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eSmartTax THE DIGITAL BUSINESS AND WEALTH MANAGEMENT MAGAZINE

July/August/September 2008

CASH iS

KING

managing cashflow in uncertain times

MANAGEMENT

BUY OUT’S could you make a real impact on the business?

Accounting and audits…

what information do you need to provide?

Also inside this issue Anti-money laundering…

information held on the companies register not necessarily reliable

The UK tax system...

less fair and less transparent than other tax regimes


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Contents

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16 08

28 eSmartTax - July/August/September 2008

In this

issue 05

Anti-money laundering... information held on the companies register not necessarily reliable

06

Management buy out’s… could you make a real impact on the business?

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Value Added Tax… your questions answered

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Jargon Busters… common VAT terms used by HM Revenue and Customs (HMRC)

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Climate change levy… supplying taxable commodities

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National Insurance… building up your entitlement

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Putting your business on a proper footing… which structure best suits the way you do business?

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Partnership… taking a share of the risks, costs and responsibilities

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Limited liability partnership (LLP)… limited liability to the amount of money invested in the business

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Limited liability companies… keeping the company’s finances separate

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Franchise… an established concept can give you a head start

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Accounting and audits… what information do you need to provide?

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Accounts submissions… qualifying for a total audit exemption 3


Contents

In this

issue 20

Alternative business finance... factoring and invoice discounting

22

To sell, or not to sell? the most important financial deal you’ll ever make

24

Businesses don’t plan to fail, but many do fail to plan… make sure your business has a financial record that will attract buyers

26

Cash is king… managing cashflow in uncertain times

27

The UK tax system… less fair and less transparent than other tax regimes

27

Large UK companies… pay more in corporate taxes on the wealth they create

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Senior executives buy-in to a business vision… identifying the right target company is crucial

29

Self-employment… flexibility that comes with responsibility

30

Sole traders… a straightforward approach to business

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Property Authorised Investment Funds… corporation tax exemption on a pool of income and gains

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Give your business a wealth check... weathering an economic storm requires good financial planning

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Don’t fall foul of late creditor payments... in a period of economic slowdown keep a keen eye on the cash

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

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eSmartTax - July/August/September 2008


ENTERPRISE

Anti-money

laundering

Information held on the companies register not necessarily reliable

A recent report by the Financial Action Task Force suggested that information held on the companies register was not necessarily reliable. In the Financial Action Task Force’s third mutual evaluation report of the UK’s anti-money laundering systems they point out “that information on the companies register is not verified and is not necessarily reliable.” One of the main areas of concern and risk when conducting business relates to anti-money laundering. How do you know the person you are dealing with is the person they claim to be, or whether or not they are the subject of HM Treasury sanctions?

Regulations (2007) specifically require all firms to have systems in place to prevent transactions where anonymity is present. New requirements under the Companies Act 2006 also requires all companies to have at least one director who is a real person, to assist with the potential threat of fraud taking place.

This was highlighted by Worldcheck, which compared the directors’ database at Companies House against global sanctions lists and found 4,000 company directors who are listed as global terror suspects or fraudsters. 250,000 companies in the UK have nominee directors running their companies. The Money Laundering

eSmartTax - July/August/September 2008

Do you require more information?

One of the main areas of concern and risk when conducting business relates to anti-money laundering.

Please email or contact us with your enquiry. If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

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BUSINESS

Management

buy OUT’S Could you make a real impact on the business?

Over the past few years there has been an increase in the number of Management Buy Out’s (MBO) that have taken place. This is when a group of managers agree to purchase the business they work in from their existing owners. Members of the team seeking to complete the MBO invest some of their own personal money in return for a percentage of the equity in the business.

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BUSINESS

The existing owners sell all or most of their stakes in the business to the new managers and their fellow investors. MBO deals can range in size and complexity, from the relatively simple to the highly complicated, and typically there is the necessity to raise finance external to the business. Managers that launch a MBO are usually motivated by the fact that they can make a real impact on the business, and this provides them with the opportunity to decide the future strategy and direction of the business in the future. The financiers, as a general rule, will expect that the amount of personal money invested by the team be deemed as ‘meaningful’, and this is usually expected to represent a considerable commitment by the new management team, although it does not necessarily follow that the amount required has to be a substantial sum. One common scenario when a business may be subject to a MBO is if the existing directors of a family-run do not have any children interested or capable in running the business. So in

these circumstances, they may be keen to ensure the business and its workforce continues to work successfully. MBOs can also follow acquisitions, when a company purchases another business and then finds that not all of what it has acquired is needed. In this situation it may offer the managers of that particular operation the opportunity to buy the business from them. The reason many managers decide to mount a MBO is because the existing owners see the particular part of the business they work in as no longer core to the whole operation. They may be planning to sell it or even close it. Some companies that are in financial difficulties decide that they also want to sell off assets and get some cash in to stave off financial ruin. For a successful MBO there needs to be a combination of elements in place to ensure its success and the team of managers should ideally have a broad mix of complementary skill sets. One member of the team also needs to have a sound knowledge of the

financial workings of a business and importantly someone must have a clear vision of what the business can achieve, given time and investment. The business does not necessarily have to be profitable but it should be capable of achieving profit and be viable. The existing owner of the business must also be willing to sell. If they have no intention of selling, there’s no way of taking it over unless the financial backers and shareholders in the business give their approval. A MBO at the end of the whole process has to achieve a realistic price for the business. If the existing owners are selling because they want to retire, they’ll hold out for the best possible price. So too will most owners, except those who are desperate to get some cash in. The agreed valuation has to reflect the potential of the business.

If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

Do you require more information? Please email or contact us with your enquiry.

For A successful MBO there needs to be a combination of elements in place to ensure its success and the team of managers should ideally have a broad mix of complementary skill sets.

eSmartTax - July/August/September 2008

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TAXATION

VALUE

ADDED TAX YOUR QUESTIONS ANSWERED

Value Added Tax, or VAT, is a tax charged on most business-to-business and business-to-consumer transactions in the UK. VAT is also charged on goods, and some services, imported from places outside the European Union (EU) and on goods and some services coming into the UK from other EU countries.

