Government introduces Consumer Rights Act, as it seeks to simplify and modernise UK consumer law

Small and medium-sized enterprises (SMEs) are being made aware that the law has changed for consumers and it now covers new areas.

Introduced on 1 October 2015, the Consumer Rights Act 2015 seeks to simplify and modernise UK consumer law. The act replaces three major pieces of consumer legislation; the Sale of Goods Act 1979, Unfair Terms in Consumer Contracts Regulations 1999 and the Supply of Goods and Services Act 1982.

Importantly, this is the first time that consumer rights relating to digital content have been clearly set out in the UK. It means that if a digital product such as a game or music file is faulty, not as described or not of satisfactory quality, consumers are entitled to a refund, repair or a replacement. However, if that repair or replacement is impossible or if not done within a reasonable time, then consumers can ask for a price reduction, which can be up to 100 per cent of the cost of the digital content. Consumers will also be entitled to a remedy if any device or other digital content is damaged as a result of the digital content that has been downloaded.

Furthermore, the Consumer Rights Act 2015 introduces a specific period of 30 days for consumers to reject a faulty item and obtain a full refund. The period is shorter for perishable goods where the timeframe will be determined by how long it is reasonable to have expected the goods to last.

There is also a ‘tiered’ remedy system for faulty goods, digital content and services, as well as a focus on unfair conditions in consumer contracts. This will mean that the key terms of a contract, including charges, may be assessed for fairness. Furthermore, the Consumer Rights Act 2015 states that if a retailer provides pre-contract information in relation to a service and the consumer takes this information into account, the service must comply with that information.

For information and advice on how to run your business please contact us today.


How combining technology with a forward-thinking approach can get you noticed in the market…

The Business Development Leaders Network, BDLN, has published an interview with our Director Robin John around our approach to business development.

Robin discusses how combining technology with a forward-thinking approach can get you noticed in the market. In this fascinating insight into the Wellden approach, Robin covers:

  • How a modern approach can outperform the traditional
  • Why smaller firms can often have the edge
  • The importance of innovating in the digital age

 

Businesses urged not to be complacement over accelerated payment notices

Businesses are being urged not to be complacent if they receive Accelerated Payment Notices (APNs), after new figures reveal that the government has collected more than £1 billion through their use.

HM Revenue & Customs (HMRC) recently announced that it has collected more than a billion pound using APNs, since it was granted the new powers in 2014/15.

Under the accelerated payment rules, HMRC is able to make taxpayers pay disputed tax in advance, rather than waiting for the outcome of a tax tribunal ruling.

Once an APN is received taxpayers have 90 days to pay the outstanding tax, whether they feel it is due or not or face additional penalties. If the taxpayer wins the case the money is reimbursed to them with interest.

During the first year HMRC issued more than 10,000 notices to businesses or individuals who had used a disclosable scheme under the Disclosure of Tax Avoidance Schemes (DOTAS) rules.

Andrew Brown, Associate Director said: “Receiving an APN should not be taken lightly, as it can have a serious effect on the liquidity and reputation of you and your business.

“The fact that HMRC have collected more than £1 billion, shows that they are serious when it comes to potential tax avoidance.”

Earlier this year, it was revealed in HMRC’s annual report on tax avoidance, that of the £596m received from APNs during 2014/15, some £28m was refunded after legal challenges.

“While many of those targeted by these new powers may have legitimately avoided paying tax, there will be some individuals and business who have been unfairly targeted and this is evident in the number of refunds already issued by HMRC,” added Andrew. “Seeking professional advice sooner rather than later is critical.”


If you’ve had an issue with the Taxman or you’re subject to a tax investigation by HMRC, then contact us today for confidential help and advice.

UK’s smallest employees need to embrace auto-enrolment

A recent survey comissioned by the Chartered Institute of Payroll Professionals has found that more than a third of workers reaching the end of their working lives are not planning financially for their retirement.

At a time when auto-enrolment is very much at the forefront of SME owners’ minds, 36 per cent of individuals aged 51-60 admitted to having no pension provision. Meanwhile, two-thirds of 20-24 year-olds surveyed also confessed to having no pension plans, with 30 per cent of all survey respondents fearing that their final pension pot is unlikely to be enough to live on when they do come to retire.

Jane Watford, Payroll Manger said: “I would hope that most people are thinking about their future, but these results show that a great many towards the end of their working lives are not planning for their retirement.

“This should act as a wake-up call for SMEs to look at their automatic enrolment staging date and evaluate the role that payroll plays within their organisations. Auto-enrolment is here to stay and will not go away by ignoring it.

