in focus turn your business strategies into reality
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issue eight: Spring 2016
Special
Mind the VAT gap business advice
Tax & online trading
accountancy & audit
Know your rights
tax advice
Existing after exit
wealth management
1 finance
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welcome
in this issue welcome to issue eight Welcome to the eighth issue of ‘in focus’ magazine. Business owners need to constantly review and should be asking the questions:
In this issue:
04 Staff News
Another baby and Gina Gardner gets her AAT qualification.
05 Clarity on Consumer Rights Assistance on the new legislation
06 - 07 Making a profit in a
1. What’s worked well? 2. What needs to change? 3. What are we going to achieve next?
changing market
It’s no different for Randall & Payne.
Why selling a business isn’t just about getting the best financial deal
I look back on our own business performance in this financial year and it is pleasing to see sustained growth. We are in year three of our current ‘growth journey’, so two years of preparation helped deliver the growth we now see.
09 Centre of Excellence
It’s important to remember that consistent growth does not come easily or quickly - it requires patience and persistence to pull it off and it requires the allocation of adequate resources. R&P and ‘in focus’ magazine deliver up-to-theminute creative solutions and expert advice and can help assist you with your growth plan to help you on your own journey.
Tim Watkins, Managing Partner
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The key attributes to a responsive business
08 Existing after Exit
New training opportunities ensure high standards in the Food and Drink industry
10 - 17 Budget Day with R&P
R&P’s Budget Day event at Gloucester Rugby Club, Kingsholm and how the Budget will affect you and your business.
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Randall & Payne’s Budget Event and a Summary of how the changes may affect you and your business www.randall-payne.co.uk
contents
Academies Update 22 - 24 18 Tax Seminars
Keeping clients informed about how changes to the way tax operates may affect them.
19 R&D Tax Relief
James Geary asks whether your company could benefit from a cash boost?
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business advice accountancy & audit tax advice wealth management financing business startups valuations buyouts debt factoring
Enjoy afternoon tea to celebrate the Queen’s birthday and help Gloucestershire Young Carers.
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20 - 21 VAT news
VAT complexities of online business and how to avoid falling into the tax gap
22 - 24 Academies Update Funding, pensions, efficiency and the use of school facilities
25 Randall & Payne in the Community News of our fundraising activities for Gloucestershire Young Carers
26 Dates for the Diary 27 Tax Reference
Designed by Isaac Partnership Ltd
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R&P update
news focus turn your business strategies into reality
your guide to what’s new in the world of business...
Staff News Another new arrival!
Hannah Hill
Congratulations to Hannah Hill on the birth of her second child, a little girl named Poppy.
Exam Success Trainee Accountant Gina Gardner has successfully completed her AAT (Association of Accounting Technicians) training and is now AAT qualified. Gina joined R&P in 2014 and completed, what is usually a three year qualification, in 16 months! ‘’I joined Randall & Payne as a Trainee Accountant in August 2014 after finishing ‘A’ Levels. I began studying Level 4 in September and am over the moon to have become a Full Member of AAT by February 2016. I am thoroughly enjoying my role at Randall & Payne, where I have gained so much experience in a short space of time. Everyone here has been so welcoming and, despite being subject to my endless questions, they have always been there to help me. My training has not just been about studying accountancy. It has increased my confidence with public speaking and getting involved in a number of events within the firm has enabled me to begin building a rapport with a number of clients. My aspirations for the future include going on to study ACA to become an Associate of The Institute of Chartered Accountants in England and Wales, before qualifying as a Chartered Accountant as I have always wished to do. I’d also like to further develop my understanding of a range of accounting software packages, such as Xero and Sage.” if
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payroll news
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Clarity on Consumer Rights The Consumer Rights Act 2015, which came into force on 1st October 2015, updated the laws governing every business selling directly to consumers. The law is now clearer and easier to understand. The changes are relevant to every business which sells directly to consumers and clarify what should happen when goods or digital content are faulty, or when services are not provided with reasonable care and skill. Understanding your rights and responsibilities will save time and money. The Consumer Rights Act replaces a number of laws with regard to business-to-consumer transactions, including the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.
This ‘consumer rights summary’ is not intended to be a comprehensive guide to consumer rights, but rather a general overview of the key consumer rights, focusing on the most common issues.
It will be clearer and easier to understand, meaning that consumers can buy and businesses can sell to them with confidence. The changes are relevant to every business that sells directly to consumers. The new law makes it clear what should happen when goods or digital content are faulty, or when services are not provided with reasonable care and skill. Businesses and consumers who understand their rights and responsibilities will save time and money.
There is no legal requirement for you to display this information, but it could help you make things clearer for your customers and staff. The design of the information sheet is a basic layout and you may want to tailor it according to your business needs - for example, by offering a returns policy that builds on the statutory requirements, or adding examples from your own business (perhaps replacing the words ‘goods’, ‘services’ or ‘digital content’ with something that you sell). The words are legally correct and outline your customers’ rights, so we suggest tailoring and adding to these words, rather than deleting or altering the wording provided. if
To help businesses and consumers understand the changes, the Department for Business, Innovation and Skills (BIS) has worked closely with business and consumer groups to develop a plain English summary of the key elements of the Act, available as a PDF or Word Doc on https://www.businesscompanion.info/en/ news-and-updates/consumer-rights-act
www.randall-payne.co.uk
For more information contact our business advisory team on 01242 776000 or visit www.randall-payne.co.uk
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business advice
Making a Profit in a Changing Market:
the key attributes to a responsive business
Will Abbott looks at the important elements required to make a profit in an ever changing market. Making profit is an obligation for all enterprises, big, small, government or private. A policy of status quo will not produce ongoing quality profits and, indeed, may result in the firm’s rapid demise. Speed, now an integral part of a successful business strategy, is not sufficient on its own. The ability to respond, rather than react, is the goal. Many things support a strategy of responsiveness - this article looks at four key elements of culture and purpose:
1. Seeking renewal
2. Vision which motivates
A responsive business seeks constant renewal, creating in its people the ability to flex to meet needs as they arise. Social media supports an environment where products can become unfashionable within days or weeks of a successful launch. Even in a stable environment, the situation may change in three months and over the years the market may no longer be interested in the products and services which are provided today. Business must seek to change and shape to the new environment.