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TAXATION

VAT is charged to a buyer by a VAT registered seller. This VAT is reclaimed by a VAT registered buyer after goods and services are purchased. There are three different rates of VAT, standard, reduced and zero. These apply to different types of goods and services. Some goods and services are exempt from VAT, while others are outside the scope of VAT. Businesses registered for VAT usually account for VAT on a quarterly basis by filling in a VAT return and submitting it to HM Revenue & Customs (HMRC). Q: What is VAT? A: VAT is a tax charged on most businessto-business and business-to-consumer transactions in the UK. If you are VAT registered business, VAT is a tax on the net value added to your products or services - the difference between the value of your sales and the value of your purchases. If you are a non VAT registered businesses or organisation, or a consumer, VAT is a tax on your consumption. Q: Who charges VAT and what is VAT charged on? A: You must register for VAT if your turnover for the previous 12 months is over a specific limit - currently £67,000 - or if you think your turnover may soon go over this limit. You may register voluntarily at any time. There are a few exemptions from registration. VAT is charged by someone who is registered for VAT, a ‘taxable person,’ on: n goods and services sold or otherwise supplied in the UK n goods, and some services, imported from places outside the EU n goods and services coming into the UK from other EU countries Q: How is VAT charged and accounted for? A: For items which are standard rated or reduced rated for VAT, VAT is charged to the buyer (output tax) by the VAT registered seller. This VAT is reclaimed by the VAT registered buyer (input tax) after goods and services are purchased.

If you are registered for VAT generally you charge VAT on your business sales and reclaim VAT on your business purchases. The difference between the VAT you charge and the VAT you are reclaiming is the amount of VAT you must pay to HMRC. If the value of the VAT you reclaim is more than the value of the VAT you charge, then HMRC pays you. If you are not registered for VAT, you do not charge VAT on your sales. You still pay VAT on your purchases and you cannot reclaim this VAT. You usually account for VAT on a quarterly basis by filling in a VAT return and submitting it to HMRC. You then pay HMRC the excess of your output tax over the VAT you can reclaim as input tax. If the input tax you can reclaim is more than your output tax, you can reclaim the difference from HMRC. Q: What are the current rates of VAT that apply? A: Different VAT rates apply to different goods and services. Currently there are three rates: n standard rate - 17.5 per cent n reduced rate - 5 per cent n zero rate - 0 per cent The standard rate of VAT is the default rate for goods and services unless specified otherwise. Examples of reduced rate items include: n domestic fuel and power n installation of energy-saving materials n residential conversions n children’s car seats Examples of zero-rated items include: n food, but not meals in restaurants or hot takeaways n books and newspapers n children’s clothing and shoes n public transport Q: Are there any items which are not covered by VAT? A: Some items are not covered by VAT, exempt items and items which are outside the scope of VAT.

eSmartTax - July/August/September 2008

Items which are exempt from VAT include the following: n insurance n p  roviding credit n e  ducation and training, if certain conditions are met n f und-raising events by charities, if certain conditions are met n subscriptions to membership organisations Selling, leasing and letting of commercial land and buildings are also exempt from VAT. However you may elect to waive this exemption and choose to apply VAT at the standard rate. This is known as ‘opting to tax’. Items which are outside the scope of VAT include non-business items such as income from a hobby, or statutory fees such as an MOT test supplied directly by a test centre to its customer. Q: What is the difference between exempt and zero-rated? A: If you sell zero-rated goods or services, they are taxable for VAT at 0 per cent. If you sell exempt goods or services they are not taxable for VAT. Unlike zero-rated supplies, exempt items are not treated as taxable. No tax is payable, but equally, the person making the supply cannot normally recover any of the VAT on their own expenses. If you sell only exempt goods or services, generally you cannot register for VAT or reclaim VAT on purchases. If you sell some exempt goods or services, you may not be able to reclaim VAT on some purchases. If you sell only zero-rated goods or services you may apply for exemption from VAT registration.

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JARGON BUSTERS

jargon

busters

Common VAT terms used by HM REVENUE AND CUSTOMS (HMRC) Acquisitions: goods brought into the UK from other EU countries, formerly imports. Corporate body: an incorporated body such as a limited company, limited liability partnership, friendly, industrial or provident society. Distance sales: where a business in another EU country sells goods to UK consumers, e.g. Internet or mail-order sales. Input tax: the VAT you pay on your purchases which you reclaim from HMRC. Output tax: the VAT you charge on your sales which you pay to HMRC.

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Place of supply: the country where a supply of goods or services is said to be made for VAT purposes. Self-billing: a customer issues a VAT invoice and sends a copy to you with their payment. Supply: selling or otherwise providing goods or services, including barter and some free provision.

registered for VAT. This can be an individual, partnership, company, club, association or charity. Taxable supplies: all goods and services sold or otherwise supplied which are liable to VAT at the standard, reduced or zero rate, whether or not you are registered for VAT.

Supply of goods: when exclusive ownership of goods passes from one person to another.

Taxable turnover: the total value, excluding VAT, of the taxable supplies you make in the UK. Excludes capital items like buildings, equipment, vehicles or exempt supplies.

Taxable person: any business entity that buys or sells goods or services and is required to be

Tax period: The period of time covered by your VAT return, usually quarterly.

Tax point: the time when a VAT liability arises. For goods, this is usually when you send the goods to a customer or when they take them away. For services, this is usually when the service is performed.

Do you require more information? Please email or contact us with your enquiry.

If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartTax - July/August/September 2008


TAXATION

Climate change levy Supplying taxable commodities The levy is part of a range of measures designed to help the UK meet its legally binding commitment to reduce greenhouse gas emissions. It is chargeable on the industrial and commercial supply of taxable commodities for lighting, heating and power by consumers in the following sectors of business: n n n n n

industry commerce agriculture public administration other services

The levy does not apply to taxable commodities used by domestic consumers, or by charities for non-business use. All revenue raised through the levy is recycled back to business through a 0.3 per cent cut in employers’ national insurance contributions, introduced at the same time as the levy, and support for energy efficiency and low carbon technologies. The levy is charged on taxable supplies. Taxable supplies are

certain supplies of the following taxable commodities: n electricity n natural gas as supplied by a gas utility n petroleum and hydrocarbon gas in a liquid state n coal and lignite n coke, and semi-coke of coal or lignite n petroleum coke The following are not taxable commodities for levy purposes: oil road fuel gas heat steam low value solid fuel (e.g. coal tailings and sweepings) with an open market value of no more than £15.00 per tonne n waste as defined in statute n n n n n

Some supplies are excluded or exempt from the levy. Others have a reduced or half-rate. The levy is applied as a specific rate per nominal unit of energy. There is a separate rate for each category of taxable commodity: n e  lectricity = £0.0043 per kilowatt hour n g  as supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility = £0.0015 per kilowatt hour n a ny petroleum gas, or other gaseous hydrocarbon supplied in a liquid state = £0.0096 per kilogram n a ny other taxable commodity = £0.0117 per kilogram If you are in business and are making or intend to make taxable supplies, you need to

contact HM Revenue & Customs (HMRC) and register for the Climate Change Levy. The date you need to register from is the date of making the taxable supply or intention to make the supply. Unlike VAT there is no registration threshold. If you have to register but don’t, you can be compulsorily registered. You may also have to pay a penalty. You need to complete HMRC Form CCL1 and send it to them within 30 days of becoming liable to register.

