Business Matters McCabe Ford Williams Newsletter | Autumn 2018
MFW.CO.UK
Welcome to our autumn newsletter We are delighted to share the great news that MFW now numbers seven offices following the recent acquisition of a new office in the picturesque village of Lenham near Maidstone, Kent. Please see page 1 for more details. Inside this issue We look at the complex issue of opting in or out of VAT for commercial property matters and also warn of changes to RTI penalties which take effect from next April. We ask, is it time to review your pensions with a guest article by Lee Giles of Argentis Financial Management Ltd.
RTI PENALTIES – A WARNING The changes you need to know before April 2019.
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TAX MATTERS – TO OPT OR NOT TO OPT? Tax Manager Daniela Jarosova provides some answers.
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Talking about time – don’t forget that the clocks go back on Sunday 28 October as we head towards the shorter days and longer nights of winter. We hope you enjoy this issue. SPOTLIGHT ON This issue we put partner Ashley Phillips under our spotlight.
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AUTUMN BUDGET 2018 LoCASE FUNDING
The Autumn Budget will take place on UPDATE Monday 29 October. We will keep you posted, of course, with further news Robupdates Robinson KCC provides and viaof our blog and social an update on LoCASE media channels.
funding opportunities. Page 7
Celebrating PR success with PR Academy’s 2018 graduates (page 5).
MFW NEWS TAX MATTERS
MFW – Lenham makes seven Our new Lenham office is conveniently located near to Lenham Green and will be managed by our Maidstone partner Emma Andrews. We recently caught up with Emma to ask her about the news which is part of our exciting growth and development plans. “I am delighted to be able to extend our services, skills and experience to a wider part of rural Maidstone. As an office whose original specialisms centered on the agricultural market we view the new Lenham office as an ideal additional base to offer the same services, skills and experience that our Maidstone clients have enjoyed since the firm was first established. Nowadays, of course, we work with clients from a wide range of sectors and industries and with clients of all shapes and sizes – from sole traders through to partnerships and limited companies. Our team offer a flexible range of services including accounting, taxation, business development and business start-up advice, through to payroll, MTD and cloud accounting solutions. We will, of course, continue to provide a high level of service and support to our Maidstone clients and I am delighted that we can now extend this to our new Lenham clients."
Today, MFW is a modern and thriving firm offering many more services than the typical accountancy, tax and audit services one might expect. We welcome the Lenham clients to MFW and look forward to working with them in the future”.
Comment from Ian Pascall, Senior Partner “It is many years since we last opened a new office so we are very excited by this expansion which reflects our intention to remain one of the largest firms based in Kent. Whilst we are proud of our strong heritage and history, we also believe in looking forward and never resting on our laurels.
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Our friendly Lenham team can be contacted on 01622 859797 or at lenham@mfw.co.uk. For directions, or more details please visit our website.
www.mfw.co.uk
In June 2018, HMRC announced that there would be no penalty charges for a late filed Full Payment Submission (FPS) so long as it was filed within 3 days of the ‘payment date’. However, it should be noted that employers who are persistently late filing their FPS, but do so within the 3 days of the ‘payment date’, may soon risk incurring a penalty as from 5 April 2019, HMRC propose to bring in automatic late filing penalties for late filing of in year returns FPS and Employer Payment Summary (EPS). These changes propose that: • there will be no late filing fee for the first missed deadline (unless the scheme is for an annual payroll); • penalties will be issued every quarter; • new employers will not receive a penalty so long as they submit their first FPS with 30 days of the payment date.
Cost of penalties How much the penalty is will depend on the size of the payroll. Penalties are as follows: 1 to 9 employees
£100
10 to 49 employees
£200
50 to 249 employees
£300
250 or more employees
£400
It should also be noted that if you are more than 3 months late, you may also be charged an additional penalty of 5% of the tax and National Insurance reported. Thereafter, if you pay the penalty within 30 days, there will not be any interest. However, where penalties are not paid within 30 days interest will accrue.
Late payment of Tax and National Insurance Automatic penalties will be issued to employers who pay their PAYE and NIC late in the year. These will be processed on a quarterly basis and the penalty amount will be based on the amount of PAYE and NIC that is late. The first default of payment will not receive a penalty but will, however, be recorded on the employer account.
