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Growing Your Business and the Importance of the Business Plan

Whether the business is a new start or looking to develop to the next level, seeking, securing and managing the finances is a crucial task.  The greatest aid for this is a coherent Business Plan.

It is all too easy to see the Business Plan as set in stone whereas it needs to be regarded as an evolving document that reflects the pitfalls and triumphs the business encounters on the journey from concept to reality.

The Business Plan provides the opportunity for the entrepreneur to highlight their vision and objectives both to third party investors and the key personnel of the company.

Whilst the Business Plan can be nuanced to suit a particular target audience, there are certain benchmarks that need to be included.

The Executive Summary is critical.  In essence, this is the chance to engage with potential investors or lenders.  As a result, it needs to convey the salient points in a crisp and concise manner without drilling into too much detail.

The remainder of the Business Plan is designed to inspire confidence that the venture is more than just a germ of an idea, it is a thought through and considered proposal.  For this the following should be included:

–          The Key Personnel detailing who they are, what their area of responsibility will be and their experience and expertise.

–          Market Analysis on the sector, the products or services provided and the competitors. 

–          The Client Base in terms of both the current order book and the potential pipeline.

–          A Marketing Plan on how sales volumes can be increased to existing clients and how new clients will be won.

–          For existing businesses, the last three years of Financial Data together with the key performance indicators.

–          Financial Forecasts for the next three to five years detailing the core assumptions.

–          Cash-Flow Analysis and Projections out for a minimum of two years detailing the amount of funding that will be required.  In the cases of new starts and recoveries, the Projections should go forward to the point where the business moves into profit.

–          A SWOT Analysis that focuses on the strengths, weaknesses, opportunities and threats to the business.

–          Asset Management that details the key assumptions on the control of capital expenditure, stock, debtors and creditors over the forecast period.

–          Investment Schedule that shows how much the owners have committed to the venture, the details of any existing third party investment and the new funding requirement.  Depending on the type of investment sort, attention should be drawn to potential tax reliefs for the lender (such as the Seed Enterprise Investment Scheme featured in our previous newsletter http://cooperfaure.co.uk/business-finance/) and how either the loan will be repaid or the shareholder will receive a return.

The absolute golden rule is to ensure that the Business Plan has a sufficient inbuilt margin to ensure that the proposal is fully funded.  There is no quicker way to lose an investor’s confidence than by having to revisit for additional funding for the current plan.

At CooperFaure, we have extensive knowledge of business planning and cash-flow forecasting.  If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

Job Vacancy – Accounts Administration Assistant

Friendly Accountancy firm based in Teddington, Middlesex is looking for an Accounts Administration Assistant to join their small but busy and dynamic team.

The candidate should ideally have at least 6 months practical experience working within an office environment.  Experience in an accountancy office is not essential, as full training will be provided.

The applicant must be numerate, meticulous, have a good phone manner and be extremely self-motivated. 

This role is suited to someone looking for their first placement in the sector with opportunity to develop.

Job Type       –           Permanent, Full-Time

Salary            –           £15,000 per annum

Duties this role will include: –

• Managing the daily post and filing.

• Administering the client data archiving.

• Validating Expense Reports and receipts.

• Processing data on to Sage Line 50 software and Excel.

• Generating and Distributing Invoices.

• Attending and making calls.

• Providing general office administrative tasks.

• Greeting clients.

• Assisting with a variety of secretarial duties.

Skills and Expertise Required

To be eligible for this role, candidates must meet the following criteria: –

• Intermediate MS Office skills including Word and Excel

• Excellent customer care skills

• The ability to manage time efficiently and prioritize tasks

• Excellent attention to detail

• A professional, confidential and flexible approach

• Ability to work on your own initiative

• Ability to build relationships and engage with colleagues and clients at all levels

• Personable/professional image (for client visits)

• A team player who is able to provide cover or assistance to colleagues where appropriate

• Experience using Sage is desirable although full training will be provided.

• AAT Qualification is desirable though not necessary

If you are interested in the above role then please apply to freddie.faure@cooperfaure.co.uk.

The Impact of the Change in Stamp Duty

The major announcement in the Autumn Statement was the change in Stamp Duty on a residential property.  This guide illustrates the impact this will have.

For an individual buying a property under the previous rules, the Stamp Duty was levied a single rate based on the purchase price of the property, as follows:

Amount

%

Up to £125,000

0%

Over £125,000 to £250,000

1%

Over £250,000 to £500,000

3%

Over £500,000 to £1,000,000

4%

Over £1,000,000 to £2,000,000

5%

Over £2,000,000

7%

Now, Stamp Duty is charged at a marginal rate with the total tax being sum of the parts of the property price within each tax band at each rate, in the same manner as Income Tax, with the following rates:

Amount

%

£0 – £125,000

0%

£125,000 – £250,000

2%

£250,001 – £925,000

5%

£925,0001 – £1,500,000

10%

£1,500,001 +

12%

As a result, if you now purchase a property for £275,000, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£25,000.00

5%

£1,250.00

£275,000.00

 

£3,750.00

Under the old rules, Stamp Duty would have been calculated at 3% of £275,000.00 totalling £8,250.00.  As a result there is a saving of £4,500.00 under the new method.

