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Reminder – Employer Annual Returns (P35)

May 9th, 2012

Leighton Reed, Director, Broomfield & Alexander

The next HMRC filing deadline is on 19^th May for the submission of the Employers Annual Return form P35.

Changes were introduced for 2011-12 to remind employers about the deadline for filing their Employer Annual Return. A letter will be issued by HMRC at the beginning of May in time for the return to be submitted by 19 May.

A further reminder letter will then be issued after the filing deadline if HMRC still haven’t received a return or a ‘no annual return’ notification.

This letter will explain that a penalty may already have been incurred and say that the return should be submitted immediately in order to avoid the penalty increasing. (More information on penalties can be found at www.hmrc.gov.uk/paye/problems-inspections/annual-return-late.htm)

From 31 May 2012, HMRC will introduce a “P35 Interim Penalty Letter” which will be issued over a 5 day period, so that it reaches employers within a month of the filing deadline. The letter will state that the employer has incurred a late return penalty and explain what to do to avoid it increasing. This will be calculated at £100 per 50 employees for each month or part month there is a delay in filing the return.

If the return remains outstanding for more than four months, the employer will receive another penalty notice shortly after 19 September and again the following January and May, if necessary. These penalty notices will show the amount of penalty that’s building up because the employer hasn’t filed the return on time. This will again be calculated at £100 per 50 employees for each month or part month there is a delay in filing the return.

If you have had PAYE schemes in the past but no employees in 2011/12 it is worth checking whether a notice to file a P35 has been issued. If yes, then you will be required to file a nil P35 by 19^th May 2012. The link to HMRC for a nil P35 is below.

https://online.hmrc.gov.uk/shortforms/form/P35NilEmployer

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New service is response to increasing individual wealth in Wales

May 9th, 2012

Ian Thomas, Director, Broomfield & Alexander

Professional advisors Broomfield & Alexander have announced the creation of a new joint venture wealth management service in response to the increasing numbers of affluent people in Wales – where it’s expected there will be 85,000 millionaires in Wales by 2020.

Broomfield & Alexander Wealth Management Ltd will offer individuals with six-figures and above in-house stock broking and discretionary and advisory investment management alongside the existing high-level tax advice and planning.

Managing director Ian Thomas said the new venture, with independent financial advisory firm AFH Financial Group plc, was a response to client demands for greater interaction between tax planning and wealth management from individuals whose wealth was increasing.

Higher property values, the first baby boomer wills, higher professional salaries and even lottery winners are all combining to push the assets of an increasing number of people above the million mark, with estimates that the number of millionaires in the UK will be approaching the two million mark in the next six years.

“The personal and business assets of many of our clients are rising to significant levels, often above the £1,000,000 mark,” said Mr Thomas. “Our aim through this exciting joint venture is to be able to offer a complete integrated service to our clients. At the opposite end of the spectrum we can apply lateral thinking to propositions – for example, loan backs from pension schemes can sometimes assist businesses with cash-flow pressures.

“There’s an increase in the wealth of our clients and we saw an opportunity to combine seamless in-house wealth management and tax planning – something that is not covered well by other firms.”

AFH chairman and chief executive Alan Hudson said the joint venture marked the company’s first established foothold within a strong Welsh market.

“I see both Broomfield & Alexander and AFH as two complementary and client-focussed businesses, seeking to deliver end-to-end solutions for a wide range of clients,” he said.

“We are delighted they have chosen us as a partner and we look forward to working with them to grow Broomfield & Alexander Wealth Management Ltd into a leading and recognised brand.”

What to consider in a charity merger

May 4th, 2012

Sarah Case, Director, Broomfield & Alexander

Considering a merger?

Charities are increasingly exploring a variety of different ways of working together, often due to the need to be more efficient with resources or to access additional funding opportunities.

There are many different forms of collaboration, including the sharing of resources (such as premises or staff), joint marketing or fundraising projects, or the submission of joint funding bids, possibly through a formal consortium arrangement. Although by no means inevitable, successful collaborations may eventually lead to a merger of two or more charities, and the most successful mergers are often between charities who have already worked together.

The importance of thorough planning for a charity merger cannot be overstated and there are a number of issues which need to be considered to ensure that the process runs smoothly:

Ensure that the Trustees have sufficient powers

For a merger to be legally sound, Trustees must act in line with the powers in their charity’s governing document, or those given to them by law. If these powers are insufficient, the Trustees can ask the Charity Commission for extra powers to facilitate the merger.

It is equally vital to make sure you have comprehensive information about the purposes, powers and property of the charities involved in a potential merger in order to identify any problems or legal barriers in advance of a formal decision.

Make sure the purposes of the two merging charities are compatible

The purposes of the merging charities do not have to be identical, but they should be compatible and the main duty of Trustees transferring assets to another charity is to take into account the interests of the people their charity was set up to help.