If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

The levy is part of a range of measures designed to help the UK meet its legally binding commitment to reduce greenhouse gas emissions.

eSmartTax - July/August/September 2008

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NATIONAL INSURANCE

National

Insurance Building up your entitlement

You pay National Insurance contributions (NICs) to build up your entitlement to certain social security benefits, including the State Pension. The type and level of NIC you pay depends on how much you earn and whether you’re employed or self employed. You stop paying NICs when you reach State Pension age.

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NATIONAL INSURANCE

You pay NICs if you are an employee or selfemployed and you are aged 16 and over, providing your earnings are more than a certain level. You stop paying NICs at State Retirement age. This is currently 65 for men and 60 for women but will gradually increase to 65 for women over the period 2010 to 2020. Your National Insurance number (NI number) is your own personal account number. The number ensures that the National Insurance contributions and the tax you pay are properly recorded on your account. It also acts as a reference number for the whole social security system. The only people you should ever give your NI number to are: n HM Revenue & Customs (HMRC) n your employer n Jobcentre Plus, if you claim Jobseeker’s Allowance n your local council, if you claim Housing Benefit

Entitlement to many benefits depends on your National Insurance contribution record (see ‘Benefits that depend on NICs’ below) so it’s very important not to give your number to anyone else. You will also be required to provide your NI number if you open an Individual Savings Account (ISA). If you don’t already have a NI number you must apply for one: n as soon as you start work n as soon as you or your partner claims benefit To be able to apply you must be: n over 16 years of age n resident in Great Britain (England, Wales or Scotland) If you are a parent or guardian and receiving Child Benefit, any children you care for will automatically get a card showing their NI number just before they reach the age of 16.

National Insurance Rates

The following amounts apply for the 2008/09 tax year: If you’re employed

If you’re self-employed

n if you earn above £105 a week (the ‘earnings threshold’) and up to £770 per week you pay 11 per cent of this amount as ‘Class 1’ NICs

n you pay ‘Class 2’ NICs at a flat rate weekly amount of £2.30

n you also pay one per cent of earnings above £770 a week as Class 1 NICs n you will pay a lower amount as an employee if you are a member of your employer’s contracted out pension scheme

n you also pay ‘Class 4’ NICs as a percentage of your taxable profits - you pay eight per cent on annual taxable profits between £5,435 and £40,040 and one per cent on any taxable profit over that amount n if your earnings in the 2008-2009 tax year are expected to be less than £4,825 then you may be entitled to the Small Earnings Exception (SEE), meaning you don’t have to pay any Class 2 NICs - you can apply for SEE for the 2008-2009 tax year on form CF10

eSmartTax - July/August/September 2008

Do you require more information? Please email or contact us with your enquiry.

If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

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ENTERPRISE

Putting your business ON

a proper

footing Which structure best suits the way you do business?

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ENTERPRISE

To put your business on a proper footing with HM Revenue & Customs (HMRC) and other authorities, you need to make sure that it has the right legal structure. It’s worth thinking carefully about which structure best suits the way that you do business, as this will affect: n the  tax and National Insurance that you pay n the records and accounts that you have to keep n your financial liability if the business runs into trouble n the ways your business can raise money n the way management decisions are made about the business There are several structures to choose from, depending on your situation. If you are not sure which legal structure would best suit your business, it’s important to obtain professional advice about your particular situation.

Sole trader The advantages of being a sole trader include independence, ease of set up and running, and the fact that all the profits go to you. The disadvantages include a lack of support, unlimited liability and the fact that you are personally responsible for any debts run up by your business.

Partnership The advantages of being in a partnership include its ease of set up and running, and the range of skills and experience that the partners can bring to the business. On the other hand, problems can occur when there are disagreements between partners. There is unlimited liability and, as a partner, you are personally responsible for any debts that the business runs up.

Limited liability partnership (LLP) LLPs retain the flexibility of a partnership and your personal liability is limited. There is no restriction on the number of members, but at least two must be “designated members” - the law places extra responsibilities on them. The formation of an LLP is more complex and costly than that of a partnership and problems can occur when there are disagreements between the members. If the number of partners is reduced, and there are fewer than two designated members, then every member is deemed to be a designated member.

Limited liability company In a limited liability company your personal financial risk will be restricted to how much you invest in the business and any

guarantees you have given in order to obtain financing. However, you should remember that this type of company also brings a range of extra legal duties, including the maintenance of the company’s public records, e.g. for the purpose of the filing of accounts.

Franchise The major advantage of a franchise is that it takes advantage of the success of an established business and support networks. However, your freedom to manage the business is limited by the terms of the franchise agreement. Also franchisees often pay a share of their turnover to the franchiser, which reduces overall profits.

Social enterprises Social enterprises are businesses that trade for a social purpose and represent a diverse and growing range of business activity across the UK.

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The advantages of being in a partnership include its ease of set up and running, and the range of skills and experience that the partners can bring to the business.

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BUSINESS

TAX FACTS (continued)

Partners themselves usually manage the business, though they can delegate responsibilities to employees.

Partnership

Taking a share of the risks, costs and responsibilities In a partnership, two or more people share the risks, costs and responsibilities of being in business. Each partner is self-employed and takes a share of the profits. Usually, each partner shares in the decision-making and is personally responsible for any debts that the business runs up. Unlike a limited company, a partnership has no legal existence distinct from the partners themselves. If one of the partners resigns, dies or goes bankrupt, the partnership must be dissolved, although the business can still continue. A partnership is a relatively simple and flexible way for two or more people to own and run a business together. However, partners do not enjoy any protection if the business fails.