Leaders are in their place for a variety of reasons. One is to create a picture of the future to which efforts can be directed. Essential to this is the creation of a community that feels as one and can be persuaded to follow the leader’s vision. Fred Hollows, an eye specialist in Australia, wanted to stop Aborigines losing their sight to a preventable disease, trachoma. His ability to visualise and communicate that picture enabled his cause to gain money and support. As a result, Australia no longer finds the high incidence of trachoma in Aboriginal people acceptable and funds have been made available to reverse its effect. Most businesses do not have a vision of such high humanity, but can see how the business fits into the future. Responsive businesses are clear on what the business is and will be and communicate this well to their people, customers and others.
Small businesses are generally best at this, as systems are less fixed and decision making is spread. In a responsive firm it is understood that each individual contributes to the overall success of the firm and accepts their responsibility in the success. Large firms can adopt a small business psyche if the safety of hierarchy and protection of systems is not too difficult to shift. Where a business is aging, rather than renewing, its problems are systemic and larger businesses can unwittingly fall into systemic stagnation.
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business advice WILL ABBOTT, Partner LLB FCA AMSF MInstLM Will leads our team of business experts and helps clients to take a step back from their business in order to see it clearly: its strengths and weaknesses, its goals and what needs to be done in order to reach them: “By working with business owners we can drive improvement and growth which ultimately leads to increased value and greater choice.”
4. Dissent
3. Community A known set of values, understood by all in the firm is essential. People now come from a myriad of cultures, values and beliefs. The thinker, Seth Godin, promotes the idea of tribes to optimise business returns, defining a tribe as: “a group of people connected to one another, connected to a leader, and connected to an idea”. In business the “tribe” is our community and a business comprised of separate groups rather than a single “tribe”, will have difficulty responding at speed in tumultuous times. President Obama demonstrates how difficult it is to get laws in place when lobby groups seek different goals. Change in business can also be limited if lobby groups are allowed to develop in the firm.
Innovation can arise from people finding fault in a product, procedure or service and looking at it anew. Developing a culture of dissent encourages people to try something new and to succeed or fail in doing so. For our risk averse society, failure is something to be avoided, but for a responsive business, failure is part of each person’s responsibility. Where people see the failure and look for ways to produce success for the future, failures become stepping stones to success, not the end of a journey. When asked by a young journalist if going through 10,000 bulbs to get one that worked felt like failure, Thomas Edison responded: “I didn’t fail. I just found 10,000 ways that did not work.” New ideas come from changing the status quo, not keeping it as it is. So, competitive advantage must now include speed of response. No business can afford to stand still. Strategies supporting agility, flexibility and responsiveness are essential, regardless of the external forces on the firm. Flexibility and responsiveness are driven from the top, and assumed by all in the firm. Leadership is key. if
For more business advice see our website www.randall-payne.co.uk or call our Business Advisory team on 01242 776000 Randall & Payne Quorum allows business leaders to connect and share strategies for growth while gaining skills and tools to implement them. For a small investment you not only get a sounding board for your ideas, but real training and the knowledge that you can see and measure your progress regularly.
• Online Tools • Remote Business Support • Accounting For Business • Workshop for Business Leaders • Minimising Tax • Making the most of your wealth
Don’t just take our word for it... “As business owners sometimes we forget the importance of planning ahead and the Quorum is a great place to share your problems and find the answers to resolve them.” Steve Barnett – Glevum Security
Next Quorum Meetings: June 14th; Sept 13th; Nov 29th. To book a place, contact Jo Kline or Will Abbott on 01242 776000
www.randall-payne.co.uk
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Existing after Exit I recently read an article which likened an entrepreneur to someone who is riding a lion. All the onlookers are thinking “they’re brave”, whilst the entrepreneur is thinking “how did I get on this lion in the first place and how do get off without being eaten?”
Ollie Newbold
One of the big issues associated with getting off the lion i.e. exiting the business, is preparing yourself to do so. In this respect I am not talking about preparing the business for sale, considering taxation issues or other practical issues – I am talking about being prepared for the lifestyle adjustment. Often business owners become inextricably linked to their businesses and being a leader of such a business can form part of your own identity. How, therefore, is this dealt with on exit? The focus of the professional and the client before a business sale is primarily on ensuring the client obtains maximum value and retains sufficient funds to meet their ongoing retirement needs. Long before we get to this stage it is equally important to prepare the client for a change of pace and mindset so that, following the sale, the client still feels their life has a purpose. We tend to find that business owners are optimists, who actively feed off the highs and lows of their business life. It is therefore important to have mechanisms in place to replace these thrills. Unfortunately, the local golf course might not cut the mustard in this case. In summary, be prepared for the potential hidden personal costs of exiting your business. By addressing this early and getting the right professional advisers to maximise your financial position, it is unlikely that you will ever look back after selling your business.
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Case Study – Sale of Stroud Based Manufacturing Company What was the deal? An acquisitive manufacturing company in the same industry purchased a 100% shareholding in our client for £2.3m. – this is against the backdrop of an initial offer of £1.8m. What were the key achievements with this deal? Randall & Payne’s advice and guidance throughout the process allowed the client to achieve an almost 30% increase in eventual proceeds. In addition to this, the initial offer was based on a significant element of deferred consideration based on performance. The final deal was 100% cash on completion, with the exception of a cash adjustment in respect of a specific project.
