Author Archives: pmm-blog

HMRC tightens the net on offshore tax avoidance

Put simply, HMRC and other tax authorities worldwide are getting tougher on individuals, trustees and companies not paying the right amounts of tax. They are increasing their focus on tax compliance both onshore and offshore in a bid to ensure all tax payers are paying the right amount of tax.

HMRC has more data sharing facilities than ever before and data is already flowing into the UK from sources such as the US FATCA arrangement, Crown dependencies and overseas territories arrangement. The introduction of the common reporting standard from September 2017 means data will also be flowing in from over 50 countries already signed up to the exchange of information agreement. In addition, HMRC can now collect and handle large amounts of data via their computer system ‘Connect’ which as the name suggest, connects with lots of external sources of information such as the land registry, banks and other financial institutions, the DVLA and many more. All this global and national transparency means HMRC has access to more data than ever before and is using this to ensure taxpayer compliance in all areas.
UK taxpayers with offshore interests will soon be subject to new reporting obligations with severe penalties if they fail to comply. To assist taxpayers in understanding their obligations and to offer a way to correct past irregularities HMRC introduced the Worldwide Disclosure Facility – WDF.

It opened on 5 September 2016 and runs until 30 September 2018.  It has been introduced to enable taxpayers to disclose UK tax liabilities that relate wholly or partly to an offshore issue. That is, income arising outside the UK, assets situated or held outside the UK, activities carried on wholly or mainly outside the UK or funds connected to a UK liability transferred outside the UK.

Changing rules over recent years, particularly in relation to residence and domicile could now mean that even if you have taken advice in the past, this may now not be correct. As a first step, taxpayers with complex international tax affairs should review their position and, if need be, ask for a health check to be undertaken. If a disclosure is then required the WDF can be used.
To encourage and drive tax compliance this facility will offer taxpayers a final chance to clear up issues from the past and avoid the highest rate of penalties that HMRC can impose.

A key part of the WDF is known as the Requirement to Correct – RTC

The RTC requires taxpayers to disclose any outstanding UK tax related to offshore matters up to 5th April 2017. Taxpayers will have until the end of September 2018 to do this and if they do so, tax interest and penalties will be paid under the current rules. If this deadline is not met, additional penalties known as Failure to Correct penalties will be added to the settlement which will be a minimum of 100% of the outstanding tax. There will also be an asset based penalty for serious cases of 10% of the value of the asset on top of other penalties.

There are also separate further penalties which can be applied for offshore tax depending on the jurisdiction of the asset. This could be up to a further 200% of the tax not paid and depends on the jurisdiction of the territory.

Penalties generally under the disclosure agreements will be less severe if the disclosure is unprompted by HMRC and there has been no deliberate attempt to conceal the tax.
The message is therefore clear, if you believe you may have a requirement to disclose a previously undeclared source of income, either in the UK, overseas or both, you should use the current disclosure facilities available to ensure a better financial outcome and you should do it now. The penalties for being found out if you do not will be severe.

If you would like to discuss any related issues or need further advice or guidance please get in touch with Julie Walsh on Julie.walsh@pmm.co.uk or 01254 679131

Making Tax Digital and VAT

making tax digital and VATFrom April 2019 businesses with turnover above the VAT threshold will be mandated to use the Making Tax Digital for Businesses (MTDfB) system.

As VAT registered businesses already prepare quarterly returns business owners could be mistaken in thinking that there will be little change required to the format of their current record keeping processes. The reality however is that the MTDfB regime requires records to be held digitally meaning business owners who currently maintain manual records will need to change to using an accounting software package.

Whilst migrating accounting systems can be a testing time for many there are numerous opportunities that Cloud accounting packages offer when used to their full potential.

Cloud software gives business owners the flexibility to run a business from work, home or on the go, with multi user access making it easy to collaborate online with an office based team or professional advisors.

Automation is key. Cloud accounting packages offer numerous opportunities to automate time consuming processes with the software, creating a smart accounting system meaning you’ll have far less work to do. Useful features include bank feeds, where transactions from the bank accounts automatically feed into the software, auto-matching transactions and customised online invoicing to name but a few.

Many cloud packages also sync with third party Apps to create a fully functioning accounting package. There are hundreds of Apps available covering inventory control, time tracking, CRM, Point of Sale, Bills and Expenses, Debtor tracking plus many more.

