Category: Tax

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UK Telecoms Industry Boasts Fastest Growing R&D Spend Of Any Sector

telecoms

UK Telecoms Industry Boasts Fastest Growing R&D Spend Of Any Sector

The telecoms industry is the UK’s fastest growing sector when it comes to spending on R&D, the latest ONS data has revealed.
Telecoms businesses increased their spending on research and development by £192m to £947m, according to the latest statistics for 2018 which were released recently.

This was a rise of 25.4%, taking it to a four-year high. However, the sector is still some way off its all-time high of £1.5bn set in 2007, analysis by R&D tax relief specialist Catax shows.

Total R&D spending by telecoms firms totalled £755m in 2017 and £797m in 2016.

The amount that UK businesses across all sectors have invested in R&D continues to grow, rising £1.4bn to £25bn in 2018 — up 5.8%. Manufacturing was associated with £16.3bn of R&D spending, up 4.7%, but pharmaceuticals remained the biggest product group with £4.5bn of R&D spending, up 3.3%.

The number of staff employed by UK businesses also continued to grow, rising 7.3% annually to exceed 250,000 full-time equivalents for the first time.

Mark Tighe, chief executive of R&D tax relief specialists Catax, said: “The telecoms industry is extremely important to the UK strategically and it is reassuring to see such growth in investment.

“There is still some way to go if this investment is to recover to levels seen before the financial crash, however, and it is vital this happens if Britain is to continue to be a key technological player on the world stage.

“More broadly, this is the second full year that Brexit Britain has shrugged off the political poison after the EU referendum and posted great gains in terms of R&D investment, running head and shoulders above the long-term average.

“For the first time in history a quarter of a million people nationwide are engaged full time in keeping the UK at the cutting edge. This is going to make a huge difference to Britain’s prospects outside the EU.

“The rate at which UK businesses are adding R&D staff to the workforce remains impressive, virtually matching the previous year with a rise of 7.3%.”

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Corporate TaxTax

UK engineering companies are potentially missing out on £10 billion of R&D funding each year

r&d

UK engineering companies are potentially missing out on £10 billion of R&D funding each year

 

Engineering companies in the UK are potentially missing out on over £10 billion of R&D funding each year, new research has revealed.

The study, commissioned by innovation specialists MPA for Advanced Engineering 2019, found that one in five (21%) innovation active engineering firms are not taking advantage of the government’s R&D Tax Credit scheme, which allows companies to claim back up to 33p for every £1 spent on R&D activity.(1)

On average, engineering companies invest £386,000 a year on R&D activity, meaning they are potentially able to claim £100,360 in funding.(2) With over 100,000 UK engineering firms not claiming, despite describing their company as innovation active, a staggering £10.2 billion is going unclaimed each year.(3)

Reasons for not claiming the funding vary, but the most common answer given by engineers is that they don’t believe their companies are eligible (10%).

However, the research revealed that many engineering companies probably qualify without them realising. Some examples of indicative qualifying activities are, if your company develops new processes to improve efficiency, quality or performance; overcome unplanned technical difficulties or create bespoke solutions for clients.

Two-thirds (67%) of workers think that their firms are ‘innovation active’, which is the most accurate indicator that a company is eligible for the R&D Tax Credit scheme. Despite this, only a third (37%) say that their companies claim the available funding.

Another barrier blocking engineers from claiming is a lack of awareness about the initiative. Nearly a quarter (24%) of the surveyed engineers who aren’t claiming admitted that they didn’t even know that the scheme exists. Even among those who think they are innovation active, one in fourteen (7%) said that they were completely unaware of R&D tax credits.

While many are yet to take advantage of the scheme, engineering companies in the UK are planning on investing heavily in research and development. Over the next year, over one in five (22%) businesses in the industry are planning on spending over £1 million on innovative projects.

Nigel Urquhart, Senior Technical Analyst at MPA, said: “Engineering companies in the UK are respected all over the world for their quality and innovation, but a worryingly low number of them are claiming the R&D funding they are entitled to.

“Our research has highlighted that more work needs to be done to raise awareness of the R&D Tax Credit scheme, as these innovative companies could save themselves hundreds of thousands of pounds. This money could then be reinvested to fund further innovation, which would ensure UK engineering stays at the forefront of the industry.”

To see whether your company is eligible for the R&D Tax Credit scheme, visit: https://mpa.co.uk/services/rd-tax-credits/

[1] Survey of 250 UK engineers conducted by The Engineer on behalf of MPA in September 2019

[2] R&D tax credits calculator: https://mpa.co.uk/services/rd-tax-credits/

[3] Office for National Statistics: ‘Engineering Industry in the UK’ (December 2018) – there are 721,940 active engineering enterprises in the UK. 485,143 (67%) of these are innovation active. 101,880 (21%) of these innovation active companies are not claiming R&D funding: //www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/adhocs/009383engineeringindustryintheuk

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ArticlesTax

Bras, rum and crisps – just some of the things the government has given tax relief on

crisps

Bras, rum and crisps – just some of the things the government has given tax relief on

 

Organisations of all shapes and sizes can benefit from R&D tax credit, providing tax relief on research and development costs and while you might think the work you’re doing doesn’t qualify, R&D tax credit specialist RIFT Research and Development Ltd has released some of the stranger cases they’ve worked on to highlight just how much of the UK’s output could qualify.

Drone technology for a humanitarian crisis

 

One engineering company set out to address the issue that 40% of vaccinations expire while still in the warehouses before they can be delivered and administered to those in need.

They set out to use drones to deliver medicine to remote regions in order to save money and lives and in doing so, found that the technology required was advanced, needing to include links with existing response solutions, ground controlled computers, autopilots and aerial surveillance.

The project went from a conceptual idea to a built and tested prototype and RIFT identified over £104,000 worth of qualify R&D costs over two claims in two years.

Plus-sized lingerie

One company that qualified for tax relief designs and manufactures plus size lingerie and swimwear, starting at bra size 36D, with the aim to flatter, accentuate and celebrate natural curves.

The founder used to struggle to find larger sized underwear and swimwear that offered the same boudoir appeal to smaller sized undergarments, so they brought garments to market that used high quality materials such as lace, soft satins and chiffon.
The company engaged in research & development to produce high quality, durable, comfortable and supportive bras that come in a range of materials, patterns and sizes.

RIFT identified £55,000 worth of eligible costs over two financial years that qualified for R&D Tax credit.

Guess who – facial recognition technology

The firm in question developed facial recognition software which better identifies forgeries.

The company collated a dataset of copied documents, including photocopied, manipulated, screen modified and superimposed examples.

These were combined with professionally forged documents that had been legitimately acquired to test out the technical uncertainties of the new detection solutions they developed. 

The systems were able to detect real identification documents and flag fakes. They can also verify that the photo within the ID matches the person claiming to own the ID.

RIFT identified over £1.07m of qualifying R&D expenditure in one financial year, even though many of the technologies were still at the prototype stage when the claim was submitted. 

Natural crisp flavours

The company produces crisps using locally sourced ingredients from the South of England which are hand-cooked and free from artificial ingredients. 

The manufacturer identified that few companies exist that make unique flavours of crisps using locally sourced ingredients, so it wanted to experiment with new flavours.  

Through a trial and error process, new ways of flavouring were found and tested with sample groups. 

Technical advances were made and technical uncertainties were resolved by the company with RIFT identifying £101,000 worth of eligible costs across two financial years that qualified for R&D Tax credit. 

Making traditional luggage using new methods

A 200-year-old brand used by Royalty and famous explorers worked on numerous projects to combine Victorian engineering with the latest technology, materials and processes.

The company collaborated with the most prestigious fashion houses and brands to make technologically advanced pieces while retaining that traditional feel.
RIFT identified over £1.037m worth of qualifying R&D costs over three claims covering four financial years.

Boutique Rum

Alternative rum flavours are increasing in popularity and demand, such as spices or coconut.

However, there were no established, open-sourced recipes, which meant that distilleries/fermenters had to develop their own by combining flavours and identifying the correct ingredient quantities, blends and alcohol levels.

The firm in question decided to develop a rum base which would have high quality coffee infused into its 5 year old golden rum.

After various tests and alterations to the recipe following feedback from bartenders and members of the public, the company increased the alcohol and flavour strength to produce a coffee rum liqueur that can be drunk straight or used in a cocktail.

RIFT identified £60,000 worth of eligible costs across two financial years that qualified for a R&D Tax credit.

Technical advances were made and technical uncertainties were resolved by the company in producing a cocktail in a matter of seconds instead of minutes.

Head of RIFT Research and Development Limited, Sarah Collins commented:

“Even though the R&D claim process was launched nearly 20 years ago, the number of companies failing to claim back R&D tax credit for their work is huge and this is largely due to nothing more than the fact they didn’t realise they could claim, or they had been incorrectly advised otherwise.

But as these examples show, there are a whole host of unconventional and wonderful things that qualify for R&D tax credits and so it’s always well worth looking into.”

R&D tax relief
Corporate TaxRegulationTax

Manufacturers top the R&D tax relief table – is your sector lagging behind?

R&D tax relief

Manufacturers top the R&D tax relief table - is your sector lagging behind?

Manufacturing firms claimed £1.25bn using R&D tax relief in the 2017-18 financial year, more than any other industry sector, a study from R&D tax credit experts, RIFT Research and Development reveals.

Manufacturing firms also made the highest number of claims over the period, at 11,925.

The R&D tax relief scheme is effectively Corporation Tax relief that can reduce a company’s tax bill and R&D specialists, RIFT, have dissected the latest industry data. This shows which sectors are submitting the most claims, the sectors being awarded the most in successful claims, and those that are bringing home the largest sums financially with just a single claim.

Other major users of R&D tax relief

Professional, Scientific & Technical firms came in second by amount, claiming £1.02bn annually. Behind that sector was Information & Communication (£820m), Wholesale & Retail Trade, Repairs (£235m) and Financial & Insurance firms (£215m). The smallest amounts claimed were from firms in Accommodation & Food (£5m), Real Estate (£10m), and Electricity, Gas, Steam and Air Conditioning (£10m).

Information & Communications rank high on number of claims

Information & Communication firms made 11,635 claims over the period, the second highest behind Manufacturing. Professional, Scientific & Technical firms were also responsible for 9,545 claims. There were only 125 claims for the Electricity, Gas, Steam and Air Conditioning sector, while there were just 215 claims by Real Estate firms. 

Mining & Quarrying dominate high value claims

The Mining & Quarrying sector has by far the largest average claim amount, at £1.16bn. However, despite the extremely high value, there were only 95 claims over the course of the year in that sector.

Other high value sectors per average claim were Financial & Insurance firms (£232,400), while third on the list was Arts, Entertainment & Recreation (£157,900). Once again Accommodation & Food was the smallest sector regarding claims (£21,700), while another comparatively low value sector was Wholesale & Retail Trade, Repairs (£44,000).

Head of RIFT Research and Development Limited, Sarah Collins commented:

“It’s been interesting to see how the dynamics of the research and development landscape have changed, as more and more companies from a wide variety of sectors have started to utilise the scheme.

“Of course, a sector like manufacturing is likely to provide more regular opportunities to further develop the practices being used through R&D and so it’s no surprise that it leads the way for both the total amount claimed and the number of claims. However, when it comes to the value of the claim, it can very much be a case of quality over quantity, with some of the less prolific sectors for overall claims contributing with some of the highest values of R&D tax relief.”

Sector League Table - £ amount claimed
Sector League Table - Number of claims
Ranking League Table - average £ per claim
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FundsRegulationTaxWealth Management

Boom or bust? Brexit’s impact on innovation and R&D

gdp

Boom or bust? Brexit’s impact on innovation and R&D

 

Brexit will undoubtedly affect life in the UK in several ways. The nature and extent of its impact, however, is anyone’s guess. Regarding research and innovation, on the surface not much should change. The R&D Tax Credit Scheme is a government initiative and while it is subject to European Union rules, ultimately the money is provided by HMRC, so the amount of funding available for creative pursuits should not be affected.

