Got ideas buzzing about your business? Let's talk! Schedule a hassle-free, commitment-free consultation at your convenience. Whether it's a Zoom call, MS Teams meeting, or a good old-fashioned phone chat, we adapt to your style. In this initial conversation, share your business vision and queries. From there, we'll whip up a tailored proposal, open for your comments and revisions until it's just right. Give us a shout — let's see what we can achieve together!
We are delighted to announce that Freddie Faure, Lindsay Kantorowicz and Emma Kiviniemi Andersson have qualified as Xero Certified Advisors.
Whether you have implemented Xero and want to unlock its full potential or are looking to migrate to the software, we have the expertise to navigate you through the process from the basic set-up through to developing sophisticated reports.
In a further development, we have implemented Digita, a Thomson Reuters product, to integrate with Xero to seamlessly produce the draft Annual Accounts and the Corporation Tax return.
Already a Xero Gold Partner and with other system implementations on the horizon, this represents a major step to define CooperFaure as the Silicon Valley of Accounting.
If you would like any assistance or advice on Xero or Digita, please email us at welcome@cooperfaure.co.uk for an initial consultation.
On Wednesday 23rd November, Philip Hammond will be delivering his first Autumn Statement as Chancellor of the Exchequer.
Although three months have passed since the EU Referendum and the government repeats the mantra of ‘Brexit means Brexit’, it is still totally unclear exactly what Brexit means.
Against this backdrop, the 2016 Autumn Statement is seminal in shoring up business confidence in these uncertain times. We have advocated restoring the small profits rate of Corporation Tax and setting it at 15% and locking the rate at 5% below the main rate.
On Thursday 24th November, we will be hosting a Free Webinar on the Autumn Statement between 1pm and 2pm. We will be looking at the impact on the entrepreneur, the contractor and the property investor. As well as expert advice and a free copy of the presentation, you can ask that nagging question in our Q&A session.
As ever, places are limited so please click here to register.
The government has accepted the recommendations from The Low Pay Commission to increase the National Minimum Wage for workers aged under 25 and apprentices with effect from 1st October 2016. The changes include:
For workers aged 25 and over, National Living Wage remains at £7.20 an hour.
In a departure from previous years, these new rates are set to last for six months only until 31st March 2017. This is to harmonize the National Minimum Wage and The National Living Wage cycles with new rates for all five categories from 1st April 2017 expected to be announced in the Autumn Statement.
A new business starts on a wave of optimism and enthusiasm whether it be to pursue your dream, to develop a new product or to leverage your talent.
In many cases, the business is incorporated into a Limited Company with a friend, colleague or partner to share the journey and it seems only fair to divide the shares on a 50:50 basis.
Unwittingly, by adopting this structure, you have both just created the potential for deadlock which could have dire consequences in the years ahead.
Like relationships in life, a business relationship can breakdown with irreconcilable differences. If the fall out means that neither shareholder can agree on the business strategy, the company is in deadlock and no decisions can be advanced.
Whilst there are remedies, it is important to recognize that this situation is not catered for in the model Articles of Association when the company is incorporated.
Deadlock is damaging for any business but particularly in the early years where finances and deliverables tend to be tight and the reputational harm can be irreparable.
Should you end up in this unwelcome situation, it is vital that you take action as the future of your business is in peril. The problem is that the remedies at this stage are likely to carry a punitive cost whether it be initiating a court action or seeking to injunct a formal negotiation process.
The first step is to engage a commercial lawyer to advise you of your rights and steer you through the process.
However, this could all have been avoided at the outset by putting a simple Shareholders’ Agreement in place as part of the overall business set-up process.
A Shareholders’ Agreement is a private contract between the parties unlike the Articles of Association that are in the public domain. As such, it provides a framework to formalise a process to resolve a deadlock discreetly.
A Shareholder’s Agreement is also platform to define in detail the rights and the responsibilities of shareholders with regards to the management of the business, the treatment of shares and dividends and their exit strategy.
