Ask the Experts « Broomfield & Alexander Chartered Accountants

Ask the Experts

Communicating in silence; lessons from The Artist

Friday, May 11th, 2012

Alison Love, Alison Love Ltd

I recently went to see the film The Artist (I know everyone else probably saw it ages ago and I am a bit behind the times). I was not quite sure what to expect, particularly with all the hype, however it is one of the best films I have seen in a long time. I was totally captivated throughout the whole movie, quite some feat given that there are very few spoken words.

This got me thinking about how much can be conveyed and communicated without speech and about how much of what we communicate is so much more than the words we speak.

This is important in a workplace conflict or mediation context where it is necessary to understand the needs and interests of the parties. The issues in dispute in a workplace conflict are the real tip of the iceberg, it is what lies beneath that is important. The real issues relate to how people engage and interact with each other and how they are feeling and reacting to this is important for both parties to understand. This does not mean that the parties have to agree or accept the others position but they do need to gain an understanding of the others perspective.

To gain this understanding it is necessary to listen to what is beneath the words, to look for clues in an individuals demeanor, gestures, body positioning, facial expressions, eye contact and also tone of voice. Some studies suggest that 93% of our messages are conveyed by tone of voice and facial expressions and 7% by the words spoken. It is clear that we express our emotions and attitudes more non-verbally than verbally so the nonverbal clues are vitally important to understanding the underlying issues.

Real, deep listening is hard and takes some effort. Listening to the words is hard enough in itself but to listen to all the emotions and feelings is even harder. It requires sustained and full attention without letting your mind wander as to what’s for tea tonight or what your next question is. Multi tasking is not an option here and even taking the briefest of notes can distract you from what is being communicated. The skill of the mediator or conflict coach is to listen empathetically and to then to reflect back what is being communicated between the parties in an appropriate way and so that their understanding of each others perspective is deepened.

In the Artist there was the benefit of atmospheric music, lighting and the artistic composition of scenes, (and a very cute dog) which are not available in a normal interactions with individuals. Without these clues it is even more important to engage in deep empathetic listening; a vital skill for anyone involved in dealing with workplace conflict either as a line manager, HR professional, conflict coach or mediator.

For more information about how to gain the skills needed to manage difficult people or conflict situations (including coaching support and training courses) please visit my website at www.alisonlove.co.uk.

Alison Love will be holding breakfast seminars in Swansea and Cardiff on the 18 and 24 May, From Conflict to Collaboration; a win-win for all your relationships – for more information or to register to attend, please click here.

Proposed VAT Cost Sharing Exemption

Wednesday, May 9th, 2012

Liz Maher, Director Centurion VAT

Our regular guest contributor, Liz Maher of Centurion VAT discusses the proposed VAT Cost Sharing Exemption.

It seems a long time in coming since it was announced in the Autumn Statement 2011 but Centurion now have sight of the Draft proposals for the introduction of this new VAT exemption for qualifying recharges, between a shared service centre and its members, to benefit from a VAT exemption treatment rather than a taxable VAT treatment. Comments about “my horse could have had a foal in same time” from me are being ignored by the rest of the Centurion team!

The draft proposals are open for consultation until the 18^th May and Centurion are happy to consolidate any comments from interested parties on the plans for implementation of this VAT exemption or if you’d like to discuss the proposals as the details of its working are becoming clearer (or less opaque!).

What is clear is that the intention is that exemption will only to apply to recharges for services from a shared services consortium that meets the criteria set out in the proposals. We are pleased to report that as a result of feedback from the consultation process there has been a widening of the definitions being applied which should allow more bodies particularly in the charity sector to benefit should a shared service consortium approach look like a valuable tool to have in the cost management tool kit.

The key issues to look at include:

HMRC’s definition of an “independent group of persons” for the Cost Sharing Group (CSG)
All CSG members must carry on exempt or non business activities
HMRC’s definition of “ directly necessary” supplies to members that qualify for the VAT exemption treatment
Direct re imbursement of costs condition to be applied by the CSG to its members
Distortion of competition condition that the CSG could be open to from commercial operators

It’s clear that these arrangements will not be the “silver bullet” that sectors such as charities, housing associations, universities across Wales might have initially hoped that it would be, but there is still enough of flexibility in the proposals to make this a serious option to consider where critical mass can be achieved to deliver volume savings: Areas such as maintenance services across the housing association sector perhaps? – and the cost sharing group doesn’t have to restrict itself to groups of entities from the same sector; local authorities could join with charities or with housing associations for a commonly incurred service cost as well.

