Business Matters McCabe Ford Williams Newsletter | Summer 2016
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Welcome to the summer 2016 edition of Business Matters As we go to print the UK has just made the momentous decision to leave the European Union with 52% of the 33 million who voted opting for a Brexit. As a result of this outcome David Cameron has announced his resignation as Prime Minster, citing that a new Prime Minister should be, in his view, in place by October, and it would only be right for them to captain the ship moving forward. Change is therefore very much on the agenda for both the Conservative party and the people of the UK, although what shape and form these changes will take are yet to be seen. Rest assured, however, that we will keep you posted of any taxation issues in due course as we watch this next period of our history unfold. You can keep posted of updates via our blog and news area of our website, our mobile APP and also through our social media channels.
PSC REGISTER
CLIENT PROFILE
Mark, Deb and Dave of DmD Electrical Services Ltd
CHANGES TO TAXATION INVESTMENT
Changes to the Small Business, Enterprise and Employment Act mean that all UK companies must now keep a register of people with significant control (PSC register). More details inside.
We meet the team behind DmD Electrical Services Ltd who may just happen to have the best business slogan ever!
HMRC have made some changes to investment taxation in a bid to simplify tax affairs. Find out more inside.
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PSC REGISTER
The PSC register is designed to increase transparency over who owns and controls UK companies and will assist investors when they are considering investing in a company. It will also be used to support law enforcement agencies with any money laundering investigations.
How to set up your PSC register An officer of the company is required to: • Identify the people with significant control (PSCs) over the company and confirm their information.
Important News
Register of People with Significant Control (PSC) Small Business, Enterprise and Employment Act - Register of people with significant control (PSC) The above Act received Royal Assent in March 2015 and came into effect in April of this year. This Act has implications for the majority of businesses, relating to the way in which businesses file information with Companies House. An area we would like to highlight to you of critical importance is the Register of People with Significant Control (PSC Register). The Small Business, Enterprise and Employment Act now requires all UK companies, Societas Europaea (SEs) and Limited Liability Partnerships (LLPs) to keep a PSC register, in addition to existing registers, i.e., the register of directors and register of members (shareholders). In addition, businesses must also file their PSC information with the central public register at Companies House from 30 June 2016.
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• A PSC is anyone in a company or LLP who meets one or more of the conditions listed in the legislation. This is someone who: • owns more than 25% of the company’s shares; • holds more than 25% of the company’s voting rights; • has the right to, or actually exercises significant influence or control; • holds the right to exercise or actually exercises significant control over a trust or company; • holds the right to appoint or remove the majority of directors; • records the details of the PSC(s) on the company’s own PSC register. • Provide these details to Companies House as part of the annual Confirmation Statement (which will replace the Annual Return); and • Update the information on the company’s own PSC register when it changes, and update the information at Companies House when the next Confirmation Statement is made. For further information on these changes please visit the information contained on the Gov.UK website at www.gov.uk/government/news/the-small-businessenterprise-and-employment-bill-is-coming#psc-info
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HMRC NEWS
HMRC intensifies clamp down on underpayment of tax by ‘Mass Affluent’ HMRC has increased its investment in specialist staff as it intensifies its crackdown on the underpayment of tax by the ‘mass affluent’. The Revenue’s Affluent Unit, which was first set up in 2011, has increased its headcount by 54% over the last two years, and now employs over 300 people. The Affluent Unit was set up to investigate taxpayers on an income of over £150,000 per year or net wealth of over £1million. Many moderately wealthy professionals and businesspeople come under its remit. The increased manpower means more and more taxpayers from this group are likely to find themselves under scrutiny; the Revenue has significantly enhanced its ability to identify potential targets for investigation. A number of factors are likely to attract the attention of HMRC’s Affluent Unit. Some common ‘red flags’ include possession of any property or bank accounts offshore, a particularly low rate of income on total assets or the late filing of self- assessment tax returns. HMRC’s multi-million pound database system, ‘Connect’, has made the identification of targets for investigation particularly simple. The system compiles information on individual taxpayers’ affairs from multiple third party sources, flagging up any unusual activity and allowing users to zoom in on any ‘outliers’. Data is collected from a number of sources, including banks, local councils, legal aid data and even social media. Continued investment in the Affluent Unit confirms that HMRC has broadened its traditional focus on High Net Worths; the mass affluent are now an equally important
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target. Several voluntary disclosure campaigns targeting white collar professionals and moderately wealthy businesspeople have been launched over the last two years, and proved extremely fruitful. The 2010 Tax Health Plan, for instance, a ‘tax amnesty’ for doctors and dentists, saw the collection of over £70 million in extra tax. Like most central government departments, HMRC has faced budgetary pressures over recent years, meaning that finding the most efficient ways of maximising tax take has become increasingly crucial. HMRC has found that tax investigations are yielding more and more in extra revenue and, therefore, they are likely to continue to concentrate resources on specialist tax investigation units. The increased risk that these developments pose to innocent everyday taxpayers mean that more are opting to insure themselves against the costs of an investigation by the Revenue. You can protect yourself against the cost of most tax investigations by subscribing to MFW’s Tax Investigation Service. To find out more please contact your local MFW office.
