Business Matters McCabe Ford Williams Newsletter | Winter 2014
Season’s Greetings Christmas Quiz
client profile
Employment Matters
It wouldn’t be Christmas without the MFW Christmas Quiz
Brookside Garden Centre
Flexible Working Hours
It’s a magical time at the Brookside Garden Centre Christmas Grotto
What you need to know about employees’ rights
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Photo credit: Brookside Garden Centre
Season’s greetings
d n a s a m st ri h C ry er M a r fo es h Best wis r ea Y ew N l fu ce ea p d n a s u o er a prosp from the Partners and staff of McCabe Ford Williams The Partners and staff of McCabe Ford Williams have all been busy this year supporting a host of charities and other good causes including: The Royal British Legion Poppy Appeal
Martha Trust
Macmillan Cancer Support
African Impact
Kent Air Ambulance
The Queen Victoria Memorial Hospital
Parkinson’s UK
MND Motor Neurone Disease Association
New Leaf Support
East Kent Relate
Dandelion Time Demelza House Jeans for Genes Day Man on the Run Cancer Research Race for Life and Pretty Muddy® events
See Ability Herne Bay in Bloom RNLI Gambia Links in Education Royal Marsden Cancer Charity
Crabble Corn Mill Trust
Kent Association for the Blind
White Cliffs Blues Festival
Macaroon Productions
Swale Youth Development Fund
Various Rotary charities
May we take this opportunity to thank all these charities and good causes for the work that they do and for the valuable support they each provide.
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CHRISTMAS QUIZ
Christmas quiz For your chance to win a ÂŁ100 Marks & Spencer voucher simply unscramble the following seasonal words. Name
Itsamhcsr Tuediely
Ntlsei Tesrepn Astna
Telephone
Rpdluoh Tnrho epol Ryektu
Good luck! This competition is not open to MFW Partners and Staff or their friends and family.
Mawnnos Eglihs Ysto Oiskntgc
Closing date: Wednesday 17th December Once you have unscrambled these words please complete and return your forms by no later than Wednesday 17th December to karen.gray@mfw.co.uk or by fax to 01795 428810. Alternatively send your entry by post to: Karen Gray, McCabe Ford Williams, Bank Chambers, 1 Central Avenue, Sittingbourne, ME10 4AE. The winner will be the first name randomly selected from all correct entries and will be contacted shortly after the closing date. Do hurry as unfortunately entries received after Wednesday 17th December will not be counted.
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Business Matters Winter 2014
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CLIENT PROFILE
Client Profile: Brookside Garden Centre, East Peckham
It’s beginning to look a lot like Christmas... Well it certainly is for the team at Brookside Garden Centre, East Peckham, who are all busy putting the finishing touches to this year’s Christmas Grotto, ensuring that this year it is an even more magical experience than ever for all the good boys and girls. One of Father Christmas’ elves will guide you through the Grotto which includes making a wish with the help of a glow stone, watching the workshop elves busy at work crafting toys for other boys and girls and finally greeting Father Christmas himself. The Grotto attracts visitors from all over Kent and from further afield too but its success has brought its own challenges. This has ultimately led to a online only booking process in order to avoid long queues of people wanting to meet Santa.
from spring and autumn planting supplies to summer barbeques and outdoor furniture sales. In addition, the garden centre features a coffee shop, a pet shop and an outstanding aquarium centre. Also on sale are a wide range of books and gifts together with an assorted paraphernalia of gardening equipment, so there certainly is something to please everyone.
Not just for Christmas
Family values
Whilst Christmas is a big season for the Garden Centre the team are, in fact, busy all year round. Each season brings a range of different products and gardening solutions
The business was started by Terry Shead in 1969 and has been built up slowly and steadily ever since. Terry, originally a Londoner, was one of the boys sent to a Somerset
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Matt, Terry & Simon Shead farm as part of the YMCA British Boys for British Farmers (BBBF) Scheme which was established in 1932. Afterwards he spent a further 8 years in Somerset working in horticulture before returning to London where he set up in business with his brother. The business involved selling potatoes door to door and within two years the brothers had thirteen lorries delivering potatoes across London. However, times change and with the onset of the dairies which then started to deliver other produce on their milk rounds, Terry knew that his existing business model was under threat.
