Business Matters Winter 2016

Business Matters McCabe Ford Williams Newsletter | Winter 2016

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2016 – What a year!

David Cameron was noticeably surprised to have won the general election in May 2015 with a clear majority. It meant, of course, that he had to keep his promise to hold a referendum on staying in or leaving the EU. As we all know, on 23 June 2016, with a 72% turn out, the country decided by a 52/48 majority to leave. This was too much for David Cameron and he resigned leaving us with, effectively, no one to take us through the process and much political unrest has ensued.

CONTINUED...

CLIENT PROFILE

BUSINESS PLANNING

TAX MATTERS

Open Sesame We visit the ‘Aladdin’s cave’ at W E Rolfe & Son

Success to Succession How to exit a business is just as crucial as how to build one

The Gift of Giving An update on what you can and can’t gift this season

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CHRISTMAS MESSAGE

Prime Minster Theresa May is now spearheading the Brexit plans but as I write this the High Court has decided that before Article 50 can be invoked, it needs the permission of MPs. So, 3 people have ruled that it is down to 650 people to decide if what 17m people voted for should come about. Whichever way you voted, you would have thought that the legal position had been considered before the vote took place.

Anyway, the pound is down against the dollar and euro, the stock market is riding high and the base rate of interest is down to a mere 0.25%, but the predictions are for inflation caused largely by the exchange rate changes.

Added to all this is the fact that Donald Trump will be the 45th President of the USA, so it is not surprising that there is much uncertainty about what the future will bring.

Of a more routine nature, much later than usual because of the referendum, we had the Finance Act 2016. For years there has been talk of “tax simplification”. This Finance Act was in fact the second longest Finance Act ever (the longest being 2012) with 649 pages comprising 191 sections and 25 schedules. The Finance Act 2016 is also the sixth one to exceed 600 pages. In the 1940s and 1950s the TOTAL number of pages in all of the Finance Acts came to 625 and 686 respectively. Since then the length has grown remorselessly and, undoubtedly, one of the principal reasons for the increase in size is the volume of tax avoidance legislation.

The concern is that the anti-avoidance provisions are so widely drawn that they will catch unexceptional tax planning, and those simply planning to arrange their affairs in such a way as to minimise their tax bills. The most often quoted ruling on this subject, confirming that tax avoidance (rather than evasion) is acceptable and legal, comes from the court case of IRC v Duke of Westminster (1936): “Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as

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Business Matters Winter 2016

to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax”.

Will that principle be changed?

Then there’s the Government initiative to “Make Tax Digital” (MTD). The changes proposed in the MTD consultation documents will have a profound impact on the operation of the tax system, the way that businesses keep their records and the role of tax agents, such as MFW. The Chancellor’s Autumn Statement took place on 23 November. View our Autumn Statement coverage online www.mfw.co.uk/blog/article/autumn-statement (those with a printed newsletter will find a copy included inside).

Draft legislation for inclusion in the 2017 Finance Bill will be published on 5 December 2016.

Exciting times!

Whatever occurs, MFW will keep you abreast of developments through our newsletters and blogs, all of which will appear on our website and through our App. On behalf of all at MFW, may I wish you a Merry Christmas, and hope that 2017 is kind to you and your business. Finally, don’t forget to enter our Christmas competition on page 9 for a chance to win a £100 Marks & Spencer voucher.

Author Ian Pascall Senior Partner – Dover Office

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Charities Supported Turner Contemporary Kent Enterprise Trust Marie Curie

Sebastian Coe Charitable Foundation Queen Victoria Memorial Hospital League of Friends Relate (East Kent) Martha Trust Whitstable Junior Football Club (under 11s) Fishing for Life Help for Heroes Aspire free school, Swale The Mill Project Skate park for young people run by young people in Sittingbourne New Leaf Support Macmillan coffee morning

We are delighted to announce that Mark Greenwood has joined our Ashford office.

Mark started his career in accounting as a trainee for a Folkestone firm back in 2003 where he worked his way up to an audit and accounts manager. He qualified as a Chartered Accountant (ACA) in 2007.

In 2014 Mark left practice life to work in industry where he worked for a local entrepreneur in a new Finance Manager role. This included managing the finances of many businesses including Rocksalt restaurant in Folkestone.

