taking account
DESCRIPTION
For clients of CLB CoopersTRANSCRIPT
Planning for the future
Developing a successful strategy for your business
accounttaking:
Companies Act 2006How will it affect your accounts?
Time to pay... up! Rescheduling payments to creditors
Research and development tax creditsDo you qualify?
VATCross-border changes and UK rate increases
The newsletter from CLB Coopers Chartered Accountants Issue 3 2009
in briefNews
Printed on ‘Nine Lives’ – an FSC certified, 100% recycled paper.
Since our last issue we have seen evidence that the economy has improved although the outlook is still uncertain. It will be interesting to see what will be announced in the pre-budget statement on 9 December; I think we are all reconciled, however, to increased personal and corporate taxation and a reduction in public expenditure over the foreseeable future as the government seeks to balance public finances.
Of equal interest is the banking world as it struggles to reconcile its outward-facing offering and lending criteria with its own needs for capital and asset cover. Again, the coming 12 months will be a crucial time for many businesses and the banks’ position will become even more important in any sustainable economic recovery.
Hopefully the articles in this issue will give you some pointers and practical steps to take. We hope you find them of interest and look forward to working with you to take advantage of the inevitable opportunities and challenges that will arise.
David J TravisManaging Partner
SubscriptionsTo manage your subscription please contact Nicola Gainey-Smith at [email protected] or call 0161 245 1039.
FeedbackWe write this newsletter ourselves to help you and your business succeed and we value your feedback and input to ensure the content is useful, current and relevant to you. If you feel we could improve in any way please email David Clift at [email protected]
Don’t be late for a very important date 3
Companies Act 2006 4
Time to pay... up! 5
Planning for the future 6
Do you qualify for R&D tax credits? 8
Are you ready for the new 50% tax rate? 9
Cross-border VAT changes from 2010 10
Goodbye snail-mail... hello SDE 11
Locations and Partners 12
Details of how to contact us can be found on the back page.
Businesses for saleCLB Coopers have a dedicated tailor-made research service to help with all your M&A needs. Contact Steven Lindsay for a full list of current business opportunities on 0161 245 1031 or email [email protected]
Company car and fuel tax Did you know you can calculate the tax on your company car and car fuel benefit? Contact Doug Chadwick on 01524 54 1200 to discuss how this can be reduced. Check out our Fuel Cost Calculator at: www.clbcoopers.co.uk
Introduction
This issue’s contents
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Don’t be late for a very important date The deadline for the online submission of your 2009 Self Assessment Tax Return to HMRC is 31 January 2010. A late submission will incur an automatic late filing penalty of £100, although this can be mitigated in certain circumstances. This is also the date on which any tax that you owe for the year which ended 5 April 2009 is to be paid, together with any required payment on account for the year to 5 April 2010. HMRC will charge interest on late paid tax.
Also note that if any tax due for the year to 5 April 2009 remains unpaid after 28 February 2010 then you will incur a 5% surcharge based on the tax outstanding. If you do have a liability, and believe that you may have problems in making payment by this date, speak to us in advance so that we can contact HMRC and request that you be given additional time to pay. By doing so you will not incur the surcharge, although interest will still be charged.
If you have any questions or worries about the deadlines contact your specialised tax team as soon as possible or call Terry Eaves,
Private Client Manager on 0161 245 1000 or [email protected] to arrange a consultation.
JANUARY312010
Pre Budget Announcement9 December 2009 Go to www.clbcoopers.co.uk to download our full summary report
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Wherever in the world you have business interests you can benefit from our international knowledge and connections. CLB Coopers are members of The Leading Edge Alliance, the third largest international association of independent accounting firms for 2009 as ranked by the International Accounting Bulletin. Call David Clift on 0161 245 1032 to discuss how the Alliance could benefit you.
