Business matters spring 2017

Business Matters McCabe Ford Williams Newsletter | Spring 2017

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Welcome to the spring 2017 edition of Business Matters Mothering Sunday falls on Sunday 26th March this year and coincides with the start of British Summer Time. So, what better time to issue our spring newsletter providing a catch up on key tax changes and other important news and information.

TAX ROUND UP TAX MATTERS Key changes happening this April.

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We hope you enjoy this issue.

Budget update Following Chancellor Philip Hammond’s Budget speech on Wednesday 8th March, we also include a copy of our Budget highlights for your information. As ever, please do feel free to contact us should you need any further information or advice on any point contained therein.

EMPLOYMENT & HR LAW How has ‘Brexit’ affected UK Employment & HR Law? Page 03

OPENING UP NEW TRADING BORDERS

Client Profile: Pillory Barn Creative.

How to design a team for success (page 5)

Is now the time to look at international trade?

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TAX MATTERS

TAX ROUND UP

Inheritance Tax A new limit is set to be introduced to Inheritance Tax, which will allow an individual to pass on an estate valued up to £500,000 tax-free. The limit prior to April 2017 was £325,000.

The increase in the limit is tapered and is worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21.

The key is that this total must include a ‘family home’ and must be passed onto direct descendants. Potentially married couples can pass on assets worth £1m, tax-free.

Employment Tax Changes The tax and National Insurance advantages of salary sacrifice schemes will be removed from April 2017, excluding arrangements relating to pensions, childcare, the Cycle to Work Scheme and very low emission cars.

April 2017 sees a wide range of changes, to a variety of different taxes, some of which may have an impact on you. We cover some of the most relevant changes here.

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Business Matters Spring 2017

Employees that swap salary for benefits will now pay the same amount of tax as individuals who buy them out of post-tax income, although arrangements in place before April 2017 will be protected for one year and arrangements for cars, accommodation and school fees will be protected until April 2021.

Company car tax percentages continue to increase each tax year. This means that the Benefit In Kind Tax on the same company car (which is payable on the list price), will increase each year despite the car being older.

In addition, although not a change to tax, on April 1, the National Minimum Wage and National Living Wage rates for all age bands and for apprentices will, once again, increase. The main rate payable for employees aged 25 and over is rising from £7.20 to £7.50 per hour.

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Value Added Tax (VAT)

Tax-free childcare is a new Government initiative, available from 2017, which will replace the existing childcare voucher scheme. For every 80p you pay into a childcare account, the Government will top it up with an extra 20p. They will top up to a total of £10,000 - the equivalent of £2,000 support per child, per year.

In order to qualify both parents (and single parents) in the household must work a minimum of 16 hours per week and earn income(s) of no more than £100,000.

Significant changes to the VAT Flat Rate Scheme were announced in the Autumn Statement.

Two new £1,000 tax-free allowances on income are also offered from April 2017. The new allowances will mean that individuals with property or trading income will not need to declare or pay tax on the first £1,000 they earn from each source per year. If they earn more than this amount, they can benefit by deducting the allowance first.

In order to make the tax system fairer, Income Tax Relief received by landlords on residential property finance costs (such as mortgage interest), will be restricted to the basic rate of tax.

This change is being introduced gradually over the next 4 years, starting from April 2017, and will affect landlords that are higher rate taxpayers.

VAT Flat Rate simplifies businesses record keeping requirements and is used by businesses that spend very little on goods. Unlike the standard VAT scheme, the Flat Rate Scheme calculates a flat percentage of sales that is payable to HMRC. The percentages vary for different business types. It was designed to give the government roughly the same amount of VAT, but it should be much easier to work out.

From April 2017, businesses that have a very low cost base will find their percentage increased to 16.5%.

This will affect an estimated 123,000 small businesses in the UK and will increase the VAT paid by labour intensive businesses such as consultants, hairdressers and other service related industries.

