In Focus Issue 12 by Randall & Payne

in focus turn your business strategies into reality

issue 12 Spring 2017

2017

Find out how the Budget will affect you and your business

A warm welcome to our latest Trainees

Hobbs Bros. Ltd Journey

www.randall-payne.co.uk business advice accountancy & audit

Spring Budget Day 2017 tax advice

Academies Update

wealth management

finance

welcome

welcome to issue twelve Hello and welcome to our Spring edition of ‘in focus’. The daffodils are out, the horses are being readied for the Festival and the Chancellor has made his first budget announcements for 2017. Some things never change! These events form a framework by which we all measure the passing of the year and they are invaluable constants that help us deal with the ever increasing pace of change. This year could be the second year of a rollercoaster ride with amongst other things elections to come in several European countries, Article 50 being triggered and who knows what’s coming out of the US. Despite all this the sun will still rise and we will continue to enjoy what’s important to us all.

in this issue 04 – 05 Staff News Richard Gray takes coaching to new levels; Aimee sleeps on the street for charity; A warm welcome to our latest Trainees

04 06 – 07 Corporate Finance

Hobbs Bros. Ltd: A Journey to a Successful Sale and Retirement…

Locally the year has started well and we should acknowledge the work of GFirst LEP in securing funding from the Government for three projects in the county – infrastructure for a new Cyber Business Park in Cheltenham, traffic flow improvements and release of housing land in Longford and a new Further Education campus in the Forest of Dean. And not too far away Dyson has announced huge expansion plans. Internally we continue to push ahead. As was said last time the tax and accounts teams have been reorganised and a big thank you to all our clients for bearing with us while this was done. We continue to recruit and have also launched our business clinics which are free for you and there will be more developments over the coming months.

Tim Watkins Managing Partner

Spring 2017

06 8 – 9 Tax Planning Whats new for 2017?

Planning Ahead for the new Tax Year

www.randall-payne.co.uk

contents

2017 10 - 13 Over 100 local business people join R&P to witness the ‘last Spring Budget’ R&P hosted their Budget event in Kingsholm Rugby Club’s Ricoh Lounge, joined by Cotswold Business and Professional Life, The Pied Piper Appeal and guests from the local business community to watch Philip Hammond deliver what was generally considered to be a ‘safe’ Budget.

business advice accountancy & audit tax advice wealth management financing business startups valuations buyouts debt factoring

Race Night Academies Update How to get leaner when belts are tightening - R&P Academies seminars provide the best advice

16 Clause 24 - Residential property interest restriction from April 2017

18-19 www.randall-payne.co.uk

Spring 2017

staff news

news focus turn your business strategies into reality

your guide to what’s new in the world of business...

Staff News

Richard Gray

Richard Gray takes coaching to new levels… mBIT, or Multiple Brain Integration Techniques, is a powerful and deeply insightful new field that uses neuroscience findings about our multiple intelligences (Head, Heart, Gut), to leverage what business owners need to consider when generating wider decision making.

We are pleased to announce Richard Gray has recently qualified as an mBIT certified coach and can now work with our clients to produce results that can be achieved when Head, Heart & Gut are aligned. Being one of the leaders in this newly merging exciting field enables our business advisory offering

to stand out and differentiate in the market place, whilst massively boosting our coaching effectiveness. When our three brains (Head, Heart and Gut) fight each other, or ignore each other, it can be very limiting but using the mBIT coaching approach we can show how our goals can be easily achieved

Aimee is out on the Street for Charity ‘Sleep Easy’ is an annual initiative supported by YMCA’s across the country, in which fundraisers ‘Sleep rough so that others don’t have to’. As well as raising vital funds to support the Homeless of Gloucestershire, Cheltenham YMCA hoped this event would raise awareness of homelessness across the county. Randall & Payne Trainee, Aimee Berry, decided to help after driving to work every day before Christmas and passing a homeless couple sleeping in a shop entrance. Seeing them exposed to the harsh winter elements whilst she enjoyed the warmth of her car played on her mind a lot. Looking into how she could help, Aimee saw that the YMCA, who strive to help vulnerable people and make a difference to their lives, run this

Spring 2017

national initiative. So, on 3rd March 2017, a wet and cold Friday night, Aimee slept in a cardboard box for the night in Cheltenham, to help raise money and awareness for this worthy cause.

Fact - In 2016 Government statistics showed that 4,134 people slept rough on any one night across England - over double the number counted in 2010

Aimee said of her experience: “I would like to thank everyone for their tremendous support during this campaign. The YMCA is an inspirational charity and I’m delighted to have been part of Sleep Easy 2017. The experience was extremely insightful and rewarding and I would encourage anybody wanting to give something back to their local community to take part in a local fundraising event. I look forward to joining Cheltenham YMCA for Sleep Easy 2018.”

