Ce diaporama a bien été signalé.
Nous utilisons votre profil LinkedIn et vos données d’activité pour vous proposer des publicités personnalisées et pertinentes. Vous pouvez changer vos préférences de publicités à tout moment.

Exeter - Essential 6-monthly Finance Directors' Update - June 2016

316 vues

Publié le

Our six-monthly Finance Seminars provide an overview of the most important technical developments in financial reporting and taxation. The seminars address the key topical financial matters, the opportunities they present, how they affect your business and the pitfalls you can avoid.

Our seminars aim to provide the essential elements of technical CPD for a finance director.

Publié dans : Business
  • Soyez le premier à commenter

Exeter - Essential 6-monthly Finance Directors' Update - June 2016

  1. 1. Essential 6-monthly Finance Directors’ Update Exeter 15th June 2016
  2. 2. Chairman's Welcome Glenn Nicol, Partner
  3. 3. pkf-francisclark.co.uk . Housekeeping
  4. 4. pkf-francisclark.co.uk . Merger with Princecroft Willis • 1 April 2016 • 11 partner office • 120 staff • Turnover £6.8m • 2 offices - Poole - New Forest
  5. 5. pkf-francisclark.co.uk PKF Francis Clark PKF Francis Clark offices
  6. 6. pkf-francisclark.co.uk . About the PKF network • Global network of legally independent firms bound together by a shared commitment to quality, integrity and the creation of clarity in a complex regulatory environment. • PKF is in the top 12 of worldwide accountancy networks • PKF in the UK is ranked, by AccountancyAge Top 50 Firms, as number 11 (operating as a network) • Global network of over 300 independent member firms • 440 locations in 150 countries • A team of 14,000 including 2,600 partners • Over $2.3bn worldwide revenue
  7. 7. pkf-francisclark.co.uk PKF International Network
  8. 8. pkf-francisclark.co.uk South West Insider Dealmaker Awards 2016 Nominations include: • Corporate Finance Advisory Team of the Year • Dealmaker of the Year – Andrew Killick • Young Dealmaker – Matt Willmott • Young Dealmaker – Nick Tippett Award Nominations
  9. 9. pkf-francisclark.co.uk What is new in PKF Francis Clark? Martin Hobbs became a Partner in the Torquay office on 1 April 2016
  10. 10. pkf-francisclark.co.uk What is new in PKF Francis Clark? Neil Hitchings, became Director, Corporate Services, Exeter, 1 April 2016 Amy Edwards, became Director, Corporate Services, Exeter, 1 April 2016
  11. 11. pkf-francisclark.co.uk • EU Referendum • NHS • Steel Industry • National Living Wage • US Presidential Election • Tax Havens UK Economy – period of uncertainty
  12. 12. Programme Current Issues in Financial Reporting – Stephanie Henshaw Topical VAT issues – Julie Towers Corporation tax – where are we headed? – John Endacott BREAK Capital gains tax for corporate investors – John Endacott Employee benefits and pension auto-enrolment 3rd anniversary duties – Rachel Allen Transactions and Funding – Andrew Killick LUNCH pkf-francisclark.co.uk
  13. 13. Current Issues in Financial Reporting Stephanie Henshaw
  14. 14. pkf-francisclark.co.uk . In this session…. • New audit exemption thresholds: do they make a difference in practice? • Company secretarial changes: how to stay on top • FRS 102: the first six months – hints and tips • New IFRSs and impact on UK GAAP
  15. 15. pkf-francisclark.co.uk Thresholds Small companies Turnover not exceeding £10.2m Total assets not exceeding £5.1m Employees not exceeding 50 in all cases Going up: audit exemption thresholds Periods beginning on or after 1 January 2016 (no early adoption)
  16. 16. pkf-francisclark.co.uk Thresholds Small Groups (gross) Small Groups (net) Turnover not exceeding £12.2m £10.2m Total assets not exceeding £6.1m £5.1m Employees not exceeding 50 in all cases Impact of group membership? Audit exemption only available where worldwide group is below group threshold
  17. 17. pkf-francisclark.co.uk • Well understood public report • Checks and balances on management External perception • Cheaper credit • Covenant compliance Third party attitude • Impact on warranties • Attitude of buyers Looking to sell? Advantages of audit?
  18. 18. pkf-francisclark.co.uk • Annual guarantee by parent • All liabilities existing at year end – actual, contingent and prospective • Until liabilities settled  how much risk? • Procedural requirements apply Option for subsidiaries: audit exemption via guarantee
  19. 19. pkf-francisclark.co.uk Company secretarial changes Persons with Significant Control With effect from 6 April 2016 Annual confirmation statements With effect from 1 July 2016
  20. 20. pkf-francisclark.co.uk Introducing PSCs Persons with Significant Control “Registrable individual” “Registrable Relevant Legal Entity”
  21. 21. pkf-francisclark.co.uk Identify Confirm RecordFile Monitor Operating the new regime
  22. 22. pkf-francisclark.co.uk Condition Action required i Individual who holds more than 25% of the shares (direct or indirect) Review register for holdings in excess of 25% ii Individual who holds more than 25% of voting rights Review register of members and articles of association to identify voting rights iii An individual who holds the right to appoint or remove the majority of the board Review the articles for information on appointment rights e.g. sole director whom one individual appoints iv Individual who has the right to exercise or actually exercises significant influence or control Relevant where individual does not meet I – iii above but does exercise significant control V Trust or firm would satisfy i – iv if it were an individual Statutory conditions apply What is “significant control”?
