Monthly Archives: June 2015

Are Your Properties Divided By Hadrian’s Wall?

shutterstock_213922042From 6 April 2016, the Scottish Parliament will have the power to set the rate of income tax for Scotland. This might be difficult for HMRC as it will likely cause some problems determining who qualifies as “Scottish”.

For income tax purposes, it will much depend on an individual’s residence status. The current proposal for determining the residency of an individual is the location of their sole or main residence.

If that isn’t clear cut, then a day counting test is proposed.  Anyone with homes in both Scotland and the rest of the UK or has close economic links to Scotland will need to understand the new rules when they are finalised later this year and ensure they know where they will be a tax resident.

Setting aside matters of national pride and focusing on the tax aspects, whether you want to be Scottish or not will depend on the respective rates of tax.

At this stage, we don’t know if income tax rates will be higher or lower than the rest of the UK, but new powers will allow Scottish Parliament to vary the income tax rate by up to 10% above or below the main UK rates.

It will also be interesting to see whether or not the Scottish Government will obtain further devolved tax powers to implement capital gains tax or inheritance tax changes.

For the rest of the UK, David Cameron has announced that there will be no VAT, national insurance or income tax increases for the next five years. For more information or if you need any guidance with your tax planning, please contact our tax team on 01254 679131 or email tax@pmm.co.uk.

Family Business and Generation Next!

Family BusinessI recently read an article concerning UK family businesses highlighting that many are now falling out of family ownership. Statistics indicate that approximately 30% pass to the second generation of the family, with only 12% making it to the third generation.  My initial reaction to this research was to be saddened. However, as I gave the matter further thought, I concluded that optimism should be the overriding emotion.

We live in period of continual change affecting all aspects of the way we live. People have a much greater choice in many areas and this includes the choice of whether to pursue a particular career or develop certain skills. The opportunities that are available mean that working in the family business with a view to future ownership is low on the list of alternatives for many people. Therefore the number of businesses remaining under control of the same family or families is diminishing. Whilst this may not have been the initial intention, it does provide opportunities for individuals who are not part of the family.

There are a large number of highly capable and skilled individuals who would not historically have had the opportunity to manage and own a business for the sole reason that they were not members of the controlling family. There is now an overriding reason for families to seriously consider how to embrace non-family employees as the new leaders and owners of their businesses. This does not have to be at the expense of family values and the culture that is the very fabric of many of these companies, but it does allow them to develop with the input of new ideas and alternative ways of thinking.

PM+M advise many family businesses and, being members of The International Centre for Families In Business (ICFIB), we are able to utilise our experience and expertise to discuss succession issues and help find practical solutions that work for both the family and the business.

The potential for family businesses to develop and flourish under ‘outside’ control should be embraced. Assuming that family leadership and ownership is the only way forward for a family business can quite simply be a recipe for disaster.

Tim Mills – Corporate Finance Partner

PM+M Race To Beat Cancer

DragonOn Saturday 1 August, PM+M will be bringing a 20-strong team to Preston docks to compete in a Dragon Boat Race in aid of the Rosemere Cancer Foundation.

This annual race is an important part of the fundraising for additional equipment and facilities for cancer patients being treated at the specialist Royal Preston Hospital Cancer Centre and other local cancer centres throughout Lancashire.

Last year was a huge success and we would like to replicate the enthusiasm behind the event this year. If you would like to donate to this great cause, please click the button below which will lead you to our Just Giving page. Any donation would be much appreciated.

Thank you in advance – Jackie Fisher

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Pension Freedoms – What You Need To Know

shutterstock_147678989When George Osborne delivered his 2014 autumn statement, he announced that in the future you would be able to access your pension pots in much the same way as you do your bank account, and also be able to pass on your pension pot onto your loved ones. This created huge ripples across the pensions industry. The share prices of leading annuity providers fell sharply as a core part of their business was no longer the default product for retirement. Why would you lock yourself into a fixed withdrawal for the rest of your life and potentially lose a large nest egg for your heirs should you die early?

So it was with much excitement that on 6 April many of the new ways of accessing your pension became available. Except it is a bit more complicated than that.

First there is the tax. For those wishing to extract their pension in one go there is a substantial tax bill. After receiving 25% tax free as a Pension Commencement Lump Sum (PCLS), the remaining fund extracted is added to your income and taxed accordingly in that year. If you have income from other sources there’s a good chance that much of this lump sum will attract 40%, or maybe even 45% income tax.

In addition, if you don’t have a P45 in the current tax year, pension providers may apply a “month-one” tax code, treating the income as if you were to receive the same payment each subsequent month – thus meaning you pay a lot more tax than is due. Employed people may be able to claim back any overpayments during the year, but the self-employed will have to have wait until submission of their tax return the following year.

Apart from the tax, you will also need to consider whether your existing pension can allow you to access these new freedoms. The Telegraph outlines how Friends Life (part of the Aviva Group) are unable to offer Flexible Drawdown within their existing pension plans. Similarly, not all providers are offering the option of being able to draw your cash out in one go. For advisers this situation comes as no surprise – to expect legacy providers with creaking IT systems to be able to meet these new requirements and to completely change their business model in a matter of months was always going to be a challenge. Many people will need to change their pension provider to access benefits in the way they would like.

If you’re looking to take retirement benefits, you should take financial advice to find out and discuss what options are available to you, and to be aware of the tax consequences of any decision you make.