Another risk from deadlock is that it will lead to diverting profits. It is important to be aware that, whilst the Directors have a fiduciary duty to act in the best interests of the business this does not automatically apply to shareholders. As such, without a Shareholders’ Agreement specifying otherwise, there is nothing to prevent a shareholder establishing a competing business and plundering your business’s employees and customers and, effectively, diverting your profits.
As a Shareholders’ Agreement is additional cost at the time when the business is a kernel of an idea and all-consuming, plus it can be perceived to infer a lack of trust, all too often the founders defer or ignore the issue.
The reality is that there is no better time than the early days to address this whilst the plans and expectations of the founders are fully aligned and the business structure is straightforward.
‘Kicking the can down the road’ invariables results in a costlier Shareholders’ Agreement both as the business matures and adds complexity and as views diverge. On the occasions when deadlock occurs it is too late!
At CooperFaure, we can guide you through the issues that you need to consider and prepare a Shareholders’ Agreement for your business. For further information, please contact us at tax@cooperfaure.co.uk.
The date for the court hearing to decide whether there should be a judicial review of the tax changes to mortgage interest relief on buy-to-let properties has been moved.
This hearing was originally due today but has been rescheduled to Thursday 6th October at the request of HMRC who indicated that their lawyers were not available this week.
The court date in October will determine whether the case put forward by landlords Steve Bolton and Chris Cooper is sufficiently compelling to warrant a full judicial review. However, this is not an indicator that the action will ultimately be successful. We will be reporting as events unfold.
Amongst a whole host of HMRC consultations that are underway is one looking at “salary sacrifice for the provision of benefits in kind” with a view to introducing reforms from April 2017.
Since the turn of the decade, the level of PAYE clearance requests for salary sacrifice schemes has risen by over 30% and there is little doubt that the potential tax savings have been a contributory factor to this increase.
At the moment, under a salary sacrifice or flexible benefit scheme, an employee may be offered a benefit in return for a compensating reduction in salary and there is no restriction on what the benefit can be.
Take the example of a corporate gym membership that costs £700.00 per year. If this is provided to an employee under a salary sacrifice scheme, the cost to the employee in the basic rate tax band in the reduction of net pay would be £476.00. The remaining £224.00 would be funded by reduced Income Tax and National Insurance deductions from the lower salary. Moreover, the employer would save £96.60 of Employer’s National Insurance contributions.
For an employee in the higher rate tax band, the cost would be £406.00 and the Income Tax and National Insurance savings would be £294.00. The employer’s element remains the same.
The government is proposing that, from April 2017, the gym membership itself would be treated as a benefit in kind and, therefore, there would be no tax saving for either the employee or employer.
For the following specific areas, there will be no change to the current system with the tax savings remaining:
Whilst the proposals do not impose any constraint on the benefits an employer can offer under a salary sacrifice arrangement, everything else would be taxed as a benefit in kind.
Therefore, the only potential upside for the gym membership in our example or, say, a mobile phone contract or laptop, would be if the buying power of the company enabled it to attract a better price than the individual.
The taxable benefit in kind is set to start from 6th April 2017. The consultation document uses the example of and employee that starts to sacrifice £600.00 per year for a workplace parking space in September 2016. Until 5th April 2017, there continues to be no Income Tax or National Insurance due on the parking space but from 6th April 2017 it will be treated as taxable.
Employers would be required to report these taxable benefits in kind provided through salary sacrifice to HMRC in the same manner as other taxable benefits in kind that they already report, such as company cars or private medical insurance. Usually, this requirement is met by submitting P11Ds at the end of the tax year.
In our response to the consultation that we will be submitting at the beginning of October, we will highlight two main concerns.
Firstly, from the employee’s perspective, there will be no visibility that anything has changed. Taking the consultation document example, the payslip in March 2017 and April 2017 will be identical with a £50.00 salary sacrifice for the parking space reducing the gross pay.
It will only be when the P11D is submitted at around July 2018 that the tax liability for the 2017-18 would become apparent to HMRC and the tax would fall due.
Secondly, whilst the parking space is clearly optional and the employee can choose to end the arrangement at the end of March 2017, no provision has been made for instances where the employee is locked into an arrangement. For example, a two-year mobile phone contract with a third party vendor.
