In Focus Issue 4

in focus turn your business strategies into reality

issue four: winter 2014/15

Are you eligible for

Research & Development tax relief?

PLUS! The importance of forecasting when securing funding‌

Academy Trust Advice business advice

Caring for Young Carers

accountancy & audit

Autumn Statement tax advice

Get set for the Budget

wealth management

finance

welcome

in this issue welcome to issue four

08 04

Hello and Welcome to the fourth issue of ‘in focus’ magazine – your quarterly guide to growing both your business and your profits.

In this issue, our new Corporate Tax Manager, James Geary, shares some of his R&D Tax Relief and Capital Allowance Project success stories since his introduction in the last issue.

The next issue will feature our Budget Day event bringing together a wealth of knowledge along with our expertise giving an altogether unique experience for local business leaders.

Things are always changing at Randall & Payne LLP and in the last few months those changes have included welcoming a new batch of trainees to continue our investment in young talent.

We also welcomed some new additions to the R&P family in 2014 and congratulate Denisa Peters-Handreich, Rob Case, Vicky Bowden and Hannah Hill on the birth of their babies.

Welcome to our new trainees In this issue:

04 news update

A warm welcome to our new staff

05 tax planning

James Geary success stories

06 multi academy trusts Could they be right for you?

08 agricultural news

Cuts to stewardship payments planned to prevent ‘Double Funding’ and concern about the rising cost of borrowing

04

08

What doesn’t change is what Randall & Payne and in focus magazine deliver: up to the minute creative solutions and expert advice to help grow your business and develop your full potential.

02

winter 2014/15

www.randall-payne.co.uk

contents

business advice accountancy & audit tax advice wealth management financing business startups valuations buyouts debt factoring

18

09-11 autumn statement A review of the ‘mini budget’

12 - 13 the importance of forecasting

Will Abbott takes us through the income matrix for securing funding

14 - 15 are you eligible for R&D tax relief?

The future is changing for innovating SME companies - The tax landscape

16 Randall & Payne in the community Supporting Gloucestershire’s Young Carers

17 our take on corporate social responsibility Why CSR is good for everybody

18 practical lessons from the new tax rules for fixtures 20 - 21 Cirencester focus CIA Fire and Security

22 tax reference www.randall-payne.co.uk

winter 2014/15

03

R&P update

news focus turn your business strategies into reality

your guide to what’s new in the world of business...

A warm welcome to our trio of trainees!

R

andall & Payne are excited to welcome three new trainee accountants to our growing team.

Gina Gardner, Katie Frost and Josh Walker are the newest additions to Randall & Payne and each comes from a different background.

Gina comes to us straight out of Sixth form, Josh from studying Accounting and Finance at Cardiff University, and Katie from a background of studying accounting within the context of a Masters degree in Crime and Forensic Science. This breadth of experience adds greatly to our accounting team and we look forward to seeing our new trainees progress through the ranks.

Left to right: Katie, Josh and Gina

04

winter 2014/15

Josh is currently working towards his ACA, Katie towards her ACCA and Gina towards her AAT. Over the years Randall & Payne has taken on many trainees, many of whom have become fully trained full-time accountants with us. Randall & Payne understand the importance of training staff up to join our team. We support our trainees throughout their exams and the experience of working at a large firm helps them develop into fully fledged accountants.

if

To see the latest job vacancies at Randall & Payne, check the careers section of our website at www.randall-payne.co.uk/jobs/

www.randall-payne.co.uk

news

Congratulations...

... on their new arrivals, the latest additions to the Randall & Payne family!

Vicky Bowden, a son, Sebastian

Hannah Hill, a son, Rocko

Denise Peters-Handreich, a daughter, Evie

Rob Case, a daughter, Phoebe

if

Tax planning success stories with James Geary of Randall & Payne

James, Corporate Tax Manager, is thrilled to have secured another Capital Allowance repayment for one of our Healthcare clients.

Two cheques from HMRC totalling over £16,000, as well as ongoing tax reductions for future years is another pleasing result from the work James has been doing for this client.

T

he case illustrates the benefits of fully investigating the Capital Allowance rules as, where a commercial property is either purchased, refurbished or fitted out, there will be large elements of qualifying costs within the contractor’s costings or the overall purchase price which are not immediately obvious and are often missed.

Recent changes to the rules on claiming for fixtures make this a complex area of tax planning, but this case illustrates that plenty of opportunities still exist for commercial property owners to maximise their tax allowances.

Another client has also experienced success with James helping them qualify for Research & Development tax relief.

“Our thanks go to James,” “Our thanks go to James,” said David Bater, Managing Director at Central Compressor Consultants.

“Having invested significant time and manpower into our cutting edge compressor technology over the last few years we were very pleased to discover that we qualified for R&D Tax Relief.

“James guided us expertly through the whole process in terms of presenting the technical information in the right format for the authorities, maximising the amount of costs we could include and preparing a detailed report for HMRC. The first two years of claims have generated a tax saving

For more information visit our website www.randall-payne.co.uk

of around £33,000 for the company which we are absolutely delighted with. For any business developing new products or processes in their field I would thoroughly recommend talking to James to find out if you can also qualify for this very valuable tax incentive.”

Using James’ and his team’s expert knowledge, we are pleased to provide our clients with such great news and help to, ethically and legally, secure them repayments and reduce their tax liabilities in times when everyone is still finding finances are stretched.