For more information or advice on how to efficiently access your pension pot, please contact Richard Hesketh on 01254 679131 or email richard.hesketh@pmm.co.uk.

HMRC Waive Fines For Reasonable Excuses

shutterstock_276958952The news over the last week of the leaked memo suggesting that HMRC have decided to waive the £100 fine for people who missed the deadline for filing their tax returns earlier this year is an interesting and welcome development. The decision is said to be part of a plan to reallocate resources to target major tax avoiders rather than penalising “ordinary people”.

However, this is not just a blanket waiver and is not carte blanche for missing the tax return filing deadline in the future. Anyone who has missed the deadline will need to have a good reason for sending it in late and will also need to make sure that they have now paid their tax and submitted the return.

The concession only applies to late 2013/14 income tax returns.

In this one instance, in order to reduce their backlogs, HMRC have said that they will take at face value and not check people’s applications for penalty waiver because they have a reasonable excuse. The rules around late returns are normally quite strict and are firmly applied by HMRC.  Acceptable reasonable excuses tend be to things that are unexpected or beyond your control.

If you filed your tax return late and would like advice on cancelling a penalty, or if you would like to make sure that you get your 2014/15 tax return in on time, please get in touch with our tax team for advice on tax@pmm.co.uk or call 01254 679131.

Jane Parry Is Raring To Glow

RaringJane Parry, Managing Partner and Head of Tax at PM+M, will be taking on the Raring to Glow challenge on Saturday 4 July in support of East Lancashire Hospice along with other local business women from Taylors Solicitors, Trevor Dawson, Role and NatWest. Together, they are ‘The Walkie Talkies’.

The East Lancashire Hospice provides an important service to the local area by providing palliative care for patients and their families. The Walkie Talkies will take on a 7 mile walk to raise as much money as possible to help fund the care of these patients and support their families.

If you would like to kindly donate to this great cause, please click the button below which will lead you The Walkie Talkies just giving page. Any donation would be much appreciated.

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The UK Economy Enters Negative Inflation

shutterstock_230949013Inflation in the UK has turned negative for the first time in more than half a century, providing a boost for household finances by lowering, amongst other things, food and energy prices. The Office for National Statistics (ONS) conclude that falling costs in transport services (particularly air and sea fares) have played a significant role in the reduction.

However, the latest data has prompted discussion among economists about whether this is actually a period of negative inflation rather than deflation and whether it could actually have an adverse effect on the economy.

But what’s the difference?

Negative inflation – this is a when the annual inflation rate turns negative, with an accompanying fall in consumer prices. Typically, this makes us all feel better off and gives us extra money to spend in other areas of the economy.

Deflation – a decline in prices, often caused by a reduction in the supply of money or credit. This can be caused by a decrease in government, personal or investment spending.

While many will welcome negative inflation, savers will be hit the hardest as interest rates will remain low. Some economists are arguing this is a warning of the underlying weakness of the UK’s economic recovery, and concerns will increase if the period of negative inflation continues.

Those potentially benefitting the most are pensioners and others who have fixed increases. The “triple lock”, which ensure pensions increase by whichever is the highest between inflation, wages or 2.5%, saw state pensions rise by 2.5% in April.

Workers on the national minimum wage will also see an increase of 20p an hour (the biggest increase in seven years) though this will only come into force in October 2015.

Whatever your personal views, this is undoubtedly good news for the economy (at least for the time being), but any prolonged period of negative inflation could be damaging. It is expected that inflation will bounce back later this year when oil and food prices start to increase. Watch this space.

The Queen’s Speech

shutterstock_114857485Last week at the state opening of Parliament 2015, the Queen made her speech outlining the proposed legislation of the new government.

As expected an EU referendum by 2017 is on the agenda along with free childcare, an income tax freeze and the extension of the right to buy scheme for housing association tenants. There are also a number of bills that have been proposed.

The Enterprise Bill will incorporate measures to reduce regulation on small businesses and help them develop, in a bid to boost job creation. The Enterprise Bill will also contain measures to create a conciliation service, to help settle disputes over late payment practices between small and large businesses. There are also plans in place to improve the business rates system ahead of 2017.

There were various tax pledges made by the Conservatives during the General Election and they are set to keep their promises in the Finance Bill as the Queen announced that there would be no rise in income tax rates, VAT or national insurance before 2020. It was also announced that anybody working 30 hours on the minimum wage or anybody earning below £12,500 will not have to pay any income tax.

Jane Parry, Managing Partner and Head of Tax at PM+M, says “The follow up on election promises is welcomed but, interestingly, there was no mention in the Queen’s speech of the proposed inheritance tax relief for houses passed down in the family.  Hopefully it will appear in the Budget speech on 8 July.”

In his second Budget speech of the year, George Osborne will reveal the Government plans to cut £12bn from the UK’s welfare bill, as well as hopefully firming up on his tax proposals. Nothing substantially damaging to businesses is expected to be announced but, as always, there could be a few curve balls in the Chancellor’s announcements regarding measures to clamp down on tax avoidance. This budget should provide some clarity on what will happen to the Business Annual Investment allowance from 1 January, as the Chancellor was keen to avoid giving a commitment on this in his first Budget speech.

To find out what this means for you and your business, we would like to invite you to our post-election Budget breakfast seminar on Thursday 9 July.

For more information about our free seminar or to book, please click the button below or call Daniel Hill on 01254 679131.

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