Wrong-foot the taxman before the rules change 6 April 2016

Wrong-foot the taxman before the rules change 6 April 2016

In his attempts to reduce the UK debt mountain, George Osborne has made inroads into a multitude of basic tax reliefs. Many significant changes are due to be made from 6 April 2016.

 

From this date, the government has declared its intention to deny UK taxpayers a number of basic reliefs. If enacted, these changes will divert personal and business cashflow, after tax income, into the Treasury. We have highlighted two areas where these changes will have a significant impact: private landlords and incorporated business owners.

 

Private landlords

 

Landlords of furnished, residential property will likely see an increase in their tax payments when the present 10% wear and tear allowance is replaced by a more restrictive replacement cost relief from April 2016. These are the reliefs that compensate landlords for replacement of furniture and some fittings. In most cases landlords will be out of pocket.

 

Landlords who add to their property portfolios from April 2016 will suffer an increased Stamp Duty charge. From this date buyers of second homes and buy-to-let property will face higher SDLT bills. In some cases up to three times the present charge.

 

Next year, from April 2017, tax relief on loan interest will be gradually restricted to the basic rate. This will seriously impact the ability of landlords with high debt to property values to maintain their property holdings. Landlords that are presently basic rate taxpayers may even find themselves paying tax at higher rates; this due to the gradual add back of actual loan interest paid and the deduction of lower tax credits.

 

What to do?

 

Landlords should delay any further purchases of replacement furniture until after 5 April 2016. In this way their claim for the wear and tear allowance 2015-16 will be unaffected and next year they can claim the new replacement furniture relief.

 

Landlords considering new property acquisitions should consider bringing forward the completion date prior to 1 April 2016.

 

Finally, all landlords with high borrowings should start planning now for the loss of tax relief in the coming years on their interest payments.

 

Limited company owners

 

At present, shareholder directors of small companies have enjoyed the use of a perfectly legal strategy that minimises National Insurance costs by paying themselves a reduced salary and the balance of their remuneration as dividends. From 6 April 2016, the overall tax cost of this arrangement is set to rise.

 

From 6 April 2016, the first £5,000 of dividend income is tax free, but any additional dividends, will be taxed at:

 

  • 7.5% if the dividends form part of your basic rate band
  • 32.5% if the dividend forms part of your higher rate band, and
  • 38.1% if the dividend forms part of your additional rate band.In practice, this will mean that any person in receipt of significant dividends will likely pay more tax.

What to do?

 

Consider stripping out any available company reserves to 5 April 2016 as dividends. If this can be done without pushing your overall income into the higher rates you will have no additional income tax to pay. Even if the distribution pushes you into the higher rates there may still be overall savings to be made.”

 

So there we have it. Across a broad range of topics a large number of taxpayers are facing increases in tax that they will be unable to resist. Contrast this with the tax treatment of multi-nationals who sit across the table to negotiate their sweet-heart deals!

 

If you have any queries, please do not hesitate to email enquiries@williamhinton.co.uk or call a member of the team.

We look forward to speaking with you soon.

Ian.

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Tax doesn’t need to be taxing – Or does it?

In the budget on Wednesday, a number of prominent announcements were made.  Notably the more generous Inheritance tax relief for the family home, benefit caps and the restriction on interest relief for Buy-to-let owners.

Dividend tax however has not received quite the same coverage.  Currently dividends include a notional tax credit to account for the fact that the company will have paid corporation tax on the profit it was paid from.  With the rate of corporation tax now 20% and set to fall, the government has decided that this credit, originally intended to avoid double taxation, is to be removed from all dividends paid to individuals from 6 April 2016.

Alongside this change, the rates of tax on actual dividend income received will be changed to 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1%  for additional rate tax payers.

Who will this affect? – You! The owner managed business!

OK, so what does this mean?  The current effective tax rate on dividends after the notional credit are 0% for basic, 25% for Higher and 30.6% for additional.  This measure will mean an increase in tax for all taxpayers receiving taxable dividends!

To put this in perspective, until 6 April 2016 we would advise a typical owner managed business to draw a modest salary topped up by way of dividends.  If this dividend was £28,000, then the personal tax liability is likely to be zero subject to other income.  Under the new regime, this could increase to £1725.  This could be considerably more for a profitable business with more than one shareholder!

We feel this will be a particularly unwelcome liability to bear and we will be on hand to help you manage your liabilities as effectively as possible as we adopt the new rules.

If you have any queries, please do not hesitate to email enquiries@williamhinton.co.uk or call a member of the team.

We look forward to speaking with you soon.

Ian.