If you are unsure if you could receive a capital allowance repayment, or whether you could benefit from R&D tax relief, please feel free to contact James on 01242 776000.

if

winter 2014/15

05

business news

The R&P Academies team was established to ensure that all our academy clients are given the same kind of high level client service as our commercial clients.

O

ur commitment to the education sector, where there are regularly changing regulations which demand specialist knowledge, means we ensure our team are well trained, experienced in this sector and kept up-to-date. We act for a wide range of schools, from single small primaries, to large secondaries and ever growing Multi Academy Trusts.

As one of the leading accountancy firms, we provide highly valued support and advice to Academies alongside providing the compliance requirements dictated by Companies Act, Charities Act and the Education Funding Agency (EFA). With Randall & Payne you have a dedicated team ready to help you achieve not only your compliance needs, but also your strategic goals in your role as direction setters for your Academy. We keep our team members up to date technically through briefings and courses, together with the updates and e-bulletins from the EFA and they each share their experiences on issues that have arisen on our Academy clients, so that best practice can be shared.

Why change to a Multi Academy Trust (MAT) model?

• • • • •

Sharing best practice.

Economic benefits, such as centralised services.

The ability to focus funds where they are most needed.

Increased and flexible staffing resources.

The opportunity to establish succession planning and, in doing so, potentially retain good staff who might otherwise move on – including headteachers.

Governance in MATs

In a MAT, the trust is a single legal entity responsible for a number of academies. The MAT consists of the main board and each school’s local governing board.

• The Trust Board have ultimate control over the academy trust and delegate to the Local Governing Bodies.

• Trustees are responsible for the same core governance functions performed by the governing body in a single academy trust, that is, setting the direction, holding the headteacher to account and ensuring financial stability.

06

winter 2014/15

www.randall-payne.co.uk

spotlight What does Good Governance look like?

The guides to good Charity and Corporate Governance place the emphasis firmly on the governing board to understand their role and how they can have the best impact upon their organisation by: • • • • • •

Understanding their role; Ensuring delivery of organisational purpose; Working effectively both as individuals and as a team; Exercising effective control; Behaving with integrity; and Being open and accountable.

Whether you’re thinking of taking your school to academy status or joining or forming a MAT, Randall & Payne have the experience and knowledge base to support and guide you through the transition. For more information on academies, MATs or the benefits of good governance, contact Rob Stokes in our Academies Department.

“Good governance is essential for the success of any organisation...Boards set the long-term vision and protect the reputation and values of their organisations….”

- the Good Governance Code

Come along to an Academies Seminar!

At Randall & Payne we pride ourselves in sharing our knowledge and helping others.

Our Academies Seminars run termly and are open to all converted Academies, whether you’re clients or not, so if you are interested in attending, check our website for dates and complete an online form expressing your interest.

www.randall-payne.co.uk

winter 2014/15

07

if

agriculture

Under EU regulations, farmers must set aside 5% of their land as an Ecological Focus Area (EFA).

They must also meet greening requirements relating to crop diversification and measures to maintain permanent grassland. Up to 30% of the farmers’ Basic Payment Scheme (BPS) payment is conditional on complying with the regulations.

However, farmers who already receive additional payments for putting in place measures under Environmental Stewardship agreements will effectively be paid twice if they use the same measures to comply with the new greening rules. To address this issue, Defra has decided that farmers with ELS agreements that started on or after 1 January 2012 will have their payments reduced if they include options that also count towards their CAP greening requirements. ELS agreements that began before January 2012 will not have their payments affected.

Cuts To Stewardship Payments Planned To Prevent ‘Double Funding’ Defra has listed 19 ELS options and 18 Organic ELS (OELS) double funding options for which farmers will have their payments reduced.

Farmers who are already carrying out additional greening measures on top of those for which they already receive payment may be doing enough to meet both their greening and ELS obligations and so may avoid areduction in payments.

If they are not carrying out enough greening measures to satisfy both requirements they can either leave the ELS scheme without penalty, change their agreement to add further options, or accept the reduction.

Natural England will write to all affected agreement holders from mid-summer 2014, setting out the choices available to them.

if

Early Interest Rate Rise Could Increase Borrowing Costs Farmers could face higher borrowing costs if the Bank of England decides to raise the base rate from 0.5% sooner than expected, economists have warned.

Anand Dossa, economist at the National Farmers’ Union (NFU), said that after three years of strong investment a rate rise would push up borrowing costs in the agricultural sector. He advised farmers seeking finance to ensure they could justify what they were seeking to borrow and factor in the effect of a rate rise in their business plans. “If you want to borrow, banks are still lending to farmers, but they are being much more stringent with their criteria,” he warned.

John Barker, financing specialist at Randall & Payne, said: “We’ve experienced an unprecedented low interest rate John Barker environment for the past 5 years and there is no question that rates will go up, it’s simply a case of when. Mark Carney, Governor of the

08

winter 2014/15

Bank of England, has already tried to provide some guidance and clarity on when interest rates are likely to increase and has indicated that one of the main drivers should be a fall in unemployment levels to below 7%. Notwithstanding that unemployment remains above this threshold, two members of the Monetary Policy Committee (MPC) voted in August for an interest rates rise, so stand by your beds – it could happen at any time! We proactively advise our clients on accessing finance.

This includes reviewing the structure of the finance and conducting various sensitivity factors, including uplifts in borrowing costs.”

For more information on accessing finance please contact either: John Barker (john.barker@randall-payne.co.uk) or Oliver Newbold (oliver.newbold@randall-payne.co.uk)

if

www.randall-payne.co.uk

autumn statement

How will the Autumn Statement affect you, your business and your family?

