RAFFINGERS STUART NEWSLETTER WINTER 2014/15
SMALL DETAILS
BIG DIFFERENCE
SRA Propose New Reforms to Focus on Significant Risks to Client Monies Low risk firms could soon be relieved of submitting annual accountant’s reports.
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Pension Reforms Offer New Freedoms
New Tax Relief for Investment in Social Enterprise
Make the most of your working life, whilst also planning for the future.
This new relief allows investors to reduce their income tax liability.
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Contents
Welcome and Partners
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Special Feature ‘Tis the Season for Tax Returns
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Latest Proposals to Affect Employment Intermediaries in the Temporary Labour Market
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Pension Reforms Offer New Freedoms
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Employee Spotlight
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Benefits of Incorporating a Business
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Client’s Story MV3
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Recruitment Industry Network
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2015 Event Agenda
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Tax Efficient Ways to Repay Your Director’s Loan Account
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New Tax Relief for Investment in Social Enterprise
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Partner’s Perspective 100% Penalties for Tax Avoidance
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PP SMALL DETAILS BIG DIFFERENCE
Welcome to our WINTER Newsletter We hope you have had an amazing Christmas and New Year. Can you believe we are now in 2015?!
Raffingers Stuart Partners
Gary Inglis Managing Partner
Now that the holidays are over, there is one key item occupying ours and our client’s time - self-assessment tax returns. Remember the deadline for these is the 31 January 2015. Read our Special Feature, on page 3, to find out more.
gary.inglis@raffingers-stuart.co.uk
In this edition we also bring you the latest update from the Solicitors Regulation Authority, more information on pension reforms and an article on the benefits of incorporating a business.
andrew.coney@raffingers-stuart.co.uk
We also have our ever popular Client Story, by MV3, and our Partner’s Perspective, which this month puts Gary Inglis in the spotlight. We hope you enjoy reading our newsletters. If you would like to be featured in our next client story, or have any suggestions for topics that you would like to see discussed in the next edition, please get in touch.
Andrew Coney Partner
Lee Manning Partner lee.manning@raffingers-stuart.co.uk 2 Adam Moody Partner adam.moody@raffingers-stuart.co.uk
We wish you all a wonderful and successful 2015! The Partners at Raffingers Stuart
Suda Ratnam Partner suda.ratnam@raffingers-stuart.co.uk
Barry Soraff Partner barry.soraff@raffingers-stuart.co.uk
Paul Dell Partner paul.dell@raffingers-stuart.co.uk
RAFFINGERS STUART NEWSLETTER WINTER 2014/15
‘Tis the Season for Tax Returns SPECIAL FEATURE
It is that time of the year again when ours and our client’s time is occupied with frantically completing and submitting self-assessment tax returns. The paper tax return deadline has been and gone, but you still have until 31 January 2015 to submit your return online. With the deadline getting closer, it is now time to seriously think about your tax return, if you have not already. (That is if you want to avoid a £100 late submission penalty.) 3
A few tips... In order to submit your return online it is essential you register for online filing. You can do this personally, or we can do this for you. Either way, registration needs to be done now. In 2013, HMRC were taking up to six weeks to register people for self-assessment. Therefore, the longer you leave it before taking action the tighter the deadline will be for completing your return and in the most extreme circumstances the deadline may be missed all together. Once registered, it is then important that your returns are filled out correctly and on time to avoid any late filing penalties. To make this process as efficient as possible our team is on hand and can complete your returns for you, should you wish, guaranteeing that they will be submitted before the deadline.
DEADLINE - 31 JANUARY 2015 This is the final deadline - all tax returns must be submitted online by midnight on the 31 January 2015. Also, note that 31 January 2015 is also the deadline for you to pay any outstanding tax you owe from the 2013/14 tax year. If you do not pay any outstanding tax by this date you will incur a 3% interest charge on the outstanding amount. In addition, there will be a 5% penalty surcharge if the payment is not made by 1 March 2015.
For further advice, or for help completing your tax return, please contact Adam Moody at: adam.moody@raffingers-stuart.co.uk
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SRA Propose New Reforms to Focus on Significant Risks to Client Monies As I am sure you are aware the Solicitors Regulation Authority (SRA) has recently been proposing new changes to the Account Rules in the hope of reducing costs for smaller solicitor firms. These proposals are being phased in three waves; we have now entered phase two of the process. Phase one of proposals saw the SRA relax some rules on the filing of accountants’ reports. Firms now only have to send an accountants’ report to the SRA if the report is qualified and firms that get all their fees from legal aid work do not need to obtain a report at all. Following the phase one consultation, the SRA has now announced its phase two proposal. This proposal is currently under consultation until 28 January 2015. The proposals for phase two involve reviewing the circumstances in which accountants’ reports are qualified and consequential amendments to the Account Rules and the format of the report. It will also consider whether low risk firms (those where there is little danger of the solicitor taking money from a client) can be excluded altogether from the burden of an annual accountants’ report. The criteria to determine which firms are low risk, as set out in the SRA’s proposal, are those with an average
balance of client funds less than £10,000.
accountants and the SRA time and money.