 

Five Reasons not to sell your business

Having worked for years to build up your business, the future is looking bright. Revenue is strong and profits are up. You have the income you want but there’s a snag – you don’t have the time to enjoy it. So, is it time to cash in and exit forthwith? Not necessarily!

1. Make yourself redundant and increase the value of your business

I’ve worked with many company owners and all too often, their success is entirely dependent on their own personal knowhow. They might feel great being instrumental in the company’s success but this invariably leads to little time to enjoy these successes before they have to solve the next problem or make things happen.

And this situation can be bad for profits and kill the eventual sale of your business!

The solution is to put into place a good management team and structure well before you plan to sell. In fact, if you get this right, you might not want to sell.

With clearly defined roles, delegated responsibilities and accountability, your staff could be running the business day-to-day. You may already have very capable people within your operation that know almost as much as you do and have all the enthusiasm to succeed. You just have to park your ego and accept that these people may do as good a job as you of running things.

You can then take a strategic leadership role, grow the business and increase profits. You’ll spend less time working in the business and more time working on it, and you should have more time to enjoy life as you go.

Selling your business might move off the agenda and, ironically, this is when your company is likely to be most attractive to prospective purchasers.

Why? It’s simple really. The buyers of a business want to know a) that it has been profitable and b) that it will continue to be profitable. The more indispensible you are, the harder it will be to sell or get a price you are happy with because there’s just too much risk of failure if you’re not around.

So go ahead, make yourself redundant! This could be the most profitable thing you can do for your life now and your business in the future.

2. Show me (what to do with) the money!

We’re living through one of the deepest recessions on record and it may run for some time yet. This is likely to make a business sale more challenging.

Many companies aren’t awash with cash to make acquisitions, and if they are, they’re often reluctant to part with it given the uncertain climate. And, in spite of the positive noises, banks aren’t falling over themselves to lend for the purposes of business acquisition.

But let’s say that you are successful at selling – what are you going to do with the money? It’s a tough climate in which to generate returns. In the UK, the Base Rate has been 0.5% for well over three years. Stock market returns have also been lacklustre.

In short, your investment in your business may earn you more.

3. The taxman cometh

Subject to satisfying relevant conditions, you might benefit from Entrepreneurs Relief (ER). If so, the capital gains you make on disposal of your business will benefit from a reduced rate of 10% tax, as opposed to 18% or 28% for non-qualifying assets.

Clearly, this is a good thing.

If you sell, you will convert an asset eligible for Entrepreneurs Relief to one that is not – cash!

4. The taxman cometh…again

Surely not! Err…yes!

By selling, you also convert an asset, which is potentially eligible for Business Property Relief, into assets that don’t benefit from an exemption from Inheritance Tax.

This means that, when you eventually shuffle off this mortal coil, the taxman may take up to 40% of proceeds of the company that you fought to build up but cashed in.

5. No Capital Gains Tax on death

So, you’ve decided to put into place a management team and hold on to your business.

It’s profitable and now runs, for the most part, with just a light touch on the tiller from you. As predicted, its value has increased. You have a great team and it feels like the business could run forever. But sadly, you can’t.

The good news is that Business Property Relief has sheltered the value from inheritance tax and there’s no capital gains tax to pay on death. Your beneficiaries inherit the shares in your business at the value placed on them at your death. The capital gains you’ve made up to that point are disregarded for tax purposes and your beneficiaries have a great business to be involved with or to sell on to those who want to continue your fine work.

By keeping your business in your hands you could free yourself from the day-to-day operations, give members of your staff the opportunity to spread their wings, increase the company’s value and shelter a great asset from tax.

Keeping all of your financial eggs in your business basket does present some risk if times get hard. Tax efficient extraction of some of the profits is also essential.

Here at William Hinton we are excellently placed to help you implement a systemised approach to your business which adds value and growth.  Growth will lead to higher profits and consequently increased levels of taxation!  Our team at William Hinton regard taxation as an opportunity!  Helping you minimise your tax liability is the best way to illustrate the proactive service that we offer to add value to our clients.

William Hinton Limited

Accountants based in Stow-on-the-Wold,

Cheltenham, Gloucestershire.

Childs Play

In the furore about the ‘granny tax’ and offshore companies owning property, the ‘reform’ of Child Benefit seems to have sneaked under the radar. The government initially raised this issue at the Conservative Party conference in 2011 and there was an outcry.  It was unfair, complex and just not on!

Things then went extremely quiet until Budget 2012 and, as part of the reforms to the welfare system it was confirmed that Child Benefit will be withdrawn from households that include certain higher earners.

Although the change applies from January 2013 the calculation to decide whether or not a household is affected by the reform includes the full income for 2012/13. So those households that include higher earners need to be aware of the rules now so they can plan to ensure they don’t miss out unnecessarily.

