Energy Saving Opportunity Scheme (ESOS) – what you need to know

The Energy Saving Opportunity Scheme (ESOS) is the UK implementation of new EU legislation, requiring a mandatory programme of energy audits for “large enterprises”. This blog post will provide answers to some key questions about the new legislation.

Who does it apply to?

ESOS applies to any “large enterprise”, which is a business with more than 250 employees, a turnover exceeding 50m euros and a balance sheet exceeding 43m euros (these criteria should be met from 31st December, 2014).

It is also important to be aware that companies viewed as standalone SMEs can also be applicable if they are part of a UK or EU group containing other UK entities which are large.

What do you have to do to comply with ESOS?

You must perform an audit of 90% of total energy use for a one year period and identify/evaluate efficiency opportunities, informing the Environment Agency of these.

Your first energy audit must be conducted by 5th December,2015. The approximate cost to each business will be £6,600 over a four-year cycle.

You will also need to appoint a ‘Lead Energy Assessor’ – this person will need to be registered through an approved professional body.

What will happen if you do not undertake an ESOS assessment?

Failure to notify the Environment Agency of compliance will result in a penalty of up to £50,000 and/or an additional daily penalty of £500 for each day that your business remains non-compliant. These details may also be publicised.

Important points:

  • Plan ahead – there is a greater risk of penalty if you leave it until the last minute and it will also be more difficult to find and book in a lead assessor. Use your assessor early in the process to find out the best way to save time and money.
  • The penalty is final – failure to comply will result in the penalty as outlined above. You cannot simply pay a fine to void non-compliance.

For further advice regarding ESOS, please contact us on 0191 285 0321.

NECC Business Tips Book Released

NECC

As part of its 200th anniversary celebrations, the North East Chamber of Commerce (NECC) has worked with Activ Technology and Microsoft to compile and publish a book of their top 200 business tips.

With tips and insights in a wide range of business areas including leadership, strategy, recruitment, marketing, HR and finance, you can find some expert advice which may prove to be very useful for your business.

Click here to access the book.

Could you get caught out by the July Budget?

Our Head of Investment Services, Nick Swinhoe shares his thoughts on what the Chancellor may announce in regards to tax relief in his July Budget…

Financial commentators are expecting a change in respect of the tax relief available on pension contributions. The outcome could be a cut to the annual allowance in respect of pension contributions for the highest earning individuals (those who earn over £150,000 per annum).

In doing this, the chancellor would limit the level of tax relief available to those within that earnings band, thus saving the treasury millions, which could then be used to fund the other pre-election promises that he made.

In the past when similar changes have been made, anti-forestalling legislation has been used to close the window of opportunity between the budget and the proposed changes becoming law. It is unlikely that it will be different this time.

If you could be caught by this change you should consider making your annual pension contribution before 8th July rather than waiting until after the budget. Remember, you can also carry forward any unused allowances from the previous 3 years meaning that you could invest up to £180,000 and get tax relief of up to £81,000.

For further advice, please contact Nick Swinhoe on 0191 285 0321 or email nick.swinhoe@taitwalker.co.uk

 

 

This blog represents my interpretation of current and proposed legislation and HMRC practice as at the date of publication.  This may be subject to change in the future.  The purpose of this blog is to inform and should not be interpreted as a personal recommendation or advice.

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.

Mini Budget Predictions

Our Tax Associate, Chris Hodgson, give his predictions for the mini Budget on 8th July…

Due to the short timetable that was available to enact Budget announcements into a Finance Act prior to the election, a number of matters had to be set aside. Having now been re-elected, we can expect some of those matters to be reintroduced. Largely they were technical changes and so will not be grabbing headlines any time soon.

This Budget will give the Chancellor the chance to remind us of the promises made in the party’s manifesto and to look to introduce some of them now as a clear statement of intent for the next five years. There will be talk of the bill that will prohibit any increase in tax rates. This has the benefit of creating a feeling of stability but, in reality, if a Chancellor wants to increase taxes there are many ways to do so other than raising the rate of tax.

Welfare reforms

One of the main areas of content is likely to be in terms of proposed welfare reforms. In the run up to the election, the Conservative Party said that the reforms would produce savings of £12 billion, but there was no detail on the specific areas of reform. The mini Budget may be the platform for George Osborne to now give that detail.

Inheritance Tax

Another proposal is to introduce a new nil rate band for Inheritance Tax. Where the family home is to be passed to the children, this can allow a further amount of up to £350,000 to avoid Inheritance Tax, giving a tax saving of up to £140,000. The benefit of this saving will very much be felt in the South East.

