They think its all over… It is now! The CASC rules have finally been enacted

Taxation & Payroll

As an update to the long running saga of the changes to the rules on Community Amateur Sports Clubs, the legislation implementing the changes to the CASC rules announced by HMRC and, which have been consulted on for nearly two years, was enacted on 18th December 2014.

The new legislation will come into force from 1 April 2015 and will require many clubs to alter aspects of their membership structure or structure for provision of facilities and services to both members and non-members.

The new rules implement the key changes as had been expected and widely consulted upon, namely:

  • The “Open to the Community” rules will require clubs, who have base membership fees of more than £520 annually, to provide new affordable membership options to persons on low incomes where that cost of participation will have to be less than £520 a year
  • The “income condition” will require that clubs who generate more than £100,000 a year of turnover from trading income adapt their corporate structures to remain within the CASC rules.  This turnover test will potentially impact on any club which has income being derived from bar sales, catering sales or fees for participation being charged to visitors such as green fees, court fees or charges to visiting parties
  • The total limit for payments to players of £10,000 has been enacted as proposed.

How clubs should approach the changes

The key point with the new rules is that HMRC see the changes as positive – and we agree.  Overall, the rule changes should provide positive financial support to clubs, but clubs may need to adapt to remain within the rules.

Clubs should not shy away from seeking to understand what the new rules require. The legislation is in force from 1 April 2015 but there will then be a 12 month “period of grace” in which clubs will be given time to implement any changes needed to comply with the rules going forward.

To help clubs adapt, HMRC will be contacting clubs to highlight the new rules.  They are also willing to enter into correspondence about the changes a club needs to make and will provide a formal clearance process whereby a club can put forward the changes it will make to meet the new rules, and HMRC will provide formal “clearance” that the new club structure or membership options etc. will meet the requirements.

We believe clubs should try to meet the new requirements as the benefits in terms of the potential for additional fundraising, the business rate savings and the flexibility to help the clubs to expand –which are provided by the new rules – should be viewed as a compelling reason to try to seek to remain within the CASC regime.

The changes enable clubs to be put on a more secure footing in relation to compliance with the CASC regime and most clubs will already maintain the records they need to enable them to consider in detail what changes are needed, if any, to comply with the new rules.

We offer a free review for any club of the impact of the new rules on their specific club. The impact of the rules will be different for each organisation, but there are common themes within most major sports of what changes clubs typically need to make (if any) to remain within the CASC rules.

We have already assisted clubs across a range of sports to understand what they need to do to comply with the rules, to communicate the changes to their members and then implement those changes.

If you would like a free, no obligation consultation in relation to your club, please contact Alastair Wilson or Sara Andrews on 0191 285 0321 or email alastair.wilson@taitwalker.co.uk or sara.andrews@taitwalker.co.uk

‘Tis the season for fraudsters…

It’s always the season for fraudsters!

News from Northumbria police:  There have been a significant number of successful mandate frauds recently which, on some occasions, run into many hundreds of thousands of pounds being de-frauded.

The fraudsters email unsuspecting businesses, either purporting to be a client of theirs or a senior member of their team, and request transfer of funds to a particular account (which is generally overseas). This has not been questioned or challenged and often results in the funds being sent as requested to the criminals.

The email is often followed up with a phone call to add authenticity and the fraud is not discovered until some days later, by which point the money is long gone and diverted into hundreds of mule accounts across the globe with little or no chance of recovery.

The fraud is so convincing that it catches people out and often they do not even implement their own in house checking/confirmation policy.

Be wary of all unusual requests or transactions this year and next and remember, in house procedures are for life, not just for Christmas…

Pension Changes, fairness and succession planning for family businesses

WEALTH_MANAGE

Our Corporate Finance Partner, Steve Plaskitt shares his thoughts on our recent Pensions Update seminar…

Growing up in a family business, I am well aware that it is difficult to pass business/wealth to the next generation without diluting it or distributing it unfairly.  I am very lucky as a second son of a second son as, under traditional methods where all the inheritance would pass to the oldest child, I may have had a very different upbringing.  Thankfully, my Grandfather didn’t follow these rules and wanted to treat his offspring fairly.