The proposals can equally apply to the business sector, of course, but those businesses would have to have significant levels of exempt business activity to meet the qualifying conditions but in other European States businesses in the health and insurance markets do take advantage of the relief that the legislation brings to the burden of VAT on their costs so perhaps businesses in the property, exempt training sector, welfare, betting and gaming sectors should at least be aware of the potential this change could yield.

Any responses to this draft proposal will need to be back in with Policy Division in HMRC by the 18^th May.

Centurion will be including the topic for our VAT Forum for FD’S in the Welsh Housing Association Sector to be held on 15 May at ESIS Nantgarw and at our Annual Forums for Welsh Universities and Further Education Colleges held in June.

If you’ve not had sight of the Draft Proposal from HMRC as it currently stands give me a call 01633415390 or send me your comments liz.maher@centurionvat.com for inclusion in our response to the proposal by the 17^th May.

Liz Maher, Centurion VAT Specialists Ltd

www.centurionvat.com

Follow VATbat on Twitter

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on finance in the charity and the third sector and other business and financial topics, or by simply registering for our monthly newsletter

Charities – planning for closure

Wednesday, April 11th, 2012

Peter Gotham, MHA MacIntyre Hudson

Make sure that you plan your closure in time to rescue some of your good work, says Peter Gotham of Macintyre Hudson

Across the voluntary sector, traditional sources of funding are drying up. I am left wondering how many charities are gambling on “something turning up” to avoid a possible closure in six months or so? Sometimes reputation, relationship, hard work or just plain good luck will bring that extra bit of income, and the charity lives to fight another day.

But even a rescue can be only a short-term solution, merely postponing the inevitable – whittling away at financial and emotional reserves in the meantime. And if the gamble does not work or bad luck or increasing disillusionment intervene, then often a planned closure becomes impossible and the train hits the buffers. There is then no chance of a controlled closure – with the possible saving of some activity and even jobs.

At this stage in the third sector economic cycle, I am increasingly seeing a difference between the charities that hold on until the last moment, and end up with a chaotic closure, and those that play a little safer.

Charities with a reasonable level of reserves might, with good advice, have enough time and energy to rescue some of the charitable delivery – and perhaps to form a successor body that is more able to cope with the changes buffeting the sector at the moment.

Any threat of closure, however remote, is stressful, and early advice is important to help trustees understand the risks they are facing and assist in keeping the team together.

One form of liability that can cause particular difficulty is contingent liabilities – liabilities that become due, or crystallise, only in certain circumstances. These can commonly be dilapidation clauses on leases, termination payments due on early cessation of photocopier or premises leases, or termination payments due on defined-benefit pension schemes. Charities can find their decision-making unduly affected by a wish to avoid these ‘cliff-edge’ liabilities – where a demand will, of itself, make the charity insolvent.

I have seen premises retained, at a constant drain on resources, just to avoid crystallisation of premises liabilities. Particular staff are even retained to avoid crystallisation. Staff are sometimes kept on because the departure of the final member of a pension scheme would crystallise a defined-benefit pension liability.

One question about liabilities is when a contingent liability becomes so imminent that it needs to be taken into account when assessing solvency.

Obviously the situation will be different from charity to charity, and I would not wish to risk giving catch-all advice.

However, ignoring the issues rarely helps to maintain the positive dynamics that good delivery of the charity’s mission requires.

Conversely, informed early advice can sometimes assist in identifying negotiation options to manage the relevant liabilities. This can mean there is then time, with teamwork, to identify possible routes forward for the effective delivery of the charity’s mission.

This article originally appeared in Third Sector magazine (3/4/12) and was written by Peter Gotham of MHA MacIntyre Hudson.

Broomfield & Alexander are members of MHA, a UK association of independent professional firms.

There is no such thing as difficult people

Wednesday, April 4th, 2012

Alison Love, Alison Love Ltd

Difficult people I have known!

We can all think of people we have come across in our working lives (no names mentioned) who were difficult to deal with. Someone who seemed to have the ability to say or do absolutely the right thing to really wind you up. Someone who doesn’t listen? Takes credit for work you’ve done? Wastes your time with trivial issues? Acts like a know-it-all? Can only talk about themselves? Constantly criticizes? Sound all too familiar?

Whose problem is it?