Who will the rules apply to?

Legislation will impose a new charge (the High Income Child Benefit charge) on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner, if they have one, are in receipt of Child Benefit for the year. Where there is a partner and both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

Weekly woes

As the charge is by reference to weeks, the charge will only apply to those weeks of the tax year for which the partnership exists. If the couple break up, the partner with the highest income will only be liable for the period from 6 April to the week in which the break up occurs. Conversely, if a couple come together and Child Benefit is already being paid, the partner with the highest income will only be liable to the charge for those weeks from the date the couple start living together until the end of the tax year.

Very strange

So an inequity arises! One couple with £60,000 of adjusted net income will lose all of the Child Benefit, whilst a couple with adjusted net income of £49,999 each will retain it all. Therefore, equalising income for those who are able becomes important.

What is the £50,000 made up of?

It can be seen that the rules revolve around ‘adjusted net income’, broadly:

  • net income (total income subject to income tax less specified deductions e.g. trading losses and payments made gross to pension schemes),
  • reduced by grossed up Gift Aid donations and pension contributions which have received tax relief at source.

It may be that a couple would want to donate more to charity, for example, to reduce or avoid the charge.

Who is a partner?

A person is a partner of another person at any time if any of the following conditions are met at that time; the persons:

  • are a man and a woman who are married to each other and not separated; or
  • are a man and a woman who are not married to each other but are living together as husband and wife.

Similar rules apply to same sex couples.

The charge

An income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000, rounded down to the nearest pound. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Example

The Child Benefit for two children amounts to £1,752 per annum.

The taxpayer’s adjusted net income is £54,000.

The income tax charge will be £700.80.

This is calculated as £1,752 x 40% (£54,000 – £50,000 = £4,000/£100 x 1%).

Administration

 Interestingly, the requirement to notify liability to income tax and capital gains tax by 6 October following the tax year is amended to include situations where the person is liable to this charge. In addition, the charge is included in PAYE regulations so that it can be collected through PAYE, using a reduced tax code, unless the taxpayer objects.

Continue claiming?

Child Benefit itself is not being made liable to tax and the amount that can be claimed is unaffected by the new charge. It can continue to be paid in full to the claimant even if they or their partner have a liability to the new charge.

Child Benefit claimants will be able to elect not to receive the Child Benefit to which they are entitled if they or their partner do not wish to pay the new charge. However, this will not affect the credit available (for state pension purposes) to certain people who stay at home to look after children.

An election can be revoked if a person’s circumstances change.

When does the new charge apply?

This charge will have effect for any week beginning on or after 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.

It may well be that neither you and/or your partner currently receive a tax return but this may well change for 2012/13. Remember the need to tell HMRC by 6 October 2013 if you think a charge may be due.

HMRC will contact people earning over £50,000 about the new charge from autumn 2012.

How many are affected?

To quote the government:

‘The new tax charge in relation to Child Benefit will affect approximately 1.2 million families. Approximately 70 per cent of these households will lose all of their Child Benefit, and 30 per cent will only lose a portion. The average loss for those that lose will be roughly £1,300 per year. Ninety per cent of families in the Child Benefit population will continue to benefit from some or all of their Child Benefit.’

Further help

HMRC have released a series of FAQs at http://www.hmrc.gov.uk/budget2012/cb-income-tax.htm to explain the change, essential reading for many families.

However, if you are unsure about anything to do with this new charge or would like to discuss things further including how we might be able to minimise the tax charge which will apply to your family, please do not hesitate to get in touch.

Thanks for reading

The Blog Team

Automatic enrolment – How much will it cost you?

Workplace pension law has changed such that you as an employer have a legal duty to help your employees to save for retirement. Under the new legislation, you are obliged to automatically enrol your employees into a workplace pension and make contributions to it.

How this will affect you as an employer?

As an employer you need to ensure that you provide a qualifying scheme and automatically enrol all your eligible employees into the scheme from the staging date (the date the law is ‘switched on’ for their business). Staging dates are being staggered over six years, with large employers first. We envisage that you as a smaller business, your staging date will be between 2015 and 2017. 2015 is not far away and there is still much to plan and prepare for. It will affect administration in terms of increased compliance, employee consultation process, payroll and systems.

You are required to pay a minimum contribution equal to 3% of the employee’s qualifying earnings into the scheme. The contribution level is being phased in during implementation, increasing gradually to help you adjust to costs.

How this will affect employees?

Eligible employees will be automatically enrolled into the pension scheme that you choose for your company. This means that you must make all the arrangements and the employee need do nothing to be put into the scheme.