“Small employers should therefore be embracing auto-enrolment and promoting the virtues of it to their staff. After all, the survey revealed that 55 per cent of employees feel saving for the future through payroll is a good idea.”

If you’re confused about what the changes to The Pensions Regulator laws mean for your business, and you require assistance setting-up your automatic enrolment scheme, then please email our Payroll Manager, Jane Watford.

Should you require confidential advice on planning for your retirement, then we are also on-hand to help, so feel free to contact us today.

 

New EU court ruling could have significant impact on businesses

A new European court ruling has clarified that travelling time to and from work could itself be classed as work.

In a landmark ruling, the European Court of Justice has said that time spent to and from first and last appointments by workers without a fixed office should be regarded as working time and that wages should be paid in relation to this.

Within most businesses this time has not previously been considered as work and it means that firms operating without a fixed office may be in breach of EU working time regulations.

Failing to meet these regulations could see an employer brought before the Health and Safety Executive in the UK, which could lead to improvement notices being issued. Subsequent failure to comply can lead to unlimited fines and imprisonment.

Simon Odam, Director, said: “This new ruling represents a significant change to the current Working Time Regulations and could have a number of implications on a business, ranging from additional wage costs for travelling time to fines or even imprisonment for those who fail to meet its requirements.

“While some business owners may not be happy with this new measure it is important that they comply with it, or face the prospect of an investigation that could have a significant effect on them and their business.”

Simon went on to explain “this new ruling is most likely to affect care businesses, sales representatives and tradesmen who begin and end their working day at home.

Therefore, if you’re starting a new business, or you’re already a business owner, then speaking to a professional about your responsibilities as an employer in regards to the Working Time Regulations could save you a lot of problems further down the line.”

For further information on on your responsibilites as an employer contact us today.

 

Top Tips for Starting a Business: How to link your Personal goals with your Business Plan

It often amazes me how many Small and Medium Size Enterprises (SME’s) there are in the UK that do not have a Business Plan. According to even the most conservative of estimates, over one million MD/Business Owners don’t have a plan for their business. Are you one of them?

This raises numerous questions…

How can success be gauged accurately? How do you know what direction your business should be heading in without a plan? How can you plan for contingencies if you don’t have a plan in the first place? Let alone not being able to measure your businesses progress on a regular basis.

I think there is another reason that SME owners of small medium do not have clearly thought out business plan. It’s a lack of vision, or perhaps the loss of passion that was there when they started the business originally. Surely your business venture should be the vehicle by which you, the business owner, can achieve your personal goals, thus creating a better life for yourself and those dearest to you?

However too many of the classic business plan templates (usually handed out by banks) fail to link the aspirations of the person running the business, with the objectives of the enterprise concerned. How can the owner of a business be fully engaged with the targets of the business if there is not a direct link to the personal goals that are most important to the business owner? This disconnect is a fundamental flaw in the majority of SME Business Plans as there is often little emotional engagement with the cold hard business goals.

Here’s how to address this issue…

Whether you are starting a business, or planning ahead for your existing business, before putting ‘pen to paper’, ignore the goals of the business (for the moment at least). Your first points of reference for the business plan are your own personal goals and objectives. Time needs to be spent working out exactly what you wish to achieve in the most important areas of your life over a given time period.

These personal goals should be written down, stated in positive language and follow a model like S.M.A.R.T (Specific, Measurable, Agreed, Realistic and Timed) or something similar. There are more detailed goal setting tools, but this method is a start. Once your personal goals are clear, and written down, only then should the Business Plan be drafted.

The key is to ensure that each personal goal has a corresponding goal in the business plan. Personal and business financial goals are easy to link together and therefore easy to measure. For other personal goals you may find it more difficult to make a direct connection between these and business targets. However if you spend time giving these more thought, then a bridge can be built between what you which to achieve in your personal life with the goals you want your business to achieve.

Here’s an example…..

MD/Owners often work long hours, therefore not having enough time for their personal life. I have lost count of the number of business owners who simply don’t get the opportunity of spending more time with their loved ones. When they do manage to spend valuable time with the family it is often interrupted by business communications via the latest mobile device.

One of your personal goals could therefore be to spend five more hours per week with your family and friends, without interruptions from the business. To free up this time, certain business tasks may have to be delegated. The easiest way would be for you, the business owner, to write out simple easy to follows processes for tasks that only you carry out. The business goal in the business plan would therefore be to ensure that written processes are in place to enable you the business owner to delegate. This in turn frees up more time for you to work ‘on the business, not in it’ and to spend more of your time away from the business.