Randall & Payne were joined at their headquarters in Chargrove House by some of Gloucestershire’s business leaders, to discuss the impact on local businesses of the Chancellor’s Autumn Statement.

Managing Partner, Tim Watkins and finance and tax experts, Trish Clements, John Gaze and James Geary were joined

by Rob Lister of Lister Communications, Terry Young from Dove Construction, Steve Wills from Insight Management Academy, Kerry Brimfield from Diocese Gloucester Academies Trust, Richard Iles-Caine from Fluid Transfer, Di Pitts from Handelsbanken, Simon Birks from Sherbornes Solicitors and Steve Barnett from Glevum Security, providing comment from a wide range of industry sectors.

Tim Watkins said: “This was the pre-election Autumn Statement and in some respects that showed. There was a lot of emphasis on the north of England which seemed to contradict the ‘we are in this together’ comment.

On balance, the feeling around the table was that there was not a lot in this for the average person on the street, although the Stamp Duty changes were welcomed.”

Unusually for an Autumn Statement, we saw a number of announcements in the week leading up to the speech, as well as the announcements on the day. On the day there was confusion caused by the changes in the presentation of figures and the consensus around the table was that the electioneering had truly begun.

Steve Barnett thought there were a lot of questions still to be answered regarding the funds available to help businesses export, while Richard Iles-Caine felt that, with most economies predicting much lower growth, if any, companies trying to export would still be facing a tricky time.

The Stamp Duty changes were a headline grabber and, as Simon Birks said: “You wouldn’t want to be working in a conveyancing office tonight!”

www.randall-payne.co.uk

winter 2014/15

09

autumn statement

Key announcements and changes from the Autumn Statement 2014 The following summary brings together everything of significant note.

Health

An additional £2 billion of funding for frontline health services has been announced, labelled as a “down payment” on an existing plan from NHS bosses calling for an extra £8bn per year above inflation by 2020.

Flood Defence Schemes

£2.3 billion of funding has been announced for 1,400 schemes across the UK, including £13.4m for the South West (mostly south of Bristol) and £4.3m for the West Midlands, so very little of this is relevant to Gloucestershire.

Most of the earmarked funds (around £1.8 billion) relate to the Thames estuary.

Infrastructure

£15 billion of funding has been announced for various infrastructure projects, including a 1.8 mile tunnel under Stonehenge as part of plan to dual the entire length of A303 from the M3 south of London through to the M5 in Devon.

Locally, a pledge to fund a solution to the Birdlip ‘missing link’ which takes into account both the economic importance of the route and the sensitive environment of the area has been made. This gives some hope that this is somewhere high on the agenda but finding a solution will be far from a simple exercise.

Air Passenger Duty

From 1 May 2015 this will be abolished on economy flights for children under 12 years old, and from 1 May 2016 this will be extended to children under 16 years old.

Business Rates

A full review of business rates has been announced, intended to help High Street shops to compete with internet retailers. However the outcome of this review is not expected to be announced until Budget 2016 so help here is a long way off.

Following last year’s announcements we already have a system which caps the RPI increase to 2%, as well as a £1,000 discount for shops, pubs, cafes and restaurants with a rateable value of £50,000 or below, and doubled Small Business Rate Relief for 12 months from 1 April 2014. The discount will now be increased from 1 April 2015 to £1,500, and the doubling of relief for small businesses will be extended for a further year to April 2016.

Diverted Profits Tax on Multinationals

A new 25% tax charge, the ‘Google’ tax, is to be introduced from 1 April 2015 to apply to multinational companies on their profits derived in the UK. It is unclear how this will work in practice given the double taxation implications with other jurisdictions and the high risk of avoidance activity. There is certain to be a period of consultation before legislation is implemented.

Restriction on use of Historic Losses for Banks Banking businesses with historic losses will only be able to offset 50% of their profits against those losses to ensure they are contributing to the UK recovery.

Tax Simplification

The Office of Tax Simplification (OTS) delivered a detailed report in October on the competitiveness of the UK tax system, which showed that the UK ranks 3rd in the G20 (behind Saudi Arabia and Canada), 2nd in the G7 (behind Canada), 3rd in the EU (behind Ireland and Denmark) and 14th globally. The government would like to improve on these rankings and has highlighted tax simplification and reduction of red tape as a means of achieving this. The OTS believes that a target of top of the G7 and top ten globally is achievable. They have highlighted a number of suggestions for simplification: • Replacement of Capital Allowances • Simplification of Capital Gains rules • Better guidance on R&D Tax Relief, with tax allowable depreciation as well as harmonisation of the for companies descriptions of R&D in SSAP13, • Consolidated Corporation Tax • Materiality as a concept for tax HMRC guidance and BIS guidelines Returns for groups of companies • Ability to set up an annual payroll • Simplification of VAT partial • Simplification of tax loss rules scheme for small companies by a exemption rules structured email facility • Harmonisation of tax and NIC This review did get a passing mention and the Chancellor mentioned that he would be considering all the suggestions made, so expect further announcements and consultations to find out which of the above measures are going to be taken forward.

10

winter 2014/15

www.randall-payne.co.uk

autumn statement Scottish Tax Powers

Draft legislation is expected by 25 January 2015 to devolve the following powers to the Scottish parliament, as agreed between Scottish political parties: • Income Tax – power to set rates and thresholds for non-savings and non-dividend income only.