The minimum contribution level is equivalent to 8% of qualifying earnings, of which you as the employer must pay a minimum of 3%, although you could choose to pay more if you wish. The employee must make up the difference.

Of course your employee may opt out if he/she wishes to do so, however the opting out has been made quite onerous and once opted out, your responsibility as the employer must opt them back in every three years if they chose to opt out.

Solution

As an employer you have a legal responsibility to act now and there are a number of activities you must do. However, to ensure you keep working on your business and not be sidetracked with onerous administration, we can help take that burden away from you.

This affects all employers and you have a legal obligation to adhere to the requirements otherwise penalties will be imposed. There is a one off penalty for non-compliance in addition to escalating daily rate charges.

We are looking to run a seminar/s on this subject in Spring 2013 where a specialist will illustrate all the details you need to know and we will provide a solution to ease the burden on your business.

To confirm your interest in this very important change, please would you be kind enough to email Ian at ian@williamhinton.co.uk, or telephone the office on 01451 831130.

We look forward to hearing from you soon.

The Blog Team

Contributed by Emma Robinson

This weeks breaking practice news – Congratulations to Daimien McConnell for passing his PCG Accredited Accountant Certification for Professional Freelancers, Contractors and Consultants.

In June this year we celebrated Ian Quartermaine’s success in passing a demanding training programme in respect to the intermediaries’ legislation (IR35).

Today we are very proud to announce that Daimien McConnell joins Ian as another member of the team to pass this grueling training programme. In fact when the results came through, ‘excellent’ was on Damien’s report. PCG Membership Manager, Mandie Bell who looks after the programme said she had never seen such fantastic comments on completion of the programme before in the years that she has been with PCG.

Accreditation is only given to a select number of accountants throughout the UK who undergo a rigorous training programme with Accountax LLP, the leading firm of specialists in the field who defend a large proportion of cases brought by HMRC to tribunal.

If you are looking for advice, look no further, call Daimien McConnell or Ian Quartermaine, our committed Freelance and Contractor Directors who will be happy to arrange a free no obligation meeting to discuss your requirements.

So who are the PCG?

The PCG was set up in 1989 to provide independent freelancers, contractors and consultants with a united voice in opposing original IR35 proposals. This then grew and within a few months several thousand freelancers and contractors joined the network.

PCG is a not for profit organisation for freelancers and contractors across business sectors IT, graphic design to engineering, protecting the interests, promote freelancing and contracting and to save these individuals time and money. For more information on PCG please go to www.pcg.org.uk

PCG appoint the expertise of Accountax LLP for their training and technical support. Accountax LLP are the UK’s leading experts in IR35, Employment Statute, Umbrella Companies and other contentious tax issues and have been involved in thousands of disputes with HMRC.  Accountax LLP has a proven track record of success with many cases being conceded by HMRC.

 

Why accredit William Hinton Limited?

Some years ago a PCG survey identified what members most wanted was a scheme whereby the PCG would identify and promote accountants who had received additional training on contractor-specific tax and accounting issues and had a good understanding of how freelance businesses operate.
In response to this clear demand, they have launched a PCG Accredited Accountant scheme. The PCG scheme involves:

  • Strict entry criteria
  • Training on IR35/S660A
  • Customer service training to enable accountants to meet the needs of freelance consultants and contractors
  • Annual assessment, including feedback from PCG members

Benefits to PCG members:

  • The reassurance that PCG accredited accountants will have received relevant and up-to-date training in freelancer-specific issues
  • A published list of all accountants who passed the course satisfactorily and qualified
  • The ability to provide feedback on accredited accountants to PCG which will be taken into account when performing annual reviews.

Services:

With over 20,000 PCG members there is an increasing demand for specialised accountants trained within freelance issues such as IR35, contract reviews, S660A and PAYE. William Hinton Limited saw this as a growing market and wanted to be able to offer this service and is one of very few firms in the Gloucestershire area able to work within the PCG Accredited Accountant Scheme. Our services in this area include:

  • Status Issues

Is Joe really self employed or does his contractual arrangements really make him an employee of the organisation to whom he provides his services? This is an area of tax law that often comes to light at the time of an HM Revenue & Customs (HMR&C) PAYE review and can prove costly to the taxpayer if the wrong arrangements are in place.
With the new Construction Industry Scheme requiring a monthly declaration being signed and submitted to HMR&C more visits are forecast and more fines issued if errors are discovered.

  • IR35IR35 was introduced in 1999 to prevent those operating through a Limited Company and often via an agency drawing large dividends and a low salary when without the intermediary their status would have required them to be an employee of the end user to whom the services are provided.Many contractors believe that their contract is “IR35 proof” and continue to draw the dividends. But are they correct in this assumption and may a substantial tax bill be waiting for them around the corner? There are also those contractors who signed up to IR35 but now may be with a different agency under a different agreement and so may have the flexibility to remove themselves from the scheme.

