Business Matters McCabe Ford Williams Newsletter | Spring 2016
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Welcome to the spring 2016 edition of Business Matters The weather may not yet feel very spring like but we hope we can spread some sunshine in this issue with a series of celebrations. This year McCabe Ford Williams turns 80 and in the spirit of celebrating business milestones we also feature Terry & Shirley Slater of Turner’s Models Shop, Dover who last year celebrated their 40th business anniversary. In addition, we share some important firm news on recent promotions, details of which can be found on pages 1 & 2. We hope you enjoy reading this issue and take this opportunity to wish you a Happy Easter.
ESTATE PLANNING Advice on how to manage your estate to reduce Inheritance Tax liabilities. Page 05
TAX SNIPPETS A round-up of some of the main changes to tax which come into effect in April. Page 07
FOCUS ON PAYROLL Is it time to outsource your payroll? Page 09
INSOLVENCY UPDATE News on the impact of the Small Business, Enterprise & Employment Act 2015 Page 10 Emma Andrews and Ashley Phillips
FIRM NEWS
New promotions at McCabe Ford Williams as we celebrate 80 years This year we are celebrating our 80th anniversary. Since 1936, when the firm was established, we have naturally expanded, both in terms of our team numbers and their skills and expertise and in our office locations. Today, we are a dynamic and forward thinking firm but we still believe in the traditional values of putting our clients first. Our ethos remains the same to put our clients’ needs first and foremost and ultimately to help them to keep more of what they earn.
New promotions In addition to celebrating another milestone we are also delighted to announce two new partners, from 1st April, Emma Andrews and Ashley Phillips.
About our new partners Emma Andrews FCA Emma qualified as a Chartered Accountant in 2005 and now heads our Maidstone office. She works with a wide portfolio of clients, providing advice on all areas of accounting and taxation. Emma prides herself on
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client care and particularly enjoys working with new businesses and start up companies, assisting them in making the appropriate tax decisions and establishing a business structure that will minimise the overall tax burden on the owner. Of her move to become one of McCabe Ford Williams’ partners Emma comments, “Since joining the firm in 2013, I have been excited about the possibility of becoming a partner. The partnership comprises of partners and staff that I consider to be great accountants and as a whole MFW works together to ensure that our clients get a very high level of service.
“I take a huge amount of pride in helping clients, whether it is to save tax or increase their profitability and I am very much looking forward to continuing the good relationships that I have with my clients and developing new ones. Accountants are widely perceived as being “stuffy and boring” and I would also like to be able to help change that perception”.
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Ashley Phillips, FCCA
Other firm news Associate promotions Other promotions across the firm include our two new associates, Jonathan Fullarton at our Dover office and Leigh Jones of our Herne Bay team. Further details about Jonathan and Leigh will appear in our next newsletter.
Ashley is involved with many local initiatives and government schemes looking to create jobs across Kent through the provision of business loans and funding and acting as a voluntary business mentor. He is also a board member for the Expansion East Kent Small Business Boost Scheme. Asked about his promotion Ashley said, “Having an opportunity to be a partner of a firm which has given me so much valuable experience is everything I have wanted since I started work with McCabe Ford Williams in 2008. We have a great team of people and I am committed to giving support to help them also realise their potentials.
I am looking forward to continuing to assist my clients to help them achieve their business and personal goals. In addition, I am also delighted to be involved in local projects designed to strengthen the business economy in the region. It’s an exciting time to be part of a business community where there are so many entrepreneurs and individuals, at all stages of their work careers, with great product ideas and it is our responsibility to assist them with the business support and advice that will help them to turn those ideas into successful enterprises”.
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Comment from Ian Pascall, Senior Partner “To keep a firm such as ours going for another 80 years it is necessary to ensure succession, and I am delighted to be able to welcome both Emma and Ashley into partnership. Congratulations, too, to our new associates, Jonathan and Leigh. I look forward to working with them to ensure that our advice and service remains as good as it has been for the past 80 years”.