Partners themselves usually manage the business, though they can delegate responsibilities to employees. Partners raise money for the business out of their own assets, and/or with loans.

Each partner needs to register as self-employed.

It’s possible to have ‘sleeping’ partners who contribute money to the business but are not involved in running it. The partnership itself and each individual partner must make annual self-assessment returns to HM Revenue & Customs (HMRC).

It’s a good idea to draw up a written agreement between the partners.

The partnership must keep records showing business income and expenses.

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As partners are self-employed, they are taxed on their share of the profits. Each partner also needs to pay Class 2 and 4 National Insurance contributions. In England, Wales and Northern Ireland, partners are jointly liable for debts owed by the partnership and so are equally responsible for paying off the whole debt. They are not severally liable, which would mean each partner is responsible for paying off the entire debt. Partners in Scotland are both jointly and severally liable.

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eSmartTax - July/August/September 2008


BUSINESS

Limited liability

partnership (LLP) Limited liability to the amount of money invested in the business A limited liability partnership (LLP) is similar to an ordinary partnership, in that a number of individuals or limited companies share in the risks, costs, responsibilities and profits of the business. The difference is that liability is limited to the amount of money invested in the business and to any personal guarantees that have been given to raise finance. This means that members have some protection if the business runs into trouble. Each member needs to register as self-employed. There is no restriction on the number of members, but at least two must be designated members, the law places extra responsibilities on them. If the LLP reduces in number and there are fewer than two designated members then every member is deemed to be a designated member.

LLPs must register at Companies House. It’s a good idea to draw up a written agreement between the members. Usually the members manage the business, but can delegate responsibilities to employees. Members raise money out of their own assets and/or with loans. The LLP itself and each individual member must make annual selfassessment returns to HM Revenue & Customs (HMRC). All LLPs must file accounts with Companies House.

eSmartTax - July/August/September 2008

An annual reminder letter will be sent to the LLP a few weeks before the due date requesting they download the form from the Companies House website. It needs to be completed and returned to Companies House with the appropriate fee. Members of a partnership pay tax and National Insurance contributions (NICs) on their share of the profits. The profits of a member of an LLP are taxable as profits of a trade, profession or vocation and members remain self-employed and subject to Class 2 and 4 NICs.

Do you require more information? Please email or contact us with your enquiry.

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BUSINESS

Limited liability

companies Keeping the company’s finances separate

Limited companies exist in their own right. This means the company’s finances are separate from the personal finances of their owners. Shareholders may be individuals or other companies. They are not responsible for the company’s debts unless they have given guarantees (of a bank loan, for example). However, they may lose the money they have invested in the company if it fails. The Companies Act 2006 makes a number of changes that will affect directors and shareholders of limited companies.

Main types Private limited companies - can have one or more members, e.g. shareholders. They cannot offer shares to the public. Public limited companies (PLCs) - must have at least two shareholders and must have issued shares to the public to a value of at least £50,000 before it can trade.

It is recommended you take professional advice before creating one. Must be registered (incorporated) at Companies House. Must have at least one director (two if it’s a plc) who may also be shareholders. Directors must be at least 16 years of age. Private companies are not obliged to appoint a company secretary but if one is appointed this must be notified to Companies House. Public limited companies must have a qualified company secretary. A director or board of directors make the management decisions. Finance comes from shareholders, loans and retained profits.

Public limited companies can raise money by selling shares on the stock market, but private limited companies cannot. Accounts must be filed with Companies House before the time allowed for filing those accounts to avoid a late filing penalty. Accounts must be audited each year unless the company is exempt. When you file your Annual Return for the first time a letter will be issued to the Registered Office containing the company’s authentication code and instructions for use of Companies House web filing services. Directors are responsible for notifying Companies House of changes in the structure and management of the business.

If a company has any taxable income or profits, it must tell HM Revenue & Customs (HMRC) that it exists and is liable to corporation tax. Companies liable to corporation tax must make an annual return to HMRC. Company directors are employees of the company and must pay both income tax and Class 1 National Insurance contributions on their salaries. Shareholders are not personally responsible for the company’s debts, but directors may be asked to give personal guarantees of loans to the company.

Do you require more information? Please email or contact us with your enquiry.

Private unlimited companies these are rare and usually created for specific reasons.

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BUSINESS

Franchise agreements The basics to consider The franchise agreement is crucial. Don’t sign any agreement, or pay any fees or deposit, until you have taken professional advice.

Areas covered by a typical agreement

Franchise

An established concept can give you a head start

Taking on a franchise is an option worth considering for anyone who wants to run a business but doesn’t have a specific business idea or prefers the security provided by an established concept. The right franchise can give you a head start. Instead of setting up a business from scratch, you use a proven business idea. Typically, you trade under the brand name of the business offering you the franchise, and they also give you help and support.

This is the most common form of franchising. A true business format franchise occurs when the owner of a business (the franchisor) grants a licence to another person or business (the franchisee) to use their business idea - often in a specific geographical area.

keeps control over how products are marketed and sold and how their business idea is used.

Successful franchises have a lower failure rate than completely new businesses. However, you still need to work hard to make the franchise a success and you may have to sacrifice some of your own business ideas to fit in with the franchisor’s terms.

The franchisee sells the franchisor’s product or services, trades under the franchisor’s trade mark or trade name and benefits from the franchisor’s help and support.

Distributorship and dealership: you sell the product but don’t usually trade under the franchise name. You have more freedom over how you run the business.

The term “franchising” can describe some very different business arrangements. It is important to understand exactly what you’re being offered.

In return, the franchisee usually pays an initial fee to the franchisor and then a percentage of the sales revenue. The franchisee owns the outlet they run. But the franchisor

eSmartTax - July/August/September 2008

Different types of sales relationships are also sometimes referred to as franchises. For example:

Agency: you sell goods or services on behalf of the supplier. Licensee: you have a licence giving you the right to make and sell the licensor’s product. There are usually no extra restrictions on how you run your business.

Term: how long does the franchise last? Will you have the option to renew it, and on what terms? Territory: what area does your franchise cover? Do you have exclusive rights to sell within it? Fees: what initial fee will you have to pay? What percentage of sales revenue will you pay? Will you pay a regular management fee - and if so, what does it cover? Will you have to pay other costs? How are the costs worked out? Support: how much help will you get starting the business? What continuing support will you get? Restrictions: what restrictions are there on what you’re allowed to do and how you must run the business? Exit: what happens if you can’t continue in business for some reason - perhaps due to ill health? What happens if you want to sell your franchise?