    The opportunity of taking specialist advice to determine whether IR35 is applicable to you as a Contractor may well represent money well spent in identifying risks or opportunities in this most difficult of areas.

If you work in the Professional Freelancers, Contractors or Consulting market then please call Daimien or Ian on 01451 831130 at William Hinton Limited to make sure that you receive the best possible advice.

Businesses don’t plan to fail they fail to plan! – First ten readers to ‘LIKE’ this Blog will receive a Business Health Check worth £500

I wanted to write this article as I see so many small businesses suffering similar issues which are quite symptomatic of business failure. So I wanted to write about why some businesses fail and really focus on one area of failure which is the topic of this article – Planning!

Let’s just take a few moments to understand why some businesses fail. Although the focus to my article is planning, let’s not forget there are other factors as to why businesses fail too and should really all be considered during the planning process.

A few reasons why businesses fail include:

Lack of planning – A well thought out business plan forces you to consider the future. It also gets you to think of your current situation and likely changes that are needed in order to plan the future of the business. It is a key document as it impacts on the whole business.

Shortage of finances – Not keeping track of your finances can cause serious problems within a business. Again this is something that really deserves an article in its own right as it is so important. Too many businesses take on too much debt. Having properly planned the business, debt can be better managed as you will have an understanding of what sales you want to achieve and what debt you may need to achieve that level of sales, rather than just incurring more debt.

Many small businesses tend not to keep track of their income and expenditure. I see so many of these businesses using a bookkeeper to do the ‘record keeping’ and handover to their accountants, but the business owners do not see any further information on the current performance. It is crucial to have this information to help you monitor your current position and the targets in the business plan.

Small business tend to have lack of cash for unexpected price increases, bills etc which can then build up overdraft costs if not planned for.

Another cause for poor financial health of a company is overspending. You should have planned targets for spending; this in itself prevents staff/managers with overspending on areas where there are restrictions. Finance is a function and has to be part of the overall business planning process to build a Finance Strategy.

Lack of market research – I also see a lot of businesses failing to look at their target market but rather just sell what they have to any willing buyer. This is a really bad mistake, as it means any marketing strategy/plans are wasted effort because they are not tailored to a specific audience.  Many small businesses face a lot of competition, again something that they tend not to look at in detail, but which is so important. Never say you don’t have competition. There is always competition but if not in your market at the moment, there soon will be…A marketing plan has to be built within the overall business planning process.

Location – Carefully consider your location/local population. Just because the lease is cheaper in a quieter area doesn’t mean to say you will thrive.

Poor planning execution – Customer service and after care are absolute key essentials. Everyone in the business is important, from answering the telephone to delivering the product. When executing your business strategy/plan, it is vitally important that your staff are fully on board and you let them know how it benefits them. Planning comes from within an organisation; it is a cultural change that will need to be made before external changes can be made. It is your staff who will help you deliver the achievement of your goals and targets so it is important to ensure they understand what is expected of them in order that the whole organisation achieves its aims. Again, when it comes to staff then there should be a staff plan or HR plan that becomes an integral part of the overall planning process.

Understand what is meant by planning – So many small businesses don’t know what planning is so bypass it. Planning has many functions such as HR, Marketing, Finance and Admin, IT, Operations and I have touched upon some of those areas above. It is the lack of alignment within these areas that results in poor planning.  This is why I feel it is the most important reason for business failures.

Why a business needs to plan
A business needs to plan as much the same as an athlete needs to train for a race. I compete in triathlons and I know how hard it is to achieve success. For example; you enter a race and the goal is to become 1st. How are you going to achieve that goal? It could mean you need to run faster, cycle quicker or swim harder, the same way as a business may need new computer equipment to work faster, become more efficient in order to be able to achieve the goal of having a more responsive customer service. So do you see where I am going with this?A plan helps you get from where you are now to where you want to be in say 5 to 10 years time. Have you asked yourself as a business owner where you want to be in 5-10 years time? Business planning is not just about marketing.

Again I speak to so many businesses that think they need a website, social media…, without thinking about the business vision and how to get there. Yes planning involves marketing but also involves the other functional areas (IT, HR, Finance and Admin, Operations…) involved in the planning process as discussed above.

A business plan is an evolving document over time through the lifecycle of your business from start up to exit. Now it’s time to think about your plan….call now to arrange a FREE Business Health Check to see if you are on the right track to achieve your goals!