  23. 23. pkf-francisclark.co.uk What about groups? Company C Company C Company C Company B Company A Company B Company A Company B Company A Company A Overseas Company B Overseas Company C
  24. 24. pkf-francisclark.co.uk Maintain register Part of statutory books Record details of PSCs or state there are none Notify registrar As part of annual confirmation statement On incorporation Actions required
  25. 25. Annual confirmation statements: replacing annual returns • File any annual return with due date up to 30 June as normal • New annual confirmation statement <14 days of: • Anniversary of incorporation; • Anniversary of due date of last annual return “Confirmation Date” • Fee as for annual return (£13 online) • “Check and confirm” details held at Companies House – add PSC information as part of the first confirmation • Companies House will be issuing reminders
  26. 26. pkf-francisclark.co.uk Points to watch Loans and preference shares Distributable profit Reduced disclosure regime New disclosures FRS 102: the first six months
  27. 27. pkf-francisclark.co.uk Impact on presentation • Classify as due within one year unless formal agreement restricts lender’s right • Non-interest bearing long term arrangements must be discounted • Actual liability > balance sheet creditor(!) • Capital contribution in equity for discount • Discount unwinds via P&L  Accounting and tax issues = If classification is important, consider formalising interest arrangements Related party loans
  28. 28. pkf-francisclark.co.uk • Must meet specific conditions re: interest, prepayment and extension rights • Non-basic loans at fair value • Review proposed terms for impact on balance sheet Is it a basic loan? • Fair values mandatory • Impact on net assets • Where are fair value movements reported? Caps, collars, swaps and forwards • Unavoidable obligations still result in treatment as debt • Market rate coupon? • Beware ratchet impact on basic/non-basic Preference shares Third party finance
  29. 29. pkf-francisclark.co.uk • New fair value adjustments via P&L • Tracking mechanism – narrative explanation or transfer to separate “non-distributable” reserve (Also useful if have reorganisations, hive ups via interco) Distributable profit FV adjustment Available for distribution? Investment property No Short term forward contracts Yes Interest rate swaps Is it backed up by cash?
  30. 30. pkf-francisclark.co.uk • Available to subsidiaries and parent entity in own accounts • Exemptions include: • Cash flow statement • Share capital reconciliation • Certain financial instrument and share-based payment disclosure • Provided shareholders notified in writing and do not object • Disclose name of parent preparing consolidated accounts, summary of exemptions taken Reduced disclosure regime
  31. 31. pkf-francisclark.co.uk Stock • Cost of stock included in P&L • Movement in stock provision Debtors • Movement in doubtful debt provision Operating leases • Total commitment under leases, not annual • Analysed by period New disclosures
  32. 32. pkf-francisclark.co.uk IFRS Deals with Effective date for IFRS reporters Key changes IFRS 16 Leasing A/Ps beginning 1/1/19 Lessees: All leases on balance sheet Exceptions for low value or total lease period < 12 months Lessors: No change IFRS 15 Revenue recognition A/Ps beginning 1/1/18 5 stage process to determining whether and when revenue should be recognised Forthcoming changes to IFRS
  33. 33. pkf-francisclark.co.uk Unclear at this stage • FRS 102 subject to triennial review • No amendments expected before 1/1/19 – 3 years from small company application • Implementation evidence before applied in UK – 2025? Impact of IFRS on FRS 102?
  34. 34. Topical VAT Issues
  35. 35. Agenda • What’s new with HMRC? • Practical points on international trade • Brexit – what could it mean for VAT? pkf-francisclark.co.uk
  36. 36. pkf-francisclark.co.uk . What’s new with HMRC? • Then and now • Biggest reorganisation of HMRC in living memory • Currently a large number of offices spread throughout the UK • HMRC has been centralising over the last 20 years
  37. 37. pkf-francisclark.co.uk . What’s new with HMRC? • The future - 13 regional hubs • Office closures from end of 2016 • Interim measures – likely to be more visits, while offices await closure. Transitional offices • Specialist teams eg construction & cash teams • Uncertainty, increased targeted visits and use of IT
  38. 38. pkf-francisclark.co.uk What’s new with HMRC? HMRC VAT offices open in 2016
  39. 39. pkf-francisclark.co.uk What’s new with HMRC? …and in 2021
  40. 40. pkf-francisclark.co.uk . International Trade: Contents • Goods held in other EU countries • Sales via online retailers • Customs duties
  41. 41. pkf-francisclark.co.uk • Movement to EU = EU VAT Registration • One sale in EU = EU VAT Registration • Call-Off vs Consignment  Consignment  Own Stock for distribution  Place of supply = Country of location  EU VAT Registration  Call-Off  Stock held for customer/customer’s country  Place of supply = Country of location  EU VAT registration…?  Simplification may apply International Trade: Goods held in other EU countries
  42. 42. pkf-francisclark.co.uk • Amazon only an example, other providers likely to be very similar • Likely to become more widespread, authorities likely to latch on to tax raising opportunities • Issues where a business has Amazon as their sales partner, rather than buy-sell International Trade: Amazon
  43. 43. pkf-francisclark.co.uk • MFN → Merchant Fulfilment Network  Amazon market goods  Goods from supplier’s warehouse  B2C (Business to Consumer) contributes to Distance Selling • EFN → European Fulfilment Network  Fulfilled by Amazon  Supplier picks Amazon warehouse  UK → B2C contributes to Distance Selling  EU → EU VAT registration • MCI → Multi Country Inventory  Goods moved to various Amazon warehouses  Supplier unaware until stock report  Potential multi-EU registrations International Trade: The Amazon Effect
  44. 44. pkf-francisclark.co.uk • Is your business involved in importing goods from non-EU countries? • If yes do you take advantage of appropriate reliefs eg inward processing relief? • Do shipping agents classify goods for you? • Duty savings affect bottom line • Impact of changes to Union Customs Code from 1 May 2016 International Trade: Custom Duties
  45. 45. pkf-francisclark.co.uk YES Brexit: Will VAT be affected?