As you may be aware, the final provisions of the Companies Act 2006 (the Act) came into effect from 1 October 2009, thus marking the end of the Companies Act 1985. The Act was passed as law in 2006 and has been introduced in stages between 2007 and October 2009.
The Act contains approximately 1,300 sections and it is beyond the scope of this article to summarise all of the changes; please speak to your lawyer for this! Whilst the Act does not introduce any fundamental changes to the financial reporting regime in the UK, there are changes nevertheless.
The Act impacts financial year ends ending on or after 30 April 2009
Companies Act 2006How will it affect your accounts?
If you have any queries about the practical implications of the Companies Act 2006 please speak to your usual CLB Coopers contact or call David Clift on 0161 245 1032 or email [email protected]
for companies and 30 September 2009 for limited liability partnerships. It may well be that you have seen some of the changes already.
Changes to bring to your attention include:
l Medium-sized groups now need to prepare consolidated financial statements (unless they are members of a larger group which prepare consolidated accounts anywhere else in the world). The sting in the tail here is the obligation to produce comparative information, which can be time consuming. Working your way through the criteria for consolidation is not always straightforward so call
us if you have any queries. If the requirement to produce consolidated accounts is overlooked then this is a criminal offence.
l Filing deadlines are now 9 months for private companies and 6 months for public companies. Filing penalties have also increased. A point worthy of note is if there was a failure to comply with filing requirements in the previous year (and the previous financial year end had begun on or after 6th April 2008) the new penalties are doubled; serial late filers beware. The filing deadlines become the natural month end, so accounts for a private company
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Time to pay... up!with a year end of 28 February are now due for filing by 30 November (not 28 November) thus removing a source of confusion and irritation.
l As private companies are no longer required to hold an AGM they are not obliged to send financial statements to members until they are due to be filed at Companies House.
l There is no requirement to disclose the authorised share capital of a company in the accounts, unless the accounts are prepared under International Financial Reporting Standards. In fact, companies formed under the new Act will not have authorised share capital.
l The audit report included within the set of financial statements presented to the shareholders will be signed in the name of the Senior Statutory Auditor (typically the partner), for and on behalf of the practice in question. The set sent to Companies House will continue to be signed in the name of the practice but will include the name of the Senior Statutory Auditor.
l All Companies House forms changed from 1 October.
l From 1 October all directors will have a service address as well as their residential address. It is this service address that will now be publicly available from Companies House, not a director’s residential address as has been the case previously. The residential address will only be made available to credit reference agencies and public authorities.Existing residential addresses automatically became service addresses on 1 October 2009. As a director you are entitled to change your service address online.
It is clear that we are in the grip of a very difficult trading period and we are likely to feel the effects for some time yet. The stress of it all is quite painful for everyone – for you as the business person, your colleagues and your customers.
There is a natural tendency to cut costs to survive which is eminently sensible; but sometimes cost-cutting, or more particularly cutting corners, is potentially counter-productive. A topical example of this is the time to pay (or the rescheduling of payments to) your creditors, most particularly HMRC.
As a formal response to the credit crisis in the UK, HMRC created a formal time to pay opportunity which many businesses took advantage of, but did it ‘in-house’. We are aware that many businesses are going back to HMRC asking for a variation to the agreed arrangement; quite often because there are changing circumstances or defaults. HMRC are not always willing to renegotiate and, following this hardening by HMRC and other creditor groups, we have recently seen the following:
1. Not enough attention spent on the original proposal and cash flows at the outset
2. No formal monitoring of the situation
3. A lack of appreciation that banking and financial arrangements would be, or have been, broken as a consequence of the arrangement with creditors (i.e. breaches of the solvency covenants)
4. Management in a real dilemma as to their options going forward
5. Accelerated merger and sales activity
6. Formal insolvencies
7. Pre-packed sales in administrations
8. Desperate measures including serious breaches of invoice discounting arrangements
So what are we getting at?To us it means not trying to cut corners by attempting to solve the challenge yourself. We at CLB Coopers are well placed and have the requisite experience to help you with the challenges that you face; either through the debt advisory team or with help from the sales and merger activity undertaken by David J Travis, Steven Lindsay and others.