Other powers (such as personal allowance and rates / thresholds for savings income) remain with the UK. • VAT – first 10 percentage points of all standard rated VAT in Scotland allocated to Scots parliament budget.

• Air Passenger Duty – power to set rates and bands for passengers leaving Scotland.

• Aggregates Levy – once current European legal challenges are resolved.

All other powers remains with the UK parliament including Capital Gains Tax, Corporation Tax, Inheritance Tax, Oil and Gas Tax Revenues, Fuel Duty, Excise Duties and National Insurance.

Patent Box

This is set to undergo changes before it is even fully phased in, due to objections from other EU member states (principally Germany) who believed the generosity of the scheme was distorting competition between EU tax jurisdictions. We understand that Patent Box, as it stands, will be closed to new applicants from June 2016 and abolished by June 2021. It is important to note that a patent must be granted before a company can elect into Patent Box, so applications for patents will potentially need to be accelerated if there is an intention to use the regime.

R&D Tax Relief

The rate of relief for small and medium sized companies will be increased from 225% to 230% with effect from 1 April 2015. This means that a company can benefit from a Corporation Tax saving equivalent to 26% of the qualifying costs identified (previously 25%). In addition, the rate of payable tax credit available to companies under the large company scheme will be increased from 10% to 11% from the same date.

Enterprise Zones

An order designating assisted areas has been released, these areas benefiting from 100% Capital Allowances on plant and machinery from 1 April 2012 (backdated).

Most of these are in Scotland and the North of England although there are three areas in South Wales.

Stamp Duty Land Tax

The new Land and Building Transactions Tax will replace Stamp Duty Land Tax in Scotland from April 2015, as announced in October. In the Autumn Statement the government has introduced a remarkably similar new banded system for UK Stamp Duty Land Tax as follows: Purchase price (£) Rate on part of price within band 0 – 125,000

0% 125,001 – 250,000 2% 250,001 – 925,000 5% 925,001 – 1,500,000 10% 1,500,001 and over 12%

Individual Savings Accounts

ISAs and New ISAs which are left to a spouse on death will no longer lose their income tax free status at that point - good news for those whose accounts are worth significant sums.

www.randall-payne.co.uk

Income Tax Allowances and Thresholds

The Income tax Personal Allowance was to be £10,500 from 6 April 2015 but this will now be £10,600.

The higher rate threshold will increase by £600 so that higher rate tax payers can benefit in full from the £600 increase. The government’s stated goal is to achieve a £50,000 higher rate threshold by 2020.

Removal of Unfair Advantage for Incorporating Businesses

Existing businesses that incorporate and sell their own generated goodwill to the new company will no longer be eligible for Entrepreneurs’ Relief on the goodwill value.

This means a likely Capital Gains Tax charge of 28% instead of 10%.

In addition, goodwill bought by a company in this situation will no longer qualify for Corporation Tax relief as it is written off in the accounts. This would also apply where a company is purchased and then the trade, assets and goodwill are transferred inter-company.

These measures are bad news for traditional tax planning around transferring a growing business to a limited company, underlining the need to seek proper tax advice before incorporating a business.

Deferral of Capital Gains into an Investment under Enterprise Investment Scheme (EIS)

Under existing tax rules, where a Capital Gain which would have qualified for Entrepreneurs’ Relief was deferred into an EIS investment, Entrepreneurs’ Relief was lost so that the gain came back into charge (upon disposal of the EIS investment) at full rates of Capital Gains Tax. This anomaly has been removed so that eligible gains deferred into EIS investments retain their qualifying status for Entrepreneurs’ Relief.

Remittance Basis for Non-domiciled Individuals There is already a £30,000 annual charge for non-domiciled individuals who have spent 5 years out of the last 7 in the UK, if they wish to be taxed on the remittance basis – that is, only paying UK income tax on worldwide income which is remitted to the UK. This will be increased to £60,000 where the individual has been UK resident for 12 of the last 14 years and £90,000 where they have been resident for 17 of the last 20 years.

if

winter 2014/15

11

forecasting feature

The IMPORTANCE of forecasting in securing funding…

Business forecasts prepared by clients, usually for banks, can bear little resemblance to reality and leave the bank asking for commentary on why the business hasn’t performed as expected.

Will Abbott of Randall & Payne explains: The reality is that these figures have never been representative of what is realistic. They have either been overinflated or based upon what the owner thinks the bank wants to see.

Little wonder that the business doesn’t achieve its ‘objectives’.

Chris Isaac, owner and Creative Director of the Isaac Partnership, describes his experience, one that mirrors that of many growing businesses, “We were looking to expand and, as with all small businesses, cash-flow was tight.

We wanted to move into a larger building and take on more staff.

To be able to go to the bank and secure funding, we needed to produce a set of accounts.

“Our accountant at R&P, Will Abbott, also sat down with us for three hours and helped us to accurately forecast the next 12 months. Will looked at our existing staff, worked out how

12

winter 2014/15

productive they were and how much money was being generated by each of them. He then looked at our outgoings and our assets and was able to put together a 12 month plan based on a projected amount of work coming into the business and everybody working at a working at a realistic productive rate, to work out how much the company should be able to generate and therefore how much profit there should be at the end of the year.”

There are numerous variables which impact upon performance and it may well be that changes within the business drive the need to prepare the forecasts, but the sales figures will ultimately be capped by the capacity of the business and the staff it employs, so this should be the starting point for any forecasting.

From this cascades a whole raft of business benefits.