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ENTERPRISE

Accounting

and audits What information do you need to provide?

In most cases, small and medium-sized companies and limited liability partnerships (LLPs) are entitled to submit abbreviated accounts to Companies House, which means they have to provide less information. For financial years starting before 6 April 2008, to be a small company or LLP, you must meet at least two of these three conditions:

n b  alance sheet total must be £11.4 million or less  n average number of employees must be no more than 250

n a nnual turnover must be £5.6 million or less n balance sheet total must be £2.8 million or less n average number of employees must be no more than 50

For financial years starting on or after 6 April 2008, a mediumsized company (not LLP), must meet at least two of the following conditions:

For financial years starting on or after 6 April 2008, a small company (not LLP) must meet at least two of the following conditions:

n a nnual turnover must be no more than £25.9 million n balance sheet total must be no more than £12.9 million n the average number of employees must be no more than 250

n a nnual turnover must not be more than £6.5 million n the balance sheet total must be not more than £3.26 million n the average number of employees must not be more than 50

Small and medium-sized LLPs will be able to take advantage of the higher thresholds for accounting periods starting on or after 1 October 2008.

For financial years starting before 6 April 2008, to be a medium-sized company or LLP, you must meet at least two of these three conditions: n a nnual turnover must be £22.8 million or less 

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Even if a company or LLP stops being small or medium-sized through expansion, it will still be regarded as such for one financial year afterwards. If it then reverts to being small or medium-sized the following year, the exemption will continue uninterrupted.

There are special rules for groups of small and medium-sized companies and LLPs whose total overall size falls within the small and medium categories. Abbreviated accounts can cut costs and save time. You also minimise the information made available to others, especially rivals. When you’re a small and growing company you may not want full details of the money you earn and spend to be widely known. But remember, potential customers, suppliers, investors and lenders may check your accounts before doing business with you. Recent expansions to the scheme have allowed some small financial services providers and some small businesses, such as home-finance providers, that comply with Sharia Law to take part in the scheme.

Do you require more information? Please email or contact us with your enquiry. If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

eSmartTax - July/August/September 2008


ENTERPRISE

AccountS

submissions Qualifying for a total audit exemption Although all companies and limited liability partnerships (LLPs) have to submit some form of accounts to Companies House, these accounts do not have to be audited for financial years starting before 6 April 2008 if you:

suppliers rely on information from Companies House to assess creditworthiness and will be reassured by an independent audit. If you decide to submit audited accounts, you must appoint an auditor.

n q  ualify as a small company or LLP for the purposes of filing abbreviated n have a turnover of not more than £5.6 million n have a balance sheet total of not more than £2.8 million

Recent changes to the rules have allowed some small financial services businesses and some small businesses, such as homefinance providers, that comply with Sharia law to qualify for an audit exemption. However, businesses taking advantage of the audit exemption should be aware that shareholders who own 10 per cent or more of the company still have the right to ask for an audit. There are a number of exceptions to these criteria for audit exemptions.

For financial years starting on or after 6 April 2008, to qualify for total audit exemption, a company must: n q  ualify as small n h  ave a turnover of not more than £6.5 million n h  ave a balance sheet total of not more than £3.26 million Small and medium-sized LLPs will be able to take advantage of the higher thresholds for accounting periods starting on or after 1 October 2008. In these cases you can submit audited accounts if you wish, but it’s not compulsory. Bear in mind there can be drawbacks. Banks, credit managers and your customers and

FINANCE

Alternative business finance Factoring and invoice discounting Factoring This is a process of selling your invoice to a Factor who will then be responsible for collecting payment of the invoice from your customer. You will typically receive up to 90 percent of the value of the invoice immediately and your factoring partner will assume full responsibility for the sales ledger.

Invoice Discounting This provides the same basic facility as factoring in that it provides immediate working capital by releasing cash that would otherwise have been tied up in unpaid invoices, but without the sales ledger and collections service. In this case, your funding partner advances your business cash against the value of outstanding invoices, but you retain the collections in the usual way.

Invoice Finance, Receivables Finance, Finance, Sales Finance, Debtor Finance These are all terms referring to the range of products that release upfront, the cash value of trade debts. Whether it’s factoring or invoice discounting, the financier provides you with a significant percentage of your debtor book up front, releasing the remainder, less a percentage fee, once the debt has been paid.

Asset-Based Lending This is lending against assets on the balance sheet, debts or invoices are now recognised as one of these assets and therefore funding can be leveraged. Other assets may include stock, plant and machinery and property.

eSmartTax - July/August/September 2008

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BUSINESS

To sell, or

not to sell? The most important financial deal you’ll ever make

Selling your business could be the most important financial deal you’ll ever make. For many owners, selling the business they’ve spent years building up can also be emotionally difficult. And unless you’ve sold another business previously, you’ll have no experience to draw on.

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BUSINESS

Is selling the business the right option? Before selling your business, you need to carefully assess your reasons for doing so. You need to consider four key questions: nW  hat are my objectives as the owner of the business? For example, you might want to realise some or all of your investment in the business to fund your retirement. nW  hat are my objectives as manager of the business? For example, you might want to retire as soon as possible or prefer to keep running the business. nW  hat are my objectives for the business itself? For example, the business might need new investment in order to grow. nW  ho else will be affected and what will they want? For example, other shareholders, managers and employees, and even key customers and suppliers. Selling part or all of the business may be the best way to achieve your objectives. You might, for instance, want to sell your business outright, leaving you with no financial or management involvement. But a sale may not always be the best solution. And, of course, it may not always be realistic either. There are a range of other exit routes that may suit your needs better. If, for example, you want to retire but already have enough money, you could pass the business on to your children. Or a stock-market flotation could give you access to capital to develop your business while making it easier to sell part of or your entire stake in the business.

Ways to sell a business Most businesses are sold in a trade sale to another business but an alternative is to find a private-equity buyer. Alternatively, a venture capital firm might be prepared to help your management buy the business. There are several different sale options:

Partial or full sale You may want to sell the entire business. Sometimes the purchaser prefers you to retain partial ownership and continue to run the business. This can give the purchaser confidence that the business will do well.