But Brexit will likely alter the entire business landscape for UK companies and these wider changes may indirectly affect the state of play for those looking to innovate.

Here innovation funding specialist MPA, which is exhibiting at Advanced Engineering 2019, looks at the implications of Brexit on innovation and R&D in the UK, and whether the current political uncertainty will actually give way to a more prosperous environment for businesses.

Funding freedom

According to the latest figures from the Office for National Statistics, UK spending on R&D rose by £1.6 billion in 2017 to £34.8 billion, placing it 11th in the EU for R&D expenditure as a percentage of GDP.

While such figures are impressive, with an average of £527 spent for each person in the UK, the spending is somewhat restricted by EU regulations. R&D tax credits are classed as ‘state aid’ by the EU and as such there are currently limits on how much the government can hand out to companies.

Once the UK leaves the union, this cap is removed, opening the door to higher value handouts and less strict qualification criteria. Such a move would be welcomed by SMEs across the country and would signal to the world that the UK is strongly encouraging innovation. Plans to increase funding are already in place, with the government’s long term industrial strategy aiming to raise R&D investment to 2.4% of GDP by 2027.

There’s widespread anxiety about the impact of Brexit on British industry and the government faces significant pressure to provide a boost for the economy. Investment in innovation would be a clear statement that the country is still thriving despite the political overhaul.

With the government potentially looking to reallocate some of the money they currently send across to Brussels, there could be funds available for such action.

Regardless of the nature of the UK’s trading relationship with the EU post-Brexit, innovation is always going to be vital for businesses to stand out and thrive in competitive industry landscapes. If trade deals put UK companies at a disadvantage on the world stage, the need to be creative and forward-thinking increases tremendously.

International collaboration

While international funding for UK research has fallen in recent years,from £5.6 billion in 2014 to £5 billion in 2017, it still comprises 14% of all investment in innovation. But it’s not just the financial connection to Europe that UK companies will have to cope without after Brexit, but the level of continental collaboration currently in operation at universities and research centres across the country.

UK industry and innovation is revered across the globe, with our institutions producing world-leading work in every sector. Such breakthroughs are only possible by bringing together the best people from across both Europe and further afield. In fact, in the decade prior to the 2016 referendum, 50% of all UK research publicationsinvolved a co-author from overseas. Moving forward, Brexit may make it more difficult for businesses to recruit staff from overseas and make cross-country projects rather impractical, if not impossible. There is talk of plans to only allow immigrants who earn over £30,000 to stay in the country and this could make it difficult for bodies to continue hiring skilled international research assistants and graduates as salaries for these jobs are generally below the threshold.

Britain’s booming tech industry has given the country potential to dominate and grow in IT and many other sectors. Mark Sewell, CIO of Microsoft recruitment partner Curo Talent, explains that for the many industries developing IT infrastructure, such as in financial services, there is concern that there may not be enough IT talent available to match increased demand. The average age of the IT workforce is increasing, and Britain’s education system is not producing an adequate number of skilled workers to replace these employees once they retire. This is exacerbated by Brexit and its restriction on access to talented EU-workers. To continue this development, businesses need IT workers with the skills to deploy the latest technology, unfortunately this talent pool may become limited.

Such barriers may force businesses to seek ventures elsewhere. Even British companies might start to launch their innovative operations overseas, targeting countries which have both good R&D incentives and simpler immigration policies, allowing multi-national teams to work without obstacles. Asian nations might be among those that benefit, with China and South Korea as potential suitors. In recent years, South Korea has been one of the world’s biggest investors in R&D and UK businesses could cash in on the country’s commitment to progress.

Uncertain fortunes

As with most aspects of Brexit, no-one really knows how the UK leaving the EU will impact on homegrown innovation. While some relevant policies will remain unchanged, such as the general R&D claim process, there are wider-reaching implications which could affect British researchers.

The UK has an excellent reputation for innovation and this could prove significant. If our economy suffers as a result of Brexit, the value of the pound against other currencies will fall. As such, global businesses may see British companies as attractive investments, as their quality services and projects will suddenly be available for smaller sums. This could potentially fill the void left by current EU funding.

R&D tax credits and Patent Box relief will play a crucial role in establishing the UK as a creative force post-Brexit. Once EU funding for projects is removed, the importance of the domestic HMRC initiative will amplify tremendously, potentially causing a rapid increase in applications.

Continuing and improving the financial incentives for businesses to spend time on R&D will ensure that the country continues to be at the forefront of innovation. MPA’s guidance on the R&D Tax Credit Scheme and Patent Box relief will help you see whether your company qualifies for the initiative.

MPA is exhibiting at Advanced Engineering 2019 and can be found at stand C14 in the Automotive Engineering section.

R&D
ArticlesCapital Markets (stocks and bonds)Corporate Finance and M&A/DealsTaxWealth Management

Meet the company recouping hundreds of thousands for UK business in R&D tax relief

R&D

Meet the company recouping hundreds of thousands for UK business in R&D tax relief

 

While growth in R&D tax relief claims has increased by 35% annually since inception in 2001 to over £4bn last year, and has already returned £26bn in total tax relief to businesses across the nation, the scheme is yet to be fully utilised by UK business according to R&D tax credit specialists RIFT Research and Development Ltd.

RIFT secures each client an average of more than £60,000 in tax relief due to R&D across sectors such as construction, manufacturing, agri-foods, ICT, advanced engineering, business and finance, mining and even education, but believe many are still failing to take advantage of the financial benefits. 

Introduced by the Government, the scheme is almost two decades old and encourages scientific and technological innovation across a plethora of UK business sectors. 

 

What is it?

It’s essentially Corporation Tax relief that when utilised, could reduce your company’s tax bill and in some cases, it can even result in you receiving payable tax credits.  

A company can qualify for R&D relief when they carry out research and development within their respective sector with the intention of advancing the overall knowledge or capabilities of science and technology within that field.  

 

R&D tax relief schemes

There are currently two R&D tax relief schemes in operation although the most beneficial is that aimed at SMEs which considers companies with a headcount of less than 500, a turnover of £86.3m or a balance sheet total below £74.3m – learn more.

If you want to see if your company qualifies and the types of costs you can reclaim, RIFT can also help you – learn more.

 

R&D sector success stories

RIFT has worked with countless companies who weren’t just unaware of R&D tax relief but had been incorrectly told by their accountants that they didn’t qualify.   

Here are some of the highest value claims.

Automotive: RIFT worked with an automotive industry tool manufacturer and identified £900,000 worth of qualifying costs, of which, the company was able to recoup £180,000 worth of previous costs.

Construction: RIFT worked with a leading construction company and identified £2m worth of qualifying costs for ongoing innovation across the entire business. Their accountant had identified just £50,000 worth of qualifying costs relating only to some new software they had developed and failed to recognise the gravity of the work they were doing within the sector. 

Architecture: Working with a private limited company practice within the architecture space, RIFT identified £1,000,000 worth of qualifying costs per year, after their accountant had told them their activities didn’t qualify as R&D.

Software: Thanks to RIFT, a client developing software was able to claim back a huge £750,000 from HMRC after £2.3m in qualifying costs were identified.

 
Head of RIFT Research and Development Limited, Sarah Collins commented:  

“Across the UK we have such a wealth of great businesses driving their respective sectors forward through research and development and it’s only right that they should be recognised in one form or another for doing so.  

However, time and time again, we see companies who are really leading the charge but are failing to maximise the return on their efforts by neglecting R&D tax relief. Some aren’t aware of the scheme full stop, while some are, but just didn’t realise that the innovative work they’re carrying out qualifies.  

Particularly now, while many SMEs are struggling with the potential implications of leaving the EU and the reductions in funding this might bring, R&D tax relief provides a very real, Brexit proof opportunity to maximise financial viability.”

HMRC
Corporate TaxTax

Leyton UK welcomes increase in R&D funding, but urges ‘further and faster action’

HMRC

Leyton UK welcomes increase in R&D funding, but urges ‘further and faster action’ by Government

 

Leyton UK, the country’s leading innovation funding consultancy, has welcomed the increase in R&D tax credit claims, announced last week by HMRC, but urged the Government to go further faster and to increase awareness and uptake of the scheme to ensure the UK keeps pace with other economies. R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.

The announcement by HMRC has revealed that there have been 48,635 R&D tax credit claims for 2017-18, of which 42,075 are in the SME R&D scheme, corresponding to £31.3bn of R&D expenditure. This is expected to rise and HMRC has now revealed that claims for the last complete year, 2016/17 indicate an overall increase of 20% from 2015-16. The increase was primarily driven by a rise in the number of SME claims, which totalled 45,045 in 2016-17, an increase of 22% from 2015-16.

Leyton highlights that the take up of claims from sector to sector and across the country varies. The Government has an ambitious target of 2.4% investment in R&D overall by 2027. The most recent ONS figures however revealed the UK’s investment to be just 1.69% of national GDP, well below the European average of 2.07%. This suggests far bigger increases in R&D investment will be required to come close to meeting this ambition. The need to focus on investment in innovation is clear and Prime Minister Boris Johnson promised to ‘double down’ on R&D investment in a recent speech at the Manchester Science and Industry Museum.

According to Leyton UK MD William Garvey: “The R&D tax incentive has become well established in the UK and we are seeing an encouraging take up as businesses realise the full scope of what they can claim. However, if the Government wants to realise its goal to ‘double down on R&D’ there needs to be better education and communication for SMEs as we have found awareness of the scheme varies from sector to sector and across the country. We would also suggest further financial incentive. The UK is blessed with a combination of creativity and technical brilliance that are the foundations for success in the future. To support innovation post-Brexit, Government will need to continue to invest.”

Leyton UK has witnessed impressive growth on the back of increasing awareness of the scheme, recently revealingannual revenue growth of 50% for the financial year 2018/2019, its most successful year in its 10-year trading history.

Unexpected Tax
Tax

Businesses not ready for contractor tax upheaval

Employers are largely unprepared for changes to off-payroll working in the private sector, which are due to come into effect in April 2020. That is according to new research from recruitment trade body, the Association of Professional Staffing Companies (APSCo).

The new rules mean that changes to IR35 legislation, which were introduced in the public sector in April 2017, will be extended to medium and large private sector companies. From next year, businesses engaging independent workers will become responsible for setting the tax status of these individuals. As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual.

A survey of the trade association’s membership revealed that fewer than half (39%) of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes. In addition, just 12% said the majority of their clients are actively preparing for the updated legislation.

When asked if the organisations they recruit into are expecting to pay more for contractors after the changes are implemented, just 10% said ‘yes’, 21% said ‘no’ with the remaining 69% ‘not sure’. This suggests that many are unaware of the wider potential consequences of the reform.

Previous research from APSCo following changes to off-payroll working in the public sector found that 45% of professional recruitment companies witnessed the costs of resourcing contractors increasing after the new rules were introduced. Of these, 46% reported that rate rises were in excess of 15%.

On the findings, Samantha Hurley, Operations Director at (APSCo) and Co-Chair of HMRC’s IR35 Forum, commented:

“Businesses now have just months to get ready for incoming changes to IR35 legislation but, as this research suggests, it seems that many may be ill-prepared. Companies which haven’t already must urgently review their existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage. They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively. If we’ve learnt anything from the public sector roll out, it is that we are now entering a period of significant and arduous change. However, by working with expert recruitment partners, private sector organisations can ensure that they navigate the new landscape with ease.”

