Home    Contact us    Site map

balanced online:
Issue 5


Welcome

Les NutterIn this edition we’re delighted to introduce to you one of our most valued clients of some 70 years. They’ve moved with the times, yet still managed to retain a personal touch which has undoubtedly been a key to their success - something in business we can perhaps all aspire to. We also feature an array of articles and useful advice in the usual sections that I hope you find helpful.

Les's signature
Les Nutter



Contents

What's new at Cassons?
New European service
Pupil barrister seminar
Cassons comes top!
Deal success
Your business
Thinking of sharing your business?
Could your employees work from home?
Benchmarking - will it benefit your business?
In brief...
You and your family
Keep SIPP in the family
Pre-owned assets
Do you know how much you are risking?
In brief...
Ask Cassons
Buying a property in Spain
Dying before updating a will
Client profile
Oddie's family bakery and confectioners

What's new at Cassons?


New European service

We, together with other members of BKR International, have formed ICE (International Corporate Experts) to provide a pan-European mergers and acquisitions service to our clients. If you are looking to acquire a business elsewhere in Europe we can find a suitable target, arrange the deal, and introduce you to local advisers.

Back to contents



Pupil barrister seminar

Our Bar Department was again invited to speak at the Northern Circuit seminar for pupil barristers. Run annually, the event provides essential guidance to new barristers as to how to manage their practices. Our presentations on tax, accounting and personal finance matters were very well received.

Back to contents



Cassons comes top!

An independent consultancy recently surveyed the websites of the top 50 UK firms of accountants. We commissioned them to benchmark our website against the results and they concluded that: "… strong scores across the board - especially usability - would have placed the website in first place." Why not Contact us and let us know what you think of the site?

Back to contents



Deal success

Cassons recently negotiated the sale of the Commercial Division of Aquasoothe Ltd to the German Otto Bock group. Aquasoothe sells bath lifts and other mobility aids. Managing Director Ben Cain said "We were impressed with Cassons' skill and professionalism throughout the negotiations." Chairman Howard Davies added "If we ever decided to sell the main business, we would not think of using anyone other than Cassons."

Back to contents


Your business


Thinking of sharing your business?

When giving shares to those who contribute to the company’s success, one theme emerges: the tension between wanting to give shares in your business to those who can help it grow and the natural desire to keep hold of what you have got. Perhaps you’re afraid of giving shares to key employees whose performance is not yet proven; or, if you are looking for outside finance, you resent what you see as the extortionate demands of venture capitalists.

Financial backers are entitled to a handsome reward for the risk they take and the opportunity they unlock. On the other hand, it is your business, your plan, and your acumen. So take steps to reduce business risk and structure any finance deal so that outperformance increases your share. This will help you give your backers a fair reward – but no more.

You may not need to give key employees share incentives; a well structured remuneration package may well be the answer. But, if a share incentive is needed, give options, linked to performance. If managers perform, they deserve the shares they get. If they fail, they will not get the shares at all. You can impose conditions on the options; for example, the options may lapse if a manager leaves the company. Properly designed and structured, options can incentivise management, protect you, and provide tax benefits all round!

Think twice before offering shares, but don’t be too stubborn or emotional. You may well be better off with a reduced share of a more profitable and more valuable business.


Back to contents



Could your employees work from home?

Advances in technology now make working from home a practical option for many employees. With broadband access, virtual private networks and on line reference materials, they can have access to the same resources as they would in the office. An employer could offer staff the option of home working arrangements as an incentive, or as a necessity if, for example, there are accommodation constraints at the business premises.

Computer equipment
Computer equipment up to the value of £2,500 can be provided to employees tax-free, and they can be given the option to purchase the equipment at the end of the loan period for its value at that time. If employees are willing to take a salary sacrifice, such a scheme can be implemented with little cost to the business.

Home working arrangements
If employees regularly work at home under agreed home working arrangements, you can reimburse them for the cost of their additional household expenses. Payments of £2 per week can be made free of tax without documentary evidence, but above that level the payment must be supported by evidence of the additional costs incurred.

Home as a workplace
Employees may want their home to be classified as their ‘workplace’ so that they can, for example, claim travel expenses from home to other workplaces. A suitably worded contract can be a vital ingredient for a successful claim, but this is not enough. The employee must actually be required to work from home, and do so.


Back to contents



Benchmarking - will it benefit your business?

Benchmarking is the process of comparing your business with the competition. At the simplest level, comparisons are based on Standard Industry Classification (SIC) codes, or on trade descriptions. These can often be misleading or vague and the comparator companies are not always truly comparable. Irrelevant companies are often included while the companies that matter to you may be overlooked.

This one-dimensional approach can be adequate for some businesses. But there are other options.

Cassons can add another dimension and take benchmarking to the next level. A skilled researcher can identify businesses that are truly comparable to yours. This will result in a more meaningful report because it includes market and industry research in addition to the basic statistics like turnover levels, profitability and performance ratios.

It does not stop there.