If you would like to discuss any Cloud Accounting requirements, please contact Jill Morris (jill.morris@pmm.co.uk) or Delyth Oxford (delyth.oxford@pmm.co.uk)

Taxing times deliver opportunities

 

 

 

 

 

 

 

Every industry is being threatened by technological advancements, regulation changes and the challenge of finding and recruiting great staff. The accounting and tax industry isn’t immune, currently we are facing a multitude of problems;

  1.  Information flows that have become automated and confidentiality further restricted.
  2.  Regulations tightened both by government and by our own regulatory bodies.
  3.  Automation is improved within every business in the market and also within our clients
  4.  Recruiting bright and competent people becomes ever harder

In lots of ways it is healthy for the economy as a whole to allow technology to automate tax compliance. Perception suggests, there is little net benefit to the world from a tax return, often the stated opinion of my engineering and nursing friends.

It is however, fundamental to our society that the right type of tax is paid and that people are confident that the accurate amount of tax (and no more) is also paid. Ensuring the first and supporting the second is what we at PM+M do and will continue to do so.

Dealing with the environment we trade in, we see the key challenges to sustaining our business for the future to be:

  1. Building and developing relationships with clients who require human intervention in their tax processes. As automated as we can make it, tax is still a complex requirement
  2. Recruiting and developing a team with a broad range of ages and backgrounds to secure succession and communicate well with the varying cultures of our clients
  3. Retaining technical competence as the volume of legislation grows (and making sure we have all the necessary specialists either in house or reliably available elsewhere)

And most importantly;

4. Maintaining the culture of our firm and our partnership, after all there is no point in     running a firm if you can’t bring everyone on your journey.

One of the great things about a growing tax team that occupies 20% of your headcount, is that you can have your say to directly influence  the journey of the business, ensuring we all grow and succeed in an exciting period of evolution.

Our first and most important step has been to set out, by committing to a vision for our business, not because consultants told us to or because we thought it was trendy, but because asking ourselves and our team to commit to being “the best North West firm of finance professionals” allows us to drive change with integrity throughout the team. Those changes and the reinforcement of great things we have done that haven’t changed allow you to deal with the challenges the world throws at you.

The next key step was to re-emphasise to everyone within our team how important our culture and values are. We are hugely proud of the culture we have built and of our values of quality, achievement, fun and doing the right thing.

Based on our values, we are building a firm of bright and inspiring people who want to make a difference. We have committed to trusting in people and particularly trusting in youth – recruiting apprentices and graduates and investing in professional training, coaching/mentoring and interpersonal training. We have given our people at all levels freedom to express their personality and build fantastic relationships with clients.

The effect of our decisions, commitment, vision and values: A great motivated team; higher sales than ever; strong relationships with clients at all levels; and great quality and technical capacity.

We have now hit the point that our need is not how to manage and deal with individuals challenged by technology and regulation, it’s how to continue to lead them to continued growth and success – we need more leaders and particularly tax partners.

Feel free to call us if you are interested in joining us on our journey, we would love to hear from you.

Brexit: Opportunities to be found

Brexit Part 2: Acquiring UK businesses

As time passes by, it feels that the word ‘Brexit’ will eventually become an unspoken word, like ‘The Scottish Play’. It will be associated with bad luck. However, as the UK starts to negotiate our exit from EU, we believe there are some positives aspects that should be considered by EU based companies that may be looking at setting up a business in new territories

From an economic view, the current rate of corporation tax in UK is the lowest in the G20 and this rate is set to continue to reduce over the next few years.

The workforce in the UK is the second largest in the EU and is one of a very small number of EU countries that expect to have a labour supply growth in the next 15 years. Furthermore, the flexible employment laws mean companies can employ staff in a way that suits the business.

The UK has an excellent infrastructure and there are significant projects planned to improve the current transport systems. These include Crossrail in the south east and High Speed 2 which will link eight of Britain’s ten largest cities.

The fall in the value of sterling in recent months makes the UK very attractive from a cost of investment perspective. Clearly how long and to what degree the pound will remain relatively weak is unknown. However, EU companies should consider taking advantage whilst they can.

Away from the financial and commercial aspects, the UK is very diverse for such a relatively small place. There is a wide variety of communities all over the UK and the variety of businesses to acquire reflect the diverse nature of the UK. There are therefore undoubtedly business opportunities to satisfy all requirements.