The penalty percentages applied are as follows: No. of defaults in the year
Penalty % applied
1 to 3
1%
4 to 6
2%
7 to 9
3%
10 or more
4%
Interest will accrue daily on all amounts unpaid from the due date of any PAYE, NIC and penalties due. If, after 6 months, the employer has still not made a payment in full, they may also be charged an additional penalty of 5% of the amounts unpaid, and a further 5% penalty if it is still not paid after 12 months.If you think that you may struggle to meet deadlines for payments to HMRC, you should contact them direct to arrange a payment plan to ensure interest and penalties are kept to a minimum. If the introduction of RTI and the pending changes due to Making Tax Digital (MTD) are starting to exhaust your payroll capabilities then please do contact a member of our payroll teams at your local MFW office. Author: Tina Mitchell, Payroll Manager McCabe Ford Williams, Sittingbourne 01795 479111
www.mfw.co.uk
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MFW TAXNEWS MATTERS
RTI Penalties - a warning
TAX SNIPPETS
TAX MATTERS
To opt or not to opt? VAT can be confusing and never more so than when it comes to property matters. It is one of the areas of VAT which is disputed most frequently by HMRC; perhaps not surprising considering land and property transactions are likely to attract high tax liabilities. When acquiring certain commercial property or land, taxpayers have a choice whether to bring their newly acquired asset into the VAT regime or not. This affects recoverability of VAT on the initial and future spend, as well as the VAT status of the future sale and, in turn, the pool of buyers and tenants. Whether you decide to opt or not is a big decision as it cannot be revoked as and when your circumstances change, but will have a lasting impact for the next twenty years!
First things first Before rushing ahead with the notification, you ought to decide whether you actually need to make the election. Provided the building is used in the business, such as that of a trading company, any VAT charged on the acquisition is simply going to be reclaimed on your VAT return, in more or less the usual way. It is a common misconception that you need to elect the property into the VAT regime in order to reclaim the VAT in a situation like this. Twenty years is an awfully long time however, and we all know that the best-made plans do not always ‘go to plan’. It is possible, for example, that the use of the building will alter over a period of time and that it may end up being let out to a tenant. Unless an active decision by way of the election to opt had been made, the rent will be exempt for VAT purposes regardless of the fact that your main stream of income may carry standard 20% VAT rate, as most businesses do.
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So far, so good - as that does not really change much. The tenant is happy not paying VAT, as even though they can often reclaim all their VAT, it helps with their cash flow. What then if the current tenant’s lease runs out and the property needs some refurbishment works done before a new tenant can be found? Surely, as a VAT registered business you will be able to recover the VAT on the works? The answer is unfortunately, no. However, you need not worry, as you can opt to tax the property before you do the works to reclaim the VAT. But timing is crucial as HMRC do not believe in hindsight. If you are thinking you should opt to tax, to recover the VAT on works done last year, you are already too late, although there may still be a chance to salvage some VAT back. Hindsight is a tricky point and often disputed. There are instances where it will work, but it is best avoided at all costs.
Future rents The option will also change the future rents from exempt to standard rated, subject to VAT at 20%. Existing lease agreements should be reviewed for references to opting, as it may be the case that you will not be able to pass on the cost to your tenant. If your tenant is not VAT registered, or they make exempt supplies (so they cannot register for VAT), then your decision would effectively result in their rent going up by 20%.
Revocation After twenty years has expired, you can ask HMRC to cancel the election from that point on. This would generally need to be an active decision. It is important to note that the option stays with the owner, as it is not attached to the building unlike some other considerations mentioned later in this article.
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Transfer of a going concern Sometimes you may not really have a choice. If the seller has opted, then they will charge VAT on the sale of the property and so you would want to make sure you can reclaim the VAT back. Often, opted property will be sold as essentially a business with tenants already in place. This changes matters, as although you would need to be VAT registered, the transfer would not necessarily give rise to VAT being charged on the building, provided the transaction is executed well. This is especially the case when it comes to transfers as a going concern, such as our property rental business mentioned earlier. If the election is made with the wrong date, (i.e., after completion date) then that can become a very expensive oversight indeed. This is the case even if the form is just a day out, which could jeopardise the recoverability of VAT charged on the purchase. Often the deals are very time sensitive, especially in a holiday season. Recently, one of our client’s deals was brought forward as their solicitor was going on holiday. HMRC had no other choice but to demand VAT to be charged on the sale of a property. Another aspect of acquiring a property to consider is that you are also buying the history of the building, to some extent. If purchasing a property in excess of £250,000 plus VAT, you should firstly clarify how the building has been used over last few years.