Photo by Alex Chalk, MP for Cheltenham So far Aimee has successfully raised over £300 for the Charity as well as helping make others aware of the cause. If you would like to make a donation, Aimee’s fundraising page is: http://uk.virginmoneygiving. com/fundraiser-web/fundraiser/ showFundraiserProfilePage. action?userUrl=AimeeBerry

www.randall-payne.co.uk

staff news

A warm welcome to our latest Trainees Randall & Payne are excited to welcome three more trainee accountants to our growing team. Ben Humeniuk, Rosie Grundy and Aimee Berry are our newest trainee recruits and all have again shown us what talented young people we have in Gloucestershire. Ben joined the accounts team as AAT Trainee in August 2016 after leaving full time education. Ben had previously carried out work experience at R&P and felt that was his chosen career path so applied to be part of our trainee programme. Ben says: “Although there was a lot I needed to learn I enjoyed my work experience at Randall & Payne as the Accounts team were patient with me, showing me how interesting accountancy could be. I was pleased when I was successful in applying to be part of their trainees programme.” Ben recently won the Silver award of the Outstanding Work Experience Student 2016 at the Grow Gloucestershire Showcase Awards. Rosie joined the Accounts team as AAT Trainee in October 2016 having previously carried out work experience a few months earlier the same year. Whilst on work experience, Rosie showed confidence and a quick learning ability, and was asked if she would be interested in applying for the outstanding trainee

www.randall-payne.co.uk

Rosie and Ben (sadly Aimee was unavailable when we took the photo)

vacancy. Before starting her Level II studies Rosie was a childminder. Rosie says “Randall & Payne made me feel really welcome when I was on work experience and my colleagues were really friendly. I liked the atmosphere in the office. When I heard there was a position available I knew I would be happy doing my training here. Changing my career was something I had thought some time about. I enjoyed working with the children but at times felt I needed more adult interaction but in a role which still proved challenging. I think I have definitely made the correct career choice” Aimee joined our Corporate Finance Team in October 2016 as our very first Corporate Finance Trainee. This is a new position

in our Trainees programme and was due to the need to have more staff trained in this area to support our Corporate Finance Partner with the demands in this increasing business area. Aimee, who will start the ACA training programme in Sept 2017, is a full time mum who stayed home until she decided to kick start her career and go back to college. After obtaining a 1st class degree at University, Aimee was excited by the challenges the Job description for the Corporate Finance Trainee role would bring. Aimee says “The Randall & Payne team have welcomed me into their community with open arms and I am looking forward to starting my ACA studies next September and forging a successful career within the if company going forward.

Spring 2017

corporate finance

Hobbs Bros. Ltd: A Journey to a Successful Sale and Retirement… Hobbs Bros. Ltd was founded in the late 1890s by Clement Hobbs and his wife Polly. The business began selling paraffin, transported from London by train and distributed by pony and trap to customers’ houses. Fast forward - more than 100 years and four generations later - Hobbs Bros. Ltd, run by Mark Hobbs and his wife Mandy, is one of Gloucestershire’s longest established businesses with an average annual turnover of £15 million. Randall & Payne have had an 85 year association with Hobbs Bros. Ltd, one of our oldest clients. From initially being assigned as the Hobbs company accountants, we have held their hand on a journey where we have seen them improve their commercial strategy, invest in new assets in order to develop and most recently, bestow the reins of the business to another family company. In 2008, we became part of Mark and Mandy’s extended

Spring 2017

management team and provided services such as: • Assistance with accounts and tax compliance; • Facilitation of a company restructure; • Liaising with key suppliers; • Implementation of strategic objectives. Shortly after 2012, Mark approached us with his plans to invest in the business, with the intention to build a new premises,

committing to futureproofing the company operations. Ollie Newbold, Head of Corporate Finance, secured the funding for a £3 million state of the art purpose built facility at Spinnaker Close, Gloucester. This allowed Mark to increase oil reserves and service a much wider client capacity. At the time, Mark Hobbs said of the investment progress that they “couldn’t have achieved what we have without the assistance and expertise of Ollie Newbold and Randall & Payne”.

www.randall-payne.co.uk

corporate finance

Mark contacted Ollie, having made the decision to retire. Owing to our extensive industry knowledge and pre-sale groundwork, we were able to deliver a six month start to finish sales process. In January, Hobbs Bros. Ltd was sold to Ford Fuels Limited, a South West firm, built on the very family foundations Hobbs had been. Having fulfilled their objectives to sell to another family company, there really couldn’t have been a more suitable buyer.

Of the sales process Mark and Mandy said “Randall & Payne made the whole process so easy. Ahead of time we were supported in collating all the documentation a buyer would want to see so we were not under pressure to provide information in short timeframes – this allowed us to complete the sale quickly and with the minimum of fuss. Most importantly they expertly dealt with numerous interested parties, weeding out the ‘tyre-kickers’ and allowing us to achieve the best possible value by creating a competitive bidding environment”. –

“Working with Mark and Mandy over many years has been a pleasure and I am delighted to see that all the steps in the journey they have taken over recent years have led to such a successful end result. I am thrilled to see that the buyer, Ford Fuels Ollie Newbold Limited, is a company that shares so many of Hobbs’ important values – this was evident throughout the transaction, where both the buyer, seller and their respective advisers worked so collaboratively to get a deal done that was right for everyone.” if

We pride ourselves on only servicing a maximum of six sale mandates at a time in order to provide the best service to our clients to allow us to get the job done. If you are looking to sell your business or for any Corporate Finance advice, please contact Ollie Newbold, Head of Corporate Finance on 01242 776000.

www.randall-payne.co.uk

Spring 2017

ifif

tax planning

Trish Clements

Planning Ahead for the new Tax Year

The new tax year is fast approaching, so there is limited time to make sure your money is working the best it can for you before the new allowances and tax bands come into force. This article gives you a series of pointers to make sure you have made the most of the tax reliefs and exemptions in the 2016/17 tax year, before they are lost on 5th April 2017. Use your ISA allowance The ISA limit for 2016/17 tax year is £15,240 and this will reset on the 6 April 2017. The allowance is a ‘use it or lose it’ allowance and it cannot be carried over. Children under the age of 18 who do not have a trust fund are also entitled to an ISA allowance of £4,080 Use your Inheritance Tax Annual Allowance Each year, every individual is entitled to gift £3,000 without being liable to Inheritance Tax. You can carry over this exemption to next tax year, but the maximum you can gift in a single year is £6,000. Effectively, this means you can use this years and last year exemption, but it will be lost after two years. It is also worth noting that you can make individual gifts of up to £250 to anyone free from Inheritance Tax Use your annual exemption Are you thinking of selling some assets? The annual exemption (or tax free gains) that you can make in the 2016/17 year is £11,100.

