Increasing complexity of tax legislation calls for market leading corporate and private client tax planning services.

Are you looking to set up a Furnished Holiday Let business (FHL)? Here are five things to watch out for.

When a property is inherited, the estate may be subject to inheritance tax on the excess over the nil rate band. If the property was the deceased’s main home, and passes to direct descendants, the estate may qualify for an additional relief, termed a residence nil rate band. A previous insight has covered this topic in detail. This can lead to an additional nil rate band of up to £350,000, which would otherwise be taxed at 40%, giving rise to overall tax relief of up to £140,000. If this has not been achieved by the will, it is possible that this could instead be achieved through use of a deed of variation.

I recently attended the Retail Technology Show at London Olympia.  This was my first in-person expo since before Covid, and it was a refreshing experience to catch-up with technology suppliers and retail ex-colleagues in person.

The show was extremely well organised, with an interesting variation of retail technology providers in attendance, ranging from start up tech firms to large multi-nationals – all showcasing both their current and future technology and software offerings.

Both businesses and employees are facing pressure on their finances arising from the recent tax hikes and the high levels of inflation that we are all experiencing. Now is therefore a good time to consider employee incentives that have minimal upfront cash outflow whilst providing potentially significant long-term rewards. This will help motivate and retain key members of your workforce.

For companies these can take the form of share incentives where an employee is provided with either shares, or ‘options’ to acquire shares at a future date, normally on the occurrence of certain events or performance targets being achieved.

In the current second-hand car market, it is common for people to be offered payment on return of their vehicle at the end of a PCP lease agreement. One would imagine that if the leaseholder refused this offer and sold privately, they may be able to make a greater profit. Alternatively, if a car has been purchased second-hand previously, it may be possible to sell this and even make an overall profit.

So, the question is, is this taxable?

There has been a lot in the press made of the squeeze on household spending and the Chancellor was under much pressure to help with this when he approached the dispatch box on 23rd March to make the Spring Statement. His increase of the primary threshold for National Insurance is meant to be his key answer to that issue, but it is worth noting that from a business perspective this increasing threshold is not being mirrored to the secondary threshold for National Insurance and hence the 1.25% increase to Employers’ National Insurance is going ahead in full.

When a shareholder sells their shares, they are normally subject to capital gains tax on the disposal. There is however a way to undertake a company disposal and not pay any tax at all. The way to do this is to sell to an Employee Ownership Trust (EOT). EOTs were introduced in 2014 to encourage greater employee ownership of companies inspired by the John Lewis business model.
Since their introduction, popularity of this business model has been gaining momentum with more and more companies choosing to adopt this structure.

Buy-side due diligence is about doing the right deal at the right price.

In an environment in which competition for the right deal is strengthening, an acquirer needs to be certain that they can generate incremental value over and above any premium that needs to be paid to get the deal done.

Understanding where your company falls in regard to audit thresholds is crucial to ensure that companies are able to adequately plan ahead should an audit become a necessity in the future. It is also important to be aware of the benefits of undertaking an audit as well as a voluntary audit may be worthwhile for your business.

Recently DEFRA announced some preliminary details surrounding the Lump Sum Exit Scheme which is designed to pay retiring farmers a lump sum in exchange for giving up their Basic Payment entitlements and land. There is plenty of information already and more details to come but there were 5 points in particular which are of interest from a tax and business planning point of view.

If a company (or partnership with a corporate partner) owns any residential properties it will need to consider whether the Annual Tax on Enveloped Dwellings (ATED) rules apply to it.

ATED is charged on these entities when they hold an interest in any UK residential properties (dwellings) with a value that exceeds £500,000. The property value is assessed at either a valuation reference date or the purchase/development date, if later.

Most companies own a variety of fixed assets on which capital allowances are claimed, and many of you will have seen our recent insight on the capital allowances which can be claimed on specialized buildings. Are you also aware of the substantial tax advantages which apply to intellectual property?

Red diesel is simply diesel which is dyed to indicate it is rebated and hence subject to less fuel duty and VAT than normal (white) diesel. Currently, most non-road machinery is capable of being powered by red diesel, which is significantly cheaper than white diesel, but as a result of the government’s climate change policy the exemptions are reformed such that they will only apply to very specific uses such as for agriculture or for non-commercial heating.

When circumstances mean that business owners have limited control over their revenue, the only remaining avenue to prop up profitability is focusing on the cost base. It’s always worth being aware of what interventions you might make in spending to maximise your profitability and minimise the risk of fundamental damage to your business.