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The danger is that you could be liable to repay to HMRC some of the seller’s VAT they had claimed, perhaps on construction of the building. Consider a business that builds new premises but say, in year 5 they decide to let part of the building to a tenant. Without an election, the rent will be exempt from VAT. If you acquire that building as a transfer of going concern and continue to let the building then you would need to pay back a proportion of the seller’s VAT to HMRC. This is because the use of the building has changed and HMRC would want to claw some VAT back regardless of the fact that you are the new owner.
It is your decision whether to opt or not, or whether to revoke or not. However, we advise consulting an expert before making your decision, as each case should be considered on its own merits and the impact has lasting effects.
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If you are looking for VAT advice, please get in touch with your usual MFW contact or myself.
Author: Daniela Jarosova Tax Manager, ACCA, CTA McCabe Ford Williams, Sittingbourne 01795 479111
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MFW TAXNEWS MATTERS
This can be useful for a largely exempt business which cannot reclaim all their VAT back, such as charities, dentists, financial services and insurance sector clients, as well as schools, to mention a few. If these are your existing tenants, you might consider negotiating a deal that would suit all parties, which could be achieved by revocation.
CLIIENT NEW PARTNERS PROFILE
Client Profile
PR Academy PR Academy is the largest provider of public relations (PR) education in the UK, training students in PR, internal communications and crisis management. It is also the largest Chartered Institute of Public Relations (CIPR) Accredited Teaching Centre and the only centre to offer the entire range of CIPR courses. The business was established in 2007 by husband and wife team Dr. Kevin Ruck and Ann Pilkington who are clients of Emma Andrews, Partner and Lee Phillips, Manager, both of MFW Maidstone. Spotting an opportunity
Ann Pilkington and Dr. Kevin Ruck
Kevin and Ann had for many years worked as PR practitioners in corporate positions, which they coupled with teaching. It was while teaching for other PR education providers that they spotted a business opportunity when the CIPR decided to add online PR courses to their curriculum. Kevin and Ann pitched for, and won the initial contract and so PR Academy was born, later going on to attract students from across the world.
Student focused approach
Why use PR?
The couple attribute their success to two things:
We asked Kevin and Ann why a business should add PR into their marketing mix? Kevin replied, “There is a common misconception that PR is just media relations i.e. press releases and stories in the media. The way we teach PR is about building an organisation’s reputation and enhancing its market standing. Often small businesses will ask, “How will that increase my sales?”, however, whilst PR can indeed generate an increase in sales it can help to achieve so much more. It not only helps to build better brand reputation but to also develop better relationships with the people that matter to a business”.
• Adopting a customer service approach where they place each student’s needs first, ensuring that every interaction they have with a student is efficient and easy.
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Business Matters Autumn 2018
Some eleven years later, they both still find teaching to be very rewarding. Ann says that it is great to see students develop their confidence and go onto gain promotions or take on new positions as a result of studying and achieving their CIPR qualifications.
So, what is the secret to their success?
•M aking training fun and interactive so that students enjoy their lessons. All PR Academy tutors have both teaching and PR practitioner experience so that students benefit from studying real world experiences and applications and do not just study PR theory. Not surprisingly, student satisfaction is very high which naturally leads to an increase in word of mouth recommendations, with many satisfied students recommending PR Academy to friends and colleagues.
www.mfw.co.uk
Planning for the future
Kevin and Ann have also shown great business acumen by realising the opportunity to expand on the range of courses CIPR could offer. They have worked alongside the CIPR to initiate and design new qualifications in internal communications and public affairs, bringing in new business as a result.
Talking with Kevin and Ann, you can see how passionate they are about PR and how they are on a mission to increase the numbers of qualifications to both new and existing PR professionals. Whilst no official industry figures exist to substantiate the numbers of UK PR practitioners, the industry estimates this figure to be in the region of 70,000. However, it might surprise you to know that less than 10% of these hold any professional qualification. This is something that both Kevin and Ann are working hard to change whilst also promoting the value of CIPR qualifications to the wider community.
Working with MFW, Maidstone Emma and Lee have been working with Kevin and Ann since joining MFW. Between them, they provide the dayto-day payroll services, prepare VAT returns and produce management and Year End accounts. In addition, they have integrated PR Academy’s bookkeeping system to create a completely paperless system, sharing documents via a document exchange system. Emma and Lee meet with Kevin and Ann regularly and having timely management information enables them to advise on business strategy and tax planning. Emma has also provided assistance and advice on a company share buyback, in order for Kevin and Ann to buy out third party shareholders and obtain complete control of PR Academy.
Kevin and Ann are also currently assessing business opportunities in South East Asia. Not only is this an area where PR is still young, there are also no reputable PR courses being marketed there. This therefore offers an excellent growth area for PR Academy to promote CIPR courses and reach new prospective PR students. No matter where Kevin and Ann spread their PR message in the future, we wish them all the best with their plans and are excited to be part of them.