Within phase two, in order to amend the Account Rules and remove the amount of prescribed testing that is required in the reports, the SRA has suggested giving accountants more freedom in their testing. Therefore, there will be a greater reliance on the professional judgement of the accountant in identifying risks to client money and when a report should be qualified.
There are two further issues included in the consultation. The first is that an annual declaration should be submitted to confirm that an accountant’s report was obtained by the solicitor. The SRA will argue that this is unnecessary. The second issue is whether the obligation to submit the reports should be transferred from the solicitor to the reporting accountants. Again, the SRA does not support this on the grounds that compliance with the rules rests with the solicitor.
The SRA is trying to reduce the unnecessary regulations in the law profession. It is hoped that with these latest changes the number of qualified reports with minor breaches that currently get submitted will decrease, saving solicitors,
Within the industry there has been broad support for more proportionate and targeted regulation and these latest proposals put SRA one step closer towards achieving their goal.
If you have any concerns over these new rules or would like further information, please contact Suda Ratnam at: suda.ratnam@raffingers-stuart.co.uk
RAFFINGERS STUART NEWSLETTER WINTER 2014/15
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Pension Reforms Offer New Freedoms Family run businesses are the bedrock of the British economy. Business owners, many of them husbands and wives, have worked together for years to build fledgling enterprises into profitable businesses and rightly deserve a rewarding retirement. The purpose of this article is to discuss the options available to business owners looking to make the most of their working lives whilst also planning for the future. Since the inception of old age pensions a century ago, life expectancies have soared. Better diets, more leisure time, and greater prosperity, combined with medical advances, mean that traditional ideas about pensions are now significantly out-of-date. The Bonfire of the Annuities
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The Chancellor, George Osborne, introduced the most fundamental change to the pensions market in decades at the last budget. He proposed to remove the restrictions on how much an individual can take from their pension pot, which will take effect from April 2015. Previously, the majority of savers were locked into using annuity policies, and alternatives for removing capital from their pension faced hefty tax penalties or required complex investment alternatives. Not having access to hard earned capital, outside of the 25% tax free lump sum allowance, put many business owners off fully funding their pension pot. Therefore, the new rules open up genuine tax planning opportunities. Adding a Lump Sum to a Pension Pot As a simplified example, if your spouse has a paid role in your firm, the firm can contribute up to ÂŁ40,000 a year into their pension. The immediate tax benefits of this are twofold. Firstly, the rules allow you to carry forward any unused annual allowance from the three previous tax years to offset this charge. Secondly, as the tax free benefit is a personal allowance, it means both partners can use their own allowance without incurring penalties. Under the new rules, pension benefits can be taken at 55 in the form of a 25% tax free lump sum and further SMALL DETAILS BIG DIFFERENCE
staged drawdowns in the future. Therefore, if you or your spouse have no other earnings, you can take your ÂŁ10,500 in the next tax year free of tax. On top of your personal tax benefit, the company can reduce its Corporate Tax liability by funding the pension contribution. With Added Death Benefits These new rules also open up the potential for enhanced death benefits. Currently, once income (or drawdown) is taken there is a 55% tax charge on any amount left in the pot on death. However, from 2015 it will be easier to manage the way income is taken, so that part of the pot on death (before the age of 75) is free from the 55% tax rate. It is also widely anticipated that in the future, the 55% tax levy on death will reduce. Future Proofing Your Wealth Taking a chunk from your pension pot leaves the remainder of your pension fund invested, and allows you to draw a regular taxable income. However, remember that the fund could fall as well as rise. You may have to pay set-up and annual charges on the investments in your fund; and if the income you take plus these charges exceed any growth in your fund, the value of your fund will decrease. Purchasing an annuity with the remainder of the pension pot can make sure that, whatever happens on the stock market, a guaranteed income will be available each month. Annuities always have a cost, as managed policies they attract charges, but in return they insure the purchaser against future economic volatility. Getting advice You should review the new tax planning advantages of the pension reforms in the context of your finances as a whole. For further information contact Dharmesh Upadhyaya on 020 8418 2708 or email: Dharmesh.Upadhyaya@raffingers-stuart.co.uk
Benefits of Incorporating a Business Incorporating your business into a limited company is a big decision. However, it is one that is definitely worth considering, especially if your business is generating a profit.