For help from our Corporate Finance Team, contact us on 01242 776000 or visit our website. 8
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business news
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Linsey Temple, CEO of Gloucestershire Engineering Training tells us
Excellence comes from the Centre The background
The opportunity
The landscape for apprenticeship provision is going through substantial reforms. Trailblazer groups, made up of employers in common sectors, are firmly in the driving seat, developing new apprenticeship standards across a variety of sectors to ensure that provision is more cost effective and specific, to meet the employer demands.
GET were approached last summer by the National Skills Academy in Food and Drink (NSA-FD) to consider applying to become a Centre of Excellence for apprenticeship delivery in the Food and Drink Sector. Providers were handpicked by the NSA and the Trailblazer group, based on their reputation for delivering high quality apprenticeship programmes - this group is being very selective about who they choose to work with.
The National Skills Academy in Food and Drink and the Trailblazer group for that sector have become acutely aware that, whilst they are working on new standards to be delivered in 2017, there aren't any providers who have the knowledge and skills capabilities or resources to deliver these new standards. A decision has therefore been made to develop a small number of Centres of Excellence, specialising in Food and Drink provision, throughout the whole of the UK so that tailor made provision is available for employers (and supply chain organisations) when these new standards go live.
Having been through the application process (initial expression of interest, presentation to a panel of employers and the NSA and a visit from an employer from the panel), GET have successfully been chosen as a provider to be developed into a centre of excellence. The majority of the training is already on offer at GET. However, what will be required is a specific area to replicate a typical work environment in the food and drink sector. The idea is to convert a classroom (or two) into a mini food
production or packaging area, with different access control arrangements and separate sets of personal protective equipment (PPE), tools and equipment. Processes inside this facility will be different to that in general manufacturing (e.g. chemical washing, hygiene factors etc), as will elements of the Technical Certificate (the academic programme), making it more related to food hygiene. GET is now calling for employers in the food and drink sector to come forward, be part of this exciting new opportunity and share in the development of these programmes. GET’s structure and ethos is very much based on employer support and direction and, to ensure these programmes truly represent the needs and demands of employers, they need your support to develop them. A briefing session is being held at GET on Monday 4th April where further information will be available so come along and find out how you can help develop this centre of excellence within our county.
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Gloucester-based GET have provided work-based learning for 37 years. Run by the industry for the Industry, their training covers a diverse range of engineering specialisms.
For further information please contact Kelly White on k.white@get-trained.org. www.randall-payne.co.uk
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the budget
Each year Randall & Payne hold our Budget Day, gauging the reactions of local business leaders to the Chancellor’s proposals. For the last few years the event has been held at Gloucester Rugby Club at Kingsholm, and attended by hundreds of the county’s business leaders. This year was no different, despite the budget clashing with Ladies Day at Cheltenham the venue was packed, with representatives from the county’s largest businesses gathering to discuss this year’s budget. The event began with Tim Watkins welcoming everyone before handing over to Jane Dyer from Glos Young Carers, Randall & Payne’s nominated charity for the year. She spoke
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about the struggles young carers have and the fantastic work that the charity does. A raffle held during the event raised £361 for the charity. A poll was taken on the EU vote, with a landslide victory for staying in. A surprising 68.25% of Gloucestershire businesses voted to stay in the EU, with just 14.29% voting to leave. The remainder were undecided.
Clements took the stage to make their predictions for the budget. The screen was then taken over by the Chancellor for the budget, followed by a portion of the opposition’s response. The room was then opened for discussion where businesses discussed what they had heard and their thoughts on the impact of the announcements.
The room saw Kevan Blackadder from Cheltenham Business Partnership, Chris Pockett from Renishaw Group, Helen Taylor from Ecotricity and Linsey Temple from Gloucestershire Engineering Training discuss their hopes for the budget before Corporate and Personal Tax Specialists James Geary and Trish
www.randall-payne.co.uk
the budget Key Points from the Budget 2016 Below is a summary of the key points from the budget: Stamp Duty on Commercial Property Currently the rate of Stamp Duty Land Tax (SDLT) on commercial property is a single percentage rate dependant on the purchase price of the property. This “slab system” can result in an increase of £1 in purchase price increasing SDLT liability by several thousand pounds. Following on from reforms to the rules for residential property, the system will now become banded, to remove this “cliff edge” effect. The following rates will now apply: Transaction Band
Rate
£0 - £150,000
0%
£150,001 - £250,000
2%
Over £250,000
5%
Stamp Duty Land Tax – Additional Residential Properties As previously announced, an additional SDLT charge of 3% will apply to individuals acquiring second or subsequent residential properties (such as second homes or buy-to-let properties) with effect from 6 April 2016. In addition, it is now confirmed that companies buying residential property will also be subject to the higher rates of SDLT. Where there is a delay before the old home can be sold, in a situation where there is an overlap of main residences, the additional SDLT charge will be payable on the purchase. There is then a 36 month window to complete the sale of the first home, following which a repayment of the SDLT supplementary charge can be claimed. The government expects around 10% of residential property transactions in the future to be subject to the higher SDLT rates.
A similar banded system is to be introduced for net present value of leases. The new bands and rates will apply for commercial property transactions completing on or after 17 March 2016.
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the budget
Business rates From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates. Currently, this 100% relief is available for a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less. There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates. Entrepreneurs’ Relief – Associated Disposals New rules were introduced in 2015 to require that for a part disposal of an interest in a business to qualify for Entrepreneurs’ Relief (ER), at least 5% would need to be disposed of. However this has resulted in some normal family succession situations where an associated sale of business property is concerned to lose ER on the connected property disposal. The rules have been adjusted to ensure that a disposal of property used in the business will still qualify for ER where all or part of a business is passed to another family member – even where the amount transferred is less than 5%. The adjustment will be backdated to the date of the rule change in 2015.