The employer and employee have made an arrangement in good faith under one set of rules only for these to change part way through with no exit strategy.
Whilst at the margin salary sacrifice or flexible benefit arrangements have been used to manipulate an employee’s income to reduce Student Loan repayments or to enable the continued entitlement to Child Benefit, broadly speaking these schemes have been operated as a genuine incentive to staff.
Although HMRC estimate that the overall cost to the Exchequer is in the region of £5 billion a year, it is clear that the vast amount of this is driven by pension contributions and childcare schemes that will remain unchanged.
As a result, we believe that it would be far more fair and equitable for this change to apply to new arrangements from 6th April 2017 onwards and for the resulting additional tax to be collected via the payroll rather than the P11D process.
If you have any questions, comments or concerns on this HMRC proposal, please email us at tax@cooperfaure.co.uk.
An ever-increasing number of property owners are offering their home for a short-term let either around sporting events like Wimbledon or through Airbnb whilst on vacation.
A common misconception is that the income received is covered by the Rent a Room scheme but this is not the case if the whole property is let out.
In these cases, the income must be declared on a Self-Assessment Tax Return and the resulting tax paid accordingly. This is an area HMRC are focusing on as part of their crack down on tax evasion.
You would qualify for the Rent a Room scheme if you are a resident landlord letting out a part of your only or main home on a furnished basis. This can be a room or an entire floor but not a purpose-built flat within the premises.
For the 2016-17 tax year, the scheme allows you to earn up to £7,500 per year tax-free. For the 2015-16 tax year, the threshold was £4,250. These thresholds apply to the property and would be halved if you share the income with your partner or someone else. Should you elect to charge for additional services such as meals or laundry, all payments received must be added to the rent in determining your total income.
If your overall income is below the threshold, the tax exemption is automatic and there is no requirement to report this to HMRC.
However, you must complete a tax return if you earn more than the threshold. If this is the case, you can either opt into the scheme and claim your tax-free allowance or, instead, record your income and expenses in the property section of your tax return.
In theory, you can be a resident landlord irrespective of whether or not you own your home but, if you are a lodger, you need to be certain that your tenancy agreement allows you to take in a lodger.
The manner in which you share your home impacts the kind of tenancy the lodger has and their resulting rights and how the tenancy can be ended.
For the resident landlord, your lodger is deemed to be an ‘excluded occupier’ if they share a kitchen, bathroom or living room with you or a member of your family.
If this is the case, you only have to give them reasonable notice to end the letting, which is commonly reckoned to be the length of the rental payment period, and you can evict them without redress to a court order.
If your lodger does not share any living area with you and your family, they would be classed as an ‘occupier with basic protection’.
In this case, you must serve them a written ‘notice to quit’ and the notice period would need to be stipulated in the tenancy agreement. If your lodger refuses to leave, you would need a court order to evict them.
There are no restrictions per se on the level of the rent you can charge and this can include Council Tax and utility bills. However, this needs to be agreed with your lodger beforehand.
There are other considerations:
As well as the Income Tax on your rental income, it is important to consider the Capital Gains Tax consequences.
You are entitled to full Private Residence Relief, which would mean the gain on the sale of your home would be exempt from Capital Gains Tax when you sell the property, if the following conditions apply:
As a result, whilst it may be tempting to take in more than one lodger at a time, you must bear in mind that this could result in a Capital Gains Tax liability in the future.
If you let rooms to more than two lodgers at the same time, your property would be classed as a House in Multiple Occupation which has far more stringent standards and safety requirements and can require a licence.
If you have any questions around any aspect of renting your property, please email us at tax@cooperfaure.co.uk for an initial, free consultation to discuss your situation.
Last weekend Emma was in Stockholm competing at the Swedish National Athletics Championships in her sport of pole vaulting.
Emma exceeded her ranking by finishing a magnificent fifth with a season’s best clearance of 3.77 metres in a competition where the first and second placed athletes had represented Sweden in the Rio Olympics.
A massive congratulations to our young accountant as she continues her quest to compete for her country at the Tokyo games with the support of the West London Pole Vault team at Brunel University.