When we come across one of these characters it can have a significant impact on how we feel, our emotional wellbeing and how happy (and productive) we are at work. This is especially true when the person you’re struggling with is your boss or a team member.

Often it is all too easy to fall into the role of victim. Whatever is going wrong isn’t our fault and by blaming others we feel better in the short-term.

The problem with being a victim is that you give up control and it does not resolve the situation. I saw this put brilliantly recently as ”it is like allowing someone to live rent free in your head”.

It’s all about you.

What one person see’s as a difficult or challenging person is not the same as others as we all have different levels of tolerance to certain behaviours. For example some people get incensed when someone is late for an appointment while others will be far more relaxed about it. I am in the latter camp so will incense others for whom strict timekeeping is important.

Only 2% of the population are considered to be truly difficult. It is therefore far more likely that where there is a problem with a difficult person, it is really a conflict; a difference of views, ideas, values or interests. Far better in this situation to appreciate that you are unlikely to change the person concerned and the only person you have the possibility of changing is yourself; not your personality but your behaviour.

So what can you do?

Understand your own behaviour – the first thing to do is to understand your own behaviour. We all have a default behaviour programme and a default response to conflict. It can be enormously helpful to understand your own default behaviour in order to avoid simply reacting to the other persons behaviour and instead think and choose your behaviour.
Take charge of your own behaviour – be aware of how your own behaviour (and the words you use) impacts on how others might react and adapt your behaviour accordingly. Do not allow yourself to be hooked by what other people say or do.
Build your confidence and self-esteem – believe in yourself first, in that way your interactions with others will improve.
Improve your listening skills – deep listening is one of the most difficult skills to learn and practise. It involves listening to the words and what is behind them and reflecting back what you think you have heard. You will need to listen more than you speak.
Understand the impact of your language/tone/body language – the words and what is behind the words are very important and can make a huge difference to the way the other person reacts. People are more influenced by how you say things than what you say.
Become more assertive - learn to become assertive rather than submissive or aggressive. The latter will often exacerbate a conflict situation and make your life harder.
Be likeable - people are more likely to do as you ask if they like, respect and trust you.
Learn the art of persuasion – persuading others involves changing the other persons mindset and will require the skills, qualities and characteristics to make you believable and credible.
Empathise – always be aware that the other person may see the world differently from you. Empathise with their viewpoint and offer solutions that ensure a win-win outcome.

It is not always easy to put these into practice, particularly when someone is struggling to deal with a difficult individual. It will take some hard work and patience. However, it is worth the effort as the benefits can be enormously powerful and unless you do take control the only person you will be hurting is yourself.

Alison Love will be holding a breakfast seminar in Cardiff on 24 May, From Conflict to Collaboration; a win-win for all your relationships – for more information or to register to attend, please click here.

Business rate devolution could help, says Brian Morgan

Wednesday, April 4th, 2012

Welsh Government control over business rates would help companies here, according to Brian Morgan, the economist who chairs a panel on rates reform.

Morgan, director of the Creative Leadership and Enterprise Centre at Cardiff Metropolitan University, said: “There is a problem in Wales. Business rates are not properly devolved. If we are going to do anything, we need to devolve business rates to Wales completely.”

He told a gathering organised by insurance broker Thomas Carroll Group and accountancy firm Broomfield & Alexander that Wales could go for a two-year exemption on rates for new commercial buildings. “It’s the new build that benefits the economy,” he said.

And he suggested that devolving power over business rates would encourage the Welsh Government to take more responsibility. He said: “At the moment, all they can do is spend money. That has not got us anywhere.”

In November, business minister Edwina Hart appointed Morgan to chair a task and finish group on Welsh business rates policy.

Morgan said Hart and the Welsh Government seemed to be more focused now on helping business to develop the Welsh economy. He said: “They are beginning to talk to the private sector about what private sector businesses really want.”

And he was positive about the idea, put forward for the UK government, of regional public sector pay levels across the UK.

He said different pay levels would hit Welsh expenditure in the short term. But he added: “The long run effect would probably be very good, if we could get over the adjustment period. At the moment, it is very difficult for private sector employers in Wales to compete with a dominant employer (the public sector).”

This commentary originally appeared in the Insider News Wales, 3 April 2012

Budget 2012 – commentary

Thursday, March 22nd, 2012

Leighton Reed, Director, Broomfield & Alexander

As always the Budget produces a mixed bag of changes, some win and some lose out. We can focus however on three groups of people; pensioners, those on higher incomes and businesses.

