finance tools - uk200 group
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#Finance4SUBWifi Code – R3port1ng
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UK200Group members presenting:
Price Bailey LLPHaslers Anderson Barrowcliff LLP
www.uk200group.co.uk
#Finance4SUB
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• A leading UK professional member association• Established 1986• Independent chartered accountants and
lawyers • Over 150 member locations throughout UK• Over 500 partners • Combined client base over 150000 businesses• Annual quality review of a high standard• Specialist technical expertise• International reach
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Finance Tool for Small BusinessCorporate Finance Structures relevant to small business start up and growth companies
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5www.pricebailey.co.uk
Introduction
• Simon Blake
• Head of Corporate Finance and a Partner in Price Bailey LLP
– London and East Anglian Chartered Accountants
– 75 years old, 300 staff including 23 partners
– Growing by acquisition and organic efforts
– Focussed on private owner management businesses
– Clients from start ups to mature family business and overseas subsidiaries. A few AIM/Plus listed clients
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6www.pricebailey.co.uk
Simon Blake and UK200Group
• Chairman of the UK200Group Corporate Finance Panel
• Representing independent accountancy firms nationwide
• Specialist corporate financiers working on new business funding, structures, M&A for owner managed private businesses from Cardiff to Castleton, Leeds to London and Maidstone to Manchester
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7www.pricebailey.co.uk
Setting up the Business
• You have the innovation
• You have decided to run with it
• You have raided the piggy bank/mortgaged your mothers house
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8www.pricebailey.co.uk
What Structure?
• Sole Trader
• Partnership
• LLP
• Limited Company
• PLC
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9www.pricebailey.co.uk
It depends!
• What is the business going to do?
• UK Trading or International?
• Aiming for £10,000pa sales or £10m in the first 3 years?
• Funded entirely by you, multinational corporate, venture capital….
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10www.pricebailey.co.uk
Fundamental differences
• Partnership and Sole Trader– transparent to individuals
• for liability and taxation
– simple to administer
• Limited Company, LLP, PLC
– Separate legal entity
– Liability falls on the company
– Taxed corporately
– Requires more administration
– PLC requires £50k share capital. Does not mean listed.
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11www.pricebailey.co.uk
On shore or offshore
• Offshore companies are only appropriate where
– Much of the business trading is being offshore
– Most of the investment/funding is coming from overseas
– The founders are non UK resident/domiciled
– Acceptance of complicated accounting/tax/structure issues (Apple, Facebook etc)
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12www.pricebailey.co.uk
Most common approach
• Limited companies are the most common entity used in the 21st century
– Whether for a one man start up or an MBO of a non core division being bought from a multinational
• Can be formed by one director with £1 share capital
• No limits on number of directors/shareholders
• Easy to adapt, but publicly accessible information
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13www.pricebailey.co.uk
Funding angles
• All funders recognise Limited companies as the easiest vehicle to fund
• Banks will often require director/shareholder guarantees which breaks the liability protection for bank borrowing (but not other liabilities, e.g.. Contractual disputes)
• Different structures of shares can accommodate almost any arrangement of equity funding solutions
• Easily convertible to PLC for listing requirements
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14www.pricebailey.co.uk
Pitfalls and planning
• Easy to set up, but what about when things are less rosy?
• Avoid 50:50 shareholding where possible, as this risks a deadlock
• Always have a private shareholders agreement (not on public record)
• Keep companies clean
– respect it’s individual entity status, and
– don’t confuse personal and business
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15www.pricebailey.co.uk
Shareholders / Investors Agreements
• For companies, a shareholders agreements provides a framework and a fall back position in dispute
• Vital where mixture of shareholders working in the business and pure investors
• Sets the parameters for
– Dealing with disputes
– Transfers of shares
– What happens when a shareholder wants to leave
– What happens when other shareholders want a shareholder to leave
– Who makes what decisions – management or shareholders
– How are shares valued for internal transfers of shares
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16www.pricebailey.co.uk
What do buyers want?
• When you come to sell your business, what structures do buyers want?
• Buyers want clean assets and no liabilities
• Sellers want typically cash now and walk away!
