mfw Business Matters Winter 2015

Business Matters McCabe Ford Williams Newsletter | Winter 2015

Christmas Quiz

Sea son’s Greetings

It’s that time of year to enter our Christmas quiz for your chance to win a £100 Marks & Spencer voucher.

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client profile

Call of the Wild A Merry Christmas and a happy and prosperous New Year

We visit the penguins and a host of other animals at Wingham Wildlife Park.

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from all at McCabe Ford Williams TAX Matters

Landlord’s Beware!

What you need to know about tax changes affecting property income.

Page 05 Photo credit: Tony & Scott Binskin of Wingham Wildlife Park and their Humboldt’s penguins

CHRISTMAS QUIZ

Christmas quiz We have a ÂŁ100 Marks & Spencer voucher up for grabs. For a chance to win simply untangle the following seasonal words.

Name

Atviiytn Emiychn

Email

Glena Elno Eererind

Telephone

Kescrarc Bleuab Wolfsnake

Good luck!

This competition is not open to MFW Partners or staff or their friends and family.

Gortot Etismotel Utrlet Voed Rats fo Hebemhlet

Closing date: Friday 18th December Once you have unscrambled these words please complete and return your forms by no later than Friday 18 December to karen.gray@mfw.co.uk. Alternatively, you can send your entry by post to: Karen Gray, McCabe Ford Williams, Bank Chambers, 1 Central Avenue, Sittingbourne, ME10 4AE. The winner will be the first name randomly selected from all correct entries and will be contacted shortly after the closing date.

Do hurry as unfortunately entries received after Friday 18 December will not be counted.

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Business Matters Winter 2015

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Senior Partner, Dover Office

If you had not taken up a career as an accountant, what would you have done for a living?

I would probably have been a solicitor. I have always enjoyed the technical aspects of my work which often involves getting out the books to see what the laws and regulations actually say, not what someone writing an article thinks that they say.

How do you spend your spare time?

In simple terms, I try to work hard and play hard. I enjoy playing golf, cricket, squash and cycling. I also ski and enjoy my holidays. I read about two books a year, mostly whilst lying on a sunbed somewhere hot.

What has been the most important life lesson you have had and what did you learn from it?

In my teens I coasted a bit at school. My GSE O levels results (that shows my age!) were “just good enough” and my awakening happened when I failed my AS level in Maths. I realised that it was probably not possible to get what I wanted out of life by coasting. I didn’t fail another exam after that.

How would you like to be remembered?

In view of the above, and the changed mindset “he always did his best”.

What are your pet hates?

Most are covered by one word –“carelessness”. I get very cross with myself when I do something really stupid and find it frustrating when others are careless or sloppy. It is fair to say, to use a well known phrase, that I don’t suffer fools gladly.

Tell us something about you that would surprise most people.

When I was 11 I represented my school in a television quiz called the Survival Game. We managed to reach the final and so, in total, I was on TV half a dozen times.

However, my wife thinks that is not as interesting as the fact that some 40 years or so later I still hold the record for the under 14 110 yard hurdles at Dover Grammar School for Boys. I still hold the record because the following year all of the races went metric and there is no ready conversion for the 110 yard hurdles times!!

Who has been your role model and why?

I have to say that is my Dad. He worked hard and by his behaviour in life taught me what was right and what was wrong. When I became a partner he suggested that I never forget that I was once an employee, and

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Ian is both a keen photographer and flying enthusiast. This is photo he took whilst pairing a Spitfire from the inside of a Havilland Dove aircraft and taken in the skies over Dover.

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Spotlight on

Spotlight on Ian Pascall

to remember to praise as well as criticise. He was also something of a perfectionist which is a trait I appear to also have.

CLIENT PROFILE

Client Profile: Wingham Wildlife Park

The call of the Wild Unlike many of us the Binskin family don’t set alarm clocks to rouse themselves from their slumber as they can always rely on the waking calls of gibbons, penguins and wolves to oust them from their beds. However, that is to be expected when you own and live at Wingham Wildlife Park.

In 2008 Tony Binskin and his wife Jackie took over the ownership of the existing Wingham Wildlife Park under the new business name Wingham Wildlife Park (2008) Limited, acquiring the site plus 6 staff members and just 27 different species of animals. Under their ownership the park has gone from strength to strength and now employs 43 staff and is home to over 200 animal species.

