Welcome to Issue 20
of In Business
On behalf of everyone at Humphrey & Co we would like to wish all of our readers a very Merry Christmas and a happy, healthy and prosperous 2017.
Payroll and PAYE legislation
Payroll & PAYE legislation is ever changing, becoming more complex and making it harder than ever for business owners to manage the task in-house.
Recently we have seen the introduction of the employment allowance, payrolling of benefits in kind and shared parental leave, to name but a few, and most significantly the introduction of auto enrolment and workplace pensions. According to the latest information released by The Pensions Regulator, within the next six months, nearly 100,000 small and micro employers will reach their ‘staging date’ and must start their new duties.
If your business has already staged, then automatic enrolment should now be part of your usual processes when preparing the payroll. If your staging date has not yet arrived then now is the time to start planning for auto enrolment to avoid the risk of a fine. Many businesses may be unaware that the new auto enrolment duties will apply to them. Our payroll team are always available to assist with any queries our clients may have. We are able to offer a full payroll and pensions administration service, from the initial set-up to staging and beyond. If you do not require our support with processing your payroll but would like some help with getting set up for auto enrolment, then we can assist you with this too.
Making Tax Digital
There has been much in the press concerning the forthcoming changes affecting how taxpayers will interact with HM Revenue & Customs (HMRC), known as “making tax digital” (MTD). These changes will affect all tax payers.
Many clients have raised concerns as to how this legislation will impact upon them. The problem we have is that the changes have not yet been finalised and until such time as they are we cannot advise clients exactly of their new commitments.
In general terms the changes which are envisaged are:
- Digital tax accounts for all taxpayers (if you are an unincorporated business or landlord and have an annual turnover below £10,000 you will be exempt from the digital tax obligations).
- Businesses will be required to maintain their records digitally and file quarterly reports to HMRC.
- Taxpayers will be able to make voluntary payments on account of their tax liabilities throughout the year.
Although you will not need to start providing HMRC with digital updates until April 2018 (the current timetabled date), it is worth starting to consider planning for the transition to a digital tax world. Under the Government’s Making Tax Digital strategy, most businesses will be required to keep track of their tax affairs electronically and to update HMRC at least quarterly.
We will be able to help with your increased responsibilities. It will be essential that you update your records on an on-going basis so that you are able to provide the information to HMRC on time for each quarterly update. The reporting deadlines are likely to be tight.
We would recommend that businesses who do not yet use cloud (or web-based) accounting software consider making the change within the coming 12 months, possibly coinciding with their accounting year-end. Please do contact us if you need any assistance with this. As certified partners to provide training and advice, we would recommend the use of Xero and its associated add-on partners, to achieve these goals.
When the “making tax digital” requirements have been finalised we will of course provide clients with more information.
Tax Efficient Investments in EIS & SEIS companies
Enterprise Investment Scheme and Seed Enterprise Investment Scheme (SEIS) investments are becoming increasingly popular due to the generous tax advantages they offer.
Enterprise Investment Scheme (EIS)
The tax advantages
The EIS scheme offers the following advantages to investors:
- an income tax reduction equivalent to 30% of the amount invested for the year of investment or the prior year
- the opportunity to use the EIS investment to defer Capital Gains Tax (CGT) on the disposal of other assets
- if the EIS shares are sold at a gain, that gain is exempt providing the shares are held for at least 3 years
- if the EIS shares are sold at a loss, that loss can be used to relieve capital gains or converted into an income tax loss and utilised in the year of disposal or the prior year
- EIS shares qualify for Inheritance Tax Business Property Relief
What is an EIS qualifying company?
In outline an EIS qualifying company is unquoted (or quoted on AIM), is not controlled by another company and does not undertake an excluded trade. The company cannot have gross assets exceeding £15 million immediately before the issue of shares to investors and not more than £16 million afterwards. The company must also have fewer than 250 full-time employees at the time of issue. Further more, the company must control its subsidiaries, that is, own more than 50% of the ordinary share capital.
The following trades are excluded:
- dealing in land, commodities, futures of shares/securities
- dealing in goods, other than in an ordinary trade of retail or wholesale distribution • financial activities such as banking and insurance
- leasing or letting assets on hire
- providing legal or accountancy services
- property development
- operating or managing hotels
- operating or managing a nursing home
What is an EIS qualifying investment?
The investor must subscribe for shares (the shares must be issued by the company in return for the investment funds) that must be paid up in full in cash. The investor cannot be connected with the company, which includes:
- being an employee;
- being a director (unless unpaid or receiving only reasonable remuneration); or
- holding more than 30% of the ordinary share capital or voting rights
The maximum annual investment in an EIS qualifying company by a single investor is £1 million.
Seed Enterprise Investment Scheme (SEIS)
SEIS investments offer the reliefs of the EIS with the following modification:
- the SEIS income tax reducer is more generous at 50%
- the SEIS scheme gives the investor the opportunity to use the SEIS investment to extinguish up to 50% of the CGT payable on the disposal of other assets
What is an SEIS qualifying company?
As for EIS but with the following modifications:
- the company must have fewer than 25 employees at the time of issue
- the company can have no more than £200,000 in gross assets
- the company can only raise £150,000 under the SEIS scheme (this is a lifetime limit, not an annual limit). Additional funding must be sought under the EIS scheme after the SEIS funding round.
What is an SEIS qualifying investment?
The SEIS qualifying investment is the same as for EIS, but the maximum investment that can be made by any one person is £100,000.