  46. 46. pkf-francisclark.co.uk • Fortunately (for me) we are likely to keep it – VAT accounted for 20% of receipts (ironically) • Third highest tax after income tax and NICs • Dwarfs income from corporation tax receipts • In most circumstances UK VAT law is derived from EC Directives • Already had an effect – womens’ sanitary products for instance and mention of allowing states more freedom Brexit: Will VAT be affected?
  47. 47. pkf-francisclark.co.uk • Immediate impact would be that the UK would not be bound by CJEU decisions • Could expand zero rate • Could have extra rates • Standard rate higher than 25% • Super high rate for things we don’t like, tobacco, sugary drinks • VAT ‘holidays’ for certain supplies, say reduce for restaurant for a few months Brexit: Will VAT be affected?
  48. 48. pkf-francisclark.co.uk • Could narrow exemptions • Likely to impact on cross border sales in EC • Distance selling, MOSS (Mini One Stop Shop), duty all likely to be affected • Place of supply of services – no need for business test? • How about recovery of VAT re specified supplies? Brexit: Will VAT be affected?
  49. 49. pkf-francisclark.co.uk And finally….
  50. 50. Corporation Tax – Where are we heading? John Endacott
  51. 51. pkf-francisclark.co.uk • Big Announcement…. Where are we heading? • 23 June – EU Referendum • Fundamental uncertainty as to direction of Tax Policy • But, that said, we do have “A Road Map” as to preferred direction….
  52. 52. pkf-francisclark.co.uk . The Old Map • George Osborne - May 2010 • Corporate Tax Road Map • Most competitive Corporate Tax regime in the G20 • Stable economy • A level playing field for taxpayers • Aligning tax with modern business practice • Avoiding complexity
  53. 53. pkf-francisclark.co.uk • Corporation Tax rate unchanged 1 April 2016 – 31 March 2017 - 20%. Past and future corporation tax rates: Tax Competition or Tax Haven? Northern Ireland – 12.5%
  54. 54. pkf-francisclark.co.uk • Taxes should be low but must be paid? APNs/Follower Notices • Encourage Entrepreneurship? Low Rates of CT/10% rate of ER • Not Reward Aggressive Tax Avoidance? Introduction of GAAR – July 2013 What else have we seen?
