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balanced online: Issue 4

Welcome

Les NutterThis issue has the usual mixture of tips to save you money, keep you out of harm's way and hopfully inspire you to think about your business and personal financial planning. In addition, we focus on our new website, launched last month. What do you think about it? I'd be keen to hear. You will find directions inside showing you where on the website you can find further information about the articles in this issue.
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Les Nutter

Contents

What's new at Cassons?
No surprises - Fixed Price Agreements
Cassons goes global
BKR International update
Your business
Management accounts - a passenger or a driver?
Is your partnership seaworthy?
In brief...
In focus - Barristers
You and your family
Property investment through pensions
Inheritance tax (IHT) and your house
A question of volatility
In brief...
Staff profile
Paul Rosson - Director of Financial Services
The all-new www.cassons.co.uk
Introducing our new website

What's new at Cassons?

No surprises - Fixed Price Agreements

Where our service to a client consists of a fairly well defined annual cycle of work we now often commit this to a Fixed Price Agreement. The Agreement is simple - we set out an agenda of the annual work to be undertaken, agree a price, a payment plan by instalments and set out how to deal with any extra work we are asked to do. Back to contents

Cassons goes global

Our corporate finance team have successfully completed the sale of Oldham–based Medical Air Technology Ltd. Ashley Hayman, Head of Corporate Finance explains; “MAT is a UK market leader, so we marketed the company internationally, attracting interest from the United States, Austria, France, Germany, Spain and Sweden before finally negotiating the sale to Kendro, a subsidiary of the American corporation SPX”. Back to contents

BKR International update

Hong Kong was the venue for the annual world-wide conference of our international accounting network, BKR International. David Tagg and Les Nutter represented the firm. Amongst other things, it gave us the ideal opportunity to meet for the first time members with whom we have communicated over recent months on client matters. Back to contents

Your business...

Management accounts - a passenger or a driver?

Can you answer "yes" to these questions? If not, then you are missing an opportunity to improve the efficiency of your business.

Most computerised accounting packages produce the basic management accounts. To rely on them you need to be confident that the information on which they are based is accurate. This means ensuring that you reconcile your bank accounts and review your lists of aged debtors and creditors each month. If you also prepare accruals, prepayments and month end journals, then your management accounts will be that much more accurate and meaningful.

It is not just, however, about accuracy. Not everyone is good with numbers, so why not consider ways to improve the presentation of your accounts? For example, you could prepare a summary to show only the key figures and ratios, or graphs to illustrate monthly trends.

The management accounts should be presented with the different users in mind. Whilst the business owner might be interested in overall profitability and liquidity, a divisional manager will want to know figures and trends for his own division.

We can help you by training you or your staff to present the information in a more focussed and meaningful way. The basic accounting information is often readily accessible; it just needs to be harnessed, so that you can then use it as a resource to help you run your business, and not think of it purely as an overhead.

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Is your partnership seaworthy?

"Partnership, it’s the most unstable ship ever launched!" Why do some people say that? Well, essentially for two reasons:

- the sensitivity of the underlying relationship(s)
- the often inadequate legal mechanism through which any instability, if it does arise, can be redressed.

Relationships
It is not only when business is poor that disputes arise. Very often when business is booming there is a disagreement as to how the spoils are to be allocated.

It doesn’t need to be a disagreement as such to throw up a quandary. It is often the unexpected, for instance how to react if a partner:

 The business must go on! But how can it?

The mechanism

The law of partnership is governed by a law which was enacted in the 19th century. It is no surprise therefore that it doesn’t necessarily suit modern commercial circumstances and often leads to unwanted results

The partnership agreement

The answer is to ensure a well-drafted partnership agreement is put in place to set out in clear terms how the partners agree to deal with matters such as:

The agreement should cover the ‘what happens if’ scenarios because, if there is one law that is always sure to catch us out, it’s Murphy’s!

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In brief...

Late payers beware

If you claim input VAT when you receive purchase invoices, but delay payment for 6 months or more, then you need to repay the VAT claimed. This is regardless of whether your supplier has claimed bad debt relief or not.

Starting to trade?

Since 2001 there has been a requirement for self employed people to notify the Revenue, within 3 months, when they start up. This principle is now extended to companies, who must tell the Revenue when they start to trade. It applies to new companies and those that were dormant then begin a new trade. It is not always straightforward to tell the precise date that a trade starts, so if you are considering starting a new trade, please let us know.

National Insurance deferment applications

Do you have more than one employment, or self-employment income as well as being employed? If so, you might be paying more NIC than you need to. If you make a ‘deferment application’ (before 14 February for income in this tax year) then you can avoid paying excess NIC. If you do overpay the NIC it can be reclaimed, but it takes some time to get the refund.

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In focus - Barristers

Taxing times

When you take maternity leave, or another career break, is tax planning on your mind? If you are paying the catch-up charge, on the transition from cash basis to earnings basis, the charge can be reduced to 10% of earnings. This may be low or non existent during the break, leading to an increased charge in year 10. Conversely, there may be an advantage in choosing to increase the annual charge. If you have got no (or low) income, you may pay no (or low) tax now instead of paying higher tax later.

Mortgages for barristers

Cassons, as specialist advisers to the Bar, have designed a mortgage loan product exclusively for barristers.

Stop press...

