A new gain in the tax department at Warrener Stewart

19 December 2014 •

Merger with Tax specialist Whins Associates

The tax team at Warrener Stewart has enjoyed one of its busiest years of tax planning for corporate and private clients based in south west London. 

In order to strengthen its capacity in this area Warrener Stewart has acquired Whins Associates, a tax-specialist London accountancy practice established in 2011 by Francis Kershaw, based in Chelsea. 

“Efficient tax planning is all about building an ongoing relationship between your Chartered Tax Advisor and you the client,” notes Damian Talbot, director of tax at Warrener Stewart. “We have been busier than ever advising many owner managed businesses this year, which is why we are delighted that as a result of the merger, Francis has joined the team as a senior tax advisor.”

In the nine years since graduating from Warwick University with a degree in economics Francis has immersed himself in the world of taxation. He has worked for two of the Big Four accountancy firms, initially spending five years with PwC where he completed his training, before moving to KPMG. 

In 2012 Francis made the brave decision to leave the security of the corporate world to start his own accountancy business as he wanted to work with owner-managed clients taking a more hands on approach to advising them. For the past two years he has concentrated on building a profitable business working with several clients who will move with him to Warrener Stewart.

“Francis has the perfect background and thorough understanding of corporate and private tax that our clients need,” comments Damian. “He has a very forward looking approach and moreover appreciates first-hand the challenges owner managed businesses face. He will be helping a range of corporate and private clients maximise their value through efficient tax planning, while continuing to look after his original client base.”

Review of the 2014 Autumn Statement

04 December 2014 •

In his 2014 Autumn Statement the Chancellor announced a number of significant changes. Here is our initial reaction to these changes, as well as an overview of some of the key points that could affect you and your business.

Stamp Duty Land Tax

This was one of the key changes announced in the Chancellor’s Autumn Statement and the changes are anticipated to deliver savings for up to 98% of the house purchasing public. Rather than a stepped method of calculating Stamp Duty Land Tax on acquisitions of residential property, from 4th December 2014, this will change as follows:

Property Value (£) Tax rate charged on part of property price within each tax band (%)
0 – 125,000 0
125,001 – 250,000 2
250,001 – 925,000 5
925,001 – 1,500,000 10
1,500,001+ 12

Broadly, the new calculation mechanism means a lower SDLT charge on values up to £937,500, but a higher charge for property purchase above this value.

Entrepreneur’s Relief Changes

Changes have been announced to the availability of Entrepreneur’s Relief on the incorporation of sole trader and partnership businesses into Limited companies.  From the 3rd December 2014 Entrepreneur’s Relief will no longer be available on the transfer of good will between these connected parties and no corporation tax deduction is available within the company for the amortisation of this acquired goodwill for the company.

ISA Transfers

The Chancellor announced that he will now allow for ISAs to be transferred to surviving spouses on death of an individual and retain the tax benefits of the ISA “wrapper”.

Pension Transfers

As previously announced the onerous 55% tax charge payable by pension schemes on transfer at death has been abolished. Now surviving family members can receive these pension funds free of tax.

Remittance Basis charge

A new rate for UK resident/non-domiciled individuals utilising the remittance basis has been announced. Individuals who have been a UK resident for more than 17 of the last 20 years will now incur a £90,000 remittance basis charge if they wish to utilise the remittance basis.

In addition, the £50,000 remittance basis charge which is incurred by UK resident/ non-domiciles who have been resident in the UK for more than 12 years has been increased to £60,000.

If you would like to talk to one of our tax team and explore what this Autumn Statement could mean for you and your business, please call 020 7731 6163

No responsibility for loss occasioned to any person acting on or refraining from action as a result of the material in this email can be accepted by us.

Fulham Boys School a new secondary school in Fulham officially opened

02 December 2014 •

Having been assisting the newly established Fulham Boys School as auditors and tax advisors for the last couple of years, Warrener Stewart was delighted to attend its official opening as a new secondary Free School in south west London on 21st November.

Nick Morgan, Ryan Lane and David Bayman joined with local dignitaries including The Rt Hon Greg Hands MP and the Rt Revd Paul Williams, Bishop of Kensington to celebrate the opening of London’s first secondary Free School for boys. In recognition of the school’s hard work and the Government’s commitment to the development of more Free Schools Nick Gibb, Minister of State at the Department for Education also attended the official opening.

Local parents have worked tirelessly with FBS governors and staff over the past five years to access government funding to start a Free School.  Warrener Stewart were delighted to have been appointed as the school’s auditors from the outset and during recent years to have worked alongside the governors to ensure the school could open to their first Year 7 intake in September 2014.

Warrener Stewart’s director, Nick Morgan who is the Firm’s principal contact with FBS commented; “This school is great news for Fulham and the surrounding area and promises to deliver great things in the future. It’s the culmination of 5 years hard and thankless work by the original founders and others who have joined them along the way. We look forward to being a small part of the evolving success.”
 