Just take a few minutes to answer these questions:
1) Why are you in business?
2) What do you want out of life?
3) How much leisure time would you like?

If your answers to these three questions are vague then you may need some help in evaluating your future and how you are going to get there.

I hope you have found this article interesting and helpful. Of course it really is just the tip of the iceberg. Please do call me on 01451 831130 here at the office for further information on helping you in your business. I would be delighted to help.

This article was written by Emma Robinson
Thank you for reading!

The Blog Team.

Capital Allowances – a gift to small businesses

While many businesses claim capital allowances on items such as computers and cars, not many are aware of the huge tax savings that can be made in claiming on other ‘plant and machinery’ items that are embedded in their property.

Most commentators agree that over 90% of commercial properties in the UK have untapped capital allowances within them that could create huge savings for small to medium sized enterprises (SMEs) in tax relief, often over 30% of the purchase price of the building.

‘Machinery’ as a claimable category is rather self-explanatory and items falling into it are often easily defined. ‘Plant’ items however are very different. In basic terms, plant items that can be claimed on are taken to be “apparatus used for carrying on a business”.

This can include items such as removable floor coverings, demountable partitioning, air conditioning systems, toilets and kitchens, but the complex web of rules and case law that is the capital allowances regime means that this definition is in no way exhaustive. In fact, the items falling into this category can be very varied and often unusual — allowances have in the past been claimed on items such as bowling alleys, fish tanks, zoo cages and artwork. One person even tried to claim on a horse!

Capital allowance claims on existing plant and machinery purchased with a building can only be made once in a building’s lifetime. However, a proportion of capital expenditure incurred on maintenance, refurbishments, alterations, extensions and new installations can also be claimed back against your businesses taxable profits to reduce your tax bill.

This can extend to claiming back on the services paid for throughout the whole process. For example, the capital expenditure on the design, project management or cost control or for the specialist costs of installation of a specific item of plant or machinery can also be taken into account for capital allowances — it is not just the cost of the item itself which is eligible. To take full advantage of the generous rules, SMEs should be sure to keep detailed records, particularly for building works on these projects.

Whether your business owns a factory, office, shop, hotel or other commercial property, the chances are good that it will have a sizeable amount of tax relief hidden away in its fixtures. While the big accountancy and law firms are well aware of these capital allowances and may claim for their international clients on a regular basis, advisors to smaller businesses generally do not have access to the same specialist expertise. This is a shame, as £50,000 or so claimed in tax relief through capital allowances can make a much bigger difference to the margins of an SME that it can for the likes of Tesco.

SMEs wishing to take advantage of this system should act fast. Changes to legislation mean that a time limit for making a claim has now effectively been phased in. Although you can still make a claim at any point after the capital expenditure on plant or machinery has been incurred (providing you still own the assets), you must now pool the expenditure and make an election before you sell. It is also possible that a time limit for claiming may be introduced in the future as this is already under consideration by HMRC.

The outlay for identifying, recording and claiming these allowances can seem complex and daunting, but the tax relief available often makes it more than worth it — taking just one example, expenditure of £100,000 on a hotel can typically generate £35,000 worth of tax relief hidden away inside. With these kinds of bonuses on offer, capital allowances could just be the industry’s best kept secret.

 Article written by Jeanette Edmiston, Portal Tax Claims.

 This is why we at William Hinton have recently engaged with a firm of Capital Allowance Tax Claim specialists to help us benefit clients and prospects alike.

This is just one area of many ‘big firm’ services that we are offering. Something that can add real value to SME’s in times of cashflow difficulties. We have already begun the process of looking at our clients to see whether they would benefit from such a claim with many proceeding with such a claim.

Please do get in touch with us if you think this could apply to you and we will be sure to provide you with all necessary information and help.

 Thanks for reading

 The Blog Team

William Hinton are awarded the PCG Accredited Accountant Certification for Professional Freelancers, Contractors and Consultants.

Need to know more about IR35? Is the Tax Man going to be knocking on your door? Here at William Hinton we are proud to announce that we are able to offer specialist advice in respect to the intermediaries’ legislation (IR35).

On 14 June 2012 leading firm of Chartered Accountants and Business Consultants, William Hinton Limited were accredited with the Professional Contractors Group (PCG) certification. Accreditation is only given to a select number of accountants throughout the UK who undergo a rigorous training program with Accountax LLP, the leading firm of specialists in the field who defend a large proportion of cases brought by HMRC to tribunal.

Having met the demanding requirements set by PCG, William Hinton Chartered Accountants and Business Consultants are now an accredited firm. If you are looking for advice, look no further, call Ian Quartermaine ACA, our committed Freelance and Contractors Director who will be happy to arrange a free no obligation meeting to discuss your requirements.

