Monthly Archives: January 2014

Auto Enrolment

Affecting every employer in the UK, Auto Enrolment requires employers not only to set up and contribute to employees pensions, but also to comply with a whole new set of legislation.  This new legislation, the most radical change to the UK pension system in our lifetime, is designed to tackle the double difficulties arising from increased life expectancy and low pension savings.

To meet their duties employers will have to:

  • Know their staging date.
  • Assess their workforce – identify and categorise employees.
  • Review existing pension schemes  to see if they meet the new requirements.
  • Communicate with workers in line with obligations.
  • Automatically enrol eligible job holders.
  • Manage opt-ins.
  • Manage opt-outs.
  • Make required contributions for and on behalf of jobholders.
  • Make arrangements for any “entitled workers” who want to join a pension scheme to do so.
  • Keep records and provide information to the Pension Regulator if asked to do so.

Whilst the legislation is well intended, as you can see from the above, it is complicated and potentially onerous for employers!

With potential daily fines of up £10,000 for getting it wrong or failing to comply, employers need to act now.

In the next few years a staggering 1.4 million pension schemes will need to be created with 8.8 million employees needing to be auto enrolled.  The pension industry is struggling to cope with this demand and already we are seeing providers being selective about which schemes they want to act for.

It is critical to start the planning process as early as possible (we would recommend at least six to nine months in advance of your staging date).

For further information on pensions and auto enrolment please contact Antony Keen on antony.keen@pmm.co.uk or 01254 679138.

Derian House

Derian House photo - web

On Friday 17th Jan, PM+M presented Derian House with a cheque for £837.07 raised over the Christmas period.

Based in Chorley, Derian House is a children’s hospice with a catchment area encompassing the whole of Lancashire and the South Lakes.  It currently supports over 300 families who have a child suffering from a life shortening condition in addition to providing support to a a further 200 families who have suffered bereavement.

The money was raised through a Christmas themed bake sale held at the Blackburn office on Challenge Way and a raffle at the Christmas party.

Upon presenting the cheque Business Services partner Jackie Fisher remarked “The team at Derian House kindly gave us a tour of their fantastic facilities and I think that all those who went would agree that it was a deeply moving experience and that the work done at the Hospice is incredibly humbling.  It certainly puts things into perspective.

“It costs £3 million per year to keep the Hospice running and only 9% of that comes from government funding so the rest is totally relied upon from fundraisers.”

Jackie added “We’re delighted to be able to make a contribution to such a worthy cause and hopefully we can raise even more for Christmas 2014.”

Tax changes for commercial property purchases from April 2014 – don’t lose out on the tax relief

When buying a commercial property it is often possible to claim significant tax relief on the plant and fixtures within the building using capital allowances.

The rules on such claims change significantly on 1 April 2014 and action in advance of property purchase will be needed in order to retain any possibility of making claims.

The changes are important and should be noted by all parties involved in commercial property transactions.

The relevant legislation for the above was introduced as part of the Finance Act 2012 and we have been in a 2 year transitional period which ends on 31 March 2014.

In broad terms, capital allowances will not be claimable by a buyer acquiring a second hand property after 31 March 2014 where the allowances have not been pooled by a seller and included in a Fixed Value Requirement (s198 Election) or a Disposal Value Statement.  Advice should therefore be taken before the purchase takes place.

Failing to take account of the changes means property owners may lose out on considerable tax relief or may even suffer a reduction in property value for onward sale.

As regards historic acquisitions, despite what some press releases would suggest, there are no additional restrictions on retrospective claims and these can be made at any point prior to disposal.  It is therefore well worth checking that the maximum tax relief has been claimed on previous commercial property purchases.  Clearly the sooner these claims are made, the sooner the cash flow benefit is obtained.  Our capital allowances specialist can provide a no obligation review of potential claims – contact us for details.

For expert advice on capital allowances matters please contact Jane Parry or Claire Astley on 01254 679131 or at jane.parry@pmm.co.uk / Claire.astley@pmm.co.uk.

Tax Changes for Commercial Property Purchases from April 2014 – Don’t Lose Out on the Tax Relief

When buying a commercial property it is often possible to claim significant tax relief on the plant and fixtures within the building using capital allowances.

The rules on such claims change significantly on 1 April 2014 and action in advance of property purchase will be needed in order to retain any possibility of making claims.

The changes are important and should be noted by all parties involved in commercial property transactions.

The relevant legislation for the above was introduced as part of the Finance Act 2012 and we have been in a 2 year transitional period which ends on 31 March 2014.

In broad terms, capital allowances will not be claimable by a buyer acquiring a second hand property after 31 March 2014 where the allowances have not been pooled by a seller and included in a Fixed
Value Requirement (s198 Election) or a Disposal Value Statement.  Advice should therefore be taken before the purchase takes place.

Failing to take account of the changes means property owners may lose out on considerable tax relief or may even suffer a reduction in property value for onward sale.

As regards historic acquisitions, despite what some press releases would suggest, there are no additional restrictions on retrospective claims and these can be made at any point prior to disposal.  It is therefore well worth checking that the maximum tax relief has been claimed on previous commercial property purchases.  Clearly the sooner these claims are made, the sooner the cash flow benefit is obtained.  Our capital allowances specialist can provide a no obligation review of potential claims – contact us for details.

