4 simple & easy tips for Change Management!

In light of the recent Brexit decision, one thing is inevitable in business in the coming months and years and that is change.

Whichever way you decided to vote, the result of the referendum means that you and your business must be prepared to change and adapt to a new business environment.

Here are a few change management tips for your business:

Create a plan and set realistic goals

People tend to resist change so create a plan that outlines each step of the change process, the key stakeholders, the timeline and the deliverables. Ask different staff members from across the business to feed into this plan. Someone might have a great idea to contribute to the plan – sometimes all you need to do is ask.

Communicate

Communicate your vision clearly to your team. Identify what it is that you are trying to achieve through the change process. What is in it for your team? The best managers can explain this in a way that inspires the team to get involved and move forward with the plan.

Maintaining momentum

Your employees may agree with your vision initially, but they're likely to become frustrated or disillusioned along the way, especially if they don't see immediate progress. Find ways to keep the conversation going through short town hall meetings, staff surveys and casual conversation. Ask the team for their honest feedback regularly and be willing to listen. Be honest about what you don't know, and commit to updating employees when those details are finalised.

Get the team on board

Getting the senior management team on board is relatively easy. They should be able to see “what’s in it for them.” However to succeed in managing change in your business you need to get your middle management and your junior staff members on board too. Ask representatives from different groups across your business to get involved, share their views and take ownership of different aspects of the change process.

Are you using Dropbox for your business?

Dropbox is among the simplest and most user-friendly cloud storage and file-syncing services. It gives users access to files from nearly anywhere. You can install Dropbox on virtually any computer or mobile device and dozens of other apps support integration with Dropbox, too. Dropbox Business is aimed at the business and professional market. Free version offers up to 16 GB. For larger firms there is also the option to upgrade to Dropbox Enterprise.

Dropbox Business supports real-time collaboration for Office Online users, so you and your colleagues can access and edit the same Dropbox file at the same time while seeing one another's changes appear on the screen as they happen.

It includes useful extras such as remote wipe, unlimited file recovery as well as email and telephone support services. You begin with 1 TB (1,000 GB) of storage, but can request more once you reach that limit.

In terms of collaboration, you can share files and folders with Dropbox users regardless of whether they're part of your Dropbox Business account, but external users are limited by their plan's storage limits.

In addition to a desktop app, Dropbox also provides mobile apps for iOS and Android, all of which sync with your online account. The mobile apps let you create files and folders and share them.

The system is good but it isn’t perfect. You can't edit documents inside Dropbox itself. When you click the open button on a file, you're redirected to Microsoft Office 365 online, where you have to either set up an account or log into an existing one. This isn't ideal but given that most businesses use Microsoft Office, shouldn’t prove to be too much of an issue.

Dropbox Business offers lots of options in terms of security permissions, encryption, etc. and users can prevent other members from adding, editing, or deleting files in a particular folder.  Dropbox business costs from £11 per user per month (based on a minimum of 5 users). You can also choose a free 30 day trial of the service.

Seed EIS Relief Denied

The Enterprise Investment Scheme (EIS) and the recently introduced Seed EIS provide generous tax breaks for investors who subscribe for shares in qualifying companies provided the correct procedures, and in particular the correct forms, are used to claim tax relief.

Seed EIS provides income tax relief of 50% of the amount invested and EIS 30% relief, both given by way of a deduction from the investor’s income tax liability. Furthermore there is an exemption from capital gains tax when the shares are sold after 3 years.

In a recent case before the Tax Tribunal, tax relief for Seed EIS investors was denied by HMRC and the Tribunal as the directors had filled in the wrong HMRC forms! They tried to save costs by not using professional advisers - a very costly mistake!

Contact us for all your accounting and taxation needs:
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

New Rules For Buy-To Let Landlords - August 2016!

The 2016 Finance Bill sees the introduction of important tax changes for property investors that were originally announced in the 2015 Budget.

From 6 April 2016 onwards, there are important tax changes affecting the replacement of furnishings for buy to let landlords. 6 April 2017 will see the start of mortgage interest being restricted to basic rate only.

Wear and tear allowance abolished

Until 5 April 2016 landlords who were letting residential property on a fully furnished basis were able to claim a 10% "wear and tear” allowance towards the cost of the depreciation of furnishings. This simple allowance was an alternative to claiming a deduction for the actual cost of replacing furnishings which was a concession that applied up until April 2013.

So for example, where the gross annual rent was £9,000 there would have been an allowable deduction of £900.

This change seems to be inconsistent with the government's stated desire to simplify the tax system.

The new relief for replacement of furnishings in property businesses

Up until April 2013 it used to be the case that where furnishings were replaced in a property rental business there was deduction for the cost of the replacement items in arriving at rental profits.

This was never a statutory deduction and was accepted by HM Revenue and Customs on a concessionary basis. That concession was controversially withdrawn at relatively short notice in 2013 so for a three year period, unless landlords were eligible for the "wear And tear" allowance there was no relief for furnishings.

As the result of extensive lobbying by the accounting profession, and the residential landlords association, the relief has been restored on a statutory basis from 6 April 2016 by the latest Finance Bill.

The new relief provides a deduction for the actual cost of replacing furniture, furnishings, appliances and kitchenware for the use of the tenant in the let property.