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the budget
Entrepreneurs’ Relief – External Investors Entrepreneurs’ Relief (ER) will be extended to external investors in unlisted trading companies. Normally such investors would only qualify for ER if they were directors or employees, and owned at least 5%. This therefore encourages investment into such companies where the stake purchased may be lower than 5%, or where the investor will not be involved in the actual running of the company. The extension applies from 17 March 2016, and requires the shares to be held for a minimum period of 3 years. The same lifetime limit for gains (£10 million per individual) applies as for ER currently. This is good news for businesses who are seeking investment, particularly with the use of crowd funding, where the investors will typically not be getting involved in the business but have vital capital to contribute to the growth and success of the business. Capital Gains Tax – Rates In a surprise announcement, headline rates of Capital Gains Tax (CGT) will be cut for disposals from 6 April 2016 onwards. The main rate for higher rate income tax payers will now be 20% (previously 28%) and the rate for gains falling into any available basic rate band will now be 10% (previously 18%).
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The new rates will not apply to disposals of residential property, and main residence relief for the family home is unaffected. On the face of it this is very good news for individuals with investment portfolios. However part of the Exchequer cost for this change is no doubt covered by the tightening of the rules on winding up companies where there is a continuation of the business in another form, also effective on 6 April 2016. This measure will result in many capital distributions in a winding up or liquidation becoming liable to higher rates of dividend tax instead of CGT. Capital Gains Tax – Goodwill In a reverse move, the government will now allow Entrepreneurs’ Relief to be claimed (subject to certain conditions) on goodwill sold from an unincorporated business to a connected limited company, where the company is controlled by 5 or fewer participators or by its directors. This will be backdated to disposals on or after 3 December 2014. This is great news for small businesses considering incorporation and makes the transfer to limited company status more attractive, particularly where the business is well established with a strong goodwill value.
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the budget “It was an interesting budget, the headline for a company like Renishaw is the investment in the future, innovation and people, the reduction in corporation tax is really interesting. We’ve always said as a company we should be trusted to spend our own money wisely, so that’s good news. “There was a small cheer on our table on the Wales announcement. Renishaw has a big operation just to the west of Cardiff, so the reduction in the Severn crossing toll by 50% has an impact for us. We have hundreds of staff who make that crossing so thats significant. Also because we have the facility, the £1bn city deals for Cardiff and Swansea could be interesting, we do a lot with universities, research colleges and research institutions in both those cities so that’s interesting to us. “The other headline for us is, as an engineering company we focus on STEM, science, technology, engineering & maths, so the teaching of maths to 18 for all pupils is something we’ll be having a look at. I tried to find more detail on the apprenticeships levy, we haven’t yet seen the mechanics of how that will work. We’re recruiting 45 additional apprentices this year alone and we have concerns that it could act as a tax on jobs as well as added bureaucracy, so we hope that money is used positively.” - Chris Pockett Renishaw Group Corporation Tax – Loans to Participators With effect from April 2016, the rate of tax payable by a company on any balances lent by it to an individual participator or related unincorporated business will increase from 25% to 32.5%. This is intended to mirror the effective higher rate of income tax on dividends which is moving from 6 April 2016 at the same rates. As before, the tax is a temporary tax designed to ensure that the Treasury receives the same amount that it would have if the amount had been paid out by dividend instead. When the loan account is repaid to the company, or otherwise cleared or written off, the tax becomes repayable to the company.
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the budget Corporation Tax – Loss Relief The rules for loss relief in companies has been identified as outdated and significant changes will take place from 1 April 2017. There are three principal changes proposed: • Losses carried forward by a company can currently often only be used against the same type of profits in the future (especially trading losses). It is proposed that losses carried forward will now be able to be offset against future profits from all sources. • It is also proposed that losses carried forward by a company within a group can be used against future profits of other companies within the group. • Where a company has profits in excess of £5 million in any one year and also has losses brought forward, the amount of loss it can use on excess profits over £5 million will be restricted to 50% of that excess. The first two of the above are great news for small and medium sized companies and groups and will provide a very welcome simplification of the rules and a more accurate reflection of the reality of how modern companies operate.
Corporation Tax – Rates A further reduction in Corporation Tax to 17% was announced, effective from 1 April 2020. The already planned reduction from 20% to 19% on 1 April 2017 will still go ahead, followed by the fall from 19% to 17% on 1 April 2020. “I was expecting some really bad news when they opened by downgrading the growth predictions but it never came. There was good news for businesses, reductions in corporation tax, reductions in small business rates, reductions in capital gains tax, from 28% down to 20%. There was nothing to counter that, no bad news. It’ll be interesting to see if the crackdown on multinationals like Amazon and Google provides enough revenue to fund the giveaways for small business in this budget. “It’s incredibly positive from a business perspective, very positive from an employee perspective, the increase in personal threshold and the increase in the higher rate to £45,000 is more good news for employees.” - Simon Birks, Sherbornes Solicitors Ltd
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The rules will only apply to losses incurred on or after 1 April 2017, so older losses will still carry the same restrictions. This will prevent a massive Exchequer cost in year one if significant existing losses were suddenly used at the same time. New tax allowances for money earned from the sharing economy From April 2017, there will be two new taxfree £1,000 allowances – one for selling goods or providing services, and one income from property. People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income. In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free. Capital Allowances – Cars 100% Capital Allowances on new low emission cars will be extended for a further three years from April 2018, but the emissions threshold for the allowance will reduce to 50 g/km. At the same time, the threshold for cars receiving the lower 8% annual writing down allowance rate will reduce from 130 g/km to 110 g/km.