  55. 55. pkf-francisclark.co.uk Measures to ‘clamp down on artificial structures used to gain a tax advantage’ since 2010 • Disguised remuneration • Corporate loss buying • Partnership review • Offshore intermediaries • Diverted Profits Tax • Phoenixing • High profile ‘wins’ collect £494million Anti-Avoidance
  56. 56. pkf-francisclark.co.uk . • Government’s approach to business tax for the Parliament • Supporting small business • Continuing to deal with avoidance and aggressive tax planning • Level playing field for all tax payers • Simplifying and modernising the tax regime Business Tax Road Map - 2020
  57. 57. pkf-francisclark.co.uk • Business Rates • Business Energy Efficiency Taxation • International Matters • OECD (BEPS) • EU directives • G20 (tax haven transparency) Business Road Map – specific areas worthy of mention
  58. 58. pkf-francisclark.co.uk • Relief for rateable values of £12,000 or less; • Previously £6,000 or less • Clearly good news for the smaller “bricks and mortar” business • Climate Change Levy increasing over 4 years • CCL ‘Relief’ enhanced – good for heavy users • Tata Steel and BHS? Business Rates & Green Taxes
  59. 59. pkf-francisclark.co.uk • BEPS has a large focus on digital businesses • Enlarged definition of permanent establishment • Increased emphasis on commercial & economic substance • Increased emphasis on VAT & destination principle • Transfer pricing, treaty abuse & hybrid mis-matches • UK already implementing BEPS Initiatives
  60. 60. pkf-francisclark.co.uk • Interest expense • Amount of tax relief on interest • Capped at 30% of EBITDA • Exceptions for groups with legitimately high interest • UK measure from 1 April 2017 BEPS Action 4 - Interest
  61. 61. pkf-francisclark.co.uk • Extend withholding tax to use of trademarks & brand names • Taxing “outbound” royalties • Means of ensuring MNCs can’t avoid UK tax • More taxation of inbound royalties by other countries • Finance Bill 2016 measure BEPS Structuring - Royalties
  62. 62. pkf-francisclark.co.uk • Current scheme introduced from April 2013 • 10% CT rate for profits derived from qualifying IP rights (UK and EU patents) • OECD considers a ‘harmful tax practice’ (Action 5) • New scheme from 1 July 2016 for new IP and new entrants • Current scheme grandfathered until 30 June 2021 • 2 year time limit for electing into old regime – the latest accounting period being one which straddles 1 July 2016 Patent Box – New BEPS compliant regime
  63. 63. pkf-francisclark.co.uk • What’s new? • Restriction on Patent Box profits where >30% of R&D subcontracted to connected parties • Restriction is calculated by a ‘nexus fraction’ (connected vs unconnected R&D) • If 100% of R&D is subcontracted to connected parties = fraction will be 0% (no relief available) • R&D spend is cumulative for 15 years in fraction, recalculated annually • Applies to UK and non UK subcontractors – so all UK groups with R&D in a separate company to income will be restricted Patent Box – New BEPS compliant regime
  64. 64. pkf-francisclark.co.uk • Streaming income and expenditure for each patent will be mandatory • Nexus fraction applied to each Patent Box stream • Increases administrative burden • Once grandfathering expires, nexus fraction must include streamed R&D spend – need to start streaming this now • Complex situation for companies needing to apply both regimes until 2021! • Is it worth it? Yes if the Patent Box income stream is high margin Patent Box – New BEPS compliant regime
  65. 65. pkf-francisclark.co.uk • Company can use a trade loss against profits of the same year • Can be carried back against profits of the previous 12 months • Group relieved against profits of that year; or • Carried forward against profits of the same trade Trade Losses – Current Position
  66. 66. pkf-francisclark.co.uk Losses – Old Rules Year 1 Year 2 Rental Profit 300,000 300,000 Trading Profit - 50,000 Loss c/y profit (300,000) vs same trade (50,000) Taxable Profit - 300,000 Corporation Tax - 60,000 Trading Loss 500,000 200,000 Used vs Trade - year 1 (300,000) (50,000) Loss Carried forward 200,000 150,000
  67. 67. pkf-francisclark.co.uk • Losses incurred from April 2017 • Apply to both standalone companies and group companies • Allow carried forward losses to be used against other income and gains • For taxable profits in excess of £5 million, restrict to 50% the amount of profits that can be offset through losses carried forward Trade Losses – New Rules
  68. 68. pkf-francisclark.co.uk Losses – New Rules Year 1 Year 2 Rental Profit 300,000 300,000 Trading Profit - 50,000 Loss c/y profit (300,000) (200,000) Taxable Profit - 150,000 Corporation Tax - 30,000 Trading Loss 500,000 200,000 Used vs Trade - year 1 (300,000) (200,000) Loss Carried forward 200,000 -
  69. 69. pkf-francisclark.co.uk • Impact on Deferred Tax? • Need to stream losses for pre and post 2017 • Timing of expenditure/projects Losses
  70. 70. pkf-francisclark.co.uk • Annual pay bills >£3,000,000 • <2% of employers will pay • 0.5% of excess over £3,000,000 • Introduced with effect from April 2017 • Class 1 NIC – apprentices under 25 Apprenticeship Levy
  71. 71. pkf-francisclark.co.uk • Annual pay bills >£3,000,000 • <2% of employers will pay • 0.5% of excess over £3,000,000 • Introduced with effect from April 2017 • Class 1 NIC – apprentices under 25 • Auto-Enrolment – additional 3% (6 April 2019) Apprenticeship Levy