Much has already been said about the “granny tax” but to put this in perspective, it will affect pensioners who are not yet aged 65, who have annual income of more than about £9,200 but less than about £29,000.

Turning to those who have larger incomes, the cut in the top rate of tax to 45% is a good thing overall. Many business owners have tried to avoid the 50% tax hit by deferring income since the rate came in and by accelerated income before it came in. Entrepreneur’s and owners often say to me that the 50% tax rate stifles their enthusiasm to invest to make more profit because a bigger proportion of that profit is paid to the Government when you take National Insurance into account. We think the cut in the rate will reduce the need for tax avoidance plans, encourage more entrepreneurship and increase the Government’s tax take overall.

Staying with business owners, the cut in corporate tax, combined with extra tax savings for those businesses investing in research and development and patents are very welcome indeed. That said, these tax benefits can only be accessed for businesses which have set themselves up as a company. There are several tax benefits for running a company and all business owners need to review their business structures.

You can download a detailed Budget Report 2012, and our 2012-13 Tax Rate Card is available for download also

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on Tax and other business and financial topics, or simply register for our monthly newsletter.

Budget Report March 2012

Thursday, March 22nd, 2012

Download our Budget Report March 2012

George Osborne continued his fiscal campaigning by attempting to juggle tax take, Government borrowing and economic growth. Only time will tell how many balls he will continue to keep in the air and for how long.

There are no dramatic tax changes announced in his Budget Statement. Many of the key items such as reduction of the 50% income tax rate, increases in stamp duty for higher value homes and increases in the personal income tax allowances, were “leaked” in advance. However, there were a few surprises.

Details of the tax changes announced are set out below.

Personal Tax Allowances

The income tax allowances and rates for 2012-13 have already been announced. They are:

Personal Allowance – £8,105.
Age Related Allowance for persons aged 65-74 – £10,500.
Age Related Allowance for persons aged 75 and over – £10,660.
Married Couples Allowance for those born before 6 April 1935 – £7,705.
Blind person’s allowance – £2,100.
Age related allowances will continue to be reduced if earnings exceed £25,400.
Personal Allowances will be reduced by £1 for every £2 of income exceeding £100,000.
Tax relief for the Married Couples Allowance is restricted to 10%.

The expected increase in the basic personal allowance to £9,205 from April 2013 was confirmed. This means that individuals earning less than £177 per week will pay no tax at all. This takes the Government within striking distance of their goal to set a basic personal tax allowance of £10,000 before the end of the current parliament.

Age Related Allowances

In an attempt to simplify allowances Aged Related Allowances are to be frozen at 2012-13 levels until they match the basic personal allowance. From 6 April 2013 these allowances will no longer be available to individuals born after 5 April 1948. The higher Aged Related Allowance will only be available to individuals born before 6 April 1938.

State Pension

The current weekly basic State Pension is due to rise to £107.45 from April 2012. This is a weekly increase of £5.30.

George Osborne has also reaffirmed his pledge to simplify the current, over-complex State Pension schemes by merging the basic and second state pension into a single scheme. It is estimated that this single tier State Pension will be about £140 per week.

Income Tax Rates

As expected the 50% rate is to be cut from April 2013 to 45%. Detailed rates are:

2012-13

• 20% basic rate on first £34,370 of taxable income.
• 40% higher rate on income between £34,371 and £150,000.
• 50% additional rate on income over £150,000.

2013-14 (subject to confirmation in the Finance Bill 2013)

• 20% basic rate on first £32,245 of taxable income.
• 40% higher rate on income between £32,246 and £150,000.
• 45% additional rate on income over £150,000.

Cap on unlimited tax reliefs

Legislation is to be introduced in Finance Bill 2013 that will seek to apply a limit to income tax reliefs claimed by individuals from 6 April 2013. It would seem that the Chancellor is keen that everyone pays their fair share of tax. Effectively this will set a line in the sand such that tax relief will be denied if:

Anyone seeks to claim reliefs in excess of 25% of their income or £50,000, whichever is the greater, and
Such reliefs are currently not subject to any restriction.

Draft legislation will be published later this year for consultation.

Child Benefit income tax charge

In an attempt to deny Child Benefits to higher income families the following new income tax charge will apply from 7 January 2013. The tax charge will be at the rate of 1% of the full Child Benefit award for every £100 of income between £50,000 and £60,000. Therefore if income reaches or exceeds £60,000 the tax charge will equal the Child Benefit received.