Have you visited the About you section of our site? It contains an area dedicated to providing useful information for both pupil and established barristers.

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You and your family...

Property investment through pensions

Many people have become disillusioned with the performance of some traditional pension funds and are looking for alternative means of investing for retirement. With this in mind you might like to consider investing in commercial property as part of a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS). SSASs are established by a sponsoring employer to provide benefits for directors or employees. SIPPs are established by individuals (self-employed) to provide for their own future. The attractions of owning property within a pension scheme include:

The property is yours - you can touch it! It has been popular for the owners of businesses to purchase their business premises within their own pension scheme. Indeed, property investment in SSASs and SIPPs has, until now, been restricted to commercial property. This is set to change from April 2006. Pension funds will be permitted to hold residential property, which will enable them to participate in the ‘buy to let’ market. Property is generally considered to be a good long-term investment and, as such, is an attractive option for long-term pension investment planning.

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Inheritance tax (IHT) and your house

With rising property prices, how can you protect your house from IHT? IHT is charged at 40% on assets over £263,000 on the death of an individual, and on gifts made within 7 years of death. Even a modest property can make a significant inroad into £263,000. We all have £263,000 of tax-free allowances on death, and any gifts between spouses, during lifetime or on death, are exempt from IHT. So what options do you have?

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A question of volatility

Most private investors do not have the inclination or the resources to research the shares they buy. Many simply invest in a household name that they are interested in. But, having got in, they do not know when to get out.

Of course there are big gains to be made if you get it right. But what if you get it wrong? Suppose, for example, that you had invested in Marks and Spencer three years ago. You would be quite happy today, with the price over 40% up. But, if you had bought, or sold, at the wrong time within those three years, you could have lost almost 40%!

So, how can you avoid such volatility? The key is diversification. If you have a portfolio with many different holdings in it, then your overall volatility is not so vulnerable to a sharp movement in the price of any individual holding. That is why Cassons specialise in building investment portfolios using collective investment funds such as unit trusts and OEICs (Open Ended Investment Companies). Such funds invest in large portfolios of shares. You should also get the benefit of professional fund management, targeting more consistent, less risky returns than those available from single company shares.

Of course, if markets fall then investment funds too will fall – but not as far or as fast as individual shares can. Indeed it has been calculated that a portfolio of as few as 50 holdings can eliminate 95% of stock specific risk.

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In brief...

Is it worth the weight?

Posting your signed tax return close to the 31 January deadline is always a risk; even more so if it is not properly stamped. The postage for a basic tax return is currently 60p, but can be more if there are extra schedules. Take care - that extra stamp may well save you a £100 fine for a late return!

Funding care costs

Funding long-term care costs is a major worry for many people. An immediate needs annuity (purchased with a single lump sum investment) can provide a ‘tax free’ income to pay care costs for your lifetime leaving the balance of your savings for your family.

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Staff profile: Paul Rosson - Director of Financial Services

Paul RossonWhen Paul joined Cassons four years ago, from Halifax Bank, he was looking for a change of direction. “I didn’t want to be under pressure to sell products in order to earn commission. Cassons is the perfect place to work. They had a substantial Financial Services Department, working to high professional standards, and with an advisory rather than a selling culture.”

“Indeed,” says Paul, “the most rewarding aspect of my job is meeting clients, understanding their circumstances, and helping them with complex financial planning issues.” Paul is 36. Actually, that could be his inside leg measurement! If you’ve met Paul, you’ll know that he is the tallest person in Cassons. Paul specialises in planning investment portfolios, working alongside Financial Services Partner Steven Greenwood. As Director of Financial Services, he is also actively involved in all aspects of the Department’s work, and shares with Steven Greenwood the responsibility of managing the Department.

In person…

What law would you introduce if you were made Prime Minister & why?
Ban automated telephone switchboards - they drive me mad!

Which actor would you choose to play you on TV or film?
Pearce Brosnan on stilts

If you became stranded on a desert island, which famous person, book and photograph would you want with you, and why?
- Famous person: Rick Stein (at least I would eat well!)
- Book: Raft building for beginners
- Photograph: My wife Steph & dog Tiga

Who's your role model & why?
My dad - the most intelligent & bravest person I know

What makes you angry?
Laziness

What makes you smile?
Thinking about home

Most treasured possession?
My house - part of a renovated farmhouse on the moors above Rochdale

Favourite pastime?
Mountain biking

What is your idea of hell on earth?
Being part of a reality TV program

How would you like to be remembered?
Those who count will remember me in the right way

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Introducing our new website

After many months of hard work, we launched our new website on 8 October – www.cassons.co.uk. Our objective was to develop a site that is user-friendly, informative and interesting, and one which is relevant to clients, contacts, potential clients and potential employees. As with any website, it will continually evolve and we already have plans for the next stage of its development. We very much view our website as an online extension of our services for our clients. The site is updated each working day with new business and financial news articles.

You will find hundreds of pages of content in the About you section, split into sections called You & your family, Your business and Your profession. The content is based on real situations and challenges that have been faced by our clients, explaining the issues involved and outlining solutions.

There is also a Clients section containing comments from our clients, information about our client care policy and a short form to enable clients to send in their comments or suggestions. We’ve had very positive feedback since the site was launched and would welcome your comments. Why not take a few moments to browse the site and then contact us to let us know what you think?

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