Kevin and Ann are very complimentary of the service they receive. Ann said: “We feel that Emma and Lee know our business really well. When you are a small company you are very reliant on advisers and so our trusted relationship with Emma and Lee really matters. It means that there is an important area of our business that we know is being well looked after which enables us to get on with running and developing the company.”
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For more information about the range of courses available, please visit https://pracademy.co.uk/ Alternatively, contact a member of the PR Academy team on 44 (0)20 3862 6910 or by email at courses@pracademy.co.uk.
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CLIENT PROFILE
Developing the service offering
SPOTLIGHT TAX MFW SNIPPETS NEWS ON
Spotlight on
Ashley Phillips, FCCA, Partner, MFW Sittingbourne You studied law before starting a career in accountancy - why the change? Whilst law is definitely interesting in some areas, I never really wanted to work in that field. From the age of about 7 up to the age of 17 I always wanted to be a heart surgeon – I even spent two weeks of my summer holidays when I was 16 shadowing a surgeon at Maidstone Hospital, going on patient rounds and into the operating theatre. But, when I was 17, and already studying Maths, Physics, Chemistry and Physics A Levels, my grandad was diagnosed with a hereditary tremor which presents as a shake of the hands. Whilst not a problem in day-today life, it would be impossible to be a surgeon with the condition, so I gave up on my childhood dream. I did not know what else I wanted to do at that stage so I decided to study law as that was a valued degree, which would still enable me to go into many different potential careers. When I left university, I decided to try accountancy, after speaking with a family friend who worked in that field, as it seemed an area that would suit my strengths. Hopefully, I was right! Fortunately, I really enjoy what I do and working with people to achieve their own life goals. How has your law degree helped you in your role as a Chartered Accountant? For my options, I studied Contract and Commercial law so it has helped me to understand the legal side of transactions that clients enter into. It has definitely helped me to be able to read legal contracts so, whilst I would not try to write them myself, I can interpret solicitor language for my clients and advise if there are any issues from an accounting perspective.
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Ashley with his wife Tracey and son Jacob How do you spend your spare time? I mainly like to spend time with my family and friends, but I also like reading, playing football and travelling. I love music and used to do a lot of singing at karaoke nights but now I mainly sing my son to sleep! My biggest passion though is probably cooking. I love thinking of new recipes and throwing ingredients together to come up with something new or putting my flavour into a known favourite. There’s also nothing better than firing up the barbeque and cooking for friends and family – the only problem is that I think everyone eats as much as I do, so I end up eating barbeque meat for a week after. Ok, so it’s not really a problem as I’m a bit of a carnivore.
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I would absolutely love to scuba dive a shipwreck. I started swimming from a really young age and got all my badges by the time I was 7. I probably move more naturally in the water than I do on land. We started taking our son for swimming lessons at 4 months as well and he has such fun in the water. I learned to scuba dive on holiday with my family when I was about 10 and loved it so it would be amazing to do a proper dive around a known site. What has been the most important life lesson you have had and what did you learn from it? We lost my dad to a brain tumour a few years ago. One day he was fine on holiday in Florida and then suddenly I had a call from my mum saying he was in hospital having brain surgery. The surgery went well but we were told then that it was only to give him more time. We had a bit more than a year with him after that but any amount of time is never long enough. I learned that life is short and it is so important to make the most of every day and to appreciate the people around you.
What would you have told your 18-year-old self? Things happen for a reason and the important thing is to own your decisions and make the most of the opportunities you have. At 18, I had just given up on what I thought was my dream and had just lost my grandad. In truth, I was probably a bit lost myself but, I always think that if you have confidence in yourself, and work to your strengths then you can achieve amazing things. Without those tests I wouldn’t be the person I am today and more importantly, I wouldn’t have met my wife and we wouldn’t have our son. I don’t regret a single thing because it brought me to this point. Finally, you are stranded on a desert island, what three things would you miss the most? My family, books and music. If I had those 3 things, I could probably live like the Swiss Family Robinsons quite happily.
What is your motto in life?
Making Tax Digital (MTD) reminder
Life is about the journey, not the destination – don’t spend so long trying to get to where you are going that you don’t appreciate where you are or where you have been.
Don’t forget that the 1st stage of MTD goes live on 1 April 2019 for VAT registered businesses. After this date you will no longer be able to manually enter your VAT Return figures onto the HMRC Government Gateway Online Platform. Instead you will need to submit your VAT Returns using MTD compliant software package.