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FIRM NEWS
Ashley is a Chartered Certified Accountant and law graduate and has worked at our Sittingbourne office for almost eight years. He oversees a large number of our owner-managed and charitable companies and notfor-profit audits, including leisure trusts and academy schools throughout the country. As well as audit clients, Ashley is also responsible for a broad range of non audit clients and is experienced in assisting businesses with the implementation of financial systems and controls as well as producing financial models and business plans.
CLIENT PROFILE
Client Profile: Turner’s Models Shop
From Balsa kits to drones – how the modern day model shop has had to remodel itself Turner’s Models shop in London Road, Dover was originally opened back in 1957 by Harry Turner who successfully ran the business for almost 20 years. In 1975, however, husband and wife team Terry & Shirley Slater purchased the business and have been running it ever since, celebrating their 40th trading anniversary last year.
Spur of the moment decisions can sometimes work Prior to purchasing the business Terry & Shirley, together with Shirley’s parents, had been running a very successful post office and garage just outside Rye, East Sussex. However, with Shirley’s parents wishing to retire and with extra legislation that the Post Office started to introduce the couple decided to sell their business and look for another retail opportunity. A business opportunity in Dover presented itself but alas, in the final stages of negotiation, that sale fell through. However, fate intervened when a friend suggested the couple visit a local model shop which was up for sale. As a keen modeller Terry admits that on his first visit he was hooked, he loved the buzz of the shop and made a spur of the moment decision to buy Turner’s Models Shop on the spot. The rest, as they say, is history.
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Shirley & Terry Slater of Turner’s Models shop
Play to your strengths The best teams play to their strengths and this has certainly been proved with the way in which Terry & Shirley run their business. Shirley runs the front of house whilst Terry puts his mechanical skills to work providing a repair service from his workbench at the back of the shop. Being in a man’s world Shirley admits that, in the early days, being front of house did have its challenges with some customers finding it difficult or simply unwilling to talk to her. However, she overcame this with her down to earth and friendly manner and her willingness to go the extra mile for her customers. An example of this is that the couple, during our visit, were busy sourcing a rare part for a model vintage car which was in Terry’s workshop and which they will, if necessary, import from Japan in order to satisfy their customer.
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Changing with the times
CLIENT PROFILE
Where once children would be happy to buy an Airfix model and take time to painstakingly build it, it seems that nowadays children would rather be off playing video games and now expect models to work straight out of the box; a fact that most parents are probably only all too aware of on Christmas day morning. These changes in attitudes and in childhood pastimes have meant that Terry and Shirley, along with the shop, have had to change with the times. Whilst they still stock more traditional products the shop is now better known as the place to go to purchase remote control models ranging from cars, planes, tanks and even drones.
Adopting a hands on approach Despite previously dabbling in online sales the couple prefer the hands on approach. In an age where online shopping is taking over high street sales this trading style might seem strange to some, but Shirley and Terry have certainly found a winning formula which has earned the shop many loyal and satisfied customers and, as a result, an increase in repeat business. It is also an approach that brings in customers from far and wide. Shirley can recall many of her customers and their first visit and often what they purchased. One of her fondest memories is perhaps the time when a man visited the shop with his family from Canada to show his son the shop where he had purchased his first ever railway set. She recalls how special that return visit was for both father and son and it is probably no surprise that the visit naturally ended with the son leaving with a new James Bond Scalextric set tucked under his arm.
Terry busy in his workshop
Window of opportunity Shirley also believes in the power of visual merchandising and every three weeks will change the window display, often reflecting key events and occasions with the Christmas window display being a particular favourite. Her window displays have not only been well received by new and old customers alike but have also won her many local awards and recognition.
Terry’s fix it skills have also ensured the business continues to prosper by offering a service that the internet simply cannot compete with, a repair service for his customers. Judging by the projects he tackles there seems to be nothing he can’t mend.