Our holistic ‘3-D’ approach to benchmarking involves considering your corporate strategy and business plan, so that a refined selection of comparator companies can be made. The results are then analysed and researched to find out not just who is doing well but why they seem to be doing well. The aim of this is to build up a complete understanding of your business, the industry in which you operate, where your business fits in and how your company can exploit its position in the market. This can lead to the refocusing your corporate strategy or business plan.

Benchmarking now becomes a valuable and productive business tool that can make a real difference to your business.

We call this ‘3-D Benchmarking’. Maybe it will add a new dimension to your business…

Back to contents



In brief...

Stop press! Budget 2005
Our website has a user-friendly guide to the Budget. You can access it by clicking here.

Vans
From 6 April 2005, employees who have private use of a company van can remove completely their liability to tax if they have the van mainly for business travel and any private use other than for journeys to and from work is insignificant. More changes take place from 6 April 2007.

PAYE online
The Employer’s Annual Return for 2004/5 is due by 19 May 2005. If you have fewer than 50 employees you will get £250, tax-free if you submit the return (P14s and P35) online, and there is a further £575 available over the next 4 years. You will need to have internet access and register with the Inland Revenue, or alternatively we can file online for you.

Revenue toughen up
The Inland Revenue is adopting a policy of pursuing debts through the Courts much more quickly than before. One client who should have paid his PAYE on 19 December and ignored the first reminder letter received a summons and a £250 fee from the County Court in January.

Back to contents


You and your family


Keep SIPP in the family

6 April 2006 sees one of the biggest ever shake-ups in pensions legislation.

From that date:

  • a pension scheme can invest in residential property;

  • a pension scheme can buy property from a connected person; and

  • a pensioner can avoid purchasing an annuity at age 75.

    • Self-Invested Personal Pension Plans (SIPPs) are one of the best ways to take advantage of these new opportunities.

    At age 75, you can choose an Alternatively Secured Pension (ASP). Instead of buying an annuity, you can hold on to your pension fund and take an income from it. You do not have to take any income if you do not need it. You (or your adviser) will control the continuing investment of your pension fund. Of course, this inevitably entails a degree of investment risk.

    On your death, your pension fund must be used to provide an income for your spouse or dependent children. Non-dependent children can also count. When your spouse dies, the remaining fund can be transferred to the other family members.

    Once your heirs reach age 55, they can take a tax-free lump sum of up to 25% of the fund and draw an income from the remaining investment. But they can also include their children in the plan; and so the pension fund can cascade down the generations. Perhaps surprisingly, under current rules this will all happen without any inheritance tax being chargeable!

    Marketing people like slogans. So look out for the new buzzword: Family SIPPs.

    Back to contents



    Pre-owned assets

    A new tax charge may affect you from 6 April 2005. Known unofficially as the “pre-owned assets tax” (or “POT”), this is a new income tax charge intended to attack avoidance of another tax – inheritance tax (IHT). It may affect you even if you are not actively seeking to mitigate IHT.

    Not only is POT radical in using one tax to block avoidance of another, but it is retrospective. (The Revenue deny this and instead claim it is “retroactive”!). POT will catch any arrangements entered into from 18 March 1986 (yes, 1986!) being the day when IHT was introduced.

    The new rules will not just catch “artificial” tax avoidance schemes. Entirely innocent transactions may be caught – IHT avoidance may be the intended target but it is not a prerequisite to the application of the rules! Take home equity release schemes, for example. On a strict reading of the new rules equity release schemes are caught full square by POT. The Revenue has tried to ridicule this suggestion and equity release will no doubt ultimately be excluded from the tax charge, but it is unfortunate that the rules are so ill-considered and widely drawn that “innocent” cases must be excluded by concession. And beware: more and more innocent cases will surface in the future.

    The Revenue has promised to give its interpretation of the new rules by early 2005. At the time of writing this guidance remains notable by its absence.

    Effective IHT planning is possibly more difficult to achieve now than ever. Nevertheless, do not be complacent because there are still opportunities to mitigate the tax with proper planning.

    Back to contents



    Do you know how much you are risking?

    How long is it since your investment portfolio was reviewed? If it is more than 12 months, you could be risking more (or less) than you think!

    A well-balanced portfolio is divided between asset classes such as property, equities and corporate bonds. Within each asset class, there is an allocation between sectors, for example UK, European, American and Asian equities. The whole balance is chosen to suit your individual attitude to risk. If your portfolio is not reviewed regularly, then the balance may shift and the risk profile may change.

    For example, in 2004 a property fund could have risen by 45%, outstripping other asset classes. If the portfolio initially had 25% allocated to property, and supposing the rest of the portfolio averaged 10% growth, 1 year of such divergence would have raised property to 31% of the portfolio. If there were a second year of similar divergence, property would become 37% of the portfolio. The portfolio would become unbalanced.

    It may be obvious that too much risk is bad. Perhaps less obviously, too little risk can be just as bad. There is a correlation between risk and reward. You may have accepted higher risk because you are targeting higher returns. If the balance of your portfolio shifts, you may no longer achieve the returns which you seek.

    An annual review provides an opportunity to rebalance your portfolio, if necessary. Are you ready to review your portfolio? Or would you like advice about constructing a portfolio which matches your risk profile?