On other words Personal Goal = More time with the family = Business Goal – write down processes to enable me to delegate tasks

In summary, if you don’t have a business plan then write one, but only if it has a direct links to those goals you wish to achieve in your personal life.

For advice on how to manage your business more efficently and effectively, plesase contact us today.

Welcome to a simpler dividend tax regime (but be prepared to pay more tax)

In the Summer 2015 Budget, George Osborne announced fundamental changes to the way in which dividends are taxed. The changes take place for dividends received from 6 April 2016. Some individuals who extract profits from their company as dividends may need to consider whether to increase dividend payments before this date.

When a dividend is paid to an individual, it is subject to different tax rates compared to other income due to a 10% notional tax credit being added to the dividend. So for an individual who has dividend income which falls into the basic rate band the effective tax rate is nil as the 10% tax credit covers the 10% tax liability. For a higher rate (40%) taxpayer, the effective tax rate on a dividend receipt is 25%.

From 6 April 2016:

• The 10% dividend tax credit is abolished with the result that the cash dividend received will be the gross amount potentially subject to tax.
• New rates of tax on dividend income will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.
• A new Dividend Tax Allowance will remove the first £5,000 of dividends received in a tax year from taxation.

Many owner-managers running their business through a limited company will pay more tax next year if most of the profits are paid out as dividends rather than as a salary. This prospect raises a number of questions which we answer below.

Will trading as a limited company still be the best option?

There is still a benefit in tax terms for most individuals to continue to trade as a limited company. The tax saved by incorporation compared to being unincorporated will be reduced next year but there is still an annual tax saving.

Will it be better to take a dividend rather than an increase in salary?

There is still a benefit for a director-shareholder to take a dividend rather than a salary. The amount of the tax saved will be less than under the current regime.

Should dividends be paid before 6 April 2016?

If you do not currently extract all the company profits as a dividend you may wish to consider increasing dividends before 6 April 2016. However, other tax issues may come into play, for example the loss of the personal tax allowance if your total ‘adjusted net income’ exceeds £100,000. There will also be non-tax issues such as the availability of funds or profits in the company to pay the dividend.

Please contact us before you make any decisions about changing the amount of dividends taken. Please note our answers above are based on only limited information that has been supplied by the government on the new regime. We expect draft legislation for the regime to be published by the end of the year.

We can also provide you with expert inheritance tax and VAT tax advice.

Real Time Information submissions – no more automatic penalties

In June, HMRC issued the first in-year notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC.

Previously, PAYE late filing penalties only applied if the end of year return was late. However, under Real Time Information PAYE returns are now required ‘in year’ (generally at least monthly) and as a result tax law has changed to allow HMRC to charge automatic penalties for the late filing of these in year PAYE returns.

The new regime started on 6 October 2014 for employers with 50 or more employees with smaller employers being liable for the penalty from 6 March 2015. An employer who, during a tax month, fails to make a return on or before the filing date is liable to a penalty as follows:

  • 1-9 employees – £100
  • 10-49 employees – £200
  • 50-249 employees – £300
  • 250 or more employees – £400

However, the automatic nature of the penalties is not in line with the likely direction of HMRC’s general approach to many of its penalties, as outlined in a discussion document which it issued earlier this year. Rather than issue late filing penalties automatically when a deadline is missed, HMRC will take a more proportionate approach and concentrate on the more serious defaults. A more targeted approach means HMRC can focus ‘on those determined to bend or break the rules’.

This new approach will apply to all employers but HMRC will review the new approach by April 2016.

Please note, the deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid. So it is important to ensure that PAYE matters are completed on a timely basis and we are happy to assist in this area.

Our payroll team can also assist you with setting-up your company’s auto-enrolment scheme. Contact us today for more information.

The future of the Annual Investment Allowance

The Annual Investment Allowance (AIA) provides an immediate deduction to many business for the cost of most plant and machinery (not cars) purchased by a business up to an annual limit.

The maximum annual amount of the AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. George Osborne has now told us in the Summer Budget what the ‘permanent’ amount will be from 1 January 2016. It is £200,000.

What have also been confirmed are the transitional provisions to calculate the amount of AIA in an accounting period which straddles the date of change.

Two calculations need to be made:

1. A calculation which sets the maximum AIA available to a business in an accounting period which straddles 1 January 2016.
2. A further calculation which limits the maximum AIA relief that will be available for expenditure incurred from 1 January 2016 to the end of that accounting period.

It is the second figure that can catch a business out. For a company with a 31 March year end, under calculation 1 the company will be entitled to up to £425,000 of AIA (9/12 x £500,000 + 3/12 x £200,000).