Sale of assets You can sell assets such as equipment, intellectual property or your customer list rather than selling the business itself. This may be attractive to a purchaser who does not want to take on liabilities and obligations. For example the purchaser might not want to take on your employees. You will be left with whatever assets and liabilities are not included in the sale.

Immediate or phased payment You can ask for payment in full when the sale is completed, or you may be prepared to accept payment in instalments. The purchaser may well prefer to pay in instalments. But you will be at risk, for example if the purchaser cannot make future payments. Some buyers will want to make a series of payments based on profits, in which case you may be contracted to stay with the business for a period of time. This is often known as an “earn out.” Your choices can affect whether buyers are interested and how much they are prepared to offer. They can also affect the tax treatment of the sale.

Is a sale realistic? You can only sell your business if someone is prepared to pay for it. If you can’t identify strong reasons, that can be easily substantiated, why your business would make a good acquisition, it’s likely to be difficult to find a buyer. Ask yourself the following questions: n Is the business healthy? A business in trouble is difficult to sell and potential buyers are likely to wait until they can get assets at a knockdown price. n Are the basics in place to make the business attractive? Buyers like well-organised businesses with strong management. n Does the business have a good financial record? Buyers prefer a record of smoothly increasing profits with good growth potential. n Can you identify potential trade purchasers and a good reason why they should want to buy your business? Buying a business can be disruptive and expensive. Potential purchasers may prefer to concentrate on their existing operations. n Are the existing management team interested in buying the business? You may find that they are the only potential purchaser and that they only offer a modest price.

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It usually pays to start planning a sale well in advance. This gives you time to groom the business, making it as attractive as possible to potential purchasers. You may also want to get a preliminary valuation before you offer it for sale.

When to sell a business? Selling at the right time can have a significant impact on the price you get for your business. If possible, plan ahead so that you can pick the best moment rather than being rushed into a quick sale. For example if you plan to retire in five years’ time, it’s a good idea to start planning the sale of your business now. The general state of the economy and your sector in particular can have an effect. It’s easier for a trade buyer to fund a purchase when their own business is doing well, interest rates are low and banks are keen to lend. The state of your business is a more important factor. Aim to sell when profits are increasing and look likely to grow further. Consider the impact of sales cycles or seasonal fluctuations in your business you might have fuller order books at a particular time of year, for example. Planning well in advance also allows you to groom other aspects of your operations to ensure your business is as attractive to buyers as possible. For example, you can ensure that equipment is well-maintained, key contracts are in order, and that you are complying with all legislation. The detailed timing of a sale may also depend on the tax consequences, and any forthcoming changes to tax rules.

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Do you require more information? Please email or contact us with your enquiry.

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BUSINESS

Businesses don’t plan to fail, but many dO

fail to plan Make sure your business has a financial record that will attract buyers

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BUSINESS

The more confidence a buyer has in your business, the higher the price they are likely to offer. It’s essential to set out a clearly defined strategy in your business plan. Planning well ahead helps you ensure that your business has a financial record that attracts buyers when you come to selling your business. A first step is to ensure that your finances are in good order. Although this should be the case at any time, planning to sell your business can push you to focus on this area. One major area is control of working capital, through reducing stock levels and controlling creditors. There may also be opportunities to cut costs, such as renegotiating supply contracts and eliminating unnecessary perks. You can also sell underused equipment to reduce debt. You will also want to present your accounts as attractively as possible. Buyers usually prefer businesses that show increasing profits year on year. If possible, your financial performance should be reasonably stable throughout the year. You may be able to bring forward or delay purchases and sales to help with this. You may also want to change some of your accounting policies. Good sales forecasts will help to increase prospective purchasers’ confidence in your business - but you must ensure they’re realistic and can be supported with evidence. A full order book is a good sign. It’s important that buyers believe your accounts. For example, you should make realistic provisions for bad debts. Buyers will

usually see through any quick fixes you try to use to boost profits. To maximise short-term profits you can reduce longer-term investment. For example you might avoid taking on new staff. But avoid excessive cost-cutting, you need to maintain spending in essential areas, otherwise the business suffers and so does the price buyers will be prepared to offer.

The confident buyer The more confidence a buyer has in your business, the higher the price they are likely to offer. It’s essential to set out a clearly defined strategy in your business plan. You also need to show that you’ve got a strong management team in place. If your business is too dependent on your own skills, it will damage the price it can fetch - and could even make it impossible to sell. Appointing deputy or departmental managers can enhance a company’s value by alleviating that risk. You may also want to encourage key employees to stay by considering appropriate incentive schemes. Aim to reduce your dependence on too few customers or on one or two key suppliers. Show how your customer base is expanding and formalise any informal deals you have with customers and suppliers. Ensure you’re complying with health and

eSmartTax - July/August/September 2008

safety, employment and other legislation consider asking your professional advisers to review the business

settle any legal disputes n m  ake sure you have clear ownership of any intellectual property n e  nsure property contracts are sorted out n p  ut in place suitable management information systems n e  nsure your finances are in good order The sooner you start planning, the more effectively you can do all this. There is a strong case for setting out your exit strategy in your original business plan. This will prevent sudden and probably misguided decisions about leaving the business, which could leave you financially worse off and could make the sale less attractive. Throughout the sale process, continue to demonstrate that you will be flexible and co-operative. Show that you would also be willing to spend some time after the sale helping the buyer get acclimatised to the business. If you think it will help the sale, be prepared to work for the company for a fixed period after the sale is completed.

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ENTERPRISE

Cash

is king

Managing cashflow in uncertain times

Business confidence dropped sharply during the second quarter of 2008 but a recession remains unlikely, according to the Institute of Chartered Accountants in England and Wales.

