Saturday 7 January 2017

CMA Report: Impact on SMEs & The "War on Talent"

CMA Report:

Many of us will have listened to the national TV and radio coverage on the Competition & Markets Authority’s (“CMA”) report on retail banking and how proposed changes will affect personal banking. It was all about making it easier to switch bank accounts and using common technology.


The initiative however also applies to SME’s. The report advocates:
Better information about what different banks can offer a small businesses - comparison web sites
The publication of SME lending product prices
Standardised business account opening requirements 
Soft search credit searches that do not affect credit ratings
The secure sharing of information with potential lenders

The CMA have also decided that lenders must provide SME’s with the APR rate of products as they do with personal finance on products up to the value of £25,000.

The CMA’s orders come into force from the first quarter of 2017 and if you need advice on finance and banking arrangements, we can assist you in this process.

The "War on Talent"

The "war on talent" seems to be raging on. Large businesses are competing to recruit the best graduates straight from university and many firms are prepared to pay well for the most experienced candidates. As a result, all businesses need to manage the talent they already have.  Talent management is often considered to be an HR matter but the management team in any business should be involved in managing the firm’s most valuable resource – its people. Start by identifying the high potential people in your firm and work towards developing them and retaining them in the business.

Talent Development.

Create a strategy to hire the best people and nurture them throughout their careers. Managers should set the tone and work to develop employee’s skills and knowledge to help them to realise their potential in the firm. Your firm’s talent development programme should include theory and practice as well as coaching and mentoring sessions for your high potential employees. If your team feels like they have an opportunity to develop at their current firm, they are less likely to look for opportunities elsewhere.


Learn from Others 

Consider what talent management looks like at other firms within your industry sector. What do the biggest international firms do well and what could you offer to your team members that would differentiate your firm from the competition? Even if you run a smaller business, you can learn from the market leaders and implement some of their ideas. 


Recognition and Reward

Consider the skills, knowledge and performance of employees and identify those who are high performers and/or exhibit leadership potential. Formal performance appraisals should happen at least annually and “top talent” within the business should be sufficiently challenged with objectives which will encourage them to perform, while retaining their commitment to the firm. The appraisal process should be transparent in order to avoid any potential conflict between employees.

Continuous Professional Development

Good businesses tend to promote a culture of life long learning. All members of your team should be offered access to and encouraged to take part in training courses, development opportunities, etc. Investment in continuous professional development should be viewed by the firm as an investment in the future of the business as today’s “top talent” are the business leaders of tomorrow.

Thursday 5 January 2017

Don’t Miss Out On Tax Relief On R&D

The government is concerned that many small companies are missing out on generous R&D tax credits.  For the last year HMRC have been offering companies an advance assurance scheme to check whether or not their activities qualify before they make a claim. So far over 200 applications for advance assurance have been made.  There is a general misconception that R&D involves scientists in white coats but it should be remembered that R&D may be necessary to resolve a problem with a product or a process.

So some of the work by your engineers or technical staff may qualify as R&D. For Small and Medium-sized Enterprises (SMEs) the tax credit is 230% of the expenditure on qualifying R&D, and where the company incurs a trading loss, HMRC will provide an immediate cash refund rather than waiting until there is a profit in a future period.

By applying for advance assurance the company’s R&D claim will not be subject to an HMRC enquiry and HMRC will then accept the first three years of claims.  Companies eligible to apply for advance assurance:

•              turnover below £2m
•              fewer than 50 employees
•              no previous R&D claims

Then claim “patent box” in respect of your innovation

If the R&D results in a product or process that can be patented there is a further tax break available. The “Patent Box”, introduced in 2013, will provide a 10% rate of tax on profits derived from that product or process.

Thursday 29 December 2016

6 Retirement Planning Questions To Ask Yourself!

It has been said “Only two things are certain in life. Death and Taxes”, but what about before we reach the former? As we move into our 50’s and look towards our 60’s, health and retirement become more important than ever before. Assuming we are in reasonable health the big question we should ask ourselves is “will I have a comfortable retirement?”


Too many of us retire without any planning and things often do not turn out as we would have wished, and as we get older many of us cannot rely on others for support, we will be on our own, so maybe we should be planning and thinking about retirement a little earlier?

We cannot advise on everything about retirement and certainly you wouldn’t want us to, but below are a few questions to consider that may help you focus on the issues BEFORE you retire and maybe help you to think about some of the practicalities of retirement.