Spring 2017

It may be worth considering delaying the sale of some assets if you have already used up this allowance, to make use of next year’s allowance. Alternatively, you may want to think about bringing forward the sale of other items to use the allowance if you have not already done so. Marriage Allowance The Marriage Allowance allows every married couple or civil partners to transfer 10% of their personal allowance between them providing that one member of the couple has income below the personal allowance and the other individual does not pay higher rate tax. You may want to consider whether you would benefit from making this claim as you could save £220 of tax in the current year, or a total of £432 if you can also carry back the allowance to the 2015/16 tax year. Pension Allowance In the 2016/17 tax year, the annual contribution allowance for pensions was £40,000 (providing your income is less

than £150,000). You can roll forward up to two years of contributions if they are unused, however the limit has decreased in the past. Have you got the potential to use more of your allowance? Notifying Chargeability If your circumstances have changed in the 2016/17 tax year, you may be eligible to pay additional tax; either on new income that has not already been taxed, or on capital gains that have been realised in the year. You, as the taxpayer, are responsible for notifying HMRC by 5th October 2017 that you are liable for further tax. For the 2016/17 tax year this is likely to apply to individuals with more than £5,000 of dividends who previously were not liable for additional tax. If you think this is you, we could complete the relevant SA1 form and ensure that you are registered for Self Assessment in time to avoid any penalties.

www.randall-payne.co.uk

tax planning

What’s new in 2017? The new tax year brings about a raft of changes in legislation, some which benefit you, others which may worry you. Our tax team is always available to talk through your worries and discuss any changes with you. Allowance Increases The personal allowance (tax free income) for individuals will increase to £11,500 for the 2017/18 tax year and the basic rate tax band will increase to £33,500. This means that individuals will not pay higher rate tax until their income is over £45,000, a £2,000 increase on the 2016/17 tax year. Personal Savings Allowance The new savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers was put in place at the start of the 2016/17 tax year. From the changes we have seen this will take a substantial number of UK taxpayers out of the Self Assessment system and is likely to mean that a large number of savers will no longer pay any tax on their interest. It has also allowed directors with a Directors Loan Account, which is in credit, to charge the company interest on their borrowings and withdraw some profits from the company tax free. This interest is also deductible for the company and so is extremely tax efficient, but will require a small amount of administrative time to set up. If you would like us to help you complete a CT61 form, or if you would like to discuss whether you could benefit from this allowance, please do not hesitate to contact us.

www.randall-payne.co.uk

Lifetime ISAs From April 2017, any individual between the ages of 18 and 40 will be able to open a new lifetime ISA (LISA). Savers can pay in up to £4,000 per year, and will receive a 25% government bonus on this money. The money from the ISA can be accessed when the saver reaches 60, or first time buyers can withdraw the money to purchase a property. If you already have a Help to Buy ISA, you can transfer your savings into a LISA without impacting any of your allowances. Main Residence Nil Rate Band The main home of any individual that dies on or after 6th April 2017 who owns that home and is passing it on to their direct descendants will be entitled to a larger nil rate band to cover the gift, providing their total estate does not exceed £2m. The new main residence nil rate band will be phased in between 2017 and 2021. If you would like to discuss how this could affect you, or your family, please let us know. Rental Changes The introduction of new rules surrounding finance costs paid for rental properties has been quite a controversial move for the government. Higher rate taxpayers will only be eligible to a basic rate deductions for any finance costs incurred on their rental properties. Although this

will not affect the tax position for basic rate taxpayers, there may be effects for tax credit purposes that will need to be discussed (see the Clause 24 article for more details). On the plus side for residential landlords, new rules coming into place from 6th April 2017 will allow rental deductions for the like-for-like replacement of furnishings, white goods and appliances, whereas before we could only claim relief for repairs of these items. Digital Tax Breaks From April 2017 the government have introduced two ‘digital tax breaks’ of £1,000 each. The tax breaks will allow those tax payers who make additional income through selling goods or services online, or who rent out their own homes or property on digital platforms, such as Airbnb, to benefit from the allowance. However, HMRC are also increasing their data collection and analysis from these platforms to target any online traders that are evading tax and National Insurance. The authorities are also analysing huge amounts of data from social network pages, including Facebook and LinkedIn, to identify those taxpayers where their online presence doesn’t match the tax affairs they have disclosed.

Spring 2017

the spring budget

2017 Spring Budget 2017 The final Spring Budget (for some time anyway) was delivered against a backdrop of an impending exit from the European Union (with Article 50 expected to be triggered this month, maybe even as early as next week) and an economy that has performed beyond everyone’s expectations since the UK voted for Brexit. This has reportedly given Philip “Spreadsheet” Hammond an unexpected £27 billion boost to the government coffers already and this is growing. However, as expected, he has delivered a cautious Budget, resisting the temptation to spend more money and increase the UK’s borrowing, keeping the extra money as a “war chest” for the uncertainty of how much Brexit is actually going to cost us.

