Tax Year End Planning For Individuals

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The tax year end is fast approaching, so the PM+M tax team have put together some useful tips for individuals who need some guidance with their tax planning.

Tax planning can be complicated but the PM+M team are here to help. To download our individual tax planning helpsheet, click on the button below. Should you have any questions, please do not hesitate to call a member of the tax or wealth management teams on 01254 679131.

HELPSHEET

Are you aware of the new statements required under the Modern Slavery Act 2015?

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Having received the regular newsletter from HRC Law, it occurred to me that I wasn’t aware of this new requirement and wondered whether our clients and friends of PM+M were also unaware. As finance professionals, your PM+M team cannot advise you on the law but we should raise the issue and build awareness.

Jane Wilkinson, a solicitor at HRC advised that if your organisation supplies goods or services and carries on (part of) a business in the UK it will have to publish an annual slavery and human trafficking statement (the Statement) for each financial year ending on or after 31 March 2016, if its global turnover exceeds the £36 million threshold.  This threshold includes the turnover of subsidiary undertakings too, so it’s not as huge a number as it first sounds.

The Statement must disclose what steps the organisation has taken to ensure that human trafficking is not taking place in any of its supply chains or its business; or state that it has taken no such steps (with the latter approach being a potential PR disaster!).  Home Office Guidance outlines what should be included in the Statement and HRC Law can provide further support and guidance.

Even if you’re below the turnover threshold, it’s probable that (some of) your customers and suppliers will be caught by the requirement to produce and publish a Statement.  As you will form part of their supply chain, they’ll be looking to you for assurances about your practices, procedures and supply chains.  Thinking about this and preparing accordingly could help you to outshine your competitors and stay ahead of the game.

So, from PM+M’s point of view, this isn’t a case of this won’t ever impact our clients – it very well could and it very likely already is.

Helen Clayton – Corporate Services Partner 

PM+M Shortlisted for Red Rose Award – Employer of the Year

Yesterday, Jane Parry (Managing Partner) and Helen Clayton (Head of Corporate Services) headed to Blackburn Rovers Football Club to fly the flag for PM+M at the Red Rose Awards interviews. PM+M will be vying for the Employer of the Year award and even being shortlisted is a huge achievement.

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During the interview, Jane and Helen talked with the panel about how PM+M has evolved over recent years and how the firm truly believes in bringing out the best in its people.  Our values underpin everything that we do and we believe in investing in people throughout their careers. Quality, Achievement and Fun relate to all interactions at PM+M, whether that be with clients, team or members of the wider community. Winning the award would be an honour, given the calibre of businesses shortlisted this year. But whether we win or not, the team will continue to ensure that PM+M is a fantastic place to work, achieve and grow.

Speaking about life at PM+M, Neil Welsh (PM+M’s newest financial adviser) said: “Having joined PM+M almost a year ago I can endorse fully the values which see them nominated for a Red Rose Award. Not only have I been made to feel very welcome, the culture and dynamic within the team is both energising and liberating. More recently, following the loss of my father (and the resultant absence that was required to deal with hospital/hospice visiting, funeral and other family commitments) the support given across the breadth of the firm gave me strength at a very difficult time. The genuine and heartfelt words of comfort and reassurance from the partners downwards that the team were there to help reduced some of the mental and emotional strain. Moreover, upon my return to work the actions within the team of helping me prioritise, taking work off me and getting me back to operational speed is testament to a great team of people and firm.”

Now we just have to wait until March 9 to find out if we’ve won. Watch this space!

If you’d like to know more about life and PM+M, or would like to check out our latest vacancies, visit www.pmm.co.uk/careers.

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Looking forward to ATED

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If you own residential property in a company and its worth more than £500,000, then you may need to comply with the Annual Tax on Enveloped Dwellings (ATED) rules.

The rules require an annual tax return to be submitted by 30 April covering the forthcoming year.  The ATED charge for the forthcoming year must also be paid on that date.

Who needs to file an ATED return?

ATED returns must be filed and an ATED charge paid every year by non-natural owners of residential properties located in the UK, where the property is worth more than £500,000, and one of the reliefs or exemptions has not been claimed for the property.

