Export Week – What’s going on in the North East

EVENTS

UK Trade & Investment will be holding its 6th Export Week during the week of 10-14th November. Across the week there will be a varied series of events all over the UK, aimed at businesses to either start their export journey or increase their international business.

Previous Export Weeks have seen over 17,000 companies in the UK attend exporting focused events. This week we will again have over 70 events across the UK; there will be at least one event per day in every part of the UK.

Some of the week’s activities include seminars, trade workshops, targeted market days, intellectual property and marketing workshops. In addition, regions will be holding various events allowing you to access UKTI trade experts’ knowledge and experience, alongside that of regional partners.

You can find all of the events in our region here, so get involved and reserve your place today! And if you’ve been inspired by Export Weeks past or present, arrange a face-to-face meeting with a UKTI adviser today.

Government consultation day shows economic optimism is alive and well in the North

Northern Futures was a recent Government consultation day held at Newcastle’s Toffee Factory, facilitated by Northumbria University, Newcastle, to ask how economic growth can be stimulated in the North. We asked some local business leaders for their thoughts:

Rob Charlton, CEO of Space Architecture

“My view on this is that the North East must invest in skills. We must take a long term view and ensure our young people have the best skills to compete in the digital age. We have some excellent universities and we must work hard to retain that talent in the region. We should also work hard to promote the quality of life the region provides and focus on exports to other parts of the UK and further afield.”

Jonathon Stokes, Head of Dispute Resolution at Gordon Brown Law Firm

“For as long as the North is seen to stop at Leeds it is difficult to be optimistic about any support that is not self-generating. The recent suggestion that HS3 would create a ‘powerhouse in the North’ is undermined by the fact that the proposal is for Manchester, Liverpool, Sheffield and Leeds; and our existing link to Leeds is not good enough. It may be a vanity project, but that is not the point; that the North East was marginalised again, is.”

Nick Devitt, a North East based specialist in service design and innovation, and Northumbria graduate

“I hope that this sort of consultation is the beginning of the Government actively involving residents in identifying the problems that need resolving in the North East, and also building on strengths that we have up here. For too long, policy makers have been too far removed from real people in real places, and Northern Futures is certainly a step in the right direction towards closing the gap.”

Nynzi Maung, NECC Access Programme Leader

“North East businesses want to grow within a context where they can be sure there will be consistency of policy in conjunction with a long-term commitment to business support initiatives, from transport links to apprenticeship schemes. Decide on a policy and service, stick with it and give business enough time to engage with it properly to get the most out of it. Stop chopping and changing every two seconds.”

Ian Malcolm, Managing Director of automotive parts manufacturer ElringKlinger (GB)

“I think what is important is to get education and business communicating to ensure that schools in particular are giving their pupils what they need to be useful to industry.  It is all well and good talking about needing to get industry involved in education, but if the teaching is not serving the pupils then we will get nowhere. Transport links are strangling Newcastle in particular and why anyone would want to commute into the city I cannot understand, which means people are put off working there, therefore stifling growth.”

Jasmine Morris, a recent graduate from Northumbria’s Multidisciplinary Innovation MA course

“It’s great to see the Government being more proactive in starting a conversation about maximising the potential of the North. I feel a renewed sense of optimism about our economic future. We are ready for change!”

 

Is an IVA always the best option? – 10 points to consider

TURNAROUND AND INSOLVENCY

Lynn Marshall from our Turnaround & Insolvency team discusses some important points about IVAs:

  1. Determine whether an IVA is the best option
    An IVA (Individual Voluntary Arrangement) may not be the only available option; therefore a full discussion should take place BEFORE any decision is made.
  2. Don’t consider an IVA in isolation
    We frequently arrange to meet individuals to discuss options and are told that they will not consider anything other than an IVA. Any decision is yours, but all options should be considered based upon your unique situation.
  3. Avoid a blinkered view
    Different options work best dependent upon individual circumstances e.g. whether you own a house, if you’re a Company Director or employed, and your area of work. Be prepared to listen to all options with an open mind as the one best suited to you may be a surprise!
  4. Be honest when seeking advice
    Sometimes only half the story is provided at the initial meeting. The correct advice can only be provided if you explain everything. Discussing the value of your assets and exactly what you owe is absolutely necessary. Remember, the meeting is CONFIDENTIAL and we are there to provide you with the best advice.
  5. Look around – don’t just take one person’s opinion
    Look at a variety of sources and obtain information from the internet, booklets and from different advisers. By seeking the opinion of more than one person, you can decide who would be best to work with. You need to be able to trust the individual and the firm that they work for – make sure that they are right for you.
  6. Consider what is important to you
    It is vital to consider what is important to you and to make sure your priorities are known. Do you want to save your property or were you thinking about moving? Do you need to be a Company Director – if so, how important is this to you? By thinking about all of these things, your options may change and something that was previously unavailable may suddenly become free.
  7. Know that you may not get everything you want
    You may have a wish list or a particular process that you want to consider, but it may not always be possible. Know that we will provide the best advice for your circumstances and that our advisers will always consider your needs.
  8. The art of compromise
    Any insolvency process usually involves a compromise. If an IVA is considered, creditors will usually be compromising on their debts. They will then expect to receive as much as is feasible and will therefore expect you to compromise on what you can retain. In the event of other options, negotiation will also be necessary whether this relates to the amount of monthly surplus you can retain from your salary or whether you can keep your home.
  9. Pride doesn’t pay the bills
    I have given countless advice to clients over the last 24 years in regards to debt and insolvency. On numerous occasions there have been no discussions with relatives and friends, who have sometimes indicated that they would have helped if they’d known about it. It can be an uncomfortable topic of conversation, but it is one which may be worth having.
  10. Remember you are not the only one!
    You are not alone and while it may feel that way, there are countless people who are prepared to help and to provide you with the correct advice. The first step is a call or an e-mail to start a discussion with an appropriate adviser. Simply obtaining the required information will not eradicate the problem, but it will make it more manageable and easier to deal with.

For further advice about whether an IVA is the right choice for you, please contact Lynn Marshall on 0191 285 0321 or email lynn.marshall@taitwalker.co.uk

 

Major changes to the taxation of buying property in Scotland

Taxation & Payroll

Increasing numbers of North East businesses are acquiring property in Scotland as part of their expansion into areas such as Aberdeen, Edinburgh and Glasgow. However, recent announced changes will impact upon property acquisitions completed after 1 April 2015. For some, the new Land and Buildings Transaction Tax may increase the tax payable on acquisition and for others the new regime may reduce taxes.

North East based purchasers of property in Scotland should consider whether they will be affected and may wish to seek to accelerate or delay purchases accordingly. Angel Haig of our MHA affiliate firm Henderson Loggie has summarised below the major changes.

The first of the devolved taxes, land and buildings transaction tax (LBTT) comes into force on April 1 2015, replacing stamp duty land tax (SDLT) in relation to transactions involving land in Scotland.

LBTT is similar to SDLT in many ways, however, where SDLT is a slab tax (i.e. the whole price is taxed at a fixed rate) LBTT will be a progressive tax (i.e. slices will be taxed at different rates depending on the bracket they fall into).

The announcement gives more certainty to the housing market which has suffered in recent months due to the referendum and the unknown rates of LBTT.

Those purchasing residential property for a price exceeding £324,285 will want to consider a purchase prior to April 1 2015 as that is the level at which LBTT exceeds SDLT.

Those purchasing residential property below that value may wish to defer purchasing, where possible, until after April 1 2015 as there is a saving to be made.

Therefore, it is likely that there will be more movement in the more expensive properties in the next few months.

At the upper end of the market, a house purchase at £1.5million will cost £137,300 in LBTT, an effective rate of 9%, instead of the 5% rate of SDLT.