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Business Matters Spring 20156
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The secret to success
ESTATE PLANNING
CLIENT PROFILE
Whilst trading conditions may change over time it seems that with the right mindset businesses can still thrive if they put the effort in. This is certainly the case for the couple who believe in providing a personal touch. When asked what has been the secret to their success they both say that it is their approach to treating customers with respect. They are in the business they said to make a living and not to make a huge profit at the expense of their customers. It is an approach that has worked so well that many customers are now considered friends or extended family.
A model client John Sheather, Partner of our Dover office looks after the accounts preparation and tax returns on behalf of Mr and Mrs Slater. He remembers taking over the account back in 1988 when he first joined the firm. The Slaters have been clients of John’s ever since and now John also acts on behalf of Terry & Shirley’s daughter and grandson and their business ventures as well. When asked about the relationship with John Sheather and the rest of the team at McCabe Ford Williams, Dover Terry and Shirley say that they have always received sound business advice including John’s help with VAT issues. They find the team at Dover to be very helpful and that everyone provides the best business advice. As Shirley said “We would not have been with McCabe Ford Wiliams so long if the service and advice wasn’t right”. So congratulations to Terry & Shirley and Turner’s Models Shop and here’s to many more anniversaries to come.
Estate planning to reduce inheritance tax Many people are finding that due to the value of their assets, there will be a significant inheritance tax (“IHT”) liability for their beneficiaries. Careful planning can help to reduce or remove this, allowing your wealth to be passed on more efficiently when you die. The current Nil Rate band (“NRB”) is £325,000. Potentially there may be a 40% tax charge on death for assets above this.
So what can you do about it? Use your gift exemptions The following gifts are exempt from IHT • Y ou can give anything you own to your husband, wife or civil partner, so long as you both are ‘domiciled’ in the UK – this broadly means that the UK is your permanent home for tax purposes. • G ifts up to £3,000 per tax year, per donor. Unused exemption can be carried forward 1 year • Gifts up to £250 per recipient • Gifts out of normal income • G ifts on marriage or civil partnership up to certain limits • Gifts to charity
For more information or to find something special you can visit Turner’s Models Shop at 14 London Road, Dover or call Shirley & Terry on 01304 203711
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Charitable giving A lower IHT rate of 36% applies where you leave 10% or more of your net estate to charity.
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Potentially exempt transfers (“PETs”)
• Y ou die within 7 years. Taper relief applies between year 3 and year 7
(iii)Loan trust Not a gift at all; the client “lends” the capital to the trust, therefore retaining access to the original amount. The capital is never outside of the estate, but any growth on the investment is immediately outside.
• Y ou continue to derive some benefit from the gift. This is a “gift with reservation”.
Business property Relief (BPR)
However, tax will apply if;
Trusts Many people want to reduce their IHT liability, but don’t necessarily want to make an outright gift to their beneficiaries straight away as they would lose control of the asset. Using trusts can help with this. Using a discretionary trust means that the beneficiaries are not decided at the outset; the trustees decide how, when and to whom the assets are distributed. This provides flexibility, and allows the gift to be made to the trust without beneficiaries, such as children, having immediate access to the money. Discretionary trusts are potentially liable to IHT every 10 years, and on exit, but usually this is less than keeping it within your estate.
Some types of investment qualify for BPR after 2 years (as long as they are still held upon death); which means that they have 100% relief against IHT. These include Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT) and some specialist ISAs. The value of any investments 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. Any assumptions about the tax position of these plans 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. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Whilst a gift into a discretionary trust is a “chargeable lifetime transfer”, no tax is payable at the outset if the gift is within the available nil rate band. ( i) Gift trust A trust that is used to hold a gift. Any investment growth is outside of the donor’s estate, and the rest of the gift is exempt after 7 years. The donor has no access to capital or income. (ii) Discounted Gift Trust (DGT) Allows the donor to give away capital but retain a payment stream for life.
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Author Lee Giles DipPFS Senior Financial Planner, Argentis Financial Management Limited Argentis Financial Management Limited is regulated and authorised by the Financial Conduct Authority
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ESTATE PLANNING
Most lifetime gifts outside of the above exemptions are treated at PETs. If the donor survives 7 years after making the gift, it usually becomes exempt from IHT.