Spring 2017

We were not expecting any significant surprises and, from a tax point of view, there was only really one. The key changes relevant to individuals and businesses (many of which were already known) are outlined below. Making Tax Digital (MTD) For the last couple of years the government has been forging ahead with very ambitious plans for a new digital tax system for all businesses and individuals. Grave concerns have been raised by business and the professional tax bodies about the timetables and not being ready for the transition. Reportedly, software providers have only a few weeks to come up with their first builds of the required software but are still

lacking the required technical specifications from HMRC that they need to complete the work. The timetable is for unincorporated businesses and landlords to join the system from April 2018; businesses for their VAT obligations from April 2019; and companies for Corporation Tax from April 2020. Under the system tax payers will need to file quarterly updates to business or income figures in lieu of an annual tax return. A £10,000 de minimis was proposed to exempt smaller businesses from the requirement to use the MTD service but representations were strongly made that this was too low. The Budget

www.randall-payne.co.uk

the spring budget

announcements therefore included a deferral of a year for unincorporated businesses and landlords with turnover under the VAT threshold (£85,000 from April 2017) so that they do not have to comply with the MTD rules until April 2019. This is very welcome news and gives considerable breathing space to those smaller businesses while the new systems bed in. Personal Tax The one tax surprise in the Budget was the announcement that the new £5,000 dividend allowance (which only came in from 6 April 2016) will be reduced to £2,000 from 6 April 2018. This is disappointing when it was introduced alongside a new 7.5% basic rate of tax on dividends originally and therefore it represents yet another attack on entrepreneurs who choose to incorporate their businesses. Individuals with significant

www.randall-payne.co.uk

share portfolios (potentially as a preference to a pension), as well as individuals who have invested in small growth companies, will be caught in the cross-fire, which is unfortunate. This will cost basic rate tax payers up to £225 in additional Income Tax each year. Other changes were already announced in relation to 6 April 2017. The tax free personal allowance will increase from £11,000 to £11,500 (with an ultimate target of £12,500) and the higher rate tax threshold will increase from £43,000 to £45,000 (with an ultimate target of £50,000).

The normal ISA subscription limit is increasing to £20,000 from 6 April 2017. Restrictions to Child Tax Credit come into effect from 6 April 2017 on two fronts – the family element is being removed and any 3rd or subsequent children in a family born on or after the effective date do not bring any additional entitlement.

The new Lifetime ISA (LISA) is launching in April 2017. Under this new system anyone between the ages of 18 and 40 can open a LISA to save up to £4,000 per year tax free towards a pension or a first home and the government will add a 25% bonus when the funds are used for one of those purposes.

Spring 2017

the spring budget

National Insurance There was much talk in the days leading up to the Budget about a potential rise in Class 4 National Insurance paid by the self-employed, which currently sits at 9% (as compared to employee’s Class 1 NIC which is 12%). It was not, therefore, a surprise to see an announcement that the rate will increase. The good news is that it is not simply increasing to 12%. Instead the rate will increase to 10% from 6 April 2018 and then to 11% from 6 April 2019. Inheritance Tax The main residence nil rate band begins to phase in from 6 April 2017. This new relief grants additional inheritance tax nil rate band where the deceased passes a main residence to any direct descendants. By 2020 the allowance will effectively increase the nil rate band to up to £500,000 per person

Spring 2017

(£1 million per married couple or civil partners). From 6 April 2017 an additional £100,000 is available to relevant estates, effectively increasing the nil rate band up to £425,000 where there is a main residence in the estate. The Budget gave no further clarification on the rules, so we await more detailed guidance on exactly how this will operate in practice. Corporation Tax The main rate drops from 20% to 19% from 1 April 2017 and is due to drop to 17% from 1 April 2020. This is all unchanged from previous announcements. We were hopeful of some improvements to the R&D Tax Relief Scheme but the rates remain unchanged. The Budget announced a review of the administrative burden with a view to make the process simpler, but we will have to wait for a consultation on this.

www.randall-payne.co.uk

the spring budget

VAT The changes to the flat rate scheme for “limited cost traders” will go ahead from 1 April. This will affect businesses that spend less than 2% of their turnover on “relevant goods” and will result in a higher flat rate of 16.5% applying. For a small business turning over around £150,000 previously paying a 12% flat rate, this will cost around £5,000 per year to the business. While this removes virtually any financial benefit of being in the flat rate scheme for affected businesses, they should not be too quick to deregister from the scheme, because the remaining advantage is that the administration is very straightforward. Contracting and “the gig economy” Changes to the “IR35” regime come into effect from 6 April 2017. Under this regime individuals providing their services through a limited company can be required to account for taxes under Pay As You Earn rather than paying themselves by dividend, where the terms of the contract are similar in nature to an employment contract with

www.randall-payne.co.uk

the ultimate contractor (in terms of aspects like control, mutuality of obligations, hours and so forth). The new rules affect situations where the ultimate contractor is a public sector organisation, and require the individual providing the services to make an assessment of their status for IR35. To assist with this, HMRC has replaced the previous “Employment Status Indicator” tool with a new ESS (Employment Status Service) which an individual can work through, anonymously and get an assessment as to whether the rules are likely to affect them. They can then rely on this on later enquiry by HMRC provided the answers given were accurate.