For expert advice on capital allowances matters please contact Jane Parry or Claire Astley on 01254 679131 or at jane.parry@pmm.co.uk / claire.astley@pmm.co.uk.

Four tips for a smooth transition when a director retires

Recently I had the challenge of helping a client and its managing director with his retirement. It’s never easy when a long standing director of a relatively small business wants to retire – the many roles and positions they play and hold make an apparently simple end to employment into a complicated personal and corporate transaction.

I have been an accountant for an (awful) lot of years and had acted for the business for a long time so I assumed I knew how it needed to be done.  Reality showed that  as always when dealing with entrepreneurs, there are angles/negotiations/issues which appear out of the blue. Normally these are the personal points, but sometimes there are technical accounting/tax queries which challenge you unexpectedly.

The process gathered momentum slowly over an 18 month period.  It began with the business owners trying to find out the retirement plans of their MD, without triggering any employment law issues (as is usually the case the employment contract of the directors had not been updated with developments in the law, even when the shop floor terms and conditions had been changed).

Once agreement had been reached over a retirement date, there were two largely separate projects needed: succession planning and a financial settlement.  The role of the business adviser can vary enormously depending on the relationships amongst the parties in the business and between each of them and the adviser.

In my recent case, the biggest issue was the succession planning.  Operational roles needed filling (the managing director had key roles in technical development and in sales) and the supervision of the company required reorganisation.  My role here was largely as a sounding board for the various parties to check ideas, along with maintaining communication – passions can get high in these circumstances and it is often useful to have an engaged outsider to act as a mediator.

As you would expect for an accountant, I had a much bigger role in the financial settlement.  The underlying issues included the level of annual bonus due for the part year of retirement, the price to be paid for the options/shareholding held by the retiring director and the price of effective restrictions on him after he had left.  Each of these had a tax consequence for the retiring director and for the company. In addition, the terms of the deal with the retiring director were communicated through me, to avoid adding further friction to the already tense succession planning situation. Assessing and advising (to the extent possible) on the corporation tax, inheritance tax, income tax and capital gains tax aspects of various payments while maintaining good relations with all concerned was challenging and time consuming!

We (the company owners, the ongoing management, the retiring director and me) eventually reached an acceptable arrangement.  It was all signed up on the agreed retirement date and the business is progressing well.

I learnt a great deal from the process and my four tips for retiring company directors and businesses would be:

  • Early consideration of these things is best – try to have an established succession plan in place to avoid being caught short by an impending retirement.
  • Don’t underestimate the amount of time consumed by discourse between the various parties – these discussions can be sensitive and should be approached with appropriate tact and understanding.
  • Even relatively small transactions can become complicated in their accounting and tax implications.  This is not a matter of simply dotting I’s and crossing T’s, these are complex issues and should be treated as such and planned in advance.
  • A business adviser should be used as a sounding board or intermediary by which the process can be streamlined, advising wherever possible.  My experience tells me that an adviser should know when to take a step back and when to engage the parties.  If not, these boundaries should be established promptly.

I’d be interested to hear about your experiences regarding retirement of company directors, so please leave a comment on this blog, drop me an email at david.gorton@pmm.co.uk or call me at our Blackburn office on 01254 604308.

David Gorton – General Practice Partner

How much do you really know about the Construction Industry Scheme?

Are you a contractor or an employer?

Do you have time to check your subcontractor’s status with HMRC?

Are you struggling to keep up with providing statements?

Then there’s the monthly returns to be sumitted to HMRC by the 19th of each month, not to mention the fines if it’s late!

The construction industry tax regulations are only relevant when all 3 of the below elements are present:

  1. Construction Operations
  2. Self Employed Subcontractor (or Subcontractor Company or partnership)
  3. Contractor

One of the main points to consider is whether an individual subcontractor is really self-employed. If you get this wrong, it could become very costly.

If the indicators below are present then the individual is likely to be an employee:

  1. Set Hours
  2. Timesheets
  3. Paid an hourly rate
  4. No substitute allowed
  5. Contractor controls the individual
  6. Contractor pays for all the individual’s tools and equipment

Furthermore if there is a mutual obligation in that there is an on-going obligation to offer work on a regular and continuing basis by the contractor to the individual and there is an obligation for the individual to accept, carry out and perform all the work offered then the individual is highly likely to be an EMPLOYEE.

An individual is regarded as a self employed subcontractor if, under the contract, he is under a duty to the contractor to carry out the operations, or to furnish his own labour and some or all of the below apply:

  1. No Timesheet
  2. Flexibility
  3. Minimal control by the Contractor
  4. A substitute may be sent in an individual’s place
  5. The individual is paid on completion of work
  6. The individual provides and pays for his own tools

Once you have determined if the individual is a true subcontractor, you then have to check their status with HM Revenue and Customs by verifying their personal details and UTR number.  HM Revenue and Customs will then confirm how you should tax the subcontractor.

All of this can take time that might be better used running your business.  Add on to this the risks of getting it wrong and incurring penalties and it makes outsourcing your CIS returns to us an easy decision.

Let us prepare your subcontractor returns – we will provide the subcontractors with statements each time they carry out work for you and we will submit your electronic returns to HM Revenue and Customs by the 19th of the following month.  Saving you time, hassle and money and giving you peace of mind.

For more information contact Julie Mason on Julie.mason@pmm.co.uk or 01254 604311