This provides the potential for an immediate reduction to your estate (“the discount”). The rest follows the 7 year rule.
TAX SNIPPETS
Tax snippets – New tax year changes National Living Wage (NLW) From 1 April, the Government’s new NLW will become law. This means that workers aged 25 and over, and not in the first year of an apprenticeship, will be legally entitled to a new minimum pay rate of £7.20 per hour. If you’re an employer, you will need to ensure you are paying your staff correctly from 1st April 2016, as the NLW will be enforced as strongly as the current National Minimum Wage. To ensure you are ready for these changes follow these four steps: 1. Check staff for eligibility by checking on GOV UK’s website www.gov.uk/employment-status/overview 2. Make any necessary changes to your payroll. To help you with this check out HMRC’s employing people tutorials www.gov.uk/government/news/ webinars-emails-and-videos-on-employing-people
Stamp Duty Land Tax 3% surcharge for BTL/2nd home purchasers In a move to make more properties available for first time buyers the government will introduce a 3% surcharge for buy to let purchases which will also affect people buying a second home in England, Wales and Northern Ireland. This will significantly increase the purchase price of a property.
3. Advise your staff as to their new pay rates 4. Check all staff under 25 to also ensure they are earning the correct rate of National Minimum Wage www.gov.uk/national-minimum-wage-rates
Example £175,000 property £125,000 no SDLT
More information about the NLW can also be found on the National Living Wage website. For further assistance with any payroll issues contact your local MFW office.
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£50,000 at 2% SDLT
£1,000
3% surcharge for BTL/2nd homes (charged on full £175,000)
£5,250
Total SDLT for BTL/2nd homes
£6,250
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Employers Allowance
Landlords also need to be aware of another change that came into effect on 1st February this year, requiring all landlords to check that prospective tenants or lodgers have a right to rent property in England. Landlords can be fined up to £3,000 for failing to comply. For more details check out our recent blog post www.mfw.co.uk/blog/article/right-to-rent-alandlords-responsibility
The employers allowance is being increased from £2,000 to £3,000 with effect from 6 April 2016. From 6 April 2016 companies, where the director is the sole employee, will no longer able to claim the employment allowance.
The following two rules are subject to a consultation period and the policy details will be announced on 16 March 2016.
Personal Savings Allowance From 6 April 2016, no tax will be deducted at source on your savings income. Basic rate tax payers will be able to earn up to £1,000 in savings income tax free whilst higher rate taxpayers will be able to earn up to £500. Individuals paying tax at 45% will receive no allowance. Savings income includes account interest from Bank & Building Societies, accounts with providers such as credit unions or National Savings and investments. It also includes interest distributions from authorised unit trusts (not dividend distributions) open ended investments, income from government or company bonds and most type of purchased life annuity payments. Interest from ISAs, however, does not count towards your Personal Savings Allowance and therefore the annual maximum allowance for ISA’s of £15,240 should be utilised, where possible.
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Employers Allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run a payroll until the allowance of £2,000 (£3,000 for 2016) has gone or the tax year ends. For further information on any of these tax matters do contact your local MFW office www.mfw.co.uk/contact who will be pleased to help.
Social Media Update We have recently opened a Twitter account so if you want to give us a tweet then please do so at @mfwaccountants.
Budget Day Update This newsletter has been printed before the Budget. Therefore some of the contents herein may yet be affected by any announcements made in The Chancellor’s speech. We are including our Budget Day update which will come ‘hot off the press’ and we will follow up on any changes in our next newsletter and on our news and blog areas of our website. Be sure to visit www.mfw.co.uk for further news.
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TAX SNIPPETS
Right to rent
FOCUSTAX ON SNIPPETS PAYROLL
Is it time to outsource your payroll? There are many benefits to be had when outsourcing your payroll but perhaps the most important issue, after ensuring every member of staff is paid on time, every time, is the issue of remaining compliant.
Payroll services include:
The introduction of Real Time Information followed by the changes to workplace pensions in the form of Auto Enrolment means that running a payroll has become even more of an administrative burden.