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Terry is now joined by his sons Simon, Graham and Andrew in running the business and they all have an important role to play. Graham grows the majority of the plants that are sold at the garden centre whilst Andrew and his wife run the coffee shop. Meanwhile, Simon has become Terry’s partner and is responsible for not only the Christmas Grotto and Christmas Shop but in helping his dad to run the rest of the business, all year round.
Successful growth When asked what he feels his secrets are to his business’s success, Terry modestly says that it was down to the hard work of his family, together with deliberately taking a sure and steady approach to developing his business slowly over time. The Garden Centre now sells thousands of different product lines and with that comes quite a challenging product/supplier management process. Managing
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relationships with their suppliers is very important to Terry and Simon. They both prefer to enter into fair transactions with their suppliers opting for win/win situations to benefit both parties and it is this approach that has earned them the respect of their suppliers and gained them a name within the industry.
CLIENT PROFILE
Purchasing a small plot of land in East Peckham to build a home Terry started selling a few plants, fruit and, of course, potatoes with no formal plans to build a business. However, over time and with the acquisition of adjoining plots of land, the Brookside Garden Centre was born and has developed to the 50 acre site it is today.
Product selection is also crucial as making the wrong decision can severely impact on the bottom line. However, after years of experience both Terry and Simon believe that they can trust their gut feelings when making product inclusion decisions and being independent they can make decisions much quicker than the national garden centre chains, allowing them to often stay ahead of the game.
Working with MFW Terry’s relationship with MFW began in 1969, firstly with former partner David Coupée who after retiring has handed the reins (no pun intended) to current Cranbrook partner David Boobbyer. David assists Terry and his family with a range of services including, preparation of management and year end accounts, running their payroll and providing general business and tax advice including inheritance tax planning.
‘Tis the Season to be jolly…. But do remember to spare a thought for the elves and the rest of the team at Brookside Garden Centre who will be working right up until late on Christmas Eve. It seems only Santa has a tougher job!
For more details about Brookside Garden Centre visit www.brooksidegc-kent.co.uk or call 01622 871 250.
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pensions
ISAs versus Pensions In this year’s budget the Chancellor announced a range of significant measures to bring greater flexibility to individuals who want to access their funds in defined contribution pension schemes. Some of these changes came into effect on 27 March 2014 but as reported previously, others are planned and subject to further consultation, will follow in April 2015. For more information about changes to how you can access your pension fund please speak to a Partner at your local MFW office or visit the blog area of our website to read our post on Pension Changes http://www.mfw.co.uk/ blog/article/pension-changes. In the meantime we’ve asked Argentis Financial Management to provide an insight into the benefits of paying money into a pension or an ISA and here’s what they have to say.
Which is “better”, a pension or an ISA? This has long been a topic of debate, but the radical pension reforms, due to take effect from April 2015, have reopened the discussion.
What are the differences when you pay money in? With an ISA, or as it is now called a “NISA” (New Individual Savings Account), each individual (who meets the qualifying criteria) is allowed to contribute up to £15,000 per tax year. There is no immediate tax relief, and if you do not use the allowance, it cannot be carried forward to the next tax year. A personal contribution to pension is more tax efficient as you receive tax relief of 20% immediately (subject to limitations and qualifying rules) even if you are a nontaxpayer. Higher and additional rate taxpayers obtain relief at their highest marginal rate of tax; 20% immediately and the rest can be claimed via their tax return. To qualify for tax relief, an individual can pay up to 100% of their net relevant earnings, subject to an overall annual allowance of £40,000 in the tax year. However you may be able to “carry forward” the unused allowances from the previous
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3 years (up to £50,000 each). Note, after April 5th 2015, the 2011/12 allowance ceases to be available. What is more, a company owner may be able to receive corporation tax relief on company contributions under “wholly and exclusively” rules. There is normally no income tax or NI liability on the contributions (within the limits). This makes pensions a very effective way for company owners to extract retained profit that is no longer needed within the business. Also, the pension contribution could help you “reclaim” your lost child benefit if you earn over £50,000, and your lost personal allowance if you earn over £100,000.