  72. 72. pkf-francisclark.co.uk • Corporation Tax rate unchanged 1 April 2016 – 31 March 2017 - 20%. Past and future corporation tax rates: With one hand he giveth… Year Commencing 1 April Main Rate % Small profits rate %* Auto Enrolment % Apprenticeship Levy % 2010 28% 21% n/a 2011 26% 20% n/a 2012 24% 20% 1% n/a 2013 23% 20% 1% n/a 2014 21% 20% 1% n/a 2015 20% - 1% n/a 2016 20% - 1% n/a 2017 19% - 1% 0.5% 2018 19% - 2% 0.5% 2019 19% - 3% 0.5% 2020 17% - 3% 0.5%
  73. 73. pkf-francisclark.co.uk Old rules vs new rules • SDLT on commercial property transactions aligned with residential property rules – “slab-based” to “slice- based”. • New non-residential SDLT rates are as follows: Stamp Duty Land Tax (SDLT) Value SDLT Rate % Up to £150,000 0% Between £150,001 and £250,000 2% Above £250,000 5%
  74. 74. pkf-francisclark.co.uk • Example - purchase of commercial property costing £300k SDLT is reduced by £4,500. SDLT – illustrative calculation Old SDLT £ New SDLT £ On the whole £300k – 3% 9,000 On the first £150k – 0% - Between £150k and £250k – 2% 2,000 Final £50k – 5% 2,500 9,000 4,500
  75. 75. pkf-francisclark.co.uk • More than one dwelling • SDLT rate is arrived at by taking: • Aggregate consideration for dwellings • Divided by the number of dwellings • Subject to a minimum percentage of 1% • Usually now at least 3% • Can be 15% • Can also be treated as non-residential SDLT – Multiple Dwellings Relief (“MDR”)
  76. 76. pkf-francisclark.co.uk • We have already seen the 2020 Roadmap • Review of Substantial Shareholdings Exemption (SSE) and Double Taxation Treaty Passport (DTTP) • Anti-avoidance measures • Publication of tax strategy for large businesses • New QIP dates for large companies from 2019 • All 4 payments will be made within the 12 month accounting period • Bringing in line with other G7 countries (and increasing cash flow advantage for HMRC!) 2020 and Beyond
  77. 77. pkf-francisclark.co.uk • Clear Roadmap as to plans to 2020 • But major T-junction in place on 23 June! • The most important slide is the next one… 2020 and beyond
  78. 78. (c) copyright PKF Francis Clark, 2016 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by PKF Francis Clark in any format whatsoever unless you have obtained prior written consent from PKF Francis Clark to do so and entered into a licence. To the maximum extent permitted by applicable law PKF Francis Clark excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by PKF Francis Clark. These materials and /or any services provided by PKF Francis Clark are designed solely for the benefit of delegates of PKF Francis Clark. The content of these materials and / or any services provided by PKF Francis Clark does not constitute advice and whilst PKF Francis Clark endeavours to ensure that the materials and / or any services provided by PKF Francis Clark are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by PKF Francis Clark; nor do we commit to ensuring that these materials and / or any services provided by PKF Francis Clark are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales. These materials and / or any services provided by PKF Francis Clark are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request. Our liability is limited and to the maximum extent permitted under applicable law PKF Francis Clark will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by PKF Francis Clark, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited. PKF Francis Clark is a trading name of Francis Clark LLP. Francis Clark LLP is a limited liability partnership, registered in England and Wales with registered number OC349116. The registered office is Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF where a list of members is available for inspection and at www.pkf-francisclark.co.uk. The term ‘Partner’ is used to refer to a member of Francis Clark LLP or to an employee. Registered to carry on audit work in the UK and Ireland, regulated for a range of investment business activities and licensed to carry out reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales. Partners acting as insolvency practitioners are licensed in the UK by the Institute of Chartered Accountants in England and Wales. A partner appointed as Administrator or Administrative Receiver acts only as agent of the insolvent entity and without personal liability. Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Disclaimer & copyright pkf-francisclark.co.uk
  79. 79. BREAK fcfp.co.uk
  80. 80. Capital Gains Tax for the Corporate Investor John Endacott
  81. 81. pkf-francisclark.co.uk • Dividends or capital gains? • Completely different tax regimes • Enterprise investment schemes (EIS), entrepreneurs’ relief (ER) & investors’ relief (IR) • Changes to ER proposed by Finance Bill 2016 Returns to shareholders
  82. 82. pkf-francisclark.co.uk . Dividend taxation Effective tax rates taking account of tax credit (2015/16) but ignoring £5,000 dividend allowance (2016/17): 2015/16 2016/17 Increase Basic rate 0% 7.5% 7.5% Higher rate 25% 32.5% 7.5% Additional rate 30.6% 38.1% 7.5% Other Changes – removal of the “Notional Tax Credit” and also the £5,000 dividend allowance.
  83. 83. pkf-francisclark.co.uk . Capital Gains Tax Note – excludes residential property (28%) (subject to Royal Assent of FB 2016) 2015/16 2016/17 Basic Rate Taxpayer 18% 10% Higher Rate Tax Payers 28% 20% With Entrepreneurs’ Relief 10% 10% With Investors Relief 10% 10%
  84. 84. pkf-francisclark.co.uk • Tax rates on income much higher than capital • Promotes entrepreneurial flair • Extraction as capital advantageous • Even better if you can claim EIS, ER or IR • Targeted Anti-Avoidance Rules (TAAR) on liquidation Capital or Income?
