New EU court ruling could have significant impact on businesses

September 18, 2015 Posted by Wellden User

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

September 16, 2015 Posted by Wellden User

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.

The future of the Annual Investment Allowance

September 11, 2015 Posted by Wellden User

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?!

September 11, 2015 Posted by Wellden User

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.

Growth top of the agenda for SMEs

September 8, 2015 Posted by Wellden User

According to research from Close Brothers Asset Finance, growing a business is top of the agenda for 34 per cent of SMEs.

The quarterly survey of UK SME owners and senior management from a range of sectors also revealed that more than half of firms have already experienced growth in the last 12 months, while a further 37 per cent expect their business to expand during the next year.

The results also highlighted that a significant number of firms are planning to recruit, with 43 per cent hoping to take on new staff within the next year.

Simon added: “Naturally, firms need to expand their team as they grow organically but the challenge often lies in how they manage this growth. It’s important that firms seek professional advice to help with obtaining funding.

“I would urge any business owners looking at expanding to ensure that they assess their plans and evaluate all of the financial options available to help them find an appropriate solution to fit their needs. At Wellden Turnbull my team and I can assist with a range of issues affecting SMEs and we can also handle the payroll. This allows SME owners to get back to doing what they do best; running their business and growing their enterprise.”

If you would like more information and advice about how to grow your business, please contact us today.

Growing opportunities for SMEs to secure public sector contracts

September 3, 2015 Posted by Wellden User

The Government has announced that it is aiming to increase its spending with small and medium-size enterprises (SMEs) to a third by 2020, and we are encouraging all our businesses clients to get involved.

The most recent public expenditure figures show that from 2013 to 2014, the government spent £11.4 billion of its budget with SMEs – equivalent to 26 per cent of its total spend during that period.

This taken into context with its new target of 33 per cent by 2020 would mean that an extra £3 billion per year will be spent with SMEs, either directly or through the supply chain.

Invoice financing for SMEs

August 24, 2015 Posted by Wellden User

There has been a lot of publicity recently on the availability of finance for small to medium sized enterprises (SMEs), particularly focusing on traditional bank loans or equity investments.

However, there are other forms of business funding which should also be considered as an alternative source of money for firms.

Invoice finance is a solution that is being increasingly used by companies to deal with late payments whilst also improving cashflow. This is where a finance provider pays an agreed proportion (usually 80-85 per cent) of approved invoices to the company on receipt of a copy of the invoice. The balance (minus a small charge) is paid upon client payment.

Andrew Brown, Associate Director said: “With the economy growing, there has been a surge in demand for working capital in the SME sector that has created lots of opportunities for more invoice financing. Despite this, its current use is relatively low compared to ‘traditional’ sources of lending. In fact, only around 43,000 SMEs out of a total of nearly five million in the UK are currently using invoice finance.

“Whilst invoice financing is available from the banks and independent providers, one of the major problems is that there is a general lack of awareness by SMEs of the advantages of utilising this source of funding.”

For more information on what finance options are available for your business, please contact us today.

Businesses need to prepare for changes to company law

August 21, 2015 Posted by Wellden User

New changes to company legislation have recently been announced, which will require businesses to register individuals with ‘significant control’ over the company.

Under proposals, laid down in the Small Business, Enterprise and Employment Act 2015, all businesses that are not subject to specified separate disclosure requirements must create and maintain a register containing details of any person with ‘significant control’.

A person with significant control is loosely defined as a person who directly or indirectly holds more than 25 per cent of the shares or voting rights in the company.

It also includes any person who directly or indirectly has the power to appoint or remove the majority of the board of directors of the company or otherwise has the right to exercise or actually exercises ‘significant influence’ or ‘control’ over the company.

Any person who has the right to exercise or actually exercises significant influence or control over a trust or firm (such as a partnership) that is not a legal entity, which in turn satisfies any of the first four conditions over the company, is also considered a person with significant control under the legislation.

The new Person with Significant Control (PSC) Register must be available for inspection and up to date information must also be provided to Companies House at least once per year.

For confidential advice on managing your business, please contact us today.