So who are the PCG?

The PCG was set up in 1989 to provide independent freelancers, contractors and consultants with a united voice in opposing original IR35 proposals. This then grew and within a few months several thousand freelancers and contractors joined the network.

PCG is a not for profit organisation for freelancers and contractors across business sectors IT, graphic design to engineering, protecting the interests, promote freelancing and contracting and to save these individuals time and money. For more information on PCG please go to www.pcg.org.uk

PCG appoint the expertise of Accountax LLP for their training and technical support. Accountax LLP are the UK’s leading experts in IR35, Employment Statute, Umbrella Companies and other contentious tax issues and have been involved in thousands of disputes with HMRC.  Accountax LLP has a proven track record of success with many cases being conceded by HMRC. 

Why accredit William Hinton Limited?

Some years ago a PCG survey identified what members most wanted was a scheme whereby the PCG would identify and promote accountants who had received additional training on contractor-specific tax and accounting issues and had a good understanding of how freelance businesses operate.

In response to this clear demand, they have launched a PCG Accredited Accountant scheme. The PCG scheme involves:

  • Strict entry criteria
  • Training on IR35/S660A
  • Customer service training to enable accountants to meet the needs of freelance consultants and contractors
  • Annual assessment, including feedback from PCG members

Benefits to PCG members:

  • The reassurance that PCG accredited accountants will have received relevant and up-to-date training in freelancer-specific issues
  • A published list of all accountants who passed the course satisfactorily and qualified
  • The ability to provide feedback on accredited accountants to PCG which will be taken into account when performing annual reviews.

Services:

With over 20,000 PCG members there is an increasing demand for specialised accountants trained within freelance issues such as IR35, contract reviews, S660A and PAYE. William Hinton Limited saw this as a growing market and wanted to be able to offer this service and is one of very few firms in the Gloucestershire area able to work within the PCG Accredited Accountant Scheme. Our services in this area include:

  • Status Issues

Is Joe really self employed or does his contractual arrangements really make him an employee of the organisation to whom he provides his services? This is an area of tax law that often comes to light at the time of an HM Revenue & Customs (HMR&C) PAYE review and can prove costly to the taxpayer if the wrong arrangements are in place.

With the new Construction Industry Scheme requiring a monthly declaration being signed and submitted to HMR&C more visits are forecast and more fines issued if errors are discovered.

  • IR35

IR35 was introduced in 1999 to prevent those operating through a Limited Company and often via an agency drawing large dividends and a low salary when without the intermediary their status would have required them to be an employee of the end user to whom the services are provided.

Many contractors believe that their contract is “IR35 proof” and continue to draw the dividends. But are they correct in this assumption and may a substantial tax bill be waiting for them around the corner? There are also those contractors who signed up to IR35 but now may be with a different agency under a different agreement and so may have the flexibility to remove themselves from the scheme.

The opportunity of taking specialist advice to determine whether IR35 is applicable to you as a Contractor may well represent money well spent in identifying risks or opportunities in this most difficult of areas.

If you work in the Professional Freelancers, Contractors or Consulting market then please call Ian on 01451 831130 at William Hinton Limited to make sure that you receive the best possible advice.

Thanks for reading!

The Blog Team

Avoiding a false start – how to tackle employment issues during the Olympics

 Your questions answered:

 A number of our staff wish to take time off to attend the Games and others want time off to watch some of the big events. Do we have to allow them time off even though we have no cover?

There is no statutory entitlement for employees to take time off for the Olympics. Under the Working Time Regulations, provided employees are permitted to take their statutory entitlement during the relevant holiday year, individual requests for holiday can be refused. The employer is under no obligation to consult with the employee or justify its refusal. Employers are advised to check their own contracts and policies, but it is highly unlikely a policy would permit an employee to take time off during a major sporting event. However, if an employee has obtained tickets to attend the Games we would advise employers to permit the holiday request if at all possible. Clearly refusing such a request would damage morale and would do nothing to improve an employee’s loyalty or motivation. Employers should also be aware that if the holiday had previously been approved and the employee had paid for tickets to see an event as a result of receiving that approval, an employer would need an extremely good reason to change its mind. Otherwise this could be seen as a breach of the implied term of trust and confidence which could result in an employee resigning and bringing a constructive unfair dismissal claim.

In relation to employees who simply want time off to watch events at home, while employers are not legally obliged to do so, they may wish to adopt a relatively flexible approach given that the Olympics only comes around every 4 years, and allowing reasonable time off during the Games may help to avoid any disruption caused by absences.

