Will employees give away their rights in return for shares? Reply

Its an interesting concept and tax advantages sound good too.

The Chancellor of the Exchequer, the Right Honourable George Osborne MP, has today announced plans for a new kind of employment contract called an owner-employee. New employee-owners will exchange some of their UK employment rights for rights of ownership in the form of shares in the business they work for, any gains on which will be exempt from capital gains tax.

Companies of any size will be able to use this new kind of contract, but it is principally intended for fast growing small and medium sized companies that want to create a flexible workforce.

Under the new type of contract, employees will be given between £2,000 and £50,000 of shares that are exempt from capital gains tax. In exchange, they will give up their UK rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training, and will be required provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual 8.

Employee-owner status will be optional for existing employees, but both established companies and new start-ups can choose to offer only this new type of contract for new hires. Companies recruiting employee-owners will continue to have the option of inserting more generous employment conditions into the employment contract if they want to.

Legislation to bring in the new employee-owner contract will come later this year so that companies can use the new type of contract from April 2013. The Government will consult on some details of the contract later this month.. Employee-owners receiving full capital gains tax relief on the shares awarded as part of their contract will still be eligible for existing employee share ownership schemes such as the Enterprise Management Incentive.

http://news.bis.gov.uk/Press-Releases/No-capital-gains-tax-on-employee-share-ownership-for-new-employee-owners-68152.aspx

steve@bicknells.net

Where will you get Financial Advice from January 2013 1

From January 2013 advisers are preparing to dump their unprofitable clients, if you have investments worth less than £500k this could be you.

This story was covered in the Investors Chronicle this week.

Currently IFA’s and advisers are paid commission but from January they must charge fees, typically starting from £250 per hour.

The new regime is called the Retail Distribution Review (RDR).

Lloyds Bank have already said that they will stop their mass market advice from November, Barclays have already pulled out of face to face advice.

Where will you get your advice?

steve@bicknells.net

Employer v’s Employee Pension Payments (Net Relevant Earnings) 9

Currently the maximum pension payments allowed per year are £50,000 this for Employee and Employer payments, however, if your net relevant earnings (NRE) are below £50,000 your personla payments will be capped at the higher of your employment income or £3,600. (Carry Forward may be available)

NRE excludes Dividends and if your personal pension payments exceed the NRE then you will need to declare the over payment on your self assessment return and pay tax on it.

This can be a big issue for company directors-shareholders who often take a large part of their income in dividends.

The solution to this is for the company to make employer contributions. Employer contributions count towards the £50,000 limit but are ignored for the NRE cap.

The attached link is useful article on this subject

http://www.scottishlife.co.uk/scotlife/web/site/Adviser/TechnicalCentralArea/Informationguidance/Contributions/Employercontributions.asp

But there are further explanation on Accountingweb, Skandia, Indicator Tips & Advice Tax (4 October 2012)

steve@bicknells.net

How can £4m disappear in a black hole in the Accounts? Reply

That’s exactly what happened at London Black Cab maker Manganese Bronze

http://www.bbc.co.uk/news/uk-england-coventry-warwickshire-19255918

The company blamed the accounting mistake on its new IT system, which meant losses, dating back several years, had been understated by £3.9m.

Coventry-based Manganese Bronze saw its shares fall 34% after saying it expected “substantially higher” losses for the first half of the year.

Manganese said a combination of “system and procedural errors” meant a number of transactions and balances were not transferred to the new IT system when it was introduced in August 2010.

Basically Invoices went missing during the transfer between systems.

If you are changing accounting system:

1. Choose your new software carefully and ask for references

2. Have a migration plan

3. Makesure your data is safe, secure and correct before you switch

4. Test the new system before your go live

5. If necessary parallel run the systems

steve@bicknells.net

Business Property Renovation Allowance as used by the rich and famous Reply

Earlier this year there were a number of press articles such as

http://www.thisismoney.co.uk/money/celebritymoney/article-2083797/Wayne-Rooney-cuts-tax-investing-office-park.html

So what is BPRA and how does it work?

BPRA is a form of Government Aid given as a Tax Break in certain areas of the country for the renovation and reuse of commercial property.

You can purchase property for your own use or invest in a scheme with others.

Investors might in theory invest £100k but but scheme might borrow 75% leaving the investor to put in only 25%, but the investor will get 100% tax relief on the £100k (“initial allowance”).

BPRA will be available until March 2017 when its likely to be withdrawn, it could also be capped from 2014.

Its a complicated high risk investment and authorised advisors need to able to advise on unregulated collective investment schemes.