The aim is to gradually reduce the cash benefit if the following conditions apply:

Where a partner has adjusted net income over £50,000 in a tax year and where either they or their partner receives Child Benefit the new tax charge will apply.
If both partners have net income over £50,000 the partner with the highest income will suffer the tax charge.

A partnership is defined as:

A married couple living together.
Civil partners living together.
A man and a woman who are not married to each other but who are living together; or
Same sex couples who are living together as if they were civil partners.

Tax payers who do not want to pay the new charge can elect to refuse Child Benefit.

Tax and vehicles

The following changes are announced:

1. The car fuel benefit charge multiplier will increase from £18,800 to £20,200 from 6 April 2012. (There will be a further increase, 2% over rate of inflation, from 6 April 2013).

2. The van fuel benefit charge multiplier is frozen at £550. (This charge will be increased by the rate of inflation from 6 April 2013).

3. Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre by 1% to a maximum of 35% in 2014-15.

4. In both 2015-16 and 2016-17, the appropriate percentages of the list price subject to tax will increase by two percentage points, to a maximum of 37%.

5. From April 2016 the 3% diesel supplement will be removed. From this date diesel cars will be subject to the same level of tax as petrol cars.

6. From April 2015 the five year exemption for zero carbon cars and the lower rate for ultra low emission cars will come to an end.

7. The appropriate percentage for zero emission and all low carbon cars emitting less than 95g of carbon dioxide per kilometre will be 13% in 2015-16, and will increase by two percentage points in 2016-17.

Employer asset-backed pension contributions

Further legislation has been announced, effective from 21 March 2012, that will ensure unintended excess tax relief should not arise on these contributions.

Qualifying Recognised Overseas Pension Schemes (QROPS)

Changes in legislation will be introduced in Finance Bill 2013 to strengthen reporting requirements and powers of exclusion relating to the QROPS regime. They will support the changes published for consultation on 6 December 2011. The Government also announced that when the country or territory in which a QROPS is established makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended or available under the QROPS rules, the Government will act so that the relevant types of pension scheme in those countries or territories will be excluded from being QROPS.

Corporation Tax Rates

From 1 April 2012 the small company rate is set at 20%, the main standard rate at 24%, down 1% from the previous expected rate of 25%.

From 1 April 2013 there will be a further reduction in main standard rate to 23%.

From 1 April 2014 there will be a further reduction in main standard rate to 22%.

Tax simplification for small businesses

In a welcome move the Chancellor committed to a process of consultation on a number of tax simplification proposals for smaller businesses. These will include:

1. Unincorporated businesses with a turnover below the VAT registration limit, will be able to adopt a voluntary cash basis for business tax purposes.

2. A simplified system for claiming expenses for use of cars, motorcycles and business use of the home.

3. Finally the consultation will look at the need for a simple way to disincorporate a small limited company so it can revert to a self-employed status.

Seed Enterprise Investment Scheme (SEIS)

As previously announced, legislation will be included in Finance Bill 2012 to introduce a new Seed Enterprise Investment Scheme from April 2012. Following consultation, changes have been made to the legislation to allow companies:

To qualify if they have subsidiaries;
To determine eligibility by reference to the age of any trade rather than to the age of the company;
To remove reference to the holdings of other entities in calculating asset and employee tests;
To allow previous (but not current) employees to qualify; and
To allow directors who have qualified under SEIS to continue to qualify under EIS, subject to time limits.

Patent Box

Legislation will be introduced in Finance Bill 2012 to allow companies to apply a 10 per cent corporation tax rate to a proportion of profits. This would be attributable to patent and certain other qualifying intellectual property from 1 April 2013. In the first year this proportion will be 60 per cent and increase annually to 100 per cent from April 2017.

Wallace & Gromit Relief

George Osborne raised a laugh in Parliament when he referred to his intended corporation tax reliefs for the British video games, animation programs and high end TV productions as “keeping Wallace & Gromit in the UK”.

The industry has lobbied hard for tax concessions so that it can remain competitive with companies based in other non-UK locations. Consultation on the detail will take place during the summer 2012 with a view to legislation being included in the Finance Bill 2013, effective from April 2013.

