balanced newsletter

What's new at Cassons?

balanced 2009

For 2009 we are planning to change the style of our balanced newsletter and will send it out primarily by email. This will enable us to keep you up to date more quickly with any new developments and allow us to include some new features. You can make sure that we have your correct email address by contacting us at welcome@cassons.co.uk. But, if you prefer, we'll still send out a printed copy!

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New Manchester office!

On Monday 22 September we moved to our new offices in Manchester after 25 years at Bow Chambers. Our new office, which is on Bridge Street, is better suited to our requirements and is extremely well situated, being just off Deansgate. We are close to many of the city centre car parks, the closest being King Street West - better known as Kendals - and Bridge Street. We hope to see you there?

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Deals success

Cassons corporate finance team recently advised the owners of Flextex Limited, a converter of polythene and supplier of bespoke flexible packaging solutions to UK-wide businesses, on the sale of the company. Mike Martin and Bill Bird founded the company in 1985 operating from a small warehouse with only one bag making machine. Flextex is now one of the most successful companies in the industry, with a workforce of over 30 people. They approached Cassons when Mike wanted to retire and we put together the whole deal for them, including finding the buyer. The terms of the deal and financial details have not been made public.

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Congratulations!

We send our warmest congratulations to clients Giles Harridge and Jon Smith of Getting Personal who have won the coveted 2008 Manchester Evening News Young Business of the Year Award.

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Your business

Weathering the storm

All the economic indicators tell us that we are looking at some tough trading times ahead. It is far better that you control what is happening now rather than being in a position of having to react further down the line. Here are a few ideas for you to consider:

1. Review budgets and make sure targets for 2009 are realistic and achievable.
2. Make sure your terms of business contain explicit payment terms and a retention of title clause.
3. Review debtors' lists, chase up overdue invoices, get rid of any "can't pay/won't pay" customers and perhaps offer discounts for early settlement.
4. Agree extended payment terms with suppliers and, if appropriate, review banking facilities and discuss future needs.
5. Review the main processes in your business (eg sales processing, order fulfilment etc) and challenge the need for each step. Consider whether alternatives such as outsourcing would be more efficient.
6. Apply "bottom up" budgeting with staff charged with the responsibility of saving say 10% on costs over which they have control.
7. Review your staffing needs now for the next 12 months.
8. Review your list of products and services and eliminate those that are unprofitable or not core.
9. Establish your key performance indicators and measure them constantly. For example: sales leads generated; orders supplied/fulfilled; cash balance; stock turnover; debtor days; gross profit; and net profit.
10. Hold an "all hands" meeting with staff, explain the business strategy, and get their support.

This is the time when the smart and the brave businesses can survive and indeed be ready to thrive when conditions improve. We will be delighted to discuss these or any other issues with you.

For further information please contact:
Les Nutter
E les.nutter@cassons.co.uk

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Capital allowances revisited - the bad and the good

Tax relief for businesses for the cost of their capital spend on equipment, plant and machinery was changed in April 2008. These changes were summarised in issue nine of balanced.

Amidst this technical detail, how do these changes affect your business? First, the bad news. The rates of allowances you get annually are going down. You used to get 25% per annum (on the reducing balance of unrelieved expenditure). This is now 20% for most equipment and plant. In some cases the allowance is reduced to 10% for new items of plant or fixtures forming part of a building. So you now get less tax relief annually for capital assets already held at April 2008 and for new expenditure costing more than the new Annual Investment Allowance ("AIA").

The AIA is most definitely good news. Your business can spend up to £50,000 on plant (but not cars) in a year and receive 100% tax relief. There are complications, naturally, if you have "related" businesses, to stop the allowance being given more than once each year.

The other good news is on fitting out buildings. Some types of spend are, for the first time, now eligible for capital allowances (either the AIA or 10% per annum). These include general lighting (as opposed to specific purpose lighting, which may already have qualified), electrical wiring, installation of cold water supplies (now in addition to hot water), and thermal insulation.

It is assumed that these changes were intended to increase business tax liabilities generally, but "smaller" businesses spending up to £200,000 on plant a year will probably benefit, particularly as a result of the AIA.

For further information please contact:
Colin Tice
E colin.tice@cassons.co.uk

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CIS and gross payment status - an urgent reminder

We reported in issue nine of balanced how HMRC reviews the tax affairs of subcontractors holding gross payment status in the Construction Industry Scheme (CIS). We are now seeing in practice the real consequences of the taxman's "reviews".

As a subcontractor currently holding gross payment status you are required to comply fully with all your tax obligations at all times or risk the Revenue seeking to cancel your status. If you don't keep up to date, submit HMRC forms on time and pay all taxes on time, your gross payment status is at risk.