If you sell the investment within 7 years a tax charge will be triggered (“balancing charge”) effectively withdrawing the “initial allowance” this tax charge can also be triggered by death.

Income Tax on Profits and Capital Gains on sale will apply.

steve@bicknells.net

 

 

 

Should the wealthy pay more tax? Reply

Its a popular theme. Earlier this week Danny Alexander said to the wealthy ‘we are coming to get you’.

http://www.guardian.co.uk/politics/video/2012/sep/25/danny-alexander-tax-avoiders-video

When it comes to tax dodgers and moving money and assets overseas he may have a point but what about mansion tax covered in the same speach. Is a tax on property the way to go?

France now want their top earners to pay 75% tax!!

http://www.bbc.co.uk/news/world-europe-17189739

But will this just lead to businesses and individuals moving to lower tax countries?

Will the UK be a winner, the UK Government want us to have the lowest corporation tax rate in Europe and we are moving towards a main rate of 20%.

steve@bicknells.net

Donate Trade Pounds to Charity and get Cash Back 1

Bartercard has many charity members who all love getting donations http://belmontmail.co.uk/ZFF-YPOC-E24SJ4HO59/cr.aspx

But often charities and those making donation fail to claim the cash back relating to the donations, for example:

Gift Aid

25% tax refunds in cash http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/GivingMoneyToCharity/DG_10015097

This means that for every £1 donated, you can claim an extra 25 pence.

Individual Tax Relief

If you pay higher rate tax and make a donation through Gift Aid you can claim some tax back too.

Corporation Tax Relief

When your company makes a qualifying donation to a charity the amount paid is treated as a ‘non-trade charge’ – this means your company can make a claim in its Company Tax Return to set the amount of the donation against its taxable profits.

steve@bicknells.net

 

What if my tax adviser gets it wrong…… 2

I have seen some great articles on this recently for example ‘Tips & Advice Tax’ (Indicator Issue 22 September 2012)

A few years ago the tax rules were updated and the government added one aimed at ensuring those who took “reasonable care” in preparing their tax returns shouldn’t be penalised if the return is incorrect.

But HMRC don’t always remember the “reasonable care” rule for example J R Hanson and HMRC (H and HMRC) as reported in ‘Tips & Advice Tax’ Article HMRC overzealous on penalties.

H incorrectly applied a capital gains tax deduction he wasn’t entitled too and was hit with penalty for £14000, however, H used an accountant to prepare the returns and he had shown reasonable care so HMRC lost the case.

In addition under current rules HMRC could not pass the penalty to his accountant, so that means the accountants PI cover remains intact.

Here are some tips on how to show you have taken reasonable care:

1. You must supply your adviser with all the information that is relevant, don’t hold back information

2. Check your tax return agrees with the information you supplied

3. Ask about entries you don’t understand and keep records of the answers, you don’t need to become an expert you just need to keep notes

There are cases where reasonable care hasn’t been a successful defence for example Mr Waseem Shakoor v HMRC [2012] highlight by www.rossmartin.co.uk as they point out in the this case the taxpayer didn’t follow the the 3 steps above and it was commented at the Tribunal that this was:

“a case of shutting one’s eyes to what either was or ought reasonably to have been seen as incorrect advice – if, indeed, any such advice was actually given –a matter upon which we entertain significant doubt.”

steve@bicknells.net

 

Pay Day by Pay Day Tax Relief 3

Pay Day by Pay Day Tax Relief also know as Pay Day Relief Models have been used by Umbrella Companies and Employment Businesses but I have no doubt other business have used them too.

Basically the employer applies for Dispensations for Expenses and then without a valid employee claim reduces the employees pay to cut PAYE and NI costs.

There is a great example to be found on the Ross Martin website

http://www.rossmartin.co.uk/index.php/employers/employee-expenses/957-dispensations-agencies-and-umbrella-companies

HMRC issued a further statement in August

http://www.hmrc.gov.uk/news/news290812.htm

Its worth reading to makesure your procedures are HMRC Compliant

steve@bicknells.net

When the HMRC inspector visits get some extra help 2

HMRC campaigns and task forces are on going and Compliance checks are becoming common.

So its worth knowing that you can appoint an extra advisor to help you answer the inspectors questions, its quick and easy to to arrange using this link

http://www.hmrc.gov.uk/forms/Comp1.pdf

Its a temporary authorisation that does not cancel or amend permanent authorisations ie your normal advisers/accountants

HMRC have also issued new Fact Sheets for Compliance Checks and Penalties

http://www.hmrc.gov.uk/compliance/factsheets.htm

Sometimes we all need a little help and specialist advice can be invaluable

steve@bicknells.net