Stamp Duty Land Tax (SDLT)

The Government seems to have selected SDLT as its tax of choice to target the wealthy in the UK. There are two changes announced today:

1. Residential property sold with a consideration in excess of £2m will be subject to SDLT at the rate of 7%. This will affect transactions completed on or after 22 March 2012.

2. Residential property that is purchased by a non-natural person (HMRC’s definition) will be subject to a 15% SDLT charge if the value of the property acquired exceeds £2m. The process of purchasing in this way is sometimes described as “corporate enveloping”. This will apply to appropriate transactions completed 21 March 2012 or later.

Alcohol and tobacco duties

With effect from 26 March 2012 increases in duty on alcoholic drinks will add:

3p to a pint of beer
2p to a litre of cider
11p to a bottle of wine, and
41p to a bottle of spirits

With effect from 6pm on 21 March 2012 increases in duty will add:

37p to a pack of 20 cigarettes
12p to a pack of 5 small cigars
37p to a 25g pouch of hand rolling tobacco, and
20p to a 25g pouch of pipe tobacco.

VAT registration limits

From 1 April 2012:

The taxable turnover threshold, which determines whether a person must be registered for VAT, will be increased from £73,000 to £77,000;
The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £71,000 to £75,000; and
The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased from £73,000 to £77,000.

Other tax simplification matters

1. In April 2012 HMRC will provide taxpayers with a “Dashboard” giving access to information on the taxes they pay and how much.

2. From April 2014 HMRC will provide Personal Tax Statements to individuals who file their returns online and to some PAYE tax payers. The statement will include: details of the amount of tax and National Insurance they have paid, average tax rates and show them how their payments have contributed to public expenditure.

3. The old chestnut of integrating income tax and National Insurance is still on the cards. Consultations are to continue and detailed conclusions will be published in due course.

Anti Avoidance announcements

The Government seems set on legislating to create a general anti avoidance rule – an all-encompassing, catch-all that will aim to block any attempt at reducing tax payments using artificial arrangements. It is unlikely that this will apply before April 2013. The announcements in the Budget to deal with specific schemes include the following topics:

Inheritance tax: offshore trusts
Inheritance tax: settlor-interested trusts
Sale of lessor companies
Capital allowances: changes to anti-avoidance rules for plant and machinery
Plant or machinery leasing
Life insurance: income tax avoidance
Post-cessation trade relief and post-cessation property relief
Loan relationships avoidance: debt buybacks
Property business loss relief
Stamp duty land tax (SDLT): enveloping
Stamp duty land tax: sub-sales rules
Site restoration payments
Disclosure of tax avoidance schemes (DOTAS)
Stamp duty land tax: disclosure of tax avoidance schemes
Manufactured overseas dividends
General anti avoidance rule (GAAR)
Manufactured payments
Tax mitigation and IR35

Super connected cities

The Chancellor announced that a £100m budget has been made available to create 100Mbps citywide broadband networks in 10 urban areas. Four we knew already: Belfast, Cardiff, London and Edinburgh. The other six declared by the Chancellor today are: Birmingham, Bradford, Bristol, Leeds, Manchester and Newcastle. A further £50m of funding was also announced to be shared amongst ten unnamed smaller cities.

By 2015 it is hoped this investment in cities will provide ultra-fast broadband coverage to 1.7m households and high speed wireless to 3m residents.

Sunday trading

It was confirmed that Sunday Trading regulations would be lifted for 8 Sundays during the Olympics and Paralympics starting 22 July.

Enterprise loans for young people

Budding entrepreneurs will be able to bid for a Government loan to help them start their business under a new £10m pilot scheme. The enterprise loan will operate in a similar way to the current student loans system. It will provide young people aged between 18 and 24 the chance to borrow cash to help them start up their own business. Applicants will need a “viable” business idea to secure a loan. Loans are expected to be worth between £5,000 and £10,000 per individual.

National Guarantee Loan Scheme

The published details of the scheme are:

The scheme allows banks to raise up to £20bn of funding guaranteed by the Government, to lend directly to smaller businesses (who are more reliant on bank finance) at a lower cost than would otherwise be the case.
UK businesses with a turnover of up to £50m will be eligible to benefit from the scheme.
Banks apply for Government guarantees against the borrowing and they can use the guarantee to raise funds at a lower cost.
In order to qualify for the guarantees, banks will demonstrate that they can pass the benefits of the guarantee on to businesses through cheaper loans (as in the European Investment Bank’s (EIB) well-established ‘Loans for SMEs’ scheme).
Participating banks retain the full credit risk of the loans they make under the scheme.
Banks participating in the scheme will have to offer interest rates at 1 percentage point lower than loans outside the scheme.
A range of banks will provide access to the scheme.