If you are considering purchasing a commercial property then the point at which LBTT exceeds SDLT is a purchase price of £1.95million.

Although LBTT doesn’t come into effect until April 1 2015, transactions that are ongoing at present that are not completed until after this date will be caught by LBTT, rather than SDLT.

 

If you’d like further guidance in relation to these changes, please contact Alastair Wilson on 0191 285 0321 or email alastair.wilson@taitwalker.co.uk

Fraud in your organisation – how to protect your business

Forensic Services

Many businesses are shocked not only when they discover a fraud, normally perpetrated by someone from within their organisation, but also by how little the police are often willing or able to do about the loss.

Frauds are often complex and difficult to prosecute. Even straightforward cases can take years to bring to trial and involve a great deal of time, money and risk to reputation. With current budget constraints the local police force has neither the time nor the expertise to properly investigate and prosecute most cases.

Businesses then frequently try the civil recovery route and often end up signing a compromise agreement with the offender(s) simply being dismissed, only to arrive at their next employer with the same plan.

The first piece of advice is to look at your recruitment policies and ensure that you fully research the background of new potential employees.

However ordinary, honest people do sometimes turn to fraud. What do you need to do with your existing staff to recognise this change?

Sometimes the way people behave might suggest that they are committing a fraud.  These signs are called ‘red flags’. Although independently they may not be any cause for concern, a few at the same time may cause suspicion.

‘Red flags’ could be:

  • Significant changes in behaviour that you’ve noticed
  • An individual has large personal debts or financial losses, and a desire for personal gain
  • A resistance to take holidays
  • Constant working of unusual hours without supervision
  • Audit findings deemed to be errors or irregularities
  • Transactions taking place at odd times, odd frequencies or involving unusual amounts or to odd recipients
  • Internal controls that are not enforced, or often compromised by higher authorities
  • Discrepancies in accounting records and unexplained items on reconciliations
  • Missing documents, or only photocopied documents available
  • Inconsistent, vague or implausible responses arising from inquiries
  • Unusual discrepancies between the client’s records and confirmation replies
  • Missing inventory or physical assets
  • Excessive voids or credits
  • Common names or addresses of payees or customers
  • Alterations on documents (such as back dating)
  • Duplications (such as duplicate payments)
  • Collusion among employees, where there is little or no supervision
  • One employee has control of a process from start to finish with no segregation of duties

This is not an exhaustive list and it won’t pick up all possible cases, but vigilance and action on these areas will certainly help.

Consider having a fraud response plan and always avoid complacency – the fraudster’s friend.

For further advice regarding protection against workplace fraud, please contact David Arthur on 0191 285 0321 or email david.arthur@taitwalker.co.uk

Update on the markets – what you need to know

Following last week’s trading session you may be receiving calls or be inundated with emails giving opinions as to what went on. Please find below one view point and summary from Brooks Macdonald giving you their stance on this market volatility.

Global equity markets have suffered a sharp selloff over the last month with the FTSE 100 down almost 10% since early September. Yesterday’s 2.8% fall was precipitated by a disappointing retail sales data which recorded consumer spending in the US declining -0.3% in September, whereas analysts had expected a slightly smaller, -0.1% fall. While this is slightly disappointing, it should be taken in the context that the previous month’s figure very strong reporting 0.6% growth.

There is no single reason for the recent share price declines unlike 2008 and 2011 where the credit and Eurozone crises were clearly evident and arguably a rational reason for stock markets to decline. The recent declines can be attributed to a combination of factors including weak Eurozone growth and increasing risks of deflation, civil unrest in Hong Kong, tax changes in the US and fears over Ebola. In the short term all these factors have been successful in undermining investor confidence.

We base all our investment decisions on long term fundamental valuation and growth factors rather than on short term sentiment. We believe several important fundamental factors are currently being largely ignored.