  85. 85. pkf-francisclark.co.uk Investor qualifies for ER if:- i) Hold 5% of the ordinary shares & 5% of the votes; ii) Are an officer or employee of the company; and iii) Shares are in a trading company Must be throughout a 12 month period immediately prior to the disposal. Entrepreneurs’ Relief on shares
  86. 86. pkf-francisclark.co.uk • CASTLEDINE V HMRC Ordinary Shares Mr C > 5% Others < 95% Company
  87. 87. pkf-francisclark.co.uk Deferred shares created; they had • no dividends rights • no voting rights • no realistic participation in winding up • Mr C held no deferred shares Ordinary Shares
  88. 88. pkf-francisclark.co.uk • CASTLEDINE V HMRC Ordinary Shares Mr C < 5% Others < 95% Company Deferred Shares
  89. 89. pkf-francisclark.co.uk • Deferred Shares are ordinary shares • Shares diluted Mr C’s shareholding • Moral of the story……. But…contrast with McQuillan Case…. ….zero coupon preference shares Ordinary Shares
  90. 90. pkf-francisclark.co.uk • Dispute between Mr Moore and other shareholders • Feb 2009 agreed the company would buy his shares • Clearance for capital treatment granted • Agreed that employment to be terminated • May 2009 General Meeting resolved to purchase shares • Date of resignation of directorship 28 February 2009 • Entrepreneurs’ relief refused Employment – Moore case
  91. 91. pkf-francisclark.co.uk . Entrepreneurs’ Relief – Joint Ventures Finance Act 2015 changes introduced to prevent ‘abuse’ E.g. 10 individuals each own 10% of a management company Family 10% 10% 30% 70% 10 individuals ER? Pre FA 2015 a FA 2015 r Now r Management Co Trade Co
  92. 92. pkf-francisclark.co.uk . Entrepreneurs’ Relief – Joint Ventures Finance Act 2015 inadvertently caught commercial arrangements 100%100% 50% 50% Trade Co Mr A Mr B ER qualifying Pre FA 2015 a FA 2015 r Budget ‘16 announcement - March 2015 onwards a
  93. 93. pkf-francisclark.co.uk . • New definitions of trading company and trading group • Treated as carrying on a proportion of the activities of JV • Claim ER if effective 5% interest and control Entrepreneurs’ Relief – Joint ventures Co A Co B 20% 40% Mrs A 20% x 40% = 8% effective control
  94. 94. pkf-francisclark.co.uk . Entrepreneurs’ Relief – Joint Ventures E.g. 10 individuals each own 10% of a management company Family 10% 10% 30% 70% Effective 3% Control Management Co Trade Co
  95. 95. pkf-francisclark.co.uk • 10% CGT rate on newly subscribed shares in unlisted trading companies • Cannot be an employee or director • Trustees are not eligible • Spouse transfers take original holding period & status • £10m lifetime allowance additional & separate from £10m ER lifetime allowance • So a director owning 3% is entitled to….. Investors’ Relief (IR)
  96. 96. pkf-francisclark.co.uk • Held continually for 3 years before disposal after 5 April 2016 • New issue of shares on or after 17 March 2016 • Measure continues theme to make equity more attractive than debt • Full EIS investment still more attractive in the long term as Capital Gains Tax free Investors Relief (IR)
  97. 97. Entrepreneurs’ relief versus New investors’ relief - summary Condition ER ER Acquisition of shares From anyone at any time - shares can be second hand Subscribe for new shares on or after 17 March 2016 What shares qualify Includes all types of shares, preference and securities (debentures) Only ordinary shares Period to hold shares 12 months to date of disposal 36 months to disposal, period starts no earlier than 6 April 2016 Minimum proportion of shares in issue to hold 5% of ordinary share capital No minimum Employment condition Investor must be employee or officer of company for at least 12 months to disposal Requirement that not officer or employee Company Trading company or holding company of trading group Unquoted trading company or holding company of trading group Maximum life time gains covered by ER £10 million £10 million
  98. 98. pkf-francisclark.co.uk Investors Relief Enterprise Investment Scheme 10% Rate of Capital Gains Tax Free Gains Any Trading Company Beware of Excluded Trades 3 year holding period 3 year holding period Can be an exit plan No pre-determined exit plan What about EIS Relief?
  99. 99. pkf-francisclark.co.uk • Important for ER, IR and EIS • HMRC to be reviewing “trading” definition • Important for South West with: • Hotels • Holiday parks • Farms • Marinas • etc Trading…..
  100. 100. When is this going to be law? • Would normally be by 21 July – when Summer Recess starts • However may not be until MP’s Summer Holiday ends – 5 September • Then less than two weeks before Conference Season starts • Very little time for Committee Stages • Latest date for Royal Assent is 16 October • So any number of changes might be removed • Legislation might be revisited!