A landlords guide to tax liabilities

13 November 2014 •

Navigating the rental market as a landlord can often be confusing. While there are many rewarding aspects to being an investor, there are also tax obligations to bear in mind.

Writing in this month's KFH's London Property Market Blog, our tax expert Ryan Lane outlines some allowable expenses landlords can enter on their annual tax return.

If you are planning on letting a property in the UK, your rental income profits will be subject to income tax. This is fairly standard, however there are still many who don’t fully understand what this entails and what implications you may face should you not adhere to HM Revenue & Customs (HMRC) procedures. In order to avoid any penalties, a self-assessment tax return must be submitted annually to HMRC. Your profits will then be subject to tax at a rate of 20%, 40% or 45%, depending on your total income in that tax year.

There are ways in which you can mitigate some of your tax liabilities. One way is to ensure that you have deducted all the allowable expenses from your total rental income as you would only be taxed on your net rent. The list of allowable expenses is comprehensive and includes contents insurance, lettings agent’s fees, maintenance and repairs to the property and the cost of services. According to the Landlord’s Energy Saving Allowance, you could also reduce your tax bill by up to £1,500 by installing energy saving products. If you’re a landlord with multiple properties, employing an accountant may be beneficial to ensure you are making the most effective use of your tax allowances.

HMRC has strict procedures in place. These include timelines on notifying HMRC of new sources of income and deadlines on filing tax returns. Failure to comply could lead to tough financial penalties for you. For example, failing to notify HMRC of taxable rental income could result in a fine of up to £3,000. HMRC is aware of a large tax shortfall from landlords failing to register their property business. To address this problem, it has introduced the Let Property Campaign. For landlords who have failed to declare their correct rental income, the Let Property Campaign provides the opportunity to get their tax affairs in order. Reporting undisclosed income now, will mean exposure to penalties will be limited from 100% of the tax due, to a maximum of 20%.

If you have any questions about tax requirements for landlords please contact one of the Warrener Stewart tax team at our Fulham offices.

Double entry at Warrener Stewart

31 October 2014 •

Two new recruits join the Fulham chartered accountants

To meet the growing accountancy and tax needs of our clients, Warrener Stewart has recruited two new trainees to join their Fulham offices.

Suzie Chadwick, who has a degree in Economics and Accounting from the University of Southampton, joins as a trainee accountant. Whilst Ryan O’Connor is the latest trainee tax technician to be recruited to the expanding tax department.

Both new recruits have chosen to continue their training whilst they work, combining a heavy schedule of exams alongside working for many of the owner managed businesses that Warrener Stewart handles.

For Suzie, joining a medium sized firm of chartered accountants like Warrener Stewart gives her the opportunity to gain experience across a wide range of businesses. Commenting upon her appointment she said; “Following my degree I started work within the financial sector before deciding to train as a maths teacher. Whilst teaching was rewarding, I wanted to learn and gain more skills; this is the perfect way to develop my accountancy career whilst gaining experience in all aspects of client handling from VAT returns to preparing accounts for audit.”

The opportunity to study and work alongside the experienced tax professionals at Warrener Stewart was the driving force for Ryan O’Connor to become part of the tax team as a trainee tax technician. After graduating in Sports Rehabilitation, Ryan decided upon a change of direction into tax. “I wanted to make the move to London and work in taxation, when an opening came up within the tax department at Warrener Stewart.” 

HMRC spam email

11 September 2014 •

Based on our experience, it is at this time of the year that spam email traffic, purportedly from HMRC, starts to increase.

These emails advise the recipients that they are due a tax refund and requests details of bank accounts in order that the refund can be sent to them.

It is HMRC policy that they will NOT send direct emails to taxpayers detailing tax refunds or requesting personal information and if you do receive an email of this kind, we recommend that you delete it. 

Simply get in touch with us if you have any questions regarding your tax position.

Warrener Stewart joins the ICAEW Business Advice Service

28 August 2014 •

Why it is some businesses thrive and other’s barely survive?

Professional business advice for SME’s and startups can frequently be the difference between their survival and their failure. The professional membership organisation for chartered accountants, the ICAEW, recognises that as qualified business advisors chartered accountants are perfectly placed to help fledging business so has introduced the Business Advisory Service (BAS).

Fulham based chartered accountants Warrener Stewart has been helping owner managed business of all sizes make sense of their numbers for the last 30 years. Joining the ICAEW’s BAS scheme seemed a natural progression to helping business owners, many of whom are based near Warrener Stewarts’ offices in SW6.

Under the ICAEW’s scheme, businesses who are not currently using Warrener Stewart are offered a free, one hour consultation to discuss a business related matter with one of their expert principals.  Commenting on the scheme, company director Gary Chapman, who signed Warrener Stewart up to BAS, said:

“So many businesses face the same concerns throughout their lifecycle, such as developing and implementing a business plan, through to understanding their tax liabilities and how to access finance, plus knowing how to restructure their company.  Since we work with such a wide variety of owner managed businesses we felt that we had a wealth of experience that new clients could benefit from so happily signed up to BAS.”