Some businesses need rapid tactical changes to their costs, and others need more measured structural interventions to cost management.

Many will be aware of a case that went to tribunal in 2018 in which a taxpayer successfully argued that a custom built grainstore qualified as plant rather than a building and therefore qualified for capital allowances (Stephen May v HMRC 2019). In essence, the cost of the grainstore was allowed in full against the taxpayer’s taxable profits.

Recently a similar case was heard at tribunal regarding a farming business that attempted to claim a potato store as plant and machinery. The story is as follows…

Green software and technology is not a new concept, but has gained traction and publicity due to concerns around the impact of pollution and global warming.

How do you judge your business’ financial performance? Surprisingly, the answer we hear often from clients is that it is still just based on a combination of a general feeling from management and the amount of cash in the bank.

Is your business set up in the best way possible to achieve its goals for 2022? If this is not absolutely clear, then an in depth assessment of your organisation design will help.

Organisation design is the way that structure, roles, capability, and resources are deployed within a business to deliver a strategy. It is the formal system of accountability that defines key positions and enables the efficient allocation of resources to enable success.

Staff from Droitwich-based professional services firm Ballards LLP have donated a variety of children’s toys, chocolates, cosy socks and pampering gifts to the children and teenagers staying at Birmingham Children’s Hospital over Christmas.

I saw in the Budget that there is an extension to Capital Gains Tax reporting and payment to 60 days. I didn’t know we had to report this as I’ve sold a bit of land recently. Should I have reported this by now?

The short answer to this question is that any expenses borne by your company in relation to Research and Development (R&D) projects will qualify for tax relief.

However, there is a distinction to be made between two different types of R&D relief which can be claimed for large and small companies.

There are no strict rules regarding the structure of the consideration for a business sale.

It is not uncommon for an element of the proceeds from the business sale to be deferred and paid at a later date.  

The Farming Investment Fund (FIF) announced last week is designed to provide grants of between £2,000 and £25,000 towards specific farming equipment and technology; and grants of between £35,000 and £500,000 towards larger capital items to improve productivity, profitability, and environmental sustainability; the first of which is The Water Management grant.

As environmental policies dominate the news, it started me wondering what tax savings were currently out there for ‘going green’. Tax is much more than just a way of raising money for public finances, it is an incredibly complex tool used to drive behaviours desired by the government. If we are truly serious about climate change as a country, then taxation of business should be evolved to encourage efforts to reduce carbon footprint and punish those who do not change their behaviours. Below I look through a few carbon saving ideas and decide if they are rewarded with tax savings.

If you are thinking of selling your business, it is worth taking the time to consider all potential investors’ perspectives before the sale process begins. This will mean you can present your business in the best possible way for anyone who might be considering a purchase to see the value specifically for them.

Staff from Droitwich-based professional services firm Ballards LLP have recently delivered a collection of food and household goods to Ronald McDonald House Charities UK. The collection will be converted to a cash donation for the charity.

In the event that families do not live close to a hospital where a child is being treated, Ronald Mcdonald House Charities UK provides free accommodation and meals so that parents can be by their child’s bedside in a matter of moments.

Over the last 18 months Covid-19 has forced many businesses to undertake tactical digital transformation projects to continue operations, for example enabling remote working of colleagues, setting up eCommerce sales channels etc. 

These tactical transformations may have addressed the short-term need forced by the Covid-19 pandemic, but now is the time to consider the long-term success that digital transformation can bring. 

The Chancellor today (27th October) unveiled his Autumn Budget. As with all Budget announcements, the devil is in the detail and further information will no doubt be released by the government shortly.

When looking at a Research and Development tax claim (R&D), there are 4 main questions that we seek to answer, based on the criteria HMRC will use to evaluate the claim.

With the current property boom, I am sure that amongst the readers of this document there is a significant proportion of people who are buying, selling, or investing in property. There are lots of tax implications out there which are not straight forward and lots of areas you should seek advice on. On that basis, I have listed a number of common thoughts around residential property which might spark some thought.

The tax landscape is changing rapidly.  This change is driven by the government’s push to replace paper-based tax filings with more economical digital filing procedures.

I hear many business owners talking about the need for digital transformation and the benefits of becoming a digitally enabled business.  Though, far too often businesses will start their digital transformation journey without assessing their current state, often leading to the costly purchase of systems that are not right for the current or future business.

As the Summer draws to a close, and the children go back to school, it is the time of year when our routine begins to return to normal. This has led me to reflect on many changes which have occurred over the last 18 months as a result of our pandemic. Much of our life has changed with a greater reliance on remote working, and the requirement for maintenance of social distancing.