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on Tax and other business and financial topics, or simply register for our monthly newsletter.

Sage hints & tips – Week 53

Friday, March 16th, 2012

Mark Jones, Director, Broomfield & Alexander

Because 2012 is a leap year, week 53 includes two days this year – Wednesday 4 and Thursday 5 April.

You’ll only have a week 53 if you’re due to process any weekly, two-weekly or four-weekly paid employees on either of these days.

Will I have a week 53?

In the 2011/2012 tax year, you will have a week 53 if the following applies:

Normal pay day is a Wednesday or Thursday and…

Weekly paid employees are last processed on Wednesday 28 or Thursday 29 March 2012.
Fortnightly paid employees are last processed on Wednesday 21 or Thursday 22 March 2012.
Four weekly paid employees are last processed on Wednesday 7 or Thursday 8 March 2012.

In each of these instances, the employees are due to be processed next on 4 or 5 April 2012, week 53.

Note: If your normal processing date falls on Wednesday 4 or Thursday 5 April 2012, but you intend to process your payroll earlier, you must still set the date to the correct date.

These are the only scenarios where a week 53 should be processed, as the next processing date for all other pay dates falls into the 2012/13 tax year. Monthly employees do not have a week 53.

Tip: There is nothing different that you need to do to process week 53. Simply set your processing date to the correct date and follow your normal processing routine.

You must ensure that the payroll for week 53 is updated, just like any other pay period, before beginning the year end process.

Note: If you don’t have a week 53, once you’ve processed and updated your final pay period, you can start your year end routine.

How tax and national insurance (NI) is calculated in week 53

Tax

To comply with government legislation, Sage 50 Payroll correctly calculates tax in week 53 using a week 1 / month 1 free pay allowance. Any previous pay and tax is ignored. This means that tax is calculated on the gross pay for tax this period only, using a weekly pay adjustment at the current tax code. If the employee is paid fortnightly or four weekly, the two or four weekly pay adjustment is applied.

Note: If the employee’s total pay for the year, including the pay for week 53, is less than their free pay allowance, then no tax is deducted in week 53. For example, a weekly employee on tax code 747L has an annual free pay allowance of £7479.12. They have been paid £5000 up to and including week 52, then is paid £500 in week 53. As £5500 is less than their free pay allowance, no tax is deducted.

NI

For employees, NI is calculated as in any other pay period, using the weekly, two weekly or four weekly thresholds, as appropriate.

For directors using the table method, their NI is recalculated in week 52 using the annual thresholds. The NI for week 53 is then calculated cumulatively on a year to date basis. For directors using the year to date method, their NI for week 53 is calculated cumulatively as in any other pay period.

How does week 53 appear on reports?

P11 Deduction Cards (PAYE and NIC)

Payments processed on 5 April appear as a separate line on the P11 with 53 in the Wk/Mth No column.

Note: Total pay to date (column 3), Total free pay to date (column 4) and Total tax due to date (column 6) show the amounts for week 53 only, not cumulative values.

P14/60

Forms P14/60 have a Week 53 payment indicator box. This box is only populated if a payment has been updated on 4 or 5 April. This indicates that an extra tax calculation has been performed in this tax year and shows one of the following values:

Weekly paid employees – 53
Fortnightly paid employees – 54
Four weekly paid employees – 56

Note: This payment is referred to as week 53, however fortnightly or four weekly paid employees have tax deducted using the two or four weekly pay adjustment. The week 53 payment indicator box reflects this by showing week 54 or 56 for these payment frequencies.

The tax period shows week 53, but I don’t have a week 53

One of the first steps of the year end process is to change the process date to 5 April. This is the date that should be used for all year end reports as it is the last day of the current tax year.

After changing the date the tax period displayed on the status bar shows tax week 53. This does not mean that you have to update week 53. You only need to process week 53 if your employees are weekly, fortnightly or four weekly paid and your normal processing date is 4 or 5 April 2012.

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on Sage and other business and financial topics, or simply register for our monthly newsletter, you can also contact us directly on Sagesolutions@broomfield.co.uk

Growth in manufacturing predicted

Tuesday, March 6th, 2012

Ian Thomas, Director, Broomfield & Alexander

Almost two-thirds of manufacturers in Wales responding to a national survey of the sector are predicting growth during 2012, according to a new report.

