Monthly Archives: April 2014

You Don’t Have to Be a Rocket Scientist to Claim Research and Development Tax Credits

Industry reports suggest that many companies are still missing out on the opportunity to claim this valuable tax relief. This is probably because many business owners don’t realise that their company’s activities may qualify.

There’s still a perception that research and development reliefs can only be claimed by companies carrying out purely scientific, laboratory type research. In reality however, this is far from the case.

The definition of research and development is drawn very widely and includes any significant advances in product development, process development or advances in software and systems.

If your business has developed a product or process that would impress your competitors, or if customers come to you to make them something they can’t get anywhere else, there’s a good chance that you’ve been engaged in research and development activity. It can also apply when you’ve been developing your internal systems and processes, as well as your external products.

Even if your company has been unsuccessfully attempting to develop new systems or products, then this can still count as a qualifying activity. The government is actively encouraging research and development in the UK and claims tend to be looked on favourably.

For small and medium sized companies the benefit of making a claim is:

‘That the company receives a 225% tax deduction for the costs of its qualifying research and development activities, including the staff costs of the employees engaged in the R&D.‘

If the company is loss making, or becomes loss making as a result of the research and development claim, it can opt to receive an immediately repayable cash tax credit. This can be an extremely valuable boost to cash flow.

The relief is not as generous for large companies; however, it is still beneficial to make a claim.

My advice if you’re a company director, is that it’s worth thinking about the activities undertaken by your business and considering whether there may be a project that could qualify for this tax relief.

If you think there might be an opportunity, we can help – given our considerable experience of negotiating claims for a wide range of clients. If you want to chat through your position and options, feel free to call me on 01254 604363 or email claire.astley@pmm.co.uk

Claire Astley – Tax Manager, PM+M

Blackburn Youth Zone – A Club With Differences!

YZlogo2My greatest challenges and pleasure lately have come from working with Blackburn Youth Zone. For those who have no idea what I am talking about, this is a youth club with differences!  Right in the centre of Blackburn, it has nearly 3,000 members, around 1000 visits a week from young people, fantastic facilities and a team organising more than 20 special sessions every night.

I have the privilege and pleasure to be a trustee and to have specific responsibility for the finances and while my day job involves a lot of financial review and analysis, it is very different when you are doing it for a charity that you really care about.

BYZ is supported by the local council but most of its funding comes from the business community – there is an inspiring commitment from local entrepreneurs to give back to young people in their area. The Youth Zone (which opened in 2012) allows young people from whatever background to have access to brilliant facilities and to experience competent caring support allowing them to reach their potential – in many cases this has a transforming effect on their lives and their stories help make it all worth while.

My time in the last month has been committed on two projects – the first was trying to get a budget agreed, matching the needs of young people, the aspirations of the committed professional staff and the continuing financing difficulties for local government and business. There is a difference between being a Trustee and being a professional adviser and the emotional involvement can make it harder to take the tough decisions.

The other project is the much more pleasant challenge of launching a beer festival for Blackburn, again bringing together the business community to help the Youth Zone. The idea came from 4 Blackburn businessmen meeting at Bolton Beer Festival in October and deciding that one of these should be run in our town. Six months later we have a venue at Blackburn Rugby Club, fantastic support from our local brewery Thwaites (and their friends in the brewing trade) providing 60 real ales, more than £15,000 raised in local business sponsorship and teams of volunteers planning to man the bar over the May Bank Holiday weekend. Loads of work, but a great feeling and the chance of helping a lot of people have a lot of fun whilst raising a lot of money for my favourite charity.

My part includes running meetings, encouraging businesses to sponsor barrels and helping the recruitment of volunteers – a lovely experience. If I haven’t managed to get to you, please give me a ring and offer to sponsor a barrel; if you can’t manage that (and even if you can) make sure that you visit the Blackburn beer festival between 2nd and 4th May.

David Gorton – Head of Corporate Services

SME Finance Update: Payroll and Employment News April 2014

2014-04-09 16.32.37

The PM+M payroll team – hard at work!

There are 4 key things you and your business need to be aware of this April:

1. Employment Allowance

Don’t miss your chance to claim the new Employment Allowance – The Government have introduced the new tax cut for businesses and charities and could take up to £2,000 off your employer National Insurance Contributions (NICs) from 6th April 2014.

The allowance will be available to eligible businesses and charities, regardless of size and can be claimed back through your payroll processes by notifying HMRC you are claiming this on your RTI submissions.  Claims can be made up to 4 years from the date the allowance applies.

The Employment allowance is only applicable to employer class 1 NICs and cannot be used against Class 1A, Class B NICs or offset against late payment penalties or interest.

There is only one allowance per employer, no matter how many PAYE schemes you operate. If you operate more than one company, you can choose which scheme takes advantage of the allowance.