The change is also to be focused so that the nil rate band will be gradually reduced, if a person’s estate is more than £2 million. We will only find out on Budget day if the proposals are to be introduced in their original form, but if so a person with an estate of at least £2.7 million will have to pay more Inheritance Tax than under the current regime.

Overall this Inheritance Tax change will reduce the tax take and to balance this tax reduction, the government is looking to restrict tax relief on pension contributions for persons earning over £150,000. We can all put up to £40,000 per annum into a pension, as that is the annual allowance. Under the proposals, where a person has income from all sources of more than £150,000, the annual allowance will be gradually tapered down to a minimum of £10,000 for any person with income of more than £210,000.

Where a business owner has the ability to control their income levels from year to year and they want to put money into pension, if the measure is introduced, an income level of just under £150,000 may be attractive.

Annual Investment Allowance

The final point which we would like to see in the Budget is a glaring omission from the March Budget. At that time George Osborne said that the level of the annual investment allowance, applicable from 1 January 2016, on which a business can claim a 100% deduction for plant and machinery, would be announced in due course. This announcement could be as late as December 2015, when the Autumn Statement is presented to the House of Commons.

Given the need for businesses to have forward plans for capital expenditure, forward knowledge of the tax position is vital. We are told that the country benefits from the government having a long term economic plan. It is to be hoped that the government will understand that forward visibility of the tax position will be of benefit to UK industry.

For further advice, please contact Chris Hodson on 0191 285 0321 or email chris.hodgson@taitwalker.co.uk

Directors’ responsibilities before and after insolvency

As company director, there are a number of duties that apply in your role during the normal course of the company conducting its business. These include the following:

  • Keeping accurate companies books and records including accounting records
  • Preparing and filing accounts or making returns to Companies House
  • Submitting tax returns and paying on a timely basis
  • Ensuring that you are not trading at a time when the company could be deemed to be insolvent
  • Ensuring that you are not trading at the expense of creditors

Your duties as a director must continue in the event of the company entering any form of insolvency procedure. Your integrity and conduct may be questioned if you fail to do so.

The following is a list of responsibilities which should not be taken as being exhaustive:-

  • In the period prior to the formal insolvency taking place, the Directors remain responsible for the Company and must continue to comply with all government and other statutory regulations.
  • Immediately prior to insolvency, any acquisition of assets of the company or any proposed transactions in which a director or party is connected may require disclosure to the board under the Companies Act 2006.
  • Following insolvency, the Directors may be required to identify any assets belonging to the company and may possibly be required to assist the “Official Receiver” (OR) or “Insolvency Practitioner” (IP) to dispose of and collect in assets. The Directors have an ongoing duty to cooperate and to provide information to the OR/IP.
  • There is an overriding obligation for directors to act in the best interests of creditors. Failure to do so may expose Directors to a claim for misfeasance or breach of duty.
  • If you are a Director of the company and the company enters liquidation you will be prohibited from using any name by which the company was known or similar names suggesting an association with the company. However, it is possible to use such a name if the correct procedure is followed.
  • Directors will be required to deliver a complete record of the company’s accounting records.
  • Directors should be aware that any personal guarantees given on behalf of the company may be called in.
  • You can act as a Director of another company unless you are disqualified from doing so.
    If you have misapplied or misappropriated company funds at the expense of creditors, this could result in disqualification proceedings being taken.

For further information regarding the director’s role during insolvency, please contact Lynn Marshall on 0191 285 0321 or email lynn.marshall@taitwalker.co.uk

Why do businesses fail?

There are many reasons why businesses fail and for lots of business owners its things that are out of their control – such as cash flow issues arising from unpaid debts and difficulty raising finance for new projects.

Whilst it’s not possible to plan for the unexpected, businesses can plan for some of the situations they may face and some of the difficulties that can arise from late planning!

We asked our debt specialist Lynn Marshall to give us her top planning tips, to help your business stay above water.

Plan for increased staff costs

Planning your staff costs correctly is key for every business, even if you expect your staff levels to remain static.