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the budget Renewals Allowance for Tools and Equipment For many years businesses and landlords have been able to include replacement of small tools and equipment as expenses rather than as capital purchases. Recently many businesses have been claiming this allowance for much larger items which was not the intention of the rule. The rule has therefore been abolished, meaning businesses will now have to claim Capital Allowances on the replacement of tools and equipment, no matter how small. This is potentially bad news for capital intensive businesses who are already likely to be making full use of the £200,000 Annual Investment Allowance, as tax relief on these small items will be significantly delayed. Residential landlords should be unaffected by the change as the new renewals allowance for furnishings and white goods, effective from 6 April 2016, will preserve the relief for them.
“Generally you’d come away from that thinking it wasn’t that bad, I was prepared for there to be more shocks in there. I think for an everyday person you might come away thinking it had been quite fair but there were some really bad things from our perspective. We’re looking at trying to improve the environment, trying to heighten peoples awareness of trying to support and improve climate change issues, but the carbon reduction commitment is being abolished. There’s support for oil and gas to help them through a difficult time, when the most important thing is to reduce our reliance on oil and gas and get onto renewables. They’re earmarking £720m for flood defences. The cause of the increased flooding is climate change. “There was a brief mention of funding for modular renewables but there was very little detail, it’ll be interesting to follow that. “I think there was nothing too awful, in terms of the day to day, people will have more money in their pockets but the devil’s in the detail and at this stage we just don’t know the details.” - Helen Taylor, Ecotricity
Sugar Levy Soft drinks companies will pay a levy on drinks with added sugar from April 2018. This will apply to drinks with total sugar content above 5 grams per 100 millilitres, with a higher rate for more than 8 grams per 100 millilitres. This won’t need to be paid on milkbased drinks or fruit juices. Duties raised from this levy will be used to double the primary PE and sport premium (the additional money schools have to spend on PE and sports) to £320 million a year. Personal Tax – Allowances and Rate Bands Further increases were confirmed for the tax year 2017-18. The personal allowance (tax free income) for individuals is £11,000 for the 2016-17 tax year, and will increase to £11,500 for 2017-18. The basic rate tax band is £32,000 for 2016-17, and will increase to £33,500 for 2017-18. This means that individuals will pay higher rate income tax on income over £43,000 for 2016-17, rising to £45,000 for 2017-18. The government has already pledged that by 2020 the personal allowance will be £12,500 and the higher rate tax threshold will be £50,000.
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the budget
Lifetime ISA From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money. Money put into this account can be saved until the account holder is over 60 and used as retirement income, or it can withdrawn to help buy a first home after at least 12 months. Funds can also be accessed at any other time for any other purpose, but the bonus would be repaid to the government, plus a proposed 5% charge. The total amount an individual can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017. Help to Save To help the people who find it hardest to save, the government will introduce a new Help to Save scheme for those on low incomes who wish to regularly set aside some of their income. The scheme will be open to 3.5 million adults in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours at the National Living Wage, or those in receipt of Working Tax Credit. It will work by providing a 50% government bonus on up to £50 of monthly savings into a Help to Save account. The bonus will be paid after two years with an option to save for a further two years, meaning that people can save up to £2,400 and benefit from government bonuses worth up to £1,200. People will be able to use the funds in any way they wish.
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Pension Dashboard To help individuals who have multiple pension funds (typically individuals will have 11 different employers throughout their working lives) to keep track of their pensions, it is proposed that a pension dashboard will be implemented by 2019. In addition, to make financial advice more affordable, the government will consult on measures to allow individuals under the age of 55 to withdraw up to £500 from a defined contribution pension scheme to redeem against the cost of financial advice. The allowance for an employer to pay for financial advice tax free for employees will also be increased from £150 to £500. Effective dates are to be confirmed.
For more information on how any of the budget announcements will affect you or your business, contact Randall & Payne on 01242 776000 if
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tax news
Nothing’s as sure as change - and tax! April 2016 and beyond sees significant changes in the way in which tax will operate for many of our clients. Trish Clements from our Tax Team has put together a series of seminars to inform our clients about these changes and the main issues they need to consider in 2016/17 and beyond. The first in the series of seminars were run in February and March 2016. The seminars are aimed at a variety of clients and cover a range of subjects, including: Rental changes for landlords: we look at the potential impact upon landlords of changes to repairs and renewals and the abolition of the wear and tear allowance from April 2016. Also, April 2017 sees the introduction of a restriction on interest relief paid on rental properties for higher rate and additional rate taxpayers. Our interactive seminars enable clients to ask relevant questions and to see worked examples of how the interest relief may impact on them. Dividend tax regime: from April 2016 a new regime of dividend taxation is introduced in the greatest change to the system we have seen for many years, which may see people facing a new, unfamiliar tax bill. The seminars cover old and new regimes, to prepare individuals for the changes in order to plan for any impending tax liability which would be due in January 2018. Worked examples are talked through to give a general overview.
Pension changes: the last few years have seen a significant change in the way pensions are operated, both from a contribution viewpoint and in extracting the pension. The seminars are aimed at those considering their options, from topping up a pension to the most tax efficient way of drawing on pensions. We also discuss moves regarding state pensions, the introduction of one rate and the options available in ‘topping up’ the NIC contributions to increase the pensions.
Inheritance tax: there are many IHT reliefs and options available of which people may not be aware. These seminars cover the possibilities of using these reliefs to minimise IHT exposure and the points that need to be considered when making gifts. Despite the legislation not yet being finalised, we also discuss the introduction of the Main Residence Nil Rate band and its potential impact on individuals and finally, the misconceptions regarding the £1million Nil Rate Band!
Capital Gains Tax: the end of the tax year always sees people considering ways to minimise or defer their capital gains tax liability. Should they have disposed of an asset in the year? This seminar covers the reliefs and deferral mechanisms available for individuals to consider, if this applies. The various options available are discussed and compared.
The seminars are presented in the informal setting of Chargrove House’s boardroom where a relaxed atmosphere encourages all present to air views, thoughts, experiences or concerns.
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The seminars will run again in May/June 2016. To register your interest please email Trish Clements at Trish.clements@randall-payne.co.uk.