In the United Kingdom, for all landlords, Income Tax is due on the rental income from a property on an annual basis and, potentially, Capital Gains Tax in the year the property is eventually sold.
The calculation of Income Tax for a non-resident landlord or overseas investor is broadly the same as a UK-based landlord.
However, there are two specific considerations – the Personal Allowance and, if applicable, the impact of a double-taxation agreement.
As it stands, you are entitled to receive a Personal Allowance if you are a British passport-holder, a citizen of a European Economic Area country or if it is provisioned in a double-taxation agreement between the UK and the country you are living in.
The key point as a non-UK resident is that you have to claim the Personal Allowance at the end of each tax year in which you have UK income by sending form R43 to HM Revenue and Customs (HMRC). The R43 form can downloaded here and the Guidance Notes here.
Whilst the government has mused on restricting the entitlement of a non-UK resident to a Personal Allowance, there is a commitment that no change would be made before the start of the 2017-18 tax year.
If you are eligible for a Personal Allowance, you pay Income Tax on your income above that amount. Otherwise, you pay Income Tax on all your income.
If you are also taxed on your UK income by the country in which you are resident, you may be entitled to a partial or full relief from paying tax twice depending on whether there is a double-taxation agreement in place between that country and the UK.
Each double-taxation agreement stipulates whether you can either apply for a relief before the tax has been paid or a rebate after you have been taxed. As a general principle, if the rates of tax are different in the two countries, you will end up paying the higher rate of tax.
If you would like more information on the double-taxation agreement between your resident country and the UK, please email us at tax@cooperfaure.co.uk.
Even if there is no Income Tax to pay, you are required to submit a Self-Assessment Tax Return for each tax year that you have UK income. The tax year runs from 6th April to 5th April.
The HMRC online filing service is not available to non-residents. As a result, the options are to send your tax return by post which must be done by 31st October or to engage an accountant to act on your behalf which extends the deadline to 31st January.
The rules for Capital Gains Tax are driven by whether you are UK tax resident when come to sell the property.
Take the scenario where you have bought a property as your home only to rent it out to pursue an employment opportunity overseas but subsequently return to the UK to sell property. As long as you have established a footprint that you have lived in the property as your main residence, however briefly, then you will be entitled to Private Residence Relief and Letting Relief.
Unless you have lived in the property as the owner, then the only allowance would be the Annual Exempt Amount that is currently £11,100.
Private Residence Relief exempts the period that you lived in the property and the final eighteen months of ownership, irrespective of whether you are living in the property, from Capital Gains Tax.
The remaining time as a percentage of the total period of ownership determines the amount of the Chargeable Gain against which Letting Relief is claimable at the lowest of:
There are a couple of key points to make about Letting Relief. It pertains to the person and not the property so, if the property is jointly-owned, each owner would be entitled to the relief on their portion of the chargeable gain. However, it cannot be applied to a Chargeable Gain made whilst your home is empty.
Finally, the £40,000 ceiling on Letting Relief has not changed since 1991 which has undoubtedly blunted its impact. However, for a Higher Rate taxpayer, it would have reduced the Capital Gains Tax payable by £11,200 in the 2015-16 tax year.
For overseas investors disposing of a UK residential property, Capital Gains Tax has applied on gains arising on disposals after 5th April 2015 but only on the portion of the gain accrued since 5th April 2015.
There are two main methods to calculate the portion of the taxable gain – rebasing or time apportionment.
For rebasing, you would need to establish the value of the property on 5th April 2015 and the gain arising between then and the date of sale would be taxable. This is difficult to validate retrospectively unless a valuation was undertaken at the time.
Therefore, time apportionment may be the better option. Here the overall gain is calculated and factored by the proportion of the time of ownership since 5th April 2015.
As a result, the dates of the purchase and sale form a central part of the Capital Gains Tax calculation together with the financial details around the purchase and sale of the property.
An important note is that there are no double-taxation arrangements in place for Capital Gains Tax resulting from the sale of a UK residential property.