The park is a real family affair as Tony and Jackie are also joined by other members of the Binskin family. This includes their daughter Joanna and sons Luke & Scott (the

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Business Matters Winter 2015

Tony & Scott Binskin of Wingham Wildlife Park

Financial Director of the park) along with his wife Emma. Other family members are Tony’s sister Debbie and his mother Mary Bottle. The remainder of the WWP team consist of a number of excellent keepers and other valued support staff plus their Animal Curator Markus Wilder and his wife Ruth.

The family have worked hard since acquiring the park, updating both the infrastructure and facilities for the benefit of both the animals and visitors alike. To bring in visitors in the off-peak season they have also developed a heated indoor play area.

Everyone involved in the park is passionate about animals and perhaps no one more so than Tony whose ambition was always to own his own wildlife park.

Tony believes strongly in education and conservation. Within this in mind there is an education centre and museum on site and daily talks are given by the park’s keepers. He also feels that through these they can educate people about the inappropriateness of keeping some exotic animals as pets, becoming somewhat of a sanctuary for some of these types of animals following their time as house pets.

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Tony, Jackie and the rest of the family also get involved in rehoming captive animals and providing them

with a new and more enjoyable and peaceful home. As well as the chimpanzee project the Binskins have already rehomed, amongst others, two male lions named Brutus and Clarence from a French circus, a group of Barbary macaques and some Capuchin monkeys from breeding farms in Israel.

Taking care of the animals is, of course the family’s top priority and this, at times, has also included hand rearing some of them. This includes the two tigers Troy and Blade and a puma named Binx.

More recently the family have also stepped in to help hand rear a baby Puma named Jesse whose mother was unable to properly care for him.

Conservation projects are driven by a charity they have set up named Wingham Wildlife Park Animal Welfare (WWPAW) which is chaired by Markus. The charity has been established to help with conservation projects not only in the park but anywhere in the world. One key project they are currently focussing on is the work they are doing alongside Fundación Entropika in Columbia. Here they use the Spix Night Monkey as a flagship species to highlight the illegal wildlife trade as well as deforestation in their natural habitat. More details

about the foundation’s work can be found here www.entropika.org/en/ about.html As clients of our Sittingbourne office the Binskin family were previously looked after by former Senior Partner Peter Frowde and are now in the safe hands of Partner Clair Rayner.

Clair has vast experience of setting up and running charities so will also be able to help the WWPAW to establish itself and help with the ongoing running of this charity. In addition the firm manages the WWP payroll and handles the Year End accounts. Scott Binskin says of the relationship that the family have with MFW “When we first wanted to acquire Wingham Wildlife Park, we do not feel that we could have done it without Peter Frowde’s help in setting up the initial cash flow” With everything that the family does it is no surprise to learn that Wingham Wildlife Park is the fastest growing zoo in Kent with more species of animals than all the other zoos and wildlife parks in Kent combined. The family are always working on new ideas so that regular visitors can often see something new so if you haven’t visited for a while you will be in for a pleasant surprise.

For more information visit winghamwildlifepark.co.uk or call the WWP team on 01227 720836.

Tony feeding one of his hand reared tigers

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CLIENT PROFILE

The animals have also benefitted from newer, bigger and greener enclosures which are also designed to be eco friendly. A 12,000ft2 enclosure is currently being finalised and will be the new home to 8 retired chimpanzees donated by the Yerkes National Primate Research Centre, Atlanta, USA. Once finished the 6 girls and 2 boy chimpanzees will be able to enjoy a new warm, safe and spacious environment featuring 6m high climbing structures, under floor heating and private bedrooms.

TAX MATTERS

Summer Budget 2015

Changes Affecting Property Income Significant changes to the taxation of buy to let properties were announced by the Chancellor, George Osborne, in the summer budget.

Restriction of Relief on Finance Costs The most significant of these changes is the restriction of tax relief on finance costs on residential properties, to the basic rate of income tax. This will be phased in over 4 years from April 2017. The changes will affect all landlords that are higher rate tax payers and may also push some landlords that are basic rate tax payers into the higher rate band of tax.

‘Finance costs’ incorporate not only mortgage interest but interest on loans to buy furnishings and also fees incurred when taking out or repaying mortgages or loans.

