A progressive, South West based accountancy practice

LATEST POST

Farewell, and Welcome!

As one team member moves on, another joins us. We said farewell to Lois on Friday, and we say hello to Lindsey on Tuesday. Come and say hello to Lindsey when you can. Lois has relocated to Taunton where her fiancé lives and works.

New client

We welcome Penny as a new client. We’ve managed to cut her fee and improve the service she was(not) getting. We are looking forward to working with her to help grow her business!

Taking the burden

Geoff used to do his own VAT returns, but the increasing use of technology has made this difficult for this very busy man. We were pleased to take over responsibility from him, and free him up to concentrate on the really important things. If you would like us to free you from the drudgery, we’d be happy to help.

Cutting your taxes

Richard runs a very successful business that is seasonal in nature. Every year he struggles to pay his tax because the bill arrives in his quiet season. We have implemented a restructuring plan which not only cuts his bill, but allows us to choose when it falls due, improving his cashflow and sparing him from his annual fight with HMRC!

Helping other professionals

We met with two partners from another professional firm last week, and we are delighted that they’d like us to be their tax advice line! Details need to be sorted, but we are pleased to be entrusted with their clients – and humbled that they chose us!

Steering you through the minefield

Did you catch our live coverage on the Autumn Statement? If not, you can still request a copy of our action plan for SMEs. Complete the “get in touch” form and ask for a copy. There’s a particularly nasty change to the VAT flat rate scheme which may make it uneconomic for some SMEs.

Simple Stuff That Works

After completing our Simple Stuff That Works workshop with Ross and John 6 months ago, and identifying some changes needed within the business, we were delighted to see that their 6 month results showed an 88% increase in turnover, with the cost savings we identified helping them turn this into a whopping 552% increase in profits.

Do you complete a regular review of your key financial stats within your business to identify any issues arising? If you think this would benefit you, talk to us about our Monthly Health Check – our clients love it.

Autumn Statement 2016

Philip Hammond has delivered his first Autumn Statement. From 2018 onwards, he will use this will be replaced by the budget speech. The reason is to give us all more time to prepare for the tax changes that will come into effect in the April. This is a good idea, and one which the tax profession has been requesting for a long time.

The budget speech will be renamed the Spring Statement, so we will still have two set piece announcements that have the potential to change the tax landscape.

So what did he announce today? It was fairly dull. In truth, he had little room to manoeuvre.

Economic growth and forecasts
Issue: Brexit has made the outlook more uncertain, and this is reflected in the growth forecasts issued by the OBR. Growth will hover around 2% per annum for the foreseeable future.

Action: Business owners must implement their own growth plan as general economic growth is not going to deliver the sales growth needed to keep pace with inflation. Living standards will fall further, as profits will come under pressure.

Tax changes
Thankfully, Mr Hammond announced far fewer than his predecessor. Here are the main changes

Issue: Salary sacrifice schemes are being restricted. From, April 2017, only pensions, child care, Cycle to work and ultra low emission cars will qualify. Schemes in place at April 2017 will be protected until April 2018, with school fees, cars and accommodation being protected until April 2021.

Action: If you want to implement a salary sacrifice scheme, do it before April 2017 to get the maximum benefit. Otherwise, you’ll be restricted to a very small range of benefits. Arguably the most valuable (pension contributions) remains available.

Review all schemes where the current arrangement/asset needs replacing after the stated expiry date, to consider alternative forms of remuneration, or perhaps moving renewal dates forward to extend the life of the tax efficient arrangement.

Issue: the new tax allowances of £1,000 for property income, and trading income will be implemented. The trading income exemption is now extended to the provision of services and assets (i.e. renting them out).

Acton: Look at your current asset holding arrangements and consider whether holding them differently may enhance the tax efficiency.

Personal allowance and NIC threshold
Issue: the thresholds are being raised from April 2017.

Acton: Review the tax efficiency of your current business structure and remuneration arrangements to ensure they are still the most tax efficient.

National Insurance
Issue: Class 2 NIC is to be abolished, with access to benefits for the self-employed being through Class 3 or Class 4 contributions.

Action: This is likely to increase the cost of accessing state benefits. Review your circumstances to see if it would be cheaper to insure privately (e.g. income protection, critical illness cover may be cheaper than making higher NICs)

Benefits
Issue: The rate of clawback on Universal credit is being cut from 65% to 63%.

Action: The clawback is still very high, but workers may be able to maximise their claim by using salary sacrifice arrangements and some of the new tax free allowances. Consider whether planning is a) legal, b) possible, and c) cost effective.

Business taxation
Issue: 100% allowances are available for businesses who invest in electric car charging points.

Action: It may be of limited appeal, but if you are investing in ultra low emission cars, possibly as part of a salary sacrifice arrangement (see above), it may be worth planning the timing of installing charging points, to maximise the allowances claim.