ArticlesCorporate Tax

Why Brand Image Is More Important Than Ever

If you want to be a leading business in your market, you must have a reputable brand. Brand awareness is one of the most significant factors that contribute to the successful running of a business. You want to make a great first impression that will last if you have aims to increase your consumer base and become a thought-leader in your sector.

Within this piece, you’ll learn more about what your customers think and what you should be doing in the future. 

Implementing change

For many businesses, uniforms are a main element. You need to ensure that your employees are identifiable to customers and this can only be achieved by designing a uniform that stands out; while catering to each type of individual that works for you (considering religions etc).

Corporate wear represent your business – so you must design them in the correct way and prioritise employee comfort to ensure you receive the best delivery from them.

Above all that, skill development is core to any future success. This should cover ways that they interact with consumers of all kind (race, religion, disability) and offer the most efficient service possible to show that you’re a reputable brand. On top of this training, you should also make your staff aware of any new products or services that you begin to offer so that they can give customers all of the information that they require.

You must consider other areas internally too. Research has suggested that customers will spend up to 13 minutes in a store — so it’s important that you deliver an exceptional service. Queues are notoriously long here in the UK and can be the biggest contributing factor to a customer’s walk-out. To combat this, why not look at queue management software and point of sales service?

What your customers think

More people believe that the in-store experience is more valuable than the product. Although you should also be prioritising the quality of your products (to reduce returns and negative reviews), you should be constantly reviewing your current customer service methods and continually think of ways that you can improve the overall service.

Although you should always be confident with your service delivery, know that there’s always room to improve internal strategies. According to one study, 80% of businesses already believe that they deliver a superior service to their consumers – but only 8% of shoppers actually agree with this statement.

Loyalty is key for retail businesses, and if you offer a quality service from the start, customers will appreciate that.  Not only that, but if you’re looking to increase your consumer acquisition rates – this is a good avenue to go down. 84% of people make a purchase because of a referral; so if your first impression is worthwhile, it could lead to additional business.

Are you prepared to make the changes necessary to ensure success?

 

Sources:

https://www.lucidpress.com/blog/25-branding-stats-facts

https://www.crowdspring.com/blog/successful-branding-for-entrepreneurs-statistics/

https://www.thebalancesmb.com/retail-uniforms-good-or-bad-2889981

 

 

AccountancyValue Chain Management

Guidant Global announces new leadership line-up to drive further international expansion

Guidant Global, part of Impellam Group, is delighted to announce changes to its executive team as the global leader in talent acquisition and managed workforce solutions continues to make rapid progress in expanding and transforming its portfolio across international markets.

Former Senior Vice President of Global Solutions, Karen Gonzalez, is stepping into the newly created role of Chief Sales Officer where she will become immediately responsible for overseeing global sales across North America and in the UK.

For over 25 years, Gonzalez has dedicated her career to helping clients find better ways to manage their workforces. She was appointed to her former role, overseeing the company’s sales organization, in 2015. In her first year she led the sales team to achieve more than $650 million in spend under management, a figure which has now risen to more than $1.5 billion.

Commenting on her expanded remit, Karen Gonzales, Chief Sales Officer at Guidant Global, said:

“I am delighted to be stepping into this new role which is firmly aligned with Guidant Global’s long term objectives through enabling a more holistic approach to international sales strategy. I’m incredibly excited by what can be achieved, both in the short to medium term and as we continue to expand into new geographies.”

Former President of the Americas, Brian Salkowski, meanwhile, has been elevated to Chief Operating Officer where he will lead the implementation of the brand’s strategic vision and its operational delivery.

Dedicated to changing the dynamic of MSP services by championing a better, more forward-thinking approach, Salkowski has 20 years’ experience in the workforce management industry and was a key figure behind the coming together of Bartech and Guidant Group, which marked the inception of Guidant Global in 2018.


Commenting on his new role, Brian Salkowski, Chief Operating Officer at Guidant Global, said:

“I am honored to step into this role at a time when the organization continues to grow its portfolio across international markets. The creation of Guidant Global enabled greater sharing of best practice, best people and operational accountability for the workforce solutions business and through the creation of a Chief Operating Officer role we are able to bring greater synergy across implementation, operations and account management.”

Simon Blockley, CEO of Guidant Global, added:

“I’d like to congratulate both Karen and Brian on their new positions and I have no doubt that both will excel in their new roles. The alignment of our key teams is integral to success in expanding our global reach and this new leadership structure is indicative of our commitment to finding better ways of working in order to meet our organizational objectives.”

digital tax
FinanceFundsTaxTransactional and Investment Banking

The importance of Making Tax Digital to the UK mid-market

The importance of Making Tax Digital to the UK mid-market

Written by Steve Lane, CTO at Access Group

With UK Government’s Making Tax Digital (MTD) deadline less than two months away, the race is on for UK organisations to understand the impact of MTD on their business. MTD could mean a significant shift in operations for some organisations, which means they need to act now in order to get themselves in order for the impending deadline.  


What MTD requires

The Making Tax Digital programme will require UK businesses with annual turnovers above the VAT threshold of £85,000 to keep digital records for VAT and submit their returns digitally. The points-based penalty system means business taxpayers gather points with each late submission of an MTD report, those with multiple businesses must submit tax reports for each of their businesses. To ease the transition process, HMRC is allowing the use of ‘bridging software’ to support the digitised submission and account information retrieval from spreadsheets. However, those without it in place risk not being able to carry out their business as usual.

While all respondents in Access Group’s survey use some type of electronic system for financial management, 96 percent of mid-market businesses still process a portion of their tax returns manually, for example performing off-system calculations, which could be problematic come 1st April if businesses fail to use bridging software to support the digital submission of their VAT returns. Which begs the question, why do some organisations still rely heavily on manually calculating? A large proportion of the finance professionals surveyed explained that they haven’t transitioned to 100 percent digital processes due to a lack of knowledge and training (26 percent) while others said it’s the fact that multiple legal entities are involved in VAT registration (23 percent).


Putting off MTD is no longer an option

Manually entering VAT is inefficient and opens businesses up to human error. Under the new regulations, mid-market businesses could stand to lose not only money in fines, but credibility within their field. Putting off making the necessary technical changes to your business is no longer an option.  

There are certain things that businesses simply cannot afford to ignore, for instance:  


Transformation

Deploying new business software isn’t always an easy decision. Especially when there are multiple ways to ensure your organisation remains compliant with government regulations. Considerations need to be made for either full business software transformation or a single solution update i.e. bridging software, to support. Given the impending deadline, businesses must act now, to ensure they’ve put in place measures that abide by the regulations.


Accreditations

When deciding to begin a digital transformation project, particularly with digitising financial systems, choosing a partner that has the proper government accreditations is vital. Acronyms like ISO or IL are ones to look out for.


Productivity

Digitising financial systems offers the business not only a more efficient, and free of human error way of working, but a more productive way as well. Entrusting admin-heavy tasks to intelligent software can free up time elsewhere to focus on innovation, business development and growth ambitions.

Whilst it’s important that businesses’ financial systems are all set for the 1st of April deadline, to think about Making Tax Digital solely in terms of tax compliance would be to miss the point. It’s the perfect opportunity for UK business’ senior management teams to take a broader perspective – one that turns this regulatory burden to the business’ advantage. The organisations who act now are the ones who will see greater efficiency and productivity, driving both business growth and profitability. It’s good practice to update your operational processes at any moment in time, the MTD deadline provides a good excuse for companies to do just that. Given the pressures coming from Government organisations to digitise and the complexities that go into technology investment, mid-market businesses need to ensure their finance teams’ house is in order to remain compliant and avoid fines in the new era of digital tax.

Cash ManagementMarketsRisk ManagementTax

Top tips when it comes to completing your self-assessment tax return

The time of year is almost upon us where millions will have to complete their self-assessment tax return. Whether that’s as a sole trader, a freelancer, a contractor or running your own businesses, anyone who works for themselves will have to complete their forms before the annual January 31 deadline. For many, it can seem like a daunting task, so is there anything you can do to make the process easier?

 

 

James Foster, Commercial Manager at specialist accountancy provider Nixon Williams

At Nixon Williams, we manage a large client base of small businesses, contractors and self-employed individuals, which means we complete thousands of tax returns each year. This experience has provided us with an in-depth knowledge of the process and how to maximise efficiency when it comes to completing a self-assessment tax return submission.

 

The majority of the working population have their tax deducted at source from the company that they work for, however, anyone that is self-employed has to complete a self-assessment tax return in order to be taxed appropriately on their earnings by Her Majesty’s Revenue and Customs (HMRC).

 

When you start working for yourself, your workload includes everything that you might need to do to make your business a success – from marketing and advertising to admin and ordering stationery. You may find that managing your finances is more complex than you might have expected as you will need to keep records of all the money you spend in the running of your business, as well as how much you earn. Many people decide to use the services of a professional accountancy firm like ours to help them through the process, but some decide to manage everything themselves. Either way, there are some simple things you can do to make the process as straightforward as possible, so here are my top five tips:

 

  • Get organised – compiling all your invoices and receipts ahead of time is the best way to alleviate last minute stress when it comes to self-assessment forms. Ideally, you’ll have kept some form of spreadsheet or an online portal up to date throughout the year of your accounts, and you can use that to finalise your tax return. But if that’s not the case, don’t wait until the very end of January to get started. There are often missing pieces of information you’ll need to track down, so give yourself plenty of time to work through everything. And don’t forget – if it’s your first time completing your Self-Assessment Tax Return, make sure you’re registered with HMRC in time.    

 

  • Know the key dates for completion – If you decide to complete your tax return online then the deadline for this is any point up until the 31st January, whereas a paper tax return needs to arrive with HMRC by the 31st October the previous year. If you haven’t sent an online tax return before then you will need to register and HMRC advises you to do this no less than 20 working days before the deadline.

 

  • Separate your work and personal bank account – a number of self-employed people operate with just one bank account for personal and business use, but this can make it hard to separate out your business expenses from your personal expenses. It’s often easier to identify which costs are related to your business by having a separate business bank account. This will not only help you keep a track of your business expenditure throughout the year, but it will make your life a lot easier when it comes to your tax return.
  • Know the expenses and tax reliefs that you can claim – if you are a sole trader, for example, make sure that you know the expenses that you can claim in your tax return, as there may be some items you might forget about such as business mileage and expenses relating to working from home. It’s also beneficial to know about other tax reliefs that you are entitled to such as personal pension and gift aid payments.

 

  • Tax returns can be complex so use an accountant – having professional support can be really beneficial because an accountant should not only assist with the compliance side of things (i.e. helping you to file your tax return on time) but they will also give you pro-active advice where appropriate.  Tax returns are something most accountancy practices deal with on a daily basis from April to January, alleviating a lot of the financial stress away from clients and helping them to focus on what they do best – making a success of their business.

 

Running your own business and managing the many tasks that come with it can often push your tax return submission to the bottom of your ever-growing pile of work to do – but help is always available from professionals with the right experience and knowledge of the latest legislation. You can find further information on completing your self-assessment tax return on the Nixon Williams website here.

Inheritance Tax
Family OfficesIndirect TaxInheritance TaxReal Estate

Number Of Retail Investors Seeking IHT Advice Set To Rise

Advisers highlight expected increased use of flexible IHT solutions for clients

More than three out of four (78%) financial advisers expect the number of retail investors seeking help for IHT planning to increase over the next three years, according to new research from TIME Investments, which specialises in tax efficient investment solutions.  The findings come as IHT receipts hit a record £5.2 billion in 2017-18 despite the introduction of an additional nil-rate band.

Six out of ten (63%) advisers also predict an increase in the number of IHT products and investment solutions to be launched in the UK.  However, whilst this will offer more choice to investors, it also comes with a health warning – 88% of advisers questioned are concerned that new products will be launched by firms that don’t have the appropriate track record and/or expertise.

