landlords and property investors on the current property market and the age-old question, whether you should incorporate your portfolio. Finally, for businesses, we look at the future SME market, profit extraction in light of the new dividend arrangements and how you can extract more profit from your business by looking at your overheads. For help or advice on any of the articles discussed, please do not hesitate to contact one of us. To contribute to our next newsletter, contact: lauren.kelly@raffingers.co.uk. The Partners at Raffingers

Raffingers Partners

Gary Inglis Managing Partner gary.inglis@raffingers.co.uk

Andrew Coney Partner andrew.coney@raffingers.co.uk

Lee Manning Partner lee.manning@raffingers.co.uk

Adam Moody Partner adam.moody@raffingers.co.uk

Suda Ratnam Partner suda.ratnam@raffingers.co.uk

Barry Soraff Partner barry.soraff@raffingers.co.uk

Paul Dell Partner paul.dell@raffingers.co.uk

Roy Butcher Partner roy.butcher@raffingers.co.uk

Neill Staff Partner neill.staff@raffingers.co.uk

Your Business Our Passion

Best in Tech SPECIAL FEATURE

The technology should be using.

your

business

Best in Class Business Technology helps you to do more with less.

you focus on your core business, not on the technology that helps operate it.

In the last few years, there have been rapid advances in cloud services, artificial intelligence, data management, IT services, and more that can make an impact on your business.

The solutions we offer in this document are those that are the most common and which we have tried and tested for our clients.

There are now so many business solutions available that it can be overwhelming and difficult to decide on the â&#x20AC;&#x2DC;rightâ&#x20AC;&#x2122; solution for your needs. You want to make choices that let

To find out more about any of the systems recommended in this article, contact lee.manning@ raffingers.co.uk.

Core, Recommended and Optional Solutions for Your Business

6. Payroll

10. Online Marketing

7. Financial Services

2. Debtor Tracking

5. Payments

1. Cloud Accounting Software

3. Bills and Expenses 9. Project Management

4. Reporting

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8.CRM

Core Solutions

6. Payroll: Deputy

1. Cloud Accounting Software: Xero

Deputy is an all-in-one employee scheduling, time and attendance and communication software that seamlessly integrates with Xero.

Our cloud accounting system of choice for small to mid-sized businesses is Xero. The beauty of this software is the flexibility it gives you to run your business from work, home, or on the go. You can be confident that you have an up-to-date picture of how your business is doing, no matter where you are.

Deputy works for businesses with 5 to 50,000 employees and allows for easy integration with Xero. This means any information can be synced, such as employee details, leave requests and timesheets.

Recommended Solutions

Optional Solutions

2. Debtor Tracking: Chaser

7. Financial Services: MarketInvoice

Chaser addresses two important problems:

MarketInvoice offers business loans and invoice finance solutions. Their integration with Xero means a quick and simple process, from application through funding.

1. Getting your invoices paid on time. £225bn in late payments are owed to UK SMEs. 2. Time spent on chasing customers to pay invoices. UK SMEs spend 336 hours a year chasing late payments. Chaser delivers an average 16-day debtor day reduction that is equivalent to a cashflow boost of over £4,400 for every £100,000 of turnover. Chaser also saves customers on average 7.3 hours per week on credit control. 3. Bills and Expenses: Receipt Bank Receipt Bank saves time through more straightforward and real-time accounting. The key benefit of Receipt Bank is its simplicity, allowing you to easily get receipts and invoices into Xero. You can take a picture using the Receipt Bank mobile app, send an email to your unique Receipt Bank email address or link it straight up to your PayPal account. Never will you have to worry about losing a receipt again. 4. Reporting: Futrli Futrli works alongside Xero to provide you with complete clarity of your data, allowing you to visualise and track your financials, as well as plan for the future. What makes Futrli so valuable is that every transaction from the beginning of time can be imported, which means absolutely any KPI can be looked at in real-time for operational, retrospective and future analysis. And if anything is amiss, you are always the first to know. 5. Payments: GoCardless GoCardless helps businesses to collect recurring payments from customers across Europe. GoCardless allows you to take control of your payments, ensuring your invoices get paid on time, every time via Direct Debit. With automatic reconciliation in Xero, GoCardless improves your cash flow and reduces your admin.