Even if you have no tax to pay, you must notify HMRC that you have sold the property within thirty days of transferring ownership commonly referred to as conveyancing.
This thirty-day deadline also applies to the payment of the Capital Gains Tax due unless you are already submitting a Self-Assessment Tax Return. In which case you can choose to make the payment when your return is submitted or on the normal due date of 31st January after the tax year of the disposal.
We have prepared worked Capital Gains Tax examples for Private Residence Relief and Overseas Investors.
However, this is a complex area of taxation that we specialise in at CooperFaure. Please email us at tax@cooperfaure.co.uk if you would like an initial, free consultation to discuss your situation.
Next Monday, we will be publishing a newsletter that looks in detail at the rules for a Resident Landlord as HMRC looks to crackdown on collecting the tax due from Airbnb income.
Whether you have decided to move abroad for work or lifestyle reasons but keep your UK property or you have opted to buy a property in the UK as an investment, you need to be aware of the tax implications both if you rent out the property and when you come to sell it.
The rental income of the property is subject to UK Income Tax. The level of net income combined with whether you qualify for a Personal Allowance determines how much tax is due.
To protect the Exchequer, the HMRC introduced the Non-Resident Landlord Scheme to collect tax at source from overseas landlords either from the letting agent or the tenant, unless you receive a rent of less than £100.00 per week directly from the tenant.
This is also the case should the payment be made from the tenant to your UK representative, such as a friend or family member, who is not a letting agent.
Under the scheme, the rent, less any direct expenses incurred, is taxed at the basic rate of 20% with no consideration made of your entitlement to a Personal Allowance or the other costs incurred on the property.
As a result, in most cases, the landlord is grossly over-taxed and only has the chance to remedy the situation at the end of the tax year.
To counter this, as non-resident landlord, you can apply to have you rent received without tax deducted. Broadly speaking, the application will be approved so long as you are up to date with your UK tax returns and payments.
If your application is approved, HMRC will instruct your letting agent or tenant not to deduct tax from your rent. Instead, you will be required to declare your income through a UK Self-Assessment Tax Return.
It is important to bear in mind that if you intend to no longer live in the UK, it does not automatically follow that you are a non-resident for tax purposes and, if you are, there are absolute rules on the number of days you will be allowed to spend in the UK. This will be determined by the Statutory Residence Test. The HMRC provided an online Tax Residence Indicator but, given the Guidance Notes run to 105 pages, we would strongly recommend that you review this with a tax advisor.
Although you have the option of managing the rental of the property yourself or relying on friends or family, this can be extremely time-consuming and stressful. As a result, most commonly a professional letting agent is appointed to administer the property.
As a rule, the agency fee will be between 10% and 15% of your rental income. In exchange, the agency will ensure that the property is tenanted with as few breaks as possible, the rent is collected in a timely manner and the property is well maintained.
If you have a mortgage on the UK property that you are planning to rent out, it is vital that you contact your provider and notify them before you commit to the decision. It may be moving overseas and renting out your property violates your current loan agreement. This needs to be resolved prior to you embarking on the property rental.
Finally, it is critical to ensure that you have adequate landlord insurance in place not only covering the building and contents but also rent arrears, legal costs and damage.
This is easier said than done as the main insurers tend not to make it obvious whether they cover overseas landlords.
To save time on lengthy research, you could opt to contact a landlord insurance broker to advise on the providers and their level of cover and policy limits.
Emergencies tend to happen at the most inconvenient times so, as well as the cost of the premium itself, you should consider how contactable the insurer will be. For instance, an online chat facility would reduce the cost of phone calls.
Ideally, the policy will allow a disclosee to be nominated. This is a person authorised to act on behalf of the policyholder which can be especially useful where your time zone difference becomes a factor.
At CooperFaure, we are currently advising clients with both individual and corporate property portfolios and would be pleased to review your circumstances. Please email us at tax@cooperfaure.co.uk for an initial, free consultation.
We will be publishing an accompanying newsletter that looks in detail at the Personal Allowance, Income Tax and Capital Gains Tax implications for overseas landlords.