The contracting industry and professional bodies remain unconvinced by the ESS tool and many organisations are now taking the option to employ all workers and boycott all those through limited companies. This is damaging to the industry and to businesses with multiple clients where the limited company is wholly commercial and appropriate. Business rates Finally, as expected, some relief was granted to help small businesses that are about to see a significant jump in their business rates. The government is going to consult on reform to the revaluation process which will aim to avoid sudden jumps in rating levels in the future. Increases in rates will be capped at a maximum of £50 per month and public houses with a rateable value of less than £100,000 will receive an additional £1,000 discount – this will benefit 90% of public houses in the UK.

Spring 2017

if business advice Discover how to dramatically improve profitability in your business. With waste accounting for up to 30% of many organisations’ operating costs, a Waste Audit and Recovery Plan is essential for business growth. Randall & Payne Business Advisors specialise in identifying the underlying causes of poor profit performance, wasteful practices and missed opportunities that can impact on your business’ profitable growth. We will guide you through a proven set of tools and methodologies to improve your profitability at one of our Profit Improvement Workshops which will include:

Improve profitability over the next 12 months?

Let us to help you make those plans a reality.

• Profit Formula: Analysis of the underlying elements contributing to your profit, generating ideas for optimising sales, reducing overhead and decreasing variable expenses. • Seven Wastes: A powerful process from Toyota that focused on the ‘seven wastes”, identifying where waste is occuring in your organisation and developing removal strategies. • Practical Outcomes: Richard and Will use a unique set of tools to drive the profit improvement process and ensure that it simply becomes a blueprint for ‘the way you do business’. They share their experiences and advice in facilitated workshops that enable you to:

Walk away with a clear and concise ‘One Page Profit Improvement Plan’ for your business Learn a series of profit improvement tools you can use yourself in the business. WILL ABBOTT, LLB FCA AMS Will Abbott has been a partner at Randall & Payne LLP since 2001. An Accredited Mindshop Facilitator, he delivers an established process to drive growth and profits by understanding your current situation, clarifying what you are trying to achieve, and then identifying the actions you need to take.

RICHARD GRAY, BA(Hons) FInstSMM Richard is one of R&P’s leading business advisors, with expertise in developing sales and growth strategies through working with clients to understand their business’ needs. “We show a business where they are now, find out where they want to be in a year and use our skills and expertise to help them get there.”

Profit Improvement: Essential tools and techniques to reduce waste and increase profit in your business. (Part of the Skills for Business workshop programme) BOOK YOUR PLACE NOW TO: • Learn about Profit Formulas: Analysis of the underlying elements contributing to your profit, generating ideas for optimising sales, reducing overhead and decreasing variable expenses; • Develop your own clear and concise “One Page Profit Improvement Plan” to use on your business; • Learn a series of profit improvement tools you can use yourself in the business;

Workshop 9am - 1pm, April 26th 2017 Lunch and networking 1pm – 2pm £195.00 + VAT Chargrove House, Shurdington Road, Cheltenham, GL51 4GA For more information about this workshop or other Skills for Business workshops contact Jo Kline on 01242 776000 or email Jo.kline@randall-payne.co.uk

Spring 2017

www.randall-payne.co.uk

advice

Living Wage Increase We are advising you of important increases to the National Minimum and National Living Wage rates which are due to come into effect on 1 April 2017. The hourly minimum wage a worker is entitled to depends on their age and whether they are an apprentice.

The National Living Wage will increase to: •

£7.50 per hour – for workers aged 25 and over

The National Minimum Wage will increase to: •

£7.05 per hour – for workers aged 21-24

•

£5.60 per hour – for workers aged 18-20

•

£4.05 per hour – for workers aged 16-17

•

£3.50 per hour – for apprentices aged 16-18 and those aged 19 or over who are in their first year*

* All other apprentices are entitled to receive the national minimum wage for their age. With effect from 1 April 2017, as HM Revenue & Customs advise that it is a criminal offence for employers not to pay someone the National Minimum & Living Wage. Should you have any queries or concerns please feel free to contact Karen Harries or Andrea Cormer on 01242 776000 if

The Changes to Accounting Standards FRS102 and FRS105. Its now in effect The new standard is a single standard that replaces existing UK GAAP for entities that are not entitled to report as small companies and are not required to report under IFRS. For periods commencing from 1 January 2016 (e.g. financial years ending 31 December 2016), small companies will be within the scope of FRS 102. So from now on your reporting standard will be different, and how much more you need to file is depending on whether you use FRS105 or FRS102: FRS105 - Qualifying criteria: ( 2 out of 3 must apply) • Turnover must be less than £632,000 •

Balance Sheet value must be less than £316,000

•

Average number of employees is <10

FRS102 Qualifying criteria: ( 2 out of 3 must apply) • Turnover must be less than £6,500,000 • Balance Sheet value must be less than £3,260,000 •

Average number of employees <50

There are pros and cons to both new Accounting Standards, however you have no choice but to adhere to one of these. If you would like information or advice about this, our Accounts team would be happy to help. Call us on 01242 776000 if