Similarly, for a £600,000 property, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£350,000.00

5%

£17,500.00

£600,000.00

 

£20,000.00

Under the old rules, Stamp Duty would have been calculated at 4% of £600,000.00 totalling £24,000.00.  As a result there is a saving of £4,000.00 under the new method.

However, for £1,200,000 property, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£675,000.00

5%

£33,750.00

£275,000.00

10%

£27,500.00

£1,200,000.00

 

£63,750.00

Under the old rules, Stamp Duty would have been calculated at 5% of £1,200,000.00 totalling £60,000.00.  As a result there is an increase of £3,750.00 under the new method.

The ‘tipping point’ is £937,500 where the Stamp Duty calculates through to £37,500 under both the old and new method.

For residential leases, if the cost is more than £125,000, Stamp Duty will continue to be charged at 1% on the amount above the £125,000 threshold.

Likewise, there is no change to the Stamp Duty levied on non-residential and mixed-use properties which is based on the purchase price and lease premium or transfer value at the following rates:

Amount

%

To £150,000 – annual rent < £1,000

0%

To £150,000 – annual rent =>   £1,000

1%

Over £150,000 to £250,000

1%

Over £250,000 to £500,000

3%

Over £500,000

4%

There is no change to the payment process with a Stamp Duty return submitted and the tax paid within thirty days of completing on your property.  Although this is the responsibility of the purchaser, a solicitor or conveyancer usual handles this.

A Stamp Duty return is required even if you are not due to pay any tax unless the property costs less than £40,000.

On receipt of a valid Stamp Duty return, the HMRC will issue a certificate which allows the title of your to the property to be registered at the Land Registry or the Registers of Scotland.

If you would like more detailed guidance on Stamp Duty or the impact of any of the Autumn Statement announcements or have a specific question, please contact welcome@cooperfaure.co.uk and we would be pleased to advise you.

Autumn Statement 2014

The UK Chancellor of the Exchequer today presented the 2014 Autumn Statement which was his final chance to impact the tax regime before the General Election.  Most of the changes were at the margins but this newsletter summarizes some of the main changes that will affect individuals and businesses.

The flagship announcement was the change in the Stamp Duty from a step tier rate system to a marginal rate system with the following rates:

Amount     

%

£0 – £125,000     

0%

£125,000 – £250,000     

2%

£250,001 – £925,000     

5%

£925,0001 – £1,500,000     

10%

£1,500,001 +     

12%

As a result, if you purchase a property for £275,000, the Stamp Duty would be calculated as follows:

Amount

%

Stamp Duty

£125,000.00

0%

£0.00

£125,000.00

2%

£2,500.00

£25,000.00

5%

£1,250.00

£275,000.00

 

£3,750.00

This represents a saving of £4,500.00 against the current method and the new method come into effect from 4th December 2014.  If you have already exchanged but not completed on a property you will have a choice about whether to use the old or new rules.

There was modest additional increase to the Personal Allowance for the 2015-16 tax year of £100 increasing the total to £10,600.  The Basic Rate tax threshold will also increase to £31,785 resulting in the overall amount over which individuals start to pay Income Tax at £40% will be £42,385.

Again, a modest increase to the limit for Individual Savings Accounts (ISAs) was stated for 2015-16 to £15,240 with the Junior ISA and Child Trust Fund limits both to be increased to £4,080.

However, the government will legislate to allow an additional ISA allowance for spouses or civil partners when an ISA saver dies equal to the value of that saver’s ISA holdings on their date of death.

In a similar vein, from April 2015, beneficiaries of individuals who die under the age of seventy-five with remaining uncrystallised or drawdown defined contribution Pension Funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free.  This is under the proviso that no payments have been made to the beneficiary before 6th April 2015.

Where the individual was over seventy-five, the beneficiary will pay at their marginal rate of Income Tax or at 45% if the funds are taken as a lump sum payment.

The Autumn Statement also revealed that Air Passenger Duty would be abolished for children under twelve from 1st May 2015 and this would be extended to children under sixteen from 1st March 2016.

The interim finding of the review into the overhaul of the Business Rates system will be published in December 2014 with the government then conducting a review of the future structure of Business Rates to report by Budget 2016.

In the meantime, the government will extend the doubling of Small Business Rate Relief for a further year from 1st April 2015.

In addition, the Business Rates discount for retail and food and drink premises with a rateable value up to £50,000 will increase to £1,500 from 1st April 2015.