Also, transferring charities must ensure the recipient charity has purposes which are suitable in relation to the terms of the dissolution clause, or any other power being used by the transferring charity.

Look carefully into the rules controlling any special trusts, restricted funds or permanent endowment

It is essential to identify at the outset any classes of funds – such as special trusts, restricted funds or permanent endowment – because they must be dealt with according to the rules governing their use. They cannot be simply mixed in with the general assets belonging to the recipient charity.

Consider the involvement of your members in the merger process

The governing document of the charity will usually explain the role of members in the administration of the charity. Trustees looking to complete a merger should consider the involvement of members from the start. This is especially important if the proposal requires the consent of or other input from members.

Make sure the estimated costs of the merger are realistic

Underestimating the cost of a merger can create major problems further down the line, so it pays to keep actual and expected costs under close scrutiny at all stages. Some costs can be anticipated early in the process, such as changes to services, integrating ICT systems, professional advisory fees, advertising, rebranding,

relocating and governance costs. Costs that are less predictable include missing out on opportunities due to time spent on the merger, and disruption to the smooth running of the charity through, for example, having to relocate your premises or implement a redundancy programme.

Speak to an advisor early on in the process

It is important to contact a specialist charity advisor as early as possible in the merger process. If you would like any further details about working together through collaborations and mergers, then please do get in touch.

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

New Managing Director for Broomfield & Alexander

April 18th, 2012

Ian Thomas is to lead Broomfield & Alexander, taking over the role from Robert Preece, who held the position for almost 10 years.

Currently Audit Director, Ian worked for 17 years with a leading international firm in Cardiff before joining Broomfield & Alexander in 2002, offering commercial advice on audit, accounting and corporate finance issues, and working with a broad range of businesses including UK subsidiaries of large international groups.

Ian said he was very much looking forward to his new role. “Robert has moved the firm on in great strides during his time as managing director,” he said.

“He orchestrated our merger with the Swansea chartered accountancy firm, Griffith and Miles, moved the business into prestigious new offices on the Cardiff Gate Business Park, and took us into MHA (MacIntyre Hudson Association), the association of independent accountancy and business advisory firms, which is opening up national and international contracts for us.

“The result is that we have grown to become a highly-respected firm with 12 directors, around 90 staff, more than 4,500 clients and offices in Cardiff, Newport and Swansea.

“My aim is to build on that legacy. We are proud of the high standards of service and personal attention to client care which have characterised Broomfield & Alexander for 100 years, with each project led by a director who draws together a team offering the right blend of specialist expertise. I will ensure that ethos and approach is maintained and developed.”

Robert, who will be continuing as a director of Broomfield & Alexander, said the practice would benefit from the fresh impetus which Ian would bring to the leadership of the business, and wished his successor well in taking over the mantle of guiding the practice in its future development.

“Ian has numerous leadership qualities which he is able to bring to this role, and I am sure he will have the support of all his colleagues in the future, as I have had in the past,” he said.

Capital allowances on fixtures in properties

April 13th, 2012

Leighton Reed, Director, Broomfield & Alexander

For some time HMRC have not been happy with capital allowances claims made by buyers of existing properties (often going back over many years) and have been seeking to tighten up the rules. Changes are being incorporated into the Finance Bill 2012.

The proposed changes are detailed and are intended to apply from April 2012. In broad terms, if a buyer wishes to claim capital allowances on fixtures in a property, he and the seller must enter into an election (known as a section 198 election) to agree the allocation of the purchase price to plant and machinery. The election must be entered into within 2 years of the buyer’s acquisition. Such elections have existed for some time, but have not been mandatory.

In addition from April 2014 the past owner must have allocated its expenditure on the fixtures to a capital allowances pool prior to its sale of the property or must have claimed a first year allowance in respect of the expenditure. This is likely to mean that if the seller was entitled to claim capital allowances, but hasn’t and has therefore not pooled its capital expenditure, the buyer may have to negotiate with the seller to pool the expenditure before the sale.

Practically speaking this means that when a property sale takes place there is an even greater need than in the past to carefully consider the capital allowances position before the deal is finalised. Purchasers will need to undertake additional due diligence when making a purchase and the sale and purchase agreement formulated appropriately. It will no longer be possible to rely on sorting the capital allowances position out after the event.

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.

Substantial donor rules retargeted

April 11th, 2012

Sarah Case, Director, Broomfield & Alexander

HMRC’s Tainted Donation rules, in application since 1 April 2011, have given charities the opportunity to review arrangements with potential donors.

Under the Substantial Donor rules that were previously in force, innocent transactions with a substantial donor (or their connections) during the six years following the gift could put a charity’s tax exemptions at risk.

Historically, to manage this risk, transactions to be avoided included employment by the charity of relatives of a major donor and properties rented to the same persons – the possibility of these relationships occurring sometimes prevented major donations that were wholly motivated by desire to support the charity.