  101. 101. Employee Benefits and the AE Triennial Review Rachel Allen
  102. 102. Agenda • Employee benefits • What are employee benefits? • Market background • Why bother? • Getting benefits right for your company • Auto-enrolment Triennial Review • How to approach it • Summary fcfp.co.uk
  103. 103. What are employee benefits? • Benefits provided by employers, for their employees: • Pension! • Death-in-Service • Group income protection • Group critical illness • Private medical insurance • Salary sacrifice – Eye care vouchers – cycle to work – childcare vouchers - etc Employee Benefits fcfp.co.uk
  104. 104. Employee Benefits • Advisers could set up a plan for employers • “no charge” to the employer • A large commission paid up front • Paid for by high charges within the plan • “the good old days” Market background fcfp.co.uk
  105. 105. Employee Benefits • Auto-enrolment has raised employee awareness • …and expectations And…. • Commission no longer payable • Employee Benefit Consultants (EBCs) changing their proposition • Higher employer costs, and/or • Reduced service • Member-level service all but gone Market background – the times they are a-changing… fcfp.co.uk
  106. 106. Employee Benefits Why bother? • Employee expectations • A ‘given’ for larger employers • ……..don’t be left behind • 43% of employers provide PMI for all/some staff* • 26% provide income protection/long-term disability cover* * “Absence Management 2015” published October 2015 by CIPD fcfp.co.uk
  107. 107. Employee Benefits Why bother? • Employee market is tightening • Harder to get the right people; Over 75% of employers that attempted to fill vacancies in 2015, encountered difficulties, regardless of sector* • Retention more important • Reduced recruitment costs * “Resourcing and Talent Planning” published June 2015 by CIPD fcfp.co.uk
  108. 108. Employee Benefits Why bother? – an example • 25 Employees • Average salary: £47,500 • Group Life cover (4 x salary) - £540 p/month • Group Income Protection - £745 p/month • Total: £1,285 p/month • £15,420 pa • Recruitment costs for one person? • Two people? fcfp.co.uk
  109. 109. Employee Benefits Why bother? – an example • Average salary: £24,000 • Group Life cover (4 x salary) - £270 p/month • Group Income Protection - £372 p/month • £7,700 pa • Recruitment costs for one person? • Two people? fcfp.co.uk
  110. 110. Employee Benefits Why bother? • When was the last time benefits were reviewed? • Are renewals completed ‘automatically’? • Are benefits in line with a modern market? • And at a competitive market rate? • £7,700pa (previous example) could be £10,000pa if you’re not paying attention! fcfp.co.uk
  111. 111. Employee Benefits Why bother? • 66% of staff saying they would be more likely to stay with an employer that offered good benefits 1 1Employee Insight report 2015 - Capita Employee Benefits fcfp.co.uk
  112. 112. Employee Benefits Why bother? • Pension contributions are deductible for Corporation Tax purposes • Salary Sacrifice offers an Employer NI saving • Relevant Life policies are hugely tax efficient • Group Income protection: qualifies for Corporation tax relief • As does Group Critical Illness fcfp.co.uk
  113. 113. Employee Benefits Why bother? • Relevant Life policies: fcfp.co.uk
  114. 114. Employee Benefits Identify those employees in skilled, strategic positions Or those in areas with high turnover Consider an ‘inclusive’ benefits package for these employees Offer ‘benefits lite’ for other staff (lower-skilled, more transient) Getting benefits right for your company fcfp.co.uk
  115. 115. Employee Benefits Death-in-Service • Relevant Life policies for owner-managers; 15 x salary! • 4 x salary for key personnel • 2 x salary for ‘blue collar’ workers Getting benefits right for your company fcfp.co.uk
  116. 116. Employee Benefits Group Income Protection • Bespoke benefit for owner-managers • 75% salary for key personnel • 50% salary for ‘blue collar’ workers • 6 month deferred period – or specify for each category of benefit Getting benefits right for your company fcfp.co.uk
  117. 117. Employee Benefits Group Private Medical Insurance • To include partners and children for key staff • Basic benefits for others Getting benefits right for your company fcfp.co.uk
  118. 118. Employee Benefits What to do first? • Pension! • Thereafter, consider the needs of your workforce… • DIS • Group Income Protection • Group PMI • Group Critical Illness Getting benefits right for your company fcfp.co.uk
  119. 119. AE Triennial Review How to approach it • Establish review date (three months either side of third anniversary of staging date) • Review scheme for suitability • Review scheme for AE purposes • Review payroll interaction • Reassess workforce, including opt-outs, and re-enrol appropriate staff • Complete Declaration of Compliance fcfp.co.uk
  120. 120. Summary • Employee benefits can cover their own cost • Existing benefits should be reviewed • Expected (and appreciated) by an increasingly savvy workforce • Why wouldn’t you promote them? • Auto-enrolment still has to be done correctly Conclusions fcfp.co.uk
  121. 121. No responsibility can be accepted for any action taken as a result of information contained in this presentation. We therefore strongly recommend that no action should be taken before obtaining detailed professional advice. Past performance is not a guide to future returns and the value of investments and income from them may go down as well as up and an investor may not get back the amount invested. PKF Francis Clark Financial planning and wealth management is a trading name of Francis Clark Financial Planning Ltd which is authorised and regulated by the Financial Conduct Authority. Registered Office: Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF. Registered in England No. 05413603. Francis Clark Financial Planning Ltd is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Exeter | New Forest | Plymouth | Poole | Salisbury | Taunton | Torquay | Truro Disclaimer & copyright fcpp.co.uk
  122. 122. Transactions and Funding Andrew Killick
  123. 123. pkf-francisclark.co.uk . Agenda • Bank covenants – ensuring that they work for you • Transactions – is the current environment the new norm? • Strategic planning in an uncertain world – a good time to revisit and plan ahead