The exit by the UK of the EU will undoubtedly result in several negative outcomes for UK based businesses. However, there will also be considerable opportunities for those ensuring they are best placed to take advantage. As matters currently stand there appears to be no U-turn on the agenda for the UK leaving the EU, therefore it seems obvious that business owners from across the globe should ensure they are best placed as matters develop. The close proximity of the UK to mainland Europe gives a clear first mover advantage to European businesses.

Companies that have a strategy to acquire or establish a business in the UK should ensure they have UK based advisers, who are capable of dealing with acquisitions or setting up a new business. This will also include advising on any tax implications of trading in the UK and an understanding of the interaction with overseas tax legislations. Obtaining the right advice from the outset is critical.

In conclusion, EU business owners should invest some time and money now to thoroughly research the UK market place and potential acquisition targets. Those who have a well thought out plan in place for the UK’s exit will not consider ‘Brexit’ to be a cursed word and may indeed consider it to be a word associated with good luck and future prosperity.

If you would like to discuss any of the points raised, we would be happy to help, please contact Tim Mills  (tim.mills@pmm.co.uk)

Do I qualify for research and development tax credits?

What are research and development tax credits?

Research and development (R&D) tax credits are a government tax incentive for UK companies, especially small and medium sized enterprises (SMEs), designed to encourage investment in innovative products, processes and services.

The government announced in March 2017 at the Spring Budget its commitment to R&D tax incentives going forward, which is particularly helpful and reassuring post Brexit. There will be an additional £4.7 billion invested by 2020-21, which will include improving awareness of the R&D scheme amongst SMEs, as it is widely accepted by HM Revenue and Customs (HMRC) that only a small proportion of SMEs undertaking qualifying R&D have claimed the tax relief. This represents a significant opportunity for SMEs undertaking innovative activities that have yet to claim R&D tax credits.

What is it worth?

R&D tax credits are extremely valuable for SMEs and are worth the equivalent of up to 33% of a company’s R&D expenditure being available as a cash repayment from HMRC or reductions of tax bills.

What type of work qualifies for R&D?

Whilst the Government plans to increase certainty and simplicity around making R&D claims, currently HMRCs R&D conditions are very broad. Therefore, SMEs in most sectors and industries can potentially qualify for R&D tax relief.

If you are not sure if the project you are undertaking is scientifically or technologically feasible or you don’t know how to achieve the desired outcome, it is likely that your project will qualify for R&D tax relief. This is even the case where you have incurred expenditure but your project has not been successful.

The type of project work could include creating new products, services or in-house processes. It could also include significantly changing or adapting your current products, services or processes.

Basically, if you are doing something that your competitors are not doing and would be impressed by, there is a reasonable chance that it could qualify as an R&D activity.

What costs qualify?

The main cost is usually the salaries of people engaged in the R&D activity, including employer’s national insurance and any pension contributions. Other allowable costs typically include consumables, sub-contractor’s costs, software and some utility costs if these can be directly related to the R&D activities.

How we can help?

Here at PM+M we have a wealth of R&D experience and have made hundreds of successful claims on behalf of our clients. Each client and R&D project is unique, so at PM+M we offer a no obligation meeting with a member of our tax team. This allows us to understand your business and the type of project(s) you are working on, with a view to assisting you in starting to identify any qualifying R&D activities.

Below is a summary of our most recent R&D claims made on behalf of our clients:

  • Mattress manufacturer – unique mattress designs improving comfort and reducing heat retention. This claim resulted in a £50,000 tax refund from HMRC.
  • Classic Car Company – the company redesigned a continuation model of a 1950’s racing car which involved a complete overhaul of the internal setup of the car for safety purposes and making it road worthy. The claim resulted in a £60,000 tax refund from HMRC.

If you would like to discuss R&D or if you have questions, please contact Jonathan Cunningham (jonathan.cunningham@pmm.co.uk) or Claire Astley (claire.astley@pmm.co.uk)

Untangling the pensions “Webb”

As we enter a period of pension uncertainty impacted by Brexit negotiations, a coalition government and changes to the Finance Act, what could all of this mean for our pension pots?

PM+M Wealth Management hosted a breakfast session on 25th July with former Pensions Minister Steve Webb.  Steve was Minister of State for Pensions between 2010 and 2015, the longest-serving holder of the post before moving to Royal London as Director of Policy and External Communications.