What are the differences when you take money out? Here, the NISA is more flexible. You can access the money at any time, and all proceeds are free of income tax and capital gains tax. The pension is more restrictive. Presently, you can’t access the money until age 55 and this will be rising to 57 in the future under recent announcements. You
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So, which is more “tax efficient” overall? The tax rate table (below) shows the value of your pension fund after it has been taxed at your marginal rate in retirement. The figures represent the after-tax value of a £10,200 lump sum initial investment after 25 years, assuming 6 per cent growth after charges and 2.5 per cent annual inflation Source Hargreaves Lansdown
Pension Value
Summary So, we can see that pension is usually more tax efficient, and NISAs are usually more flexible. The more suitable option will depend on personal circumstances, and taking advice is encouraged. It might be sensible to have a mixture of both. The value of your Pension Plan, NISA, and any other investment, can fall as well as rise and you may not get back the full amount invested. Past performance is not a reliable indicator of future performance. The benefits you receive are dependent upon future contribution levels, the age at which you take benefits and external influences such as investment returns, inflation, interest rate, annuity rates and charges. The benefits can therefore be lower than those illustrated. Any assumptions about the tax position of the plans and recommendations made in this report are based on current law and HMRC (Her Majesty’s Revenue & Customs) practice, which may be subject to alterations, including retrospective changes in the future.
Pre-retirement tax rate
Post-retirement tax rate
ISA value
0% or 20%
0%
£34,725
£43,406
The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
0% or 20%
20%
£34,725
£36,895
Not all individuals are eligible for a pension and/or NISA.
40%
20%
£34,725
£49,125
Argentis Financial Management Limited is regulated and authorised by the Financial Conduct Authority
What about if I die? Here the pension is usually the winner. If you die before you take benefits, and before age 75, proceeds can pass to your nominated beneficiary. Usually this is outside of your estate, and incurs no tax, subject to the overall lifetime allowance, currently £1.25 million. If you have already taken some benefits from the pension, then tax could apply at up to 55%; however from April 2015 this is proposed to be reduced for those over 75, and removed altogether for under-75s. A NISA receives no protection, and all proceeds are part of your estate for inheritance tax purposes.
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Lee Giles DipPFS Senior Financial Planner Argentis Financial Management Ltd
For further information about how you could minimise taxation on your pension fund please contact your local MFW office who will be pleased to help.
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PENSIONS pensions
can take up to 25% of the fund, as a tax free lump sum. Under the pension reforms, from April 2015 (subject to minimum age above) you will be able to freely draw the rest. That sounds excellent, but you need to remember anything you draw will be added to your taxable income for that year and therefore be subject to income tax. This may make it prohibitive for some.
Employment Matters
Flexible Working Requests: Employee rights extended
On 30 June 2014 the Children and Families Act 2014 came into force. This extended the right to request a change in working hours or place of work (“flexible working”) to all employees, not just those with caring responsibilities. The changes are likely to be of major significance to employers, because any request can only be refused on specific grounds laid down in legislation. Practically, this means that employers cannot simply have a blanket ban on flexible working, and will have to consider every request on its merits. It also means that employers could have a significant number of requests to deal with (which might be made at any time), further increasing the time they need to spend on administrative matters. An employee can make a statutory request after 26 weeks’ service, but may only make one request in any 12 month period. A request for flexible working from an employee must be in writing and must include: • The date of their application, the change to working conditions they are seeking and when they would like the change to come into effect. • What effect, if any, they think the requested change would have on the employer and how, in their opinion, any such effect might be dealt with. • A statement that their application is a statutory request and if and
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when they have made a previous application for flexible working. The employer should hold a meeting with the employee as soon as possible, at which the request should be discussed. If the employer intends to approve the request then a meeting is not needed. The employer should allow an employee to be accompanied to the meeting by a work colleague. The request must be considered by the employer in good faith, but it can only be refused on one or more of the following grounds: • the burden of additional costs; • an inability to reorganise work amongst existing staff; • an inability to recruit additional staff; • a detrimental impact on quality; • a detrimental impact on performance; • detrimental effect on ability to meet customer demand; • insufficient work for the periods the employee proposes to work; and/or • a planned structural change to the employer’s business. The decision should be conveyed to the employee in writing as soon as possible. If the request is refused then the employee must be given a right of appeal. The legislation requires that
all requests (including the conduct of any appeals) must be considered and decided on within a period of three months from first receipt. The request may be accepted by the employer with modifications, or a trial period can be offered to test the practicalities of implementing the request on a permanent basis. Whilst the remedies that an employment tribunal can award for a failure to deal with a request properly are relatively limited under the flexible working legislation (it can order that the request be reconsidered or make an award of up to eight weeks’ pay [a week’s pay being capped at a maximum of £464), employers should always bear in mind that a failure to deal with a request properly may in certain circumstances also amount to unlawful discrimination, the potential compensation for which is unlimited. It will therefore be important, from both a business organisation and financial standpoint, to deal with any requests properly. James Gomme, LLB (Hons) Partner, dgb Solicitors LLP
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claim will be higher than under the Renewals Allowance approach.