These thoughts came to me after I attended the pension seminar run by Tait Walker Wealth Management last week hosted by Phil Griffin and Chris Hodgson.  The seminar aimed to easily explain the new pension changes that are due out in December 2014, their taxation implications and how that also impacts retirement planning.  And it did!  For those who follow the right advice, private pension pots can now be regarded as a tax efficient savings account which may be passed from one generation to the next.

For a fleeting moment I was able to understand everything and, in particular, the impact that this change could have on planning succession in a family business.  It may even be a way to address two difficult topics:

  • How to pass the family business to the next generation without diluting the quality of its management
  • How to try and treat offspring in a fair way when planning your will

For a simplistic example, consider the owner of a family business looking to plan for his retirement with a daughter involved in the business and a son who is not. Let’s also assume that the family business is worth £1m and the pension pot also worth £1m.

  • Dividing the shares in the family company between the two is likely to create future problems for the business as the shareholders may have different goals and ambitions; for a start, the daughter is building up value for her brother who is not involved.  And how would the family company be passed to the third generation?  It is no wonder that many third generation family business owners decide to sell.
  • The new rules allow the simpler and fairer way: give £1m of shares to the daughter and £1m of pension pot to the son.

Now of course, no family business is exactly the same and I have not yet come across the above situation, but I can clearly see that by allowing the value of pensions to be handed down to the next generation, the number of options available to the owner of a family business increase.

For those contemplating their retirement, a combination of corporate finance (pre-sale planning), wealth management and taxation advice could offer a fair solution that would be great for family harmony and for business.

To discuss the new pension changes, please contact a member of our Wealth Management team.

Make grants your New Year resolution…

CORPORATE FINANCE

Companies can benefit from grants in the North East, especially those thinking about their investment plans and those aiming to create or safeguard jobs.

The main regional funds are the Tees Valley Business Compass and the Let’s Grow Fund. Let’s Grow is a quarterly competition and the next expression of interest closes on 23rd January 2015.

Why should you apply for a grant?

186 of 270 expressions from the first fund were considered and 102 awards were made, so with careful thought, you could have a good chance of securing a grant.

We should be able to help you win a grant if:

  • You are planning on minimal levels of capital expenditure in three years, e.g. £100,000 or more in Tees Valley or £200,000 or more elsewhere
  • You are creating jobs and/or safeguarding them
  • You have, for example, 3-5 months before you want to start and are not already committed to projects

If you have any queries or would like to discuss any of these details further, please contact a member of our specialist grants team at steve.plaskitt@taitwalker.co.uk or lee.jefferson@taitwalker.co.uk

Engineering skills fund launches

MANUFACTURING ENGINEERING

A £10m pot to allow small and medium-sized engineering companies to develop the skills of their workforce has been opened to applications.

Engineering businesses in England with fewer than 250 employees can apply for a share of the first £2.5m of the £10m fund to develop innovative company-specific training.

The match-funded cash pot forms part of a £30m initiative for investment in skills. Two previous tranches of funding have been provided under the project to improve engineering careers and develop female engineers.

This final round has been designed with smaller businesses in mind, with the minimum funding threshold reduced.

Skills minister Nick Boles said: “A company’s greatest asset is its people and making sure they have the right skills is vital in supporting the long-term economic plan.

“This funding gives employers the power to unlock the full potential of their workforce by designing and developing training catered to their specific needs. I encourage all small and medium sized engineering firms to consider how they could use this funding to take their business to the next level.”

Tim Thomas, head of skills and employment policy at EEF, added: “We are delighted that this scheme has now been opened to SME employers and that the minimum grant, which a company would need to match with their own money, has been dropped to £10,000.