Unpopular probate changes resulting in additional costs go ahead with effect from May 2017 At the end of February 2017 we received confirmation of a major change in the level of Probate fees to be levied when applying to the Courts for the Grant of Probate. A consultation document was released last February 2016 setting out the proposed changes. Despite almost 98% of 831 respondents disagreeing with the consultation, the Ministry of Justice decided to put the changes in place with effect from May 2017. These have subsequently introduced a tiered charge for probate fees, as a replacement of the current single fee charge regardless of the estate value. This will have a large impact for estates with a value in excess of £2million who will be faced with probate fees of £20,000. The positive from the changes is that estates valued at below £50,000 will be exempt from requiring a grant of probate, which represents an

www.randall-payne.co.uk

increase from the current £5,000 threshold. The Ministry of Justice believes that this increase will result in 58% of all estates in England and Wales falling beneath the new threshold. A clearer picture of how this will impact on estates will emerge when more information is released. However, for our client base at Randall & Payne, if they are to face a large charge from the Ministry of Justice, it is likely to have a major impact on the passing of assets to surviving spouses or children in the future. If you have any questions or concerns and would like to discuss them further please contact Trish Clements, who is a Chartered Tax Adviser and Trust and Estate Practitioner. Trish has wide ranging experience in dealing with private tax affairs and tailoring advice to the individual’s personal needs. if

Spring 2017

tax advice

Clause 24 - Residential property interest restriction from April 2017 How do the restrictions work? From 6 April 2017, (excluding furnished holiday lets), landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for finance costs which include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying loans or mortgages.

Other thresholds to watch out for include: • The threshold from which Child Benefit is clawed back (may apply if ‘adjusted net income’ of a person with children is above £50,000).

The restriction will be phased with 75% of finance costs being allowed in 2017/18, 50% in 2018/19, 25% in 2019/20 and be fully in place for 2020/21. The remaining finance costs for each year will be given as a basic rate tax reduction but cannot create a tax refund.

• The threshold from which personal allowances are reduced (applies if ‘adjusted net income’ is above £100,000).

For example, Annabel pays higher rate tax on all her income. Her net rental income before deduction of interest is £20,000.

• The threshold over which an individual’s pension annual allowance of £40,000 is tapered (applies if an individual’s ‘adjusted income’ is more than £150,000).

Tax year:

2016/17

2017/18

2018/19

2019/20

2020/21

Rental income

20,000

Less: Interest allowed as expense

8,000

6,000

4,000

2,000

Taxable profit

12,000

14,000

16,000

18,000

20,000

Tax at 40%

4,800

5,600

6,400

7,200

8,000

Less: credit

400

800

1,200

1,600

Net tax

4,800

5,200

5,600

6,000

6,400

Effective tax rate on net rental income of £12,000

40%

43.3%

46.7%

50%

53.3%

How much extra tax will this mean? The additional amounts of tax arising will depend on rate of tax paid by a taxpayer. Basic rate taxpayers should not be substantively affected by the proposals, but a higher rate taxpayer will, in principle, get 20% less relief for finance costs. However this may mean that some taxpayers move into higher rate tax brackets. For example, individuals who consider themselves basic rate taxpayers (£45,000 or less in 2017/18), may find that if interest is not fully deductible they would have total net income above the higher rate threshold.

Spring 2017

Highly geared property investments Those most affected are those with the highest level of borrowings, in some circumstances landlords could end up with an effective tax rate of 100% on their rental profit. So what can be done? Potential options will depend upon individual circumstances. The new rules on finance costs do not apply to companies so it may be more attractive for landlords to acquire their new property investments in a company. Corporation tax rates are low compared to personal tax rates and so more funds may

www.randall-payne.co.uk

tax wwadvice

Sure Property Group team up with Randall & Payne, to give their lettings division expert advice.

be available for reinvestment in additional properties. Historically, mortgage finance for a company investing in residential property has been more expensive and more difficult to obtain but there is evidence that banks are becoming more amenable to the concept of corporate ownership of such properties. There are however tax issues to consider when holding investments in a company: • The income tax charges if a significant amount of the rental profit will be distributed to the shareholders. • A potential double tier of capital gain on any sale of a property. Corporation tax is payable on the capital gain (although the gain is reduced by an inflation adjusted base cost of the property). Then, if the gain is distributed to shareholders, income tax could be charged on the dividend paid.

Given the potential significance of the changes for individual landlords, and following on from an initial meeting with Rupert and Colin from the Sure Property Group, we hosted an event at Chargrove House for the Sure Property Group, lettings division, to make sure they were aware of the forthcoming taxation changes impacting upon residential landlords. We also discussed some of the solutions or changes that could be implemented to mitigate the change. Whilst many will not feel the additional cost until the first extra tax becomes due in January 2019, both the Sure Property Group and Randall & Payne are taking a proactive approach to informing landlords of the impact of the changes and helping landlords to understand and structure their affairs to achieve their ultimate goals, whilst minimising the additional tax burden ethically. Feedback from the event was positive: “A very informative and provocative session, thank you very much”. Raman Sirpal Sure Lettings and Sales Birmingham Franchisee. We very much look forward to working with individual landlords and to developing a relationship with the Sure Property Group, over the forthcoming months with the aim of giving timely advice to allow landlords to effect any change before the new rules really bite. if We have developed a simple checklist to help us capture the relevant information to provide our advice so if you are interested in how we may be able to help, please get in touch with trish.clements@randall-payne.co.uk. The workshop was well received by all who took part

Transferring an existing property portfolio into a company requires even more careful consideration as it could result in capital gains and stamp duty liabilities arising on the transfer of the properties. If you are concerned about how the new rules may affect you, if please contact us.

www.randall-payne.co.uk

Spring 2017

ifif

academies update

Academies Update

Rob Stokes

How to get leaner when belts are tightening - R&P Academies seminars provide the best advice

The latest academy seminar focused on budgeting constraints currently being faced by the sector. The key scene setting themes were around an increasing number of academies showing deficits in the year ended 31 August 2016 accounts and more being expected to report deficits in the 2016/17 year. This was set against the indicative National Funding Formula results as set out in the DfEâ&#x20AC;&#x2122;s consultation response, with a summary of movements below.

