Sage data breach

As you may be aware, police are currently investigating a data breach at Sage. It has been confirmed that Sage are speaking directly with those whose data may have been accessed. If you have not been contacted, Sage have assured us that this means you have not been affected by the data breach.

If you have any queries or concerns regarding this incident, please do not hesitate to contact Claire Brown on 0191 285 0321 or email claire.brown@taitwalker.co.uk.

Alternatively, you may wish to contact Sage directly on 0845 145 3345 or email customercontact@sage.com.

Let’s Grow Fund – still available!

 

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The Let’s Grow North East has awarded grants of over £50m to nearly 200 companies in the North East and Teesside, helping to generate over 8,000 jobs.

The scheme offers grants of between £50,000 to £1m on projects with spend of £200,000 or more.

New applications are now being considered and expressions of interest must be received by close of business on 26 August 2016. Full applications must be received by close of business on 9th September 2016.

The expression of interest form and scheme guidelines can be found here.

Let’s Grow is a great source of grant funding for the North East. If you would like to discuss a grant application, or any other funding needs, please contact Steve Plaskitt on 0191 285 0321 or email steve.plaskitt@taitwalker.co.uk.

Business funding post Brexit

We are now over six weeks on from the result of the EU referendum and are still no clearer what the United Kingdom’s exit will mean for our future trading relationship with Europe – and therefore what the impact will be for SMEs in the North East. After the initial turbulence in capital and currency markets things have settled down, although the Pound continues to struggle against the Dollar and Euro. With so much uncertainty until an exit deal starts to materialise, we may well see some market volatility over the next 12 months at least.

The decision to exit the EU may have an impact on funding available for businesses. In the short term, the recent interest rate reduction may mean that some business owners think they may have access to cheaper bank lending, however the unprecedented period of low interest rates we have seen for the last seven years means it is unlikely the recent cut will have any material impact on business lending.

The EU has played a significant part in the North East SME funding landscape over recent years. This is currently through the Finance for Business North East funds that supported many businesses from 2010 to 2012, when bank finance was almost non-existent. Since then the seven funds have continued to be a major source of capital for North East business. These funds are underpinned by EU funding – from ERDF and the European Investment Bank – as will be the planned successor funds colloquially known as JEREMIE 2.

Current indications are that JEREMIE 2 will still be delivered in the North East LEP area (with Tees Valley being part of the British Business Bank Northern Powerhouse fund). However it is possible that the referendum result could impact on the life of these funds.

It’s definitely not all doom and gloom though, as funding is available to SME businesses to support growth. The Finance for Business North East fund managers have a £17m extension available in the North East for 2016 which they are well on with investing, and there have been recent announcements by Business Durham about their plans for a £20m investment fund to launch in 2017. The next few months should also see more information becoming available on JEREMIE 2 and the Northern Powerhouse funds.

If you are considering looking for funding for your business, it is more important than ever to seek advice. Tait Walker are hosting two seminars on funding after Brexit, in September. Please contact Kirsty Ramsey to express interest in attending.

Brexit – we’re in it together

Like many of you today, we are digesting the news that the electorate has decided to exit the European Union. Whilst the UK as a nation has opted to leave, the UK still remains a highly skilled and attractive place for business and a nation of great strength and competitive advantage over many economies.

I can appreciate that the outcome of the vote will come with a degree of concern to some of you as we are all faced with uncertainty on a number of fronts. Please be assured that we endeavour to keep you up to date and help you to understand the potential impact and manage any immediate business or personal risks as the picture becomes clearer.

During the run up to the referendum it has been absolutely clear that the North East has a thriving market trading with the EU. We will assist businesses in the region to identify the changes resulting from Brexit which will impact them and assist them to plan accordingly to mitigate as much impact as possible. As a North East based business, we are committed to helping our clients and contacts in the region to navigate a period of what we see as undoubted regulatory change.

UK and North East businesses must continue to do what they do best, pull together and find new ways to innovate and drive growth and make the most of opportunities ahead. We’ll be holding events in the near future to discuss the impact and what Brexit really means for the UK, you, your business and your business sector – details of which will be available soon.

In the meantime, should you have any questions or would like to discuss any concerns, please don’t hesitate to get in touch with your usual Tait Walker contact.