If you fail the review the taxman will notify you that you are to be reclassified to net payment status. He will instruct all your associated contractors to pay you net of a 20% tax deduction. Your compliance record for the next 12 months would have to be immaculate in order for you to re-apply for gross payment status. The impact on work flow from losing gross status could be quite devastating but, in the current economic climate, could potentially be fatal.

HMRC has confirmed that most failures to date are late PAYE/CIS payments. If you run your own payroll, you need to take increased care. You might consider transferring responsibility for dealing with your payroll to us. Ask us for a quote. Make sure your VAT returns are in on time. Don't leave your personal tax return until the last minute - send us the information now; and make provision for your tax bill.

There is an appeals procedure but, at the time of writing, HMRC continue to adopt a hard line despite government "undertakings" that the Revenue should treat smaller businesses sympathetically at this time.

For further information please contact:
Jonathan Rourke
E jonathan.rourke@cassons.co.uk

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In brief …

Increase in fines for late filing of accounts

From 1 February 2009 the penalties for late filing of accounts at Companies House by limited companies and limited liability partnerships are increased.

The new penalties for private companies are:

• up to 1 month late - £150;
• up to 3 months late - £375;
• up to 6 months late - £750; and
• more than 6 months late - £1,500.

In addition, the period for filing accounts has been reduced from 10 to 9 months for accounting periods commencing on or after 6 April 2008. It is even more important that you plan to have your company's accounts completed in a timely manner, or risk the financial consequence.

Pensions early warning

A new system of compulsory pension contribution is being considered from 2012. Employees will be automatically enrolled into either a new "personal account" or an employer sponsored scheme.

The total minimum contribution will be 8% of salary within the "earnings band" (currently £5,435 to £36,000 per annum). Employees will be expected to contribute 4%, employers 3%, with the government providing an extra 1%.

The reforms are designed to encourage greater participation in occupational pension schemes but employers will have to factor into their profit forecasts and cash flows an extra 3% of salary costs annually.

And payroll early warning!

This is the last year that you will be able to submit form P35 (PAYE end of year return) on paper. From 2009/10 all forms P35 must be submitted electronically. This currently applies to "larger" employers but soon all employers will need to go online.

If you have any concerns, please ask us for a quote to deal with this for you. We are a Bacs approved bureau which means we can also pay your PAYE and NIC deductions direct to HMRC and salaries straight into your employees' bank accounts on your behalf.

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Your family

Every cloud has a silver lining

The credit crunch may have originated in the US mortgage market but it has rocked financial markets globally and confidence is fragile. Investments and property holdings have fallen in value; and many businesses are suffering. So can there be any good news?

Ongoing uncertainty is one of the factors upsetting markets; and volatility seems likely to continue for quite a while yet. Volatility magnifies the opportunities both to make and to lose money. But there are indeed opportunities; and those with an appetite for risk should now be looking to get into markets. You may not quite capture the bottom of the market. But most investors will not recognise the bottom until they have missed it!

In some cases, falling values present tax planning opportunities. Extracting investments or property holdings from company or trust structures can trigger two or three tax charges: tax on the capital gains that will be realised by such companies or trusts; income tax or capital gains tax when assets are distributed to shareholders or beneficiaries; and stamp duty. It is common for assets to be "locked" inside such structures because the tax cost of getting them out is unacceptable. Falling asset values may create a window of opportunity where the tax burden becomes acceptable.

Conversely, there are many cases where it is desirable to place investments into trust, or where investors or property owners wish to pass assets to children or grandchildren as part of their estate planning; but potential capital gains tax or inheritance tax liabilities effectively thwart such planning. Falling asset values may create a window of opportunity for tax and estate planning.

Business owners will be conscious that difficult trading conditions affect not only profits but also the value of their businesses. Capital values may not matter if you are not planning to sell. But if you want to motivate key employees by giving them shares in your business, or by offering them tax-efficient incentives such as share options under the Enterprise Management Incentive scheme, now may the right time to do so with the greatest tax advantage to you and your employees.

For further information please contact:
Ashley Hayman
E Ashley.hayman@cassons.co.uk

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Pensions - strategic planning

Regulations have recently been approved by the Department for Work and Pensions (DWP) allowing self invested personal pensions (SIPPs) to hold protected rights from 1 October 2008.

Protected rights are funds built up in money purchase pension schemes from national insurance rebates where an individual has contracted out of the State Second Pension (S2P), formerly SERPS. In return for giving up part of your S2P entitlement, the government rebates part of your national insurance contributions into your chosen pension plan. This could be your own personal pension plan or your employer's occupational pension scheme. But only certain personal pension plans were permitted to accept protected rights and there were strict rules on how these funds could be invested. There were also further restrictions when taking benefits from protected rights funds.

Historically, there have been restrictions for protected rights investment because these funds were to replace part of your state pension and so "safe" investments were required, to ensure so far as possible that protected rights provided a broadly similar pension entitlement to S2P.

The changes in regulation mean that protected rights may now be held in a SIPP and allow full self investment with much more flexibility and choice.