Many people think accountants are there just to give good tax advice. We can of course do that, but our advice is so much more than that! One thing I am keen to talk to people about is the doomsday scenario – have you thought about what would happen to your business if something went drastically wrong? Perhaps an unfortunate accident involving an employee or customer, a major error leading to a loss of customer confidence, or a serious data breach? Unfortunately, despite all of the best planning in the world, serious issues do occur. What can businesses do to protect their assets in a doomsday scenario?

Boris Johnson yesterday (07/09/21) announced his long-awaited social care reform and the start of the much-anticipated tax hikes for the masses following the COVID-19 pandemic announcing increases to National Insurance and Dividend tax rates.

Transfers of assets between most married couples/civil partners in the UK are exempt from inheritance tax (IHT) whether made at death or during their lifetime.  At death transfers from an estate to other persons will generally be subject to IHT unless another relief, exemption or allowance can be set against the value of the transfer.

Getting the right management information and key performance indicators (KPIs) in the right format at the right time is vital to controlling a business. However, there are many common problems encountered on the road to getting this right.

There are two manners in which software development may qualify for R+D tax relief.

Qualifying as part of a larger project

The first is where it is being used as a tool as part of a project, rather than being an end goal, for example, developing software to use in testing machinery, recording results, or designing prototypes. The development costs will then be allowable as part of the expenditure on this larger project.

It always amazes me how many businesses out there still put little reliance on thinking about stock and work-in-progress. There are lots of practical reasons why counting stock and valuing work-in-progress is an excellent idea; forward planning on stock requirements, monitoring cashflow requirements, improving physical controls around stock, and reducing the risk of stock going missing to name but a few.

The short answer to this question is yes. However, the answer is not as simple as you might expect.

In order to understand the effect of the coronavirus support schemes on qualification of companies for tax relief, we first need to understand a couple of terms. There are two different schemes for relief, the first (RDEC scheme) is targeted towards large companies, while the second (SME scheme) is targeted towards small and medium-sized enterprises.

Following an initial on basis periods on 20 July 2021, the government confirmed in their Autumn Budget that basis period reform would be going ahead from April 2024, one year later than originally planned.

It may be that this could have cash flow implications for your businesses and therefore this needs to be assessed and planned for.

Recent data published by HMRC showed it opened 102,000 compliance investigations in Q1 2021, up 36 percent from 75,000 in the previous quarter.

This was almost quadruple the low of just 27,000 in the second quarter of 2020.

HMRC is turning its focus back to tax investigations as the pandemic has left it with a lot of catching up to do.

R&D under the beneficial SME scheme is only allowed if the project is not subsidised.
This is not a new rule, but HMRC have recently started to change their view of when an R&D project is considered to be subsidised.
In some cases HMRC are now treating projects that are undertaken for a specific customer as being subsidised by that customer and therefore ineligible for the beneficial SME R&D relief.

We are delighted to announce that Tax Partner Liz Peters has recently been appointed to the board of the Institute of Chartered Accountants in England & Wales (ICAEW) Tax Faculty.

The majority of business owners understand the need for digital transformation and the benefits of becoming a digitally enabled business, though a question I often get asked is:

“Where and how do I start Digital Transformation?”

It has always amused me when tax cases arise deciding on how to categorise a certain product or good. These cases often lead to large numbers of highly paid lawyers battling it out, with huge sums of money at stake, over what would appear completely trivial to most of us. However, some of these have real life relevance to many OMBs, so it is definitely worth asking yourself if the tax treatment of the things that you are doing is correct.

“We operate as a farming partnership and are looking to raise some cash. One suggestion my partner made was to sell some of our machinery, but I am concerned we will have to pay tax. Is this right?”

Negotiating and procuring a new I.T system is not a simple process and can be a very daunting experience.

Negotiation and procurement is a very important stage in selecting and implementing a new I.T system, and it is crucial that sufficient effort and time is assigned to this process.  It is key to realise that this process is not just about negotiating the lowest licence fees and day rate, there are many factors that need to be considered, negotiated and agreed. 

You may well have heard of EBITDA, or Earnings Before Interest, Tax, Depreciation, and Amortisation. It is used widely as an approximation for the amount of cash a business generates annually, and that its owners can deploy as they wish depending on a variety of factors such as the chosen financing structure, growth plans, reward strategy etc. In the context of a transaction, a similar idea in the US is Seller’s Discretionary Earnings or SDE, which is a helpful way of thinking about cash generation.