Start the forecast by building an Income Matrix: 1. How much income can each employee (or for a manufacturer, each machine) generate? (Is the productivity level realistic and achievable?)

2. What is the salary cost of each employee?

At this point we’ve already created a primary Key Performance Indicator (KPI) for the business based upon earnings/staff. We have an achievable sales figure and staffing cost. Assuming direct costs (excluding staff) are a percentage of sales (based upon historic trading performance) and administrative expenses are reasonably predictable, there is a basic Profit & Loss from which to start making assumptions and adjustments.

3. A basic ‘break-even’ position can be calculated.

www.randall-payne.co.uk

feature

Further stages can then be undertaken: 4. How much each product/income stream can potentially deliver? (This should match the figure in stage 1, otherwise the business will fail to perform).

5. Which of the staff will be responsible for these income streams?

(Secondary KPIs bespoke to each staff member can be created around this).

6. Income achieved by staff, per product, per month can then be used to create a detailed Income Matrix.

The Income Matrix outlined not only provides a Third Party, such as a bank, with far more information than a standard forecast, but forms a skeleton around which monthly performance (under or over) can be monitored and proactive management of the business can be achieved. It is also much more user-friendly and meaningful, as it is based upon the core operating activity of the business rather than a clever spreadsheet with headline numbers which may be difficult to understand or relate to.

Chris and his business found their forecast to be at least as important as their accounts: “The bank was more interested in looking at our forecast than any other paperwork that we had.

After answering a couple more questions we were able to secure the funding that we needed to expand the business.

We couldn’t have done that without the forecasting so it was crucial that we got it right and were able to answer all the bank’s questions, which is where Will’s expertise came in.”

For more information on forecasting your business performance contact Will Abbott or John Barker at Randall & Payne’s Business Advisory Team on 01242 776000.

www.randall-payne.co.uk

if

winter 2014/15

13

The future’s changing for

Research &

Innovating SME companies

The Tax Landscape Since before the coalition government came into force it was recognised by politicians and the Treasury that encouraging innovation and exploitation of Intellectual Property within the UK was of paramount importance if our economy is to succeed. This stems right back to James Dyson’s report, “Ingenious Britain”, commissioned by the Conservative Party in the run up to the General Election in 2010.

In that report James Dyson recommended increased support for UK businesses in a number of areas, and not just by way of tax reliefs.

A significant number of grant funding schemes are available – some of these are on a national scale such as Technology Strategy Board (now Innovate UK), SMART, Growth

14

winter 2014/15

Accelerator and Growth Vouchers to name a few. Other more local schemes are available and both Local Enterprise Partnerships and regional Chambers of Commerce are well placed to signpost such schemes.

From a tax perspective, R&D Tax Relief has been around for a long time now (since the year 2000) but there have been significant improvements to the scheme since 2010: • A stepped increase in the rate of tax relief from 175% to 225% for small and medium enterprise (SME) companies between 2010 and 2012.

• The introduction of a payable tax credit for the large company scheme from April 2013.

• An increase in the level of the payable tax credit for SME companies from 11% to 14.5% in April 2014.

If the Treasury heed the recent report from the Confederation of British Industry about ‘supercharging’ the R&D Tax Relief, we could soon see a further extension of the scheme to support companies once they have completed the development and are bringing their product to market.

It is important to be wary if claiming both SME company R&D Tax Relief and other forms of grant funding, because the amount of R&D relief can be reduced as a result.

R&D Tax Relief is a fantastic opportunity for early stage companies to claim where they are not yet in a secure enough position for banks to be able to lend. Indeed, a particularly switched on banker may even signpost R&D Tax Relief as an opportunity for a company to generate cash, with a view to helping the company reach the next stage, when a more viable proposition can be presented to lenders.

The problem that existed for many years was that there was no tax incentive for companies to exploit

www.randall-payne.co.uk

feature

Development

their IP in the UK once the R&D phase was completed, so some multinationals began moving their business offshore where more favourable tax regimes applied.

This was one of the key drivers behind the introduction of the Patent Box from April 2013 – the ability to claim an effective Corporation Tax rate of 10% on profits from innovation.

But 18 months in, just how effective is this turning out to be, especially for SME companies?

Certainly where patenting has not been pursued on ground of cost, the Patent Box merits a rethink of IP policy. However, where concerns revolve around putting information in the public domain, are these kinds of fears misguided? We would suggest that this comes down to the quality of the patent, and if this can cover a process as well as a specific product or component, then significantly more protection can be afforded. This is where a really good patent attorney can add significant value.

Entrepreneurs should be especially careful about ownership of patents.

If a patent is transferred to a company (for example, so that company can

www.randall-payne.co.uk

“Increased support for UK businesses is key for economic growth”

start to develop it and claim Patent Box) then there is an income tax charge on the individual based on the value of that patent. There is no relief to hold over that charge, although it can be spread over a number of years. Valuing a patent is not a simple process so could be a costly exercise, not to mention the tax charge itself. Consider putting this in the company name before it is granted, and therefore before it carries any notable value.

It is clear that the big pharmaceutical PLCs are going to benefit massively from the Patent Box. For SME companies selling products it will be more of a challenge to recognise a material benefit from the scheme, although from our experience so far, companies who choose to go down the licensing route are able to benefit much more readily and substantially.

There is no doubt that when it comes to the tax environment for innovative companies, the UK tax regime is one of the most attractive.