Warrener Stewart raises over £3,000 for children’s charity Shooting Star Chase

15 August 2014 •

Nick Morgan, Jon Last and Ariane Cole have just completed the Prudential London-Surrey bike ride raising more than £3,000 for the children’s hospice charity Shooting Star Chase.

Despite torrential rains and howling winds the team completed this challenging ride which was cut short by 16 miles due to the treacherous weather conditions. More than 20,000 people took part in and completed the ride, cheered on by massive crowds of supporters and well wishers who lined the route.

The ride, which took place on Sunday 10th August, celebrates the legacy for cycling created by the London 2012 Olympic Games. Cyclists set out from the Queen Elizabeth Olympic Park and followed a 100 mile route on closed roads passing through the Richmond, Kingston upon Thames, Walton-on-Thames, Byfleet, Ripley, West Horsley, Shere, Arbinger Hammer, Dorking, Box Hill village, Leatherhead, Oxshott, Esher and then back to the Mall via Raynes Park, Wimbledon Village and Putney,  a route made famous by some of the world’s best cyclists in the 2012 Olympics.

Nick Morgan said, “It’s the longest any of us have ridden (in recent years for sure!) and we had been training for several months. It was a great event, despite the terrible weather. Huge crowds lined the route and cheered us on which was really fantastic. We actually finished in the sunshine - which was a bonus, although I am, of course, devastated that Ariane beat me by 8 seconds and Jon by 5 seconds! It would be churlish to mention my puncture at about 70 miles wouldn’t it?? Fair play to Jon who waited to ‘Pace’ me back to the front, but we failed to catch Ariane who took all the Glory on the Mall. Registration for next year’s event is in a few days and Jon and Ariane are both keen to sign up. I hate those Guys!!”.

Shooting Star Chase is a leading children’s hospice charity caring for babies, children and young people with life limiting conditions as well as providing much needed support and respite for their families. If you would like to make a donation please visit https://www.justgiving.com/Nick-Morgan8
 

Fulham Boys’ School set to open September 2014

22 July 2014 •

The Audit team at Warrener Stewart is delighted at the news that newly established Free School, Fulham Boys’ School, has been given the go ahead to open at Gibbs Green for the first time in September 2014, despite political scares that the school might be axed at the last minute.

The school which has been established through years of hard work by parents and governors approached Warrener Stewart to taken on the job of auditing their accounts, since under the new laws governing the administration of Free Schools they must provide audited accounts.  Warrener Stewart’s previous experience within the educational sector and their proximity to the Fulham based school meant the team of registered auditors at Warrener Stewart was the perfect choice. 

Commenting upon the good news, director Nick Morgan said; “The school has toughed out the recent political difficulties it faced, which only a couple of weeks ago seemed terminal.  Michael Gove and Boris Johnson were both involved personally.  We are delighted that they have finally been granted a temporary site at Gibbs Green to allow them to open this September.  It will be a huge relief to all pupils, parents and staff who would otherwise have been left with no school, just a matter of weeks before the new school year.” 

www.getwestlondon.co.uk/news/west-london-news/triumph-fulham-boys-school-opening-7432419

Being Tax Efficient

10 July 2014 •

Being tax efficient can help both you and your business save money. Tax review should be an ongoing process that involves regular dialogue with your tax advisor, in order to review your tax position and ensure you understand it. A regular tax efficiency check conducted by our tax team at Warrener Stewart can help you establish that you are paying the right level of tax. Furthermore, it will explore how we can make use of tax exemptions and tax planning with a view to reducing your overall tax liabilities.

The tax team at Warrener Stewart often finds that new clients have overlooked the tax implications of their own personal assets and also the impact tax can have on their business. The tax team believes  there are a few basic practices that can easily be implemented to help clients ensure their personal and business tax affairs are managed efficiently.

Have you got the basics covered?

  • Have you made a Will?  Making a Will is one of the biggest and most overlooked aspects of tax planning. Dying intestate has many tax implications both for your business and your private estate. It is wise to spend time drawing up a will that clearly defines who benefits on your death and how assets are disposed of. Getting this wrong can affect the amount of tax charged on your estate and also the timing of when the tax falls due.
  • What assets and liabilities do you hold? Draw up a list of assets and liabilities for you (and your spouse), this could include your home, listed shares, a second home or investment properties; your tax planner will outline your Capital Gains Tax and Inheritance Tax exposure on a particular asset and on your overall portfolio.
  • Do you have adequate Life Insurance? Having a reasonable level of life cover is important since the insurance policy could cover your estate’s inheritance tax liability. Furthermore it could provide an additional lump sum on the death of the insured person. The general rule is that the younger you are when taking out life insurance, the lower the premiums will be.