  • Over the last 12 months the US economy has added, on average, over 200,000 new jobs every month. This has brought the unemployment level down to a six year low at 6.1%. While European economic growth is weak, global growth is still expected to be moderate with the respected International Monetary Fund (IMF) only last week forecasting 3.3% global growth
  • Modest global growth will be supportive for company sales and with little inflationary pressure, company profit margins and therefore net earnings should also be maintained. This is being ratified by the latest US company earnings reports. Around 10% of companies in the US S&P 500 index have so far released their financial statements in the latest round of quarterly discloses. These companies have reported an unusually high 9% earnings growth well ahead of the expected 4% growth. While this is only a small sample of companies it is still positive news which again appears to have been overlooked
  • Most importantly equity market valuations are generally around or below their long term averages. Equity markets look even more attractive when compared to other asset classes such as government bonds. The earnings yield on equities (ie. net profits dividend by the value of the company) is around 7-8%pa compared to very low yields on government bonds. For example 10 year maturity UK government bonds only offer a 1.99% return pa and German 2 year government bunds pay a negative yield at -0.1%pa. Investors are paying to lend money to the German government!

Finally commodity prices are also falling providing a boost for the western world. Crude oil has fallen over 25% and is now at a four year low (Brent Crude Oil has fallen from $115 to $85 per barrel) this effectively provides more spendable cash for consumers, with less money going to the necessities of petrol and heating. This is a positive for everyone bar large exporters such as Saudi Arabia and Russia. Interestingly gold has also fallen since August, now around $1,200 per ounce, yet again showing that it is a poor “safe haven” investment.

We believe that with patience current events will prove to be a long term opportunity. Accordingly, we are looking to increase our equity weightings where appropriate.

If you have any queries or would like to discuss any of the information contained in this email, please contact us on 0191 285 0321.

 

Reproduced under licence with the kind permission of Brooks Macdonald Group PLC. Copyright © 2014 Brooks Macdonald Group PLC

“Keep CASC and Carry On” – an important update for Community Amateur Sports Clubs

We published our blog below on the proposed changes to the CASC rules on 8th October 2014, and on 9th October 2014 the draft secondary legislation was then published for comment by the Treasury.

The draft legislation can be found here, but the principles set out in the draft legislation are in accordance with our blog issued on the 8th October.   https://www.gov.uk/government/publications/draft-legislation-community-amateur-sports-clubs-technical-consultation

Our view remains that the North East’s CASC’s should seek to, and be able to, stay within the CASC regime and should therefore use the draft legislation as the basis for their preparation to meet the revised obligations (which for many CASCs are not onerous).   For those CASCs which have high trading income and for whom a change in business structure may be necessary, the issue of the draft legislation should be seen as the trigger point for commencement of the review of any actions they need to take to remain within the CASC rules.   As set out in our blog of 8th October 2014 we will be delighted to discuss with any CASC what they should consider based on their individual club’s circumstances on a no-obligation basis.  If you would like to discuss the draft legislation with us, please contact Alastair Wilson or Sara Andrews.

 

Following our previous presentation and update documents on the proposed changes to the CASC rules we wanted to bring you up to date on the state of play with the new rules.

We are seeing inaccurate information being sent in relation to the changes to the legislation that could encourage CASCs to take steps they do not need to.

The proposed changes to the CASC rules have been well publicised and our previous summary can be found here http://www.taitwalker.co.uk/?s=casc

Importantly, CASC managers and committees should be aware that whilst we know what the new rules are intended to be and we have a very clear understanding, some aspects are still not enacted in law because HMRC are still working with sporting bodies towards ensuring the rules work as all the parties intended.