There were no momentous changes to Capital Gains Tax other than a tightening of the rules for Entrepreneurs’ Relief to restrict unfair tax advantages from the disposal of goodwill where that disposal is to a related close company.  This change comes into effect from 3rd December 2014.

However, also from 3rd December 2014, the government will allow gains which are eligible for Entrepreneurs’ Relief but which are instead deferred into investments which qualify for the Enterprise Investment Scheme or Social Investment Tax Relief to remain eligible for Entrepreneurs’ Relief when the gain is realized.

A notable alteration has been made to the Taxation of Resident Non-Domiciles who utilize the remittance basis of taxation. The charge paid by people who have been UK resident for seven out of the last nine years will remain at £30,000. However, the charge paid by people who have been UK resident for twelve out of the last fourteen years will increase from £50,000 to £60,000 and a new charge of £90,000 will be introduced for people who have been UK resident for seventeen of the last twenty years.

The Chancellor declared that there would be a continuing crackdown on tax avoidance and evasion with the primarily measure being the introduction of a Diverted Profits Tax to counter the use of aggressive tax planning techniques by multinationals to divert profits from the UK.  From 1st April 2015, at tax of 25% will be applied to profits generated in the UK.

More transparency is to be introduced to the Disclosure of Tax Avoidance Schemes (DOTAS) with the HMRC to publish summary information about tax avoidance promoters and schemes that are notified under the regime.

For acquisitions made on or after 3rd December 2014, a company will no longer receive Corporation Tax Relief on the acquisition of goodwill where that acquisition is from a related individual or partnership.

Despite a heavy campaign from HMRC, the government determined not to make any changes to the mechanism for the tax on Loans from close companies to individuals, trusts and partnerships that have a share or interest in them.

To boost business finance for SMEs, the Funding for Lending Scheme will be extended by a year until 29th January 2016 and £400,000,000 will be provided to the British Business Bank to prolong the Enterprise Capital Fund.  In addition, the Enterprise Finance Guarantee will support up to £500,000,000 of new lending in 2015-16.

As the Peer-to-Peer platform becomes a more prevalent way for business to raise finance, the government will introduce a new relief to allow individuals lending through P2P platforms to offset any losses from loans which go bad against their other P2P income.  This will take effect from April 2016 and will allow individuals to make a claim for relief on losses incurred from April 2015 through their Self-Assessment tax return.

If you would like more detailed guidance on the impact of any of the Autumn Statement announcements, whether or not featured in this newsletter, or have a specific question, please contact welcome@cooperfaure.co.uk and we would be pleased to advise you.

How to Close Your Business Tax Efficiently with Undistributed Retained Earnings

For many individuals working through their own Limited Company is a choice that gives them control over their career.

However, there comes a time when they may wish to retire or simply no longer run the business.

This guide looks at the most tax-efficient alternative when the sale of the business is not an option.

Once the company has ceased to trade, there are a number of tasks to be completed that might include:

–          Selling the assets of the business;

–          Collecting remaining monies due from the customers;

–          Paying any trade creditors;

–          Notifying HMRC and deregistering from VAT and PAYE;

–          Paying any outstanding PAYE, VAT and Corporation Tax due to HMRC;

–          Preparing accounts to the date the company ceased to trade;

–          Filing any outstanding tax returns;

–          Transferring pensions out of the company.

Once this has been done, hopefully, there will be a pot of money left.

The most tax-efficient method for this is via a Capital Distribution which allows the individual shareholders to claim Entrepreneurs’ Relief so long as they have held their shareholding for a minimum of a year.

Entrepreneurs’ Relief can be claimed by an individual on multiple occasions but has a lifetime limit which is currently £10,000,000.  This relief reduces the rate of Capital Gains Tax to 10% on qualifying assets such as Capital Distributions.

If the amount of money is no more than £25,000.00, the HMRC have granted Extra-Statutory Concession (ESC) C16 that allows this process to be undertaken in-house.

However, if the total is more than £25,000.00, this requires a Members Voluntary Liquidation (MVL).

There is a six step process to this:

–          Download a ‘Declaration of Solvency’ form (if your company is in Scotland, you will need to obtain a Form 4.25 from the Accountant in Bankruptcy).

–          Fill in the Declaration that must be signed by the majority of Directors.

–          Call an Extraordinary General Meeting with the shareholders that must be a minimum of five weeks later and ballot them to pass a resolution for voluntary winding up.

–          Advertise the resolution in the Gazette within fourteen days of it being passed.

–          Appoint an authorised Insolvency Practitioner as liquidator who will take control of the winding up of the company.

–          Send the signed form to Companies House or the Accountant in Bankruptcy within fifteen days of passing the resolution.

Once the liquidator has paid any remaining creditors in full and distributed the surplus funds to the shareholders, they will seek to close their file which triggers the company to be dissolved from the register at Companies House.

At CooperFaure, we have extensive knowledge of both opening new businesses and closing out companies.