• Administration of pension scheme deductions
Added to the time and resources this can absorb there are also implications should you get your payroll wrong often with steep financial penalties for those who do.
• Preparation of customised payslips
Outsourcing part or all of your payroll could be the answer you are looking for, leaving you the time to concentrate on what you do best.
Testimonial
At McCabe Ford Williams we can help with all your payroll needs and offer a fully flexible payroll service which can be used as often as you need us and for as little or as much as you require. Our payroll staff are up to date with all the latest legislation and therefore can run your whole payroll for you or assist you in the running of your own.
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Business Matters Spring 2016
• Compliance with legislation relating to Auto Enrolment, PAYE, RTI, national insurance, statutory sick pay, statutory maternity pay, etc. • Analyses and summaries of staff costs and deductions
• Processing of bonuses, termination payments and ex-gratia payments • Advising on and dealing with any benefits in kind • Preparation of all statutory forms, including end of year returns to be filed with HM Revenue & Customs and forms for your employees
Our payroll service is offered at very reasonable rates. Contact your local MFW office for a quote.
“Before working with McCabe Ford Williams we operated our own payroll system, it was time consuming and laborious keeping up with the latest changes from HMRC. If we had known how simple it would be to hand everything over we would have done it sooner. The team at MFW are a pleasure to work with and are extremely efficient at what they do. They have taken the stress out of payroll and are always on hand to answer any concerns we may have. We would thoroughly recommend the services of McCabe Ford Williams”.
Lyn Rungay - Director of LMR Gear Tech Limited Further testimonials can be found on our website www.mfw.co.uk/services/audit-and-accounting/payroll
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The Small Business, Enterprise and Employment Act 2015 (SBEEA) made important changes to the Insolvency Act 1986 (IA) and other insolvencyrelated legislation. Two of the major changes discussed below came into effect on 1 October 2015.
Assignment of claims
holders as assets of the company, which can be assigned as a way of realising the company’s assets or in order to obtain funding for the insolvency process. This will provide the opportunity for office-holders to make additional recoveries where a claim may have a good prospect of success, but the insolvent estate may not have sufficient funds to pursue it. In addition, any recoveries from the claims themselves will not form part of the assets available to pay the claims of floating chargeholders.
Directors’ disqualification & compensation orders SBEEA increased the period of time under s.7(2) of the Company Directors Disqualification Act 1986 (CDDA) for applying to the court for disqualification of an unfit director of an insolvent company from 2 to 3 years.
Office-holders are now able to assign causes of action for fraudulent trading, wrongful trading, transactions at an undervalue, preference actions and extortionate credit transactions (s.246ZD IA). Previously they could only assign causes of action that vested in the company and not personal actions vested in the office-holder.
Where a director is disqualified under the CDDA, a compensation order can also now be made against him/ her in circumstances where their conduct (post 1 October 2015) has caused loss to creditors (s.15A CDDA). This is a lower threshold than required for wrongful or fraudulent trading claims and could, for example, be based on disqualification for failure to maintain proper books and records.
This means that all causes of action can now be treated by office-
An order must be applied for within 2 years of a disqualification order
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or undertaking, and will require payment by the former director of a sum for the benefit of a creditor or class of creditors, or as a contribution to the assets of the company. It is unclear precisely how compensation orders will operate, and given the already tight budget of the Insolvency Service, whether there will be sufficient staff and funding to actually pursue them. In addition, whilst any sum ordered is a provable debt in bankruptcy, it remains to be seen whether the Insolvency Service will pursue compensation orders to bankruptcy. This does not currently happen in relation to costs orders made in disqualification proceedings for public policy reasons. The risk of compensation orders may deter directors from offering a voluntary disqualification undertaking and may result in an increase in formal disqualification proceedings as a result. The changes brought in by SBEEA also extend the disqualification consequences as a result of corporate insolvency to up to 5 years.
Author Joanna Ford Managing Associate - Cripps LLP
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INSOLVENCY
Insolvency update – Small Business, Enterprise & Employment Act 2015
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.