Two thirds of advisers predict an increase in the use of Business Relief (formerly known as Business Property Relief) over the next three years to help people reduce their IHT liabilities.  To encourage investors to support UK businesses, the Government allows shares held in qualifying companies that are not listed on any stock exchange and some of those listed on AIM to qualify for Business Relief. This means that once owned for two years, the shares no longer count towards the taxable part of an inheritable estate and are free from inheritance tax at point of death.

The accessibility of Business Relief investments and the range of investment opportunities available help to provide flexibility in IHT planning.  Three quarters of advisers felt that the increasing use of Power of Attorney due to rising dementia rates would contribute to the growth in the use of these flexible IHT solutions.

Henny Dovland, TIME Investments’ IHT expert comments: “The number of families in the UK being caught in the IHT net is increasing.  This represents a significant opportunity for advisers specialising in IHT and intergenerational planning and is reflected in our findings that reveal more specialist products are set to be launched in this market. However, care needs to be taken to ensure any new solutions are fit for purpose.  Our specialist team has a track record of over 22 years in this complex area.”

For further information on TIME Investments and its range of products, please visit www.time-investments.com

tax entitlements
Tax

Tax entitlements you could be missing out on

Discover 5 tax entitlements you could be missing out on!

By Tony Mills, Director, Online Tax Rebates​

Whether you’re a CIS or PAYE worker, you may be surprised at what expenses you can claim back and the money you can save in your pay packet each month.

Here’s a simple guide to what tax relief you could be missing out on and how to claim:

 

  • Professional memberships

Not only can signing up to a professional membership help you move quicker up the career ladder – and get paid more – you may also be due money back on any fees.

If you’re a member of a professional body like the Federation of Master Builders, The Chartered Institute of Building or National Federation of Builders for example and pay the subscription fees yourself, you can make a claim…worth 20 percent to a basic rate taxpayer.

If you have not claimed previously, you may be able to make a claim for the last four years. HMRC usually make any adjustments needed through your tax code for the current tax year. If a claim is made after the end of the tax year, this will be repaid by way of a payable order or bank transfer.

 

  • Capital allowances

 Many contractors are missing out on valuable tax relief due to their lack of knowledge around capital expenditure. This can have a significant impact on finances.

If you’re a builder working under CIS, for anything you purchase for business use – such as equipment, machinery and vehicles – you’re eligible to claim capital expenses.

You can claim an allowance of up to 100 percent in the year of purchase on certain items although cars are restricted to 18 percent per annum in most cases. Assets you owned before you started the business may also be claimed if you now use them for your business.

 

  • Tools & Equipment

 Your tools; where would you be without them? If you have to purchase your own tools, you may be due a tax refund on their cost, as well as money back on the costs of maintenance and replacement.

If you’re a PAYE worker, you can make a claim if the same or similar item is not available from your employer. Whereas if you’re a CIS worker, you can claim all tools as an expense.

 

  • Uniform

If you wear a compulsory branded uniform and/or protective clothing at work or on-site, you could be due a one-off rebate for the upkeep. This can be backdated to the last four tax years and received as a single payment, while any future claims will be paid in wages.

Limits on claims vary by industry but the standard flat rate expense allowance for uniform maintenance is £60 for this tax year, meaning basic-rate taxpayers can claim £12 back and higher-rate payers £24. It only takes a couple of minutes online to check using an online calculator.

 

  • Travel

By trade, you’re unlikely to be working from a fixed address every day. The cost of travelling between home and the site you’re assigned to may be claimed as an expense for tax purposes.

 

A workplace is considered temporary if your contract is below 24 months. If your contract length is uncertain, the workplace will be seen as a temporary workplace until you have been there for 24 months, it would then be considered permanent.

Be sure to keep any travel or fuel receipts to make an expense claim via your employer.

 

  • Finally, stay safe…

Don’t fall victim to fraudsters who are sending fake emails and text messages promising tax rebates.

Never hand out any personal or payment details to companies you haven’t approached personally before or to HMRC who will only ever contact you via post or your employer.

crypto tax
Indirect TaxTax

Understanding your tax obligations in the crypto world

Understanding your tax obligations in the crypto world

By Arianne King, managing partner at London based commercial law firm, Al Bawardi Critchlow

With Bitcoin’s value slipping and reports suggesting that Q1 of 2018 was the worst quarter in its history, it seems the recent wild run on the crypto-scene has come to an end. Yet, digital currencies continue to attract the interest of the governments, investors, commentators and fintech innovators alike.

The reason for this is two-fold. On one hand, the technology that underpins cryptocurrencies – blockchain – holds disruptive potential likened to that of the internet itself. With its transparent, permanent and immutable record keeping, the potential of the technology to secure transactions between multiple parties is hard to argue with.

On the other hand, regulators are increasingly ramping up efforts to establish the legal status of e-money as the technology matures. It is clear that traditional financial institutions and lawmakers plan to get more involved in addressing this and the current lack of regulatory oversight in the UK today.

Mark Carney, Governor of the Bank of England, and others have consistently called for the crypto asset ecosystem to be held to the same standards as the rest of the financial system – and there have been some signs of progress here. Earlier this month, for example, one of the world’s top cryptocurrency exchanges, Coinbase, was granted a licence to operate by the UK’s Financial Conduct Authority (FCA), confirming it had been assessed and met certain anti-money laundering and processing standards, deeming it suitable to acquire a regulated status in the UK.

That said, the way in which cryptocurrency is taxed is fast becoming a burning issue. This is especially the case for current and prospective investors.

 

Understanding your obligations

Worryingly, many investors may not even be aware that they owe tax on their cryptocurrencies today. As in nearly every other aspect of tax, different countries and jurisdictions will have varying guidelines for declaring tax and equally different approaches to tackling evasion. As such, depending on where you are domiciled for tax, you may be breaking the law – or about to.

In the US, tax authorities view the likes of Bitcoin, Ripple and other cryptocurrencies as a form of property, rather than a true currency, and so it may be subject to capital gains tax. Taxpayers are therefore required to declare all cryptocurrency transactions in their annual tax returns, with the applicable tax applied to each deal. Meanwhile, in Germany, Bitcoin is classified like stocks and shares – capital gains tax is applied to profits made within the first year of ownership. After this point, their transaction will fall within the scope of a non-taxable ‘private sale’, exempting them from further taxation.

When it comes to enforcement, however, the US Inland Revenue Service (IRS) takes a much more active role monitoring virtual currencies and managing the infrastructure that enables trading than its European counterparts to date. In February of this year, for example, it assembled a dedicated team of investigators to counter tax evasion in the cryptocurrency industry. It argues that Bitcoin, and others like it, can be used in the same fashion as foreign bank accounts to facilitate tax dodging. It recently compelled Coinbase to send data on 13,000 of its users as part of an investigation of this kind – a move we may see from HMRC here in the UK in the future.

 

Tax in the UK

In Britain, the guidance provided by HMRC about cryptocurrencies is limited to a policy paper from March 2014. That said, while an official framework for cryptocurrency related tax remains forthcoming in the UK, the Treasury’s current regime may still mean that some individual investors are falling foul of compliance with the law as it stands.

Overall, the Revenue looks at the personal circumstances of an individual to inform a decision on whether tax is paid on crypto gains or not. The individual must prove whether they are a hobbyist or a professional investor and they will be taxed accordingly.

First of all, HMRC treats hobbyist traders in the same way that it treats those involved in other speculative activities, like gambling: they are currently exempt from paying tax on gains. This approach is fortunate in that it recognises the inherent volatility of the bitcoin market and means that a personal investor would not be hit with a tax bill for gains subsequently lost because of coin values plummeting.

Alternatively, if HMRC considers that an individual or corporation involved has a professional interest in the industry, then taxes would be payable. This is assessed on a case by case basis so the resulting decision, in this respect, will often be difficult to predict. If liable, profit and loss activity must be reflected in accounts under normal Corporation Tax rules. This is applicable to those involved at all levels of the process – whether trading, mining or operating an exchange and providing supporting services.

 

Where to next?

As with all income and gains generating assets, a tax system for cryptocurrencies will surely emerge – such a system and associated measures would also go some way towards addressing concerns that virtual currencies are still being used to enable fraud, money laundering and finance illicit activities like cybercrime.
The advice is to fully research your situation by contacting HMRC, an accountant or a tax adviser and keeping a full record of any advice given. If it appears that the HMRC are likely to find that your gains are taxable, it would be wise to put aside any gains in a contingency account to cover any tax that might fall due. Despite the decentralised nature of cryptocurrencies and the associated hype about this, they are taxable as financial assets by law in many countries. Ultimately, even in the crypto world, the old adage of  death and taxes still applies.

 

business abroard
Corporate TaxTax

What are the main tax concerns for businesses looking to set up a branch abroad?

The hundreds of different nations across the globe – all with different laws and different tax rules – offer businesses an exciting platform to expand their trade. Financial advisers can look how to best advise their business clients on how to minimise their tax bill, using their knowledge and expertise to identify the best opportunities across the world. Expanding abroad is very expensive as it is but you can save money through an understanding of the tax system.

Challenging economic times mean that companies are looking to save money where they can and reduce their tax payments to stay competitive – especially if they feel that they are paying more tax than is fair.

Tax jurisdictions deliberately attract business by cutting their tax rates

Tax jurisdictions which are struggling economically deliberately cut their corporate tax rate with the pressure to compete and attract more business. Britain is known to be exceptionally ‘high tax’, so it makes financial sense for businesses to look for alternatives-even if they do sometimes go too far!

While companies may look to pay less VAT, they contribute vast amounts to the UK economy in other ways – but they need to stay competitive in order to do so. A huge amount of tax comes from UK businesses, but only a small amount of that is corporation tax. Therefore in its current form, corporate tax is perishing, because a product is no longer made in just one country.

Location, location, location

It is universally acknowledged that companies can minimise their tax bills by setting up branches abroad. For example, Google UK operates in Ireland and Bermuda, taking advantage of the low tax rates and state that they have a responsibility to their shareholders to minimise costs. Google deliberately chose Ireland as its nucleus to coordinate marketing and sales across Europe.

When a business chooses where to locate its distribution and service hubs, headquarters and factories, it makes financial sense to choose a low-tax jurisdiction. Obviously tax is just one of the criteria when a business is looking to set up a branch abroad – they also have to locate near local suppliers and an expert workforce.

It is extremely doubtful that a universal corporate tax law will be implemented across Europe in response to this movement, as this would mean that countries such as Ireland would lose out, no longer able to offer a cheap rate to cut the amount companies must pay on profit thereby no longer attracting business when they desperately need to.

Transfer pricing

Cash-needy governments are looking to crack down on businesses saving tax abroad, but even if a company can’t set up a branch abroad it can still move its taxable profits overseas. For example, the UK part of the business lending money to other branches abroad – this is known as ‘transfer pricing’. Intercompany transactions are of course perfectly legal.

Setting up a branch abroad for the first time

With the knowledge that taxes vary from country to country, the first step is to maximise tax efficiency by finding out what tax you are required to pay in which country.

Planning your move is crucial – your financial advisor will need to look into whether you need to create a permanent establishment abroad and whether it will benefit your business better as a branch or a subsidiary.

Other factors to negotiate or consider include whether you should recruit staff locally, or bring UK staff (UK tax resident or overseas residency) and how that will impact tax you pay. You will need to register for local tax and take into account your foreign currency, banking obligations and repatriation of profits.