1.       Are you sure you want to retire?
2.       Have you set a date?  Are you flexible on your retirement date?
3.       Have you considered life away from work?
4.       Where are you going to live? 
5.       Have you discussed retirement with your family?
6.       Can you afford to retire financially?
  1. Create an investment plan.
  2. Do a dry run.
  3. Know what your expenses will be in retirement.
·         Visualise your new lifestyle, any (new) sources of income and price out revised costs.  More leisure, more family time, more charitable work, “pocket money” income, non-executive income, investment management time
·         What can you expect
i)         Early years expenses to be near pre-retirement levels but these should drop off as the routine of retirement kicks in BUT, at some point, health care & medical costs may drive expenses back up and you should be prepared for this.
ii)       If you have an employer-sponsored retiree health care plan, consider the possibility that your employer might cancel or trim this benefit in the future.
iii)      On average, retirees spend anywhere from 11% to 16% of their after-tax income on expected health care BUT don't forget (to plan to pay for) unexpected health care expenses, too.
d.       For couples, plan for two eras in retirement;
i)         when both are living, and
ii)       when either one is the survivor.
iii)      Pension choices can range from 0% to 100% to the survivor. Your initial retirement choice has a massive effect on the second retirement era.
e.       Get a good feel for life expectancy
i)         Life expectancy is the #1 driver for calculating your savings requirements

There is a lot more thought needed to retiring than first meets the eye and if you need guidance on pre-retirement planning then talk to us, we can help you focus on achieving your goals and helping you set a financial plan that will work for you.

Wednesday 28 December 2016

Getting The UK “Match Fit” for BREXIT!

Introduction
The Chancellor Philip Hammond announced that his first Autumn Statement will also be his last.  In future the main Budget announcements will be made in the autumn rather than the spring.


We were not expecting that many tax announcements, and many that were made we already knew about. He could not afford too many give-aways as he expects the economy to have a bumpy ride during the BREXIT transition.

There will still be a Budget next March but thereafter the annual Budget will be in the Autumn to allow longer consideration of the announcements and draft legislation before enactment the following summer.

KEY TAX ANNOUNCEMENTS:
Personal allowance to increase to £11,500 in 2017/18, rising to £12,500 by 2020/21
Higher rate tax threshold to increase to £45,000 in 2017/18, rising to £50,000 by 2020/21
National Insurance threshold to be raised to £157 a week for employees and employers
Corporation tax rate to reduce to 17% in 2020
Business tax “roadmap” to continue, in particular new rules for company losses
Insurance premium tax to increase from10% to 12% from 1 June 2017
More anti-avoidance measures, in particular a new VAT flat rate percentage for “limited cost traders”

HELP FOR THOSE JUST ABOUT MANAGING (JAM)

The Chancellor made a number of announcements that were intended to help those families that a just about managing, given the acronym - JAM. Raising the personal allowance to £11,500 and higher rate threshold to £45,000 will mean they pay less income tax and keep more of what they earn.

This group will also benefit from the increase in the National Living Wage to £7.50 an hour and the changes to Universal Credit.

The Universal Credit taper rate will be cut from 65% to 63% from April  2017 which will mean that fewer benefits will be clawed back as claimants’ income increases. The planned reductions in the overall benefits caps will however go ahead.

CORPORATE AND BUSINESS TAX CHANGES

Many of the corporate tax changes had already been announced and are set out in the business tax "roadmap" which details the government tax strategy for the life of this Parliament and beyond.

The currently 20% corporation tax rate is planned to fall to 19% from 1 April 2017 and then to 17% on 1 April 2020. The government is committed to keeping the UK corporate tax rate the lowest in the G20 and there is talk of a rate as low as 15% in the future.

The Chancellor raised concerns that there continues to be a rise in tax-driven incorporations as there are still tax savings compared to unincorporated businesses operating at a similar level of profit. That may suggest that the government is still considering the introduction of a new “look through entity” suggested by the Office of Tax Simplification so that the tax treatment will be the same, thereby creating a level playing field.

The new flexible corporate tax loss rules announced in the spring budget have been subject to consultation and will go ahead from 1 April 2017.

CAPITAL ALLOWANCES

From 23 November 2016 to 31 March/ 5 April 2019, businesses will be entitled to a 100% First Year Allowance (FYA) for the cost of installing electric charge-point equipment for electric vehicles. This measure is intended to complement the 100% FYA available for low CO2 emission vehicles and to encourage their uptake.

HIGHER RATE TAX RELIEF FOR PENSIONS CONTINUES

There has been much speculation that the government would further limit tax relief for pension contributions by removing higher rate tax relief. That measure would save the country £34 billion in tax but the only change announced concerns a new lower limit on amounts that can be saved in a pension when individuals have started drawing down from their private pension.