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CLIENT PROFILE
Client Profile: DmD Electrical Services Ltd
Everything from a socket to a rocket That’s the mantra of the team at DmD Electrical Services Ltd (DmD), which is owned and run by Deb Colegate and Dave Garwood, and which has just celebrated its second year of trading. It’s certainly a fitting mantra as not only does it convey the team’s skills and abilities, who between them have over 100 years experience, it also sums up the type of people they are; always willing to go the extra mile for their customers. The team at DmD can tackle just about anything electrical but they specialise in the field of process engineering and installation, therefore, the majority of the projects they handle are in the industrial and commercial sectors. Projects are extremely varied and so are the industries they work in including power & water, entertainment, manufacturing and the food service industry, to name just a few. Due to the varied nature of their work the DmD team never know exactly what project they will be working on next or even where they might find themselves. However, whilst some of us could find this daunting they seem to relish the challenge of applying their know-how and expertise to a host of new and exciting projects. Little did Dave know when he started building panels from the tender age of 13, where his career would take him! Initially, Dave worked for his father’s business where he gained valuable experience and built an excellent reputation. However, in 2014 Dave’s father decided to close his business and therefore Dave, and his partner Deb, made the decision to set up their own business.
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Dave busy at his workbench
Whilst Dave and his team of two electrical engineers are onsite to tackle this wide range of projects, Deb runs the office, dealing with the book-keeping and all the admin involved in running a company, to ensure that the business continues to run smoothly.
Starting out Both Dave and Deb remember the early days of setting up their business especially with it being a first time business venture for both of them. Finding the process initially daunting they were also surprised by how hard it was to get initial advice, even finding setting up a business bank account difficult, due to the fact that they had no previous trading history. However, their solicitor recommended talking to Liam McHugh, Partner of our Sittingbourne office, for some start up advice and as part of this meeting Liam was able to set up a meeting with a local bank who were more than happy to help.
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Deb says “Liam and his team are always there at the end of a phone to discuss day to day issues. This service does cost extra though, but what’s the price of chocolate biscuits?”
Reputation, reputation, reputation Whilst still a young business, many of the jobs they win have come from the team being previously well known in their industry, and as a result of the excellent reputation they enjoy. In bidding for jobs they are often up against large multi-national companies but this isn’t as daunting for the team as it might first appear. Being smaller and with lower overheads, DmD are often more reasonably priced but it’s not all about the cost savings. The couple believe that a large part of their success at winning bids can simply be put down to their flexible approach and willingness to work with their customers on a solution rather than to dictate what the customer should do. As a result of this, and the excellent work they carry out, repeat business is high, and much of their business is won through personal recommendations due to their refreshing approach
CLIENT PROFILE
Liam and his team also help DmD with a wide range of services including book-keeping, payroll, end of year and personal tax returns, accounts help and general day to day business advice. Liam was also instrumental in helping Deb with her book-keeping by setting her up on KashFlow, a market leading cloud computing system. This was particularly helpful as Deb had previously had very limited knowledge and experience of bookkeeping/accounts and therefore KashFlow, which is designed to be easy to use for people with no accounting experience, proved to be an ideal accounting software solution. The office is in safe hands with Deb
What’s next? The team are currently working on projects for local companies as well as companies in London and beyond. Up and coming projects to quote for include the Sittingbourne Lights, to install and manage the lights in Sittingbourne High Street. This was a project which they came across by accident and, as a result of the volunteer collection work that Deb did last year to help raise much needed funds to cover the costs of keeping the Christmas lights switched on. Other work which DmD have recently been asked to quote for include the refurbishment of the Galleon ride at Chessington, including new ride controls and electrical installation, plus the refurbishment of a BUPA care home in Kensington. Whatever projects they work on we are sure there is a very bright future for the DmD team and who knows what else they will turn their hands to in time or exactly where in the world work might take them next?
For more information about DmD Electrical Services Limited visit their website at https://dmdelectricalservices.wordpress.com/about/ or contact the team on 01795 554887.
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CHANGES TO TAXATION INVESTMENT
Tax Matters Changes to the taxation of Investment Income In an attempt to simplify the tax affairs of the majority of individuals, HMRC has introduced two new allowances which effectively charge certain amounts of investment income at 0%.