This is intended as a brief outline of the rules as there are further conditions that must be satisfied and further complexities that require consideration when making an EIS/SEIS investment or when assisting a company in using the scheme.
If you would like further information on how you or your company could benefit under the EIS/SEIS scheme, please contact our Tax Director, Kevin Hancock. Email: email@example.com.
Research & Development Tax Reliefs
The Government views Research & Development (R&D) as essential for economic growth and provides generous tax reliefs for companies incurring eligible expenditure on qualifying projects.
Recent figures confirm that over 15,000 companies have been provided with over £1.4bn of support through R&D tax reliefs and HM Revenue & Customs (HMRC) are actively promoting the incentive to increase the number of claimants.
What projects qualify for R&D relief?
Projects that seek to achieve an advance in science or technology through the resolution of uncertainty will qualify for the reliefs, providing the advance sought is industry-wide and not just an advance for the claimant.
What is qualifying expenditure?
Expenditure on the following is eligible for relief under the scheme:
- staffing costs
- expenditure on materials consumed or transformed during the R&D process
- cost of work done by subcontractors and externally provided workers
What are the tax reliefs?
Companies will be able to claim an enhanced deduction equivalent to 130% of total qualifying expenditure against their profits, giving a total deduction for corporation tax purposes of 230%.
In addition, loss-making companies (or companies realising a loss after taking the enhanced deduction) can surrender losses to HMRC in return for a tax credit (taking the form of a cash repayment) equivalent to 14.5% of the loss surrendered.
We have extensive experience in assisting companies with successful relief claims, under the R&D scheme. In our experience, most clients are hesitant when it comes to making a claim for relief, as they are under the misapprehension that the relief is only available to businesses undertaking formal research (such as pharmaceutical companies), but this is not the case. We have assisted companies in a diverse range of sectors, from software development to fish breeding.
To explore the possibility of making a claim for R&D relief, please get in touch.
Projects span a range of industry sectors; from bespoke private homes to residential development, education & arts, leisure & hospitality, civic, mixed-use & commercial (including retail), master-planning, listed buildings and restoration. Clients range from PLCs to Private Clients and from Charities to Local Authorities.
Since founding the Practice in 2007, Liam's vision has been to create inspiring, innovative and rewarding-for-all architecture. Each member of his team shares both this vision and a genuine belief that buildings should be beautiful, engaging and thought-provoking and that architecture can help to positively shape the way in which people live their lives.
The practice is highly sustainable, as members of the AECB (The Association for Environment Conscious Building) and recently accrediting in PassivHaus design - the leading international low energy, design standard. “Our approach to sustainability is to keep any solution as simple as possible,” says Liam Russell, “Our clients from major investment funds as well as our individual clients all benefit from the same ambition.”
The practice had one of its projects described as ‘sublime’ most recently – a zero-carbon high-end private residential development in the South. The complexity of that project to meet the requirements of a demanding client, whilst also remaining comparatively cost effective was a challenge that the firm managed to overcome and highlights its dedication to sustainability as an approach. In addition, developing green-buildings has also become one of the best ways of encouraging their clients to differentiate from their competitors, by promoting their environmental integrity.
The public is placing increasing demands on businesses (and brands) to prove they are “doing their bit” and behaving responsibly with the means that they have. Corporate responsibility is now at the forefront of many consumers’ minds be it with the tax they pay, the buildings they build or the waste they create.
Looking to the future, Liam believes that the many developments in the industry, particularly those which occurred due to Brexit, will provide exciting opportunities for his firm. “Moving forward, there are developments in the industry that allow firms such as ours to develop and grow in the months and years ahead. I am pleased to say sustainable development is here to stay.
2017 sees the practice celebrate its 10-year anniversary and a chance for them to officially celebrate their recent multiple BUILD Architecture Award wins – one of which was for Best South East Leisure Project for Plumpton Tennis Club.
“We don’t always take time to celebrate our great achievements as there is always more work to be done, but this will be a chance to share our success with family, friends and clients and thank everyone for their great support over the last 10 years”.
Our Specialist Barrister Team
Following on from March when we mentioned the team attending the National Pupillage Fair at the Law Society.
In October, Craig Manser, the leader of the team, was a member of a panel at a Young Bar Toolkit Seminar to help barristers starting in practice. Craig’s remit was extensive; covering many aspects of the areas of which the new self-employed barrister needs to be aware, from record keeping, tax and national insurance, VAT compliance and budgeting, to the interaction of tax with pension planning.
As with all our talks we give to new professionals just starting out in their careers, the idea is to let those individuals know their responsibilities and also to ensure that they know we are there to help them.
For any readers who have questions for Craig, do feel free to contact him. Email: firstname.lastname@example.org
Wishing everyone a very happy Christmas and prosperous 2017
Please note that both our Eastbourne & Hove offices will be closed on the following days over the holidays:
Friday 23 December 2016 we close at 11.30am and closed all day:
Monday 26 December 2016 • Tuesday 27 December 2016 • Monday 2 January 2017
Local Charity Support
During 2016 we have supported RISE and are very appreciative to all members of our staff who have helped to raise money for this very worthy cause. In total we have raised in excess of £4,000.
For more information visit: www.riseuk.org.uk
The firm is pleased to announce that our Charity of the Year for 2017 will be You Raise Me Up. This is a local charity offering financial and emotional support to those families that have lost a young adult between the ages of 16 and 25.
For more information visit: www.youraisemeup.co.uk
We will update you on the funds raised during 2017 in future newsletters.