“This makes the scheme far more accessible and reflects more realistically the amount many smaller companies may be able to invest in skills and training. It recognises the fact that many SMEs want to do more and provides solid support to help them achieve this.”

Applications will remain open until 27 February and the remaining £7.5m is to be opened up in the new year, if existing funds are taken up.

https://www.gov.uk/government/publications/employer-ownership-improving-engineering-careers-smaller-companies

Bite Sized Blog – SORP FRSSE or FRS102

CHARITY

Welcome to Tait Walker’s blog series on the new Charity SORP, which follows our charity seminar giving an overview of the upcoming changes. We have also produced some accompanying bite sized guides – all of which are linked in our blog posts.

There is a change of standard in the world of accounting from the current ‘package’ of rules governing how Financial Statements are prepared, from UK GAAP to FRS102, moving towards International Standards of accounting. The change applies largely to accounting periods ending 31 December 2015, which will be the year ending 31 March 2016 for most charities.

Charities currently prepare their financial statements using the SORP 2005. Whilst there are disclosure exemptions available to small charities under the existing rules, there is only one SORP covering both large and small charities.

The SORP has been completely re-written – this revised rule book is called FRS102 SORP. The new rules are mandatory for large charities, however small charities have an option. They can follow FRSSE SORP, which has very little change compared to the existing SORP 2005 and incorporates only some of the new FRS102 changes.

Although smaller charities can choose to follow either FRSSE or FRS102, the standard setters are considering removing the use of FRSSE completely from 2017. This would mean that smaller charities who chose to apply the FRSSE SORP for their year ending 31 March would then have to change again at 21 March 2017.

Neither of the SORPs applying to small or large charities is a complete set of accounting rules for charities. It is necessary to refer back to the overarching accounting rules (FRS102) in order to understand the requirements.

Click here to read our bite sized guide on SORP FRSSE and FRS102.

For further advice regarding the new charity SORP changes, please contact Simon Brown on 0191 285 0321 or email simon.brown@taitwalker.co.uk

More MOSS fine tuning announced by HMRC

Taxation & Payroll

As we rapidly approach the 2015 deadline, HMRC have recognised the position of UK based B2C digital suppliers trading below the VAT registration limit. Before this latest announcement, businesses in this position were faced with the prospect of having to acquire a VAT number in order to access the MOSS system. This increased the cost of their UK sales by 20% as VAT would need to be added to or accounted out of the sale price.

The recent announcement allows for a UK VAT registration for MOSS purposes but allows businesses trading below the £81,000 VAT registration limit to continue to make sales in the UK free of VAT.

For further information, please see the following link:

https://www.gov.uk/government/publications/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance

If you would like to discuss the latest announcement please contact Nigel Smith on 0191 285 0321 or email nigel.smith@taitwalker.co.uk

Proposed changes to the UK’s R&D Tax Relief regimes are bad news for the North East’s engineering and offshore supply chain sectors

In the Autumn Statement on 3rd December 2014 the Chancellor announced that the Government intended to tighten the UK’s R&D Tax Relief (and R&D Tax Credit) provisions to restrict the benefit of R&D claims in circumstances where the “product” of the R&D project was an item which was then sold to a customer.

 

The draft legislation, which will be included within Finance Bill 2015, has been published today and confirms that HMRC are seeking to intend to exclude from R&D claims any costs which relate to materials, or items which are consumed, which are included within an item which is then sold to a customer.

 

The background notes to the draft legislation confirm that HMRC regard these changes as restricting the reliefs to being “targeted on innovative research and development activities, rather than activities related to production”.    The changes are intended to apply to both the SME and Large company R&D tax relief regimes and will apply from 1 April 2015 if the legislation is enacted as drafted.

 

So who will this affect?