If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

Growing Your Business with Third Party Funding

Raising business finance remains extremely tough for small businesses through the traditional business loan or overdraft from the bank.

As a result, many companies are now utilizing other avenues of third party funding.  Likewise, many people with money to invest are benefiting from the potential yield.

A common method of raising capital for a business venture is through family and friends and the government has introduced a number of schemes to mitigate the risk to the potential investor.  The Seed Enterprise Investment Scheme (SEIS) is the most appropriate for a small business looking to raise up £150,000.00.

To qualify, a business has to meet the following criteria:

–          have a UK permanent establishment;

–          have fewer than twenty-five full time (or equivalent) employees;

–          have gross assets of not more than £200,000 at the time of the SEIS investment;

–          have not previously received investments under the Enterprise Investment Scheme (EIS) or Venture Capital Trusts (VCT) schemes.

In addition, the SEIS investment must be spent for the purposes designated within three years of the investment.

The investment is in return for shares in the business which must be new Ordinary shares fully paid up at the time of issue with no preferential rights, other than some limited to dividends, and no rights of redemption.

For the investor, the SEIS offers some attractive tax reliefs with up to a 50% Income Tax relief in the year of investment and, after three years, a total exception from Capital Gains Tax.

However, there is an annual investment limit of £100,000 and there are some qualifying criteria for investors. Primarily,

–          you and your ‘associates’ must not have a ‘substantial interest’ in the business.  This is deemed to be not more than 30% of the issued share capital.  Associates include business partners, trustees and relatives – spouses, partners, parents, grandparents, children, grandchildren, but not brothers and sisters.

–          neither you nor any of your associates may be employed by the company (but you may be a director of the company).

These criteria must be satisfied for three years from the issue date of the SEIS qualifying shares otherwise the tax reliefs would be withdrawn completely.

Another method of raising finance for an established business that is growing in popularity is peer-to-peer lending. 

One of the leading facilitators for this in the UK is Funding Circle who have created a marketplace that connects businesses looking to borrow with people who want to lend and is supported by the government through the British Business Bank.

For the business, loans of up to £200,000.00 can be applied for on an unsecured basis or more if backed by security.  The application process is relatively straightforward and, once the tender has been put out to market, there is no obligation to accept the proposed rate.

In order to retain lender confidence, there is an extensive credit assessment of every application and only established and creditworthy businesses are able to borrow through Funding Circle.

However, this process is usually more expedite and less expensive than borrowing from the traditional banks.

For the investor, the returns can be far in excess of those available from deposit accounts or bonds.  However, it is important to remember that these are, in effect, unsecured loans and there is an inherent risk of bad debts.

As a result, if you decide to invest through either a peer-to-peer platform such as Funding Circle or a crowdfunding platform like Seedrs, the key recommendation is to ensure that you diversify your portfolio to mitigate this risk.

At CooperFaure, we have extensive knowledge of raising business finance both through government-backed schemes and from the third parties. 

If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

Growing Your Business and Reaping The Rewards

As the economic conditions improve, the landscape for business growth is potentially highly favourable.

There are a variety of tax reliefs and incentives that are on offer both to help a business grow and to reward the entrepreneur when they come to sell or close their business.

Virtually every business that employs staff is eligible for the Employment Allowance which reduces the amount of Employer’s National Insurance contributions by up to £2,000 each tax year.  Once a business has registered for the scheme, the Employment Allowance is intended to be automatic and perpetual.

The Annual Investment Allowance has been raised to £500,000 for a temporary period ending on 31st December 2015 when it will revert back to £250,000.  The AIA applies to capital purchases with the exception of:

–          Cars

–          Assets previously used for another purpose

–          Assets gifted to your business

–          Expenditure in the accounting period in which your business ceases

If your business does purchase a car, there is a Capital Allowances available the level of which is determined by the CO2 emissions of the car.  For cars purchased in the 2014-15 tax year, these are:

–          Over 130g/km qualifies for the Special Pool rate of 8% per annum.

–          Between 95g/km and 130g/km qualifies for the Main Pool rate of 18% per annum.

–          Less than 95g/km qualifies for a 100% allowance in the year of purchase if the car is new or the Main Pool rate of 18% per annum if the car is second-hand.

To encourage growth and innovation, small businesses are eligible for a 225% tax relief on Research and Development spending.

For each £100 of qualifying costs, the business would have the income on which Corporation Tax is paid reduced by an additional £125 on top of the actual £100 spent.

In broad terms, this R&D relief is available on projects designed ‘to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty.’

In a similar vein, The Patent Box enables a company to apply a lower rate of Corporation Tax to profits earned after 1st April 2013 from its patented inventions. The current lower rate of Corporation Tax to be applied is currently 10%.

Finally, when a business owner decides to sell all or part of the business or to close their business, they can qualify for Entrepreneurs’ Relief that reduces the level of Capital Gains Tax to 10%.