Rental Property- Repair or Renewal?
Furnished Holiday Lets
As we approach the 31 January 2015 tax return deadline for the tax year 2013/14 we are receiving more enquiries about what can and cannot be claimed by way of tax relief on property repairs by landlords. The basis of how landlords could claim tax relief on property repairs changed on 1st April 2013 for companies and on 6th April 2013 for personal tax returns. As a consequence landlords may be asked by their accountant to provide more details on any repair and maintenance expenditure incurred. Here’s a reminder of these changes to assist any landlords when completing this year’s tax return.
Unfurnished properties
A lot of unfurnished properties are let to tenants with cookers, fridges and other white goods included. Under the previous rules landlords of unfurnished rental properties could claim tax relief for the cost of replacing these items to the same standard. However the system has now changed whereby, landlords can no longer claim a deduction for the cost of replacing fridge freezers, cookers and other white goods. In addition, furniture and soft furnishings, such as carpets and curtains, are also affected under the new regulations and now replacing these items is classified as disallowable ‘renewals’ rather than repairs.
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The end result is that landlords are now finding that expenditure which was previously tax deductible is no longer the case.
Furnished properties
Pre April 2013, landlords of furnished properties had two options to choose from: The Renewals Allowance approach - where a landlord could claim the cost of replacement items but not the original cost paid. The Wear and Tear approach – (for furnished properties to let) – where a landlord could claim for wear and tear on all furnishings (but not fittings) calculated at 10% of the rental income for the year, less water rates and Council Tax (if these were paid by the landlord). Since April last year the changes mean that landlords claiming the Wear and Tear Allowance will see no change in the way they deal with any expenses. However, with the change basically making the Renewals Allowance extinct, those landlords that previously opted for the Renewals basis approach will now have to move onto the ‘Wear and Tear’ Allowance. The biggest changes that these landlords will now notice is that in those years when large expenditure is incurred the same level of deductions, as available previously will not be available, but in the years where such repair expenditure is low, it is likely the
Properties that are regarded as furnished holiday lets are unaffected as landlords can continue to claim Capital Allowances for the cost of purchasing and replacing furniture and fittings used in the property.
Simple Planning As mentioned above landlords who let furnished property to tenants and have been claiming the Wear and Tear Allowance will continue to do so, however those who have opted against this in the past should now opt to do so. Those with unfurnished properties are now faced with a decision, being unable to claim a deduction for replacing furniture or equipment in the future. Suggestions such as removing any furniture or selling it to the tenant to make it their responsibility are being put forward or alternatively, even moving to letting a fully furnished property. Contact your MFW office for any queries you may have and we will be happy to assist and as ever keep you updated on any further changes or clarification of any ‘grey’ areas.
Emma Andrews, ACA Manager – Maidstone
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TAX MATTERS
Renewals and Repairs
Tax Snippets
Tax Snippets Transfer of Personal Tax Allowances From 6th April 2015 a spouse or civil partner who is not liable to income tax because their income is below their personal allowance or who is liable to income tax at the basic rate, dividend ordinary rate or the starting rate for savings, will be able to elect to transfer £1,050 of their personal allowance to their spouse or civil partner.