Whether you are struggling to maintain a healthy cash flow or need access to cash to take on new projects, invest in growth or pay your staff and suppliers, MarketInvoice can help. 8. CRM: Insightly Insightly is an affordable customer relationship management (CRM) and project management application that provides a lot of value by helping smallto medium-sized businesses manage customers more efficiently. Insightly Xero integration gives you a complete picture of your business from early prospect communication, through the sales process to invoicing and payments. 9. Project Management: Workflow Max From leads to quotes, to time-tracking, all the way to invoicing - WorkflowMax all-in-one, cloud-based job management software is the modern and efficient way to run your business. WorkflowMax offers you everything you need to manage your workflow in one single integrated solution. 10. Online Marketing: BOMA If you have limited marketing resources, BOMA makes it easy to deliver content to your audience, without having to invest time or resource into creating it yourself. BOMA brings together all your email and social media platforms in one place. There’s no need to switch between accounts or re-create content – with a few clicks, you can easily create and share content across all your communication channels.

Your Business Our Passion

Property Incorporation Update – Tax Implications Should you incorporate your property portfolio?

Ever since the government announced plans in 2015 to restrict the tax relief on buy-to-let mortgage interest for individual investors, the hot tax topic for those affected has been whether to transfer properties into a limited company. The main issues that arise for those considering incorporating are:

• Capital Gains Tax (CGT) – a transfer to a company would normally be a deemed disposal for tax (at current market value), something that often triggers significant CGT liabilities. • Stamp Duty Land Tax (SDLT) – the acquisition by the company would normally trigger SDLT calculated at market value. • Refinancing – the need to replace existing borrowings, which are often at advantageous interest rates that can no longer be replicated in today’s lending market. We have written a great deal about possible solutions to these issues, but today I just want to focus on a practical problem that has arisen regarding the CGT issues. In order to incorporate without creating a CGT liability, we need to apply the provisions of section 162 of the Taxation of Chargeable Gains 1992 – referred to as “incorporation relief”. One of the main conditions for incorporation relief to apply to a transfer is that the property portfolio in question must constitute a “business” in its own right. Unfortunately, what is or is not a business – as opposed to a simple investment – is often not clear cut. There are a wide range of factors to consider, but in the main, these concern the level of activity undertaken by the “business owners”. Passive investment is unlikely to be a business, whereas active management likely is. Of course, in the real world the line between those is often blurred. This is why we need to examine different factors to see if property incorporation is the best option.

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Scale is a factor – a portfolio made up of dozens of buy to let properties is likely to require a high degree of active input and thus is probably a business. A portfolio of one or two – probably not. But when the potential downside risk of huge CGT liabilities is at stake, few people are happy to rely on “probabilities” from their advisers. The solution therefore was always to apply to HMRC for a clearance under their non-statutory clearance procedure. Under that procedure, you could write to HMRC setting out why you believed a particular portfolio met the threshold to qualify as a “business” and HMRC would typically write back with their view, often agreeing. In recent months however, there has been a dramatic shift in policy and HMRC has taken to refusing to deal with non-statutory clearances in this area. Their justification is always the same – that the nonstatutory clearance process is designed to deal with areas of uncertainty in tax legislation and the question of whether there is a business doesn’t constitute an uncertainty! Personally, I can’t think of anything more ambiguous and in need of clarification, but try as we might – we can’t move them from this position. This new policy – rightly or wrongly – has put a massive obstacle in the way of those buy-to-let investors that for whatever reason delayed thinking about incorporation. Anyone in that position now seems to be faced with an impossible choice. Either swallow the huge increases they face under the new interest regime or take a chance that HMRC will not disagree that the portfolio is a business and drag them through a long, difficult, stressful, expensive and potentially disastrous tax enquiry. If you own properties and are unsure whether you need to register a management company with HMRC, contact:

Barry Soraff 020 3146 1603 barry.soraff@raffingers.co.uk

London Property Investment Market Specialist lender Kent Reliance, part of OneSavings Bank, released the findings of their new research this month, which portrays a very rosy picture for landlords. The research forecasts that a typical landlord in Britain will see an estimated net profit of over £265,500 per property over the next 25 years, through rental income and capital gains. Returns vary significantly across regions, with profits in London estimated to reach over £307,000 in today’s money, almost £12,500 per annum. The Good Capital gains, which some might consider speculative, comprise a significant portion of these returns. However, the report points out that landlords need not exclusively rely on them. According to the report, even if a landlord did not sell their property and therefore did not make a capital gain, income alone would not only cover outgoings, it would provide a profit of over £65,500 over the period, over £2,500 per annum. The Bad Reading a blog on BA Marketplace, making a profit from London property investment is “increasingly difficult” due to “prices in the capital falling and profits diminishing”. In the latest house price figures released by Halifax, London was one of only two areas in the UK to see house prices fall in March compared to the same month the previous year, with an average 1% drop across the city. They warn that investors need to have a plan and could “look outside the capital to where property prices are significantly cheaper”. Finally, in an article in The Guardian, Britain’s property surveyors issued the most downbeat assessment of the housing market for five years. The Royal Institution of Chartered Surveyors (RICS) said that in March demand from buyers fell for the 12th month in a row, new instructions from sellers declined for the seventh consecutive month, and prices were flat nationally.

The headline reads “Stamp duty and Brexit ‘have killed London market’!”. The Ugly RICS measures confidence in the property market by balancing surveyors seeing price rises against those seeing price falls. It said the figures were the lowest since 2013. The downshift is deepest in London and the south-east of England, but prices were still rising in parts of the Midlands and North. “London exhibits the weakest feedback, with a net balance of -47% of respondents citing further price declines. Respondents in the south-east, East Anglia and north-east, also reported prices to be falling but to a lesser extent than in the capital. Meanwhile, prices continue to drift higher across all other parts of the UK, with Northern Ireland, Wales and the East Midlands seeing the strongest readings.” They also note that the predictions that rents would rise following the introduction of greater taxation on buy-tolets have yet to materialise, with tenant demand weak in many parts of the country. This is all very contrasting views. Speaking to our property clients the demand for rent in London has yet to feel the impact of Brexit, the changes in stamp duty have had an impact on total purchase prices but little on demand, and the changes in property tax would have had a large impact on their cash flow had they not made alternative arrangements. The best advice I can give is to ensure that you have a well thought out plan in place, as well as appropriate funding in line with your rental income, ensuring that you do not put too much pressure on your cash flow, and act fast to changes in the industry, be those legislative, market or interest rate changes.

Andrew Coney 020 3146 1602 andrew.coney@raffingers.co.uk

Landlords to make £265,500 average net profit over the next 25 years.

Your Business Our Passion

The Future of SMEs Since 2015, the UK has experienced steady growth and some political stability. Due to this, the general consensus is that UK business confidence is high. But what about SMEs? What will the future look like for SMEs over the next two years? SMEs are at the heart of the UK economy, with over 5.7million registered, representing around 99% of all businesses in the UK. In this article we will cover five key areas that will impact on SMEs, how they are changing and what your business can do to prepare. Finance In the SME finance market, alternative lenders have been gaining in popularity and the government is continuing to encourage Banks to lend more. This year, there remains a rise in the level of confidence amongst SMEs who continue to borrow and invest, with default rates remaining at historically low levels. Traditional forms of borrowing, such as the bank overdraft, are becoming less popular as SMEs recognise alternative forms of funding available. There is also the problem that, with alternative providers taking the ‘juicy bits’ of the business finance market, it is difficult for banks to operate business current accounts and remain profitable without charging higher fees. The likelihood of a rise in interest rates during 2018 is looking more likely. The fortunes of SME businesses in the UK, which are the cornerstone of the health of our economy, are closely tied to the fortunes of the consumer, and it is unclear how much spending power a rate rise could take away. Cloud Accounting Making Tax Digital is a government initiative that has set out a vision for a new digital tax system. This means that