A recent report commissioned from the Office of Tax Simplification on the competitiveness of the UK regime in

general highlights that the UK currently sits 14th in the world, 3rd in the G20 and 2nd in the G7. This is an impressive statistic and is one that the government want to improve further.

With sound business advice from advisers who are both experienced and fully up to date with all the tax reliefs and funding schemes, there is huge cause for optimism in the UK’s technology and innovation arena as the economy continues to recover.

Contact James Geary on 01242 776000 for more information about tax breaks and funding for innovation.

winter 2014/15

if 15

Randall & Payne in the community

Supporting Gloucestershire Young Carers provides a range of services to support more than 1000 young people in the county who support a family member with illness, disability or mental ill health.

Among these services are 18 respite groups that meet regularly to give the young people a break from the challenges they face at home.

“Our first project involving the company was the Twilight Briefing event at the Randall & Payne offices.

This is a conference that we hold annually to keep professionals working with young carers up to date on the resources available to them in supporting young carers in their settings.”

The message from Dr Helen Miller, Chair of the county’s Clinical Commissioning Group was “tell us your ideas on how health money can best be spent to directly benefit young carers”, when she spoke at Gloucestershire Young Carers 2nd Annual Twilight Event.

Dr Miller directed her keynote speech to the 16 young carers participating in the event held at the Randall & Payne offices in Shurdington and also praised charity staff for their ‘innovative’ approach to working with young carers.

Ele Semadeni, Operations Lead for Gloucestershire Young Carers, says: “We are delighted to be linking up with Randall & Payne. We value the support we receive from local companies.”

16

winter 2014/15

Much needed relief for young carers...

Lilly Boucher and her brother Jay go to a young carers’ group run by the charity Gloucestershire Young Carers. There, they have the opportunity to take a break from the challenges of supporting their seriously ill mum, Sadie, and they can socialise with other young carers who are in similar situations.

For an hour and a half every fortnight they can have fun and put their worries on pause.

Randall & Payne have chosen to support the charity Gloucestershire Young Carers for the next two years and, during that time, money raised and time donated will go towards supporting children and young people like 9 year old Lilly and 11 year old Jay. Sadie has congenital heart disease and, since she was a baby, has undergone numerous major heart operations. She also has a degenerative spinal condition which has left her with limited mobility.

“When Gloucestershire Young Carers linked up with our family they introduced me to The Nursing Alliance who now provide nurses who come in two or three times a day to help me with things like showering. Lilly was helping me until the nurses started coming in” Sadie explains. “Lilly and Jay go to the junior young carers group and I know that is a break for them. They love going - their brothers also liked going until they grew older. At the group, as well as having some fun, Lilly and Jay can also talk with other young carers and that makes them feel less alone.”

www.randall-payne.co.uk

if

Our take on Corporate Social Responsibility Some businesses see Corporate Social Responsibility as a chore or reluctant requirement. At Randall & Payne we try to embrace our Corporate Social Responsibility and take our moral and ethical responsibilities to our clients, the community and the environment seriously, knowing that it is partly our strong relationship with the county and its inhabitants that has helped us become the successful business we are today.

To us, Corporate Social Responsibility comprises three distinct branches: ethical, environmental and social.

Our ethical responsibilities are primarily to our clients. The nature of our work often gives us access to clients’ sensitive or confidential information.

Not only do we comply with the Data

business news from Openhouse. Openhouse is a charity that provides young people and vulnerable individuals in the county access to housing, support, development, and learning and employment opportunities. The match signalled the start of what we hope will be a long and valuable relationship with the charity.

Protection Act, we ensure we’re treating your data with integrity and provide a secure document exchange via our website. We’re also a member of the Institute Of Chartered Accountants in England and Wales and as such we uphold the In the past we’ve sponsored institute’s high standards of ethical and swimming events raising money for professional conduct. disaster relief, golf days for young carers in the community, football Our environmental responsibilities are similar to those of any other business. matches for Breakthrough Breast We try to keep our carbon footprint as Cancer and raised money ourselves for Meningitis Trust. We also have an low as possible and all of our waste active program of award sponsorship paper is recycled. Our shredding service provider recycles 520,000 tons in local schools and we help support Gloucester RFC. For the last three of paper a year, saving around 9.4 years we have also named LINC, the million trees annually.

Leukaemia Care Centre in Cheltenham The most recent example of the as our charity of the year, raising way in which we take on our social money for the charity all year round. responsibility was our 5-a-side football match with representatives if

To find out more about what we do to address our Corporate Social Responsibility, go to www.randall-payne.co.uk/about-us/corporate-responsibility/

www.randall-payne.co.uk

winter 2014/15

17

business news

Practical lessons new tax rules for Major changes to the rules on Capital Allowances came into force in two stages, effective from April 2012 and April 2014. Now these changes are fully in place it is worth reflecting on how they have impacted property transactions in practice.

The changes have certainly restricted situations now where a property purchaser can wait until after the completion and then make an apportionment without reference back to, or agreement from, the vendor. However, opportunities still exist, particularly with properties which have been owned since prior to April 2012.

What follows are three real life situations which illustrate how the playing field sits now.

1 18

The first scenario is a residential care home operator which has acquired 5 properties and converted them into fully equipped residential care units.

One of these was acquired after April 2012, the rest before. Because none of the properties were commercial before purchase, there was no possibility of the previous owner claiming anything on fixtures and therefore no fixed value was in point. It was therefore possible for the company to retrospectively value the fixtures elements of the properties and update recent Corporation Tax computations. Initial tax repayments totalled some ÂŁ16,000 and ongoing annual tax savings starting at ÂŁ5,000 and reducing over time.

winter 2014/15

2

The second is a business property purchased shortly before the new rules came into force.