• Taxation of shares v assets on exit
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17www.pricebailey.co.uk
LLPs
• Limited Liability Partnerships
• A company for legal purposes, a partnership for tax purposes
• Common for “special purpose vehicles” e.g. single asset businesses
• Heavily used by professional partnerships, albeit trend perhaps beginning to head towards Ltd and PLC for them as well now
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Price Bailey is a trading name of Price Bailey LLP, a limited liability partnership registered in England and Wales, number OC307551. Registered by the Institute of Chartered Accountants in England and Wales to carry out company audit work. Authorised and regulated by the Financial Services Authority for corporate finance business. Financial services work is undertaken by Price Bailey Private Client LLP, an appointed representative of PB Financial Planning Ltd, which is authorised and regulated by the Financial Services Authority.
Key contactsSimon Blake PartnerHead of Corporate Finance0207 065 2660 [email protected]
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UK200Group members presenting:
Price Bailey LLPHaslers Anderson Barrowcliff LLP
www.uk200group.co.uk
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VAT – the basics and some money saving tips
Debra DougalVAT Partner, Haslers
Chairman of UK200Group Tax Panel
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• Award-winning, Top 60 firm of chartered accountants, dedicated to meeting the needs of the SME sector for 60 years.
• 13 Partners, 100 staff
• Based in Loughton, Essex
• We act for a wide range of clients, including owner-managed and family businesses
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• VAT Partner
• 26 years’ VAT experience
• HMRC and practice
• Broad technical and practical VAT experience
• Pragmatic approach to problem solving
• Present on various VAT topics for trade groups, professionals and
clients
• Chairman of the UK200 Group Tax Panel
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VAT is a simple tax (Anon 1972)
• Transaction tax not an income tax
• Goods and services
• Taxable person
• In the course or furtherance of business
• Where the supply takes place
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VAT Registration
• Compulsory if exceed threshold
£77,000 from 1.4.12
• Voluntary if under threshold
• Intending if not yet commenced
• Deregistration threshold £75,000 from 1.4.12
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Categories of supplies
VAT on sales VAT on associated
purchasesTAXABLEStandard 20% claimableReduced 5% claimableZero 0% claimableEXEMPT 0% not claimableO/S 0% claimable
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Zero-rated supplies
• Food but not catering
(or pasties!)
• Books and newspapers
• Residential new build
• Exports of goods
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Zero-rated supplies cont/d…
• Children's clothing and footwear
• Residential caravans and houseboats
• Goods and aids for the handicapped
• Certain goods and services to charities
• Qualifying ships and aircraft
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Exempt supplies
• Land and existing buildings
• Insurance services
• Betting and gaming
• Financial services
• Education if business
• Health
• Burial and cremation
• Trade Unions
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Outside the scope supplies
• Supplies of services taxed where the customer belongs
• B2B
• Exceptions for
Land
Admissions to events
Passenger transport
Hire of transport
Restaurant & catering
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Money saving tips
• Timing sales and purchases
• Applications for payment
• Cash Accounting
• Flat rate scheme for small businesses
• Special partial exemption methods
• Bad debt relief
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VAT Period
STARTSTART ENDEND RREETTUURRNN
DDUUEE
SALES
PURCHASES
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Applications for payment
• Don’t create tax point for sale so VAT not due
• Widely used in construction sector
• Continuous supplies of services
• Pro forma invoicing
• Beware of tax points
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Cash Accounting
• Restricted to businesses with turnover under £1.35m –
tolerance to £1.6m
• Account for both sales and purchase VAT on cash basis
• Ideal if you offer credit terms but pay your suppliers
promptly
• Not a good idea if you receive and take up longer
credit terms
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Flat Rate Scheme for Small Businesses
• Restricted to businesses with turnover under £150,000 –
tolerance to £230,000
• Marketed by HMRC as a simplification scheme
• Can have real financial benefit if
Low VATable expenditure
Associated businesses
Expenditure is on capital items £2000+
• Need to look at specific flat rates for your sector
• Beware rules on including exempt income
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Special Partial Exemption methods
• If make both taxable and exempt supplies
• Standard method may be less beneficial
• Must be fair and reasonable
• De minimis limit £7500 and less than 50%
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Bad Debt Relief
• Not on cash accounting
• Debtors over 6 months
• Reclaim VAT owed to you
• Beware of the flip side if you owe your
creditors for more than 6 months
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VAT – the basics and some money saving tips
Debra DougalVAT Partner
Direct dial 020 8418 3426
#Finance4SUB
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UK200Group members presenting:
Price Bailey LLPHaslersAnderson Barrowcliff LLP
www.uk200group.co.uk