After 2 years in industry, however, Mark started to miss working in a practice and therefore jumped at the chance to join McCabe Ford Williams in a managerial role in our Ashford office.

We wish Mark a warm welcome and great success within the firm.

Save the Children’s Christmas Jumper Day Woodnesborough FC (Under 13’s) Friends of Wateringbury Primary School

Incidentally, Mark appears in one of the photos in this issue’s client profile.

Jeans for Genes Kent Association for the Blind Rotary Club Crabble Corn Mill www.mfw.co.uk

Business Matters Winter 2016

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FIRM NEWS

St, Edmunds School, Canterbury

CHARITIES

in 2016

New appointment for our Ashford office Mark Greenwood

CLIENT PROFILE

Client profile: Rolfes DIY LLP – trading as W & E Rolfe & Son, New Romney

‘Open Sesame’ Established in 1955, Rolfes DIY is a third generation family business which is today run by husband and wife team Spencer and Patricia Rolfe. Originally started by Spencer’s grandparents, it is now a Limited Liability Partnership that trades using its recognised brand name of W & E Rolfe & Son. The store is one of the oldest members of the British Hardware Federation, now part of the British Independent Retailers Association (BIRA).

An Aladdin’s cave Customers often refer to the shop as an ‘Aladdin’s cave’ due to the vast lines of stock on sale. From tools, home and cook wares and more, to all the DIY elements you would surely ever need. In fact, the stock is so numerous and diverse that we simply don’t have room to list everything here!

The store is an approved retailer for many well-known brands including Black & Decker, Dulux, Brabantia and Joseph Joseph, to name just a few. Also on sale are Liberon wood care products, ATCO lawnmowers and Earthborn paints. Further product lines can be ordered from the shop’s quarterly/seasonal catalogues or online via the shop’s website or eBay and Amazon sites.

Inside the store the displays are changed seasonally including BBQs and garden furniture during the summer and fires and Christmas decorations for the winter season, so there’s always something new to browse.

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Business Matters Winter 2016

Mark Greenwood (MFW, Ashford) with Patricia & Spencer

Adapting with the times Having an online shopping model means that Rolfes (as it is affectionately known by its customers) can reach customers from anywhere across the globe, which in turn helps ‘protect’ shop sales, which can be all too dependent on high street footfall.

The challenges of competition from the big DIY chains, home and garden and other retailers also has an impact but, perhaps, not as much as you might expect. The store remains extremely price competitive by adopting smart stock purchasing practices through membership of buying groups – Home Hardware and BIRA. In addition, the couple have an uncanny ability of selecting just the right type of products to sell. Stocking Sugru ®, a unique superglue product which sets as a flexible silicone rubber 24 hours after it is applied, is just one example. Knowing what their customers want or would find useful is key to getting this right!

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At your service

Working with McCabe Ford Williams Spencer and Patricia are clients of partner Barrie Wright of our Ashford office. Barrie, Mark and their team help the couple with their annual accounts, tax planning and also provide assistance with using Sage software, where necessary, although Patricia is now particularly proficient in this area. As part of Barrie’s advice the business is now trading as a Limited Liability Partnership.

Spencer says of McCabe Ford William’s team – “Our firm has utilised the excellent services of McCabe Ford Williams for many years. Times are challenging for all businesses, but we know that we can rely on Barrie and his team to support us – for example as we changed and adapted our business model. Like us, they offer a personalised service. They listen to their customer’s needs and proffer good advice.”

Christmas is both a busy time for the shop and also for Patricia in her role as the Mayor of New Romney. This is a time when her civic and charitable duties escalate.

However, it is a role which Patricia relishes. The shop has

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CLIENT PROFILE

Providing exemplary customer service is fundamental to the team’s approach to business, from advising on DIY projects to recommending respectable tradespeople when a project is just too big or daunting to tackle alone. Spencer and Patricia also go above and beyond to source non-stock items on behalf of their customers.

It is this service that the couple believe makes their business stand out and earns them such customer loyalty. Patricia says – “We have a tag line – ‘Rolfe’s – as individual as YOU’ – which acknowledges that each and every one of our customers is different – from the pensioner buying birdseed to the multi-national customers purchasing technical goods. We believe that we can offer a customer-orientated level of personal service that many larger chains are unable to deliver.”