The new anti-avoidance rules are better targeted to prevent an impact on innocent and reasonable arrangements. Although removal of the old donation thresholds (£25k over 12 months and £100k over six years) potentially increases the number of donations within the scope of the rules, the key change is that a ‘tainted’ donation is one where financial advantage is judged as a main purpose of the donor.

Whereas breach of the old rules led to a tax charge for the charity, under the new rules, if the donation is tainted, it is the donor who will normally have to repay any related gift aid claimed by either donor or charity. Thus a charity is no longer at risk of financial loss where a donor may have a motive of financial advantage that the charity did not know about.

Charities – planning for closure

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.

Are you fraud aware?

April 10th, 2012

Sarah Case, Director, Broomfield & Alexander

Companies and charities operating in Wales are being warned that they are particularly vulnerable to fraud as the faltering economy creates a combination of more desperate people and less secure organisations.

Charities in the UK estimate that they lost £1.1bn to fraud in 2010/11, according to the latest figures from the National Fraud Authority.

We’ve been talking to our clients on an on-going basis about the increasing risk for all organisations of fraud by both employees and other stakeholders. We have listed below the Charity Commissions top 10 tips with regard to fraud. At the very least you should benchmark yourself against these points.

If you or your organisation have any concerns in the area and feel that a full review may be appropriate please contact us at charities@broomfield.co.uk. We can offer services ranging from a simple fraud checklist to a full fraud review.

TOP TEN TIPS (CHARITIES COMMISSION)

1. Make sure you have access to accurate and up to date financial information and monitor the charity’s financial performance against its budget

2. Make sure that cheques and cash are kept securely, banked promptly and recorded in the accounting records

3. Ensure cheque books are kept in a secure place – do not sign blank cheques

4. Make sure there are proper controls in place to protect income received by post and bank it as soon as possible

5. Make sure there are proper controls in place in relation to fundraising events, such as making sure two people handle and record the money received, that money is banked as soon as possible and that collection boxes are numbered and recorded

6. Keep proper records when claiming gift aid – HMRC give advice on what should be recorded

7. Make sure you have a clear policy on paying expenses to staff and volunteers and make sure they are authorised by someone other than the claimant

8. Make sure you have controls to ensure that all income from trading is recorded and received

9. Have monitoring procedures in place to make sure grants have been used for the agreed purposes

10. Report any suspected fraud to the police and to the Charity Commission

You can download a copy of our fraud Helpsheet here; this contains advice and information on spotting, stopping and reviewing fraud controls in your charity.

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

Tax diary March/April 2012

April 10th, 2012

1 March 2012 – Due date for corporation tax due for the year ended 31 May 2011.
19 March 2012 – PAYE and NIC deductions due for month ended 5 March 2012. (If you pay your tax electronically the due date is 22 March 2012)
19 March 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2012.
19 March 2012 – CIS tax deducted for the month ended 5 March 2012 is payable by today.
1 April 2012 – Due date for corporation tax due for the year ended 30 June 2011.
19 April 2012 – PAYE and NIC deductions due for month ended 5 April 2012. (If you pay your tax electronically the due date is 22 April 2012).
19 April 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2012.
19 April 2012 – CIS tax deducted for the month ended 5 April 2012 is payable by today.

Warning to organisations in Wales of increasing fraud risks

April 9th, 2012

Sarah Case, Director, Broomfield & Alexander

With the UK losing a staggering £38bn a year through fraud, an increase in the number of high-profile fraud cases, and a recent report which reveals that charities are foregoing 2.4 per cent of their income to fraudsters, organisations in Wales are likely to be particularly prone to becoming the victims of fraud.

The propensity of the would-be fraudster to commit their crime is largely dependent on both their motive and the existence of opportunity,

As unemployment, rates of taxation, inflation and other factors that put pressure on disposable income all rise, so to does the motivation to commit fraud.

Meanwhile, cuts in public spending, upon which so many organisations in Wales depend either directly or indirectly, mean that many organisations will have to reduce administrative costs. This often means that processes and controls which might have prevented or detected fraud are weakened, increasing opportunities to commit the crime.

There are a number of recent high profile cases showing the financial, operational and reputation damage that fraud can cause, including the conviction of the former finance Director at the London Philharmonic Orchestra, who was sentenced to four years in prison after taking at least £660,000 from the charity – and possibly considerably more than that.

A recent National Fraud Authority’s review says that fraud in the UK costs the country £38bn a year, with the charity sector losing £1.3bn a year, a sum equal to about 2.4 per cent of its total income.

Companies and charities should take some basic precautions in the current climate.

All organisations need to ensure sure that they vigorously review financial information, especially actual results against those budgeted. They also need to be explicit in ensuring that staff understand that fraud risk is monitored and that dishonesty will not be tolerated.

Extra caution will normally be required in any situation in which cash changes hands. Robust counter-fraud policies and procedures are critical to all of us.

You can download a copy of our Fraud Helpsheet here which details various anti-fraud measures helping you to spot, stop and review your fraud controls.

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