What are your pet hates? Anyone who has seen my desk at work knows that I am a very tidy, organised person so I would probably have to say that my pet hate is a disorganised mess.
www.mfw.co.uk
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Whether you are VAT registered business or not it pays to start planning for its introduction as soon as you can. So do call your local MFW office https://mfw.co.uk/contact/ for all the help and information you need.
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SPOTLIGHT ON
Tell us something about you that would surprise most people.
PENSIONS
Review your pension Mention the word “pensions” and many people’s eyes glaze over. However, for many people, this could be their most valuable asset. However, it is often the most neglected. On average we are all living longer. If you have dreams of retiring at 60, your pension savings may need to last 40 years or more. You may also desire to enjoy your retirement years with financial comfort and more holidays than you have now. These days, you may have a variety of assets aside from a pension, such as ISAs, property and business assets which may all fit together to form your personal retirement plan. Retirement isn’t necessarily all about pensions. Therefore planning is essential. Fundamentally, will your pensions and any other assets you’ve allocated to your retirement plan actually give you what you need? You may or may not have to consider topping pensions up, but the good thing about that is that you can potentially get tax relief on the premiums. If you are a business owner, paying a pension from your limited company could help with your Corporation Tax as it’s usually a deductible expense. In April 2015, new legislation was introduced to allow more flexibility in how you could spend your pension benefits. There are 3 main options now for a defined contribution (DC) pension:
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Business Matters Autumn 2018
I. Annuity Where you use your pension money to buy a guaranteed income for life. This is a good way of ensuring your pension won’t run out; however it may not give you much flexibility in the future II. Uncrystallised Fund Pension Lump Sum You draw the whole lot in one go. The first 25% generally is tax free, and the rest is taxed at your marginal rate of income tax. However the pension company may apply month one coding, leaving you to claim a refund from HMRC. III. Flexible access drawdown You draw a flexible income to suit lifestyle. The advantage is that the flexibility may suit your lifestyle, but the danger is the money could run out if you overspend, or if there is a stock market crash. To make things more complicated, not all contracts allow all 3 and it might be necessary to change your pension to allow for all the choices. However, your existing contract, whilst not having all of these options, may actually have some valuable guarantees or safeguarded benefits that may not be available on a newer contract. You may also have some Defined Benefit (DB) schemes to throw into the mix. Essentially these are designed to provide you with a safeguarded income for life from a predefined age. The most common example is a “final salary” scheme. You may have some options to take the pension earlier or later, or in a different way.
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This article does not constitute personal financial advice and no liability can be accepted for any error or omission and we strongly suggest that you take tax planning or professional individual financial advice if you are uncertain of your own position.
Your pension itself will often contain investments of various types. This is very important to review, especially in today’s markets where things are becoming more volatile.
* The information contained within this article is based on our understanding of present law and HM Revenue and Customs practice, which may be subject to change. The value of any tax benefits depends on individual circumstances.
• Are the investments performing efficiently?
*The value of an investment can fall as well as rise.
• A re you taking the right level of risk that you are comfortable with?
* If investments are encashed in the early years the investor may get back less than the amount originally invested.
• A re the investments in the right mix in terms of asset class, geography and sector? The last thing you want is a downturn in your investments just before retirement. So, as you can see, it’s a complicated subject. However, with careful planning, and professional individual financial advice, it is possible to get this large part of your life under control and working effectively for you.
* A pension is a long term investment the fund may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future rates and tax legislation. Argentis Financial Management Ltd is authorised and regulated by the Financial Conduct Authority FCA No. 435534.Registered Office: The Wallbrook Building, 25 Wallbrook, London EC4 8AW. Registered in England and Wales. Company Number: 5137790. The FCA does not regulate tax advice, wills and trusts.
Author: Lee Giles APFS Chartered Financial Planner Argentis Financial Management Ltd 01227 784787 www.argentisfm.co.uk
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PENSIONS
Another reason to review is that you may be paying “legacy” or “bundled” charges if your pension was arranged before 2013. In plain English, there may be hidden costs that were designed to cover a commission payment. This may be ongoing so it’s best to review to make sure you are not overpaying on costs.
Bank Chambers, 61 High Street,
cranbrook@mfw.co.uk
Lenham 1A High Street, Lenham, Maidstone, ME17 2QD
89 King Street, Maidstone, ME14 1BG
(01622) 859797 lenham@mfw.co.uk
mfw.co.uk kentinsolvency.co.uk (01795) 433655
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.