Work starts on the Christmas displays at Rolfes

been at the heart of New Romney for decades providing a ‘community service’ for residents and the role of Mayor enables her to reach out to help further promote the Town, support local residents, businesses and hopefully encourage investment in the area. She notes, -“It is about Promotion and Regeneration and being a positive Ambassador for those you represent.”

Pay a visit to this Aladdin’s cave at 58 High Street, New Romney or browse the website http://www.rolfesdiy.co.uk/. To order Christmas items you can browse the shop’s Christmas catalogue: https://hhsw.cld.bz/Home-HardwareChristmas-2016 or why not simply call a member of their helpful team on 01797 363192.

If you would like more information on business structuring or advice on how to make the most of your business please contact your local MFW office.

In the meantime, may we take this opportunity to wish the team at Rolfe’s DIY and, indeed all our other clients, a prosperous trading Christmas period and a successful 2017.

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BUSINESS PLANNING

Success to succession?

Many of our clients have spent years building successful businesses. Inevitably though thoughts do turn to the future, and succession planning becomes a critical part of business strategy. How to exit from your business is a key part of your retirement planning and so it is vital that you consider this difficult topic as far in advance of your proposed exit date as possible.

First things first!

You will need to have a clearly defined goal. Decide if you want a clean break or, if you are prepared to continue working to support your successor, what level of support do you want to give and over what period of time? Your aspirations here will influence the type of buyer you want to target, the value you will realise for your business, the way in which you structure the deal and the timeline of your exit.

Get your house in order Be warned - potential buyers will spot last minute attempts to window-dress your business and if they don’t then the professional advisors they employ to perform due diligence on your business will.

The most important thing to remember when selling a business is that investors are often looking for long-term benefits, so run your business looking for the same. You might only be a few years away from retirement, but don’t let your business look tired.

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There are four main areas that potential buyers will be interested in: • the accounts • business strategy • staff and systems • contractual arrangements with customers and suppliers So what can you do to make these areas more attractive to buyers?

1) Instead of focusing the accounts on minimising your tax liability, focus them on highlighting earnings and earning potential. Highlight any one-off costs incurred to give a clearer indication of the future profitability of your business. Use your accounts as a marketing tool!

2) E nsure your business strategy is clear and concise.

You must be convinced by your business strategy; otherwise you will sell it short. Are there ways that you can improve efficiency or reduce costs without sacrificing quality? To obtain the best price for your business it should be marketed when it shows the greatest potential.

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4) A potential buyer may be looking for synergies with an existing business in which they have an interest. They will be looking for ways in which they can achieve savings through economies of scale or improved terms with suppliers. Make sure that the business is not tied into long-term contracts with suppliers and ensure that your legal housekeeping is up to date.

Valuation, Valuation, Valuation You need to be realistic about the value you might get for your business. There is no single formula that can be used to value a private business and the value will depend upon a number of factors such as the industry sector, earnings, future potential, asset base and risk.

A business is, of course, only worth what someone is willing to pay for it, but you need a starting point for negotiations so obtaining a valuation is a step in the right direction.

Identify a purchaser Consider family members - many private businesses are family owned and this may be your opportunity to pass your business to the next generation.

Don’t forget your colleagues - if they have worked alongside you whilst you have built up your business they will understand its potential and may wish to consider a management buy out.

In the above circumstances you will need to consider if the purchaser is willing to, and capable of taking on the business. Do they have the financial backing and acumen required to facilitate the retirement you want?

Remember consideration for a purchase can be

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phased over a number of years and, if appropriate, you could consider the possibility of a company buy back of own shares where finance is more difficult to secure.

Alternatively, you could of course consider selling to a third party. This would involve identifying and approaching a potential purchaser and/or advertising your business for sale. There are a number of organisations that can approach businesses on a confidential basis and so broaden the field of potential purchasers.

For simplicity’s sake Most businesses can be sold. However, in some circumstances business owners want a quicker, easier solution. In company situations an MVL might be an option worth considering. An MVL is a members’ voluntary liquidation and involves the winding up of a solvent company. More details on what an MVL is can be found on our website www.mfw.co.uk/services/ insolvency-solutions/members-voluntary-liquidations.