Landlords will no longer be able to deduct ALL of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

Deductions from property income will be restricted to: • 75% for 2017-18 • 50% for 2018-19 • 25% for 2019-20 • 0% for 2020-21 and beyond

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Business Matters Winter 2015

Individuals will be able to claim a basic rate tax reduction from their income tax liability on the remaining finance costs.

This tax reduction will be calculated as 20% of the lower of: • the remaining finance costs (25% for 2017-18, 50% for 2018-19, 75% for 2019-20 and 100% thereafter), • the profits of the property business in the tax year, or, • the total income (excluding savings and dividends) that exceeds the personal allowance in the tax year The expected rise in interest rates will increase ‘finance costs’, further aggravating the implications of these tax changes.

Although these changes are likely to mean a soaring tax bill for any landlord who pays tax at a higher rate, there is time available to plan ahead and tax planning opportunities to be considered.

Example A higher rate taxpayer pays interest on his Buy to Let Mortgages of £20,000 a year = £8,000 tax relief • 2017-18 £ 15,000 (75%) allowed as a deduction from rental income = £6,000 tax relief £5,000 given as a basic rate reduction = £1,000 tax relief Total £7,000 tax relief • 2018-19 £ 10,000 (50%) allowed as a deduction from rental income = £4,000 tax relief £10,000 given as a basic rate reduction = £2,000 tax relief Total £6,000 tax relief • 2019-20 £ 5,000 (25%) allowed as a deduction from rental income = £2,000 tax relief £15,000 given as a basic rate reduction = £3,000 tax relief Total £5,000 tax relief

Tax Planning

• 2020-21

Landlords with a mix of commercial and residential properties could shift their borrowings as these rules only affect residential property. There may

No rental reduction £20,000 given as a basic rate reduction = £4,000 tax relief

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be large bank fees incurred with this option. Remortgaging and fixing interest rates may be prohibitive.

If the landlord’s spouse is not working, they may be able to assign part or all of the rental income to them, allowing them to utilise their personal tax allowance, due to rise to £12,500 by 2020, or use their 20% basic rate band.

Perhaps the most notable option is the possibility of incorporating the property portfolio. As the limitation of tax relief only applies to individuals, incorporation will protect landlords from these changes.

There are the general pros and cons of incorporation to be considered.

There is an additional administrative burden and cost of running a Limited Company and banks typically charge higher rates of interest. Recent changes to dividend taxation make extracting profits from a company more costly than before however, where landlords

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More importantly Capital Gains Tax and Stamp Duty Land Tax on incorporation need to be considered. Transferring a property portfolio to a connected company will typically give rise to a Capital Gains Tax charge on the deemed disposal. However, Incorporation Relief may be available on this.

Similarly, the transfer would usually give rise to Stamp Duty Land Tax but, Multiple Dwellings Relief may be available. Companies that own UK residential property may also need to complete an Annual Tax on Enveloped Dwellings (ATED) return and pay ATED tax. Again, there are reliefs and exemptions from this tax.

Special rules also apply to transfers of land into and out of partnerships which can, in the right circumstances, mean that no Stamp Duty Land Tax is payable on incorporation for portfolios that have been operated as a partnership.

Incorporation of a property portfolio without due consideration of the tax implications can be costly. At McCabe Ford Williams we can assist with careful tax planning to significantly reduce these costs and help landlords to stay ahead of the curve.

Autumn Statement Changes The Treasury is clearly making a huge effort to increase the

number of properties available to first time buyers, and in a second huge tax assault on buy to let it was announced in the Autumn Statement that a 3% surcharge on stamp duty for buy to let properties and second homes will be introduced from April 2016.

This will significantly increase the purchase price of a property and, as discussed above, will need to be considered on incorporating a property business. At the moment it is unclear exactly how this change will develop. Current stamp duty rates are shown in the table below Up to £125,000

Zero

The next £125,000 (the portion from £125,001 to £250,000)

2%

The next £675,000 (the portion from £250,001 to £925,000)

5%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

The remaining amount (the portion above £1.5 million)

12%

This change will see Stamp Duty on a £175,000 purchase jump six fold from £1,000 to £6,250 (£1,000 plus 3% full £175,000=£5,250) Also in the Autumn Statement was the announcement that from April 2019 a payment on account for any Capital Gains Tax due on the disposal of residential property will also need to be made within 30 days of the completion of sale bringing forward the tax burden for landlords and those selling a second home.