County

Phase

% with increasing funding

% with decreased funding

Gloucestershire

Primary

68%

32%

Worcestershire

Primary

65%

35%

Gloucestershire

Secondary

36%

64%

Worcestershire

Secondary

93%

Partly as a result there is a growing emphasis by the EFA on financial health checks which will review school systems in relation to their financial governance, forecasting, compliance & vision amongst other criteria. This makes it essential that academies look to achieve value for money and look for cost savings. Matt Roper of the Buying Support Agency was one of the guest presenters and he looked at the procurement function, and focussed around why purchasing is important accounting for around 20% of costs. In this area a ÂŁ1 saving would be a ÂŁ1 reduction of the deficit or increased surplus and there is an increased focus by the NAO & Ofsted on value for money. His presentation continued to illustrated that procurement was outside the comfort zone of business managers who also may not have capacity to devote to this increasingly key area. The key take away message was about creating a procurement strategy to enable the key messages to be distributed across the academy to all involved in buying.

Spring 2017

With staff costs being typically 75-85% of the academy budget, the seminar moved onto managing this key area, presented by Matthew Clayton, who heads the employment law team at Willans LLP in Cheltenham.

Matthew Clayton of Willans LLP Matthew handles the full range of contentious and non-contentious employment law issues for multi-national companies, owner-managed businesses and not-for-profit organisations including schools. His particular specialisms include complex staff restructurings and employment issues concerning business transfers. if

www.randall-payne.co.uk

academies update “many schools’ budgets are being squeezed despite the fairer funding formula”

Managing staffing costs in a shrinking budgetary environment At the same time that many schools’ budgets are being squeezed despite the fairer funding formula, increased pension and National Insurance contributions are creating staffing cost pressures for maintained schools and academies. Automatic pay progression also locks schools into an ever increasing cost model. Even performance-related pay progression does not particularly help, as in most cases salary costs will increase by default, unless performance is actually poor or unsatisfactory. One might conclude that schools could save costs by parting company with older, more expensive teaching staff and replacing them with younger, cheaper teachers. But this would amount to age discrimination. Hence there is a need to look at organisational change by other, lawful, means such as: •

Changes to working practices such as asking staff to take on new tasks or responsibilities, the granting or removing of TLRs, changes to working hours or pay, relocation, or changes in reporting lines.

This will often involve contractual change, so schools should start by considering documents such as the STPCD and the Burgundy Book (for teachers), the Green Book (for support staff) and any individual employment contracts. Other terms may be implied by ‘custom and practice’, but this is more difficult to establish than union officials would have one think. Contractual change requires employee consent, unless there is flexibility within the terms of the contract itself.

•

Changes to staffing numbers. Redundancy has a specific legal definition – broadly, where the school’s requirements for employees to carry out work of a particular kind have ceased or diminished.

The starting point should always be to identify what ‘work of a particular kind’ the school has a reduced staffing need for – focus on the job or task, not the individual. A fair selection process is important, as is consultation over ways of avoiding the redundancy, and an internal appeal option, in order to avoid unfair dismissal claims. if

There are ways of imposing change unilaterally, but these carry legal risk and will undoubtedly meet with heavy resistance.

www.randall-payne.co.uk

Spring 2017

academies update â&#x20AC;˘ Changes to staffing structures or functions. Terminating employment in the context of a staff reorganisation can still be fair even when it does not meet the technical definition of redundancy, for instance where increased need drives a change from part-time to full-time roles, or there is a genuine need for a higher, lower or different skills set. However it is advisable to take legal advice on such issues.

â&#x20AC;˘ Changes in employing entities. In a multiacademy trust, staff might be seconded from one school to another, in which case it makes sense to have a formal secondment agreement. If functions are being outsourced or insourced, or if staff are being seconded to a different entity (not just a different school setting within the same MAT) the TUPE Regulations may apply and legal advice should be sought.

Even if a change programme is, on the face of it, fair and lawful, schools should still ensure that there is a strong business case for it and that there is no less damaging way of achieving their objectives. This will be the defence to any claim that the change is indirectly discriminatory i.e. that it has a disproportionate impact on a protected group such as working mothers, or older workers. Should you require any further information on budgeting or cost reduction please contact the Randall & Payne education team on 01242 776000 or rob.stokes@randall-payne.co.uk or for any issues raised by the staffing information please contact Matthew at Willans LLP on 01242 514000 or via matthew.clayton@willans.co.uk if

Come along to a free Academies Seminar! At Randall & Payne we pride ourselves in sharing our knowledge and helping others. Our Academies Seminars run termly and are open to all converted Academies, whether youâ&#x20AC;&#x2122;re clients or not. If you are interested in attending, contact

Rob Stokes on 01242 776000

Spring 2017

www.randall-payne.co.uk

in the community

JOIN US FOR...

A NIGHT AT THE RACES to raise money for Pied Piper Appeal

A social, fun evening for you, friends and family for an amazing cause.