Andrew Moorby, Tait Walker Managing Partner

Counterfeit cheques – a warning

There has been an alarming increase in the number of counterfeit cheque frauds being reported to Action Fraud since late last year.

Fraudsters are contacting a wide range of businesses and requesting to pay by cheque for the sale of goods and/or services. The business is then sent a cheque from the fraudster with a higher value than the amount anticipated, followed by a request for the difference with instructions on how to pay it back (usually via bank transfer or money transfer service).

Following the ‘refund’, it becomes apparent that the cheque was fraudulent and no funds are credited to the business’ account. The fraudsters tend to use pressure tactics to persuade the businesses to refund the amounts immediately prior to the cheques clearing.

We recommend you remain very cautious when dealing with cheques where the amount provided is higher than agreed. Wait until the correct balance is received before providing the goods/services, or wait until the cheque has cleared before refunding the difference.

If you have been affected by this, please contact our Forensics team on 0191 285 0321.

New statutory renewals basis for property businesses

In the July 2015’s Summer Budget, the Chancellor caught everyone by surprise by announcing two major changes to the taxation of buy to let properties: the abolition of wear and tear allowance and the restriction of tax relief on loan interest.

The changes to loan interest relief do not begin until April 2017, but wear and tear allowance was abolished on 6 April 2016 and replaced with a new statutory renewals basis for all residential landlords.

The old regime

Prior to 6 April 2016, landlords of fully furnished residential property could claim wear and tear allowance (10% of net rents) as a deduction from their rental profits. Wear and tear allowance was often more than the actual expenditure, meaning that taxable profits could be lower than actual profit.

By contrast, landlords of unfurnished residential property could not claim wear and tear allowance and, since the non-statutory renewals basis was abolished in April 2013, they have been unable to claim for the cost of replacing furnishings. The only way they could get relief for these items was to begin renting their properties on a fully furnished basis

The new regime

With effect from 6 April 2016, wear and tear allowance is abolished. Instead, all landlords can claim the following:

  • A new statutory renewals basis, known as “replacement of domestic items relief”
  • Replacement of fixtures

The meaning of these two terms is set out below.

Replacement of domestic items relief

To qualify for the new relief, all of the following conditions must be met:

  1. The person carries on a residential property business
  2. The ‘domestic’ item (see below) is provided for use in the residential accommodation, replacing the old item, and must be provided solely for the use of the lessee (i.e. no private use to the landlord)
  3. The expenditure is capital expenditure incurred wholly and exclusively for the purposes of the property business – without these rules a revenue deduction would not be possible
  4. The expenditure does not qualify for relief under the capital allowances rules

What is a “domestic item”?

The term “domestic items” covers the kind of things that you would need to put into a property to be able to live there:

  • Furniture (beds, chairs, tables etc.)
  • Furnishings (curtains and carpets)
  • Household appliances (free-standing white goods)
  • Kitchenware (glasses, crockery, cutlery etc.)

These are the items which would have been covered by wear and tear allowance. However, landlords will now receive tax relief for the actual amounts spent on these items rather than being able to claim wear and tear allowance which, at 10% of net rents, could have been a higher figure.

Replacement of fixtures

For expenditure on items not included as domestic items, it may be possible to claim tax relief on the basis that the expenditure is a repair. For example, replacement of fitted kitchen items such as built white goods will qualify as repairs meaning that tax relief for the cost of these items will be available (note that free-standing white goods are covered by domestic items relief).

Similarly, replacement of kitchen units or bathroom fittings would also qualify as repairs provided that there has been like for like replacement. Income tax relief is not available for expenditure on improvements.

Restriction of tax relief on loan interest

The other change was to the availability of tax relief on loan interest and this could have a major impact on the tax payable by landlords. To read more please click here.

The way forward

The taxation of property income is undergoing major changes and landlords need to be aware of how they will be affected so that they can take any necessary action(s) to minimise the tax impact. We would be happy to meet with you to discuss your needs.

If you would like any further advice, please contact Chris Hodgson or Dorothy Johnston.