Note that there is no allowable deduction for the initial fitting out of the rental property, just the cost of replacement Items. Furthermore the allowable tax deduction applies on a like for like basis so if there is any significant Improvement then the tax relief will be restricted. So, for example, where a washing machine is replaced with a washer/dryer costing £600, tax relief would only be available for the cost of the equivalent washing machine costing say £400.

No renewals relief for other businesses

Although the renewals basis has been reintroduced for rental businesses from April 2016, it has been withdrawn for other trading business. This relief was previously referred to as the "loose tools" deduction.

Consequently there is no longer relief for the replacement or alteration tooling. In future HMRC would expect such expenditure to be dealt with through the capital allowances rules, most likely by making a short life asset claim.

No change for Furnished Holiday Lettings

The above changes to the renewals basis do not apply where the property rental business falls within the definition of a qualifying furnished holiday lettings (FHL) business.

Such businesses continue to qualify for capital allowances when plant and machinery used In the course of that business is acquired and would benefit from the100% write off under the Annual Investment Allowance rules.

There are strict conditions for the property business to qualify as FHL, the most important condition being that the property is let for at least 105 days (15 weeks) in the tax year, and comprises a series of short term lets.

Note that under the capital allowances rules, relief is not just available for replacing assets but also for the initial furnishing of the holiday property.

Interest relief restriction starts 6 April 2017

As previously announced the current deduction available for mortgage interest and other finance costs starts to be phased out from 6 April 2017.  In 2017/18 only 75% of finance costs will be deductible in arriving at rental profits, the remaining 25% will only qualify for basic rate tax relief.

In 2020/21 there will be no deduction against rental profits for finance costs, just a basic rate tax reduction. This will not only affect higher rate taxpayers but will also have the effect of pushing some landlords into higher rates of tax.

Currently where a buy to let landlord has £10,000 a year net rental profits after deducting £30,000 mortgage interest, in  2020/21 his rental profits would increase to £40,000.

If his other income is £25,000 a year, the rents would currently be taxed at basic rate 20%. Assuming his other income stays the same, his taxable income would increase to £65,000 with a significant portion being taxed at the 40% higher rate. The £30,000 mortgage interest would only qualify for a £6,000 (20%) set off against the 2020/21 tax liability.

Note again that the restrictions do not apply to any part of the amount borrowed for the commercial letting of furnished holiday accommodation. Furthermore, the restriction does not apply to loans for property development trades, or loans secured on a let dwelling house which are applied for the purposes of a trade.

If you have any questions, please feel free to contact us: 
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Brexit – What are the Tax Implications?

One of the main reasons that individuals voted "leave" was to restore fiscal sovereignty to the UK so that we are able to set our own laws, in particular tax law, without interference from Brussels.

Significant tax changes currently require “State Aid” approval and we have seen many recent tax changes forced on us by the EU such as the extension of Furnished Holiday Letting treatment to EU properties and the extension of EIS and EMI to companies with a PE in the UK instead of trading wholly or mainly in the UK.

New Chancellor, a new tax strategy?

George Osborne, a leading member of the “remain” campaign, pledged to cut corporation tax to encourage investment in the UK in response to the referendum result. In an interview with the Financial Times, the former chancellor said he would reduce the rate to below 15%, although he did not mention any timescale and may not remain chancellor post Brexit. It will be interesting to find out whether the new chancellor Phillip Hammond will adopt a similar approach to corporation tax

VAT is the one tax that is likely to see the most significant changes as a result of leaving the EU. However, it is well known that it will take 2 years following the UK’s notification of Article 50 before we leave the EU. So until then, businesses will trade as normal, with business to business trade (“B2B”) in the EU being largely VAT and Duty free.

Possible VAT changes

VAT is a European tax.  Withdrawal from the EU means that UK VAT law will no longer be governed by the EU VAT Directive.

In Budget 2016 it was announced that VAT would raise £138bn revenue for the UK Treasury in 2016/17, second only to income tax and about £100bn more than corporation tax.  Therefore, it is expected that VAT or something equivalent will remain in place as an important revenue raiser for the UK, but the UK will in future have more freedom to set VAT rates.  On the plus side, more zero-rating may emerge, whereas on the downside VAT may be raised above 20%, to cope with a possible recession and to generate additional revenue.

The biggest VAT impact will be the change to Intra-EU trade.  At the moment B2B transactions are zero rated for VAT purposes. In future such sales will be imports into the EU and subject to EU VAT, which has a number of potential consequences. On the plus side, there will be no more Intrastat or European Sales Lists (ESLs) for UK business to complete.

However, businesses and their advisers will need to consider the following points:

• Will a local EU VAT registration be required?
• There will be increased freight agent costs of arranging imports and exports. There will be a requirement to “enter and clear goods”;
• Whilst UK businesses should still be able to recover VAT on overseas expenses, the system is paper based and is a more onerous and lengthy procedure.

Possible Customs Duty changes

This potentially has a major impact and very much depends on the negotiation of a Free Trade Agreement (“FTA”) with the EU.

Without an FTA, the normal WTO tariffs apply.

For example, for a UK car manufacturer selling cars to its’ French subsidiary would result in a 10% duty tariff, being imposed on the transaction.  Therefore, an FTA is critical to businesses with EU supply chains.

Contact us to know it better and what changes your business should make!
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com