Author Emma Andrews, FCA Partner – Maidstone office

Landlords will be able to obtain relief as follows:

• in 2017 to 2018 the deduction from property

income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax deduction

• in 2018 to 2019, 50% of finance costs and 50% as a basic rate deduction

• in 2019 to 2020, 25% of finance costs and 75% as a basic rate deduction

• from 2020 to 2021 all financing costs incurred by

a landlord will be given as a basic rate deduction

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Business Matters Spring 2017

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TAX MATTERS

Income Tax

EMPLOYMENT LAW

Brexit – how will it affect UK employment law and HR?

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Business Matters Spring 2017

The EU’s influence on UK employment law European Union (EU) sourced law has led to the development of a ‘progressive’ agenda of employment rights for workers in the UK. Key areas include: antidiscrimination laws; protection of pregnant workers and rights to maternity and parental leave; protection of part-time and fixed-term workers; protection of agency workers; working time rights, including rights to daily and weekly rest, maximum weekly working time, paid annual leave and measures to protect night workers; legal rights to collective information and consultation in respect of collective redundancies, transfers of undertakings (TUPE), health and safety; protection of the rights of workers in the event of TUPE, especially relevant to contracting out exercises; regulations on health and safety at work; and protection on data processing of personal data.

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The future of EU-sourced employment rights following Brexit Brexit will lead to the end of the constitutional relationship between the UK and EU enshrined within the European Communities Act 1972, thus providing parliamentary sovereignty. The Government has confirmed it will introduce the Great Repeal Bill. In essence, EU-derived rights currently in existence will be cut and pasted into domestic law until a decision is made whether to retain, amend or abolish them as the UK Parliament will then be free to do.

There are different schools of thought on what might happen in the medium to longer term. Relevant to this debate is, of course, the specific nature of the trading relationship replacing membership of the EU and the agenda of the Government that is in place at the time.

The Government’s White Paper [February 2017]: ‘The United Kingdom’s exit from and new partnership with the European Union’ states that the UK will not be seeking membership of the Single Market, but will be seeking a comprehensive Free Trade Agreement and a new Customs Agreement.

A future UK Government with a labour market deregulatory agenda is more likely to repeal and amend EU-sourced law, particularly during times of austerity. This agenda, exemplified by what was known as the ‘Red Tape Challenge’ under the Coalition Government, aimed to reduce the burden on and costs to employers.

Therefore, Brexit is unlikely to have a transformative effect on UK employment law in the short to medium term. Any repealing and amendment of EU-sourced employment law is more likely to take place in a staged, piecemeal fashion. A sudden repeal of existing EU-sourced employment rights would be potentially unworkable, causing doubt and confusion with associated costs to employers in complying with the revised regulations.

Societal changes and worker expectations in recent years are also relevant. It may prove a highly unpopular move to significantly weaken certain rights.

With changing work patterns there is also the possibility of a future domestic agenda that extends rights to the self-employed (including workers in the gig economy) and those on zero-hours contracts.

In the longer term, there could be a relaxation of rights which, with the diminished influence of the ECJ, might have a material impact upon employment law and HR practice in the future. Given the Government’s position on freedom of movement, there could also be future challenges and skills shortages in the labour market.

Author Andrew Masters Partner & Head of Employment Furley Page LLP

Andrew can be contacted on 01227 863192 or asm@furleypage.co.uk

Theresa May has moved swiftly to allay fears concerning the loss of workers’ rights by stating in October 2016: “And let me be absolutely clear: existing workers’ legal rights will continue to be guaranteed as long as I am Prime Minister”. The Government’s White Paper reinforces this approach.

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EMPLOYMENT LAW

There has also been a significant body of legal case law from the Court of Justice of the European Union (ECJ). The ECJ has usually given a wide and progressive interpretation of social rights in the employment sphere.

What makes the team tick?

CLIENT PROFILE

We recently spent some time with Miranda to find out why their business is so successful and what’s new in the creative world.

How did you and Roger meet and why did you both decide to set up your own agency?

I got to know Roger when I was Marketing Manager for the KM Group.