 

The changes will adversely impact many engineering and offshore supply chain businesses where the businesses carry out R&D in the process of development of “first in class” items such as new topside modules, J Lay towers, jacking, launching or lifting systems.    In the development process for such items, the cost of the item itself will mean that it will be sold on to a customer once developed (rather than be sold) and the material costs within such a project may be substantial.

 

For an SME involved in engineering or manufacturing large, high value, engineered items the financial risks attaching to development of innovative and complex “first in class” items can be substantial.  The path to successful development and commissioning of such high value items is not typically straightforward.   Even when the product is developed, there are typically long periods of testing, “debugging” and potentially financial performance bonds may be required by the customer.

 

What about the North East?

 

The SME R&D scheme provides a financial support mechanism of approximately 33% of the cost of R&D, and currently can include some of the material costs of a first in class item.   This enables many North East engineering and offshore supply businesses to embark on such high value projects with greater financial security in the event that the investment in R&D required is greater than originally anticipated.

 

As an example, we have recently assisted a company to claim in relation to the development of a “first in class” item where the cost of the R&D aspect of development of the item was approximately £1m and the materials content within the R&D was approximately £400,000.

Under the new provisions, the value of the financial support the R&D claim provides in the example above would drop from approximately £140,000 to approximately £80,000.

 

What happens next?

 

The draft legislation is subject to consultation until 4th February 2015.   We intend to feed back to HMRC that, rather than excluding the material and consumables costs altogether, that companies within the SME R&D scheme should be able to treat the costs as “subsidised” expenditure which could be claimed under the Large R&D scheme which would enable Above-the-Line claims to be made in relation to the materials and consumables costs.

 

If SMEs were able to claim on the basis that the material costs were “subsidised” rather than excluded, this would restrict the financial benefit for SMEs to 8% (8.8% from April 2015), but would at least continue to provide a measure of financial support to SMEs in relation to the “materials” cost of development of first in class items.

 

Don’t delay …….

 

In the meantime we recommend that companies in the engineering and offshore supply chain sectors ensure that they consider fully the opportunity to make any claims for materials and consumed items included within projects and which are incurred up to 31st March 2015.

 

If you would like to discuss how these changes could affect your R&D claims, please contact Alastair Wilson or Peter Tindale for a no obligation discussion.

How long can the average UK household survive after a sudden shock to their income?

TURNAROUND AND INSOLVENCY
The latest Deadline to the Breadline report shows that the average UK household could be on the breadline in 29 days and, for working age families (18-64 year olds), this is reduced to just 14 days.

In comparison to last years’ report, it is an improvement – but it is still worrying to know that our UK households have just under a month before relying solely on state benefits and family and friends for financial support.

It is so important that families consider improving their financial security in order to protect their future – especially as people estimate that their savings will last 77 days. This is over 2 ½ times the actual deadline.

Wales has the shortest deadline in the UK (7 days) followed by the North East at 16 days, and over a third of UK households have no financial back up plan that they can use in the event of an unforeseen shock to their income. With the average weekly cost of living at £381, these figures are a cause for concern.

The report also found that only 36% of UK households are protected by life insurance and critical illness cover.

It is vital that you understand the importance of financial planning in order to protect yourself and your family. If you’d like to discuss managing your finances with one of our specialists, please contact us on 0191 385 0321 or email advice@taitwalker.co.uk  

 

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.  Company Number 5674020. Incorporated in England.

The Chancellor’s Autumn Statement is a double-edged sword for North East Innovators

George Osborne delivered his 2014 Autumn Statement on 3rd December and in it he announced some major changes to the R&D tax relief schemes, which represent both good and bad news for innovative businesses in the North East.

 

For Small and Medium Sized Businesses…

The headline announcement delivered in the speech was that the rate of tax relief available for SME companies carrying out R&D will be increased from 225% to 230% with effect from 1 April 2015. This increase will mean that profit making companies carrying out R&D will see a 1% increase in the cash value of their R&D claims, as compared to the existing rate of relief. Loss making companies will see the cash value of their R&D claims increase by as much as 0.725%, subject to any further change in the tax credit rate.