New tax rules and potential solutions for Buy to Let landlords

With more than 400 people at our Buy To Let seminars over the past few months, it’s clear that the new tax rules are a major cause of concern for landlords of residential property. We are working with a number of landlords who are planning for the effect of this new regime. They know that if they leave matters until 2017, when the new rules start to take effect, they will be behind the curve.

For some individuals, the answer is a sale of some of their properties to try to reduce their borrowings and hence the effect of a restriction on tax relief for interest on those borrowings. If this decision is taken as the new rules come into effect, some people will be caught up in what might become a rush to sell properties. This is likely to be a buyer’s market and so this could impair the value that can be obtained on a sale of these properties.

For others, the best solution may be to incorporate their properties, and the debt on them, into a limited company. This is a major decision, and one that should not be taken lightly, but we are guiding a number of our clients through this process.

Some landlords now think that they will have to pay the higher rate of Stamp Duty Land Tax on any transfer to a company. While this is true in some cases, it is not always true. Relief is available that can mean that no SDLT is payable on the transfer in the right circumstances. We are discussing this opportunity with clients and, where appropriate, we are obtaining advance clearance from HMRC that the relief applies.

The other potential tax problem is Capital Gains Tax. Again there is the potential for incorporation to trigger a large tax bill, but we are submitting advance clearances to HMRC to get their agreement that relief applies. Agreement is now being secured in some cases and it is becoming clearer who is likely to qualify.

Having obtained the clearances, refinancing the lending in a company can be an issue, but the secured lending specialists in Tait Walker are working with clients and loan providers to facilitate the incorporation of their property portfolios.

If you are a landlord who is worried by the new rules and you want an experienced professional to guide you through the possible steps to take, please contact Chris Hodgson or Dorothy Johnston. Alternatively, you can contact Steven Whitehead, our secured lending specialist.

Chris-Hodgson

Author: Chris Hodgson, Tax Associate

 

Making Tax Digital: Newcastle Consultation on Simpler Payment & Quarterly Reporting

As we said last week, HMRC’s vision of the future is that all dealings with tax payers and agents will be digital. The process is already underway and HMRC are currently running consultation events to gather the responses of agents and advisors. Tait Walker was invited to take part in a consultation earlier this year where the topics for discussion were quarterly reporting and simpler payments.

Quarterly Reporting

All businesses will be required to take part in quarterly reporting which is due to begin in April 2018. In addition, it is anticipated that individuals with non-PAYE taxable income over £10,000 (e.g. Rental income) will also need to report quarterly. It is worth noting that the Association of Tax Technicians (ATT) has recently called on HMRC to postpone the introduction of quarterly reporting by at least a year, due to delays in the consultation process caused by the EU referendum.

The mechanics of the system are not yet known so we don’t know whether every single business transaction will be reported or whether it will be a quarterly summary of receipts and payments. There was a lot of concern from the agents in the room about how it would be possible to identify items which were and were not tax deductible.

Tax payers will clearly still need help from their accountant to check that information that has been reported quarterly is treated correctly. HMRC admitted that they do not see quarterly reporting as an end to agent involvement.

Every business is to have its own HMRC digital tax account and agents will have access to these accounts through the Agent Services process (formerly Agent Online Self-Serve), which is currently being tested by agents with fewer than 200 clients. The testing process is due to open up to larger agents later on this year. Tait Walker has registered to take part in the testing so that we can give feedback and keep our clients right up to date with what is happening.

Simpler Payment

HMRC said that Simpler Payment is an opportunity for them to consider how to simplify payment arrangements for tax payers. It is likely to follow on from quarterly reporting but discussions are still in the early stages and we were advised that nothing has been finalised. A number of agents in the room expressed concern that this was just a way for HMRC to try to accelerate tax payments dates –hotly denied by HMRC!

HMRC were interested in our opinions on what they see as 3 key issues to be addressed in the process.

  1. Pay as you go

    Many people pay for their gas and electricity monthly and HMRC are considering this as a way for people to pay their tax bills. Did we think this would be an attractive option and if so, what could HMRC do to encourage people to sign up for Pay as you go? For example, make it a flexible system and allow voluntary holidays for cash flow issues or perhaps pay credit interest on amounts paid before the official due date?

  1. Changes to payments dates

    At the moment, individuals and unincorporated businesses pay their tax in January and July each year and there can be a long delay between profits being earned and the date of payment for the tax.