Whichever end of the spectrum you may feel you are at – we can help. Why not call and let us advise you?
If you found this article of interest or of assistance to you, feel free to contact our Corporate Recovery and Insolvency partners Mark Getliffe at [email protected] or 0161 245 1000 and Diane Hill at [email protected] or 01204 551100. You may also choose to communicate with your usual contact here at CLB Coopers.
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“My business is my lifeblood... and my financial future.” Whether this statement is fact or expectation it has never been more important to plan and ensure that you survive now and thrive in the future.
Preoccupations with ‘U’ shaped or ‘W’ shaped recessions or ‘dead-cat bounces’ is all very interesting to read about in the broadsheets but business and domestic life must go on.
The recession is dealing a painful blow to many high net worth individual’s plans for an early exit to a comfortable new life. So what should they do? Plan. Planning and implementation is the only way out. Planning is equally applicable to profitable businesses that want to consolidate their market position.
For most of us who are concerned about the increase in income tax rates and where
capital gains tax might be going a consultation with an experienced tax and corporate advisor is very important. There remain opportunities for minimising tax when selling assets and businesses – there are Entrepreneurs’ Relief (CGT at an effective rate of 10% for the first £1m of your accumulated business sales), Business Property Relief and dividing assets with a spouse. Whether you are buying or selling an appreciation of the tax benefits of a deal is vitally important, especially if capital
gains tax rates are increased as anticipated.
For those planning to sell their business the good news is that the trade buyers are coming back into the market. The not so good news is that the frothy prices of 2007 / 2008 are not around and the current market conditions have lowered price expectations and indeed valuations. So the key now is to plan with all the facts. Do you sell for the lower multiples of profit but with the knowledge that tax rates are beneficial?
Plann ng for the futureDeveloping a successful strategy for your business
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Or do you wait for the time when valuations recover but tax rates are likely to be higher? In some countries capital gains tax is in line with income taxes; so with the introduction of 50% income tax, who knows what the Government of the day may propose.
If you are selling a business you will increase your chances of attracting the right purchaser by preparing the business for sale and offering it to the market place in the right way. The essential ingredient to the mix is specialist corporate finance advice, combined with good tax planning.
Any seller should undertake careful pre-sale grooming and planning with their advisors. In order to assist in the sales process you should already have covered off all the areas where the buyer will need comfort in order to minimise the opportunities for the buyer having reason to chip at the price.
Equally if you are looking to acquire, by drawing on our expertise, we will assist you in structuring a deal that on the face of it may appear low to a seller but with an informed presentation may well be
acceptable. Being in control of the process and clearly understanding the pressure points of a sale and purchase process is essential, especially in today’s difficult market conditions.
So what’s the message? Start considering your plan now and obtain professional advice as soon as possible so that you can make a fully informed decision. Our corporate finance team supported by our extensive tax capability will give you all the facts and figures you need, complemented with our usual sound commercial advice.
Contact David J Travis on 0161 245 1000 or email [email protected] let us help you either sell or buy a business.
Do you qualify for R&D tax credits?
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Research and Development (R&D) tax credits were introduced in 2000 and operates by way of enhancing the allowable expenditure for corporation tax purposes (therefore reducing the taxable profit) or, in a loss making situation, obtaining a refund from HMRC. This latter relief is only available to small and medium-sized enterprises (SMEs).
A successful R&D claim can significantly reduce a company’s tax liability or provide a vital boost to cash-flow if the company is loss making and the tax credit is claimed. Since the introduction of R&D tax credits, HMRC have continued to make the tax relief more generous and many qualifying companies are still missing out on savings of tax by not making the appropriate claim.
The SME scheme will enable you to deduct 175% of the
amount of R&D expenditure in computing your taxable profits. In the large company scheme the deduction is restricted to 130% of the R&D expenditure.
