According to Government figures, R&D tax credits provide nearly £1 billion of support to over 6000 UK companies. Over the past year, RJP has helped many clients to reduce their corporation tax bills – some to almost nothing – by taking advantage of the Government’s R&D tax credits scheme. This is a generous relief and allows over 200% of the money invested in qualifying R&D activities to be offset against corporation tax. (more…)
April 27, 2012
As announced in the 2012 Finance Bill, there have been a number of important changes to VAT rules, which it is important clients are aware of.
1. VAT and Academy schools
We have recently come across a number of academies who have applied for VAT registration without taking proper advice in relation to the implications and without weighing up the pros and cons of what VAT registration means for them. It is actually possible for schools with academy status to reclaim VAT incurred on non-business activities without the need for VAT registration and all the complications that come with it.
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February 24, 2012
There are just 7 days to go before the 31st January self-assessment tax returns deadline and Taxtalk’s Paul Webb outlines some very useful advice for those still needing to get organised. With trading conditions so tough at the moment for many small business owners, many people have had no option but to leave their Self-Assessment tax returns to the last minute and need to complete them in a rush.
Personal tax returns might be something of an administrative burden, but with HMRC out in force to collect as much revenue as possible, it is important to make sure yours is accurate and filed on time. Apart from resulting in an immediate £100 penalty (which will apply even if no tax is payable) and possible daily penalties of £10 per day, it’s never a good idea to fall under the tax officer’s spotlight. It could result in being targeted for an enquiry should HMRC’s officers start to wonder whether your business record keeping is being maintained diligently and whether there might be a tax shortfall to detect.
Taxtalk’s top tips for completing Self-Assessment tax returns (more…)
January 23, 2012
It has come to Taxtalk’s attention that HMRC has a new taskforce (specialist team to undertake investigations into compliance activity) briefed to address non-filing of tax returns across the South East. This is because they believe there is an increasing problem with some taxpayers not submitting statutory returns across Corporation Tax, Income Tax, Self Assessment, PAYE and VAT.
The Government is spending £900m as part of a re-investment scheme designed to tackle tax evasion, avoidance and fraud from 2011/12. In return it hopes to generate an additional £7 billion each year by 2014/15.
You can be sure that taxpayers found breaking the rules will be penalised heavily. HMRC are going to be targeting taxpayers that they believe have made a conscious decision not to submit the necessary declarations. Honest businesses have absolutely nothing to worry about.
If you are unsure about your tax or think you may have underpaid, our advice is to speak to a tax expert to find out your best course of action. RJP’s Anne Eager specialises in tax enquiries to ask her a question email ae@rjp.co.uk.
December 15, 2011
Exit strategy, succession planning, call it what you will; deciding what to do, and when, with your business to provide a secure future – possibly a retirement or the basis of a second career, is an issue all business owners face. And whether you are considering it because you feel the time is right to move on or step back now, or whether you’re planning ahead; as with all important business decisions forewarned is forearmed.
Whilst, a decade ago, business purchasers were aplenty and the banks had no problem providing the funds required to sustain a hungry M&A market, the recession means that things are now rather different. It is therefore useful to consider a variety options you might not have thought about before; for instance, how much deferred consideration you can afford to take, or whether a ‘partial exit’ may be an attractive alternative.
Indefinitely deferred consideration?
When selling in the good old days, many companies achieved a high goodwill value based on historic profits, and although in an ideal world most sellers preferred the total sale price to be paid in cash on completion, they regularly accepted a slightly lower payment initially and could also look forward to future lump sums paid at intervals in the form of deferred consideration.
Now, typically, the initial payment received on the sale of a company is far less, mainly because the borrowings available to the buyer are less, with a higher balance of the sale proceeds being payable in the future based on the future profits of the company (over which the seller typically has little, if any control). And of course, whilst the level of future profits, and hence the return on those profits is a concern, in the current economic climate, you also need to be sure your buyer is going to be around to actually make the payments. This is a very real issue today as future profits may be vulnerable if, for example, a major client goes out of business or indeed the buyer himself runs into financial difficulties.