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TAX MATTERS

wish to reinvest profits back into the growth of the business, incorporation may be more advantageous than personal ownership and the Corporation Tax rate will be 18% by 2020-21.

pensions

TAX MATTERS

Other Changes to Property Taxation From April 2016, landlords who let out furnished properties will lose the 10% wear and tear allowance.

This will be replaced by a new ‘replacement furniture relief’.

The new relief will apply to landlords of all properties excluding ‘furnished holiday letting’ businesses and letting of commercial properties (these businesses receive relief through Capital Allowances).

The planned system applies to all residential dwellings and only allows relief on the replacement cost of furnishings. The initial cost of furnishing a property is not included.

A benefit to landlords is that they will no longer need to ensure that their property is sufficiently furnished to claim the relief, as they did with Wear and Tear Allowance.

For those who rent out a room in their own home there is good news as rent-a-room relief goes up from £4,250 to £7,500 from April 2016.

Emma Andrews, FCA Associate – Maidstone

The ever changing world of pensions Make use of pension tax relief while it is available It has been over a decade since there was a fundamental review by government of how tax relief in the UK is given to people making pension contributions. A green paper has been issued by the government to raise this as a discussion. It has become apparent that two thirds of pension tax relief is given to higher rate taxpayers whilst the government’s stated objective is to encourage pension savings for low and middle income earners.

Bearing this in mind it makes sense to make pension contributions now while the tax relief rules remain as they are.

High earners tax relief is going to be restricted At present the annual allowance restricts the amount of tax-relieved pension saving an individual can make each year. For most individuals it is currently £40,000. It is possible to carry forward unused allowance from the previous three tax years to offset any excess in the current year. Another change in

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Business Matters Winter 2015

The Finance Bill 2015 provides that from tax year 2016/17 the annual allowance for those earning above £150,000 is to be reduced on a tapering basis so that it reduces to £10,000 for those earning above £210,000. For every £2 of income above £150,000, an individual’s annual allowance will reduce by £1.

Again for some people, making a pension contribution now might be wise as it might not be possible in the next tax year.

This will affect more people than you might think! The restriction affects any individual with “threshold income” – broadly the individual’s total earned and unearned income for the tax year – of more than £110,000. If threshold income exceeds £110,000 the individual must calculate their “adjusted income” for the tax year, which includes the value of pension savings, including employer contributions to defined contribution schemes and its share of the value of defined benefit accrual. If adjusted income exceeds £150,000 the taper will apply.

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A One off chance to pay in extra

Now that access to pension funds is much more flexible than it has ever been in the past a pension is a useful way to save in a tax efficient way or pass funds down the generations with little taxation. However in the nine years since pension “simplification” it has become an increasingly complex area where advice is needed.

Annual Investment Allowance (AIA) Reminder Don’t forget that you have until 31st December to take advantage of the current rate of AIA of £500k which will reduce to a new rate of £200k at the beginning of January.

Therefore, if you are thinking about capital investment it really pays to seek advice at your earliest opportunity.

Maximum Lifetime pension savings will be reduced again Finally, in April 2016 the maximum which can be saved into a pension over your whole lifetime will reduce from £1,250,000 to £1,000,000. If you accrue a pension pot larger than these figures the excess of this amount will be heavily taxed. If you have already accrued a fund over £1,000,000 then you have the opportunity to protect what you already have by applying to HMRC for transitional protection.

Unfortunately, the detailed rules of how this will work are yet to be released. It is worth bearing in mind that this could affect the pensions of teachers, senior civil servants, doctors and others who have long service in a final salary pension scheme.

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Peter Harris Chartered Financial Planner

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PENSIONS pensions

To add a layer of complication as if one were needed, the annual allowance is measured over pension input periods (PIPs) which do not always match the tax year. So, in order to introduce this measure, transitional arrangements are necessary to align PIPs with the tax year from 6 April 2016. This will in some circumstances provide the opportunity to have contributions tested against an annual allowance of £80,000 (plus any available carry forward).

Summary

Insolvency Matters

Charities supported in 2015 This year we have supported a host of charities including Kent Air Ambulance Macmillan Coffee Morning Cancer Research Race for Life Porchlight Queen Victoria Hospital, Herne Bay Swale Development Fund Relate – East Kent Save the Children Jumpers for Christmas Genes for Jeans New Leaf Support

A special mention to Alison Davey who ran the London Marathon in aid of New Leaf Support and to Kurt Robinson who stepped into the boxing right to help the fight for childhood and teenage cancer.