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by 2020, all businesses will have to submit their financial records digitally via cloud accounting software. SMEs tend to be more flexible than large businesses when it comes to adopting new technology. According to reports, 70% of SMEs are already using cloud accounting software or intend to do so in the near future. The only barriers SMEs state they feel is fear of data security (heightened by the GDPR), incurring costs and lack of internal knowledge. For those few SMEs that are still using a paper-based system for accounting...this will need to go! If you’re also still using a spreadsheet, then consider switching to a cloud accounting app. Some of the main benefits are: easy access to your figures, giving a real-time financial view of the company, less paper work and integration with apps to help manage all aspects of your business. Social Media Despite there being evidence that social media can be beneficial for businesses, surprisingly over half of UK SMEs don’t use it. On Instagram, up to 76% of SMEs admitted not using the platform despite there being 1billion active users. Industry experts say that we are now in an age where consumers expect businesses to engage with them online, therefore SMEs who don’t have an online presence should be worried. If your business struggles with social media, or doesn’t know where to start, there are a few marketing experts that offer free advice, such as Neil Patel and Jeff Bullas. If you’re worried about finding the time to schedule posts on social media there are free apps that can help you manage them, such as Hootsuite and Buffer. Worried about whether you’re not creative enough to produce content? Test Canva, which has pre-made designs for infographics, presentations, social media posts and flyers. These things are free, easy to use and will help you on your social media journey.

Business Growth Tips Automation Software Technology is getting smarter and ultimately your SME should adopt technology that will cut long processes so that you can dedicate more time to running your business. News of chatbots, for example, have shown that that they can greatly improve customer service, drive sales, increase social media engagement and improve company performance. Preprogramming a chatbot to be able to answer basic to moderate queries can significantly help your business by reducing time spent solving these issues. This means you’ll be able to focus on the more important aspects of your business. Adopting such software doesn’t need to be expensive and you can always start small. For example, if you have a business Facebook page, you can programme the Messenger app to greet users and create simple responses. Staffing As SMEs start to adopt cloud software and other automation technology, it may be the case that they will also employ fewer people. This will help to save time and money. In the case where “employees” will be needed, small businesses will likely be hiring people on a temporary basis with no employment contract. We see this happening now with the rise of the “supertemp” and popularity of the gig economy. Highly educated or qualified specialists are now working as contractors on a project basis. Many SMEs today have started using temp agencies to connect with solo professionals who are not looking to settle down in one place, but would rather come in, complete what needs to be done, and then move on to the next location. SMEs will need to prepare to scale down, but also practice a good working relationship with temps.

Roy Butcher 020 3146 1607 roy.butcher@raffingers.co.uk

Give your team more responsibility Give your team the opportunity to develop and don’t take everything on yourself. Teach people on the job and allow them to grow in the business. This will help you to retain your staff. Develop a strong culture Having a strong culture will not only lead to a happier, more productive team, but will also help you attract talent. Be consistent and open with your team, find out what motivates them, getting your employees involved in the business means they will be more committed. Identify your weaknesses Understand your own weaknesses as well as your strengths. Surround yourself with employees who have different strengths and let them teach you. You don’t have to know and do everything.

Identify your weaknesses

Get the right structure in place

Work with the board

Take a break and enjoy what you do

Understand your own weaknesses as well as your strengths. Surround yourself with employees who have different strengths and let them teach you. You don’t have to know and do everything. Growing from a small to medium-sized business can be a big change, particularly when adding a more vertical management structure. Don’t kill innovation by creating unnecessary chains of command. Often the biggest disagreements that happen in a business are between the founder and the board, particularly where the founder has been used to making sole decisions for a long time. Boards make changes to how a business operates or the direction that it’s going. Sometimes founders have to accept that and aim to work with them, not against them. Make sure you are looking after yourself and taking some time out. This will allow you to look at your business from a fresh perspective, especially if you use this time to speak to like-minded entrepreneurs and people who are going through the same changes as you.