The allowances are as follows: 1. Personal Savings Allowance For individuals whose interest falls within the basic rate tax band, the first £1,000 of interest received each year will be chargeable to tax at 0%. The allowance is reduced to £500 for those whose interest falls within the higher rate tax band and is not available at all to individuals with interest in the additional rate band. You may have noticed that your bank/building society no longer deducts tax from interest to accommodate this change. Whilst you may not be liable for any tax on interest earned on your savings, details of interest payments should still be included in your tax return. It is important to note that interest received on ISAs will continue to be received free of tax and the Personal Savings Allowance will not be set against this income. 2. Dividend Allowance The introduction of the Dividend Allowance, whereby the first £5,000 of dividend income received in each tax year is charged at 0% tax, is one of three significant changes being made to the taxation of this type of income.
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The second change is that the tax credit, previously 10% of the gross dividend, has now been abolished and therefore actual dividends received are deemed to be the gross taxable amounts. The third change relates to the rates of tax charged. Any dividend in excess of the £5,000 Dividend Allowance which falls in an individual’s basic rate tax band is subject to tax at 7.5% and this is actually payable, whereas previously dividends in the basic rate band were covered by the 10% tax credit, so no income tax was payable. This will have an effect on company directors who have historically taken a low salary and dividend income up to the basic rate band, around £39,000 in 2015-16, without suffering any tax.
Example: If a salary of £8,060 is drawn to avoid National Insurance charges and £34,940 taken as dividend to fully utilise the basic rate tax band then the following amount of tax would be payable for 2016-17:
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Salary.......................................... £8,060
Total Income ................................£43,000 Less: Personal Allowance ...........£11,000 Taxable Income ..........................£32,000 Tax @ 0% on £5,000......................£0 Tax @ 7.5% on £27,000..................£2,025 Therefore, company directors in this situation will now have a liability to income tax.
Promotions at McCabe Ford Williams In our spring Business Matters issue we announced the promotions of our new associates Jonathan Fullarton of our Dover office and Leigh Jones of our Herne Bay office. As promised we provide more details about them both and once again wish them congratulations on their promotion.
About Jonathan
Where dividends fall into the higher rate tax band, they will again be chargeable at 32.5% but without the 10% tax credit deducted. There is a slight increase to the tax on dividends in the additional rate band from 37.5% to 38.1%, similarly without the 10% tax deduction.
Directors Loan Accounts As from 6 April, section 455 tax on director loans, outstanding more than nine months after the accounts year end, will increase from 25% to 32.5% in line with the new higher rate of tax on dividends.
Jonathan Fullarton Associate, ACA
About Leigh
Need some help? If you are unsure on any dividend tax or other income tax matter, simply contact your local MFW office (www.mfw.co.uk/contact) for further advice.
Leigh Jones Associate, FCCA
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Jonathan qualified as a Chartered Accountant in 2010 and joined McCabe Ford Williams Dover a year after. He manages a wide portfolio of clients ranging from sole traders to audited group accounts. Jonathan also has a great deal of audit experience and takes an active role in the on-going development of audit practices within the firm.
Leigh trained with MFW after joining the firm in 2004 and qualified with the Association of Chartered Certified Accountants in 2009. He has acquired vast experience across many business sectors whilst working across a number of our offices and with a wide variety of clients, providing advice on all aspects of accounting, taxation and business development.
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FIRM NEWS
Gross Dividend ............................£34,940
POWER OF ATTORNEY
Plan for the unexpected with a lasting power of attorney People of all ages are becoming increasingly prepared to face up to the possibility that in the future they could become unable to make decisions for themselves due to mental incapacity, whether brought on by a sudden accident, illness or advancing age. Given the statistics it is worth considering how your relatives would cope should this happen to you. For example, there are around 850,000 people with dementia in the UK and, as you have probably heard in the media, this number is forecast to increase. One positive way of dealing with things is to create a lasting power of attorney (an LPA); a legal tool to appoint people you know and trust to look after your property and financial affairs or health and welfare should you become unable to do so yourself. LPAs are like an insurance policy in case you lose your mental capacity or become physically frail. When this happens people can become overwhelmed and find it difficult to deal with all manner of things. Paperwork and bills pile up, for example, and everything can seem out of control.
family can go along to any Best Interest Meetings, but will not be able to participate in any decision making unless they have a health & welfare lasting power of attorney. Before your chosen attorneys can use the powers, they must, first of all, be registered by the Office of the Public Guardian (OPG). The OPG check the forms to ensure they have been completed correctly and that the procedural requirements to have them registered have been complied with. Assuming everything is in order, the OPG will stamp the forms to confirm their registration and return them to your solicitor. The normal practice is that the forms are then returned to your solicitor to be locked away in a strongroom for safe-keeping until they need to be used.
People often choose to have just a property and financial LPA but a health and welfare LPA will put your family in a stronger position if social services intervene.
LPA’s can be set up relatively cheaply with or without the help of a solicitor but they are a powerful and important legal document and you may wish to seek advice from a legal adviser with experience of preparing them for peace of mind.