Our working together was not part of the plan, despite our positive client/agency relationship. I had reached a point in my career where it had begun to take over my role as a mum. So it was with sadness that I decided to change my career path. During that time Roger very gently and persistently pointed out the synergies between us! In April 2004, I joined Pillory Barn Creative and became a shareholder shortly after.

Client Profile: Pillory Barn Creative

Background Pillory Barn Creative is a digital and creative agency established in 1993, independently owned by Roger Hills, CEO and Miranda Chapman, Managing Director.

Their fourteen strong team represent Kent based clients such as Quinn Estates and Visit Kent, alongside national names, NSPCC and Eurotunnel Le Shuttle.

The firm are clients of Liam McHugh, partner in our Sittingbourne office. Liam and his team have tailored their services to meet the ever expanding needs of the business, including a successful transfer over to a cloud based accountancy platform, Xero.

Liam is also proactive in his advice and guidance to ensure that the creative duo remain updated with the latest regulations affecting them.

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You have worked alongside each other for over a decade - what do you know about each other and how do you best work together?

Actually, it’s quite simple. Roger is creative and I am strategic. His skills are so valuable and borne out of the era when art college taught you to craft and create beautiful typography. I am a planner – there should be a vision and an end result and I work best when clients allow us to become part of the team to achieve this. I am also a creative writer and I believe the best marketing tells a story and takes people on a journey.

How has your business changed over the years and what challenges has this caused?

In the past we would have been seen as more of a traditional agency, with a focus on creative campaigns and PR. Almost all of our work now involves digital and social media – and I like that we can quantify success.

It appeals to the strategic marketer in me. To deliver this level of work, we have invested in top level digital staff and communications staff who understand the value and importance of content. Pillory Barn is small but perfectly formed.

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Most of what we do is led by the end-users. Who is looking at a website? Who is reading the content?

Would a piece of film be better than a press release?

We are currently setting up a year long project with Visit Herne Bay and some of our first actions include drawing up visitor personas to make sure the marketing speaks to the end users. The creative process has become more sophisticated.

Where do you see the creative industry developing in the future?

Without a doubt, social media will play an ever increasing role for our sector and there is lots of scope to be creative in this space. Creating infographics and short films for use on social media are growth areas for our team, as is responsive web development.

You have built up an excellent reputation over the last 24 years. What is it about your approach that you think works so well and how do you differentiate from your competition?

It’s a bit of a cliché, but we really are only as good as the last thing that we do! Clients spend reasonable proportions of their turnover on marketing and I think that our strategic planning approach goes down well with our clients. Our staff are also well-known in their own rights; our PR Director has been with us ten years and we employ people who are really creative and aim for high standards.

You became a client of McCabe Ford Williams last year. What was your motivation to work with us?

We needed the support of a practice who could manage our creative spirit and an increasing portfolio of work. Introducing us to Xero has helped us to streamline our accounts and has placed time back in the business for creativity.

What is the best thing about being MD of your agency and how do you motivate yourself and your team?

I have been very lucky in my career; I worked both nationally and regionally for the media and I was taught to take responsibility very early. I enjoy being both responsible for our business and also working as part of a brilliant team. As for motivating the team, I have a very simple approach – I continue to work very hard for the business and I am always looking to develop people and make their job interesting.

What advice would you give other businesses about running a successful business?

Enjoy it! It’s too easy to see all of the pitfalls and none of the joy.

What exciting projects are you working on that you can tell us about?

We are launching our ‘Hello Herne Bay’ project in April.

The town has a thriving community and we hope that more people will discover the landscape, creative vibe and of course the seaside!

Finally, can you sum up what it is like to work in such a creative environment?

Original – there are no two days the same.

To find out more about Pillory barn contact miranda@pillorybarn.co.uk

Pillory Barn is a creative business – finance is not our first language but we are ambitious to continue to grow.

MFW has a long-standing reputation of working with family businesses and whilst we are not a ‘family’ in the truest sense, we behave like one.