Issue: Cuts in corporation tax, and relief for business rates remain

Action: Businesses should review their structure to see if incorporation is tax efficient, and whether they can qualify for any business rates relief.

Issue: tax deductions for losses brought forward and interest expense are to be restricted. This should only affect large companies/ groups of companies

Action: Keep aware of development sin the consultation. The Government have promised to legislate away any “unintended consequences” so inform your tax adviser if you foresee your SME being impacted by the proposals.

Capital Gains Tax
Issue: CGT reliefs are being restricted for shares issued under Employee Share Status after 1 December 2016.

Action: Review all existing and proposed new schemes and ensure that eligible employees understand that the potential benefits have been reduced.

VAT
Issue: The VAT flat rate scheme is to be amended to counter “abuse”. A new 16.5% rate will be introduced from April 2017 to be used by businesses with “limited” costs. This will effectively eliminate any savings from the scheme, leaving only the reduction in boxes to be completed as the advantage from using the scheme.

Action: Every business using the flat rate scheme will need to assess whether it is caught as a “limited” cost trader. If so, the new rate will have to be applied from April 2017.

Pensions and savings taxes
Issue: Currently people who are drawing pensions can reinvest up to £10,000 per annum and get full tax relief. This limit is being cut to £4,000.

Action: If you are making contributions of between £4,000 and £10,000 and are drawing a pension or extracting value from a fund by way of drawdown, you need to review your arrangements and assess whether they are still tax effective. Other forms of saving may be more attractive.

Insurance Premium Tax
Issue: The rate increases from 10% to 12% in June 2017.

Action: All of us need to ensure we shop around for the best insurance deals, as the savings are multiplied 1.12 times. Build in the extra cost to cashflow forecasting, as the “Red Book” shows this raises more tax than any other measure announced today (£840m in a full year).

National Living Wage
Issue: The rates are increasing to £7.50 per hour for an employee aged 22 and over, from April 2017.

Action: Review your 2017 forecasting to reflect these new rates. Make a diary note to inform your payroll provider of the new pay rates in late March. Consider salary sacrifice arrangements if employee costs are excessive, and review your own prices if further cutbacks in expenditure are not possible.

And finally…..
The Chancellor announced a massive program of infrastructure spending, so those in the construction industry should take time to read the proposals, and seek work in the funded areas, if they feel capable of benefitting, and it fits with their business strategy.

Disclaimer
This is a general overview of the changes announced today, and is no substitute for taking professional advice on the detail. We are happy to discuss your individual circumstances in more detail. Contact us in the usual way.

Good work from the team – Making Lives Better for our clients!

Steve

David met with Steve a couple of weeks ago to discuss the closure of his unwanted company. Steve took him through the process, and developed a plan that will save him between £3k and £5K of professional fees.

John arrived for a meeting completely confused about a complicated tax position he entered a few years ago. Steve took on the task of getting some clarity over his options, which meant he left the office knowing it would all be sorted out.

Dan met with Steve to finalise his business’s 5-year development plan. Covering things like sales growth, market share and exchange rate exposure, halfway through the meeting Dan said “this is exactly why I employed you guys. To help me drive the business forward”.

Following a meeting with 3 of the four directors of a company in the digital sector, Steve signposted some additional sales training for the MD. Steve said, “even when WE cannot help, we usually know or can find someone else who can.”

A local lady bought a property and wanted to know the tax implications of various options relating to some excess land on the side of the garden. Steve showed her how she could cut her tax bill by over 90%, without pretending she lived in a tent on the site!

Sometimes, our advice merely helps to avoid pitfalls. Steve met with a client who has an extremely successful business and a loss making second sector. Plans were being laid to put the two parts into separate companies. Steve showed them that this could seriously prejudice the CGT and IHT positon of the client, and lose the current loss set off arrangements, which could cost the client over £60,000 in tax. He’s now working with them to improve their position.

Andrew

Following a pricing review for a client, along with an appraisal of how they collect payments from their customers, we were thrilled to find out that over the past two years they have increased prices by 31% whilst increasing their regular monthly cashflow by £14,300. If you think you can never increase your prices, this is proof that you can!

A review of a how a husband & wife held shares within their business revealed a tax saving of £1,675. Are you certain that your business is owned in the most tax effect manner?

Last week a client contacted us to ask how they could maintain their monthly net income of £3,000, whilst also drawing down an additional £25,000 from their pension without suffering any 40% tax charges. Following a family planning review, I was able to let them know that they could still take their £3,000 per month income, and draw down £30,000 per year from their pension. All without paying any higher rate tax charges.

Have you reviewed your tax code recently? When an employee recently left a business, we contacted HMRC to reallocate the split of their tax code, resulting in £1,100 of additional allowances for their second employer to use, reducing their tax bill by £220 for the remainder of the year.