Currently the net effect of pension tax relief for a higher rate taxpayer is that saving £10,000 in a pension costs £6,000. The taxpayer pays £8,000 into their pension and the government tops this up by £2,000 with a further £2,000 deducted from the individual’s income tax liability, reducing the net cost to £6,000. For additional rate taxpayers the net cost would be just £5,500.

Remember that there is currently an annual pension input limit of £40,000 which caps the combined contributions by an individual and his or her employer. For those with high income this is tapered and can be as low as £10,000.

One new pension restriction that was announced was a measure to limit pension “recycling”. Those individuals who have started drawing down their personal pension will in future only be able to reinvest up to £4,000 in their pension.  Please contact us if you want to discuss pension planning further.

SALARY SACRIFICE RULES TO BE TIGHTENED UP

Many employers now provide flexible remuneration packages that allow employees to give up some of their contractual salary in exchange for benefits in kind. This can have the effect of saving tax and national Insurance contributions for both the employee and employer, particularly where the benefit provided is exempt from tax.

These tax and NIC advantages are to be withdrawn from 6 April 2017. Arrangements involving pensions, childcare, Cycle to Work and ultra-low emission cars will be excluded; existing arrangements will be protected for a transitional period until April 2018, and existing arrangements for cars, accommodation and school fees will be protected until April 2021.

The Chancellor has announced a wider review of the taxation of benefits, with the intention of making this area ‘fairer and more coherent’. This appears likely to have a significant effect on any employee who is in receipt of benefits from their employer.

OTHER EMPLOYEE BENEFIT CHANGES

MAKING GOOD

An employee who repays to their employer, or ‘makes good’, the cost of a benefit, avoids a tax charge. As previously announced, from April 2017 such making good will have to take place by 6 July in the following tax year if it is to be effective.

CHANGES TO TERMINATION PAYMENTS TO GO AHEAD

As announced in March, from April 2018 termination payments over £30,000, which are subject to Income Tax, will also be subject to employer’s NIC. Tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked. The first £30,000 of a genuine termination payment will remain exempt from tax and NIC.

“ABUSE” OF THE VAT FLAT RATE SCHEME

The VAT flat rate scheme is a simple scheme that enables small businesses to calculate and pay their VAT based on a flat rate percentage of total takings rather than deducting input tax on purchases and expenses and deducting that from total output tax on sales in the period. HMRC believe that the scheme is being abused by certain traders who have minimal costs who charge 20% VAT to their customers and then pay a lower percentage over to HMRC.

The flat rate percentage varies depending on the nature of the trade, ranging from 4% for food retailers up to 14.5% for IT consultants and labour only construction workers. A new 16.5% rate will apply from 1 April 2017 for businesses spending less than 2% of their turnover or less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel. Any business affected will almost certainly be better off returning to the normal VAT system with effect from that date. If you are currently using the flat rate scheme please contact us to check whether this change is likely to affect your business.


Please call us and we’d be delighted to discuss the above further.
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Wednesday 21 December 2016

The Theory Of Marginal Gains

Sir Dave Brailsford, Performance Director of Team Sky, and previously British Olympic Cycling, has been instrumental in leading a period of huge success in sport. He has transformed the sport during his tenure in terms of thinking, performance, and results, winning eight gold medals at the last three Olympics, and masterminding Tour de France wins in 2012, 2013 and 2015. So what can we learn from this and how could the theory of marginal gains be applied in business?


Brailsford’s philosophy of 'marginal gains' came from the idea that if you break down everything that goes into riding a bike, and then improved each by 1%, you will get a significant increase when you put them all together.

As well as looking at traditional components of success such as physical fitness and tactics, Brailsford's approach focused on a more holistic strategy, embracing technological developments and athlete psychology. He is noted for his emphasis on constant monitoring of key statistics, developing training regimes which target any observed weaknesses, however minor.

So how can this theory be applied to your business?
Start by identifying your goals. Consider where you want to be and how you are going to get there. Analyse relevant data and see if there is statistical evidence to support the attainment of your goals over time.

Next, spend some time thinking about the gap between current performance and your goals. Create a tangible measure for assessing how far away each goal is, and how well the business will need to progress in order to achieve those goals.

Now consider what is needed to close that gap. Break the gap down into its component parts and identify the differences between where the firm is now, and where it needs to be in order to achieve its goals. Look at successful firms in your industry sector and create a comparison document. What do they do well that you could implement in your business?

Execute your plan. Commit to carrying out the plan meticulously and reassure employees of the importance their roles and responsibilities play in the process. Use KPIs and regular reports to monitor progress and continually refine and tweak your plan as you move towards achieving your goals. If you stick to your plan you should get there in the end.