However for expenditure incurred on or after 1 January to 31 March 2016 the maximum amount of relief will only be £50,000 (3/12 x £200,000).

So check with us what will be the tax efficient capital expenditure limits between 1 January 2016 and the end of the accounting period for your business.

We can also provide expert tax planning advice on capital gains tax, corporate tax, and VAT. Contact us today to make a confidential appointment to discuss your corporate finance needs.

Want to avoid the settlements trap?!

Owner managed companies often seek to minimise the tax position of shareholder-directors by involving members of the same family and using personal reliefs and lower rate tax bands of each person. Income is therefore diverted from the higher rate taxpayer. However, anti-avoidance rules need to be considered as to whether a diversion is effective. This is particularly relevant for spouse scenarios such as husband and wife.

Where it is considered that arrangements have been made by one spouse which contain a gift element, often referred to as ‘an element of bounty’ then the ‘settlements’ rules may apply. A key purpose of these rules is to ensure that income alone or a right to income is not diverted from one spouse to the other. Genuine outright gifts of capital or a capital asset from which income then wholly belongs to the other spouse are not caught by the rules because of a specific exemption from the settlement rules.

Family company shares and the dividend income derived therefrom have frequently been the subject of challenge from HMRC on this matter. An example of a structure which will be challenged is the issue of a separate class of shares with very restricted rights to a spouse, with the other spouse owning the voting ordinary shares. An area of potential risk is the recurrent use of dividend waivers particularly where the level of profits is insufficient to pay a dividend to one spouse without the other waiving dividends. In a recent tax tribunal case dividend waivers executed by two appellant husbands in favour of their spouses constituted a settlement for income tax purposes. The dividends therefore became taxable on the husbands.

The basic facts were that two directors of a company each owned 40% of the shares in the company. Their wives each owned 10% of the shares. However equal dividends were paid to each of the shareholders by the two directors waiving part of their entitlements to dividends and thus allowing larger dividends to be paid to the wives. This had been done for a number of years from 2001 to 2010.

The arguments…

HMRC argued that the taxpayers had waived entitlement to dividends as part of a plan which constituted an arrangement with an intention to avoid tax by seeking equalisation of their dividend income. The appellants’ arguments included the contention that the waivers had been executed to maintain the company’s reserves and cash balances in order to accumulate sufficient of each to fund the purchase of the company’s own freehold property.

The Tribunal preferred the submissions of HMRC that had this been the case the aim could have been achieved by other means, such as voting a lower dividend per share. The Tribunal determined that the waivers would not have been made if the other shareholders were a third party and therefore there was ‘an element of bounty’ sufficient to create a settlement.

Basic tax planning is still an activity that many will seek to use to mitigate tax liabilities but care has to be taken in the current anti avoidance environment to avoid the traps. If we can be of assistance in reviewing your position please do not hesitate to contact us.

Tax planning still available for two homes through Principal Private Residence relief

The UK tax regime provides an important relief from the capital gains tax charge (CGT) on the gains made by an owner-occupiers on the sale of their private homes. This is known as Principal Private Residence relief (PPR).

The general principle is that only one home can count as  PPR at any one time. However, prior to 6 April 2014, where a private home qualified for PPR at any stage during the period of ownership, the last three years of ownership qualified for PPR, even if the property was not lived in during that three year period. That period was reduced for most individuals to 18 months for disposals made on or after 6 April 2014.

Although the period has been reduced there is still useful tax planning that can be achieved for someone who has recently acquired an additional property which will also be a home, for example a property ‘in the country’ which will be lived in at various periods in the year. The example shows the potential advantages of making a ‘PPR election’.


Example

Mr and Mrs White have lived in a property in Leeds for a number of years . They are now semi-retured and acquire a second property in Wales in which they intend to also reside. They start to occupy the Welsh property on 1 June 2015.

As the Leeds propery already qualifies for PPR up to 1 June 2015 the gains accruing on a time apportioned basis to the last 18 months of ownership will be relieved even if they nominate the other property to be their PPR.

They therefore elect for the Welsh property to be their PPR on 1 December 2016. This means this property will also benefit from PPR for the last 18 months of ownership.

They may vary that nomination back to the Leeds property at any time. If the variation is made within a short period of time then any resulting gain on the Leeds property will likely be covered by their annual exemptions.

If they want to change their minds again about the nomination, they can do so. However none of this flexibility is available if the first election has not been made to HMRC within two years of the time when the second property became available to live in.