If social services were to take out what they refer to as a “Best Interest Order� stating that they feel it is in your best interests that you are admitted to a care home, your
Setting up an LPA does not mean that it takes immediate effect and you can give your Attorneys instructions to deal with your affairs in a certain way.
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Some people are also concerned about what safeguards there are. Firstly, you select someone you know or someone you trust, like a solicitor or GP, to be your certificate provider. They will discuss your forms with you and counter-sign them for you if they agree the forms have been completed in accordance with your wishes and that no one is putting any pressure on you to make the powers in their favour. Secondly, you can nominate someone you know to be told about your lasting power of attorney forms. If they have any concerns about your chosen attorneys, they can contact the OPG about their concerns before your forms are registered. If your attorneys need to look after your financial affairs your solicitor will send them certified copies of your property and financial affairs form for their use. Your attorneys will take or send a copy to your bank, building society, pension provider, or other financial institution with whom you are affiliated. They will then be registered on your accounts, pension policy, or other financial assets, and your attorneys will then be able to access and operate them on your behalf. If your attorneys need to make health and welfare decisions for you, again, your solicitor will provide them with certified copies of your health and welfare form to be registered with your GP or other health professionals involved in your care.
Author Sue Jull Private Client Executive and LPA specialist Boys & Maughan Solicitors sej@boysandmaughan.co.uk 01227 207000
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Events at MFW It’s been a busy spring and summer for our marketing team as we’ve been attending a number of exhibitions including Kent B2B, Kent Vision Live and North Kent B2B where we have been demonstrating, amongst other activities, the benefits of cloud accounting. The next date for your diaries will be Wednesday 14th September where we will be exhibiting at Bank on Business Expo at Biggin Hill and 1 November for the East Kent B2B event being held at Leas Cliff Hall, Folkestone. Come and join us if you can.
Turner Contemporary summer exhibition As founding Turner Contemporary Business Circle Members we are also sponsoring the Turner Contemporary summer exhibition, Seeing Round Corners: The Art of the Circle, which celebrates the art of the circle, sphere and orb. The exhibition features over 100 pieces of art and artefacts are on show and take another look at how the circle has influenced science, religion and history. The exhibition runs until 25 September and further details can be found on the Turner Contemporary website www.turnercontemporary.org/exhibitions/ seeing-round-corners.
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EVENTS AT MFW
For example, you can state that your attorneys can only act for you if you lose your mental capacity. Solicitors can advise you on the instructions that are possible and are permitted by the OPG.
MFW TAX MOBILE APP SNIPPETS
MFW Mobile APP gets an update We have updated our mobile APP to include our social media channels and to provide more flexibility in our news postings. Our APP will now also feature push notifications to enable us to let you know when we have posted more news. Our APP contains a host of helpful features including tax tables and a wide range of tax calculators* plus contact information, news, and connections to our website, blog and social media channels. If you have not already downloaded our APP then this can be downloaded free of charge:
Apple APP Store https://itunes.apple.com/gb/app/ mfw-accountants/id503871710?mt=8
Android phone users https://play.google.com/store/ apps/details?id=co.uk.crosbyassociates.mfw
*Please note that the tax calculators in our APP should be used for guidance purposes only to assess your tax liabilities. We strongly recommend that you speak to an expert to ensure you always get the best of your tax planning as they will be able to provide further advice after considering your own personal and business tax circumstances.
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BANKRUPTCY APPLICATIONS
Changes to Bankruptcy applications The way debtors bankruptcy petitions are dealt with have changed. Until 5th April this year anyone wanting to make themselves bankrupt would have to issue a petition in the court and a judge would decide whether or not to make a Bankruptcy Order. Now however it is much easier. There is an online application, which once completed, will go before an adjudicator to review it and make decisions regarding the application. The fee has changed too. The new fee is £655 a reduction from the old fee of £705 and can now be paid online and perhaps surprisingly, in instalments. The changes do not affect creditor petitions which will continue to be dealt with through the courts.
Changes to Company Director Disqualification Act reports Until April this year liquidators were required to prepare either a return or report on the conduct of all company directors who had acted within three years of the date of liquidation. Whether a return or report was required was determined by whether or not the liquidator had found evidence of unfit conduct. There was not any de minimus for reporting purposes and therefore liquidators were required to submit reports for quite minor misdemeanours.
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With effect from 6th April the liquidators no longer have to complete paper returns or reports but they will file an online form which does not require him, or her, to form an opinion regarding the director’s conduct.
For more details on our range of business rescue & recovery and insolvency services visit our website www.mfw.co.uk/services/insolvency-solutions Or contact Amanda Ireland, Partner & Insolvency Practitioner, or Alison Collier, Manager & Insolvency Practitioner for more information 01795 479111
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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.