Feedback “As a business co-owner, I was aware that forthcoming changes in taxation would affect my personal circumstances but was unsure of exactly what the impacts would be. This series of seminars has clarified how I and the business will be affected, and has allowed us to plan for the future changes.” Rob Adkins, Director of Officeworx
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tax news
Tax News R&D Tax Relief – so much wider than people think! ...with James Geary
08 - 09
More and more companies are now benefiting from a cash boost worth thousands of pounds from the government – could you be one of them? At Randall & Payne, we have saved our clients nearly £2 million using this relief in the last 18 months alone. This tax relief is aimed at so much more than research laboratories and the key is quite simple: solving technical issues. What this means is that if you are trying to achieve something and it is not clear at the outset exactly how it would be possible, or indeed, if it is, then the project you are about to embark on is likely to qualify for R&D tax relief. Here are some examples of qualifying situations - if you’re involved in any of the fields below and are making changes or embarking on developing something new, then you may well be missing out! • Manufacturing
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Website / portal / app development
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Product design
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Software development and techniques (including Search Engine Optimisation)
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Improving an existing process – whether for quality or efficiency
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Designing bespoke systems from combinations of existing technologies
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Developing or improving formulations – whether chemical, plants or other products
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Adapting products for new uses
David Bater, Jason Buttle, Managing Director, Managing Central Compressor Director, Consultants GBE Fire & Security “Great news for CCC and thanks to James Geary “We were alerted to R&D Tax Relief by from Randall & Payne LLP. Having invested Randall & Payne . We were not previously significant time and manpower into our cutting aware that it could apply to the bespoke edge compressor technology over the last few fire and security solutions we provide years, we were very pleased to discover that we to our customers, but James Geary qualified for Research & Development Tax Relief. picked up on it in December 2015 and James guided us expertly through the whole completed two years of claims working process, presenting the technical information in to a very tight deadline, which have now the right format to the authorities, maximising been accepted by HMRC and provided a the amount of costs we could include and cash flow boost to the business worth in preparing a detailed report for HMRC. The first excess of £200,000. With the prospect of two years of claims have generated a tax saving continuing annual claims we are delighted of around £33,000 for the company with which with this result and would recommend we are absolutely delighted. For any business any business developing its own products, developing new products or processes in their software or bespoke solutions to speak field, I would thoroughly recommend talking to to Randall & Payne to see if they can also James to find out if you too can qualify for this benefit from the regime.” very valuable tax incentive.” if
If you think any of the above might apply to you, contact James Geary on 01242 776000 to arrange a free initial meeting. Visit our website for news and seminars www.randall-payne.co.uk
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tax news
VAT News ...with Rob Case
Beware the VAT complexities of online business VAT is widely regarded as one of the more complicated taxes, but it’s even worse for online businesses, particularly those that are importing, exporting, or both. Online businesses face a number of specific VAT issues. If you’re importing, you need to be aware of deferment of duties and VAT but, if you’re exporting, a number of factors influence your VAT bill, including distance selling, currency translation and place of supply. Both import and export have administrative requirements over and above normal VAT reporting. Even Google Adwords or Amazon purchases can add unexpected VAT complexities that many businesses are just not aware of. Our VAT health check can ensure you’re paying the right amount of tax. By analysing your VAT processes, our expert VAT team can assess your
level of VAT risk and make recommendations to help you ensure your business doesn’t have any outstanding VAT liability that could lead to fines. We get an initial understanding of your business, including products or services being sold, any commission arrangements that may be relevant, markets or location of customers and the type of customer: business or consumer. We then review current VAT reporting matters to ensure compliance with regulations, whilst identifying any issues, opportunities or efficiencies. A few straightforward checks can make a huge difference
to your VAT bill and give you peace of mind in case HMRC come calling. We request some basic information in advance of meeting, so that we know which issues you’re likely to run into. We then meet you, either at your offices or at ours, to get detailed information about your VAT processes and discuss our recommendations. After the meeting we will send you a report detailing all matters identified and any potential options or action points, so that you know exactly what you need to do to make sure your business is paying the correct amount of VAT.
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Randall & Payne are currently offering VAT health checks for businesses trading online from just £600. To find out the benefits of a VAT health check to your business, contact Randall & Payne today on 01242 776000.
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tax news
Don’t fall into the VAT tax gap Recent statistics released by HMRC show that the UK’s tax gap, the difference between the amount of tax that should be collected and what is actually paid, is estimated to be £34 billion. Income tax, National Insurance Contributions and Capital Gains Tax amount to £14 billion, while VAT totals £13.2 billion. Broken down by size of business, the statistics reveal that SMEs are most responsible for the tax gap, costing £16.5 billion. This means that SMEs across the country are vulnerable, as HMRC will try to recoup some of it’s losses and SME’s, Income Tax, NICs and VAT are the obvious targets, collectively accounting for around half the uncollected tax. With VAT debt at this level, HMRC have every intention of reclaiming as much as possible. To that end, they are taking a targeted approach to most VAT visits. It is not unusual now for a business to go ten years without a VAT visit, but as HMRC now take a risk based approach to most visits, there is nearly always a reason for one: an unusual repayment return that may be the result of some capital expenditure, or perhaps an unusual amount of sales with no VAT charged (e.g. Zero rated or Exempt), so be prepared to explain abnormal fluctuations. Visits can be over within a matter of hours, or a day at the most, so unless there is something untoward, the process should be relatively straightforward and not too time consuming, especially if you follow my tips below:
Be prepared
Help the officer to do their job
Have a pre-visit health check to identify potential areas of risk and help you prepare for any eventuality. Ensure your records are organised, tidy and that you can lay your hand on paperwork quickly.
Be co-operative and provide them with the answers they need. Take your accountant or adviser with you, even consider hosting the meeting on their premises, this helps to show how seriously you take your financial affairs.