There is no limit to how many times you can claim Entrepreneurs’ Relief.  However, there is a cap on the amount you can claim during your lifetime that currently stands at £10 million of relief.

In addition, there are strict deadlines to claim Entrepreneurs’ Relief.  For instance, for a business sold or closed in the 2013-14 tax year, the claim must be made by 31st January 2016.

Entrepreneurs’ Relief in normally claimed as part of the Self-Assessment Tax Return.  However, in certain circumstances, it can be claimed separately.

At CooperFaure, we have extensive knowledge of government-funded schemes and incentives for SMEs and sole traders, including those for the creative sector. 

If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

The Paper Vehicle Tax Disc Abolished from 1st October 2014

The referendum on Scottish independence has dominated the local news agenda in the United Kingdom.  So much so that the abolition of the paper vehicle tax disc from 1st October 2014 has not been given due prominence.

From this date, the paper tax disc will no longer need to be displayed on a vehicle windscreen.  If you have a tax disc with any months left to run after 1st October it can be removed and destroyed.

However, this change does not mean the end of vehicle tax which will still be needed to drive or keep a vehicle on the road.  The DVLA will still send you a renewal reminder when your vehicle tax is due to expire.

There is a crucial change when someone buys a vehicle as the vehicle tax will no longer be transferrable.  Instead, the buyer will need to get new vehicle tax before it can be used.

There are three methods to tax the vehicle:

–          the New Keeper Supplement (V5C/2) part of the vehicle registration certificate (V5C) details can be entered online at https://www.gov.uk/tax-disc;

–          or by using the automated phone service that is available 24 hours a day, 7 days a week on 0300 123 4321;

–          or by visiting a Post Office branch.

If you sell a vehicle after 1st October and you notify the DVLA, you will automatically get a refund for any full calendar months left on the vehicle tax.  There will no longer be the requirement to make a separate application for this.

In another change, there will be the facility to pay for vehicle tax by Direct Debit either on an annual, sixth monthly or monthly basis for vehicles that need to be taxed from 1st November 2014.

However, the Direct Debit option is not available for the first registration of a vehicle or for fleet schemes.

If you would like any further information on this or any other matter, please email welcome@cooperfaure.co.uk.

Tax-Free Childcare to Launch in Autumn 2015

Tax-Free Childcare is the government’s flagship measure to support working parents with up to £2,000.00 a year for childcare costs and is due to launch next autumn. 

As a precursor, more details on how the scheme will operate have been released.

When the scheme launches, qualifying parents will be able to open an online account through the government website into which monies can be paid to cover the cost of childcare with a registered provider.  For every 80p paid into this account, the government will add an additional 20p up to a limit of £10,000.00 of which £2,000.00 will be funded by the government.

There are three important considerations:

–          There will be no requirement for the monies to be paid in by the parents allowing, maybe, grand-parents or other relatives to contribute.

–          There will be no fixed monthly amount that needs to be paid in.  Instead, there will be the flexibility to pay in a greater amount when funds allow and to build up a balance to cover periods when more childcare may be needed such as the summer holidays.

–          These amounts are per child per year.

The scheme will be available for all children up to the age of twelve and, for children with disabilities, there will be a higher age ceiling of seventeen.

To qualify, parents have to be in work and with an annual income of less than £150,000.00.

Unlike the existing Employer-Supported Childcare schemes, Tax-Free Childcare does not depend on any involvement from an employer and will be open to parents who are self-employed.

The scheme will also be available to parents on paid sick leave and paid or unpaid statutory maternity, paternity or adoption leave.

If you have chosen receive Employer-Supported Childcare, typically from a Childcare Voucher scheme, then you will be able to continue to do so.  There will be no requirement to switch to Tax-Free Childcare and Employer-Supported Childcare can continue to run for as long as your employer offers it.

However, once Tax-Free Childcare is launched in autumn 2015, parents will no longer be able to register for Employer-Supported Childcare.

The only exception will be where an employer offers a workplace nursery which will not be affected by Tax-Free Childcare.

Finally, should your circumstances change or you opt to no longer use the account, there will be the ability for you to withdraw the funds that you have built up with government extracting their corresponding contribution.

The government promises that they will make the process as simple as possible for parents with a streamlined registration and ‘light-touch’ reporting.  However, at this stage, the details of this mechanism are yet to be released.

As a result, we will be monitoring developments on Tax-Free Childcare over the next year and publishing news alerts when more information becomes available.

In the meantime, if you would like to discuss whether Tax-Free Childcare will be the best option for your circumstances, please email welcome@cooperfaure.co.uk for an initial free consultation.

HMRC Offers a Settlement Opportunity for Employee Benefit Trust Schemes

As a precursor to writing to individuals who have open tax assessments resulting from their loan arrangements under Employee Benefit Trust (EBT) schemes, the HMRC have written to tax advisors outlining a Contractor Loans Settlement Opportunity.