The new Employment Allowance is intended to be an incentive for Job creation and assist in the recovery of the private sector. Although, you may spend this saving how you please.

The allowance will give the employer the opportunity to employ someone with a starting salary of up to £22,400 without paying any employer NICs at all.

2. Student Loan Deductions

The repayment threshold has risen from 6th April 2014 in line with the Retail Price Index.  Therefore a Plan 1 loan is repaid at 9% of NIC’able pay above the threshold being £16,910 per annum. (Or £1,409.16 per month or £325.19 a week.)

3. Statutory Sick Pay – Percentage threshold Scheme

From the 6th April 2014 the percentage threshold scheme has been abolished and the recovery of Statutory Sick pay (SSP) will no longer apply.

Unfortunately this change does not affect an employer’s responsibility to Pay SSP and retain SSP records to show they are meeting employer obligations, but records may now be kept in a way that suits the employer.

4. New Absence Rates for 2014/15

Statutory Sick Pay (SSP) – £87.55 per week

Statutory Maternity Pay (SMP) – Higher Rate: 90% of average weekly earnings for the first 6 weeks

Statutory Maternity Pay (SMP) – Lower Rate: the lower of £138.18 per week or 90% of average weekly earnings

Statutory Adoption Pay (SAP) – Lower of £138.18 per week or 90% of average weekly earnings

Ordinary Statutory Paternity pay (OSPP) – Lower of £138.18 per week or 90% of average weekly earnings for a maximum of two weeks.

If you have any questions or would like further information please drop me (Julie Mason) an email: julie.mason@pmm.co.uk or call: 01254 604311.

I’d love to hear your feedback on our April update, so feel free to leave a quick comment at the bottom of this post.  And, if you found this information useful you can use the social sharing icons to share this post on social media platforms.

We’ll be back soon with another payroll and employment news update.

Julie Mason – Payroll Services Manager, PM+M Accountants

Pensions your flexible new friend!

In the recent Budget, George Osborne finally achieved something that has eluded many Chancellors over the years.  He managed to simplify the rules surrounding pensions and, dare we say, even make pensions interesting! (In the same way Steve Davies made snooker interesting!)

From April 2015 gone is the requirement to purchase an annuity and the restrictions on how much you can withdraw from your pension fund.  The Government has recognised that in order to encourage people to save for their future, greater flexibility is required.

The tax free cash element remains the same and you can still take up to 25% of your fund value as a tax free lump sum.  The remaining fund can be withdrawn whenever you wish and is taxable at your marginal rate.

What’s the catch?  The price for savers will be that access to their pension pots will be pushed back, at the same pace as the State Retirement Age.  Initially it will move from 55 to age 57 in 2028. This could affect those around age 40 and under.

These new rules apply only to those who have money purchase arrangements and who have not already used their entire fund to purchase an annuity.  Whilst the new rules undoubtedly provide greater flexibility, care will need to be taken to make sure you have sufficient assets to last throughout your retirement.  Holistic and cash flow planning has never been more important and advice should be sought to make sure you maximise your investment returns and minimise the tax payable.

The main pension points from the budget are:

Transitional arrangements from 27 March 2014

  • Capped drawdown increased from 120% GAD to 150% GAD. This is the maximum level of income that can be taken.  The rates are based on tables issued by the Government Actuary’s Department (GAD) which equate very approximately to single life annuity rates.
  • Flexible drawdown guaranteed income requirement reduced from £20,000 to £12,000 – that is providing you have a guaranteed income of £12,000 per annum you can draw whatever level of income you like from your pension fund.
  • The limit for trivial commutation for small funds increases from £18,000 to £30,000.  For these small pension pots you can take 25% tax free and pay tax on the balance at your marginal rate.
  • 25% tax free cash is staying.

From April 2015

  • 25% tax free cash remains
  • From April 2015 if aged 55 or over you can take benefits how you wish.  You could take your whole pension fund in one go as income drawdown if you wish, subject to paying your marginal rate of income tax.

Future proposals

  • The age at which you can access your pension will increase from 55 to 57 in 2028 (at this point State Pension age is increased to 67).  In future, this minimum age will increase in line with State Pension age.
  • The tax charge on funds remaining in your pension scheme when you die is to be reviewed.  The Government believes 55% is too high.  Details will be announced after a period of consultation.
  • The Annual Allowance governing how much you can put into your pension is reduced from £50,000 to £40,000, as previously planned.
  • It will still be possible to carry forward any unused annual allowances from the previous three years.
  • Lifetime Allowance still reduced to £1.25m.
  • Intention to introduce legislation to remove option to transfer from public service defined benefit schemes (except in very limited circumstances).

For further details or to discuss your retirement planning please contact Antony Keen, Tony Brierley or Richard Hesketh.