  124. 124. pkf-francisclark.co.uk . Bank covenants • Bank covenants – often receive little attention until it’s too late! • Different Banks have different approaches to setting covenants • Covenants become more important when there is change in: • Interest rates – interest cover • Asset values – tangible net worth • Trading performance – CFADS/Debt service
  125. 125. pkf-francisclark.co.uk . Bank covenants - breaches • Designed to be an early warning system and contain an element of headroom • Technically, committed facilities (i.e. loans) become repayable on demand • You may be able to obtain a waiver for the breach • Timing of the waiver is key – there may be a cost involved • Discuss with your bank ahead of any forecast breaches • ‘Flexibility’ can change with changes in relationship Manager/Credit Manager
  126. 126. pkf-francisclark.co.uk . Bank covenants • Definitions – is there certainty of how they are calculated? • Accounting changes – e.g. leases?, FRS102?, profit? • Basis of valuation for assets? • Change in year end? • Acquisitions/disposals? • Audited accounts? • Timing – Quarterly, Annual, Rolling 12 months
  127. 127. pkf-francisclark.co.uk . Transactional environment For Buyers/borrowers for expansion: • Interest rates – lowest ever, borrowing margins – low • Inflation – low • Availability of debt and equity – improved dramatically since 2009 For Vendors: • Multiples/pricing – relatively high • Capital taxes – very low
  128. 128. pkf-francisclark.co.uk . Actual transaction multiples Blue line represents EBIT Red line represents profit after tax (PAT)
  129. 129. pkf-francisclark.co.uk . Deal volumes
  130. 130. pkf-francisclark.co.uk . Economy Economic forecast 2017: GDP (%) Unemployment (%) UK 2.2 5.00 Germany 1.6 4.8 France 1.3 10.0 Italy 1.2 10.9 Spain 2.3 19.5 Greece (1.7) 27.8
  131. 131. pkf-francisclark.co.uk . Transactions – the new norm? • 7 years or more of near zero interest rates • Inflation <5% for 10 years • What is ‘normal’ in today’s world? • Does your age influence your views?
  132. 132. pkf-francisclark.co.uk . Transactions – economic influences • Gordon Brown didn’t break boom and bust …but will ultra low rates reduce some of the “bust” risk? • Could we survive a material interest rate rise?? • BREXIT?! Impact on current transactions
  133. 133. pkf-francisclark.co.uk . Transactions – Debt v Equity • Debt is being attacked • Equity being given more tax benefits (IR, ER, EIS, SEIS) • Consider transaction funding structures carefully – what may seem fine now, could be viewed quite differently in the future
  134. 134. pkf-francisclark.co.uk . Strategic Plans • Post Election • Autumn spending review • EU Referendum • Political stability? • Longer term planning • Next Election? • US Election?
  135. 135. pkf-francisclark.co.uk . Strategic Planning • Think broadly – life and markets move fast – look ahead, new applications and developments? • It’s not just opportunities – what about risks/threats and new competitors? • Revisit it every few years or when there has been a significant change • Just because you’ve heard some bad news – doesn’t mean that it will affect your business!
  136. 136. pkf-francisclark.co.uk . Summary • Covenants – give them the attention they deserve! • Don’t look back and regret not undertaking a transaction • Consider your views and whether the economic landscape has changed • Undertake a Strategic Review into which your annual Budgeting process will fit
  137. 137. Any Questions? Glenn Nicol
  138. 138. pkf-francisclark.co.uk • Taunton - Tuesday 8th November, Somerset County Cricket Club • Plymouth - Wednesday 9th November, Borringdon Golf Club • Bournemouth - Thursday 17th November, AFC Bournemouth • Exeter - Wednesday 23rd November, Exeter Racecourse • Fraddon - Thursday 24th November, Kingsley Village November FD Seminars
  139. 139. (c) copyright PKF Francis Clark, 2016 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by PKF Francis Clark in any format whatsoever unless you have obtained prior written consent from PKF Francis Clark to do so and entered into a licence. To the maximum extent permitted by applicable law PKF Francis Clark excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by PKF Francis Clark. These materials and /or any services provided by PKF Francis Clark are designed solely for the benefit of delegates of PKF Francis Clark. The content of these materials and / or any services provided by PKF Francis Clark does not constitute advice and whilst PKF Francis Clark endeavours to ensure that the materials and / or any services provided by PKF Francis Clark are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by PKF Francis Clark; nor do we commit to ensuring that these materials and / or any services provided by PKF Francis Clark are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales. These materials and / or any services provided by PKF Francis Clark are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request. Our liability is limited and to the maximum extent permitted under applicable law PKF Francis Clark will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by PKF Francis Clark, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited. PKF Francis Clark is a trading name of Francis Clark LLP. Francis Clark LLP is a limited liability partnership, registered in England and Wales with registered number OC349116. The registered office is Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF where a list of members is available for inspection and at www.pkf-francisclark.co.uk. The term ‘Partner’ is used to refer to a member of Francis Clark LLP or to an employee. Registered to carry on audit work in the UK and Ireland, regulated for a range of investment business activities and licensed to carry out reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales. Partners acting as insolvency practitioners are licensed in the UK by the Institute of Chartered Accountants in England and Wales. A partner appointed as Administrator or Administrative Receiver acts only as agent of the insolvent entity and without personal liability. Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Disclaimer & copyright pkf-francisclark.co.uk

×