There are three key points about this Contractor Loans Settlement Opportunity:

–              the HMRC documentation unequivocally states the deadline of 9th January 2015 is an opportunity to settle before a case relating your scheme reaches a Tribunal.  This seems to take the Follower and Accelerated Payment Notices that were legislated for in the 2014 Budget out of play for the moment.

–              the requirement, if you choose to settle, is to be ‘engaged’ with HMRC about a settlement by 9th January rather than to have settled and paid any tax due by this date.

–              this covers the tax years up to and including the 2010-11 tax year.

The HMRC are promoting a number advantages to taking this opportunity:

–              the certainly of closing this matter with HMRC in a legally binding manner that precludes HMRC seeking an additional amount from a more favourable future ruling.

–              this is restricted to the 2010-11 tax year and earlier years where there are open enquiries or assessments.  If a settlement is agreed, the HMRC will not pursue any earlier years where there is no open enquiry or assessment other than in ‘exceptional circumstances’.

–              the settlement is restricted to the Income Tax due on the amounts received as Loans (together with the resulting late payment interest) with no National Insurance due.

–              the HMRC will waive any pursuit of the individual having ‘culpability’ in relation to the operation of the EBT except in ‘exceptional circumstances’ which would exclude any penalties being applied.

The first consideration is that, although the HMRC makes reference that they ‘strongly believe’ that the arrangements of your EBT do not work, this is still a matter of opinion.  To date, there is no Tribunal ruling to validate this.

The second consideration is that there are frequent references to ‘exceptional circumstances’ where the HMRC could issue an assessment or penalty in the future without there being any indication of what these circumstances could be.  This seems to undermine their primary offer of the certainty that the matter is closed if a settlement is agreed and, therefore, this would need to be clarified in any negotiation.

The HMRC document focuses on the Philip Boyle v HMRC Tribunal ruling that they won last December. 

Whilst the similarities are highlighted insofar as Mr Boyle was an IT Contractor who had a contract of employment with an overseas employer and who was paid for his work in the UK partly through taxed salary and partly from the provisions of loans, the HMRC do acknowledge the not inconsiderable differences.

Firstly, the scheme in this case involved loans provided directly by the employer and not through a Trust.  Secondly, the repayment mechanism for these loans was purported to be through unusual foreign currencies that led to such arrangements being known as ‘soft currency loan schemes’.  One of the key reasons that the HMRC won the ruling was that no foreign currencies were actually supplied or transacted.

The HMRC argue that the principles that applied in this case of a contractor receiving loan payments from an employer abroad are relevant in all similar circumstances notwithstanding the clear differences. 

In deciding whether the Settlement Opportunity is the route that you wish to take, it is important to reiterate that this argument is an opinion that is yet to be successfully tested by HMRC.

Indeed, last month HMRC lost its appeal to the Upper Tier Tribunal against a First Tier Tribunal ruling that had essentially determined that large parts of the Employee Benefit Trust run by Rangers FC were compliant.

It is worth noting that this First Tier Ruling was issued in November 2012 and the whole process started in 2010 which gives an indication of how time-consuming and expensive the process is.  The HMRC are now seeking permission to appeal the Upper Tier Tribunal ruling to the Court of Session, so this case is far from over.

Finally, it is important to emphasize that the legally binding aspect of the Settlement Opportunity works both ways.  If you agree a settlement with HMRC and, subsequently, they fail to win a judgement that your EBT was not tax-compliant, you have no recourse to recover the tax paid as part of the settlement.

Despite all the aforementioned caveats, with the correct negotiation, the Contractor Loans Settlement Opportunity does present a chance to close this issue.

At CooperFaure, we are currently working with several clients who have ongoing open tax assessments from their EBT. 

In addition, in 2008 we helped to negotiate settlements with HMRC for clients who were under the same scheme as Mr Boyle and were facing the same dilemma as to whether or not to settle.

If you would like any further information or to discuss your circumstances, please contact us at welcome@cooperfaure.co.uk to arrange an initial free consultation.

Growth Vouchers – Helping Small Business Afford Strategic Advice

The government has launched the Growth Vouchers Programme to support small businesses invest in strategic business advice, under European State Aid rules.  The Programme offers matching funding of up to £2,000.00 to help a business afford:

–          finance and cash flow planning

–          recruitment and staff development

–          the improvement of leadership and management skills

–          planning a marketing campaign

–          optimizing the use of digital technology

The Growth Vouchers Programme is open to small and micro businesses, including the self-employed, which fulfil all of the following criteria:

–          have forty-nine or less full time employees.

–          have a turnover or Balance Sheet total of less than €10,000,000.

–          be independent with no more than 25% owned by outside organisations.

–          have been actively selling goods and/or services for at least one year.

–          be registered in England.