A third of the firms are anticipating growth of over 10% and, in a vote of confidence for the battered financial services sector, 61% say that, despite changes in lending and loan security policies following the banking crash, they feel they are receiving adequate support from their bank.

But the confidence respondents expressed in the survey was tempered by pleas for more support at local and national Government levels, which business say would make a major contribution to the success of the sector.

One Welsh respondent said: “Reintroduction of non repayable grants from the Welsh Government is very welcome and is the way forward, but they need to redress the support for exporting companies. It is currently virtually non existent.”

The MHA survey questioned 145 manufacturers across the UK about a range of issues affecting their businesses, with the responses from Wales broadly mirroring the national picture.

The report echoes encouraging findings from Markit’s purchasing managers’ index (PMI) a month ago, indicating strong growth in the manufacturing sector.

It’s also good to see confidence in banks returning. We have been saying for some while to our clients that if businesses go about raising funds in the right way, they stand a good chance of success. A strong business plan and pitch are more essential than ever in the current climate, and robust financials and a coherent business plan are a must – and some businesses just aren’t going in with those.

According to the report, over 80% of manufacturers in Wales (compared to 90% nationally) do not believe that the UK Government currently has a specific manufacturing strategy in place, and that more support for R&D expenditure in particular would be a real boost.

Three quarters of Welsh respondents revealed they were planning to spend between 1-2% upwards of their turnover on R&D – but 59% of them (against almost three quarters nationally) said that an immediate credit from Government for R&D expenditure would encourage them to invest more.

The survey supports a wider consensus across the industry that the sector remains neglected at policy level, while competitor economies such as Germany, Norway and Japan reap the benefits of continued investment in their industries.

The Government’s proposal to reduce the corporation tax rate to 10% for profits made on patented technologies from April 2013 will aid growth in the UK economy.

We know the Government has expressed a commitment to rebalancing the role of manufacturing in terms of contributing to GDP, but this survey shows immediate and extensive action is necessary to deliver this.

We would join our MHA partners in urging the Government to consider a wider national manufacturing strategy and increased awareness in the support currently available to support the sector and ensure it maintains its place as a leading player in the global economy.

To request a copy of the report, please click here

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on MHA and manufacturing, or simply register for our monthly newsletter.

Pre-Budget planning

Thursday, February 23rd, 2012

Leighton Reed, Director, Broomfield & Alexander

The 2012 Budget is about a month away now and you may have been reading in the press the possible changes to tax to be announced by Mr Osborne. Whilst, of course, we can never really know what he will precisely say the following topics have been widely discussed by the tax community. On one hand HMRC collected more tax in January 2012 than in 2011 suggesting tax cuts but on the other we know that there is still a significant amount of tax avoidance going on which is reducing tax receipts. Possible changes are:-

Reduction of tax relief on pensions – Limits on pension contributions have changed significantly in the last 3 years. This time the Government may decide to remove higher rate tax relief on contributions and/or tax lump sum payments from the pension plan. You may therefore wish to make a contribution or take your lump sum prior to the Budget.

Imposing a tax on gifts – Everyone can make a gift of capital (perhaps cash) in their lifetime to reduce Inheritance Tax. Provided you survive 7 years the capital amount is not subject to Inheritance Tax (IHT). Other countries have a “gift tax” which is a tax imposed at the time of the gift. The Government have been looking at IHT for some time and may decide to introduce this and so some are making Gifts in advance of the Budget.

Capital gains tax and VAT – no changes here are anticipated. Capital gains tax is at 3 rates, 10%, 18% and 28%. VAT is obviously at 20% in line with many European countries.

Income tax rates – Given the desire to reduce the Government’s debt we do not expect Mr Osborne to reduce the top rate of income tax from 50% for the term of the Parliament. A report on the effectiveness of this tax rate is expected next month and so we will hear more. You may have accelerated income before the rate came in and intended to delay taking further income until the rate came back down. We will keep an eye on developments.

If you have any questions on the above then please do not hesitate to contact me or your usual contact at Broomfield & Alexander.

Why not follow @BroomfieldWales on Twitter to keep up with the latest information on Tax and other business and financial topics, or simply register for our monthly newsletter.

Ask the Experts

Tax

NI

P14/60

Categories