General Election 2015

With a General Election scheduled for May 2015 now is the time to consider whether you and your business are as tax efficient as you could be. The tax team at Warrener Stewart are mindful that a change in government could result in legislation changes and that certain allowances may alter or be withdrawn if the government changes.

Proactive Tax Planning

The tax team at Warrener Stewart has continued to grow over the years under Damian Talbot’s lead. The team has a wide range of knowledge which includes Chartered Accountants, Chartered Tax Advisors, members of the Chartered Institute of Indirect Taxation, Enrolled Agents (for US Taxation) and members of the Association of Taxation Technicians. The tax team works with you (and your other advisors) to ensure that you benefit from a bespoke plan tailored to all your business & personal tax needs

Reward Your Employees Through an Employee Management Incentive Scheme

10 July 2014 •

As the economy starts to recover the job market will pick up; for the first time in six years increases in  earnings have finally caught up with inflation. As an employer and the owner of a business now could be the time to consider ways of trying to lock the talented employees you have into the company. Suddenly giving everyone a pay rise may not be financially viable but there are a number of financial incentive plans you can implement that are designed to help retain key members of your team.

Warrener Stewart has recently been helping several businesses implement an Enterprise Management Incentive scheme (EMI), even for companies with just one to two employees. An EMI scheme is a recognised HMRC initiative specifically intended to help companies to recruit and retain employees by rewarding them with options to acquire equity shares.

Reward key employees 

An EMI scheme gives employers a controlled way to reward those employees who are central to the business and who have remained loyal to the company with the possibility to acquire equity shares. Under the scheme an employer can grant key employees the option to purchase small numbers of shares in the company at a predetermined price.

However, employees can only convert these options into shares at certain trigger points. Working with the business owner, Warrener Stewart will help decide what these key trigger points are for each business, for example it could be meeting particular business targets, the sale or flotation of the company or even to have stayed with the company for a predetermined number of years.

Buying into company

The ethos of the scheme is to reward employees who work within owner managed businesses by allowing them the opportunity to become more involved in the business by owning a slice of the company. Options can be granted to anyone in the company providing HMRC limits are adhered to and that no one member of staff (including their close relations) holds more than 30% of the company’s shares under option.

Built in safety net

One of the key attractions of an EMI scheme is that it has a built in safety net whereby the options can only be converted into actual shares at the specified trigger points. In addition, options would lapse if the employee left the company, plus there are overriding limits from time to time which restrict the total value of options that company is allowed to allocate.

Setting up an EMI scheme

Warrener Stewart can arrange the strategic and tax aspects of the entire scheme on your behalf. The first step is to organise a business valuation, then agree the terms of your scheme with HMRC and gain their approval for the scheme. Once this has been done, a firm of lawyers will be needed to draft the option documents and confirm the trigger points.  

Tax Free

The grant of the option to employees is tax-free, also when it is exercised employees are not liable for tax or National Insurance. This makes it a perfect scheme to give employees an incentive to help grow the company and engender in them a genuine feeling of business participation and ownership.

There is a further tax saving for the company once the options are exercised, because it will be entitled to tax relief on any uplift in value on the shares between the time of the grant of the option and the date on which it is exercised.

Most owner-managed companies will qualify for EMI, although there are some exceptions. If you would like to find out more about implementing your own EMI Scheme and find out if your company qualifies, speak to Colin Edney on 020 7731 6163

The requirement for filing a self-assessment tax return

09 July 2014 •

Why the reminder?
Many UK tax payers are unaware that they are required to file a tax return.  There are considerable penalties for failing to file and the late filing of a tax return.  

The process
Registering for Self-Assessment can either be completed online or by post using a Form SA1.  Once this form is filed, HMRC will issue the taxpayer with a unique tax reference known as a UTR.  This 10 digit number is required to file a tax return.  If the taxpayer has completed tax returns in the past the previous UTR must be used.  The UTR can be found on most correspondence from HMRC and if lost you will need to phone them.  HMRC will not divulge the UTR over the phone and the letter can take up to 3 weeks.

The requirement for filing a self-assessment tax return
The main reason for filing a tax return is to account for income which is not taxed at source such as a self-employment, joining a partnership or accounting for rental income from a buy-to-let property.  However there are a number of other circumstances where a tax return needs to be filed which include:

- becoming a director of a UK company;
- where annual income exceeds £100,000;
- receiving foreign taxable income over £300;
- receiving income from a trust or settlement;
- where untaxed income cannot be collected through a PAYE tax code;
- if income is over £50,000 and child benefit payments are received and
- having a capital gains tax liability.

The registration process can take up to 4 weeks and the filing deadline for the 2013/14 tax return is 31st October 2014 for paper returns and 31st January 2015 for those submitted online.