–          have an email address.

–          have received less than €200,000 in state grants in the last three years.

–          have not applied for Growth Vouchers before nor have already paid for any strategic business advice in the last three years.

In making your decision whether to apply for the Growth Vouchers Programme, an important consideration is that this Programme is being run on a lottery basis.  As a result, some of the eligible applications will be randomly selected to receive the Growth Vouchers.

Another consideration is that you need to apply for the Growth Vouchers before discussing or agreeing a package of support with a supplier against which the Growth Vouchers would be redeemed.

Finally, the Growth Vouchers may not be used to cover the cost of purchasing ‘business as usual’ services such as building a website; paying for advertising; the acquisition of software; buying any new equipment; staff training; or accountancy fees.

If you decide that it would be worthwhile for your business to participate in the Growth Vouchers Programme your application can be submitted online at https://smallbusinessgrowthvouchers.service.gov.uk.

At CooperFaure, we have extensive knowledge of government-funded schemes for SMEs and sole traders.  If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

The Mayor of London Offers Financial Support for Businesses to Install High-Speed Broadband

London is one of twenty-two cities across the United Kingdom that is participating in the Broadband Connection Vouchers scheme funded by the Department for Culture, Media and Sport.  The scheme aimed to assist businesses cover the cost of installing High-Speed Broadband.

Broadband Connection Vouchers provide up to £3,000.00 for the installation of a faster broadband connection, usually of at least 30Mbit/s, or a dedicated business grade broadband service.

High-speed broadband makes it more practical to work in the cloud, it quicker to transfer large files securely and it offers a more productive and reliable service.  All of which could support your business to work more efficiently, to grow without the need to invest in more data hardware and, potentially, to reduce your operating costs.

Broadband Connection Vouchers are available to your business in London so long as:

–          it is a Small or Medium Enterprise (SME), registered charity, social enterprise or sole trader.

–          the installation of your new broadband connection will cost over £100.

–          the connection is for your business premises.  This can be your home if this is your main work place but not if you only work from home occasionally.

–          you are prepared to commit to a minimum six month contract with your supplier.

–          the service that you select delivers a speed or performance improvement on your current connection.

–          you have not received more than around £120,000 in government grants in the last three years.

The definition of a Small or Medium Enterprise is covered by the European Commission.

A Small Enterprise is defined as having forty-nine or less full time employees and a turnover or Balance Sheet total of less than €10,000,000.

A Medium Enterprise is defined as having two hundred and forty-nine or less full time employees and a turnover of less than €50,000,000 or Balance Sheet total of less than €43,000,000.

As part of the application process, you would need to upload a quote from a registered supplier.  Help in finding a quote that fits your business requirements can be found in the London Broadband Guide at https://www.connectionvouchers.co.uk/broadband-guide/.

At CooperFaure, we have extensive knowledge of government-funded schemes for SMEs and sole traders.  If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

The Annual Investment Allowance is now £500,000

One of the flagship measures in the UK Chancellor of Exchequer’s 2014 Budget was to increase the level of Annual Investment Allowance (AIA) to £500,000 from April 2014.

AIA offers tax relief at 100% on Qualifying Expenditure in the year of purchase and is designed to encourage businesses to make capital investments in the knowledge that this will directly reduce the level of Corporation Tax due on their profits.

Most business structures are entitled to the AIA whether you are a Limited Company, sole trader or partnership.

Qualifying Expenditure is defined as ‘expenditure on the provision of Plant or Machinery wholly or partly for the purposes of a qualifying activity that the person incurring the expenditure carries on’.

Essentially, this means that the AIA is available on virtually all Plant or Machinery expenditure and Plant or Machinery covers almost all business assets an individual or company might buy.

The only business assets specifically excluded from the AIA are land, buildings and cars.

Some typical examples of Plant or Machinery that would qualify for the AIA include:

• computers and all kinds of office furniture and equipment

• vans, lorries, trucks, cranes and diggers

• ‘integral features’ of a building or structure

• other building fixtures, such as shop or gym fittings, kitchen and bathroom fittings

• all kinds of business machines, such as printing presses, lathes and tooling machines

• tractors, combine harvesters and other agricultural machinery

• gaming machines, amusement park rides

• computerised /computer aided machinery, including robotic machines

• wind turbines and fibre optic cabling.

This is not a comprehensive list and many other assets would be deemed to be Plant and Machinery and, thereby, entitled to the AIA.

If you are unsure as to whether your capital expenditure qualifies for the Annual Investment Allowance, please contact welcome@cooperfaure.co.uk for further information.

Simpler Income Tax

From the 2013-14 tax year, the HMRC has introduced Simpler Income Tax reporting for small self-employed businesses.

To qualify, you need to be a sole trader or a partnership of individuals with an income of £81,000 or less. 