  • Recent changes to paternity flexibility could leave employers having to cover maternity pay and the work of father employees who are taking shared parental leave. Covering employee leave could drastically reduce productivity and increase costs, especially where skills’ training is required.
  • If you want to retain staff, you may need to consider promotions and pay rises. It’s an employee’s market and staff satisfaction is key to the success of your business. Or you may be looking to grow the team or bring in new skills. You need to plan ahead and factor staff retention and recruitment into your budgeting.
  • Recent changes to workplace pension law means that employers must pay into pension funds for all eligible employees. The set up fees, administration time and ongoing scheme costs can be detrimental to businesses if not carefully planned and budgeted for.
  • RTI rules can also mean increased costs for your business. The rules don’t change the way PAYE is calculated, but it does mean more regular submissions to HMRC. PAYE information needs to be submitted every time an employee is paid rather than just once a year. Changes to office procedures may result in increased costs due to the setting up and ongoing monitoring of the system, which need to be factored into the cash flow of the business.

Debt recovery Procedure

Businesses need to ensure that they have a robust debt recovery procedure in place, whereby debts are chased regularly and efficiently. Paperwork must be kept up to date and payments must be sought for overdue debts.

Raising Finance

Due consideration should be given to both the type and terms of the finance on offer. Ask if the business can afford the ongoing payments, if the terms of the borrowing are too onerous or if the funds can be raised from alternate sources. Does the business truly need the finance or can it survive and grow without it?

Plan for the unexpected

Ensure that the business has a contingency fund available for any sudden or unplanned circumstances that could hit your business.

Seek early advice

Commonly, business owners affected by financial problems do not seek professional advice quickly, there is often that hope that the problem will go away on its own.

We always suggest seeking early advice, whether it is from an accountant or a solicitor. By making a third party aware of the problem, they can suggest possible steps to take and can recommend potential contacts that may be able to offer help if they can’t. If the problem is caught early enough, it can often be resolved more easily than expected.

For further advice regarding corporate recovery, please contact Lynn Marshall on 0191 285 0321 or email lynn.marshall@taitwalker.co.uk

Pre-election – potential changes to tax relief on pension contributions…

It may have escaped people’s attention but there is a General Election on 7 May 2015 and, depending on the result of the election and the result of any subsequent negotiations in the event of a hung Parliament, changes could be on the way. This blog focuses particularly on potential changes to tax relief on pension contributions.

Labour Party policy is to remove higher rate tax relief on pension contributions paid by any person with income of more than £150,000. They have also indicated that there will be a mini Budget if they form the next government. This is a policy which the Labour Party sought to introduce in 2010, but which was reversed after the 2010 election. It is likely that the policy could be introduced with almost immediate effect to apply to any contributions after the date of the announcement. In addition the annual allowance for pension contributions would be reduced to £30,000.

The Conservative Party wish to reduce Inheritance Tax payable on your home and to pay for that policy, they are also going to limit higher rate tax relief on pension contributions for persons with income of over £150,000. This will be done by restricting the annual allowance if your income is over £150,000, with the annual allowance falling to only £10,000 if your income is over £210,000. The timing of this change is not so clear but it may not be with immediate effect.

If the opinions polls are accurate, the most likely result at the time of writing is a Labour minority government; therefore individuals with income of over £150,000 should be planning for this restriction of tax relief.

For those affected, one option to consider is that if you have the available cash, you could bring forward the payment of your contribution for 2015/16 to try to lock in higher rate tax relief on the contribution. If you have not fully utilised your available contributions in previous years, you may also want to make use of the carry forward facility.

The exact date of implementation of the new rules cannot be known with certainty, but if the contribution is paid on or before 7 May 2015, it seems likely that you would still benefit from higher rate tax relief on the contribution. Taking the effective date for the new rules back to 6 April 2015 cannot be entirely discounted, but this would involve an element of retrospection, which is not common apart from with particularly aggressive tax planning. However in the current environment, higher rate tax relief could not be guaranteed.

The second option to consider is that where you are the owner of a company, you do have the ability to control the timing of your income. The new rules are to apply to persons with income of more than £150,000, so if your income happened to be £149,000, you would still secure higher rate tax relief on your pension contributions. Given the proposed increase in the Additional Rate of Income Tax from 45% to 50%, the limiting of income to no more than £150,000 is likely to be of interest in any event.

The final point to make is that these changes affect contributions made by individuals into their pension policy. If you own a company, the other possibility is that instead of the individual contributing, that person’s company will make an employer contribution.

In conclusion, there are a number of options that can be considered if these proposed changes to pension tax relief are introduced. For now, the action point is to consider bringing forward your contributions for 2015/16 to before the Election if you make individual contributions and your income is more than £150,000.

If this article is of interest to you, please contact Chris Hodgson or your Wealth Management contact at Tait Walker.