On Thursday 27th April 2017 At Hatherley & Reddings Cricket Club, Main Road, Shurdington 6pm â&#x20AC;&#x201C; 10pm

ÂŁ10 per Ticket includes food Race Sponsorship Packages available ORGANISED BY

For further information and to book your tickets, contact Jo or Fiona on 01242 776 000 or e-mail jo.kline@randall-payne.co.uk

www.randall-payne.co.uk

Spring 2017

dates for the diary monday

tuesday

wednesday thursday friday

saturday

sunday

Corporation Tax 1 2

april 2017

due - period ended 30/6/2016

23 4 5 6 7 8 9 Reply 2017/18 tax year starts

Bank Holiday 10 11 12 13 14 15 16

PAYE & Class 1 Bank Holiday 17 18 19 20 21 22 23 NIC payments (electronic sub

Due date for 2016/17 PAYE Month 12

24 25 26 27 28 29 30 Accounts filed at Pied Piper Race Night

Co Hse - period end 31/7/16, Corp tax filing period end 30/4/16

Profit Improvement Workshop

may 2017 monday tuesday wednesday thursday friday saturday sunday Bank Holiday 1 2 3 4 5 6 7

Corp Tax period end 31/7/16, daily penalties for o/s 2015/16 SA rtns

8 9 10 11 12 13 14

Reply 15 16 17 18 19 20 21 Due date for 2017/18 PAYE Month 1

PAYE & Class 1 22 23 24 25 26 27 28 NIC payments (electronic sub)

Quorum

Sales Growth Workshop

Bank Holiday Accounts filed at 29 30 31 Co Hse - period end 31/8/16, Corp tax filing period end 31/5/16

monday

tuesday

wednesday thursday friday

saturday

sunday

1 2 3 4 Corporation Tax

june 2017

due - period ended 31/8/2016

5 6 7 8 9 10 11

12 13 14 15 16 17 18 Quorum

PAYE & Class 1 19 20 21 22 23 NIC payments (electronic sub

Due date for 2017/18 PAYE Month 2

24 25

26 27 28 29 30 31 Business Strategy Workshop

Spring 2017

Accounts filed at Co Hse - period end 30/9/16, Corp tax filing period end 30/6/16

www.randall-payne.co.uk

tax reference

income tax allowances 2017-18 Personal allowance:

Marriage allowance:

Personal allowance £11,500 Income limit for personal allowance £100,000 Income limit for married couple’s allowance £28,000

Married couple’s allowance for those born before 6 April 1935: Maximum amount of married couple’s allowance £8,445 Minimum amount of married couple’s allowance £3,260

Bands of taxable income and corresponding tax rates 2017-18

Blind person’s allowance

£2,320

Basic rate

20%

Dividend allowance

£5,000

Higher rate

40%

Additional rate

45%

Starting rate for savings income

vehicle benefits Company cars 2017/18 CO2 emissions (gm/km)

Personal savings allowance for basic rate taxpayers

% of cars list price taxed

0-50 9 51-75 13 76-94 17 95 18 100 19 105 20 110 21 115 22 120 23 125 24 130 25 135 26 140 27 145 28 150 29 155 30 160 31 165 32 170 33 175 34 180 35 185 36 190 and more 37

Car Fuel Benefit 2017/18 £22,600 appropriate percentage* *percentage used to calculate the taxable benefit of the car for which the fuel is provided. For diesel cars add a 3% supplement but maximum still 37%. For cars registered before 1st January 1998 the charge is based on engine size. Company Vans 2017/18 = £3230 Fuel for Company Vans 2017/18 £610 Zero Emission Van 2017/18 20% of normal benefit.

£1,150

£1,000

Personal savings allowance for higher rate taxpayers

Dividend ordinary rate – for dividends otherwise taxable at the basic rate 7.5%

£500

Dividend upper rate – for dividends otherwise taxable at the higher rate 32.5% Dividend additional rate – for dividends otherwise taxable at the additional rate 38.1%

Capital Allowance Plant & machinery main rate

18%

Integral features, long life assets + cars over 130gkm

New cars <75g/km

100%

Annual Investment Allowance: up to 31 Dec 2015

£500,000

from 1 Jan 2016

£200,000

Complex rules apply where the accounting period straddles the change - contact us for specific advice.

mileage allowances Cars and vans Rate per mile Up to 10,000 miles 45p Over 10,000 miles 25p Bicycles 20p Motorcycles 24p These indicate the maximum tax free mileage allowance for own vehicle business use. Any excess is taxable.

corporation tax year to 31/3/2018 Now unified at a flat rate at 19%* Due to fall to 17% from 1/4/2020 *Different rates apply for ringfenced (broadly oil industry) profit.

www.randall-payne.co.uk

Starting rate limit (savings income if other income is < £5000) Basic rate band Higher rate band

£5,000

£0-45,000

£45,001 - £150k

Additional rate band Over

£150K

value added tax Standard rate

20%

Reduced rate

Annual Registration Limit: from 1.4.17 (1.4.16 - 31.3.17 £83,000)

£85,000

Annual Deregistration Limit: from 1.4.17 (1.4.16 - 31.3.17 £81,000) £83,000 No change to the Flat Rate scheme/ Cash Account limits

pension premiums 2017/18 • Tax relief available for personal contributions: higher of £3,600 (gross) or 100% of relevant earnings. • Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual. • Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years. • Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’.

If your adjusted income is over £150,000, your annual allowance in the same year will be reduced. But it won’t be reduced if your ‘threshold income’ for that year is £110,000 or less - no matter what your adjusted income is. For every £2 your adjusted income goes over £150,000, your annual allowance for that year drops by £1. The drop is limited so that the minimum tapered annual allowance you can have is £10,000.

Spring 2017

Chartered Accountants • Business Development • Tax Planning • Audit • Wealth Management