    Back to contents



    In brief...

    Equity release schemes
    Pensioners on low incomes but who have benefited from rising property prices over recent years may be tempted to turn to equity release as a way of boosting their income. These schemes are now regulated by the Financial Services Authority (FSA). You should only consider schemes which carry the SHIP mark (Safe Home Income Plans). This gives plan holders maximum protection in this increasingly popular market.

    ISAs - stand out from the crowd
    Why is it so many people invest in an ISA (Individual Savings Account) at the end of each tax year? If you invest at the beginning of the year, you could get an extra year’s tax-free growth. Equity markets are expected to perform well in the next 12 months. Now is the time to utilise your £7,000 allowance for 2005/6.

    Offset mortgages
    Are you a higher rate taxpayer with a mortgage and also significant savings balances? If so, did you know that you could benefit from switching to an offset mortgage, where your savings are offset against your mortgage debt? You will benefit from the equivalent of the same rate of interest on your savings as on your mortgage, potentially giving an effective gross savings return of around 9%.

    Back to contents


    Ask Cassons

    This issue we are featuring some of the questions which have been generated via the Ask Cassons facility on our website…


    Buying a property in Spain

    “I would like to purchase property in Spain. The rental from the place in Spain may take me over the upper tax bracket - is there any way around this? What else might I need to consider?”

    You need to consider how the property is going to be owned: whether it is just you, you with a partner or maybe through a limited company. All will have different tax implications and might reduce your tax exposure. If you intend to use the property for non-business purposes then this will have an impact on your tax position and influence how it would be owned.

    There will be local issues for you to consider, for example, you will need a Spanish will and there will also be local taxes. We are not experts on Spanish tax but we do have links with accounting firms in Spain through our international network, BKR International.

    If you are borrowing to fund the investment then you may be able to set the loan interest against the rental income. There will be other allowable expenses too.

    Capital gains tax might arise on an ultimate sale and will depend on several factors including the method of ownership, whether you have unused annual exemptions, and the period of ownership for the application of taper relief.

    Higher rate income tax can be mitigated by conventional routes such as pension or gift aid payments or perhaps by investing in a venture capital trust. The capital gains tax, if any, can be affected by the timing of the disposal of the property or indeed other asset sales.

    Back to contents



    Dying before updating a will

    “My father died before updating his will - can we change it?”

    Provided all the beneficiaries whose legacy is affected agree, the will can be changed using a Deed of Variation within two years of the death. Changes cannot be forced on unwilling beneficiaries. Changes may be made with tax in mind, but they must be real, not a sham.

    Deeds of variation can be very useful but are not a substitute for a well-planned will. It is therefore important to update your will regularly to ensure your estate goes where you want it to, especially after events such as separation or remarriage.

    Back to contents


    Client profile


    Oddie's family bakery and confectioners

    Oddie's bakery and confectionersTV personality Bill Oddie knows about birds, but if you’re talking meat pies or tea cakes, his East Lancashire namesake is your man. Oddie’s family bakery and confectioners celebrate their centenary this year and owner Bill Oddie hopes that the famous twitcher will be his guest. He believes the pair may be relatives as their grandfathers hail from the neighbouring villages of Chatburn and Grindleton.

    Bill Oddie, 63, is passionate about baking – it has been his way of life for 45 years. He has the same commitment to quality as the founder, his grandfather William Henry Oddie.

    Today, the Nelson-based bakery has 14 shops and 220 staff. But they are still a family business. And Bill prides himself on knowing every staff member by their Christian name. Some have been with the firm over four decades.

    Bill’s father Jack created the firm’s famous steak pies and potato pies. In recent years, sandwiches and savoury lunchtime snacks have really taken off. Oddie’s sell 20,000 sandwiches a week. Oddie’s have moved with the times and focaccia, corn bread and rye bread are now popular. The tuna special, made of tuna and cheese, chopped onion and Marie Rose sauce is the best seller. Customers come back for the sandwich of the week or a tasty goulash soup.

    It is no surprise that Oddie’s were awarded Britain’s Best Baker of the Year in 1993, Traditional Baker of the Year in 1996, Independent Craft Bakery of the year 2002 and they are also Investors in People.

    Bill’s daughter Lara, 36, assures the future of the firm. Bill proudly says, “She is the most wonderful thing that ever happened.” Lara, who has a management degree from Thames Polytechnic, is the firm’s marketing director. Her professionalism, computing skills and innate ability have provided a “different dimension” to the business.

    Oddie’s appointed Cassons when the firm was called Herbert Shepherd in the 1930s and have remained satisfied clients.

    The forthcoming centenary will be a celebration for the whole community. Schools close to the bakery will be designing a centenary logo. Other planned events include a family fun day with a five-a-side football competition, and a barbecue for all their staff.

    Reviewing a century of success, Bill says the secret lies in maintaining quality at fair prices and, of course, having the Oddie family touch.


    Contact:
    Lara and Bill Oddie
    Oddie's bakery
    T 01282 602181

    Back to contents