The above highlights some of the less known reasons for filing a UK tax return.  Given the penalties for failing to file a tax return it is important to check whether one needs to be filed.  If you have any queries about any of the tax issues raised please do not hesitate to contact our Tax Team on 020 7731 6163

Tax Team celebrates!

04 July 2014 •

When the Thirteen American Colonies broke from the British Empire on July 4th back in 1776 forming Independence Day paying tax was one of the key reasons for their independence. 

Now over 238 years later, American citizens resident in the UK are now caught paying taxes to the Mother Country for which they are no longer resident. Instead of revolt many turn to Warrener Stewart for help filing their US tax returns.  To cope with the growing demand the Fulham based Tax Team of Warrener Stewart has recently recruited Ashleigh Molton to take on the responsibility of ensuring all their American clients are up to date with their reporting requirements.

Ashleigh, a mathematics graduate, will be working closely with Damian Talbot who is Warrener Stewart’s Enrolled Agent, licensed by the US Federal Government.  Commenting upon her appointment Damian said; “Ashleigh has an excellent academic record and is a welcome addition to the tax team.  We are looking forward to her completing Enrolled Agent exams this autumn and taking responsibility for our growing number of American clients.”

Warrener Stewart Pedalling to Prosperity for charity Shooting Star Chase

26 June 2014 •

Two of Warrener Stewart’s directors, Nick Morgan and Jon Last, accompanied by colleague Ariane Cole have entered the Prudential Ride London-Surrey 100 mile bike race due to take place on Sunday, 10 August. 

This road race celebrates the legacy created by the Olympic Games.  It starts in the East of London at Queen Elizabeth Olympic Park, taking riders on a 100 mile trip on closed roads through the capital, out to Dorking down in darkest Surrey, over the Downs a couple of times for good measure, before heading back to cycle up the Mall to the finish line. 

The route passes close to Warrener Stewart’s offices in Fulham which was all the inspiration Nick, Jon and Ariane needed to ride for the charity, Shooting Star Chase.  All the money that the intrepid three raise will be used to support families needing hospice care for children at two hospices; Shooting Star House in Hampton and Christopher’s in Guildford.

Over the past few years Nick Morgan, together with Tony Addinall, Chairman of long standing Warrener Stewart client Badger Holdings (parent company of the Townends & Regents property services group), have completed a number of ‘ultra’ events to raise money for Shooting Star Chase.

“We said we’d retired two years ago?” says Nick. “However, early in February we ran a 10k race along the Thames though Fulham and Putney organised by Shooting Star Chase.  When the opportunity came up to take to our bikes it seemed like a good idea! After this weekend’s practice session however, we are not so sure! We are really not looking forward to cycling right over Leith Hill in Dorking - at nearly 1,000ft it is the highest point between London and France!”

Reporting Foreign Financial Accounts

19 May 2014 •

The Financial Crimes Enforcement Network, or FinCEN Form 114, formerly known as the FBAR, is used to report financial interest or signature authority over foreign financial accounts with an aggregate balance in excess of $10,000 at any point during the tax year.

Form 114 now has a mandatory electronic filing requirement as of 1 July 2013 which can be fulfilled via the BSA efiling system.  The Form can be completed independently, or by authorizing a preparer be means of Form 114a.

Form 114 must be submitted via the BSA efiling system no later than 30 June following the tax year end.  No extensions are available for the submission of this form.

Additional Requirements for Foreign Financial Assets

In addition to FinCEN Form 114 reporting, the IRS also requires reporting of foreign financial assets on Form 8938 as part of the Federal tax return.   This report extends to include financial accounts, securities, interest in a foreign entity such as a corporation, partnership, or trust and any financial instrument with an issuer or counterparty that is not a US person.

US citizens residing abroad must report these assets on Form 8938 if the market values of the foreign financial assets are greater than $200,000 on the last day of the tax year, or $300,000 at any point during the year.   These thresholds relate to individuals with a single filing status, and should be doubled for married filing joint returns.

Conclusion

It is important to note filing Form 8938 does not alleviate you of your FinCEN Form 114 requirement.
Each form carries a hefty fine of $10,000 for non or incomplete reporting, with a potential for these penalties to be higher.

It is always advisable to keep on top of your US tax affairs to avoid penalties and administrative problems, as the IRS is becoming increasingly stringent on reporting especially in respect of foreign financial accounts and assets.  For any help on this or any other American tax related issues please do not hesitate to contact Warrener Stewart for further clarification.
 

An opportunity to train with Warrener Stewart

08 May 2014 •

Current vacancy : ACA Training Contract

Warrener Stewart is offering the opportunity for a recent graduate or AAT qualified individual to join their audit and accounts team on a three year ACA training contract.

This is an opportunity to gain valuable on-the–job training whilst undertaking the professional study required to qualify as a Chartered Accountant.  Speaking about the current vacancy Jon Last, the Director who oversees training, commented;

“Undertaking a recognised training programme like that of the ICAEW not only develops the technical skills required of a Chartered Accountant but, at Warrener Stewart, also provides a valuable insight into the work of an accountancy practice and helps foster an appreciation of the incredible range of work that is involved from technical aspects of auditing through to offering business and tax advice to small and medium sized companies.