    HMRC would like tax to be paid much closer to when the profits are earned and there was a lot of discussion about how this could be done. They wanted to know what issues or problems we thought there might be and, needless to say, there were plenty. The main one was the cash flow issue of moving from 6 monthly payments (mainly in arrears) to quarterly payments on an actual basis.

  1. The alignment of payment dates for Income Tax, Corporation Tax and VAT

    At the moment the payment dates for income tax, corporation tax and VAT are all different and HMRC would like to find a way of aligning these.

    It was mentioned that VAT is already paid quarterly, so why not income tax and corporation tax? Larger companies are already using a quarterly payment regime and all corporation tax payments must be made electronically.

    There was much discussion about how the system could be adapted to cope with unincorporated businesses all having different year ends and it was suggested that their tax payment should move to being based on the accounting year end rather than on the tax year, in the same way as for companies.

Conclusion

As mentioned above, HMRC’s vision of the future is that all dealings with tax payers and agents will be digital. To paraphrase a well known advert, their vision is that ‘the future’s bright, the future’s digital’.

How we get from the present to the digital future has not yet been finalised. It is clear that the tax return process will look very different, but it was emphasised that HMRC do not see “the end of the tax return” as being the end of agent involvement. They understand that people either don’t want to, or don’t have the time to deal with HMRC and so they expect agent involvement to continue.

This is one of the reasons why they want agents to be involved in these early stages so that we can help to design a system which will not only work, but be easy for everyone to use. It was clear from the consultation session that they are happy to listen to any and all concerns.

The move to a digital tax age will see major changes in the way tax payers and agents interact with HMRC. Rest assured that we are involved in the consultation process, which means that we will be able to keep you up to date with the changes.

If you would like any further advice, please contact Dorothy Johnston.

North East funding landscape for SMEs

CORPORATE FINANCE

The SME funding landscape in the North East has been dominated by the Finance for Business North East funds over the last five or six years. These funds have played an important role in both supporting new businesses and providing access to growth capital and working capital funding to more established businesses. It was therefore fantastic news when a top up to these funds was confirmed last month.

The five fund managers have £17m to invest in over 100 North East SMEs before the end of 2016. We are seeing a strong appetite to access this funding and have a number of clients who are progressing an offer of funding. With progress being made towards a new £120m fund for the North East LEP area, which should commence in 2017, these funds will remain a key part of the funding landscape in future.

Growth Capital

Venture Capital Trusts have long been part of the equity funding landscape in the UK. Significant changes were announced in the 2015 Budget for VCTs. These changes came in force this year and have changed the types of deals those funds can invest in. In particular, VCT funds can no longer fund MBOs, which had been the focus for a number of VCT funded investment businesses and cannot invest in businesses over seven years old. This has seen the investment focus of these funds shifting from backing MBOs of established businesses towards growth capital investment in younger businesses – a big change in strategy for a number of providers. We are already working on a number of growth capital deals with investors who historically would never have considered the opportunity.

Outside of VCTs, Business Growth Fund have been very active investors in the North East over the last couple of years and retain a strong appetite to invest in successful North East businesses.

Bank funding

Bank funding remains a hot topic of discussion amongst many business owners – though the major banks are all lending money to businesses and suggest that demand amongst SME businesses isn’t there to take on debt.

We have found that there has been a willingness from banks to support transactions, though caveated with suitable security being in place in most instances. Asset finance and invoice discounting has been an increasingly common part of the funding mix in deals we have completed and can be an effective way of raising finance to support your business.

Help from the tax system

The tax system is an often overlooked source of funding for many businesses. Current government policy is seeing the focus on public sector support shift away from grants to using the tax system to incentivise business investment. A great example of this is the R&D tax credit. Tait Walker’s R&D tax team have helped clients benefit to the tune of £25m through R&D tax credits over the last five years.

We have helped a number of businesses raise funding in the last twelve months, including Atlas Cloud and Furniture Clinic. We are currently working with several businesses looking for everything from seed capital to multiple millions of growth capital.

Our Corporate Finance team will be running a seminar in the autumn on the North East funding landscape, but if you want to speak to someone about funding opportunities now then please get in touch.

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