If these issues are holding you back from a trade sale, then you might want to consider other alternatives that will give you the outcome you need without unnecessary risk and stress. These outcomes however require forward planning.
Partial exit might offer a win-win?
A partial business exit can be very attractive. It can bring new blood into the organisation whilst allowing you to take a back seat, explore other interests and ideally, enjoy some of the wealth you have generated. It can enable you to take part cash consideration and continue to enjoy a (reduced) level of income from the business – perhaps for helping out on a part time basis, helping with marketing or a smooth customer transition.
The key thing to bear in mind if you choose to take this route is the importance of ensuring continuity within the company both in terms of reassuring the current employees that your commitment is as high as ever and also by making sure that the team you bring in, whether through an MBO or entirely new blood, is up to the job and the process is managed as carefully and diligently as possible. It might also be an idea to retain a reasonable shareholding at the outset in order to reassure colleagues that you are not immediately diluting your own power too much.
Partial exit can give you the liquidity you need and offer a more flexible way to fund your lifestyle.
In order to decide on the best balance, you will need to consider the following:
1. How much time do you want to commit to the business after the sale? Work this out early so everyone involved knows what to expect – including you.
2. Your retirement is apt to go on a bit as we’re all living longer, so do the maths and make sure you’ll have sufficient income for your needs and those of your dependents.
If you are considering an external investor to finance a partial exit, one risk is the possibility that the dynamics of the business may change too abruptly. This can occur for instance if that investor is to be involved with actively running the company and for example, wants to exit in the medium term, having seen a return on his investment. Find a partner who shares your core values and has a good cultural fit with the business and who can take it to the next level while you enjoy some time to rest and relax.
Tax planning opportunities
Depending on how your company is structured and the nature of what is being sold, HMRC will either view the sale proceeds as personal income or capital gains, or a mixture of both, with the latter being taxed at a lower rate. Get tax planning advice and ensure you consider all aspects for you and your team, including entrepreneurs’ relief, gift relief, EIS relief and business property relief.
Grooming your team
If you go down the MBO route, an experienced and balanced team is critical, not just to the funding of the deal but to secure the future success of the business (and of course your future income!). No matter what role you intend to have after the sale, you must analyse the quality and balance of the team. Its skill-set should cover all key aspects of the business including sales, finance, marketing and IT. By ensuring that you groom the right team for the job well in advance and pass the business on to a robust and experienced line up, you are managing part of the risk associated with giving up control and putting your company in the best possible position for future success, hopefully enabling you to enjoy your retirement, or semi retirement without cause for concern.
So whether you sell up completely or partially to existing employees, agree a merger with a competitor or get an outside investor interested, it always pays to be aware of the options available well in advance.
Lesley Stalker is head of tax at RJP, contact her at las@rjp.co.uk
This blog has also been published by Real Business
October 26, 2011
Having worked all your life to build up assets for which you have already paid income tax, capital gains tax or VAT, it can seem unfair that, when you wish to secure financial peace of mind and pass wealth on to your family, you face a further tax on your accumulated wealth upon death. Nevertheless, this “double” taxation does exist and inheritance tax (IHT) at 40% applies to all estates over £325,000 in value. (more…)
July 26, 2011
In the past few weeks HMRC has launched yet further initiatives designed to identify businesses with tax shortfalls and this time, it’s restaurant owners and VAT dodgers who are in the spotlight. These campaigns are big business for HMRC; over the course of their previous campaigns, £500m has been recouped, with an extra £100m due from taxpayers who did not take advantage of previous disclosure opportunities.
Yields of this magnitude are undoubtedly very pleasing for the Government, who has set aside £900m for its efforts to tackle tax evasion. A return on investment of this level demonstrates an excellent result and shows tax payers are keen to take advantage of the chance to ‘come clean’ with minimal penalties payable.
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July 18, 2011
