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

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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

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.

Charities Update


As Annual General Meetings (AGM) approach for many of PM+M’s Not-For-Profit clients, trustees are busy working on the trustees’ report which is incorporated into the financial statements.

The financial statements focus on the charity’s financial performance and position but in isolation this does not give the reader a rounded overview of what the charity has achieved and the resources they’ve used.

The trustees’ report is an opportunity to publicise significant activities, the achievements of the charity and the impact they have made on delivering their services to their users.  All registered charities must prepare a trustees’ report and make it available on request.  Registered charities with a gross income exceeding £25,000 in a financial year must file their accounts and annual report with the Charity Commission.

It’s important to understand that the charity generally has three viewers:

  • Current and potential funders
  • Beneficiaries of their services
  • Wider public

Charities are publicly accountable, so the information provided should show a fair, balanced and transparent review of the charity.

The Charities SORP (FRS 102) sets out seven main section headings for the trustees’ report:

  • Reference and administrative details
  • Structure, governance and management
  • Objectives and activities
  • Achievements and performance
  • Financial review
  • Plans for future periods
  • Funds held as custodian trustee on behalf of others

Finally, a statement of trustees’ responsibilities must be included and signed by at least one trustee.

A charitable company must also incorporate a strategic report if they are not classed as a small company.

On a recent monitoring review carried out by the Charity Commission, 54% of the sample did not meet the public benefit reporting requirement as it did not include a public benefit statement nor did it explain who benefitted from the charity’s activities.

The public benefit reporting requirement must include both an explanation of activities undertaken by the charity to further its purposes for the public benefit and a statement by the trustees as to whether they have had due regard to the Commission’s guidance on public benefit.

Other common areas which are required but are overlooked include:

Reserves policy

The policy should cover the reasons why the charity needs reserves, the levels of reserves the trustees believe they need, steps taken to ensure the required levels are maintained and the process in place to monitor and review the policy.

Key management personnel

Trustees need to set out who they delegate day to day management to and whom they consider to be the key management personnel of the charity.

If you would like any further information please speak to Helen Binns (helen.binns@pmm.co.uk), head of the PM+M Not for Profit sector, who will be more than happy to help.

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…

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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.