The latest position in relation to the changes to the CASC legislation is as follows:

  • The primary legislation that will give rise to the changes has existed for some time and can be seen in Finance Act 2013 (not Finance Act 2014 as has been stated by some commentators).
  • Finance Act 2013 has moved the tests relating to whether a club is “open to the community”, is “organised on an amateur basis” and “consists mainly of social members” onto a statutory basis (rather than being based on HMRC guidance as was previously the case.
  • Finance Act 2013 also creates the power to introduce the “income condition” which is the test that can affect clubs with high turnover (and in particular those with high levels of income from non-members).
  • Critically, the new income thresholds and the new requirements for those tests enacted in 2013, which have been proposed by HMRC following the consultations with sporting bodies in 2013, are not yet in fact law. They are due to be enacted by Parliament later this year or early in 2015.
  • However, Finance Act 2014 has enacted the provisions in relation to the ability for a CASC to receive donations from companies that are not then subject to tax.
  • All of this can be seen and confirmed in the notes of meetings between sporting bodies and HMRC, which are published by HMRC here: https://www.gov.uk/government/groups/community-amateur-sports-clubs-forum

A senior HMRC adviser on CASCs has recently confirmed to us that their proposed timetable is as follows:

    • CASCs can now receive donations from companies without those donations being subject to tax (because Finance Act 2014 is enacted as law), but the guidance is still being finalised on how HMRC expect the anti-avoidance provisions in the donation mechanisms to be operated.
    • The remaining changes which may require CASCs to change their membership fees, adopt trading subsidiaries and manage the numbers of participating members are likely to be enacted as secondary legislation in December at the earliest and their guidance will be issued at the same time (but may be more realistically in the first Quarter of 2015).
    • HMRC will provide a 12 month soft landing approach to transition from the point of the new requirements being enacted and they will write to all CASCs notifying them of this transitional phase.
    • All CASCs will also have the opportunity to deregister within that 12 month period if they cannot meet the new requirements.

What do we recommend CASCs do? 

Firstly, don’t panic! The CASC rules are intended to be helpful, not unhelpful.  Your club should seek to remain within the rules if it already is, and it is likely it will be possible for your club to remain within the rules if it already is!  Do think about whether your club is likely to qualify under the new rules, but don’t rush into making changes without understanding whether you need to.

Secondly, don’t pay for accounting “review” work you don’t need!  It will be immediately apparent to a reader of your accounts whether or not the new financial requirements and limitations on what can be classed as trading income from “non-members” are likely to be met. Likewise you will know what your membership fees are and whether they are more than £520 a year for a standard adult membership. An adviser, or your accountant, should be willing to tell you for free whether the obvious conditions are met.

Finally, if you haven’t looked at the “non-financial” aspects of the new rules relating to promoting sport and being organised on an amateur basis, such as the numbers of participating members, the numbers of social members compared to participating members and the impact of paid players, then do start considering them. However it is then highly likely that you should wait for the new legislation and new HMRC guidance before making any final decisions.

Our experience of working with the new rules

We have recently helped two large “early adopter” sporting clubs in our region to work through the impact of the rules and we are now working with a number of others across a range of sports to cascade that knowledge.  In the case of the “early adopters”, one has decided to implement the changes already and the other is awaiting the final HMRC guidance.

In each case, the clubs now understand how the changes in the rules will affect them based on their specific circumstances and what they will need to do to adapt under the new rules.  But the choices they are making are based on what is best for their club.

The typical issues for each sport differ, but what we can confirm is that in most cases the issues are relatively easy to resolve, but may involve changing certain aspects of how the club’s administrative procedures are operated. The outcome should therefore be entirely manageable and the benefits of remaining within the CASC regime should outweigh any additional work required.

If you would like a “no obligation” consultation regarding the impact of the new CASC rules on your club, please contact Alastair Wilson or Sara Andrews on 1091 285 0321 or email alastair.wilson@taitwalker.co.uk.

The National Minimum Wage increases on Wednesday 1st October

From 1 October 2014, the rate of National Minimum Wage (NMW) for employees will rise as follows:

  • Aged 21 and over – from £6.31 to £6.50 per hour
  • Apprentices under 19 and those aged 19+ in the first year of their apprenticeship – from £2.68 to £2.73 per hour
  • Aged 18 to 20 – from £5.03 to £5.13 per hour
  • Aged 16 and 17 – from £3.72 to £3.79 per hour

Employers who fail to pay the NMW could face a fine of £200 for each underpaid employee.