These are the main tax concerns which can have significant consequence for your business:

• Payroll tax obligations

Payroll Tax is worked out by your wage total that you pay out per month and is collected in each branch of the business

• The impact of the OECD BEPS programme

The Organisation of Economic Cooperation and Development (OECD) designed a plan known as the BEPS programme, to try to reform the international tax system

• Controlled Foreign Companies legislation

The legislation is designed to prevent low tax jurisdictions benefiting from UK profits

• Withholding taxes

This is a tax deduction in wages, paid directly to the government

• Transfer of Assets Abroad

The Transfer of Assets Abroad (TOAA) prevents UK nationals using foreign transfers to save on tax

• Thin capitalisation

Thin capitalisation is where a business is financially boosted via a high level of debt compared to equity

• Structuring of operations including the foreign branch exemption

UK businesses can apply for profits of their branches abroad to be exempt from UK taxation

• Double tax treaty issues

Bilateral tax treaties alleviate double taxation when it happens – most EU countries have this in place

• Corporate tax residency

HMRC are seeking to maximise tax during this currently unstable economic time

• Operation of the UK R&D and Patent Box tax regimes

Businesses can apply for a lower corporation tax rate for profits made by patented inventions.

There are many key benefits for a business in setting up a branch abroad, including tax savings that can be found in the government incentives of the country you choose to move to.

Differing countries are sure to want to attract your business and a branch abroad offers access to a potentially untapped market, an increase in global brand identity and better business recognition and support in a more encouraging environment.

Seeking expert tax advice will allow you to watch out for the pitfalls and take advantage of the opportunity to expand and grow your business.

UK Passport Holders Should be Liable to pay UK taxes on their Worldwide Income
Corporate TaxTax

UK Passport Holders Should be Liable to pay UK taxes on their Worldwide Income, says CISI

Commenting in the latest edition of The Review, the CISI’s member magazine, CISI CEO Simon Culhane, Chartered FCSI says the recent leak of papers from Panama lawyers Mossack Fonseca, regarding the super-rich sheltering their income, has resulted in adverse public reaction on the issue of fairness and the tax burden.

“But the UK income tax system isn’t fair at the best of times. The top 1% of taxpayers, roughly those who have an income over £150,000, pay almost 30% of the entire income tax burden of £160bn, while the average person pays less than £5,000 a year.

“We could greatly simplify the collection of UK tax, and spread the load more fairly, if we moved away from just operating a residence test when determining whether an individual should pay tax”, says Mr Culhane.

At present it is residency rather than citizenship, which determines whether or not an individual is liable to pay tax on their worldwide earnings.

“We believe that this system should be changed so that anyone who is a UK passport holder is also liable to pay tax on their worldwide income in exactly the same way as US citizens are taxed on their worldwide income, irrespective of where they live. Of course there are double taxation treatments in most countries, so a citizen who is resident outside the US doesn’t pay twice,” says Mr Culhane.

CISI’s CEO says that mandating UK citizenship alongside UK residency as the qualifying factors for the payment of UK taxes means it will no longer matter if someone is in the UK for 16 days, for 90 days or 183 days (all key time periods at present in determining residency).

“It will avoid the nonsense of midnight flights and sub-optimal planning as individuals, usually highly paid and with a high net worth, take steps to ensure they don’t overstay their time in the UK in a given tax year,” he says.

“The citizenship/residency tests would mean those seeking lower tax havens can still do so, and they can run empires and businesses from anywhere in the world – but if they want the benefits and rights of UK citizenship they must accept their responsibilities to pay their fair dues and contribute to the UK Exchequer, “ says Mr Culhane.

ATED - Annual Tax on Enveloped Dwellings
Corporate TaxTax

ATED – Annual Tax on Enveloped Dwellings

James Hamand, Head of Professional Valuations at Douglas & Gordon, has voiced his thoughts on the change.

James has worked in residential valuations for over ten years. Valuing properties worth up to £150m, he advises private individuals and institutional landlords on how to get the best possible results from their holdings and regularly gives expert evidence at tribunal hearings.

He said:

“ATED (Annual Tax on Enveloped Dwellings) was brought in with effect from 1 April 2013 and applies to UK residential properties owned by non-natural persons (i.e. by a company or other investment vehicle). However, from 1 April 2016, it will now also apply to residential properties worth between £500,000 and £1 million.

“As was the case under the old SDLT regime, we are seeing fewer properties transacting at or just above threshold values i.e. a property theoretically worth £505,000 might now sell for £499,999 as owners take the new charges into account.

“This makes taking valuation and legal advice, particularly in the London market, critical if investors are to take a long term view, maximise the value of their portfolios and mitigate future liabilities”.

 

Sturgeon – Tax Powers must be Used for a Purpose
Corporate TaxTax

Sturgeon – Tax Powers must be Used for a Purpose

The First Minister outlined how the Scottish Government has used existing tax powers to good effect. The Small Business Bonus Scheme has helped support small businesses in tough financial times; Land and Building Transactions Tax has made the property market more progressive, and Landfill Tax is being increased to encourage recycling.

Ms Sturgeon also discussed how the proposed new tax powers can be used to complement the existing powers.

Praising the collaborative approach of the Commission on Local Tax Reform, she confirmed that the Scottish Government will announce detailed plans on local taxation next week – which will propose incentives for councils to boost economic growth by assigning them a share of income tax revenues.

The First Minister said:

“Taxation policy is, at heart, inseparable from questions about the sort of society we want to see – the sort of country we want to live in.

“Our approach to taxation recognises the interdependence of greater equality and higher growth; of encouraging enterprise and promoting fairness.

“David Hume’s great friend, Adam Smith, argued that taxes should be certain, convenient, administratively efficient and proportionate to the ability to pay. Those principles underpin the Scottish Government’s approach.

Using local tax reform as an example, Ms Sturgeon added:

“The changes to council tax that we will propose are part of a longer-term plan. In particular, we will discuss with local authorities how we can assign a share of income tax revenue to their funding.

“That means that if councils succeed in boosting economic growth, and consequently income tax receipts, they will share in some of the benefit. And it also means that local government funding will be more broadly based. Income tax, and a more progressive council tax, will both play an important part.

“It’s an approach which goes a long way towards meeting an important concern of the Commission on Local Tax Reform – that income and property-based taxes together would be a better source of revenue than council tax alone.

“It’s a further example of how considering expert evidence can help us to propose a better tax system.”

Revenue Scotland Receives 100
Corporate TaxTax

Revenue Scotland Receives 100,000th tax Return

Scotland’s Deputy First Minister called the occasion– which covers returns for Land and Buildings Transaction Tax (LBTT) and Scottish Landfill Tax received since April 1 – a “pivotal milestone”.

The most recent figures published by Revenue Scotland show that, for residential and non-residential property transactions between 1 April and 31 December 2015, more than £315 million of LBTT was collected.

This means that LBTT revenues remain firmly on track and overall devolved tax revenues are in line with the Scottish Government’s forecast for 2015-16.

Over the same period, more than 40,000 Scottish home buyers have paid less tax than they would have under UK Stamp Duty, while 93 per cent of those who purchased a house for £40,000 or more paid less tax or no tax at all on their house purchase.

Deputy First Minister John Swinney said:

“Revenue Scotland is the first agency collecting solely Scottish taxes in more than 300 years and they have now passed a pivotal milestone.

“Our objective has always been to make sure that first-time buyers have the greatest possible chance to enter the housing market.

“LBTT was one of the first Scottish taxes collected in 300 years, and these figures show that more than 40,000 home buyers have benefitted since it was introduced.

“This means that 93 per cent of home buyers have paid less tax than they would have done under UK Stamp Duty Land Tax, or paid no tax at all.

“I also welcome the recent Bank of Scotland Homemover Review which confirms that the introduction of the Scottish Government’s new land and buildings transaction tax (LBTT) has helped to increase the number of house moves by three per cent last year to reach their highest level since 2008.

“Where we have the freedom to shape a taxation system that is fair and proportionate to the ability to pay, we have created one that is progressive and supports those who most need it.”

Committee Support for new Property tax
Corporate TaxTax

Committee Support for new Property tax

The Land and Buildings Transactions Tax (Amendment) (Scotland) Bill introduces a supplement on purchases of additional residential properties in Scotland (such as buy-to-let properties and second homes) over £40,000. As drafted, the Bill would apply across the board to all relevant purchases above the threshold.

In agreeing to the general principles of the Bill however, the committee has emphasised the need to balance the interests of first time buyers with the needs of those who rent their homes and with the interests of house builders and investors, to protect the supply of new homes. The committee has therefore called for the introduction of a relief on bulk purchases of six properties or more.

The committee also noted concerns about the potential impact on the private rental sector through a reduction in the number of homes available for rent and higher rental costs. The report recommends that it is essential that the Scottish Government closely monitors the impact of the supplement on rent levels especially in areas where rents are already high.

The report also highlights support for a number other reliefs including for registered social landlords and local authorities, and for student accommodation.

Kenneth Gibson MSP, Convener of the Finance Committee, said:

“Whilst the committee is supportive of the Bill’s aim to support first time buyers entry into the property market, there are a number of areas that we wish to see addressed as the Bill progresses through Parliament.

“The committee heard concerns, for instance, about the impact on people who rent, whether through choice or necessity. The Royal Institute of Chartered Surveyors has suggested that the supplement could lead to a rise in rents as additional costs are passed on to tenants. We feel that the support given to first time buyers must not be at the expense of those people who rent their homes.”

The committee’s report also highlights concerns that have been raised by a number of stakeholders about “the limited time that has been made available by the Scottish Government for parliamentary scrutiny of this Bill”. The report’s conclusion acknowledges this and says that it is “essential that the impact of this Bill is closely monitored and that a comprehensive review is carried out once sufficient data is available.”

Mr Gibson, continued:

“Many organisations have commented on the truncated timetable that this legislation has been subject to. I agree that it is far from ideal, however this is a problem that I would expect to occur with greater frequency as the Parliament assumes more powers and the Scottish Government responds to decisions made by the UK Chancellor that impact on Scotland. There is a need for Parliament and Government to develop a process that allows for transparent consultation and scrutiny whilst recognising that it may occasionally be necessary for swift decisions to be taken on tax matters.”

 

UK Taxman Seizes more than £2 Billion from tax Avoidance Scheme Users
Corporate TaxTax

UK Taxman Seizes more than £2 Billion from tax Avoidance Scheme Users

New statistics reveal that HMRC has collected more than £2 billion in disputed tax from tax avoiders, under rules introduced by the government in 2014.

The new Accelerated Payments notices mean that users of tax avoidance schemes pay disputed tax up-front while their tax-affairs are investigated, instead of waiting until they are concluded. Given HMRC wins 80% of cases that go to court, this eliminates the financial advantage that tax avoiders previously enjoyed.

The Financial Secretary to the Treasury, David Gauke, said:

“We will not tolerate tax avoidance and Accelerated Payments has been a real game changer.

“HMRC already wins the vast majority of cases that go to court and now HMRC has taken more than £2 billion from tax-avoiders who would have otherwise benefitted from that cash while they were being investigated.

“It should be absolutely clear to anyone who is tempted by these schemes that tax-avoidance does not pay.”

Jennie Granger, Director General for Enforcement and Compliance, HMRC, added:

“Accelerated Payments continue to turn the tables on individuals looking to avoid paying their fair share of tax. Those who take part in tax avoidance now have to pay up-front and dispute later. It really is time to get out of avoidance – HMRC wins the vast majority of cases that people litigate, with many more settling before litigation.

“HMRC is now issuing over 3,000 Accelerated Payment Notices a month, and has issued over 41,000 notices since Accelerated Payments were introduced. By the end of 2016, HMRC expects to have completed issuing notices, bringing forward over £5 billion in payments for the Exchequer by March 2020.”