We welcome applications from graduates or from those who’ve already studied accountancy and are AAT qualified.”

The anticipated start date is 1 October 2014. To apply please send your CV together with a covering letter to Jon Last either by post or email jlast@warrenerstewart.com.

Warrener Stewart expands management team

15 April 2014 •

Warrener Stewart is very pleased to strengthen their management team with the appointment of their tax manager Ryan Lane as an Associate with the Firm from 1st April.

Ryan joined the Warrener Stewart tax team just two years ago and since then has demonstrated a strong business acumen and in-depth knowledge of the intricacies surrounding both private and corporation tax.  His appointment is a natural progression which is well deserved.

Commenting on his promotion Ryan said, “I am really pleased with this opportunity and feel excited about my future at Warrener Stewart. I am looking forward to the challenges ahead.”

Tax Video Update - Budget 2014 reaction

21 March 2014 •

In his Budget Statement for 2014 the Chancellor announced  a number of changes and confirmed the start of measures which had been outlined in both the Budget and the Autumn Statement of 2013.

Here is an overview of some of the key points that could affect you and your business. 

Increased Pension Flexibility

From April 2015, individuals with defined contribution pensions will now be able to draw down from age 55 with tax charged at their marginal rate rather than at the current 55% tax rate.  In addition, there will no longer be a requirement to purchase an annuity with the pension funds.  Individuals with such pension pots are to be offered free and impartial face-to-face guidance at the point of retirement.

New Individual Savings Accounts (NISAs)

ISAs are to be reformed into a simpler product by merging the Cash ISAs and Stocks and Shares ISAs into a single NISA.  The subscription limit will be increased to £15,000.

National Savings & Investments (NS&I) support for Savers

The limit for investing in Premium Bonds is to be increased to £40,000 from 1 August 2014 and then increasing to £50,000 in 2015/16.

NS&I are also to launch a Pensioner Bond for savers over 65 which will offer higher interest rates than currently available.  The investment limit will be £10,000 per bond.

Seed Enterprise Investment Scheme (SEIS)

The Chancellor announced that he will make the SEIS permanent in its current format.

There is also to be a consultation over Summer 2014 regarding EIS and VCTs that are being used to allow investment in low risk activities. This may affect the current market availability of these types of EIS and VCT investment vehicles.

Capital Allowances Annual Investment Allowance (AIA)

The AIA is to increase to £500,000 for qualifying investment in plant and machinery made on or after 1 April 2014 until 31 December 2015. This is an increase from the current £250,000 rate and will encourage further investment by businesses.

Annual Tax on Enveloped Dwellings (ATED)

HMRC are extending the scope of this annual tax charge to properties worth over £500,000 from its current limit of £2,000,000. This will be phased in over the next two years but will represent a cost to be taken into account when deciding whether a company should be used to acquire UK property.

There is also an extension to the 15% rate of Stamp Duty Land Tax (SDLT) when property is purchased by certain non-natural persons. This is also being extended to properties worth £500,000 or more from 20 March 2014.

Class 2 National Insurance

From April 2016, Class 2 National Insurance for the self-employed will no longer be collected through direct debit or direct payment but will rather be collected through the self-assessment system and paid at the same time as self-assessment liabilities and Class 4 National Insurance Contributions.

Corporation Tax rates announced previously

The corporation tax rate continues to fall towards its 20% target and from April 2014 will be 21%, reaching 20% from April 2015.

Personal Allowance and Higher Rate Threshold

The personal allowance will rise from £9,440 in 2013/14 to £10,000 in 2014/15. The higher rate threshold will also be increased to £41,865.

HMRC intends to consult on whether the current personal allowance should be restricted only to UK residents and those living overseas who have strong economic ties to the UK.

Partnerships with mixed memberships

HMRC has confirmed that it will introduce legislation that will take effect from April 2014 to counter the disguising of employment relationships in LLPs and prevent the allocation of business profits to corporate members.

Beneficial Loans

As previously announced in Budget Statement 2013, the threshold for small loans exemption limit will be increased from £5,000 to £10,000 and this will come into force from 6 April 2014.

Dual Contracts

As announced in the Autumn Statement 2013, HMRC will introduce legislation to prevent high earning non-domiciled Individuals from avoiding tax by dividing up their employment artificially into two contracts, one for UK duties and one for overseas duties.

If you would like to talk to one of the tax team and explore what Budget 2014 could mean for you and your business then please call 020 7731 6163. 

2014/15 Tax Card 

For a complete overview you can also download the our latest Tax Card 

No responsibility for loss occasioned to any person acting on or refraining from action as a result of the above material can be accepted by us.