SIPPs are now one of the cornerstones for pension savers who want more involvement in their retirement funding and planning. They represent better choice, flexibility and control. They offer new opportunities for investment for pension savers, offering a wide range of managed funds as well as direct holdings of quoted and unquoted shares, gilts, gold and other specialist investments and funds. SIPPs enable savers to invest in property and land, borrowing against the pension assets to fund the purchase. They can also deliver wider choices drawing income in retirement.

Transferring protected rights funds to SIPPs may not be appropriate in all cases. The investment performance may not be improved, charges may be higher and access to a wider range of asset classes may not be suitable for the less sophisticated investor.

For further information please contact:
Steven Greenwood
E steven.greenwood@cassons.co.uk

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Tax crackdown on landlords?

Despite the taxman's denials of a crackdown on buy-to-let landlords, there is something happening!

You may have seen recent press reports of more than 2,000 letters being sent to potentially errant landlords, in other words those who may not have entered their rental income correctly on their tax returns - if at all!

We have seen evidence of information being collected direct from letting agents, including landlords' names and the amounts of rent received.

For our clients there should be no undue concern. When preparing tax returns for landlords we disclose your income and make appropriate claims for tax relief, based of course on information provided by you. Problems will arise, however, in those cases where rental income has not yet been disclosed to the taxman at all.

Please contact us if you have any concerns about your property income. You may actually have overpaid tax. If tax is owed, a full and prompt disclosure will reduce the levels of penalties payable.

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In brief …

Stamp duty land tax "holiday"?

In an attempt to rejuvenate the depressed housing market, the government raised the Stamp Duty Land Tax threshold to £175,000 for residential property for one year to September 2009. This seems unlikely to have any significant impact - the maximum saving is £1,750 per property. At the higher end SDLT is charged at 4% on properties over £500,000. This is where the real cost is and the "holiday" has no effect at this level. It may be possible in some cases for us to help you to mitigate the charge although it is cost effective only at the higher price bracket.

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Cassons profile

Bar Department

One of our more unusual areas of expertise is in advising barristers and judges. It started off in the 1960s with just a handful of barristers and has continued to grow year on year. To begin with, our barrister clients were based primarily in chambers in the North West but they are now located across the country. We have a separate Bar Department to streamline the service to our barrister clients, bringing together accounting, tax and financial planning expertise. This summer we developed it further by launching our new website www.cassonsforcounsel.co.uk which is specifically for barristers.

Many people would assume that barristers and other professionals all have the same or similar requirements for their accounting and financial affairs. But this is not the case. Barristers have very particular rules which must be followed, especially for their taxation, however not all accountants are aware of this. "Over the years we have had many barristers coming to us who have had poor advice from their accountants, which has resulted in them having tax investigations then unexpected tax bills and penalties," said Andrew Hood, Bar Department Manager. "We have then sorted it out and tried to minimise the consequences. I relish the challenge of organising the financial and accounting arrangements for our barrister clients. They have many pressing demands on their time so I have to act as efficiently as possible to make it straightforward for them."

We also have close links with the Northern Circuit of the Bar and each year we speak at their seminar for pupil barristers. "We consider it a privilege to be able to speak to pupil barristers at such an early stage in their career," explained Les Nutter, who chairs each year's session. "We endeavour to encourage them to understand from the outset what they need to do to in order to be sensible with their accounting, tax and financial affairs. And if they choose to come to us for their help in the future, then it's a bonus!"

A number of our well established barrister clients first came to us after attending the pupil seminar - and have stayed with us. We are proud of the barrister clients we have guided throughout their careers, from pupillage through to silk and judicial appointment. We look forward to giving them many more years of advice.

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Client profile

Ways HR Consulting

Few businesses will escape the effects of the credit crunch. But those set to survive will be the ones that maximise the potential of their most precious asset - their employees. And this is where the human resources sector comes in.

Ways HR Consulting was formed in April 2007. Former Hays HRC Head of Practice, Paul Robertson, set up the new company and became its managing director.

As School Captain at Plymouth's top grammar school with perfect grades at A level, Paul's start in life was auspicious. But after dropping out of a Management degree at UMIST Paul was on the streets of Manchester helping the homeless. He went on to study Social Work at Lancaster University. Paul says: "I was very left wing and idealistic."

Paul worked his way up the social services career ladder. By the mid 90s he was working for the Department of Health improving the quality of childcare staff. After a brief spell as CE of an international charity, Paul's career path altered radically. He became an adviser on documentary films where his charity experience came in handy. But after 18 months he realised that 'films were a hobby and not a career'.

In 1998 Paul joined Hays Group and along with an ex-footballer and an ex-priest he was trained in management consultancy. His social work background helped. "Managing an awkward workshop is not as difficult as an awkward family," he remarks. "Nobody threatens to stab me in the car park or spits at me!"

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