Who is eligible? • Couples can only transfer unused personal allowances to their spouse or civil partner if neither party is classed as a higher or additional rate taxpayer. • Married couples already claiming the Married Couples Allowance (MCA), affecting only those married couples where at least one of the spouses/civil partners was born before 6 April 1935, will also not be able to make a transfer. • Non-UK domiciled individuals who have elected to pay tax on the remittance basis of taxation or non-UK residents who would be higher or additional rate taxpayers if their worldwide
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income was within the scope of UK tax, are also unable to transfer their personal allowances.
VAT on electronic services and registering for MOSS The VAT place of supply rules for supplies of electronic services are changing from 1 January 2015. The change affects business to customer (B2C) supplies of telecommunication services, broadcasting services and e-services within the EU. From 1 January 2015 the place of supply for these services will be the country where the customer belongs – such supplies currently being taxed in the country in which the business is established. This means that UK businesses supplying electronic services to non-business customers in other EU member states will have to charge and account for VAT according to the local VAT rules of the customer’s member state. Affected UK businesses will need to register for VAT in each EU member state in which they supply such services as there is no VAT threshold applicable to these services. Alternatively they can register for the Mini One Stop Shop (MOSS) system https://www.gov.uk/register-and-
use-the-vat-mini-one-stop-shop. This will enable an affected business to submit one quarterly return and payment to HMRC to account for the overseas VAT charged to customers in all other EU member states.
So what is an ‘e-service’? Live webinars are excluded but if the webinar is recorded and then supplied as a video, that is treated as the supply of a digital service. Automated distance learning packages are also caught as are supplies of learning materials, generally sold over the internet. Clearly suppliers of such services will need to ensure that they are able to identify the location of their customer and that their pricing structure reflects the VAT rate applicable to the country in which their customer resides. This may involve a substantial rewrite of the website through which the service is provided.
Have a tax matter you need resolving? Contact your local MFW office who will be happy to assist you.
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shadow directors
Shadow Directors Following recent case law the Court of Appeal has now given guidance on how to establish if a person can be classed as a “shadow” or “de facto” director. According to the Companies Act a shadow director is “a person in accordance with whose directions or instructions the directors of the company are accustomed to act”. A shadow director is someone who is not listed as a director but who directs or controls the company. The Court of Appeal stated that it was also essential to look at what the person actually did within the company rather than just their job title, for example • Did he assume responsibility as a director? • Did third parties consider he was a director? • Did he act in a directorial nature in the context of the company’s business? • Did the company consider him to be a director? Of course, it should be noted that if a person is consulted over decisions that seem of directorial nature, that would not necessarily make them a shadow director especially if they did not make or had no control over the final decision.
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The Court has reaffirmed that they will consider the activities of persons involved in a company rather than titles. Whilst it should be remembered that acting as a shadow director is not an offence in itself (unless the person is an undischarged bankrupt or disqualified from being a director), clearly there are risks to those people in senior management and this should serve as a warning especially if the company is, or becomes, insolvent. Not only would a shadow director raise suspicion that they may be hiding something by managing a company while not being listed as a director, a liquidator could also take the same action against a shadow director as can be taken against the named directors. This would include reporting their conduct under the Company Directors Disqualification Act 1986 (CDDA) which could result in being disqualified as a director for up to 15 years.
Author Alison Collier MIPA, MABRP Associate Insolvency Practitioner
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This publication is intended for general guidance only. Every case is dependent on its particular facts and circumstances, and whilst it is believed that the content is accurate, the material should not be taken or relied upon as giving specific advice on any particular matter. Neither McCabe Ford Williams (the firm), its partners or employees accept any responsibility for any loss or damage (including but not limited to loss of profit or anticipated profit, damage to reputation or goodwill, loss of business, damages, costs, expenses or tax liabilities) caused or occasioned to any person acting or omitting to act in reliance upon the information contained in this publication. Any person wishing to obtain specific advice on any particular matter should contact a partner of the firm directly, and advice can be provided on a case by case basis.