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CLIENT PROFILE

Since Pillory Barn launched the ‘creative process’ has obviously dramatically changed. What do you consider to have been the biggest and/or most fascinating changes you have experienced in this time?

HOW TO BE A GREAT EXPORTER

Author Liam McHugh, FCA Partner, Sittingbourne

How to be a GREAT exporter With the political uncertainty surrounding the ‘Brexit’ vote and subsequent negotiations, the pound has suffered significantly in recent months. Whilst this is bad news for those companies and individuals in the UK who import goods and services from overseas, it actually helps those who export their products or services to become more cost competitive.

Trading overseas can also allow businesses to spread risk across a wider range of customers and extend the potential market for existing products and services. Quite often, new ideas and opportunities from overseas can also help maintain a competitive advantage in the UK. However, only a small number (around 11%) of UK businesses sell overseas. Part of the reason for this is, no doubt, because small businesses are not aware of the support and advice, which is available to them.

As a result of this, the Department for International Trade (DIT) have launched a new digital platform to help businesses to start exporting and looking at opportunities to sell overseas.

The Government’s website www.great.gov.uk includes lots of advice and information to those businesses new to exporting, as well as those who would consider themselves experienced. In the New to exporting section, for example, you will find information designed to demystify the exporting process and steers on how to go about exporting for the first time.

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Business Matters Spring 2017

This includes: • the benefits of overseas selling • how to get ready to sell overseas including regulatory compliance and help in preparing your products, team and finances

• how to research your market • routes to market • how to reach customers online and how to make the most out of face to face communications Other information includes how to create an export plan, advice on shipping & logistics and guidance on customs and licences. There are also a number of webinars to watch which talk you through the export process.

Finally, to make exporting a little easier you can also sign up for their free service which will actively try to match a business’s products or services to worldwide demand.

For further information or assistance with exporting why not also talk to your local MFW office http://www.mfw.co.uk/contact/

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Don’t bury your head in the sand!

The Pensions Regulator Starts to get tough with small businesses The Quarterly Bulletin from the Pensions Regulator to December 2016 makes interesting reading for businesses yet to comply with the new requirements regarding Auto enrolment. Under the Pensions Act 2008 every employer in the UK must put certain staff into a pension scheme and contribute towards it. The process is called Auto enrolment and is also known as “workplace pensions”. Recent TV advertisements have highlighted its coming, but many small employers are still ignorant of it or think that they might be exempt from it on grounds of size. However, whether you are a hairdresser, an architect or employ a personal care assistant, if you employ at least one person you are classed as an employer and you now have certain legal duties to perform.

Much help is available online from the Pensions Regulator website (www.thepensionsregulator.gov.uk) or from your own accountant or Independent Financial Adviser. Despite this, businesses are failing to comply with the law and are paying the price. The Pensions Regulator says ”In the three months to December 2016 we issued 870 escalating penalty notices and 2,919 fixed penalty notices for non-compliant behaviour. By contrast, over 100,000 employers declared their compliance in the same quarter. Small employers can become noncompliant because they are more likely to leave things until the last minute, but in most cases a nudge is enough to get them back on track”. “ We’ve issued a large proportion of penalty notices to employers within the food & drink sector, including those running pubs, clubs and restaurants. This is a sector usually employing large numbers of temporary workers on non-standard contracts.”

Employers who miss their Auto enrolment duties could also find themselves with a County Court Judgement. Take the case of a South London based removals company who received two fixed penalty notices and an escalating penalty notice. Following numerous fruitless efforts to engage with them the Pensions Regulator visited the employer and inspected the premises. Their accountant was then engaged in the process but chose to ask the Pensions Regulator to review the penalty on the grounds that they were a small company with difficult trading conditions.

This is not considered to be a “reasonable excuse” so an application was made to the court for a CCJ. The employer eventually paid the fines in full and became compliant. However, they also had to pay two years’ worth of backdated contributions to ensure that staff had not missed out on the pension payments they had been due.

So the message is clear – Have a look at this right now and ask MFW for help if you need it.