What if they find something? If an error is found (and this is not unusual), penalties of up to 100% can apply. You will be given a copy of your rights under the Human Rights Act. So long as you have taken “reasonable care” it is unlikely that you will be charged a penalty. There are a few means of correcting an error, know your options so you can negotiate how best to deal with it with the officer. The key point, and where we try to help, is to reduce the risk of unexpected problems, try to ensure your VAT affairs are in order, take advice when you are unsure, document that and be prepared for that visit.
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ROB CASE Partner BA (Hons) FCA CTA AIIT Rob is a VAT specialist.
“VAT is an indirect tax with complexities across many sectors. I seek to provide a sound interpretation of the situation, taking an informative approach to what is often seen as an unpopular and overcomplicated tax.”
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For more information call Rob on: 01242 776000 www.randall-payne.co.uk
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academies news
Academies Update Revenue Funding 2016/17 The announcement of the school revenue funding was made on 17 December 2015 and the highlights are: • Dedicated Schools Grant (DSG) distribution to local authorities will be in three blocks for each authority: schools block, high needs block and early years block
• Pupil premium plus for looked after children £1,900 per pupil
• The schools block is still to be made on the basis of the July 2015 announcement. The Minimum Funding Guarantee (MFG) will continue to ensure that no school, despite budget reductions, sees more than a 1.5% per pupil reduction in 2016/17 budget, excluding sixth form funding and Education Services Grant (ESG).
The final allocations will be announced in June 2016 following the spring pupil numbers data.
• There is an additional £92.5m to be added to the high needs block • The early years will comprise the 15 hours entitlement for 3-4 year olds, participation for 2 year olds from the most disadvantaged backgrounds, and early year’s pupil premium. The rates will be held at 2015/16 levels. With regard to ESG, the retained duties will stay at £15 per pupil and, due to efficiency savings, the rate of ESG general funding per pupil will be reduced from £87 to £77. There is also a commitment to maintain pupil premium rates at their current levels being
• Service children £300 per pupil
For Gloucestershire, this means a total DSG allocation of £410.128M, broken down as schools block £334.983M; early years £24.46M; and high needs £50.574M. Worcestershire has a total of £361.663M, split as £303.618M schools block; £20.414M early years; and £37.529M high needs. Universal Infant Free School Meals have had the rate confirmed for 2016/17 at the same rate of £2.30 per meal. However, summer school funding will not continue in 2016. The formula protection funding, introduced in 2013/14 to moderate the impact of funding formula changes, will be phased out over six years, with the first reduction being made in 2016/17. There is a formula and guidance available to work on the impact of the phased reductions.
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• Primary £1,320 per pupil • Secondary £935 per pupil
For more information or guidance, contact our Academies Team on 01242 776000 22
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Teachers’ Pension Scheme There is currently a review being undertaken by Capita, in conjunction with Teachers’ Pensions, over the general administration of the scheme, encompassing the roles of the Teachers’ Pensions and the employer in the process. This has arisen due to the changing landscape in terms of the growth of Academies, the role change for the Local Authorities and, of course, developments in technology and the way in which it is used. All employers are invited to complete a short survey aimed at gathering important information on the time and costs involved in scheme administration. To take part in the survey, go to: https://goo.gl/FkLOkc
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academies news
Schools Efficiency
The EFA has developed support package, with guidance and tools, to ensure that Governors and school management teams have all the information they require to efficiently and effectively run their institution. Key inclusions are managing budgets, effective procurement and greater efficiency by spend examination in comparison to similar schools. Running alongside this the DfE has produced a new benchmarking report card, which will be sent to all schools. The report card will provide highlights of key financial and performance data compared to a small number of statistical neighbours. In conjunction with this, the DfE and Crown Commercial Services have published some procurement training for schools in a module-based format, with trainer notes and exercises, to enable schools to run their own training sessions for their staff. To access the information, tools, training and guidance, go to https://goo.gl/ta9OZY
if For more information or guidance, contact our Academies Team on 01242 776000
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 you’re clients or not. Save the date – the next seminar is scheduled for the
morning of 12th July 2016. If you are interested in attending, a booking form is available at: www.randall-payne.co.uk/news-new/events/
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academies news
Academies Update
continued...
Wraparound and holiday childcare The Department of Education provides draft advice on how schools should respond to potential requests for wraparound and holiday childcare. The draft guidance forms part of a consultation which ran from 7 December 2015 to 29 February 2016 with two key focuses: • parents who ask their child’s school to establish wraparound and/or holiday childcare; and • childcare providers who ask to use school facilities for wraparound and/or holiday childcare at times when the school isn’t using them. This is set against a background of schools being encouraged to make their facilities available for wider community use. The schools are able to make a profit from providing these services, on the proviso that the profit is reinvested within the service provided or in the school. There are opportunities for generating additional income streams for schools and this
may be one avenue of income as funding from the government is reduced. The intention is that the right to request is introduced from September 2016 and so responses were welcomed, especially as the department would like schools to be taking the lead in managing the process and governing bodies having the final decision in what action is to be taken. Feedback was requested on criteria and operational considerations, such as the setting of a minimum number of requests needed for formal consideration to take place and whether the process was clear and understandable with appropriate timescales. Full documentation can be found using this link: https://goo.gl/SPn0DW
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Schools should consider their approach given the guidance produced to plan for September 2016.
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in the community
R&P promote fundraising for Gloucestershire Young Carers Our Chosen Charity, Gloucestershire Young Carers, are gearing up to their main fundraising event of the year: Afternoon Tea for Gloucestershire Young Carers in celebration of the Queen’s 90th birthday. They will be hosting a tea party at the Pittville Pump Rooms at 4pm on 12 June 2016. The models for posters promoting the event are Young Carers Max & Chloe (pictured). Randall & Payne will be holding an afternoon tea for staff and any clients who wish to pop into our offices on Friday 10 June at 2pm to help raise funds and encourage other organisations to do the same. You can request a fundraising pack and sign up by contacting Jane Dyer by email at Jane@glosyoungcarers.org.uk Carers Week is 8 June onwards and if anyone would like to display info during that week on the work GYC do, or on the issues faced by young carers, please contact Jane Dyer.