SME news round-up

07 March 2014 •

Recession leads to start-up boom

In common with our experience, Sir Stuart Rose recently declared that more small British businesses have started up since the economic collapse than at any time in history. The former Marks & Spencer chief commented: “There are more start-ups going on in the UK than there have ever been. Following the recession, people have decided to branch out on their own.”

If you are considering a business start-up please speak to us and arrange a free initial consultation. Time spent in the proper planning of a new business venture is vital.

Lending to SMEs falls

Recent figures from the BoE’s Funding for Lending Scheme have revealed that 34 banks and building societies using the credit facility withdrew £1.32bn of lending from SMEs between April and December 2013. The largest withdrawals were by RBS, which withdrew £2.2bn of credit, and Nationwide, which cut lending by £1.14bn. Meanwhile, other data suggested that small challenger banks are beginning to fill the void, an example being Aldermore who lent £345m to small business in the period.

Sadly we at Warrener Stewart have noted this trend. SME lending needs to improve if the current economic recovery is to continue. If you are experiencing funding difficulties do contact us, we may be able to suggest options that you have not previously considered.

Chancellor salutes small businesses

Small businesses are set to receive a letter from George Osborne saluting them for their contribution to the economy. Mr Osborne is drawing attention to measures announced in last year’s Autumn Statement, handing employers an annual discount of up to £2,000 on NICs. It is estimated that up to 1.25m businesses and charities will benefit from the Employment Allowance, which takes effect next month, while approximately 450,000 will not have to pay any Class 1 NICs in 2014-15. Mr Osborne says in his letter: “Small businesses are the lifeblood of the economy and I want to make it easier for you to succeed and grow. This Government’s long-term plan backs business because that is the only way to grow our economy and create jobs. Thank you for the role you have played in securing our recovery”.

If Warrener Stewart already provide you with payroll services we will ensure that this discount is applied as early as possible. If not, and you require assistance, please get in touch.

Tax Video Update - ISAs

24 February 2014 •

Warrener Stewart Tax Update

Are you using your ISA allowance?

Individual Savings Accounts or ISAs are a method of UK residents making tax efficient investments with instant accessibility.

There are two kinds of ISA:

  • Stocks and Shares (Listed and AIM) ISA
  • Cash ISA

How to subscribe

ISA providers include banks, investment advisors and even some supermarkets.  There are also many online providers.

It is possible to move existing shares into an ISA by “bed and ISAing”.  For example if you have 1,000 M&S shares which you want to move into an ISA, you can sell them and your ISA manager should be able to use the proceeds to buy 1,000 M&S shares the same day. 

How much can I invest?

Before 5 April 2014 you can invest up to £11,520 in a stocks and shares ISA and up to £5,760 in a cash ISA.  But the amount you invest in a cash ISA reduces the amount you can invest in a stocks and shares ISA.  For example if you invest £5,000 in a cash ISA, you can only invest £6,520 (£11,520 - £5,000) in a stocks and shares ISA.

For 2014/15 you can invest up to £11,880 (less anything you invest in a cash ISA) in a stocks and shares ISA and you can invest up to £5,940 in a cash ISA.

Therefore in the next 2 months you could invest up to £23,400 in ISAs:  £11,520 in March and £11,880 after 5 April. 

Holding stocks and shares in an ISA

If you hold shares, why hold them in an ISA?  Two good reasons:

  1. Shares in an ISA are income tax and capital gains tax free.
  1. You don’t need to declare them on your tax return (so less administration). 

You are not locked into the ISA - you can withdraw the shares at any time with no consequences.

The only possible disadvantage is if the shares go down in value:  if you dispose of shares at a loss and they were in an ISA, you can’t get relief for the loss. 

(For US citizens, you can benefit from an ISA if you are UK resident, but the income and gains will still be taxable in the US.)

Conclusion

Moving shares into an ISA may save tax and administration both now and in the future.

Financial Reporting Standard (FRS 102)

19 February 2014 •

A new Financial Reporting Standard (FRS 102) will see the most fundamental change to UK accounting in 20 years when it comes into force for accounting periods beginning 1 January 2015 onwards. 

These new accounting rules will replace all existing UK accounting standards, with the exception of the Financial Reporting Standard for Smaller Entities (FRSSE) which is available only for small entities.  Whilst FRS 102 is not yet mandatory, early adoption is permitted and we have been working with our clients to ensure that their accounts will comply with the new legislation.

Below is a guide outlining the main features of FRS 102 along with the key areas of potential impact/change.

THE NEW UK ACCOUNTING STANDARD FOR LARGER ENTITIES

The introduction of FRS 102: The FRS Applicable in the UK and the Republic of Ireland

FRS 102 amends and streamlines current UK accounting standards into a single standard applicable to entities that do not qualify to use the FRSSE and that are not required to adopt European Union adopted International Financial Reporting Standards (IFRS). FRS 102 may, however, be used by small entities that qualify to use the FRSSE if they wish.