In the meantime, this BUTTON links to a free tax calculator to provide an indication of the Income Tax due for the 2015-16 and 2016-17 tax years.
The 2016 Budget included a clause on future measures to tackle the current and historic use ‘disguised remuneration’ schemes. These are generally schemes that involve individuals being paid in loans through structures such as an offshore Employee Benefit Trust (EBT) or Contractor Loans. In both instances, whilst the loans are theoretically repayable, the Loan Agreement is drawn up in a such a way to ensure that, in reality, these loans are never repaid.
The clause ended “…this will include a new charge on loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5th April 2019.”
In the first step on this journey, individuals that have been remunerated through an EBT and who have not settled with HMRC by 30th November 2016, will no longer qualify for relief on investment returns.
Commonly under an EBT, an employer paid in funds to an offshore Trust to benefit an employee. At the moment, HMRC has been looking to settle based on the amount paid into the Trust by the employer whilst there is a relief against any gains made on these monies whilst within the Trust. From 30th November 2016, tax will be due on the full amount.
Contractor Loan schemes are still actively marketed on the basis that it will reduce a tax bill for a contractor. Ironically, running a contract through a Limited Company in a tax efficient and compliant manner can usually yield the same return.
Under these schemes, rather than being paid directly from the company that the employee is working for, the remuneration is via loans from an associated trust, partnership or company.
The employee is taxed on the Benefit in Kind of receiving an interest-free loan. For the 2016-17 tax year, this would be 3.00% of the loan and this continues over the length of the employment.
If you are working under a Contractor Loan scheme, it is mandatory for the promoter to declare the scheme to HMRC. HMRC will issue the scheme with a reference number that the promoter must pass on to you for inclusion in your personal tax return.
However, any suggestion that the issuing of this reference number infers that the HMRC has approved the scheme is mendacious. The reality is that this is identifying you as a user of the scheme ahead of future investigation.
Even before the impact of the upcoming changes outlined later in this newsletter, HMRC is aggressively pursuing the users of these schemes.
For instance, under an investigation, HMRC could review your mortgage or other credit applications for evidence of a disparity between the income declared on these and that declared on your tax return. If loan receipts have been included as income for mortgage purposes, HMRC would have compelling evidence of a wilful complicity in tax evasion.
At CooperFaure, we have successfully negotiated settlements with HMRC for our clients working under a raft of these schemes. If you are concerned about your situation, please contact us at tax@cooperfaure.co.uk for a free and informal consultation.
Before looking at the impact of the proposed future measures outlined in the Technical Note published by HMRC, it is important to bear in mind the Brexit effect. A consultation on the proposals was due over the summer but, as yet, HMRC are unable to confirm when this will actually start.
In essence, the government is planning to introduce legislation to put beyond doubt that all loans and other income from a disguised remuneration scheme will be taxed as earnings if these have not been fully taxed or repaid by 5th April 2019.
Thereby, this would remove the necessity for HMRC to prove that a particular scheme was a method of tax evasion.
Within the Technical Note, there are some alarming proposals, the front and centre of which is that the notion of there being a time limit on how far back the HMRC can go to claim and collect tax on disguised remuneration is removed.
Legislation was originally introduced in Finance Act 2011 aimed at putting beyond doubt that EBT schemes in particular were not effective. This legislation came into effect from the date it was announced on 9th December 2010.
Now, HMRC are pointing to their Spotlight 5 published on 5th August 2010 to validate their view is that these schemes were never tax compliant.
Individuals that operated under an EBT scheme before 2011 have a powerful argument that tax was not payable under the law at the time when the loan was advanced. Participators in various schemes are seeking a tax tribunal hearing to make this case.
Even if the tax tribunal ruling goes in their favour, this will be overridden by the proposed new legislation. Moreover, it effectively allows HMRC carte blanche to pursue loans made all the way back to the first EBT schemes in the late 1980s.
The usual tenet is that the responsibility for the payment of PAYE and National Insurance lies with the employer that was party to the avoidance scheme.
Disturbingly, the proposals include an amendment to PAYE regulations to allow the Income Tax and National Insurance to be collected from the employee “where it cannot reasonably be collected from the employer.”