Getting the right advice It is essential when considering a disposal of your business that you get the right advice. At McCabe Ford Williams we are able to assist you with a range of services to support you with your exit plans including business valuation, tax implications of a disposal, business plans and forecasts and members voluntary liquidations. For further advice and information simply contact your local MFW office.

Author Clair Rayner Partner – Sittingbourne Office

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BUSINESS PLANNING

3) T he most valuable assets that a business can have are its staff. If your most valuable member of staff is you then things have got to change. You have to show potential buyers that your participation is not essential to the success of the business.

TAX MATTERS

The Gift of Giving Here is a timely reminder on what you can claim as a business expense for tax and VAT purposes for the festive season so that this year you don’t end up on HMRC’s ‘naughty Christmas list’.

Christmas gifts to customers Gifts to your customers should not exceed £50 and should also be business related. Examples include items such as diaries, pens and calendars. Typical seasonal gifts such as vouchers, food and alcohol are not tax deductible.

Do be aware that gifts in excess of £50 are not tax deductible and should you go over your allowance the entire amount and not just the excess is not tax deductible. VAT in these circumstances is also payable as a taxable supply.

You cannot claim tax deductions for entertaining your clients at Christmas. In the case where some clients might be invited to your Christmas staff parties then the costs of entertaining your client must also be treated differently to your annual staff allowance (see below*).

Rewarding your staff Since 6 April 2016 the rules on small gifts for staff have changed. To avoid confusion HMRC have clarified small gifts to staff as having a value of no greater than £50 per annum (or the average cost per employee) so long as this isn’t in the form of a cash gift. Non cash vouchers up to £50 are also now allowed. Cash gifts and gifts in excess of this amount are taxable and must be declared as a benefit in kind and may have national insurance implications. Please note that in the event of staff gifts which exceed this amount then the full amount will be taxable and not just the excess!

To avoid smaller companies taking advantage of this, benefits provided to directors (or their families) have a capped exemption of £300 per tax year.

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Business Matters Winter 2016

Gifts to staff from third parties These are tax exempt as long as they do not exceed £250 per annum.

Tis the Season to be ‘Merryish’ – how lavish can your staff party be?* When planning your staff Christmas party please note that the allowance is £150 per person inclusive of VAT and any staff travel and accommodation costs.

Remember, this is an annual rate and not just for Christmas so please bear this in mind if you are in the habit of throwing more than one staff party per year.

It seems that HMRC believe in the phrase “all things in moderation” so do be aware of your allowances and how best to use them. If not, your Christmas gifts will not be as impressive if they also come with a tax price tag.

If you need any further help or advice please contact your local MFW office.

Author Phillip Kearsey Tax Manager – Herne Bay Office

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Spotlight On Michael Whittaker SPOTLIGHT ON

Partner, Herne Bay Office As a young boy what did you dream of becoming?

As a child I wanted to be a fireman but realised as I got older that I didn’t like heights. This inevitably meant a need to look elsewhere for a career. I have always been good at maths so I decided to train to become an Accountant.

If you could live in any period of time past or future when would that be and why?

I’d simply wish to have been born just 5 years earlier so that I could have experienced the decade which was the Sixties. After a period of austerity following WWII this was an age where jobs and money were plentiful and times and attitudes were changing.

What are your favourite pastimes?

Fly fishing and walking are my two passions as I enjoy being in the great outdoors. I started fishing about 15 years ago and whilst this can be a solitary sport it can also be very social with friends and other fishermen all sharing a great camaraderie. Fishing can also be a great stress reliever and a great way to switch off after work.

If I go fishing with my friends in the evenings they often comment that it takes me 30 minutes to unwind from work as this is how long it takes for my casting to improve.

Michael walking the Camino de Santiago

James, one of the apostles, whose remains are buried in Santiago Cathedral. I was inspired to undertake this 27 day journey by the writings of Tim Moore in his book The Spanish Steps. I still treasure my memories of this trip and have kept the Pilgrims Passport which stamps each stage of the journey I made. Even to this day looking at a map of northern Spain takes me back to that journey and I am still amazed at the vast distance I travelled.

Which other author(s) work do you admire?