 

For Large Companies (or SMEs using the Large Company scheme)…

Large companies will also benefit with the rate of the ‘above-the-line’ R&D Expenditure Credit being increased from 10% to 11% with effect from 1 April 2015. This increase in the size of the above-the -line credit will also have a positive impact on companies whose R&D is grant funded and SME companies who carry out R&D as subcontractors to large companies. The increase in the credit, which is itself taxable, will equate in cash terms to a 0.8% increase in the value of a company’s claim.

 

(Re) Introducing an Advance Assurance process for R&D claims…

In an attempt to encourage small businesses to start making R&D claims, a new advance assurance scheme has been announced. This measure should be welcomed by SME companies, as it will help remove the uncertainty around whether a company’s first R&D claim will be accepted by HM Revenue & Customs.

HM Revenue & Customs had previously carried out a pilot of such a scheme in 2011 and Tait Walker were the only advisors in the North East to successfully guide one of their clients through the process.

 

A consultation for the nation…

The Government will launch a consultation in January 2015 on the issues faced by smaller businesses when claiming R&D tax credits. This consultation process will provide the opportunity for taxpayers and professional bodies to feedback to the Government their thoughts on how the process of claiming R&D tax credits could be improved and should be welcomed as an opportunity to influence future policy.

 

But… now for the bad news…

Unsurprisingly, the Chancellor’s speech concentrated on the announcements which would be well received by businesses that carry out R&D. However, as with most things to do with tax, the devil is in the detail. Hidden in the 108 page ‘Green Book’ released by HM Treasury immediately after the speech, was the further announcement that qualifying expenditure for R&D tax credits will be restricted from 1 April 2015 to exclude the cost of materials which are incorporated into products which are sold.

Current HM Revenue & Customs guidance permits the materials costs associated with ‘first in class’ items which are sold to customers to be included in an R&D claim in certain circumstances. The effect of removing these costs from eligible R&D expenditure will be to reduce the value of a company’s R&D claim. This measure is particularly likely to affect the engineering sector where R&D often involves the manufacture of high value ‘first in class’ items which are intended to be sold to the customer.

It was also announced in the ‘Green Book’ that new guidance for R&D tax credits is going to be developed. The existing guidelines on what constitutes R&D for tax purposes have been in place since 2004. If the Government replaces these guidelines with something new, this has the potential to cause uncertainty for businesses around whether the definition of R&D will remain the same or whether the rules are going to be made more restrictive. Such a change could potentially exclude businesses which currently qualify for R&D tax credits from qualifying in the future.

 

And what about the latest U-turns on Patent Box…

The UK’s Patent Box regime wasn’t specifically mentioned in the Autumn Statement but significant changes are nevertheless going to happen. As part of the OECD’s Base Erosion and Profit Shifting project, the Patent Box relief is going to be substantially modified to accommodate objections made primarily by the Germans.

The existing scheme is going to be closed to new entrants from 30 June 2016 and completely wound down by 30 June 2021. In its place will be a new system which will align Patent Box benefits to the location of R&D activity which is actually carried out in the UK (using an approach which identifies if there is a “nexus” between the R&D carried out and the resultant Patent Box income), something which has to be considered good news for UK based technology businesses.   In particular, as SMEs are unlikely to have entered into the cross border profit shifting arrangements which caused the objections by Germany, the nexus based approach should not disadvantage SMEs.

In the meantime, however, companies who can elect into the current Patent Box regime should give renewed thought to the benefits of electing into Patent Box before the current scheme is closed to new entrants.

If you would like further information on any of the above points please contact Peter Tindale, Alastair Wilson or Louise Barker on 0191 285 0321, or view our website http://www.taitwalker.co.uk/services/taxation-and-payroll/corporate-tax/research-and-development-tax-reliefs/

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