Category Archives: Business News

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)

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

PM+M Fundraising for Bury Hospice

 

A team at PM+M’s Bury office has entered the Bury Hospice Corporate Challenge.  There are various fundraising plans afoot which will take place between now and the end of October, when the challenge finishes.  The team at our Bury office have been given £50 to start their fundraising and are determined to turn this into as much money as possible in aid of the Hospice.

The first fundraiser is taking place over the course of Thursday 29th June with a cake sale around the businesses based at Waterfold Business Park, where our Bury office is situated.  The enthusiasm from the local businesses has been great and we just hope we have enough cakes to put a smile on everyone’s face and to raise as much as we can before the first league table for the challenge is published at the end of June. Mary Berry, watch your back!

There is also a ‘Guess the number of sweets in the jar’ and clients, contacts and visitors to our office can take part.  The number is a safely guarded secret!

We’re having fun working as a team on this challenge and the reward will most definitely be the funds raised for such a worthy cause, close to our Bury office.

If you have any items that would be worth donating to a car boot sale, please contact Helen Clayton on 0161 641 8684 or email helen.clayton@pmm.co.uk.

Watch this space for news of future events – we hope you will be able to support us along the way.

Cloud accounting – the future of your business

Cloud seminar

On Thursday 25 May, the PM+M Run My Business Team were joined by Cloud Software providers Xero and ReceiptBank to deliver our first Cloud Accounting Seminar.

This first seminar was an introduction for our clients to our cloud team and the services we carry out.  The cloud team has one objective: to make life easier for our clients.

With the arrival of Making Tax Digital for Businesses (MTDfB) scheduled to start in 2018, the need for businesses to hold their records digitally has never been more important. The new rules will force all businesses to submit quarterly accounting information to HMRC in an electronic format.  Under current proposals, the first wave of sole trader and partnership businesses will come into the new regime in April 2018, with more joining in 2019 and all businesses and companies scheduled to be within the regime by April 2020.

Cloud accounting offers a platform for individuals and businesses to record transactions digitally to help with the MTDfB process but, more importantly, to benefit from being able to view business finances in real time for better decision making and save time by automating processing.

The dedicated cloud teamwork with several different Cloud Accounting Software packages and work with clients to implement and train on the systems but also to look at specific add-ons that will help to streamline the business.

At the seminar, Xero demonstrated some of its most useful features for automating processes such as the direct bank feeds, auto-matching and customised online invoicing.  The add-on ReceiptBank demonstrated their integration into Xero. This add-on allows users to scan or email purchase invoices into the software which then extracts all the key information and posts it into your accounts system “hands-free”. Both systems have apps which can be downloaded to mobile phones, tablets etc. making them completely mobile.

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)

After the election…

shutterstock_533906236
After what has seemed a long election campaign, we finally have a result. And rather than the anticipated increase in seats for the Conservative Party, the UK woke up to find Theresa May’s party no longer enjoyed a parliamentary majority, and would seek to govern in coalition with the Democratic Unionist Party.

Uncertainty resulting from the vote has seen the value of Sterling drift downwards, and it may require a stabilisation of the political situation before the Pound recovers. Shares haven’t been adversely affected so far, with the FTSE index trading at higher levels than the previous day’s close.

What was seen as an opportunity to strengthen Theresa May’s hand, ahead of Brexit negotiations appears to have backfired, and adds doubt to the process and the timescales involved. The government will also to seek to ensure that any political uncertainty does not carry over into the wider economy. Multinational businesses usually prefer to operate and invest in a stable political environment.

For investors, don’t panic. Make sure you are invested in a sufficiently diversified portfolio. And if you are a little unsure, take advice.

Asset based lending and your MBO

shutterstock_518102962
One of the key objectives of any management buy-out (MBO) team is usually to minimise the level of equity funding required to complete the deal. A greater proportion of funding derived from debt means a greater proportion of equity in the hands of the MBO team, and what is not to like about that?

So, what is asset based lending (“ABL”)? An ABL facility is provided against a wider pool of assets than mere factoring or invoice discounting and so, in theory, a greater amount of funding should be possible. The debtors will, of course, be included via invoice finance, but a lender will also include stock, plant and equipment and possibly property, although property lending is not necessarily everybody’s cup of tea. You could also securitise forward income streams assuming they are sufficiently robust.

Historically, smaller SMEs have found it difficult to secure ABL facilities but in recent years the number of providers lending to this sector has increased markedly. Invoices will normally attract an advance rate of somewhere between 70% and 90% with stock and plant possibly up to 75% of net orderly liquidation value. What does that mean I can hear you say? Basically, because assets such as stock and plant usually carry a higher realisation risk than debtors, the lender will independently assess what they might be able to sell those assets for in the open market on a reasonably quick but controlled basis, knock off some costs and then lend up to 75% of the net figure. Hence their back is covered but you get more borrowing.

For companies with very strong cash flow, an ABL may also consider a top up cash flow term loan to increase liquidity and headroom.

There are some key benefits to ABL. As your business grows, so can the borrowing when you need additional working capital. Security is very specific and because additional assets can be included and assessed separately, more funding can be unlocked than through a traditional bank loan or overdraft. ABL is often much quicker to deliver, with additional funding as the business grows being speedily provided. For larger companies, pricing ought to be competitive with more traditional lines of funding.

There can be some things to watch out for though. For smaller companies, the pricing may well be more expensive as small often equates to greater risk in the eyes of a lender. But hey, you got your money, didn’t you? If your business is cyclical, your funding line can reduce quickly as your debtors fall in the off season. In this case, it is critical that you have quality forecasts available so that you understand the working capital requirements at all stages of your business cycle. You really don’t want to over-borrow against debtors at a high point to get the deal done but then find you run out of cash subsequently.

If you are contemplating an MBO or perhaps an acquisition, get in touch. We know the market and have the experience to help you.

Jim Akrill
Jim Akrill
Corporate Finance Partner
Email: jim.akrill@pmm.co.uk
Tel: 01254 679131

 

 

 

Quarterly Economic Review

shutterstock_580430338

The East Lancashire Chamber of Commerce are giving you the opportunity, once again, to tell the Government what it’s like doing business in East Lancashire in 2017.

The survey is carried out quarterly and is taken very seriously by central Government as it provides an economic snapshot of the area. It’s important that as many businesses as possible complete the survey so that the results provide a true reflection across all sectors and that the Government has the best information on which to make important decisions that may impact our area over the next few months.

To complete the survey, please click the button below.

484987987