Steve provided his own unique insight into the possible future structure of pensions, the impact we will face and what we should be doing now to protect our future.  Steve discussed how the Government may look to reduce the annual pension tax relief bill of £40 billion, by further reducing the annual amount you can pay into a pension, or further encouraging saving into ISA’s rather than pensions, and interesting option as we all agreed.

On the upside the 25% tax free cash element of a pension is likely to remain over the long term, to quote Steve, Governments will “pluck the goose with the minimum amount of hissing!”

With a number of bankers in the room the conversation soon turned to the transfer out of Defined Benefits Scheme to Defined Contribution schemes to take advantage of new pension freedoms.   Over the last twelve months 80,000 people have left Defined Benefit schemes, with attractive transfers values being driven by the low interest environment.   We discussed five good reasons to transfer, flexibility, higher tax free cash, inheritance tax, health and concerns over the employer, verses five good reasons to stay, certainty, inflation, investment risk, provision for survivors and taxation.

Other subjects included the ever increasing State Pension age, the new Pensions Dashboard , auto enrolment, and the possible introduction of a form of auto enrolment for the self employed.

To round off we discussed the importance of seeking financial advice.  A recent report by Royal London calculated advised clients are better off by a total of £41,099 in financial assets and pension wealth, compared to those who did not take advice.

The ticketed event raised over £300 for the Pendleside Hospice Challenge, a big thank you to everyone who attended, and helped raise money for such a fantastic cause.

If you are considering transferring out of a Defined Benefits scheme, also known as a final salary scheme or you wish to discuss any aspect of financial planning please contact Antony.keen@pmm.co.uk  

We’re hiring! Marketing and Business Development Vacancy

MARKETING AND BUSINESS DEVELOPMENT MANAGER

We are a vibrant and dynamic firm of Chartered Accountants and business advisers, with offices in Blackburn, Burnley and Bury, covering East Lancashire, Greater Manchester and beyond. We have ambitious growth plans and our vision is to be the best North West firm of finance professionals.
We are very proud of our culture and team engagement and were recently placed 3rd in the 2016 Accountancy Age Top 10 UK Employers as well as being awarded Investors in People Gold status.

We are looking for an experienced and enthusiastic marketing manager to join our team and help us shape the future of PM+M.

You will be responsible for:

· Development and implementation of marketing and business development strategy to meet the firm’s goals.
· The creation, delivery and co-ordination of all marketing activity across all departments.
· Co-ordinating and guiding the partners and managers in effective business development activity and targeting using sales and pipeline management.
· Championing the PM+M brand, ensuring all internal and external marketing activities are on brand and in line with our value proposition.
· Control of marketing budget.
· Responsibility for proposal and pitch production and managing follow-up activity.
· Driving and tracking sales pipeline and opportunity management from within the current client portfolio and new clients, including client data management.
· Managing the firm’s websites, ensuring that they and all internal and external facing collateral are brand compliant and in line with the firm’s strategy.
· Help to build the business profile in the market place and augment successful business relationships.
· Optimise the use of digital marketing channels, including social media and effectively use digital platforms for data collection, sales funnel management and customer engagement.
· Day to day management of an outsourced PR resource including identifying opportunities for wider media coverage.
· Event management, including co-ordinating follow-up activity

Ideally, you will also have;

• Have experience of working within marketing and business development – ideally in the professional services sector.
• Have excellent verbal and written communication skills.
• Have good organisational skills as well as the ability to take initiative and manage others.
• Have knowledge of recognised software applications both from a general office perspective and specific marketing and social media applications.

Please apply in the first instance by emailing your CV  to kathryn.rigbye@pmm.co.uk

 

Brexit: Consciously uncoupling from the EU

brexit

Part 1: Using EU workers

The clock is ticking, and British business is facing an uncertain future. We see businesses trying to understand their reliance on a changing EU relationship, whether that be through importing or exporting of goods, potential price sensitivities within that chain and, in certain sectors, a reliance on EU workers.  In some cases, the tax aspects of parent/subsidiary relationships with  European head offices is also a cause of uncertainty, as is the fluid movement of staff between the organisations.

Although many businesses have clarity on which countries they trade directly with, many will not have considered the dependence of their supply chains on the EU or fully understand the impact of Brexit on their workforce.