Stuffing envelopes - and leaflet posting to carers. R&P staff have been onsite at GYC HQ, stuffing newsletters into over 900 envelopes to the Young Carers, who enjoy receiving the newsletters by post. Two groups were arranged to volunteer but the first one, comprising of John Barker, Jo Kline, Lindsay Collins and Gina Gardner, were such a fine-tuned production line that they completed the mammoth task in record time and the second shift of volunteers was not needed! If you can assist with posting mailshots or can spare some volunteering time, for GYC please contact Jane Dyer. if The ‘A-team’ hard at work
If you’d like to get involved in any fundraising events for Gloucestershire Young Carers, please contact Jane Dyer by email at Jane@glosyoungcarers.org.uk www.randall-payne.co.uk
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dates for the diary monday
tuesday
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wednesday thursday friday
saturday
sunday
1 2 3
april 2016
Corp Tax Due - period ended 30/6/15
4 5 6 7 8 9 10 2016/17 tax year starts
11 12 13 14 15 16 17 R&D Tax Seminar with Circle2Success
Due date for 18 19 20 21 22 23 24 PAYE & Class 1 NIC Payments (Electronic Submission)
2015/16 PAYE Month 12
IIGE Seminar Accounts filed at Co House - period end 31/7/15 25 26 27 28 29 30 Corp tax filing deadline period end 30/4/15
monday tuesday wednesday thursday friday saturday sunday 1 Corp Tax Due
may 2016
period end 31/7/15. Daily penalties for o/s14/15 SA returns
Bank Holiday 2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22 Due date for
PAYE & Class 1 NIC Payments (Electronic Submission)
2016/17 PAYE month 1
23 24 25 26 27 28 29
Bank Holiday Accounts filed at Co House - period end 31/8/15 30 31 Corp Tax filing deadline period end 31/5/15
monday
tuesday
wednesday thursday friday
saturday
sunday
1 2 3 4 5 Corp Tax Due
june 2016
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7
period end 31/2/16.
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GYC fundraiser @ Chargrove House
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12
GYC Tea for the Queen @ Pittville
13 14 15 16 17 18 19 Quorum
Due date for 2016/17 PAYE month 2
20 21 22 23 PAYE & Class 1 NIC Payments (Electronic Submission)
24 25 26
27 28 29 30 R&P / WSP Quiz @ Marling School
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9/15 Corp Tax Filing deadline period end 30/6/15
www.randall-payne.co.uk
tax reference
income tax allowances 2016-17 Personal allowance:
Marriage allowance:
Personal allowance £11,000 Income limit for personal allowance £100,000 Income limit for married couple’s allowance £27,000
Married couple’s allowance for those born before 6 April 1935: Maximum amount of married couple’s allowance £8,355 Minimum amount of married couple’s allowance £3,220
Bands of taxable income and corresponding tax rates 2016-17
vehicle benefits
Blind person’s allowance
£2,290
Basic rate
20%
Dividend allowance
£5,000
Higher rate
40%
Additional rate
45%
Starting rate for savings income
0%
Company cars 2016/17 CO2 emissions (gm/km)
Personal savings allowance for basic rate taxpayers
% of cars list price taxed
0-50 7 51-75 11 76-94 15 95 16 100 17 105 18 110 19 115 20 120 21 125 22 130 23 135 24 140 25 145 26 150 27 155 28 160 29 165 30 170 31 175 32 180 33 185 34 190 35 195 36 200 and more 37 Car Fuel Benefit 2016/17 £22,200 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 2016/17 = £3170 Fuel for Company Vans 2016/17 £598 Zero Emission Van 2016/17 20% of normal benefit.
Personal savings allowance for higher rate taxpayers
£1,000 £500
Dividend ordinary rate – for dividends otherwise taxable at the basic rate 7.5% 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
Starting rate limit (savings income if other income is < £5000)
Plant & machinery main rate
18%
Integral features, long life assets + cars over 130gkm
8%
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 31/03/2017 Now unified at a flat rate at 20%* Due to fall to 19% from 1/4/2017, 17% from 1/4/2020. *Different rates apply for ring-fenced (broadly oil industry) profit.
www.randall-payne.co.uk
Basic rate band Higher rate band
£5,000 £0-43,000
£43,001 - £150k
Additional rate band Over
£150K
value added tax Standard rate
20%
Reduced rate
5%
Annual Registration Limit: from 1.4.16 (1.4.15 - 31.3.16 £82,000) £83,000 Annual Deregistration Limit: from 1.4.16 (1.4.15 - 31.3.16 £80,000) £81,000 No change to the Flat Rate scheme/ Cash Account limits
pension premiums 2016/17
• 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’. • Tax relief for large contributions may be spread over several years.
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That’s why 1000’s of businesses have trusted us for over 136 years to see their big picture and to provide them with the knowledge and advice they need to plan ahead for growth. For a free consultation call 01242 776000 www.randall-payne.co.uk Chartered Accountants • Business Development • Tax Planning • Audit • Wealth Management Randall & Payne is a brand name of Randall & Payne LLP. Registered in England & Wales number: OC345710. Chargrove House, Main Road, Shurdington, Cheltenham, Glos. GL51 4GA. Unless otherwise indicated we use the word partner to refer to a member of the LLP. Registered to carry on audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk for the UK, under reference number C002244548 and www.cro.ie/auditors for Ireland, under reference number EWC002244548. 28A member of the ICAEW Practice Assurance Scheme.