A growing number of SME’s to be affected by Auto-Enrolment

August 10, 2015 Posted by Wellden User

Recent data from The Pensions Regulator has revealed that approximately half a million more businesses will have to enrol than previously anticipated and will face higher employment bills as they set-up their pensions.

Apparently, around 1.8m small and micro employers will need to meet their pension duties over the next three years, compared to the previous estimate of 1.3m. Under the new regulations, employers must contribute at least one per cent of eligible employees’ qualifying earnings, rising to two per cent in October 2017 and then three per cent a year after that. However, these contributions are not subject to National Insurance (NI) and they can be offset against business profits for tax purposes.

In addition to the employer’s contribution employee’s will also be required to make contributions which many employee’s see as an extra deduction being made by their employer and it is essential that businesses communicate clearly and at an early stage with their employees to avoid any negative feelings.

But as well as the financial implications this will have for SMEs, businesses could be hit with further costs if they fail to comply with their duties as an employer. If a scheme has not been established by its staging date, the cost could escalate, with fixed penalty fines ranging from £50 to £2,500 a day.

Jane Watford, Payroll Manager said: “It is important to remember that the contributions must be paid into your scheme at each pay reference date. I would therefore advise SME owners to calculate how much they are likely to have to pay in contributions at each date, and set their budget accordingly.

“We can help by providing payroll services as well as sound financial advice for SMEs. Receiving help can reduce the cost of auto-enrolment for your business by ensuring that you’re compliant and avoid financial penalties,” concluded Jane.

Owners of personal service companies could face stricter tax rules

August 7, 2015 Posted by Wellden User

Individuals who run a personal service company (PSC) could face higher tax bills in the future as HM Revenues & Customs (HMRC) looks to re-evaluate its tax rules.

The HMRC have put forward a proposal to amend Intermediaries Legislation, which could have a serious effect on freelancers. The legislation – often referred to as IR35 – was introduced in 2000 and aims to tackle ‘disguised employment’.

It requires individuals working through an intermediary to pay broadly the same tax and National Insurance Contributions as any other employee, where they would have been providing the same services directly. This mainly refers to personal service companies, which are enterprises where people provide their services usually through their own company.

In HMRC’s latest discussion document they say there is a “growing body of evidence which suggests there is significant non-compliance with the current rules.”

They point to the fact that the number of those paying tax under IR35 has remained fairly static, while the number of PSCs has increased dramatically from 200,000 PSCs in 2011-12 to 265,000 in 2012/13 – a number that is expected to continue to grow.

HMRC officials estimate that during 2015, the cost of non-compliance regarding IR35 will total a staggering £430m.

Making the most of your savings – A guide on how to using your savings to improve your financial position.

August 5, 2015 Posted by Wellden User

People often have a slightly misjudged opinion of their savings as a sedentary block of assets that only creeps forward at a glacial pace due to the interest it generates.

The idea that an individual’s savings can be turned into a productive asset is one that is far removed from the image of throwing your money into a dark vault until you need to make a major purchase.

Figures from National Savings & Investments shows that the amount people are putting away reached its highest level in a decade in 2014. The average monthly saving last year was £113, but only 26% of those surveyed were saving with a specific purpose in mind.

Whether you are thinking about maximising the amount of resources you will have for retirement, or you simply want to start making your money work a little harder, there are a range of strategies for getting more out of your savings.

What do you want from your savings?

What you want to achieve is the foundation of your savings strategy.

For example, some options are better suited to those who simply want to increase the amount of money they have as quickly as possible to achieve short-term goals. Others might want to minimise the amount of tax they pay on the money they earn.

Some of the most common reasons people have for saving are:

having a ‘rainy-day fund’ in case you need to make essential household purchases or replacements
holidays and other fairly large and one-off purchases
financial protection
future spending on property, weddings and things of a similar nature
increasing retirement

While there are alternatives to saving to achieve some of these goals, such as insurance, loans or selling your possessions, building up a bank of savings is a less risky way to get to where you want to be.

Inflation and savings

Inflation is an important concept for anyone who is making plans based on their savings to understand. High inflation combined with low interest rates can create a situation where your hard-earned savings begin to lose value.