Given that many of the promoters are no longer around for the HMRC to pursue, the is putting the individual fore square in their sights.
Whilst it may seem grossly unjust to target individuals who have effectively been mis-sold schemes on the basis that they were tax compliant, public opinion is with the government especially in the light of the lurid cases of public figures and celebrities using such schemes to avoid tax.
What is beyond doubt is that the legislation scheduled for inclusion in the Finance Bill 2017 will be a game changer.
At CooperFaure, we will be actively participating in the HMRC consultation process. If you have any concerns from working under an EBT or Contractor Loan scheme either currently or historically, we would be pleased to have a candid and realistic discussion on this with you.
We urge anyone with an outstanding EBT enquiry to consider the implications of the direction of travel.
If you would like to arrange an initial consultation on your circumstances or to receive our free newsletters on this and other tax matters, please email tax@cooperfaure.co.uk.
In a widely anticipated move, the Monetary Policy Committee of the Bank of England has today cut the Base Rate to an unprecedented 0.25%.
As a result, borrowing will be less expensive. The estimated 1,500,000 households with tracker mortgages will see an immediate benefit and the expectation is that new property buyers will also gain from a reduction in long-term interest rates.
The rate cut is also aimed to encourage business investment in these times of economic uncertainty. This is reliant on the banks reflecting this reduction in their business borrowing rates.
Given the warning issued by the Royal Bank of Scotland to their 1,300,000 million business customers that they may impose charges on the deposit of funds should the Base Rate turn negative, there is a considerable doubt whether the rate cut will be passed on.
However, as part of the package of measures to support growth and to return of inflation to the target level, the Bank of England announced a new Term Funding Scheme potentially worth £100 billion to support bank lending to companies.
In any event, there is little evidence of businesses looking to borrow in the current economic climate. The uncertainty created by the Brexit vote is fast becoming a reason for inertia whereas it could be a time when fortune favours the brave.
The potential losers will be savers and those with pension annuities who are likely to see a reduction in their income.
This weekend, we will be publishing a newsletter reviewing of the economic state of the nation six weeks on from the EU Referendum vote.
If you would like to subscribe to our free newsletters, please email us at welcome@cooperfaure.co.uk.
These few weeks since the EU Referendum will go down in history as one of the most tumultuous periods in UK political history.
We have a new Prime Minister and Chancellor of the Exchequer but the economic uncertainty created by the vote to leave European Union remains. This is especially true for the small businesses and entrepreneurs who, for instance, do not have the infrastructure and resources to hedge against their foreign currency exposure.
As a result, we call on the new Chancellor, Philip Hammond, to support enterprise by restoring the small profits rate of Corporation Tax and setting it at 15% and, further, to lock this rate at 5% lower than the main rate. We ask you to endorse our campaign by signing our Parliamentary Petition.
The small profits rate of Corporation Tax was first introduced in 1973 by the Conservative Chancellor, Anthony Barber. It is a salutary lesson of how times have changed as, at that time, the main rate of Corporation Tax was 52% and the small profits rate was 42%!
Over the next four decades, these differential rates were reduced until in the 2011-12 tax year, they were 26% and 20% respectively. In that year, companies with profits of up to £300,000 were entitled to this reduced rate with a marginal relief for companies with profits between £300,000 and £1,500,000.
Since then, the main rate of Corporation Tax has been steadily reduced but the small profit rate remained the same until, from 1st April 2015, essentially, there has been a harmonised rate Corporation Tax rate of 20%.
According to the House of Commons Library, in 2015 there were 5.4 million businesses in the UK. Of these, a staggering 5.1 million business, 95% of the total, are deemed to be micro-businesses with fewer than ten employees.
For the overwhelming majority of the incorporated businesses, the reality of the erosion of the small profits rate is that their last reduction in Corporation Tax was in 2011.
In these uncharted times, we urge the government to support this lifeblood of the British economy that accounts for 33% of employment. Implementing this proposal would have a tangible impact.