A non-natural person can be defined as one of the following:

-       Any company wherever it is registered;
-       A partnership where one or more of the partners is a company;
-       A collective investment scheme.

There are exemptions from the charge, for example for properties which are commercially let, but there is still a requirement to submit the annual ATED return and claim the exemption, even if you have nothing to pay.

The rates

The new rates have recently been revealed for the chargeable year beginning 1 April 2017. The charge for the period will need to be paid by 30 April 2017.

Property value £ 2016/17 £ 2017/18 £
500,001 – 1,000,000 3,500 3,500
1,000,001 – 2,000,000 7,000 7,050
2,000,001 – 5,000,000 23,350 23,550
5,000,001 – 10,000,000 54,450 54,950
10,000,001 – 20,000,000 109,050 110,100
Over 20,000,000 218,200 220,350

The valuation band is determined by the properties’ market value as at 1 April 2012. If the owner acquired the property since that date, the value to use is the open market value at the date of acquisition.

If the property falls within 10% of a valuation band, the owner can apply to HMRC for a pre-return banding check. These checks can take at least 30 days to process, so it is best to apply as soon as possible.

For more information on ATED or if you’re worried about the above rates, please get in touch with our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

 

Salary Sacrifice Changes From April 2017

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New rules are coming in on 6 April 2017 for certain benefits in kind where they are provided by salary sacrifice.

If you provide benefits to your employees in exchange for salary sacrifice or have a flexible benefits package where your employee can choose a benefit or cash, or where you provide benefits but offer your employee a cash alternative then you need to know about these changes.

Benefits impacted are those which are currently taxable, like cars and white goods, and those currently tax exempt, like mobile phones and workplace parking.

You don’t need to do anything if your employees are only sacrificing salary for:

  • Pensions or pensions advice,
  • childcare vouchers,
  • workplace nurseries,
  • directly employer contracted childcare,
  • cycle to work or
  • ultra-low emission company cars (emissions of or under 75 g CO2 / km).

The new rules start on 6 April 2017. Salary sacrifice contracts entered on or before 5 April 2017 will be protected up until the contract hits a trigger point. From 6 April 2017, the normal trigger point is when the salary sacrifice contract renews, auto-renews, starts, ends or is modified or changed. At this point you must use the new rules. This should align with your normal contractual arrangements.

If an employee starts a contract on or after 6 April 2017, then you will need to immediately use the new rules for that employee. This will apply to any new recruits who adopt the arrangements.

For a better understanding of what is changing and what you need to do next, please click the button below to view our help sheet.

HELPSHEET

PM+M Helps East Lancs Box Co. Limited Secure Six Figure Lancashire Growth Fund Grant

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L-R: Andrew Cowking (PM+M), David Ingham, Peter Ingham, Amy Ingham & Neil Harrison

Andrew Cowking and the PM+M team have helped East Lancashire Box Co. secure a £120,000 grant from the Lancashire Growth Fund which will see the creation of 12 new jobs.

East Lancashire Box Co. was established in 1981 and is headquartered in Rishton near Blackburn. It manufactures bespoke cardboard box packaging and products. It offers a complete service, from initial concepts to the final product and handles all elements of design, print and production. The company’s product range is visible on the shelves of all the major supermarkets both within the UK and overseas.

The grant will be used to purchase new equipment including a state-of-the-art printer and a die cutter. The aim is to create a colour printing facility under one roof in 16,000 sq ft of new production space at the Junction 7 Business Park in Clayton-Le-Moors with the capacity to meet current and expected demand. The 12 new jobs will include apprenticeship and production positions.

Andrew Cowking – partner at PM+M – handled the forecasts for the grant application whilst Neil Harrison of The Harrison Partnership coordinated all elements of the grant application process, which was completed in just over 3 weeks from starting the application to the making of the offer.

Peter Ingham – director of East Lancashire Box Co. – said: This is a significant investment for the company and is an exciting milestone in our history. The grant will help to support our growth plans and will ensure that we are able to develop our offering and provide a bespoke service to all our customers – from small businesses to multinationals.