EU Engages in Tough Debate on Corporate Tax Practices
Corporate TaxTax

EU Engages in Tough Debate on Corporate Tax Practices

These companies had declined the committee’s first invitation to appear before it, but later changed their minds and accepted its last chance invitation. Of the 13 original invitees, only Fiat Chrysler and Walmart declined the final invitation. The meeting started with a minute of silence for the victims of the Paris terrorist attacks.
Many questions were about transfer pricing practices (money flows within the same company) and how the firms’ representatives felt about the OECD proposals against base erosion and profit shifting (BEPS). MEPs also floated proposals for mandatory country-by-country reporting on profits, taxes and subsidies and for a common consolidated corporate tax base (CCCTB) on which the EU Commission relaunched a consultation in October. Google was asked about its Bermuda subsidiary, and Facebook was asked why it stored its intellectual property rights on the Cayman Islands.

Most companies insisted that their tax practices were legal and pointed to the large numbers of staff they employ in EU member states. Most were unenthusiastic about the idea of country-by-country reporting, especially if these mandatory reports were to be made public, and objected to the administrative burden that they would impose. But they said that a common consolidated corporate tax base (CCCTB) would be welcome if it made the rules more consistent and clear. Several firms also advocated a binding mediation mechanism in the case of tax disputes.

Six-month extension

Prior to the meeting, Parliament’s political group coordinators decided to ask its political leadership, the Conference of Presidents (EP President and political group leaders), to propose prolonging the committee’s mandate by six months. The coordinators feel that they need more time to access and analyse documents and also to monitor legislative initiatives in the corporate taxation field.

Taxing Times to Hold Assets Abroad and for Accidental Evaders
Corporate TaxTax

Taxing Times to Hold Assets Abroad and for Accidental Evaders

 By Kay Aylott

Whilst it has never been acceptable to evade tax, the UK has been allowing people to regularise their affairs with favourable amnesty terms. That toleration is about to change. As has been observed: a ticking time bomb now exists under tax dispensations.

The most generous of these reprieves, the Liechtenstein Disclosure Facility (LDF), ends in December, marking the start of a much tougher regime from Her Majesty’s Revenue & Customs (HMRC).

The LDF has been a valued way for non-compliant individuals to regularise their financial affairs. It is ending several months earlier than originally announced, a sign itself of Government impatience with what is deemed unacceptable avoidance.

It has been a particularly useful device, not least for the Treasury which has recouped more than £1 billion from nearly 6,000 disclosures since it began in 2009.

But the LDF has also been good for individuals looking to get their financial house in order, even generous. Anyone making a disclosure under its terms is only liable for back taxes to 1999, as opposed to the usual 20 years.

The scheme sets a composite rate of 40 per cent for the tax years up to and including 2008/9, with 50 per cent generally applicable thereafter.

The penalty is also relatively low, at 10 per cent of money owed up to an including the tax year 2008/9, with a higher rate for liabilities in subsequent years.

Under the LDF, only a portion of assets need to be held in the Principality of Liechtenstein for those held elsewhere also to be disclosed. There is no risk of prosecution either, unless a crime is evident or a fraud investigation has begun.

Although it will be replaced, no details have been given yet. But nobody is expecting anything as generous.

The Taxman Cometh
Chancellor George Osborne, has made tackling tax avoidance a signature issue throughout his tenure at the Treasury. The political climate also suggests something harsher, with a crack down on offshore tax avoidance a valuable buttress to continuing domestic austerity.

Almost all Osborne Budgets have added something to make ‘aggressive’ avoidance harder, with one HMRC official noting that the first purely Conservative Budget in a generation this summer was no exception, unleashing what he described as a ‘tsunami’ of proposals, including new powers for HMRC.

As if to underline his determination, Mr Osborne, unfettered by coalition politics, also gave the revenue service a further £750 million to spend tackling evasion. The money will be used to triple the number of people who can be investigated, and target offshore trusts.

Against this backdrop, experts believe the penalty rate for what replaces the LDF will be punishing, perhaps as high as 30 per cent; and that the 10 year limit on liability may also disappear. Crucially, there will be no guarantee against prosecution.

The terms of entry are also likely to narrow. For example, it may no longer be possible to use the replacement as a funnel through which to declare a wider portfolio.

If that were not enough incentive for individuals to bring their financial affairs into order, there is more on the horizon.

Further pressure will come from growing co-operation between 94 tax authorities around the developed world. These will share information about people from 2017, making it much harder to find shadows in which to hide assets.

The Accidental Evader
But in fact the process of shining light on hidden wealth begins faster sooner: Data collaboration will begin in earnest with Guernsey, Jersey and the Isle of Man from next year.

The Government has also made clear its intention to make the non-disclosure of overseas assets a criminal offence. There will be no exceptional circumstances allowed.

This raises the risk for some, perhaps beneficiaries of trusts established abroad, that they could be unwitting evaders, unaware that liability always fall on the beneficiary, not the settlor, as far as HMRC is concerned

There are also people who have historic liabilities, but of which they are utterly unaware.

Issues arise when money from offshore trusts filters down through the generations, with understanding of the original trust by those benefiting from it dimmed over time.

It is not just the very rich who face being caught out either. Many offshore trusts were created in the 1970s and 1980s involving relatively modest sums removed abroad to avoid Capital Gains liabilities, perhaps the equivalent to £250,000 today.

Experience also suggests that individuals benefiting from offshore trusts are often unaware of their strict liability to declare, even when they do know about them. Some believe, incorrectly, that a capital distribution, for example, does not incur a tax liability.

They also assume that trustees will have alerted them to any tax issue. But there is no obligation on them to do so, and frequently no expertise on tax matters anyway.

What is often forgotten is that trusts can be highly complex in their structure and require considerable expertise to understand, particularly in relation to tax owed.

No Ifs, No Buts
A further discomforting threat that HMRC has made to encourage people forward with irregularities now is, under the new regime, ‘naming and shaming’ those it investigates and finds in breach.

Furthermore, it intends to be unforgiving about ignorance. Tax advisers will soon be subject to much tougher rules, essentially requiring them to make their clients aware of opportunities to disclose irregularities, and the penalties for failing to do so. The intention is to ensure that nobody can say they were not warned.

When all these steps and undercurrents are taken together it is clear that something quite fundamental is changing if not altogether clearly. Tax avoidance was once understood and applied as the legal counter to tax evasion. That distinction has now blurred.

What began as a moral crusade against ‘aggressive tax avoidance’ after the financial crisis of 2007/8 has become, certainly for those with UK reporting liabilities, an increasingly legal one.

The prospect of greater collaboration between tax authorities worldwide signals that the UK is not alone in its tougher approach. The window of opportunity to deal with difficulties favourably is shutting very fast.

Kay Aylott is Director of Private Client and Trusts at accountancy firm Kreston Reeves

Colombian Corporates: Low Oil Prices Lead to Rising Corporate Taxes
Corporate TaxTax

Colombian Corporates: Low Oil Prices Lead to Rising Corporate Taxes

This pressure could be alleviated if the government gains the ability to expand its tax base. Consumers’ disposable income has been also hit by higher personal income tax rates and inflation pressure caused by the sharp currency depreciation. Increasing corporate exports will not be a short term solution for the woes faced by issuers. Corporates will need time to rebuild export channels following the sharp appreciation of the U.S. dollar against the Colombian peso during 2015.

Fitch revised its previous expectations of GDP growth down to 3.0% in 2015 and 3.5% in 2016. Weakening terms of trade and low oil prices have hurt the economy. Economic growth will continue to depend upon the country’s fourth generation infrastructure projects (4G) and a dynamic construction sector.

The Rating Outlook for Colombian corporates is Stable, despite challenging economic conditions. Most corporates continue to maintain conservative credit profiles despite increasing leverage trends. Refinancing risk remains manageable due to robust liquidity position and access to diverse funding sources.

The full report ‘Colombia Corporates Low Oil Prices Lead to Rising Corporate Taxes’ is available at www.fitchratings.com.

New Inflation Estimates Offer First Look at Impact for Taxpayers in 2016
Corporate TaxTax

New Inflation Estimates Offer First Look at Impact for Taxpayers in 2016

The new information includes estimated ranges for each 2016 tax bracket as well as projections for a growing number of inflation-sensitive tax figures, such as the personal exemption and the standard deduction. Projections are based on the relevant inflation data recently released by the U.S. Department of Labor.

Inflation Adjustments – Background

Since the late 1980s, the U.S. Tax Code has required that federal income tax brackets be adjusted for inflation annually, and inflation adjustments have been inserted into the Internal Revenue Code in recent years with increasing frequency. For example, the Code now requires over 50 other inflation-driven computations to determine deduction, exemption and exclusion amounts in addition to the 40 separate computations needed to inflation-adjust the tax bracket tables each year.

Key Tax Savings, Non-increase Estimates for 2016:

Projections based on the Department of Labor’s inflation figures for the 12-month period between August 31, 2014, and August 31, 2015 suggest most taxpayers will experience modest savings, compared to 2015 tax filings. For example:

Because of the income ranges bracketing the marginal tax rates have increased, a single filer with taxable income of $50,000 should owe $22.50 less next year due to the adjustments to the income tax rate brackets between 2015 and 2016.

A married couple filing jointly with a total taxable income of $100,000 should pay $45 less income taxes in 2016 than they will on the same income for 2015 because of indexing of their tax bracket for 2016.

The dependent standard deduction, used on the returns of individuals claimed as dependents on another taxpayer’s tax return, remains at $1,050 for 2016.

The additional standard deduction for those 65-years-old and older or who are blind will remain at $1,250 for 2016, as will the $1,550 additional amount for single aged 65 or older or blind filers.

Inflation-adjusted Tax Increase Estimates for 2016:

The personal exemption amount gets bumped up by inflation by $50, to $4,050 for 2016, up from $4,000 in 2015.
The standard deduction for single, married filing jointly, and married filing separately filers is expected to remain the same for 2016. The standard deduction for heads of household is expected to rise from $9,250 for 2015 to $9,300 for 2016. Any increase in the standard deduction, of course, can produce lower taxes by decreasing the taxpayer’s taxable income.

Don’t Lose your Business just Because You’ve lost your Marriage
Indirect TaxTax

Don’t Lose your Business just Because You’ve lost your Marriage

Sadly divorce affects many of us, perhaps because of the difficulties balancing the extraordinary demands of growing a business with those of maintaining a thriving family relationship. The press has recently been awash with stories of business owners paying millions to their ex.

Thankfully, a number of avenues are available to an entrepreneur to mitigate the financial effects of divorce.

The first and most obvious is to get a prenup. That takes it out of the courts as much as possible and determines what’s going to happen to the assets in the unfortunate event of a marriage breakdown. If you’re already married you can get a postnup, and create a clear and plan in the best of times, to prepare yourself for the worst of times. Since Vardags’ success in 2010 in the Supreme Court in the “Radmacher” case, pre- and post-nups are generally upheld.

The second thing is to look at what you brought into the marriage because that is typically excluded from the 50/50 division. Perhaps your company was still a start-up at that stage, but it may have had considerable latent value that should be taken into account.

“My company’s going to be worth a billion in a few years”. Great for investors and staff, and great for inspiring oneself through the inevitable tough times building a business. But a disaster during a divorce! You need to remove the rose-tinted glasses and ask a few key questions:

What would someone really pay to buy shares owned by you, the key person in the business? Generally far less than an investor would pay to purchase new shares to help grow your business.

What rights do investors have over your business that restrict the value of your shares? Often quite a few: preference shares, consents or vetos, drag-along provisions, etc.

If the business were sold and a “professional manager” put in place to manage the business what would that do to the profits and hence the value? Certainly there would be the direct extra costs of that individual and perhaps some indirect ones too.

What risks are there? Past performance is not necessarily a guide to the future.