To qualify for R&D tax credits:
l Only a company may claim the relief
l The expenditure on R&D must be relevant to the company’s trade
l The expenditure must not be capital expenditure (although enhanced allowances are available)
l The expenditure must be allowable as a deduction in computing the profit of the period
l The minimum spend per year must be £10,000
If you have received ‘notified state aid’ for a specific R&D project then relief will be denied in full; likewise if the expenditure
has been subsidised or similar. In order to secure the claim we will need to compile a brief report on the nature of the R&D undertaken which should demonstrate that a project seeks to achieve an advance in science or technology. In particular, we must demonstrate:
l The scientific or technological advance
l The scientific or technological uncertainties involved in the project
l How and when the uncertainties were overcome
l The particular expertise required by the person / team undertaking the R&D
The expenditure incurred can then be quantified R&D. This will include: staffing costs (salary, national insurance, pension costs etc) and consumable stores (power, lab equipment etc).
We have tax specialists across the North West in Manchester, Bolton and Lancaster with extensive experience in securing R&D relief for clients. Contact your local office to
arrange a meeting to discuss how R&D can work for you. Call Tax Partner Ian Smethurst on 01204 551100 or email [email protected] to discuss your options.
From 6 April 2010 the rate of income tax for those earning more than £150,000 pa is increasing from 40% to 50% – a 25% increase! If this isn’t bad enough, for those earning between £100,000 and £113,000 the effective tax rate is actually 60% as personal allowances are withdrawn at these salary levels.
The effective tax rate on dividends above £150,000 is also increasing from 25% to 36.11%, representing a 44.4% hike in rates. So are there any ways to avoid this or even take advantage?
The above are just a few strategies to consider, and if you would like to discuss tax efficient cash extraction further, please contact Tax Partner Alex White on 0161 245 1000 or email [email protected]
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1. Bring forward remuneration / dividend payments
You could consider paying next year’s salary / bonus / dividend before 6 April 2010. This crystallises tax at the current rates rather than the higher levels. If the business cannot afford the cash outlay the funds extracted can be lent back to the company. Interest could be charged to the company to supplement future income whilst avoiding employer’s National Insurance.
2. Equalise remuneration
If you have a family business there is scope to realign the reward structure between husband and wife to take one spouse out of the £150,000 bracket.
3. Sole traders and partnerships
You may want to consider deferring expenditure until after 6 April 2010 to obtain relief at 50% rather than 40%. Alternatively, consider incorporation to crystallise a capital gain on goodwill taxable at 10% or 18% – then take a reduced salary /dividend in future.
Take cash now and save 10% tax!
Are you ready for the new 50% tax rate?
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VAT increase looks set for end of DecemberTreasury plans to increase the rate of VAT to 17.5% on 1 January 2010 appear certain to go ahead.
Although business groups have been lobbying the Chancellor, either to extend the current reduced rate of 15 % or to choose another less busy trading date on which to switch to the old standard rate, it has been reported that Alistair Darling has confirmed that VAT will rise as planned at midnight on New Year’s Eve.
For some time there has been consultation concerning cross-border supplies of goods and services; how they can be simplified and how potential fraud can be better monitored and prevented. A series of provisions, announced over four Budget Notices (74-77), addressed these issues and clarified the changes due from 1 January 2010.
Place of supply of servicesUK businesses will have to account for VAT via the reverse charge mechanism on most services received from overseas suppliers. The changes will be phased in on 1 January 2010, 2011 and 2013.
These changes will affect those services supplied to business customers which currently are subject to VAT in the supplier’s country as well as on services which are judged to be supplied in the country in which they are performed. In essence, this means that VAT will no longer be charged by suppliers of these services to business customers but will instead be accounted for by business customers as a reverse charge in their member state.