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Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
A MEDLEY OF PAYROLL ISSUESPRESENTED BY
MHAIRI CHARLTON
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Payroll compliance Minimise the damage of an Employer Compliance Review [ECR]
Changes to the operation of payroll Real time information – RTI
Tax efficient remuneration How to give your employees a pay rise without increasing staff costs
MEDLEY constituents
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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PAYE and NIC collected by employer’s accounts for about 50% of the total tax paid in the UK
HMRC carries out around 30,000 payroll inspections each year and with an annual average tax of £300m
HMRC carries out very few truly random reviews and most are triggered by an event or reason
The employer is generally the person who pays
Payroll compliance
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
#Finance4SUB
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Not operating the correct tax codes/implementing changes
Expenses reimbursed e.g.Travel & subsistenceMobile telephone
Mileage records
Home telephone
Staff entertaining
Payroll - common errors
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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Operate tax codes as soon as received
Pay PAYE & NIC by the due date – late payment carries financial penalties as well as increased Revenue interest
Develop procedures for dealing with expenses no receipt no reimbursement details of why the expense was incurred
Apply for a dispensation
How to avoid an ECR
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
#Finance4SUB
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WHYWHATHOWWHEN
RTI & PAYE
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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Current PAYE system was introduced in 1944 – the job market of 1944 is much different than that of today
Technology has vastly improved – the introduction of NPS (National Insurance and PAYE Computer System) in 2010 enables RTI
Reduce costs for both HMRC & the Employer (?)
Avoid overpayment & underpayment of PAYE
Prevent Tax Credit Errors & fraud
WHY
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
#Finance4SUB
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Employers will report to HMRC all payments as part of their normal payroll activity –
Monthly or weekly depending on payment period for employeesGross pay PAYE & NIC deductedEmployees bank details & net payment made
No more P45s for joiners & leaversEmployers will need to provide a leaving statement
No more P35 Employers will need to provide employees with details currently provided on the
P60
P11Ds will remain (for the time being)
WHAT
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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InitiallyInternet through the Government Gateway using HMRC Basic PAYE tools
which will be developed to enable RTI
Electronic Data Interchange (EDI) using commercial software (will be available at least until 2014)
Ultimately it is intended that the majority of RTI will be submitted via Bacs
HOW
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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April 2012: Test system with a small number of PAYE schemes (large, medium and small employees)
April 2013 to October 2013: Employers will begin to use the RTI service
October 2013:All employers will be using RTI
WHEN
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Current position
Remuneration package & outgoings
Annual £
Salary 25,000
Outgoings £Childcare 100 per w eek 4,600Pension 100 per month 1,200Car parking for work 7 per w eek 322
Mobile phone 15 per month 180
Spends on average 2 days out of the office - site based
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Employee's net disposable income after outgoings £ £
Salary 25,000
Less: Income tax 3,379
Employees NIC 2,088
(5,467)
Take home pay 19,533
Less: Outgoings
Childcare 4,600Pension 1,200
Car parking for work 322Mobile phone 180
(6,302)
Disposable income 13,231
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Cost to Employer £
CostSalary 25,000Employer's NIC 2,416
27,416
Less: Corporation Tax relief 20% (5,483)
21,933
#Finance4SUB
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Revised position
Remuneration package & outgoings
Annual £
Cash Salary 19,238Subsistence 480
Benefits Childcare vouchers 2,530
Employer pension contribution 1,200Car parking 322Mobile phone 180
Total "gross" remuneration 23,950
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Employee's net disposable income after outgoings £ £
Cash salary 19,238
Less: Income tax 2,226Employees NIC 1,397
(3,623)
Take home pay 15,615
Add: Subsistence payments 480
Less: Balance of Childcare (2,070)
Revised disposable income 14,025
Original disposable income 13,231
Increase in Employee's disposable income £794
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Tax efficient remuneration
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
Cost to Employer £
CostSalary 19,238Employer's NIC 1,621
20,859Add: Cost of benefits
Childcare vouchers 2,530Employer pension contribution 1,500 1
Car parking 322Mobile phone 180Subsistence payments 480
Administration 12625,997
Less: Corporation Tax relief 20% (5,199)
Revised cost to employer 20,798Original cost to employer 21,933
Decrease in cost to Employer £1,135
1 Employee w ill have made the contribution to the pension net of basic rate tax. The employer makes a gross contribution.
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Contact
Mhairi CharltonSenior Tax Manager
t: 01642 660 300
m: 07855 791 430
Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
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