Asking such questions and getting a realistic value for one’s business can sometimes go a long way to mitigate the effects of divorce. I’ve been involved in cases where using arguments such as the above have reduced the “headline” valuation of shares in a business by 90% or more; there is almost always something that can be done.

Judges tend to be quite unimaginative in what they will ultimately order as a settlement if your case is determined by the Court (not to mention the enormous cost of going through a fully-contested divorce process). Much better to try to negotiate a settlement. Perhaps you can find a way in which your spouse can retain a stake in the business and be aligned with your interests (both upside and downside); perhaps you could structure a payout over several years; perhaps you could raise money within the business; perhaps you can set up trusts to protect the long-term value for your children. By far the best settlements I’ve seen have been negotiated, creatively and early-on in the process before the parties establish entrenched positions.

When your life’s work is at stake, the temptation to try and hide your wealth from the courts can be intense. The most common tactics business owners use are: hiding it offshore and/or in trusts, putting shareholdings into the name of relatives, friends or business associates, creating dubious debts (to parents, to the company, to friends), “hiding behind” the corporate veil and creating a web of companies. Recently I’ve recently witnessed more obscure attempts to hide wealth, for example by investing in hard-to-track Bitcoins.

In consequence, divorce law has become a highly sophisticated corporate and financial discipline as lawyers and experts try to crack their way through to the truth – in a complex game of hide and seek. There is no doubt that some people “get away with it”, but many others certainly don’t and the Courts can take a pretty dim view of people trying to deny their spouse access to their wealth. It’s a game of poker and we would never advise a client to play it.

As an entrepreneur or business owner, if you’re involved in divorce proceedings, you really should get early professional advice. The worst cases I’ve worked on have been picking up the pieces of a DIY-job. If you head off in the wrong direction and you’ve got somebody on the other side who is absolutely determined to hunt you down, it can be incredibly time-consuming, horribly expensive and ultimately you may well get caught out. One should be quite proactive about financial disclosure: be upfront about it, present your wealth in a realistic – as opposed to optimistic – way and let that be challenged by the other side.

Of course, there is another option for people when faced with divorce. I’ve seen a number of incredibly successful entrepreneurs take the attitude of ‘I’m just going to give them half of it. I then want to move on with my life and just go and earn it again’. It’s an alternative: rather than fight it, just go with it and then make yourself successful again. It saves the time and misery of going through a costly and acrimonious divorce, something which can be incredibly distracting when you’re trying to make money.

Dr Stephen Bence is Founder and Chairman of fast-growing business information company Beauhurst and Director of Strategy and divorce finance expert at top family law firm, Vardags.

PMQs: Harman Targets Tax Credit Loss
Human CapitalTax

PMQs: Harman Targets Tax Credit Loss

Today’s PMQs became a showdown after Harriet Harman attacked the Prime Minister’s proposals to cut tax credits. The acting Labour leader, first quoting an earlier speech by David Cameron in which he stated ‘There’s…nothing progressive about robbing from our children’, before asking ‘is it not inevitable that cuts in tax credits for working families, unless employers raise their wages immediately, will mean that children are worse off?’.

Cameron responded by accusing Harman of misquoting him, and by indicating that tax credits were no longer viable because of the high proportion of unemployed people, which needed to be rectified by cutting the deficit: ‘First, what I said in that speech about robbing from our children was about the importance of getting our deficit down and not asking them to pay debts that we were not prepared to deal with ourselves. What we need to do is make sure we go on with a plan that is seeing 2.2 million more people in work. Crucially for children, compared with when I became Prime Minister, there are 390,000 fewer children in households where no one works. My programme for tackling poverty is to get more people in work, get them better paid, and cut their taxes.’ Cutting tax credits for families has long been one of Cameron’s strategies for reducing the deficit.

Harman had prepared figures to reinforce her argument, demanding of the Prime Minister ‘a lone parent working part-time: to compensate her for that loss of £1,400, the minimum wage would have to go up overnight by 25%’. Cameron’s response involved reminding Harman that he inherited a bad economy from the previous Labour Government and accusing Harman herself of being opposed to progression: ‘learned Lady seems to want is the current failure of low pay, high taxes and high welfare’. Ultimately Cameron could not provide Harman with details of how families could be compensated for the loss of the child tax credits.

Currently, families on a low income, whether working or not, are entitled to tax credit for any child either under 16 or under 20 but still in some form of education. A basic amount of £545 a year is allowed, with families receiving extra fund for every additional child, and every additional disabled or severely disabled child they care for.

 

 

July Budget: Higher Earners Should Review Pension Tax Relief Perks
Human CapitalTax

July Budget: Higher Earners Should Review Pension Tax Relief Perks

Britain’s higher earners should urgently consider reviewing their tax relief on pensions, affirms the chief executive of one of the world’s largest independent financial advisory organisations.

The message from Nigel Green, CEO and founder of deVere Group, comes ahead of Chancellor George Osborne’s post-election additional Budget, scheduled for 8 July.

Mr Green comments: “This bonus Budget, the first of the new parliament, is likely to be used to deliver bad news, as it will allow the longest time for the electorate to forgive the government before the next general election. In order to demonstrate that ‘we’re all in this together’, it is probable that the Chancellor will target higher income earners’ pension tax perks.”

“As such, those who earn £150,000 or more and are subject to the marginal rate of 45 per cent, might want to urgently review their tax relief on pensions. The time to act is now as it is highly probable the pension contribution relief for those on higher incomes will be reduced.”

“For instance, it might be worth considering making a larger one-off contribution before the summer Budget, in order to benefit from the higher tax relief.”

Mr Green continues: “This latest policy would appear to be another hammer blow for those who want to get on in life through hard work and by prudently saving for their future.

“Aspiration and securing ones’ own financial future should be being actively championed by the government, not only because it means that people will be best-placed to have the retirement they wish, but it means that they are less likely to be a burden on the State and this will help ensure the country’s long-term, sustainable economic growth.”

He adds: “The move would be another example of how politicians of all parties seemingly believe that pensions are an easy and convenient target to bolster government coffers as and when they need to. This might explain the growing trend of people moving their UK pensions out of Britain and into HMRC-recognised overseas pension schemes.”

BPR Offers Renewable Investors Timely Solution for IHT Mitigation
Indirect TaxTax

BPR Offers Renewable Investors Timely Solution for IHT Mitigation

While EIS schemes with renewable energy investments will no longer qualify for government-backed incentives from 5th April, investors can still benefit from both the incentive schemes and achieve Inheritance Tax exemption with Business Property Relief (BPR) qualifying assets, according to Intelligent Partnership (IP), the UK’s leading provider of education and insights on alternative investments.

According to a study conducted by IP for its new EIS report*, renewables have been the most popular EIS investment over the last three years, with the majority (58%) of advisers selecting this as their preferred investment sector.
IP’s research also found that, since 1998, 28% of all EIS investment offers have been in energy – 60 products in total. In its analysis of fundraising targets by sector, energy had the largest average across the market of £14.67m – almost £6m higher than the next sector average (technology).

Speaking at IP’s EIS Masterclass in March, **Henny Dovland of TIME Investments said: “Conservative investors have favoured these large-scale, asset-backed investments with well-developed technologies underpinned by government incentives because they are predictable and therefore low risk.

“They no longer qualify under EIS but the subsidies – both Feed-in Tariffs and Renewable Obligation Certificates – haven’t disappeared. For BPR they continue to be great predictable long-term revenue producing assets.”
According to IP, many EIS investors will now have financial planning needs around mitigating the inheritance tax that their estates will be liable for.

Daniel Kiernan, Research Director at Intelligent Partnerships said: “With rising asset prices and the nil rate band frozen, HMRC estimates that 5,000 additional estates will be pulled into the IHT net by 2018. The baby boomer generation are estimated to control 80% of private wealth in the UK and, as they head into their 60s, they are now thinking about how they can pass that wealth onto their beneficiaries.

“Holding assets that qualify for Business Property Relief is one way to reduce the IHT bill, and by virtue of their EIS investments, they will already have held BPR qualifying assets for the two year qualifying period required for IHT exemption. Advisers should bear this in mind. There is a three year window to purchase replacement BPR assets, so as their clients exit Renewable Energy EIS investments, there is an opportunity to reinvest in the sector and still benefit from the incentives via a BPR product. For clients who are reaching the point where IHT is a consideration, it would be a shame to let the qualification lapse and have to restart the clock.”

According to IP, if a renewable energy investment was suitable for a client within an EIS, it will be a suitable investment within a BPR product – and as such it will help clients start to take steps to mitigate their estate’s IHT bill.

Daniel Kiernan continued: “A major benefit is that, unlike other estate planning solutions, if the client requires access to the funds in the future the investment can be liquidated and the funds freed up for other purposes – so clients are not forced to make irreversible decisions or lock money up for overly long periods. An investment into a BPR product could be a way of retaining the qualification for the relief without having to commit funds indefinitely.”

Conservative Tax Cuts Worth Ten Times More to High Earners Than Basic Earners
Corporate TaxTax

Conservative Tax Cuts Worth Ten Times More to High Earners Than Basic Earners

New TUC-commissioned analysis published today (Thursday) of tax policies in the Conservative Party manifesto shows that the party has chosen to prioritise unfunded tax giveaways to the wealthy over support for the low-paid and middle earners.

It shows that the big winners from unfunded tax cut proposals would be higher earners, with the lowest paid getting much smaller gains.

The analysis looked at the average impacts for each decile across the household income spectrum. It found that the poorest decile would get nothing on average, and the second poorest only £2 a year. However, the average gain for the richest decile would be £875 a year.

Furthermore, while the maximum benefit a basic-rate taxpayer can expect from the proposed personal allowance increase is just £222 per year, the maximum benefit for a higher rate taxpayer would be £1,126.

In addition, a taxpayer earning between £50,000 and £100,000 (the level of income at which the personal allowance starts being tapered away) would also benefit from proposals to raise the higher-rate tax threshold, meaning that their after-tax income could rise by over £2,000 per year – around ten times more than the tax gains for a basic earner.

The Conservative manifesto also includes plans for extreme cuts to welfare and public services. The TUC believes that the relatively small tax gains for low earners would therefore be significantly out-weighed by major reductions to in-work support like tax credits and the services that low-paid families rely on most.

The TUC analysis modelled the impact of an alternative approach with identical costs to the Conservative proposals, which targets help to low and middle-earners through improvements to Universal Credit (see notes, and UC option 2 in the analysis). Under this approach, most middle-earners would be at least £500 better off (deciles 3,4 and 5), with some families more than £700 better off.

TUC General Secretary Frances O’Grady said: “We should be targeting help where it’s most needed. But David Cameron’s tax plans will give ten times as much to the rich as to families on regular earnings.

“Families have just suffered the longest decline in living standards since Queen Victoria was on the throne. But before wages have even recovered, the Conservatives are prioritising special treatment for the wealthiest.

“The pledge to help minimum wage workers is a con. Most of them don’t earn enough to pay income tax, but Conservative plans for extreme cuts will hit their tax credits, children’s benefits and local services. All in all, low-paid workers and their families will be left much worse off.

“A better plan to help low-paid workers and their families would be to target support through Universal Credit. This would make low and middle-earner families hundreds of pounds better off, as well as giving a boost to businesses in their local economy.”

(UK) Happy New Tax Year - the Resolutions You Need to Know
Corporate TaxTax

(UK) Happy New Tax Year – the Resolutions You Need to Know

ICAEW advises taxpayers to check which changes could make a difference to their personal finances and to get expert advice if unsure.

Pensions will be an important area for change, and most taxpayers will see an increase in their pay packet as the personal allowance increases.

Key tax changes for 2015/16 for individuals:

The tax-free personal allowance rises from £10,000 to £10,600 on April 6. For those born before 6 April 1938 the so-called age allowance will be £10,660.

