Monthly Archives: December 2016

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

David Gorton + Jane Parry

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.”