In order for your savings to be worth the same amount over time, it will need to grow (either through interest or be added to) by at least the rate of inflation.

The golden rule of savings is therefore:

after tax, your savings must earn interest that is higher than the rate of inlation in order for the value to grow.

Savings strategies

There are a large variety of strategies open to those who want to increase their savings, from finding a decent rate of interest to getting on the next plane to Las Vegas with a suitcase bulging with cash.

Here are some of the most popular options:

Tax on savings interest

You do not have to pay tax on savings interest for certain kinds of savings accounts and National Savings & Investment products. Most other savings accounts will incur income tax at 20%, which is automatically deducted from your account.

How much tax you have to pay also depends on your income. For those that earn less than £15,600 (with or without savings interest) a year, it is possible to get your savings interest tax-free. Basic rate taxpayers will have their tax automatically deducted by their bank or building society while higher and additional rate taxpayers will have to pay extra.

ISAs

You can currently save up to £15,240 tax-free into an individual ISA each tax year. The interest earned is treated differently across cash and stocks and shares ISA accounts, with the former being tax-free and the latter tax-efficient.

The 2 different types of ISA, cash and stock and shares, are slightly different, but an individual can choose to split their money between them if they wish.

While a stocks and shares ISA gives you a choice of how your money is invested, like all investments your total savings could fall.

A cash ISA does not give you a choice of how the money is used, it will keep growing with interest added every year or more frequently.

Cash ISAs can be a good option for those who are looking for a low risk way of growing their savings while usually maintaining easy access to your money. If you want the chance of a higher return, then a stocks and shares ISA might just be the ticket.

Fixed rate savings accounts

You can earn a higher rate of interest if you agree to lock up your money and not touch it for a set period of time. These fixed rate accounts are a good option if you have a portion of your savings that you are certain you will not need for a number of years.

However, as with any long-term fixed deal, once the ink is dry on the contract you are at the mercy of external market forces. If you agree not to touch your money for 3 years and over that time interest rates go down and inflation goes up, then your pot will not grow substantially.

Investing

Investing your savings is the riskiest option, but also the one that can bring a big return.

First, you need to decide what you are going to invest in, with stocks, shares, property and bonds being among your choices. Diversifying the range of ways you invest your money can be a good strategy for minimising risk.

Second, you need to decide whether you are going to invest all of your savings or apply a more drip-feed approach based on the results of your initial investment.

Keeping active

One of the most important things to consider for people who are trying to make the most of their savings is the idea of keeping active.

While picking a savings strategy and sticking with it can bring around the desired results, regularly re-evaluating that strategy can maximise these results further.

It is an interesting quirk of the market that providers often offer great deals for the first 12 months or so in the hope that savers will continue to store their assets there once the initial period is over. It may be advantageous to think about switching accounts once the starting offer runs out, but this far from an iron-clad rule.

Some banks and savings institutions also offer savers the chance to earn higher rates of interest if they can commit to make regular deposits into the account.

Good saving takes planning, discipline and knowledge of the wider market environment. We can give you the expertise you need to make the most out of your money.

We can help you with your savings strategy, contact us today

Accounting for change: audits and annual accounts

August 4, 2015 Posted by Wellden User

The threshold for compulsory filing of audited financial statements rose on 6 April 2015 to those businesses with a turnover of £10.2 million or more for periods commencing from 1 January 2016.

This is part of a new European Commission directive which allows member states to choose whether to significantly raise the existing threshold to reduce unnecessary and burdensome red tape. The UK chose to do so and the new threshold was written into the statute under the Companies, Partnership and Groups (Accounts and Reports) Regulations 2015.

This means that most small and medium-sized private limited companies are no longer required to have their accounts audited. There are exceptions, with the following limited companies still being required to carry out an audit even if they do not exceed the threshold:

a subsidiary company (unless it qualifies for an exception)
an authorised insurance company or company carrying out insurance market activity
a company involved in banking or issuing e-money
a Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
a corporate body whose shares have been traded on a regulated market in a European state.

In addition, an accounts audit will be required if shareholders who own at least 10% of shares (by number or value) request it. This can be an individual shareholder or a group of shareholders.