Alison Collier of our insolvency team will also be delivering Christmas meals on Christmas day in support of Aged UK.

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Business Matters Winter 2015

Last Orders Running a public house is now a risky business with approximately 30 closing every week. Even previously successful businesses can fall on hard times, which is exactly what happened to a local publican who we shall refer to as Mr Barry Smith.

The public house had once been a thriving success for Barry and his late father, however following the death of his father and other unforeseen circumstances, the business began to decline. Unfortunately, at this stage Barry did not know where to turn for help. To hide his feelings of failure he continued to struggle on with the business by fending off bailiffs and borrowing money from friends.

By the time Barry approached Alison Collier, MFW Insolvency Practitioner, he had been served with a Bankruptcy Petition. Alison looked at the options for the business with Barry, but with increasing rent and declining sales and the already large debts it made it impossible for the business to be saved.

Facing bankruptcy was a very real worry for Barry as he had no idea what Bankruptcy would entail and having heard all sorts of horror stories, he had no idea who to trust. He recalls that he was at his wits end by the time he spoke to Alison and although his only option was bankruptcy, after the whole process was explained to him by a professional, he started to feel more relaxed.

He further commented that Alison was a huge support to him as she also reassured him that he was not alone and should not consider himself a failure. It was this personal approach that gave Barry the confidence to trust what he was being told.

Alison also assisted Barry when he received a letter from his Trustee advising him of the amount required to purchase his interest in his property. The Trustee

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had calculated £18,000 based on a valuation which appeared to be on the high side and no allowance had been made for any costs of sale. Alison assisted Barry with obtaining two market appraisals carried out by local estate agents which valued the property at considerably less than the Trustee’s agent had. She then estimated the likely costs of an estate agent and solicitor if the property were sold and concluded that actually there was no value to Barry’s share of the property.

Alison wrote a letter to the Trustee setting out why Barry’s share of the property had no realisable value and he had no option but to accept the points she raised. She managed to get the Trustee to remove his charge over Barry’s home for no payment whatsoever, meaning he could not come back at a later date to try to realise funds from the property, saving Barry and his family considerable heartache, upheaval and

Barry went on to say that he would recommend anyone facing a similar problem should speak to a professional as soon as possible. He had let his situation escalate through fear of the unknown. He continued that he could not recommend Alison highly enough as, without her support and knowledge an already difficult situation would have been a lot worse. She always encouraged me, Barry said, to look at bankruptcy as a fresh start rather than as a failure. It was this support and reassurance that helped me get through. After speaking with Alison it was like a weight had been lifted from my shoulders and I am happy to confirm there was light at the end of the tunnel.

When asked to comment Alison advised “It is such a shame when I meet people who do not know which way to turn. It is so important for people in difficulty to seek early professional advice rather than listen to unqualified friends who mean well but probably have little or no knowledge of the law. Although I cannot always recommend an alternative to bankruptcy, in some situations that is the best way forward. For Barry that was certainly the case and I am happy that he was able to trust me enough to stop fighting the inevitable which was only causing him further debt and stress.

Insolvency people are often perceived to be there to take assets but in fact in certain circumstances we really can help and make a difference”.

To speak to Alison on any insolvency issues please email alison.collier@mfw.co.uk or call Alison on 01795 479111. www.mfw.co.uk

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Insolvency Matters

money. Barry stated “with a young family at home and no way of paying any monies to my Trustee I was sick with worry. Alison’s assistance at this time proved to be invaluable as with her help I was able to negotiate a settlement with my Trustee which ultimately meant I was able remain in the property”.

This publication is intended for general guidance only. Every case is dependent on its particular facts and circumstances, and whilst it is believed that the content is accurate, the material should not be taken or relied upon as giving specific advice on any particular matter. Neither McCabe Ford Williams (the firm), its partners or employees accept any responsibility for any loss or damage (including but not limited to loss of profit or anticipated profit, damage to reputation or goodwill, loss of business, damages, costs, expenses or tax liabilities) caused or occasioned to any person acting or omitting to act in reliance upon the information contained in this publication. Any person wishing to obtain specific advice on any particular matter should contact a partner of the firm directly, and advice can be provided on a case by case basis.