In this situation a very detailed schedule of fixtures was prepared and agreed for tax purposes at the time of the sale. However, upon review, the detailed schedule omitted quite a few qualifying items, and therefore we were able to go back and value the omitted elements retrospectively and make an additional claim.

Initial tax savings are likely to be between ÂŁ20,000 - 30,000.

www.randall-payne.co.uk

from the fixtures

3

The third is not such a good news story but is a useful lesson in carrying out transactions.

A commercial property was purchased in late 2013 but no agreement was made for fixtures between seller and buyer.

While there is technically still time to do so, it is practically very difficult for the buyer to now go back and ask the seller to agree a fixtures split, because the seller would most likely have to reduce their tax allowances to do so and would have no reason to agree to any alternative proposal.

While there is the option for the buyer to invoke a reference to the Tax Tribunals to agree a figure, this could be a costly (and potentially acrimonious) route where the ends would not justify the means.

www.randall-payne.co.uk

That is a classic object lesson that it is now crucial for the buyer to ensure their advisers are switched on to Capital Allowances as part of the sale negotiations.

What the first two examples illustrate is that all is not lost in relation to fixtures claims.

Every situation is different and it is always worth asking Randall & Payne to have an initial look to review whether there is any scope for valuable claims.

A good business adviser will carry out that initial review on a speculative basis at no cost to the business and Randall & Payne operate on this basis; contact James Geary on 01242 776000 to discuss your situation. if winter 2014/15

19

spotlight

Cirencester focus...

C

irencester is a thriving town, home to an increasing number of large businesses. While it used to be known for it’s picturesque scenery and large Parish Church, often referred to as the Cathedral of the Cotswolds, it is now also home to some of the county’s most important businesses.

Museum strives to encourage access for all to its nationally important collections, through the permanent displays within the museum, plus an extensive education and outreach programme and a diverse and imaginative temporary exhibitions programme. Cirencester remains an important regional attraction and claims the title ‘The Capital of the Cotswolds’ and other fantastic attractions include the roman amphitheatre, Cirencester Park, Cirencester Polo and the Abbey grounds.

Cirencester is currently awaiting the opening of a new retail park.

While high street shop owners are uneasy about the impact it will have on the town, there can be no doubt that Cirencester is a rapidly growing town, with exciting prospects for the future.

Cirencester’s location makes it an ideal base for visitors wishing to tour the Cotswolds and it’s popularity as a tourist destination is perhaps why the town has so many good quality hotels.

The town was once one of the most important places in Roman Britain, second only to London. The Corinium

what do these all have in common?

NeonPlay ABC Bridges Broxton Industries Cursey Technology City Electrical Factors Barrington Ayre Shirtmaker & Tailor They all operate from Cirencester

Its diverse range of shops means that Cirencester is a popular shopping destination too. With its mix of chain stores and small independent shops, it really does have something for everyone. The old Post Office redevelopment and the development of the Corn Hall have been welcome additions to the Cirencester shopping experience bringing many new shops and places to eat to the town.

if

CIA Fire & Security Case Study

A

Following a recommendation by an existing client, we were approached by Cirencester-based CIA Fire & Security Ltd to assist with the acquisition of a business. Initial discussions focused on the commercial rationale for the project and the business plan moving forward, as prepared by the client.

s is typical for a transaction of this nature we were primarily engaged to conduct financial due diligence and this was tailored and focused based on our own knowledge and experience and the client’s specific concerns. This approach allowed us to optimise the balance between cost and risk to the client.

During the engagement a number of issues arose that ultimately, following negotiations with the seller’s advisers, resulted in amendments to the proposed deal to reflect the concerns that were identified. It was necessary to revisit the original plan and intended outcomes to ensure that the commercial rationale remained achievable.

The deal was made complex by a number of issues including income recognition

and significant property assets. As the deal progressed we were involved in

negotiating with the seller and their advisers. This is often the case, as

a deal of this size for an SME can place a strain on resources; the

buyer and seller are both continuing to run their businesses and

have their day jobs and existing clients to consider.

20 20

winter 2014/15

The ability to respond to queries quickly and often outside of normal working hours is essential to keep the deal moving.

www.randall-payne.co.uk

spotlight “The CIA team were fantastic from start to finish. Their friendly staff worked quickly and efficiently to install the new system. We are so pleased with the finished product and the service provided”

- Oak Furniture Land

CIA specialises in: Protect What Matters To You with the South-West’s favourite security company

- Intruder Alarms - Fire Alarms - CCTV - Gate Automation - Access Control - Alarm Response and Keyholding

Visit: www.ciafireandsecurity.co.uk

Call: 01285 651025

We also need to give clear, objective advice as both buyer and seller can become drawn into what is often an emotionally charged event.

Sally Jones, Business Finance and Product Development Manager, said “Demonstrating fine skill and understanding of what can only be described a very complex and arduous transaction, Randall & Payne provided a first class accounting service from start to finish. Regular liaison with our team ensured each individual was fully conversant with the path of acquiring a new business. In the event of some very trying situations, Will and his team remained calm and collected; nothing thrown in to the equation could not be overcome.”

Sally added “Eager to listen to the perception and ideas of others, Randall & Payne were most considerate and thorough in their presentation of ideas and solutions. They also remained strong when faced with tough challenges and were more than willing to defend our position.