Your Business Our Passion

Profit Extraction and the New Dividend Tax Arrangements The optimum position for 2018/19 is to set the salary at the NIC primary threshold of £8,424. Since 6 April 2018, the dividend allowance reduced to £2,000. The following changes also occurred:

• • • •

The personal allowance increased to £11,850 The basic rate tax band increased to £34,500 The dividend allowance reduced to £2,000 National insurance for employees and directors: • Lower earnings level - £6,032 p.a. • Primary threshold - £8,424 p.a. • Upper threshold - £46,350 p.a. • National insurance for the self-employed: • Class 2 NIC is £2.95 per week • Class 4 NIC is £8,424 p.a. and is paid at 9% on any excess up to the Upper Threshold of £46,350 • The Class 4 NIC Rate above the upper threshold is 2% Incorporation Historically, incorporation became worthwhile (from a tax perspective) when profits reached £25,000 a year. However, a sole trader with profits of £25,000 in 2018/19 will only save around £700 in tax and NIC by incorporating. The additional compliance costs of operating through a limited company once incorporated, is likely to far outweigh these tax savings. Once profits get to £50,000, the tax savings are approximately £2,000, making incorporation more attractive, but due to the changes to dividend tax, this is no longer a one size fits all solution. The savings continue as profit levels increase, but not indefinitely. At £70,000 of profits, the tax saving is £2,380, but above this level, savings start to reduce. Therefore, at this level, the key to further savings depends on the ability to utilise the family unit to take advantage of lower tax bands and rates. Marital Tax Break The married couples allowance is limited, with the maximum savings being just £237. Although, involving a spouse in your business is much more tax efficient – with the opportunity to utilise two personal allowances and basic rate bands.

Profit Extraction If you are already incorporated, determine the optimal balance of salary and dividends from a tax perspective. Single Company director / shareholder Profits

£70,000

Salary

£8,424

£11,850

ER Nic

£0

£473

Retained Profit

£61,576

£57,677

Corporation Tax

£11,699

£10,959

Maximum Dividends

£49,877

£46,718

Personal Tax

£6,321

£6,409

£0

£411

Net Drawings

EE Nic

£51,980

£51,748

Effective Rate

74.26%

73.9%

As shown above, if the salary is taken at the personal allowance level, you are in a worse position by £232. So, the optimum position for 2018/19 is to set the salary at the NIC primary threshold of £8,424. If the employment allowance is available, a salary at the personal allowance level is the best option but only gives a saving of £28. Other Strategies Other strategies that could be used to increase profit extraction in a tax efficient manner include: -

• Smoothing – the company may be able to “smooth” the tax payable on profit extraction - by possibly deferring the taking of dividends into a later tax year. • Making use of a spouse as a fellow shareholder – to make use of lower tax bands if possible. • Paying a commercial rate of interest on any directors’ loan account that is in credit with the company • Using the company to make pension contributions on your behalf Of course, your own individual circumstances need to be considered when planning for any of the above. Contact paul.dell@raffingers.co.uk for tailored individual advice.

The above information is based on our current understanding of tax law and practice – this can be subject to change without notice.

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Achieve WorldClass Credit Control

CERTIFIED PARTNER

XERO ADD-ON

Chaser is cloud credit control software taking away the pain of carrying out effective credit control. Every business that sells on payment terms has to deal with the pains of carrying out credit control. In the UK alone, SMEs are owed a collective £225 billion in late payment. Couple that with the fact that the average small business wastes 336 hours per year chasing late payments, and it’s clear credit control is no longer an area any business can afford to not be prioritising. Enter Chaser. Chaser is cloud credit control software for Xero, taking the pain away from finance teams in carrying out effective credit control. The average Chaser user sees a £4,400 cash flow boost per £100,000 turnover, and saves 7.3 hours a week on credit control activities. How Chaser fixes the pain Chaser achieves this by automating your email chasing of customers to pay their invoices. With the ability to set custom email templates, which include your email signature and reflect your regular business email address, Chaser handles the time-consuming task of chasing for you. Without losing the human touch. But Chaser’s human-centric approach doesn’t end there. Custom schedules ensure Chaser sends its email chasers only on the days and times you want it to, so it never comes across to your customer as obvious automation. Further, Chaser’s ‘multi functionality’ intelligently detects when individual email chasers are going to be sent to the same customer at the same time. Then it automatically