Many companies, however, are continuing to be audited by choice. This is because it is an excellent way to determine exactly where you stand at the point of audit and what changes if any need to be made to keep you on the right track.

An audit also provides a lot of the information you need to comply with your annual reporting requirements.

Whether you are legally obliged to have an audit or not, annual reporting requirements are not optional. They are required by law and failure to submit them to the deadline can result in harsh penalties.

Size matters…

The amount of information you have to submit depends on the size of your business. There are effectively 4 classifications of size: large, medium, small and micro-entity. The classification is determined by various thresholds for annual turnover, the balance sheet and average number of employees. It also depends on which body you are submitting them to.

Whilst companies that qualify as micro-entities, small or medium-sized business can submit abbreviated accounts for Companies House, all sizes of business must submit full statutory accounts to HMRC with their company tax returns.

What are full statutory accounts?

HMRC requires the following:

balance sheet detailing the value of everything the company owns and is owed on the last day of the financial year and must be signed by a director
profit and loss account showing the company’s sales, running costs and the profit or loss it has made over the financial year
notes about the accounts
director’s report.

What are abbreviated accounts?

Companies House will accept the following as abbreviated accounts:

balance sheet from your company’s statutory accounts, signed by a director
notes about the accounts.

Please note you will still have to prepare full accounts for your shareholders.

Keeping records

There is a mismatch between what HMRC and Companies House require when it comes to how long an organisation must keep certain kinds of data.

Companies Act 2006 states that accounting records need to be kept for 3 years from the date they are made. HMRC however, requires that records used to complete company tax returns must be kept for 6 years from the end of the accounting period to which the records relate.

To keep on the safe side and not risk prosecution for failing to keep adequate and accurate records, you should keep the following for at least 6 years:

record of goods and services bought and sold
record of income and expenditure
sales books
petty cash books
invoices and receipts
orders and delivery notes
contracts
till rolls
business bank account statements
VAT records
PAYE records for employees
record of assets and liabilities
statement of stock at the end of each financial year
record of dividend payments, if applicable.

Your records can be kept in digital format, paper based or a mix of both. What’s important is that they are organised in a way that means information is easy to find.

Penalties and deadlines

The one area where there is no confusion is when it comes to penalties. After the end of your financial year, you must prepare full statutory annual accounts, pay corporation tax and file a company tax return within the appropriate deadlines.

Action	Deadline
File annual accounts with Companies House	9 months after your company’s financial year ends
Pay corporation tax	9 months and 1 day after your company’s financial year ends
File a company tax return	12 months after your company’s financial year ends

If your accounting period is different to your financial year, your corporation tax and company tax return deadlines may be different.

To make matters more complicated, you don’t get a bill for corporation tax. It’s up to you to work out how much your company owes.

Missed the deadline for filing accounts at Companies House?

The penalty charges are as follows:

Time after the deadline	Penalty (for private limited companies)
Up to 1 month	£150
1 to 3 months	£375
3 to 6 months	£750
More than 6 months	£1,500

The penalty is doubled if your accounts are late 2 years in a row.

Missed the deadline for your company tax return?

Time after the deadline	Penalty
1 day late	£100
3 months late	Another £100
6 months late	HMRC will estimate your company’s tax bill and add a penalty of 10% the unpaid tax
12 months late	Another 10% of any unpaid tax

If your returns are late 3 times in a row, the £100 penalties are increased to £500 each.

If your return is more than 6 months late HMRC will do a ‘tax determination’ to tell you how much corporation tax they think you must pay. What’s more, you can’t appeal against it.

No hiding place

Now that anyone with internet access can immediately view your company data, your age, address and a veritable mine of other information, compliance and transparency is more important than ever.

Potential clients can see at a glance whether you consistently file late returns or whether any directors have been struck off to name just a fraction of data that is freely available. Any blips could be seen in a negative light. Could your business withstand the scrutiny?

An audit, particularly one carried out by an external, impartial professional can not only ensure you don’t miss deadlines but can also provide that extra level of reassurance for investors, lenders and new clients alike.

Contact us today to discuss how we can assist you with your audits.