If our Parliamentary Petition can secure 10,000 signatures from British citizens or UK residents, this guarantees a government response and 100,000 signatures would mean that the proposal would be considered for debate in parliament.
Thank you for your support.
A significant change for the overwhelming majority of companies, Societas Europaea and Limited Liability Partnerships incorporated in the United Kingdom came into effect from 6th April 2016 under the Small Business Enterprise and Employment Act.
From that date, a company must have a Register of ‘People with Significant Control’ (PSC) and keep it up-to-date. Since 30th June, this information is reported to Companies House as part of the new annual Confirmation Statement that has replaced the Annual Return. For details on the Confirmation Statement, please click here.
The purpose of this change is to lift the veil of who owns and controls companies in the United Kingdom.
For the vast majority of companies, their PSCs will simply be individuals who:
In exceptional circumstances, there may be:
For each PSC, the company must verify and hold on the Register the following information:
Remember, the PSC Register must be made available to anyone on request so it is vital to hold the information in such a way that the residential address can be suppressed.
The golden rule is that a company’s PSC Register can at no time be empty.
If your company has not collated and verified the information for your PSC, the Register is required to state:
“The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.”
Similarly, it is perfectly possible for a company to have no PSCs, for example where it is equally owned by five individuals. In this case, the Register is required to state:
“The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.”
More on what constitutes a relevant legal entity later but first what it deemed to be ‘significant influence or control’.
Significant influence is deemed to be where a person can ensure that the company generally adopts the activities they desire whereas control is where a person can direct the activities of the company. This is the case irrespective of whether the person achieves any economic benefit.
An example of significant influence or control would be a person who, whilst not on the board, regularly influences a significant section of the board or is regularly consulted on board decisions.
Another would be a company founder who, whilst no longer having a significant shareholding, continues to influence other shareholders on how to vote.
On the other hand, significant influence or control is not intended to apply to a person that provides advice or direction in a professional capacity. Nor does it apply to a person for merely being a director of a company.
By definition, a PSC is an individual. However, if your company is owned or controlled either fully or in part by another legal entity, the details of this legal entity must be included in the PSC Register, if it meets both the relevant and registrable tests.
A legal entity is relevant in relation to your company, if it meets any one or more of the conditions for a PSC and either:
A relevant legal entity (RLE) is registrable for your company if it is the first RLE in the ownership chain.
If the legal entity is not deemed relevant, the most likely case being if it is an overseas privately-owned company, it is not in itself registrable.
However, the details of the individuals or RLE who ultimately have a majority stake in that legal entity, either directly or indirectly, must be recorded on the PSC Register.
CooperFaure provides a comprehensive Company Secretarial service for our clients and, especially if your company has a more complex share rights or ownership structures, would be pleased to review this for you. Please email us at tax@cooperfaure.co.uk for an initial, free consultation.
Since 30th June 2016, the required filing of an annual Confirmation Statement has replaced the Annual Return at Companies House.
The overall rationale remains the same, for a company to ensure that the information included on the public Register of Companies is current and correct.
However, instead of this being by the company providing an annual snapshot on a particular date, as was the case with the Annual Return, the Confirmation Statement is to check and confirm that the information held is accurate.
In addition, as part of the first Confirmation Statement, the information held on your PSC Register for people with significant control will need to be added.
Certain changes can be made within the Confirmation Statement:
For any other changes, such as the location of the Registered Office or the updating of a Director’s details, the requisite form will need to be completed and submitted at the same time as your Confirmation Statement.
The fee for the Confirmation Statement will be the same as for the Annual Return, £13.00 when filed online or £40.00 when filed on paper.
This fee covers a twelve-month period and, during the twelve months, you are entitled to file as many Confirmation Statements as necessary without having to pay the fee again.
In terms of timing, if your last Annual Return was made up to 31st August 2015, the review point for the first Confirmation Statement will be 31st August 2016. Please be aware that, whilst the Annual Return offered a twenty-eight date grace period for filing, this has been reduced to fourteen days for the Confirmation Statement.
For the example above, the Confirmation Statement must be filed by 14th September 2016.
If you would like any further information, please contact us at tax@cooperfaure.co.uk.