The Department of Trade and Industry also states that employers who continue to ignore their responsibility to pay NMW within seven days of an enforcement notice could also face prosecution. This could result in a criminal record and a £5,000 fine – however the maximum penalty can be up to £20,000 per worker.

Dismissing a worker due to their eligibility for the NMW will count as unfair dismissal. Workers do not have to serve any qualifying period in order to gain protection against this form of unfair dismissal.

Additionally, the advisory fuel rate for company vehicles (approved by HMRC) changed on 1 September 2014 to the following:

Engine Size Petrol LPG
1400cc or less 14p 9p
1401cc to 2000cc 16p 11p
Over 2000cc 24p 16p

 

Engine Size Diesel
1600cc or less 11p
1601cc to 2000cc 13p
Over 2000cc 17p

 

These rates apply to all journeys on or after 1/9 2014 until further notice.

For any queries regarding the new minimum wage entitlements or advisory fuel rates, please contact our Payroll Manager, Claire Brown on 0191 285 0321 or email claire.brown@taitwalker.co.uk.

Guidance on charitable reserves

The reserve policy is the key information given by the trustees, within the Trustees’ Report, to explain their process for holding reserves and where they are against their ‘target’ level.

It is important to distinguish reserves in the context of the policy as ‘free reserves’, as they are commonly misunderstood. Put simply, they are unrestricted and are available to be spent (i.e. not invested in Fixed Assets). This information is often given with the financial statement notes at the ‘Analysis of Net Assets Between Funds’.

Essentially, the unrestricted reserves form the sum: Debtors + Cash at bank – Current liabilities. They will also likely be significantly lower than the unrestricted figure on the balance sheet.

Driven by comments made by the trustees in their statement, there can only be four different positions of free reserves. Consequently, the policy should state the target level and explain either of the following:

  1. Reserves are too low and the trustees intend to do… to build them towards the target
  2. Reserves are too high and the trustees intend to do … to spend the excess and to and move back towards the target
  3. Reserves are about right and the trustees intend to keep them at this level by…
  4. Reserves are earmarked for specific purposes and explain how/when they are planning to spend

A good policy statement allows the trustees to explain to the readers (typically potential funders) the reasons for the charity asking for new funding.

With the forthcoming change in accounting standards to the new Statement of Recommended Practice (SORP), the above approach becomes mandatory.

If you would like any further guidance regarding charitable reserves, please contact Simon Brown on 0191 285 0321 or email simon.brown@taitwalker.co.uk.

Charities Beware of Over Egging the Pudding

The Serpentine Trust is a registered charity that ran an art gallery and operated schemes whereby the supporters could make annual payments to assist them.

To make the opportunity more appealing, the contributors received various benefits such as invitations to events, priority booking for events and complimentary exhibition catalogues.

HMRC considered that the sums paid by the supporters were consideration for the standard-rated supply of the benefits. The Serpentine Trust appealed, contending that the gifts were de minimis, meaning that they were not provided ‘for’ the payments; they should be apportioned between the part that was attributable to the benefits (the consideration) and the part that was in excess (a donation).

The tribunal found that the benefits had real value, which was likely to exceed the cost of providing them. There was a single supply to the supporter to partake in exclusive events and receive offers from the Serpentine Trust. That supply was entirely standard rated, therefore their appeal was dismissed.

Charities have a fine line to tread in regards to attracting donors to support their cause. In our competitive world, the third sector is under the same pressures as big businesses and they sometimes strive to go ‘the extra mile’. However, increasing the attractiveness of an offer can create its very own tax problems.

If you are uncertain about the VAT liability of your income streams, please contact our VAT specialist, Nigel Smith for an initial free consultation on 0191 2850 321 or nigel.smith@taitwalker.co.uk.

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