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Business Matters Spring 2017

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AUTO ENROLMENT UPDATE

Author John Shipley, FCA Partner, Dover

SPOTLIGHT ON TAX SNIPPETS

Spotlight On: Clair Rayner, FCA DChA, Partner - Sittingbourne

Clair has been with the firm for over 17 years and has extensive audit and advisory experience with clients in a wide range of business sectors including Leisure Trusts and Academy Schools.

Clair is the proud holder of the ICAEW (Institute of Chartered Accountants England and Wales) Diploma in Charity Accounting. Clair became a partner of the firm back in 2008, which she counts as her greatest achievement in life after her family.

We recently asked Clair to feature in ‘Spotlight On’ to get to know her even better.

Describe yourself in three words Fair, fiery and loyal.

What are your pet hates?

People who do not say what is on their minds but continue to brood about something.

I much prefer people to be straight and direct.

What is the biggest misconception about you?

That I am bossy!

Stranded on a desert island, what three things would you miss the most?

My family, chocolate and television but not necessarily in that order.

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Business Matters Spring 2017

What would be your desert island disc?

Anything by the pop group Bananarama.

Do you have a favourite meal?

I love to eat out with friends but do not have a favourite cuisine or meal. As long as I do not have to cook anything, I am happy.

If you could pick one person, dead or alive, to invite to dinner who would this be?

I’d invite Aidan Turner the actor who plays Poldark.

I’m very interested in Cornish tin mining!

Why did you study for the ICAEW Diploma in Charity Accounting?

Since I started at McCabe Ford Williams I have worked with many not for profit organisations. I admire the amount of time that people I meet on those boards give freely to their causes. I strongly believe that if you are lucky in life then you should give something back to your community. As such, I am a trustee at New Leaf Support, a women’s refuge in Sittingbourne, and I’m also a trustee at Grove Park School, Sittingbourne. I am also involved with the Sittingbourne Skate Park initiative which, when set up, will provide a facility for younger Sittingbourne residents to skate, socialise and have fun.

What is your motto in life?

Never give up!

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Dates for your diaries - McCabe Ford Williams events

Investigations into the affairs of small and medium sized businesses generated an additional £468m in extra tax for HMRC in the year ended 31 March 2016.

We will be exhibiting at both Kent B2B and Kent Vision Live once again this year.

Details below:

HMRC are using a piece of highly efficient software, which is accessing and trawling through your financial information right now. The “Connect” system is scouring vast data banks to unearth discrepancies between income, assets and transactions of taxpayers and businesses. However, sometimes they may not be correct and select the wrong targets.

Kent Vision Live, Wednesday 10 May Kent County Showground, Detling

For peace of mind MFW offers a Tax Investigation Service, which provides cover should HMRC enquire in to your affairs. For details of the level of cover and cost, please ask your usual MFW contact. http://www.mfw.co.uk/contact/

End of year tax planning We have been sending out information on how best to plan your tax affairs and have produced a helpful guide to help focus core activities.

If you missed our guide then you can find it here http://www.mfw.co.uk/files/EOY_Tax_PLanning_ Guide_2016-7.pdf Whilst this guide provides some key tips please do remember to speak to a member of our tax teams to receive one to one bespoke tax planning advice.

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SNIPPETS

MFW Tax Investigation Service

If you are visiting KVL then do pop along to stand 167 and say hello.

Whilst you are there why not also attend our Cloud Accounting Workshop where partner Liam McHugh will be explaining why it makes sense to get your books onto ‘the cloud’.

We will also be on hand to discuss Auto enrolment, business start-up and any other accounting or tax matter with you.

Tickets for KVL 2017 can be booked here https://revolution.circdata-solutions. co.uk/Microsites/RFG/publish/ KENT17may/default.aspx Kent B2B, Tuesday 25th April – Ashford International Hotel If you are in the area you can find the MFW team on stands 40 & 41.

Details about this event can be found on the Kent B2B website http://kent-b2b. co.uk/event-venue-details/

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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.