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The Institute of Chartered Accountants in England and Wales (ICAEW) is warning small business owners to protect their cash assets at all costs to survive increasingly difficult economic conditions. The organisation revealed business confidence in the UK saw a sharp fall in the last quarter, with the Business Confidence Monitor falling from -7.2 in the first three months of 2008 to -19.7 in the second quarter. “As the decline in confidence is now affecting all areas, if you haven’t already done so now, is the time to take steps to get through this phase of uncertainty,” said Michael Izza, Chief Executive of the ICAEW. “Cashflow management is critical. If there is a conflict between making profit and generating or saving

cash, go for the cash alternative. Loss-making businesses can survive, but businesses that run out of cash will not.” The research revealed the economic downturn was affecting all business, with those in the property, banking/finance and insurance sectors the worst affected. The property sector fell to the lowest level ever recorded in the index at -47 while the knock-on effect also dragged the construction industry down to -24.2. This was borne out by figures released by the Royal Institution of Chartered Surveyors, which predicted house prices would fall by 5% during 2008 and property sales would decline by 40 per cent. “The slowdown in the economy is no longer just an issue in the

City of London,” added Izza. “It has spread to all sectors, to businesses of all sizes and across all regions. Nowhere in the UK is business immune to the fall out from recent issues in the global financial markets. Significant domestic developments such as falling house prices only reinforce the concerns.” But the ICAEW remains confident the slowdown will not translate into a wider recession, instead predicting a low level of growth in 2008.

Do you require more information? Please email or contact us with your enquiry.

eSmartTax - July/August/September 2008


TAXATION

The UK tax

system Less fair and less transparent than other tax regimes

The UK’s tax system is viewed as less fair and less transparent than other tax regimes, according to an international study of finance professionals by the ACCA. Called Perspectives on Fair Tax, the report surveyed association members in Australia, Canada, Hong Kong, Singapore, the UK and the US, gauging opinions on tax fairness, complexity, transparency and how well tax authorities communicate with their citizens. Members in Singapore and Hong Kong had a positive view of their tax system, believing it to be fair

and simple, while the UK, Australia and Canada said their regimes were ‘less fair’ and ‘somewhat complex.’ Respondents from the US said their tax system was ‘relatively complex.’ Francis Chittenden, ACCA professor of small business finance at Manchester Business School, who co-wrote the report, said: ‘The message from our research is for governments

to reduce the volume of laws, directives and regulations that contributes most to complexity. There is a fundamental issue for governments around the world to decide the purpose and structure of tax systems and importantly to communicate the rationale behind these decisions.’ Asked if their country’s tax regime was transparent, respondents from the UK rated it as the least transparent, while yet again Hong Kong and Singapore claimed their system to have the most transparency.

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Large UK companies Pay more in corporate taxes on the wealth they create Large UK companies pay more in corporate taxes on the wealth they create than European competitors, according to a government study. On the other hand, they are outstripping them when it comes to creating wealth, says the Value Added Scoreboard research by the Department for Innovation, Universities and Skills. Companies add value by introducing innovative products, selling more existing products and reducing the costs of bought-in items. The top 185 UK companies handed over 12 per cent of that added value in taxes, compared with 8 per cent in France and Switzerland and 6 per cent in Germany. Although the UK has the lowest headline rate of corporation tax in the G7, other countries offer more generous tax breaks. About 23 per cent of added value by Europe’s top 750 companies came from the UK. Germany is the second most productive, making up 19.7 per cent of the total, with France third on 18.5 per cent.

eSmartTax - July/August/September 2008

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ENTERPRISE

Senior executives

buy-in to a business vision Identifying the right target company is crucial

When key managers decide to invest in a business and take over its running, this is called a management buy-in (MBI). Management buy-ins have become increasingly popular in recent years, driven by the fact that many senior executives have found themselves frustrated with the limited number of opportunities for advancement available where they are. Typically, they pull together one or more like-minded colleagues and secure financial backing after identifying the right target company to buy into.

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ENTERPRISE

BUSINESS

Self-employment Flexibility that comes with responsibility

The banks and other financial institutions that provide funding will reject unsuitable candidates, and it does not follow, that every director is capable of mounting a successful management buy-in. In more recent times due the uncertain economic climate there has been a considerable restructuring taking place throughout industry which has resulted in many directors taking pay-offs and going into early retirement much earlier than they would have ideally planned. Once a suitable team is put together and the ideal target business is found, there’s no guarantee of success. It can be a lengthy, drawn-out and stressful process. You need experience and you need to show you are capable of high achievement. Relevant sector knowledge is crucial, otherwise you could find it difficult to convince a backer that you’re the person for the role.

Quick guide to MBIs 1. Relevant experience at managing director level 2. An ability to generate increased profits in a business 3. Relevant sector experience 4. Excellent negotiating skills 5. Strong financial skills 6 Resources of at least £80,000 to100,000 7. Sound commercial judgement and vision 8. Aged less than 55 but more than 40 9. You need to look the part too, good communication and presentation skills are essential as you have to convince sceptical bankers that you can do it

You need to take professional advice and draw up business plans to present to the financial backers. Funding has to come from a combination of the executives themselves and the backers. The management team has to put in a meaningful investment, not necessarily a huge one but something that represents a significant commitment. Choosing the right venture capitalist is essential and it’s important that the repayment terms are sensible so as not to hinder the daily running of the business. Typically, you find that venture capitalists normally insist that first year’s pay is no greater than the sum invested by the managers concerned. Venture capitalists will typically expect to get their money, plus growth, back after about three to seven years in to the MBI. The business ‘exit’ strategy would normally require the business to either be floated on the stock market, sold to another business or sold to another financial buyer. In an ideal scenario, the team that buys in to the business has between three and seven years to achieve what it set out to do and prepare the business for the next step of its life, to ensure the financiers are repaid and the business itself goes on to bigger and greater things.

To mount a successful MBI you initially need to identify a target business, one that’s based in the right place, is in the right kind of industrial sector, is operating in a high-growth market and is the right size.

eSmartTax - July/August/September 2008

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To be a sole trader, a partner, or a member of a limited liability partnership as an individual rather than a company, you must be selfemployed and registered as such with HM Revenue & Customs (HMRC). This does not mean that you can’t also do other work as an employee, but the work you do for your business must be done on a self-employed basis. If you are not sure whether this work counts as self-employment, ask yourself these questions: n Do you present your clients with invoices for the work that you do for them? n Do you carry out work for a number of clients? n Are you responsible for the losses of your business as well as taking the profits? n C  an you hire other people on your own terms to do the work that you’ve taken on? n Do you have control over what work has to be done, how the work has to be done and the time when and place where the work has to be done? n Have you invested your own money in your business or partnership? n Do you provide any major items of equipment which are a fundamental requirement of the work you carry out? n Do you have to correct unsatisfactory work in your own time and at your own expense? If you can answer “yes” to most of these questions then you are probably selfemployed already, and should let HMRC know this immediately if you have not already done so. You may be fined £100 if you fail to register within three months of becoming self-employed. There is no fee for registration.