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.

Video Games Tax Relief v R&D Tax Relief for SMEs

Some video games companies are in the enviable position of being able to choose between claiming Video Games Tax Relief (VGTR) or R&D tax relief – both of which can generate loss making companies a cash tax credit.

For one client we recently worked with, we were able to claim both in one period on different games, after calculating on a project by project basis which would give the best result. This client benefitted from cash VGTR credits amounting to £70k, and an R&D tax credit of £59k!

R&D tax relief v Video Games tax relief

It’s possible that the development of a video game could incorporate activities which would qualify for both R&D and VGTR; however legislation prevents a company from claiming both reliefs on the same “project”. It is therefore important to consider which relief would give the best result for the company. Unfortunately, the answer isn’t always obvious.

On the face of things, it would seem that R&D tax relief would give the greatest benefit…

R&D tax relief

SMEs can claim a 230% deduction in relation to qualifying expenditure on R&D – namely staff costs, consumables and subcontracted R&D. If the SME is loss making it can surrender the loss up to 230% of the qualifying expenditure for a tax credit at 14.5%.  For example if a loss making SME incurred qualifying expenditure of £100,000 the maximum tax credit which could arise would be:

R&D tax credit: £100,000 x 230% x 14.5% = £33,350

Video games tax relief

VGTR was introduced on 1 April 2014 and only “core expenditure” incurred on or after that date spent in the EEA can qualify. Core expenditure is expenditure on designing, producing and testing the video game. Companies can claim an additional deduction of 80% of Core Expenditure. If the game (which must be treated as a separate trade) is loss making the company can surrender a maximum of the 80% additional deduction for a 25% tax credit. For example, if core expenditure amounted to £100,000 the maximum tax credit which could arise would be:

VGTR credit: £100,000 x 80% x 25% = £20,000

Real life example

The client that benefited from a total of £129k in tax worked on the development of nine video games within their accounting period (which straddled the 1 April 2014). An element of the development works on all nine games qualified for R&D tax relief, however  a number of the games might also have qualified for VGTR.  Whilst working through the comparison calculations and the process for claiming VGTR, we made the following observations:

  • We found that across the different projects the average qualifying “Core Expenditure” for VGTR amounted to double the amount which would have qualified for R&D tax relief. This might indicate that VGTR on the whole would give the best result (however, this wasn’t always the case).
  • Where VGTR was claimed, the taxable profit/loss for that specific game for the period was deducted/added back to the results of the “main trade”. This therefore impacted on the losses available to surrender by the company for an R&D tax credit.
  • VGTR could not be claimed in relation to games for which SME R&D tax relief had been claimed on in earlier periods.
  • To maximise a cash tax credit in a particular period it may be necessary to consider a number of different claim combinations.
  • To be able to make a VGTR claim the company must apply to the British Film Institute (BFI) for certification that the video game is culturally British. We found that the BFI were extremely approachable when we contacted them to clarify a few points. However, where possible this application should be made early to avoid delays.

For our client, generating the cash benefit of the tax credit was the most important consideration and we found that the optimum result for the period was generated by claiming VGTR on two games only. The answer may have been different if their priority was to maximise the cash benefit over the whole development period. Also, had VGTR been available for the whole period the answer may have been different again!

In summary, the new VGTR rules are not straightforward and there are lots of different elements and interactions to consider. However, we successfully guided our client through the BFI certification process for the two games, with the client receiving the cash tax credits within two weeks of the certificates being sent to HMRC.

Client feedback: “Thank you for all your help with the BFI applications, you’ve been super quick and efficient and a pleasure to work with. It’s very much appreciated.”

If you would like to discuss VGTR or R&D tax relief, please do not hesitate to call Louise Barker, Peter Tindale or Alastair Wilson on 0191 285 0321.

Building your credit history after bankruptcy or an IVA…

For some of our clients, bankruptcy or an IVA is the only solution to their debt problems. We work with them to make sure they understand how to come back from a bad credit history and ways they can improve their score.

The most regular questions we get asked are:

  • What will happen once my bankruptcy or IVA has ended?
  • What on-going effects will I experience?
  • Will I be able to get credit?
  • How long for things to be “normal”?

We’ve set out to answer these questions in today’s blog…

Start with the facts – how is your credit rating affected during a bankruptcy or IVA?

As most people would expect, during the period you are bankrupt you are unable to obtain any credit without informing an organisation that you are bankrupt. This does limit your options and so your focus should be on building your credit history back up, with positive actions and payments.