Employee Spotlight In this slot we like to introduce you to a valued member of our team, allowing you to put a face to a name. This quarter it is our Tax Senior, Reshma Johar. Name: Reshma Johar Nicknames: Resh DOB: 22 November 1984 Career history: I have gained tax experience from Big 4, Top 50 and boutique practices and have also gained my ATT qualification. I joined Raffingers Stuart in July 2014 as a Tax Senior and am enjoying gaining great exposure into various tax issues and working alongside a friendly and supportive team. I am also working hard towards gaining my CTA qualification. My experience to date has enabled me to provide help and support to both my colleagues and clients by providing tax advice in a clear and concise way. Interests: As I turned 30 recently, I bought myself a skateboard and so try to practice on a weekly basis, my aim for the new year is to go to a skate park and not embarrass myself! Just in case that was not enough thrill seeking, I have also booked some flying lessons for the new year. I also try to make sure that every year I get to do a bit of scuba diving as exploring the sea is another passion, so far I have had the pleasure of meeting an octopus, scorpion fish, puffer fish and a turtle! Partners Report: Reshma is a new recruit in the tax team and she is settling in very well. She writes many of our tax news items and blogs, which we cannot thank her enough for. I hear she is an expert with a paint brush and is not afraid to get her hands dirty in the DIY department. Reshma is a pleasure to have around the office.
With non-registered businesses, the business owners are taxed directly, having to pay income tax, which can be as high as 45%, and National Insurance. However, with limited companies: 1. The corporation tax rate is generally much lower than the personal tax rate; 2. Business owners and directors have the option of paying themselves a combination of both salary and dividends, which is taxed less heavily; 3. If you are setting up a limited company with a spouse or partner, there is always the option to split your income, which can save even more tax. What is more, among the above key tax saving benefits, limited companies also get access to more funding opportunities and incentives, among these are: ● Pensions. Limited companies can make contributions for all of their directors and employees, which can cut down National Insurance contributions; ● Research and Development (R&D) Tax Relief. The rate of the cash credit payable to SMEs conducting qualifying R&D activities stands at 14.5%, as of April 2014, based upon qualifying expenditure; ● Employee Incentives. Limited companies have the option of incentivising and retaining key employees through tax efficient share schemes, such as the Enterprise Management Incentive. We always advise non-registered businesses to annually review whether it is more beneficial to them and their business to be limited.
RAFFINGERS STUART NEWSLETTER WINTER 2014/15
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MV3 The old adage ‘a picture paints a thousand words’ was first mentioned over 100 years ago…so how many words does a video paint?
Have you ever arrived at a website and watched a short video that told you all about the company or product you were interested in, or watched a clip on YouTube about a business or service and wondered how to create one for your business?
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With 20 years broadcast and marketing experience working with BBC, Bloomberg, CNBC, ITV, Sky News, alongside many leading brands and well known celebrities, Woodford based Scott Jackson setup MV3 six years ago to produce video films and live video production for brands, products and businesses that told their stories and engaged audiences in their product or services. MV3 work across a variety of business sectors and sizes whether large blue chip companies, such as HSBC, London Stock Exchange, McCain Foods and Vodafone, alongside
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charities and smaller businesses closer to home including Haven House, Mulberry House and Simplexity Travel. Whether it is interviewing the CEO, filming case studies of customer projects, live webcasting a product launch or time-lapse filming a construction project for 12 months, MV3 has the producers, crew and equipment to meet all business needs. With the increase in online video consumption MV3 have also developed a dedicated video lead generation platform, complemented by Video SEO, to increase YouTube rankings and drive viewer engagements. Contact: Scott Jackson E: studios@mv3.co.uk, T: 0207 754 9168
Recruitment Industry Network
On Tuesday 2nd November 2014, we held our first ever Recruitment Industry Network event. Located at the HSBC Global Headquarters, the evening brought together over 30 professionals. With presentations by Liz Banks, REC, on the Recruitment Industry Trends Survey 2013/14, and Ricky Martin, Hyper Recruitment Solutions and the 2013 Apprentice Winner, on New Age Recruiting. The evening was a great success. There was also the launch of our recruitment benchmarking report, following our survey that was sent out to over 1000 recruitment agencies. The full report is available on our website along with a video of the event (just go to www.raffingers-stuart.co.uk to view). This event marked the beginning of our Recruitment Industry Network, which will see us hold quarterly events next year with HSBC, bringing together more professionals in the industry to discuss the most pressing matters. The dates of our 2015 seminars will be launched in January 2015.