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BUSINESS

INVESTMENT

Sole traders

Property Authorised

A straight forward approach to business Being a sole trader is the simplest way to run a business: it does not involve paying any registration fees, keeping records and accounts is straightforward, and you get to keep all the profits. However, you are personally liable for any debts that your business runs up, which can make this a risky option for businesses that need a lot of investment. You also need to register as self-employed. You make all the decisions on how to manage your business. You raise money for the business out of your own assets and/or with loans from banks or other lenders.

Investment Funds Corporation tax exemption on a pool of income and gains A Property Authorised Investment Fund (Property AIF) is an open-ended investment company which is a form of authorised investment fund. Its investment portfolio comprises predominantly one or more of the following: n r eal property (commercial and residential) n shares in UK Real Estate Investment Trusts (UKREITs) n shares in certain foreign entities equivalent to UK-REITs

Income Distribution (PID) which is treated for the investor’s tax in the same way as the profits of a UK property business. Investors may also receive two other types of income from a Property AIF: n PAIF distribution (interest) – treated by the investor as a payment of interest n PAIF distribution (dividends) – treated by the investor as a UK dividend (and which carries the same tax credit as other dividends)

A Property AIF is exempt from corporation tax on a pool of income and gains arising from investment in the type of property assets listed above. The investors in a Property AIF will then receive the income arising to the tax-exempt pool as a Property

All individual investors will receive a PID and a PAIF distribution (interest) after deduction of basic rate income tax. Some other categories of investor are entitled to receive payment without deduction of tax.

You have to make an annual self assessment tax return to HM Revenue & Customs. You must also keep records showing your business income and expenses. As you are self-employed, your profits are taxed as income. You also need to pay fixed-rate Class 2 and 4 National Insurance contributions on your profits. As a sole trader, you are personally responsible for any debts run up by your business. This means your home or other assets may be at risk if your business runs into trouble.

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eSmartTax - July/August/September 2008


ENTERPRISE

Give your business

a wealth check

Weathering an economic storm requires good financial planning

With the impact of the credit crunch filtering through to the wider economy, now is the perfect time for businesses to ensure that they have processes in place to be able to keep track of money coming in and going out. It is important to make sure your businesses finances are under control to be able to weather an economic storm and good financial planning is crucial. Start questioning early your credit facilities and maintain a meaningful dialogue with your bank and other professional advisers if necessary.

reviewed, and outstanding items cleared. Tighten up credit control, cash collection procedures and treasury management.

Review your bank charges and consider the options of switching accounts to find a better deal with a new bank? Ask if your current bank will give you any special deals as a loyal customer? Watch out for hidden charges when it comes to rolling-over banking facilities, and factor those into financial planning if necessary.

Look carefully at your forward order book, and the timing of future orders. It’s important to consider carefully current and future customers and their ability to pay and do not simply rely on credit ratings.

Review all your direct debit arrangements for the business and for your personal finances. Small businesses need to keep a tight rein on cashflow. Chase your cashflow and if you can’t make payments, then let your creditors know why and when they can expect a payment. Pay special attention to cash flow forecasts and to monitoring cashflow. Ensure management accounts are up-to-date, and that all key financial reconciliations are done,

Pay particular attention to investments and major capital expenditure. Appraise rigorously and consider the extent to which such items can be rescheduled. For those businesses which import/export, consider foreign exchange hedging and where this could be relevant to your business. For December year-ends, be clear about stock and work-in-progress valuations and consider getting early audit agreement to valuation principles. This also includes the same for all ‘‘fair value’ items on your balance sheet.

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Look critically at staff requirements and your recruiting strategy. Instead of taking on new staff, you could consider paying for more paid overtime. Consider where relevant, temporary or fixed-term assignments but make sure you have weighed up the pros and cons against full-time recruitment. Be cautious in awarding pay rises and in setting up staff incentive schemes. Ensure such schemes relate as much to profitability and cash generation as much as to growth. Critically evaluate your own financial drawings from the business. Are they appropriate in the light of current and future profitability and cash generation? Cars? School fees? Home improvements? Holidays? Insurances?

Do you require more information? Please email or contact us with your enquiry.

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SMALL BUSINESS

Don’t fall foul of

late creditOR payments In a period of economic slowdown keep a keen eye on the cash In a period of economic slowdown it is crucial that smaller businesses don’t fall foul of late creditor payments, especially from larger organisations. More businesses fail because of cashflow problems then anything else. A client may seem good in that they buy a reasonable amount from the business but if they don’t settle then they may threaten to cause serious problems to the business. Businesses should take precautions to protect themselves and keep on top of their debtor book and make sure it takes priority. Too many small businesses are so focused on achieving sales that they fail to ensure that they invoice promptly and chase non-receipt of debtor payments. There is also often a tendency to keep doing business with customers who have a history of not paying on time. Businesses need to treat slow or non-payers with caution and either insist on cash up front or even refuse to do business with them unless invoices are settled promptly. It’s a tough stance to take, of course, and one that many smaller traders are wary of taking for obvious reasons. Sometimes a business needs to consider whether it’s still worth keeping a long-term client on their books if their payment terms are problematic.

Prevention is better than cure There are a number of simple steps all small businesses should take to encourage a healthy flow of payments. Take look at our quick guide; n Invoice promptly n Send the invoice electronically to ensure delivery of the document n Ensure invoices are error-free n Complete and meet all the customer’s requirements n Seek payments on account, if appropriate n Regularly check the creditworthiness of customers n Raise pro-forma invoices until a satisfactory commercial relationship has been developed with new customers n Retain all evidence of delivery for any goods or a signed Satisfaction Note for services provided As a last resort a solicitor’s letter may do the trick to chase overdue debts, otherwise, the small claims court is always an option. The threat of a county court judgement against a debtor may often trigger a settlement. The important thing is to act quickly rather than keep extending deadlines.

In addition there is the additional cost of chasing the debts and of increasing cashflow support on overdraft facilities that may paradoxically have the affect of reducing the profitability of the contracts anyway.

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Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Produced by Goldmine Publishing Limited • Fairbourne Drive, Atterbury, Milton Keynes, MK10 9RG

eSmart Tax Issue 4  

The digital business and wealth management magazine

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