Incredibly professional and personable, CIA Fire & Security Ltd would recommend this Accounting Firm to any business. We look forward to working with Will and his team in the near future.”

Post-acquisition there was further work to be done to agree the final asset position which may lead to a further adjustment to the purchase price. This is also the start of post-merger integration activity and ensuring that the customers, suppliers and employees become part of the culture of the buyer in order to ensure the business plan comes together and the commercial objectives are fulfilled. A proper understanding of these objectives at the outset allows us to support this work after the deal is completed.

Tax planning is an essential part of any deal and advice regarding the structure of the deal, opportunities for tax minimisation, and subsequent restructuring of the business post acquisition were provided by working closely with our tax department throughout the engagement. if

www.randall-payne.co.uk

winter 2014/15

21 21

!

dates for the diary december 2014 monday

tuesday

wednesday thursday friday

saturday

sunday

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 Christmas Day

26 27 28 Boxing Day

Academies filing 29 30 31

Deadline for filing tax return for the tax liability to be included in the PAYE code

with EFA - Accounts filing Deadline; Management letter; Value for Money statement

january 2015 monday

tuesday

wednesday thursday friday

saturday

sunday

1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25 RePLY Business event @ Snow Business

26 27 28 29 30 31

Tax return and Academies AAR filing deadline

february 2015 monday

tuesday

wednesday thursday friday

saturday

sunday

1

2 3 4 5 6 7 8 WASBM Conference 9 10 11 12 13 14 15

16 17 18 19 20 21 22 Five Valleys Business Lunch Business event

Quorum 23 24 25 26 27 28

22

winter 2014/15

www.randall-payne.co.uk

tax reference

income tax reliefs 2014/15 Personal allowance born after 5 April 1948 £10,000

‘adjusted net income’ over £100,000.)

born after 5 April 1938 and before 6 April 1948* £10,500 born before 6 April 1938 £10,660 (For higher earners reduce personal allowance by £1 for every £2 of

vehicle benefits

(relief at 10%)* min. amount

£8,165 £3,140

* For people born before April 1948 reduce allowance by £1 for every £2 of adjusted net income over £27,000 to the minimum of the standard Personal Allowances of £10,000.

Blind person allowance

Company cars 2014/15 CO2 emissions (gm/km)

Married couple’s allowance for people born before 6 April 1935 or 75 and over

£2,230

Maximum transferable personal allowance between spouses £1,000

% of cars list price taxed

1-75 5 76-94 11 95 12 100 13 105 14 110 15 115 16 120 17 125 18 130 19 135 20 140 21 145 22 150 23 155 24 160 25 For expenditure incurred on or after 6 April 2013 165 26 (since 1 April 2013 for companies) cars with CO2 170 27 emissions not exceeding 130gm/km (previously 175 28 180 29 160gm/km) receive an 18% allowance p.a. Cars with 185 30 CO2 emissions over 130gm/km receive 190 31 an 8% allowance p.a.

195 32 200 33 205 34 210 and more 35 For diesel cars add a 3% supplement but maximum still Cars and vans Rate per mile 35%. For cars registered before Up to 10,000 miles 45p 1st January 1998 the charge is Over 10,000 miles 25p based on engine size.

capital allowances on cars

mileage allowances

Company Vans 2014/15 £3090 Car Fuel Benefit 2014/15 £21,700 x appropriate percentage* *percentage used to calculate the taxable benefit of the car for which the fuel is provided.

Bicycles 20p Motorcycles 24p These indicate the maximum tax free mileage allowance for own vehicle business use. Any excess is taxable.

value added tax

Standard rate 20% Reduced rate 5% Annual Registration Limit - from 1.4.14 (1.4.13 - 31.3.14 £79,000) £81,000 Annual Deregistration Limit - from 1.4.13 (1.4.13 - 31.3.14 £77,000) £79,000

www.randall-payne.co.uk

income tax rates 2014/15 Band £ Rate % 0 - 2,880 10* 0 - 31,865 20** 31,866 - 150,000 40*** Over 150,000 45****

*Only applicable to dividends and savings income. The 10% rate is not available if taxable non-savings income exceeds £2,880. ** Except dividends (10%). *** Except dividends (32.5%). **** Except dividends (37.5%).

Other income taxed first, then savings income and finally dividends.

corporation tax year to 31/3/2015 Profits band

Rate

Small companies rate £0 - £300,000

20%*

Marginal (small companies) rate £300,001 - £1,500,000 21.25%* Main rate Over £1,500,000 Standard fraction

21%* 1/400*

The profits limits are reduced for accounting periods of less than 12 months and for a company with associated companies. *Different rates apply for ring-fenced (broadly oil industry) profit.

pension premiums 2014/15

• Tax relief available for personal contributions: higher of £3,600 (gross) or 100% of relevant earnings.

• Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.

• Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.

• Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’.

• Tax relief for large contributions may be spread over several years.

winter 2014/15

23

WEDNESDAY 18th MARCH 2015

LIV£

BUDGET DAY

GLOUCESTERSHIRE’S BIGGEST BUSINESS BUDGET DAY EVENT!

2015 GLOUCESTER RUGBY CLUB, KINGSHOLM ROAD, GLOUCESTER. GL1 3AX

01242 776000 TO REGISTER YOUR PLACE AT THE EVENT CALL

OR VISIT

www.randall-payne.co.uk/events.html FOR MORE INFORMATION

YOUR CHANCE TO MAKE GLOUCESTERSHIRE COUNT ON BUDGET DAY.