Last year the government issued proposals to remove the ability for everyone to make an election but it has changed its mind. Instead the government has implemented changes which affect non-resident individuals with property in the UK and UK residents with property abroad.

Prior to 6 April 2014, an indivdual who was not resident in the UK was not subject to UK CGT on residential property so could sell property free from UK CGT for non-UK resident persons.

Further changes restrict the availability of nominating a property for PPR. Examples of the individuals affected by these changes are:
• UK residents who go to work abroad and acquire an overseas second home in the country in which they work
• individuals who retire overseas but keep their homes in the UK.

They may be entitled to PPR for the period prior to 6 April 2015 but will have difficulty in getting the PPR to apply to the UK property after that date. However the last 18 months of ownership may continue to qualify for PPR.

Our tax experts are always on hand to assist you with your personal tax planning, so please feel free to contact us if you consider these changes affect you or you wish to consider making an election for PPR where you have two homes in the UK.

 

The government announces its new flat-rate State Pension scheme

To ask any question about the new flat-rate State Pension scheme seems to suggest a straightforward answer. Everyone will get the same amount won’t they?

The answer to the latter question is no. The amount you will get will depend upon a number of factors including:

  • how many qualifying years you have on your National Insurance (NI) record
  • how many years you have built up an entitlement to the additional State Pension under the current system
  • how many years you may have been paying lower NI contributions because you have been in a salary-related workplace pension scheme or you received NI rebates which went into a personal pension plan. Either of these scenarios had the effect of ‘contracting out’ a person from full entitlements under the State Pension scheme.

The new State Pension scheme applies to everyone who reaches State Pension age on or after 6 April 2016. The full State Pension will be at least £151.25 but the actual amount will be set this autumn. People who have no contribution record under the current system will have to obtain 35 qualifying years of NI credits on their record to give them the flat-rate amount.

However, for individuals who have already built up a NI record (which is nearly everyone reading this article) there are transitional provisions which take into account the NI record accrued up to 5 April 2016. This is a very reasonable complication to have in moving to the= new system. Otherwise, people who have accrued a substantial entitlement under the current system of basic and additional State Pension would be treated very differently depending on whether they reach State Pension Age on the 5 April 2016 (and thus receive a pension under the current system) or on the 6 April 2016 (and therefore receive a pension under the new system).

Under the transitional provisions, your NI record before 6 April 2016 is used to calculate your ‘starting amount’ for the new system at 6 April 2016.

Your starting amount will be the higher of either:

  • the amount you would get under the current State Pension rules (which includes basic State Pension and additional State Pension)
  • the amount you would get if the new State Pension had been in place at the start of your working life.

For many of those reaching State Pension age in the near future, the transitional provisions offer the best of the current and new systems. Employees who have built up a significant entitlement to the additional State Pension will retain their entitlement. People who have been self-employed for most of their working lives may have little or no entitlement to the additional State Pension and thus will benefit from the new State Pension rules.


Example – self-employed

Joe will reach his State Pension age in October 2020 (the State Pension will have risen from 65 to 66 by then). He has been selfemployed except for the early part of his working life and he has no entitlement to additional State Pension. He has 32 qualifying years on his NI record.

His starting amount on 6 April 2016 (based on current figures) will be:

  • under the existing rules – 30 years NI record would give a full entitlement to the basic State Pension of £115.95 a week
  • using the new rules – Joe would get £138.29 a week (£151.25 x 32/35).

Therefore his starting amount is £138.29. As his starting amount is less than the full rate of the State Pension, if he continues working for three years after 6 April 2016 he will accrue sufficient additional pension rights under the new system to bring him up to the full rate of £151.25.


Example – employed

Maureen will reach her State Pension age in October 2020. On 6 April 2016, Maureen has 35 qualifying years on her NI contribution record. During her working life, Maureen has had short periods when she was contracted out of the additional State Pension.

Her starting amount on 6 April 2016 will be:

  • under the existing rules – her 35 years NI record would give her a basic State Pension of £115.95 a week plus £86 additional State Pension but a deduction for her contracted out period of £32. (This will be computed by the Department of Work and Pensions.) This totals £169.95.
  • using the new rules Maureen would get £151.25 less a deduction of £32. This totals £119.25.

Maureen’s starting amount will be the higher of these two amounts, which is £169.95 a week. As her starting amount is more than the full rate of the State Pension, she cannot accrue additional pension rights under the new system.


How do you get a state pension forecast?

You can get a forecast in some cases online via the Government State Pension website – in other cases you need to ask for a forecast by post. For more information and confidential advice, contact us.