This amount is the current threshold for compulsory VAT registration but, if you are voluntarily VAT-registered, so long as your income is below £81,000 you are still eligible to use the scheme.

Limited companies and limited liability partnerships cannot use Simpler Income Tax reporting.

There are two aspects to Simpler Income Tax reporting – using Cash Basis Accounting and Simplified Expenses.

Cash Basis Accounting

Traditionally, income and expenses reporting on your Self-Assessment Tax Return has been under the ‘Accruals’ method.  This means that you record your income as you raise an invoice to a customer and you record your expenses when you receive a bill from a supplier.

The Cash Basis allows you to report on your Self-Assessment Tax Return based on the money that has come into and has been paid out of the business.  Money in this context means all forms of payment including cash, card payments, cheques, PayPal, etc.

The potential advantage to a small business is that, at the end of the tax year, you will not have to pay Income Tax on invoices that you have raised in the tax year but that have not been paid.

From the 2013-14 tax year, you have the option to use either method.  You don’t have to use the Cash Basis and we would only advise you to do so if it suits your business.

However, if you decide to convert from the Accruals Basis to the Cash Basis, we would advise that you seek professional advice to ensure that you don’t end up paying tax on the same transaction twice.

As your business grows, you can stay in the Cash Basis scheme until your income reaches £162,000 in a tax year.  Thereafter, you would need to use the traditional Accruals Basis.

There are some specific types of businesses that are not allowed to use the Cash Basis scheme that include:

• Lloyd’s underwriters

• Farming businesses with a current herd basis election

• Farming and creative businesses with a section 221 ITTOIA profit averaging election

• Businesses that have claimed business premises renovation allowance

• Businesses that carry on a mineral extraction trade

• Businesses that have claimed research and development allowance

• Dealers in securities

• Ministers of religion

• Intermediaries treated as making employment payments

• Managed service companies

• Waste disposal companies

• Cemeteries and crematoria

Simplified Expenses

From the 2013-14 tax year, Simplified Expenses allows a small business to use Flat Rates for certain categories of business expense rather working out your actual business expenses which can involve more complex calculations.

You can use Flat Rates for any or all of these expenses:

• Business costs for vehicles

• Business use of your home

• Private use of business premises as a home

All other business expenses need to be calculated in the usual way.

Business Costs for Vehicles

For vehicles, the Flat Rate replaces the actual amounts spent on fuel, repairs and servicing, insurance, licences, etc. and, therefore, the need to allocate these amounts between business and personal use.

The Flat Rate for Cars and Goods Vehicles is 45p per mile for the first 10,000 business miles and 25p per mile for any additional business mileage.

The Flat Rate for Motorcycles is 24p per business mile.

You will need to keep a log of the number of business miles travelled but this replaces the need to keep a track of the running and repair costs of the vehicle.

You do not need to use the Flat Rate for all your vehicles but, if you chose this method for a vehicle, you must continue to report this way whilst this vehicle is used for your business.  In addition, if you have already claimed Capital Allowances for a vehicle, you are not allowed to use the Flat Rate.

The remainder of your business travel, such as train fares, would continue to be reported in the usual way.

Business Use of Your Home

This offers a Flat Rate based on the hours you work from home each month rather than calculating the proportion of the actual costs, such as utility bills, telephone, internet, etc., between personal and business use and applies if you work from home for twenty-five hours or more per month.

For the 2013-14 tax year, the Flat Rates per month are as follows:

25 to 50 Hours                  –              £10.00

51 to 100 Hours                 –              £18.00

101 or More Hours           –              £26.00

Private Use of Business Premises

A small number of businesses use their business premises also as their home.  Guesthouses, Bed & Breakfast accommodation and small Care Homes are prime examples.

In these cases, some of your business premise expenses will be for personal use.

Under Simplified Expenses, you deduct a Flat Rate for private use from the overall running expenses and this Flat Rate depends on how many people use the business premises as a private home.

Again, the advantage is that you don’t have to work out the split between your private and business use of these expenses.

For the 2013-14 tax year, the Flat Rates per month are as follows:

1 Person                               –              £350.00

2 People                              –              £500.00

3 or More People             –              £650.00

Please note that the Flat Rate does not cover Mortgage Interest, Rent, Council Tax or Rates and you would still need to work out the business and personal proportions of these separately.

As with Cash Basis Accounting, Simplified Expenses is optional and, again, we would only advise you to do so if it suits your business.

At CooperFaure, we have extensive knowledge of personal tax matters.  If you have any questions on your circumstances, please contact welcome@cooperfaure.co.uk to arrange a free consultation.

2013-14 Self-Assessment Tax Return – Second Payment on Account

If you pay tax through a Self-Assessment Tax Return and are required to make Payments on Account for 2013-14 tax year, please be aware that the deadline for the HMRC to receive the second payment is 31st July.

If you are unsure of your situation, please contact welcome@cooperfaure.co.uk for further information.