For an IVA, similar provisions to be written into your proposals, preventing you from obtaining credit during the period you are in the IVA.

What happens once your bankruptcy or IVA has ended?

Once you are discharged from bankruptcy or no longer subject to an IVA there is nothing legally preventing you from obtaining credit. However, your credit rating will have had a negative hit and so obtaining credit won’t be as easy as before.

It’s likely that leading up to your bankruptcy or IVA, late payments or missed payments will have already damaged your score and so now is the time to try and improve it!

Credit Score – How long is it affected?

Your credit report will usually date back 6 years and therefore will detail any adverse credit, including any bankruptcy or IVAs.

Your score is something that can be repaired over a period of time, but there are things you can do to improve your score a little faster. This involves building a positive payment history with new creditors or with any accounts which survived the bankruptcy.

See our hints and tips below.

Hints and tips – how to improve your credit rating

  • Firstly, ensure you are registered on the electoral roll (this bit is really important).
  • Consider applying for credit but act wisely – don’t take out more credit than you know you can afford to repay.
  • Before making a formal application for credit cards or store cards contact the provider and find out which reference agency they use and obtain a copy of your report from that agency. Find out what criteria they apply and whether your history will most likely result in a rejection of the application. By asking these questions it ensures you don’t apply for credit cards for which you don’t fulfil the criteria. An unsuccessful application can result in an adverse effect on your credit score.
  • Don’t just make minimum payments against cards – repay in full on a timely basis if you can, or at least make big lump payments where possible.
  • Always pay on time – late payments, or missed payments have a big effect on your credit score.
  • Pay utility bills by direct debit and pay on time.
  • Check your credit report has the date of any bankruptcy or IVA discharges detailed on it – if the date of discharge of bankruptcy is not detailed ensure this is amended.
  • While the bankruptcy or IVA debts will still be listed on the credit report, you can check that the report states there is no outstanding balance – if this is not the case either raise a dispute with the credit reference agency or go back to the original creditor and get them to amend accordingly.
  • Mortgage companies at this time are requesting a minimum of 3 years after your discharge from bankruptcy before considering a mortgage application.
  • Make sure credit limits on any cards are at a satisfactory level but are not excessive – never borrow more than you can afford .

For further information and advice, please contact Lynn Marshall on 0191 285 0321 or email lynn.marshall@taitwalker.co.uk  

Are you struggling to understand the new pension flexibilities? Let us talk you through it so you don’t get hit with a big tax bill

We are in a new age of retirement – which brings with it plenty of opportunity, but also lots of challenges.

According to recent research from YouGov and Old Mutual Wealth, 1.7 million Brits face a surprise pension tax bill.  Their recent survey found that, with just days to go until the new pension freedoms became reality, one in ten people who have access to their entire pension savings didn’t know that pension income is taxable.

In addition, one in four people do not fully understand the tax treatment of pension income. Normally 25% can be taken tax free, with the remaining amount taxed at their marginal tax rate of between 0% and 45%.

The survey also unveils that only one in four (26%) people who could have immediate access to their pension savings have a good understanding of income drawdown. This means that almost 13.5m people do not understand the main method of withdrawing cash without buying an annuity.

A significant proportion of people are planning to make use of the new pension freedoms post April.  The research shows that over half (56%) are planning to access their pension savings in some format.  It is therefore vital that everyone understands the tax implications of taking income from their pension savings.

Press coverage is often focused on the ability to accelerate withdrawals from pensions. However, people now understand that this aspect of pension freedom can come with a heavy tax cost. The real benefit of pension freedom is that you can extract those funds when you need them. By combining tax planning with wealth management advice, you can control the timing of other income sources when deciding to withdraw your pension funds. By minimising your tax bills, your pension goes further and gives you greater financial security in your retirement.

Having greater control over how and when you take income from your pension savings is a positive change, but there could be negative outcomes if you do not seek advice relating to your individual circumstances.

In the meantime, if you would like to talk to one of our pensions experts about your personal retirement choices, please don’t hesitate to get in touch. Email mark.parkinson@taitwalker or alastair.wilson@taitwalker.co.uk or call 0191 285 0321 and ask to speak to a member of our pensions team.

We welcome you to our pensions event, which is taking place in Newcastle on Thursday 25th June. We will talk you through the practicalities of the changes and how to make the most of the new Pension Freedoms. To reserve your place, please contact Kirsty.ramsey@taitwalker.co.uk

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