Andrew Cowking added: “East Lancashire Box Co. is a forward thinking family-owned business and one of the region’s most entrepreneurial companies. We were delighted to help them secure the grant and we look forward to seeing how it aids their expansion over the coming years.”


Buy-to-let – the new rules are coming

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If you cast your mind back to the 2015 summer budget, you may remember the significant changes that will impact all landlords. The implementation date of these changes is drawing ever closer and it will eat into landlords’ profits and, in some cases, may wipe them out completely.

With the slashed tax relief and added stamp duty, you may feel that someone has got it in for buy-to-let landlords. The question is what can you do about it?

What does the loss of tax relief mean?

This is one of the biggest changes to buy-to-let and now means that people buying to let residential property will no longer be able to claim tax relief on their mortgage interest payments at their marginal rate of tax. Before the changes this meant that basic rate taxpayers would get 20% tax relief, but those at a higher rate would receive 40% or 45% in tax relief.

What’s changing?

The changes mean that the tax relief will be a flat rate of 20%. Basic rate taxpayers, in most cases, will not see any changes, but those on higher incomes will find themselves losing much more in mortgage interest payments.   Also, more landlords may find themselves unexpectedly moving up into the higher rate tax bracket because of the way the new rules work.

To provide some perspective, here’s an example:

A landlord with a £150,000 buy-to-let mortgage on a property worth £200,000, with a monthly rent of £800, would currently have a net profit after tax of around £2,160 a year. With the lower tax relief, the net after-tax profit would be reduced £960.

Overall, the higher the interest you pay, the more you will feel the changes.

However, the full impact of the new rules is not felt immediately, as these changes will be gradually phased in from 6 April 2017, with transitional rules in place until April 2020. During the transition, the amount of interest directly deductible from rents will reduce and the proportion deducted as a fixed 20% credit will increase. This means in the transitional period landlords will be able to claim:

Tax year Interest deductible from profits Interest at fixed basic rate credit
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%

Income tax on property gains!

New rules announced last year, designed to target non-resident companies and individuals from escaping UK tax on profits made from the sale of UK properties, could inadvertently impact UK landlords. The new rules seek to charge the profits on selling UK property to UK income tax rather than CGT when the ownership of the property is more in the nature of a trade than a fixed investment.

When the changes were announced, there was widespread concern that UK landlords could be affected.

HMRC have now addressed this by releasing a 64-page guidance document to help clarify how they will seek to operate the rules.  In the guidance, they state that the new rules will not apply to businesses which buy properties in order to generate rental income, even if these businesses also enjoy an uplift in market value of the property. So the average UK buy-to-let landlord should not be subject to income tax on the gains he makes when he sells properties which were acquired for letting.

Whilst this is good news, it is only HMRC guidance and not law. For those particularly concerned about this new legislation, the position can be clarified with HMRC under their non-statutory clearance application process.

The PM+M tax team will be hosting seminars in Blackburn, Burnley and Bury to provide answers and insights into what buy-to-let landlords can do to protect their position.

For more information or to book a place, please click the button below or call 01254 679131.

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Trivial benefits in kind exemption may not be so trivial

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It’s Christmas and the annual minefield of gifts and Christmas parties for employers to navigate. If you are giving your employees gifts to create goodwill, the last thing you want to do is destroy that goodwill with an unexpected tax bill.

However, help is at hand from the new trivial benefits rules.

Previously, the rules were subjective. HMRC allowed exemptions for reasonable gifts but there were no clear thresholds, making it difficult to have certainty about tax treatment.

Under the new rules, benefits and gifts can be tax-free providing that:

-       They cost no more than £50 per benefit and
-       They are not cash or a cash voucher (gift vouchers e.g. for a shop, are allowed).

There is no limit on the number of trivial benefits that can fall into the new rules for employees, providing that they do not form part of the employee’s remuneration for their job or part of a salary sacrifice arrangement.

Special rules apply for directors to limit the overall total for a tax year to £300 of tax-free trivial benefits.