Where the request is simply to leave work slightly early or take half a day’s holiday, employers may wish to consider whether the employee could work flexibly during the Games, e.g. by not taking breaks, starting earlier and finishing earlier or making the time up on another day, and whether half a day’s absence will disrupt the business sufficiently for it to be refused. Shift swaps are also an option, provided employees can arrange appropriate cover with their colleagues. Unpaid leave can also be offered, although again there is no obligation on employers to allow this.

Some larger employers have sought to adopt an “Olympics policy” for the duration of the event to ensure requests for time off are dealt with reasonably and fairly, e.g. on a first come, first served basis. Employers should ensure that employees are aware that any changes to hours or flexible working policies are only in place for the duration of the Games, and do not constitute a permanent variation of their terms and conditions of employment.

It is also important to note that those employees who are not interested in the Games are not treated less favorably than those who are. In particular, granting holidays at short notice or allowing flexible working during the Olympics may be seen as an act of discrimination if, for example, flexible working requests have been turned down in relation to working mothers, or if an employee’s request to time off for a religious holiday has been refused, so employers should act in an even-handed manner in implementing any special practices.

If an employee calls in sick on the day of an important event, can I discipline them if I suspect they are not really ill?

If it appears that an employee is lying about being ill in order to watch a specific event then this may be treated as a disciplinary issue, but employers need to ensure they have sufficient evidence that the employee is not genuinely ill before adopting this approach.

Evidence may include the fact that an employee has previously requested the day off or an earlier finish but that request has been refused. However, an employee is not required by law to obtain medical evidence for absences shorter than 7 days, so it may be very difficult to prove an employee was not genuinely unwell, however coincidental their absence may appear.

In order to head off any potential issues with absence during the Games, employers may wish to reiterate the company policy on notifying absence to employees by way of memo or email, and to state that unauthorised absence from work during the Olympics will be treated as a disciplinary offence. Introducing return to work interviews during the Olympics (if these are not already implemented) may help to avoid “sickies”.

An employee has suggested showing big events on a screen at work. Do we have to do this, and, if we do so, what should we bear in mind?

Allowing staff to watch some of the main events on the premises may generate good-will and limit the number of sick days taken, but employers should make sure that employees who are not interested in the events are not distracted from work and, if possible, are awarded similar perks.

Please also bear in mind the fact that there may be events which are more significant to employees of different nationalities. Therefore, what is generally seen as a relatively minor event to your British employees might be far more significant for an employee from another country.

Banter between employees of rival nations may also conceivably lead to harassment claims, which employers may be liable for if they failed to take reasonable steps to prevent the harassment taking place. Employers may therefore be advised to reiterate equal opportunities and anti-harassment policies and to keep flags and other nationalistic paraphernalia to a minimum in the office.

If an employee asks to work from home during the Olympics, do we have to accommodate this?

There is no absolute right to request home working, but employers should look at each request on its merits. If an employee can do their job from home and can be trusted to carry out their work, this may be an option for employers.

However, there are also sex discrimination considerations to bear in mind. While the Olympics are enjoyed by both men and women, sport can still be seen as a male-dominated arena. If a woman has requested home working in the past and been refused, she may have a claim of less favorable treatment because of her sex if a male comparator has had his request granted.

If a request is granted, it is difficult for an employer to monitor an employee’s output from home to prove they are carrying out a full day’s work. Whilst employee monitoring is permitted, employers must be careful that any monitoring is not so intrusive so as to breach the implied term of mutual trust and confidence between employer and employee, which in turn may lead to constructive dismissal claims.

Is there any obligation to comply with requests to “dress down” or wear clothes indicating an employee’s sup-port of a particular country?

Most employers will have dress codes either to promote a smart professional appearance or for health and safety reasons. In these cases, employers are well within their rights to insist all dress codes are adhered to during the Olympics, and may discipline those employees who break the rules.

If there is no strict dress code, it may be more difficult to prevent an employee from wearing what they choose, but there is an implied term in all contracts of employment that employees will dress in a manner both suitable and appropriate to the business and will obey the employer’s reasonable orders.

From a race discrimination point of view, employees of other nationalities must also be permitted to wear their countries’ ‘colours’ if British supporters are allowed to do so.

An employee has been on the internet constantly watching events and checking results – can we discipline him?

Excessive use of the internet for non-work related reasons may be a gross misconduct offence, but employers should check their IT and internet policies and warn employees in advance of what levels of usage will and will not be tolerated.

Employers may, however, simply wish to accept that employees will not be quite as productive as usual during the Games, and that taking a more relaxed approach to internet usage now may foster a sense of loyalty and goodwill from employees in the future.

This article has been produced by ESP Ltd in association with William Hinton Ltd.

Thank you for reading!

The Blog Team.