groups them into the one email chaser. Chaser further eases the pains of carrying out credit control, eliminating credit control communication chaos. With Chaser, businesses don’t need to waste time scouring through email inboxes and folders, extracting information from co-workers, and poring over handwritten notes to get the full history of an unpaid invoice. Chaser automatically logs all email chasers sent, and any following replies between you and your customer, in consolidated invoice histories. If you ever need to have a credit control phone call with your customer, you can quickly and easily add in notes from the call. With all this, the full up-to-date history of every unpaid invoice (and the credit control carried out) is always accessible to you in one place. Only just a few clicks away. Chaser is the market leader With a perfect 5.0 star rating from more than 260 reviews, Chaser is the 4th-highest reviewed app of all 700+ on the Xero App Marketplace. It’s a four-time award winner, including AccountingWEB’s Cloud App of the Year 2017 and Xero’s App Partner of the Year 2016. And it’s a finalist once again for AccountingWEB’s Cloud App of the Year 2018. That’s why we at Raffingers are proud to be expertly trained in Chaser as official Chaser Certified Partners. Want to learn more about how Chaser can benefit your business? We’d love to help. Contact Lee Manning at lee.manning@raffingers.co.uk today.

***Example of a Chaser email (as seen via Chaser’s invoice history screen)

Your Business Our Passion

Businesses have Saved Over £2million in Tax and Repayments Thanks to Raffingers’ R&D Service We are pleased to announce that we have saved clients over £2million through the Research and Development (R&D) tax credit scheme. Raffingers offer a specialist R&D tax service to companies who are considering making a claim under the SME or Large Company R&D schemes. Raffingers also works with accounting firms who need additional expertise in this specialist area. Partner and R&D expert, Neill Staff, heads up the firm’s R&D service, which has, so far, involved qualifying R&D expenditure of £12.8million and resulted in Tax Credit repayments and corporation tax savings of over £2 million. Partner at Raffingers, Neill Staff, stated, “Hitting this milestone emphasises the savings available to

qualifying businesses through the R&D scheme. There is a big misconception that these savings are only available for people in white coats, but in the last 12 months we have managed to claim money back for businesses in design, recruitment and the arts. Many business owners are either unaware of the potential benefits of R&D tax credits or mistakenly think that the claims process is too complicated to deal with. The results we are seeing show that businesses need to be reviewing whether the work they do qualifies for R&D. They could be leaving serious money on the table if they don’t.” For a free consultation to see if your business is eligible for R&D tax credits, contact Neill Staff at neill.staff@ raffingers.co.uk.

Raffingers Launch New Website and Knowledge Hub We are pleased to announce the launch of our new website, which now includes a Knowledge Hub.

www.raffingers.co.uk We are passionate about delivering financial and strategic advice that will help you prosper. Therefore, our Knowledge Hub aims to keep you updated with the latest news and advice.

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Complete with videos, reports, articles and blogs, the Knowledge Hub supports businesses at every stage of development, from start-ups to mature enterprises.

Visit www.raffingers.co.uk/knowledge-hub Raffingers’ Knowledge Hub is your destination for all the latest news. For further support and advice contact lauren.kelly@raffingers.co.uk.

Upcoming Events July 2018 Cash Management Solutions 11am-12pm | 24 July 2018 | Webinar It goes without saying that running a profitable and sustainable business is dependent on good cash management. Yet, this is difficult when expanding the business and employing more staff, when customers take longer to pay than normal or when large payments are going out at once, e.g. rent, VAT and corporation tax. At this webinar, we will be discussing two solutions - Chaser and Fidelity Payment - that can help with cashflow as well as our own tips. To register visit our website or contact ingrid.beya@raffingers.co.uk.