The new rules are good news for generous employers who can now have clarity about what is and is not tax-free, not just at Christmas, but throughout the year. Also, employers who were previously providing vouchers and paying the tax under a PAYE settlement agreement may no longer need to that.

And don’t forget the £150 per person tax exemption for events such as Christmas parties. But do be aware that the limit can only apply to one event, not spread across multiple ones and it includes the extras such as employer funded travel.

The VAT inclusive cost needs to be used when considering if the tax-free limit is reached for both trivial benefits and the annual events exemption.

For more information in trivial benefits, please contact our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

Funding in the professional services sector

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As many will know, accessing funding in the professional services sector can be a challenging task with most firms being short on tangible assets for security purposes and potentially long on work in progress lock up, especially where conditional fee arrangements are involved. In reality, the most valuable assets are people, and try offering those up as security for your loan or overdraft!

Historically, funders have tended to blow hot and cold with regard to law firms with the appetite for lending variable dependent upon how sector sentiment is running. However, that need not be an obstacle to securing the cash you need and it is worth re-focusing on some of the key drivers.

Financial management - You need to be able to demonstrate sound financial management, particularly working capital management through regular client billing of time spent and disbursements. Allied to this is the ability to produce accurate and timely management information.

Client base –  Ideally there should be a good spread of quality clients and sources of profitable repeat work. Over reliance on a few major clients may be seen as a potential weakness.

Nature of specialism - Firms that specialise to any material extent in work which necessitates lengthy lock up, for example conditional fee arrangements, clinical negligence and criminal cases or where the outlook is less favourable, for example legal aid, tend to be viewed less positively.

Sustainable drawings policy - Where drawings are at a level where inadequate profit retention is demonstrated, or worse still, where these result in increased borrowings, it will have a negative impact on lending appetite.

Partner/staffing structure - There will often be an optimum partner/staffing structure which will maximise profitability and cash flow. It could be a negative sign if this is deemed to be too top heavy where there is insufficient delegation of work and high salary levels which depress profitability.

Reputation - A firm’s reputation and its profile in any specialist areas are critical in attracting and retaining the “right people”, which in turn can stimulate a lender’s confidence in the business. For example, a firm with a poor claims record and higher than normal Professional Indemnity Insurance premium would be looked upon less favourably.

Of course, if it is funding for an acquisition that you are looking for, the issues can be somewhat more demanding and also complicated by the funding position of your target, all of which will have an effect of the price of the acquisition and how it needs to be structured, i.e. over what period of time can you afford to pay the vendors. Conversely, as a vendor, your business will look more attractive if a purchaser is not inheriting your cash flow and funding issues.

So, if any of this rings a bell, please get in touch for a no obligations discussion.

Jim Akrill, Corporate Finance Partner (Jim.akrill@pmm.co.uk).

 

PM+M named one of the top three best employers at Accountancy Age awards

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The PM+M team is celebrating after being named one of the three best employers at this year’s prestigious Accountancy Age Awards which took place in London on Tuesday evening. PM+M is the only North West firm to be placed in one of the top three spots.

The awards process is managed on behalf of Accountancy Age Magazine by Best Companies Group (BCG) which is an independent research firm specialising in identifying and recognising great places to work. BCG manages programmes worldwide, including the US, Canada and the UK.

PM+M was placed third and was judged on various criteria including company policies, practices and benefits along with detailed feedback from an employee engagement and satisfaction survey.

The awards are open to any accountancy practice with at least 15 employees working in the United Kingdom. Entrants can be publicly or privately held, but must have been in business for a minimum of one year and have a UK facility.

Jane Parry – managing partner of PM+M – commented: “Our team is at the very heart of everything we do so this achievement is a real milestone for the firm. Having an inclusive and motivated culture is something that we passionately believe in; along with collaboration, accountability and team-work.

Jane added: Our focus is always on growing and promoting our own talent. We know that it’s not just about financial remuneration; it’s also about providing training and support as well as focusing on building an environment where people want to succeed. Jane concluded: The fact that part of the judging process was based on our team’s own comments makes it all the more special.”