Time of supply rulesFrom 1 January 2010 there will be a change to the tax point for UK businesses buying in services from overseas. VAT is currently due when the services are paid
Cross-border VAT changes from 2010for. However, from that date the tax point of a supply will be when a service is ‘performed.’ This means that the tax point of a single supply of services will be at completion of the service unless an earlier tax point has been created by receipt of payment beforehand. The tax point of a continuous supply of services will be at the end of each billing or payment period or on payment received where this is earlier. In reality there will be no impact upon your cashflow as VAT will be paid over and claimed back on the same VAT return under the reverse charge mechanism.
EC sales listsFrom 1 January 2010 UK businesses supplying services to customers belonging overseas and who are required to account for VAT in their country via the reverse charge mechanism must include such services on their EC Sales Lists (ECSLs), currently only applicable to intra-community supplies of goods. Businesses will only have 14 days (paper version) or 21 days (electronic) to file ECSLs rather than the current six weeks. HMRC may require monthly ECSLs where values exceed £70,000.
Refunds of VAT incurred in other member statesThe final changes in this category, to be implemented from 1
January 2010, affect refunds of foreign VAT. Paper claims to overseas authorities will go and be replaced by electronic claims to the VAT authorities in the country in which the claimant is established. For example, UK businesses will file an electronic claim to HM Revenue and Customs. Other changes relating to deadlines for making and paying claims will also be implemented.
For more information about how this change may affect you or about optional change of rate rules and anti-forestalling legislation or if you would like to discuss the potential impact the changes to
cross-border transactions may have upon your business contact Janice Rozario on 0161 245 1048 or email [email protected]
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Goodbye snail-mail
...hello SDE
A green future for us all...
We couldn’t live without email these days, but sometimes files and documents can be too big to send, get caught in spam filters or are simply too confidential to risk being intercepted. With the integrity of data we share in mind, we have created a solution that allows you to upload large or sensitive documents to the CLB Coopers team and vice versa in a fast, safe and environmentally friendly way.
So what is the CLB Coopers Secure Document Exchange? The Secure Document Exchange (SDE) is an online service that allows you to store documents in a secure environment. The service allows you to upload, store, download and edit documents on a secure server. Its user friendly interface offers you a convenient, no hassle approach to transferring data with us that can save you valuable time and effort.
What are the key features? l Use any electronic file format l Industry standard secure encryption l Full virus checking l 24 / 7 access to valuable
information l Send and receive data
instantaneously
How do I get access to the service? If you would like to utilise this service you must be a registered user on our website. If you would like to use the SDE service visit our client only area at www.clbcoopers.co.uk – why not start today!
We want to share some good news with you. CLB Coopers have been working with Emerge, one of the original pioneers of waste recycling in Manchester, to reduce the amount of waste we send to landfill to protect the environment for future generations in line with our corporate social responsibility.
In just 12 months our Manchester office has recycled 4.4 tonnes of recyclable waste including paper, plastic bottles and cardboard.
NEW free
online service
CLB Coopers are part of the Government’s
Ride2Work programme
David CliftAudit and Corporate Finance [email protected]
Steven LindsayCorporate Finance [email protected]
Ian SmethurstTax [email protected]
Alex WhiteTax [email protected]
Tony WhitewayOffice Managing [email protected]
David J TravisManaging [email protected]
Diane HillCorporate Recovery and Insolvency [email protected]
Mark WorsleyCorporate Finance and Office Managing [email protected]
Mike GarrettAudit [email protected]
Doug ChadwickTax [email protected]
Manchester
Locations and Partners
Lancaster
Bolton Laurel House 173 Chorley New Road Bolton BL1 4QZ Tel: 01204 551100
Fleet House New Road Lancaster LA1 1EZ Tel: 01524 541200
Century House 11 St Peter’s Square Manchester M2 3DN Tel: 0161 245 1000
www.clbcoopers.co.uk12
Mark GetliffeCorporate Recovery and Insolvency [email protected]