Recent research from the Social Market Fund (SMF) and Adecco confirms that UK businesses have a significant reliance on EU workers, with an estimated 1.6 million EU workers currently employed in the UK public or private sectors, making up an estimated 6% of all UK employees.

Whilst EU workers support many growing industries across the UK, there is a higher percentage of EU labour in specific sectors such as manufacturing (10% of employees) and accommodation and food services (14% of employees). EU employees represent 14% of those fundamental roles we need in organisations such as labourers, cleaners, and shelf-fillers, and interestingly they also represent 13% of process, plant and machine operatives, all roles that have been hard for employers to fill.  With a heavy manufacturing presence in Lancashire, this could have a huge impact on these businesses and a knock on effect for the wider economy.

Shift in our regional workforce

This reliance of many Lancashire based businesses on EU employees will have to start to shift over the next two years.  In fact, many businesses are already seeing a slow down in EU workers wanting to come to the UK.   In addition, not only will Brexit affect the residence status and right to work of EU nationals working in the UK, but it will also impact those UK nationals working in the EU.

At the moment, we don’t have all the answers to predict the full impact of Brexit, but as the Government battles out trade talks over the next two years, it’s important that UK businesses understand their risk, and use this pre-Brexit period to build resilience and agility.

By using Brexit as a catalyst for change, you can cement your business’s future. We can share our Brexit experience with you, after all we are getting Brexit ready too. If you would like to discuss with us about any issues raised in this article, then please contact Jane Parry on 01254 679131, or email jane.parry@pmm.co.uk

2020 Vision For Making Tax Digital

 

 

 

An announcement yesterday from HM Treasury delayed the timetable for the Making Tax Digital (MTD) initiative imposing quarterly tax returns on businesses. The change in policy has been driven by concerns from business owners and professional bodies regarding the pace of the proposed changes. The new timetable gives business owners until 2020 to adapt to keeping digital records and updating HMRC for other taxes. Those businesses below the VAT threshold will be able to voluntarily file digitally for other taxes should they chose to do so.

From April 2019 businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes only, filing returns with an MTD compatible software. Critically however businesses will not be asked to keep digital records, or to update HMRC quarterly until at least 2020.

The government’s original plan, laid out in the March 2015 Budget, required unincorporated businesses with turnover above the VAT threshold to submit quarterly returns to HMRC from April 2018 and those with lower turnover to follow suit from April 2019. Limited companies of all sizes we due to follow these rules from April 2020.

If you would like to discuss any Cloud Accounting requirements or find out about how Making Tax Digital will affect your business, please contact Jill Morris (jill.morris@pmm.co.uk)

HMRC Inheritance Tax receipts at a record high


Inheritance tax paid by British families has hit a record high of £5.1bn in the year to May 2017.

This is largely caused by the fiscal drag of continuing house price inflation compared to the frozen inheritance tax nil rate band of £325,000.

The new residence nil rate band which came into effect on 6 April this year may start to reduce the inheritance tax take figures, but the complexity of the new rules and the relatively narrow band of people for whom it will be of benefit mean it is unlikely to have a dramatic effect.

Inheritance Tax by the numbers

  • Inheritance tax is charged at 40% on the portion of a deceased person’s estate over and above the nil rate band of £325,000.
  • Anything left to a spouse is exempt (providing they are UK domiciled).
  • If the deceased person is a widow or widower, they may also have inherited their former spouse’s nil rate band if they didn’t use it, meaning they can have £650,000 of exemption.
  • The residence nil rate band adds another £100,000 of exemption per person – but with a complex set of conditions surrounding it. This allowance increases by £25,000 per year until it reaches £175,000 per person in April 2020.
  • You can also inherit your deceased spouse’s residence nil rate band if they didn’t use it.
  • Adding all those nil rate and residence nil rate bands together means that couples can get up to £1million of inheritance tax exemption if they plan properly.

Inheritance tax is complex and thinking about what you want to happen after your death can be daunting.  However, if you don’t want your family to be contributing to the Government’s tax receipts, you need to face it.  Our job is to make that as clear and painless as possible for you, helping you understand the options available to you and making sure that your estate and pension planning are aligned.

We draw on our strong blend of tax and financial planning expertise, coupled with our personal touch, to help our clients build the right solution for their families.

For more information, talk to us and we’d be more than happy to help.

Jane Parry – Tax Partner
jane.parry@pmm.co.uk
01254 679131