The starting rate of income tax on savings will be cut from 10% to 0% for savings income up to £5,000. The change means more people on lower incomes may be able to get their savings income paid without tax deducted.
Married couples and civil partnerships will be eligible for a tax break as the new marriage allowance lets the lower-income partner transfer £1,060 of their personal allowance to their partner – saving up to £212. This isn’t an extra allowance, just the transfer of part of an existing one, and can’t be claimed if either partner pays more than the basic rate of income tax.

The married couple’s allowance – for couples where one or both was born before 6 April 1935 – rises to £8,355. This is not to be confused with the new marriage allowance, and will be a better bet for those eligible, giving up to £835 of tax relief.

The maximum that can be invested in a tax-free ISA increases to £15,240. Junior ISA and Child Trust Fund allowances will be uprated to £4,080.

There are big changes for pensions. From 6 April 2015 those aged 55 or more can take money from their defined-contributions pension pot without having to buy an annuity or put the money into drawdown, and 25% of what they take out will be tax free.

The law will also change so that if an individual dies before the age of 75, they will be able to pass on their pension pot tax-free.

From 1 May families will not have to pay Air Passenger Duty on economy flights for children under 12.

(US) Using Tax Refunds for GAP Waivers Offers Peace of Mind
Corporate TaxTax

(US) Using Tax Refunds for GAP Waivers Offers Peace of Mind

Unfortunately, this exciting moment can be ruined by one simple mistake – failing to purchase a guaranteed asset protection (GAP) waiver.

“Sometimes the unexpected happens. It doesn’t make sense to invest so much in a new vehicle without ensuring that you’re fully protected,” said Tim Meenan, executive director of the Guaranteed Asset Protection Alliance. “Without the reassurance a guaranteed asset protection waiver offers, consumers could get stuck with an unpaid loan for a vehicle they no longer own.”

It’s important for car buyers to know that the moment they drive off the lot with a new car, the value of the vehicle depreciates. If disaster happens in the form of theft or an accident that totals the car, insurance will often only cover the current market value – which can be far less than the value of the unpaid loan. The purchaser will be responsible for paying off the loan, even though he or she may no longer have the car.

GAP waivers cover the difference, offering an additional priceless value: peace of mind. There’s no need for stress when you should be enjoying the tangible benefits of your tax refund!

From a stolen vehicle to a bad accident, there’s no way to predict when something disastrous might occur, so consumers should make the smart choice to protect themselves with GAP protection.

UK Remains One of the Most Competitive Tax Destinations
Corporate TaxTax

UK Remains One of the Most Competitive Tax Destinations

The UK remains one of the most competitive tax destinations according to over 100 of the largest British-based businesses participating in KPMG’s annual survey of tax competitiveness 2014. But Ireland has leapfrogged the UK to take the number one position this year.

In this year’s results, the UK has built on its 2013 absolute score in terms of the frequency with which respondents cite it as being in their top three most competitive tax regimes but it has slipped to second place overall. Luxembourg, the Netherlands, and Switzerland have all lost ground in the rankings as the table below shows.

Chris Morgan, head of tax policy at KPMG in the UK, said: “This year, respondents’ perception of how attractive Ireland’s tax regime is compared to other countries jumped significantly, with Ireland most frequently cited among the top three most attractive tax regimes overall. Perceptions of the UK’s attractiveness improved slightly versus 2013 but not enough to retain the top spot in the 2014 rankings.

“In contrast, the tax regimes in Luxembourg, Switzerland and the Netherlands are viewed as less attractive in 2014, perhaps due to significant proposed changes in tax regimes (especially in Switzerland), increased regulatory scrutiny on tax issues and concerns about tax rulings and EU State Aid issues (in the EU countries). While Ireland has also come in for criticism from some quarters on its tax policies, it appears that companies accept its very clear cross party commitment to retaining the low rate and believe that Ireland will introduce further measures like an Intellectual Property box regime to maintain its competitiveness.”

For the first time this year, the survey expressly asked about responsibility in business. Respondents agreed that responsible business should act in the interest of the common good and that tax was integral to this. Additionally, a significant proportion of respondents (38 percent) said they had become more transparent on how they report tax in the last 12 months. 44 percent felt they would be more transparent in the future, with this particularly pronounced among the FTSE 100 where just over half said so.

Little appetite for further radical change to system – simplicity and stability are what is wanted

In a similar vein to last year’s results, respondents believe that stability and simplicity determine the attractiveness of a tax system. Respondents were keen to see the corporate tax rate go down to 20 percent as planned by the current government. Respondents felt that this reduction was more important than a cut to business rates and almost a quarter (23 percent) saying they would increase their headcount as a result of this measure. There was relatively little support for tax devolution, with 63 percent saying it should not be decentralised and 27 percent saying it should be decentralised in line with devolution. A similar proportion (66 percent) was opposed to an allowance for corporate equity, which is a deduction based on the amount of share capital in order to level the playing field between equity and debt.

Chris Morgan commented: “According to our survey, stabilising and simplifying the tax system are the two most important measures to prioritise to drive growth over the next year. However, given that simplification would inevitably involve change to the system, there is a natural tension between these factors. The general sentiment seems to be that it makes sense to allow recent changes made to the tax system to ‘bed in’ before introducing any additional measures.”

Support for the OECD’s ‘BEPS’ action plan among respondents but concerns about compliance and UK interests

Looking to the wider tax landscape, a clear majority (76 percent) of respondents were supportive of the general aims of the OECD’s Base Erosion and Profit Shifting (BEPS) action plan. However, 61 percent expressed some concerns around the potential compliance burden of country by country reporting and over half (56 percent) of respondents felt that the UK authorities were unable to influence the overall BEPS agenda.

Chris Morgan commented: “Respondents are clearly supportive of the aims of the BEPS action plan but they do have some concerns. In particular, a significant minority believes that some work-streams could have a negative impact on the UK and more than half expressed concerns about the potential compliance burden of country by country reporting.”

In conclusion, Chris Morgan said: “It’s encouraging that the UK has held its overall score on tax competitiveness this year which suggests respondents remain broadly content with the direction of travel on UK tax policy. Ireland may have leapfrogged into the top spot but the results suggest that has been a result of it taking ‘votes’ from other European competitors rather than the UK. Respondents seem broadly happy with the direction of travel in terms of tax reform and support the OECD’s efforts to reform the international tax system. The sentiment among the senior tax executives we spoke to appears to be one of ‘steady as she goes’ rather than any urgent calls for radical reforms.”

Global Salaries to Continue to Rise in 2015
Human CapitalTax

Global Salaries to Continue to Rise in 2015

A new survey from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc, reveals that most employees around the world received pay increases in 2014 and can expect to receive comparable increases in 2015.

According to Aon Hewitt’s 2014 Global Salary Increase Survey of 12,690 employers in 110 countries, employees in Africa are expected to see the highest rate of increase in 2015 at 8.0%, up from 7.4% in 2014. Conversely, workers in North America can expect to see the lowest salary increases at 3.0%, up from 2.9% in 2014.

“This year, improved GDP projections and lower unemployment rates for most countries meant good news for many employees around the world,” said Yanina Koliren, global compensation surveys and solutions leader at Aon Hewitt. “Employers are competing aggressively for talent, particularly in some regions of the world, and they recognize pay is a key factor in attracting and retaining top employees.”

Key Highlights by Region

• Africa – In 2014, employees in Africa received 7.4% salary increases and can expect to see salary increases of 8.0% in 2015. According to Aon Hewitt, the high rate of increases reflects mainly the impact of inflation, the challenge of finding skilled employees in the region, as well as employers looking for ways to attract and retain top talent.

• Asia Pacific – In 2014, salaries for employees in Asia Pacific rose 5.2%. Specifically, in China, annual salary increases are still quite high (7.9%); however compared with previous years, the speed of salary growth is declining. Overall, employees are expected to see salary increases inch up to 5.8% in 2015, as major countries in the region see the better economic performance of 2014 continuing into 2015. Employee turnover also showed a slight uptick, and companies have adjusted their compensation budgets accordingly.

• Europe – Employees across Europe received salary increases of 3.6% this year and can expect to see similar increases (3.7%) in 2015, though the rate of increase varies by country. For example, Russia and Ukraine salary budget increases are expected to be 8.0% to 8.2% in 2015. In stark contrast, budget increases in Greece are expected to be just 1.9%. Despite the fluctuation, salary budgets in almost every country across Europe are forecasted to rise above inflation in 2015, which may reflect the anticipated strength of a European economic recovery next year and the need for organizations in this region to retain talent.

• Latin America – Companies in Latin America took a conservative approach to salary budgeting this year, and that strategy was reflected in workers’ salary increases. Employees in Latin America received average salary increases of 5.5% in 2014 and can expect to see slightly higher salary increases in 2015 (5.9%). Salaries across the region are slightly above inflation rates, with the exception of Argentina and Venezuela, where high inflation remains an issue. Employers also continue to focus on merit increases, as they try to retain and recognize top talent.

• Middle East (Gulf Countries) – Employees in the Middle East received 4.9% salary increases in 2014. In this region, organizations’ salary budgets are typically aligned with increases in gross domestic product (GDP). With GDP expected to grow in 2015, Aon Hewitt anticipates workers will see salary increases follow (5.1% in 2015).

• North America – Workers in the U.S. and Canada received average salary increases of 2.9% in 2014. In 2015, increases are projected to be 3.0%, which is the largest increase since 2008. In this region, most companies continue to reserve the majority of their compensation budgets towards variable pay programs, or performance-based awards that must be re-earned each year. In 2014, companies allocated 12.7% of their payroll funds toward variable pay.

 

Next Step Taken in Stamping Out International Tax Evasion
Corporate TaxTax

Next Step Taken in Stamping Out International Tax Evasion

Today the UK, alongside 50 other countries and jurisdictions from across the globe, is taking the next step in stamping out tax evasion by signing a new agreement at the Global Forum in Berlin to automatically exchange information.

Under the agreement, unprecedented levels of information, including account balances, interest payments and beneficial ownership, will be shared with the UK from countries across the world in an international clampdown on tax evasion.

This will increase the ability of HMRC to clamp down on tax evaders, providing HMRC with the details of billions of pounds of assets held overseas by UK taxpayers.

Speaking ahead of the signing ceremony in Berlin the Chancellor of the Exchequer, George Osborne, said:

“Today marks a negotiating triumph for Britain, and our close ally Germany, in the fight against tax evasion.”

“It was three years ago when, with my German colleague Wolfgang Schäuble, I launched a campaign for a new international deal to catch people who evade their taxes by hiding their money overseas.”

“I never expected that within such a relatively short period we would succeed in getting 51 countries to sign up to this agreement.”

“Today we strike a blow on behalf of hardworking taxpayers who are cheated when rich people don’t pay their taxes.”

“Today we send a clear message to those who still think they can escape making a fair contribution to our public services and to reducing our deficit: you can hide no more; we are coming to get you.”

The UK has been leading the international fight against tax evasion, including through its G8 Presidency, and has played a crucial role in driving both the development and the early implementation of the new global standard adopted by the OECD in July this year.

The global standard of automatic information exchange to tackle tax evasion was developed by the OECD and agreed in July 2014.

51 countries and jurisdictions, including all G5 countries, are signing the multilateral competent authority agreement under which information will be exchanged at a signing ceremony at the Global Forum in Berlin today.

Together with France, Germany, Italy and Spain the UK launched an initiative for early adoption of the new standard in April 2013. In total 57 countries and jurisdictions – known as the Early Adopters Group – have now committed to a common implementation timetable which will see the first exchange of information in 2017 in respect of accounts open at the end of 2015 and new accounts from 2016.

A further 34 countries have committed to implement the new global standard by 2018.