September 2018 Raffingers Foundation Charity Ball 6:30pm-12am | 15 September 2018 | Prince Regent Chigwell, Manor Road, London, IG8 8AE Join us for our roaring 1920s Charity Ball. As well as a three-course dinner we have live music from Frog on a Rocket and will be entertained by a cabaret musician (as seen on TV!). Last year we raised over £12,0000 for Raffingers Foundation and hope with your help we can achieve this again. To find out more or to attend contact lauren.kelly@raffingers.co.uk

into NWN Blue Square Ltd and now Raffingers, making her a dedicated and committed Payroll Manager heading up the payroll department.

Employee Spotlight In this slot we introduce you to a valued member of our team, allowing you to put a face to a name. This quarter we speak to our Payroll Manager, Wendy Martin. Name: Wendy Martin Email: wendy.martin@raffingers.co.uk Career: Wendy has worked in the financial sector for 21 years. Wendy joined Stonehills in 1996 to provide temporary maternity cover, which lead to a full time VAT and payroll opportunity. Stonehills eventually morphed

Interests: Wendy is not shy about blowing her own trumpet – well, cornet actually - playing in the North East Counties Royal British Legion Band. They can be heard as part of her local Essex Remembrance Day Service, as well as giving concerts around the Home Counties. Wendy is also a keen photographer and, along with her husband, can be found doing street photography and family shoots. As a stepmother and grandmother, she makes the kids a priority and occasionally finds time for a bit of gardening…just to relax. Partners Report: Wendy’s commitment to ensuring that the highest standards are attained and maintained is unsurpassed. Her knowledge is wide ranging as is her continuing commitment to keeping her knowledge up to date. Clients continually give positive feedback about her, and never has a negative word been said. All who have worked with her are grateful for her loyalty but woe betide if you mess up her filing system!

Your Business Our Passion

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Are your overheads taking priority over your profit? By Lee Manning

“The new definition of success is not about the most revenue, employees and office space but the most profit, generated through the fewest employees and with the least expensive office space. Make the game of winning based upon efficiency, frugality and innovation, not on size, flair and looks.” - ProfitFirst by Mike Michalowicz The challenge for any business is to make it into a cash generating machine. One way to do this is to really understand your overheads. Are your overheads taking priority over your profit (and importantly, your wages)? Understanding this will help you to make the right decisions. Mike Michalowicz outlined the process in his Profit First book... You need to categorise your overheads as either:

• P for any expense that generates (P)rofit • R for any expense that, whilst necessary, can be (R)eplaced with a less expensive alternative, and • U for any expense that is (U)necessary for delivering your offering Then, go through the previous years’ accounts, credit card statements and loan statements and on a spreadsheet start allocating overheads to each category. Once you have done this, you need to make yourself accountable and, I advise, to work with your accountant to understand what costs are necessary. Once you have allocated your overheads and resources, you can begin to look at costs that can be reduced. Start by cutting the U expenses, then find ways to reduce the R expenses - with replacements or alternatives. Then, evaluate the P expenses to see if you can structure the expense more favourably. Note, it is important to begin with small savings as you cannot jeopardise the running of your business and create uncertainty within your workplace. The secret is to have a goal that you want to achieve within a certain time period. Another cost cutting strategy is to, before investing or spending money, to sit back and assess if the cost is necessary. Ask yourself whether you can get away without buying that item, if you can, then the business doesn’t need to spend that money.

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Wesley Rocha didn’t take a raise in 10 years. The founder of LinkUSystems watched his company grow and his own income remain stagnant. “I don’t understand why it seemed like even though we would make more money, we never had any left over. I felt stressed about finances all the time.” Wesley finished reading Profit First in a weekend and realized quickly that his expenses were way out of control. “I couldn’t immediately implement cutting costs without grossly damaging projects or the business. I literally needed all of my employees and 90% of everything we had been paying for because we were stuck and committed to it.” Little by little Wesley started chipping away at his expenses. “over the past year unfortunately I have had to release 6 employees but have been able to replace their efforts by eliminating unprofitable products and services, re-creating and optimizing processes and streamlining other portions of the business. Now, I’m able to determine what expense is allowed for a project before we take it on. Otherwise, we have to figure out another solution.” Figure out another solution. Music to my ears. Not, “We have to find more money to cover it.” In the first year of implementing Profit First, Wesley was able to double his profits, which allowed him to increase his annual income by approximately 46%. Profit First gets you to think differently about spending money on your overheads. Obviously, there are going to be times when you do need to replace that old PC, but I bet you’ll do some research and compare prices now, rather than just going ahead and purchasing it.