I particularly like the work of John le Carré and have recently re-read his book The Night Manager following the BBC’s recent adaptation.

I also enjoy walking as it both relaxes the mind and the body. I enjoy being out in the elements and much prefer this to going to a gym. I also find that repeating the same walks in different seasons is enjoyable due to the changing vistas. I’ve tackled many walks over the years and enjoy the challenge that each walk gives me.

Tell us something about you that would surprise most people

What has been your longest walk?

Finally, what is your mantra?

In 2006 I walked the 500 mile long Camino de Santigo de Compostela Trail in Spain which starts in the Pyrenees in France and follows the pilgrim walk to the shrine of St

The week has an odd number of days so that you can balance your life with more good days than bad. If the balance is wrong then you need to change something.

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I once met Richard Gere and Cindy Crawford, back in the days when they were married. Their car had broken down outside the hotel I was staying at during a visit to Saint-Cirq Lapopie in south west France.

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CHRISTMAS QUIZ

Don ’t for ge our Chri t to ente the stma r c s qu £100 hance iz fo to r Mar ks & win a S p vou che encer r into

MFW

Christmas Quiz Simply unscramble the following seasonal words:

How to enter:

Carerck

Unscramble the missing words and add in your contact details below.

You can send in your entries by post, email, fax or even pop your completed entry into your local office.

Leyu Glo Remyr Masstrich Darynb Ceaus

Karen Gray McCabe Ford Williams Bank Chambers 1 Central Avenue Sittingbourne ME10 4AE

Grosoec Pesherhds Ratisoncoed

Decorations

Phlodur

karen.gray@mfw.co.uk Name

Ronth Elop Kincensenarf

Email

Gotincks Telephone (the best number to reach you should you be our lucky winner)

Laegn

Closing date: The closing date is Thursday 15th December. Good luck!

Entries received after this date will not be included in our prize draw. The winning entry will be pulled randomly from the correct entries and the winner will be notified shortly thereafter. The prize will be despatched prior to Christmas. This prize is not open to Partners, staff or friends and family of McCabe Ford Williams.

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Business Matters Winter 2016

Your MFW Office

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Please be aware that there is yet another scam doing the rounds which has already cost UK businesses millions of pounds. The name of this scam is called Bogus Boss as it is used by fraudsters to appear as if it is coming from a person in a senior position within the business. The ruse is another part of the ever increasing wave of cyber crime sweeping the UK. How does the ‘Bogus Boss’ scam work?

Fraudsters will find the name of someone senior in a business and then use software which manipulates the characteristics of an email, including the sender address, to create a fake email which appears to come from the boss. The email typically gets sent to a member of the business’ finance team requesting urgent payment to a new account and will give a pressing reason for needing the money such as looking to secure a new contract.

If the member of the finance team is not vigilant and makes the payment, funds paid into this new account will end up with the fraudsters who will empty the account immediately.

Criminals use publicly available information, such as Facebook, Twitter and Companies House data, to gain knowledge of target companies including the names of senior staff. Fraudsters have also managed to hack the genuine email accounts of those staff to send the fraudulent emails.

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To ensure your business is not affected UK banks typically suggest taking the following measures: • Always question any requests for urgent bank transfers.

• If in doubt then check with the sender direct. Do not, however, respond direct to the email or use any numbers or email addresses contained as this is what the fraudsters want. Instead seek out your colleague directly and check.

• The way in which the request is worded can often be a clue that something is not right. Pay attention to the style in which the email is written, the spelling and grammar and the use of particular phrases therein to check if that is the way the genuine person would write.

Again, if in doubt check with the individual concerned.

• Use strong internal passwords or even encryption.

• Set up, if you haven’t already, internal procedures and policies for authorising payment and ensure these are adhered to.

• If you receive an email make your colleagues aware that a scam of the company has been attempted but do not forward on the fraudulent email in case others click links.

It is a good idea to create a policy for dealing with cyber security issues. There are many places which you can go to for further information including the Get Safe Online website www.getsafeonline.org or contact your own bank for their advice on how to keep the fraudsters at bay. Remember – always check first, rather than regret later.

Author John Sheather Partner – Ashford & Dover Offices

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FRAUD ALERT

Fraud Alert Bogus Boss

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.