2015 Event Agenda In 2015, in addition to our Recruitment Industry Network events, we will be launching a whole range of events and seminars. If you are interested in attending any of these, please contact lauren.aston@raffingers-stuart.co.uk. Grooming Your Business for Sale When: Thursday 5th February 2015 If you are considering selling your business these seminars will help you prepare successfully, ensuring you gain the maximum possible price and avoid the common mistakes many businesses make. Planning for the Future - IHT When: Tuesday 10th March 2015 The easiest and most effective way to protect your wealth is to plan ahead. One Page Plan When: Spring 2015 Find out how to make the Business One Page Plan pay off for your business.
Film Screening and Networking When: Spring 2015 This event will bring together like minded investors to discuss the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). Annual Charity Golf Day If you would like to be the first to hear about our recruitment events, please contact Lee Manning at: lee.manning@raffingers-stuart.co.uk
When: Wednesday 16th September 2015 What it says on the tin. Held at Toot Hill golf course, our golf day is open to everyone, from amateurs to pros.
RAFFINGERS STUART NEWSLETTER WINTER 2014/15
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Tax Efficient Ways to Repay Your Director’s Loan Account If a balance remains outstanding on your director’s loan account at your company’s financial year-end, your company may be issued with a tax charge, called S455. This charge will be equal to 25% of what you owe. You may also be issued with a personal tax bill if you owe more than, or exceeded, £10,000 at any point during the tax year. If you are issued with a S455 tax it must be paid at the same time as your company pays its corporation tax. However, S455 is unusual as it is only temporary and HMRC will refund the amount nine months after the financial year in which you repay what you owe. But, what should you do if you cannot repay the loan in full? 9
Pay a bonus If it is not possible to pay the debt within nine months of your company’s year-end, your company can pay you a bonus, which after deducting PAYE and NI, clears your debt.
New Tax Relief for Investment in Social Enterprise The Social Investment Tax Relief scheme (SITR), introduced this year, helps individuals support social enterprises, giving these enterprises access to new sources of finance. A social enterprise is a commercial business that helps people or communities. It may be a charity or community interest company. What is in it for the investor? This new relief provides the investor with a deduction
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TOP TIP: through paying your director’s loan account in full within nine months of your company’s year-end you will prevent the S455 tax occurring altogether. However, you must be careful when opting for this solution as in many circumstances the decision to pay a bonus is made after the financial year-end, which means that your company would not receive corporation tax relief for your bonus until the following year-end. Although, there is a way around this. To ensure your company receives corporation tax relief you can pass a resolution that declares your company will pay the directors a bonus, which after PAYE and NI will settle the outstanding amounts they owe to the company. This means your company will be obligated to pay the bonus before the year-end and will therefore be able to claim corporation tax relief for that financial year.
from their tax liability, equal to 30% of the amount invested. Therefore, a £10,000 loan to a qualifying social enterprise would allow an individual to reduce his income tax liability by £3,000. This relief is available for qualifying investments made on or after 6 April 2014. The social enterprise can make sure they (and the proposed investments) qualify by sending an advance assurance application to HMRC. To find out more, contact Andrew Coney at: andrew.coney@raffingers-stuart.co.uk
partner’s perspective
100% Penalties for Tax Avoidance In the run up to the general election the Labour Party have made it clear that they intend to build on and extend HM Revenue and Customs’ (HMRCs) current efforts to crack down on tax avoidance schemes. They have announced plans to introduce penalties of up to 100% of the tax avoided through the use of what they consider “aggressive schemes”. Shadow Chancellor Ed Balls said that while his party supported the General Anti-Abuse Rule (GAAR), it was ‘currently a GAAR without teeth’ and pledged Labour’s commitment to a tougher regime. ‘Those who are caught have to repay the tax they tried to avoid, but they do not face a penalty. There is still no disincentive to try and game the system. That is why Labour will bring in a tough penalty regime for the GAAR, with fines of up to 100% of the value of the tax which was avoided,’ The Shadow Chancellor has set out a number of areas
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where he would take action including closing down what he described as ‘the Eurobonds loophole’, addressing umbrella companies and false self-employment and stopping avoidance by hedge funds. Whilst some of these areas can be seen as very much as on the fringes for most companies, the reference to umbrella companies and false self-employment will be of particular concern to the recruitment and construction sectors. HMRC will also be seeking to build on their success in recovering 23 billion pounds from previously undisclosed offshore accounts with some 56,000 disclosures reported to have been made in initiatives like the Lichtenstein Disclosure Facility. Gary Inglis Partner gary.inglis@raffingers-stuart.co.uk
RAFFINGERS STUART NEWSLETTER WINTER 2014/15
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