Lee Manning 020 3146 1604 lee.manning@raffingers.co.uk

Tax From the Trenches | Neill Staff

“A little holiday home…” For those of you who don’t know, I am a tax person by day and a musician at weekends. I love both my jobs with equal measure and a few weeks ago I was lucky enough to play at a “Sounds of the 1960’s” festival, performing alongside several headline acts from back in the day. The music scene in Essex is like one big extended family. I wouldn’t say that everyone knows everyone, but it’s not far away from that. The chances are that if I walked into a pub and a live band was playing, I would know at least one person on stage. It’s like that at the festivals too. Nine times out of ten the sound guys are the same fellas who provide the front-of-house for my band at larger venues. It was in this rich theatre of colourful personalities that I bumped into a long standing musician friend of mine. He wasn’t playing at the festival but had offered to help out with getting the equipment on and off the stage between acts. I had waved when I saw him and a few minutes later he wandered over to ask who I was playing with and when I was due on. The conversation meandered along for a while and then he asked me if we could talk about tax for a minute. I groaned inwardly because these conversations never bode well, and I do try and keep my tax head away from music at live events. But by now most of my musician friends know about the day job and, in truth, I’m always happy to help. My friend went on to tell me that he has a holiday home in the Algarve which is rented for most of the year. The property is in something of a state of disrepair but he makes a few thousand pounds a year after deducting expenses. Apparently this has been happening for about 9 years and he never realised that tax was payable on any profit he makes because, in his mind, the property isn’t in the UK. Someone had mentioned the tax position to him and he decided to ask me before going any further, which I am glad he did. For those of you who read my blogs, you will be aware that I often extol the virtues of the various HMRC campaigns that are around and available for use in cases like this. HMRC recognise that there are many people who are not completely up to date or accurate with their tax affairs, and that a fair proportion of these people would love the opportunity to get straight without having to face a series of enquiries and searching questions. In

my experience, it is the fear of “fessing-up” that puts people off and what they think will happen to them. HMRC, to their credit, have recognised this and have set up the Let Property Campaign for individuals who have received undisclosed rental income, and a Worldwide Disclosure Facility, which is suitable to deal with the foreign rental income that my friend received. As a firm we have submitted a vast number of disclosures using these facilities and HMRC has accepted each one with minimal fuss. I explained everything to my friend and told him my Firm could deal with the disclosure from start to finish. All he needed to do was give me a schedule of the rental income received and a list of all the property rental expenses he pays each year. We would then sit down together and see what costs were allowable for tax, and consider if there are any other costs, such as the annual flights to and from the property. There is no managing agent and he does all the repairs and upkeep himself. We had the review meeting in June and we’ve calculated the rental profit, which isn’t particularly high. We have also attributed some of our fee to the preparation of the rental accounts which reduced the profits even further. My friend’s day to day income isn’t particularly high so his income will only be taxed at 20%, and his final settlement, including interest and penalties, will be a few thousand pounds. We’ve registered for the Worldwide Disclosure Facility, and we’ve registered for Self-Assessment because the property is still rented. We have already completed the current years’ tax return in draft and everything will be submitted and paid in the next few weeks. If you are one of those people who has some undeclared income and wants to get straight with HMRC then it really doesn’t have to be as scary as you think it might be. I am always happy to have a chat with anyone who finds themselves in this position, and if I think I can help, I can explain what it would cost you in terms of fees and how long the process will take.

By, Neill Staff 020 3146 1605 neill.staff@raffingers.co.uk

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