For most businesses, and in most areas of the accounts, the changes introduced will not be significant but for some businesses they will be. This means that certain decisions will need to be made and in some cases information will need to be collected well in advance of actual implementation.

When will FRS 102 have to be applied?

FRS 102 must be adopted for periods beginning 1 January 2015 onwards. 

A complication for those affected is that there will be some changes in accounting policies (how the figures in your accounts are established) which will lead to ‘prior period adjustments’. This means that accounts for the previous year, and certain figures for the year before that, will have to be recalculated and restated in the first year of adoption. When, for example, the accounts for the year ended 31 December 2015 are being prepared, certain figures will need to be recalculated as far back as 31 December 2013. This means that we would need to consider what information might be needed as at 31 December 2013 - which is quite soon!

Can the new FRS 102 be adopted early?

Yes, early adoption of FRS 102 is permitted for earlier accounting periods.  For some entities in certain sectors this may be beneficial but will probably not be worthwhile for most. If adopted early it may be necessary to collect certain information as at 31 December 2013.

Will FRS 102 affect tax payable?

In some cases, the application of the new standard and any subsequent prior period adjustments may have an impact on taxable profits, which could mean either additional tax becoming payable or less tax being payable. 

Other important considerations include the impact of changes on the calculation of loan covenants and on profit-related bonuses.

What key changes will FRS 102 make?

FRS 102 is a long and technically complex accounting standard, comprising 35 sections but the following list gives an indication of some of the areas where changes to accounting treatment will, or may, be expected. Inevitably there are numerous other areas which may impact on individual entities and we would be happy to discuss these with you.

Key changes introduced by FRS 102

Presentation of accounts

  • The new standard introduces additional options for the names of parts of the financial statements and changes the way that certain items are disclosed.
  • Many entities, however, will not see a great deal of change in the way that their accounts are presented other than, for example, the use of the term ‘inventories’ rather than ‘stocks’.

Revalued property, plant and equipment

  • An estimate on the balance sheet of any tax payable in the event of a property eventually being sold for its revalued amount will need to be recognised as a provision for deferred tax. This is currently not generally required and would reduce the net assets on the balance sheet.
  • Rules on the prescribed frequency of revaluations have been relaxed.
  • Care will be needed here if there is any banking covenant or loan restriction related to any of the figures in the accounts.

Investment properties

  • Rather than surpluses or deficits on revaluation being taken to reserves as they are at present, they will be presented as part of the profit or loss for the period. They will not, however, be ‘realised profits or losses’ and they will not be available for the payment of dividends!
  • There are a number of other detailed differences from the present accounting for investment properties which may mean more (or fewer) properties may qualify as investment properties.
  • As noted above as regards other revalued property, a provision for the tax payable if the property were to be sold (deferred tax) will be required, again reducing the net assets on the balance sheet.
  • Care will be needed where the assessment of the entity’s performance is based upon the presented profit and loss account, which will show movements in the value of investment properties. Consideration of the methods employed in calculating loan covenants and profit-related bonuses will be needed.

Goodwill and other intangible assets

  • Unless an entity is able to reliably estimate the life of an intangible fixed asset, five years will be the maximum. This compares to 20 years in the existing standards.
  • Reducing the amortisation period of goodwill and other intangibles from 20 years to five years could have a very significant impact on reported profits and on the net assets, though if tax relief is available this could reduce tax payable, and again a reduction in the net assets on the balance sheet could cause problems with lending covenants.
  • The new standard also increases the likelihood of recognising more different types of intangible asset on an acquisition than under current accounting standards.


Recognition of loans, interest rate or foreign currency swaps or options

  • These items are examples of types of ‘financial instrument’ that will often require accounting for in a different manner from current UK standards.
  • Changes to the accounting treatment in this area may impact on the profits or losses presented in a given period and the amounts initially and subsequently recognised on the balance sheet.

Revenue recognition

  • A number of practical examples of measuring turnover for the period are included in FRS 102. It is possible that in some cases turnover and therefore profit, and also tax, may be different as a result of adopting the new standard.

Holiday pay accruals

  • Where untaken holiday pay is owing at the end of the period, it may be necessary to provide for the accrued value in the year-end accounts.

Related parties

  • A welcome change from current accounting standards for many, is that FRS 102 does not require the publication of the names of any related parties with whom the entity has transactions.
  • Related parties includes directors, significant shareholders and relevant family members, though HMRC may still request such information separately.

Some of the other (many) areas of change

  • Investments in listed company shares will be revalued each year and gains or losses will be taken to the profit and loss account.
  • Some leases may be accounted for differently and any lease incentives offered by a lessor may be spread over a different period.
  • The treatment in the accounts of government grants may sometimes be different.
     

“For the past 20 years Warrener Stewart has consistently given good advice... going above and beyond their remit.”
Theo Brehony - London Preparatory School Limited