PROMOTIONS ADD UP AT NEWBY CASTLEMAN

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1 SPRING 2015 PROMOTIONS ADD UP AT NEWBY CASTLEMAN Three is the magic number here at Newby Castleman, where three of our staff members are celebrating promotions. Tim Hems (35), Ricky Guerriero (29) and Samantha Faux (26), who are all based at our Regent Road office, have been promoted to managerial roles due to their commitment and hard work. Stephen Castleman, Partner at our Leicester office, comments: Tim, Ricky and Sam are all highly regarded members of the Newby Castleman team who have been selected for promotion due to their impressive work ethic and commitment to their respective roles. All have already demonstrated that they are ambitious, hard working individuals and I am confident they will continue to excel in their future careers. Tim, who is from Leicester and joined us in September 2002 after studying at Oxford, has been promoted to the position of Manager. Tim comments: I am delighted to receive this promotion and recognition for all of my hard work. I joined Newby Castleman after graduating from university and completed all of my professional qualifications whilst working for the firm, who have been most supportive throughout. I have gained a wealth of experience in many different areas during my time here and I look forward to using this in my new role to support and develop my team, ensuring our clients continue to receive an excellent service. Joining Newby Castleman in September 2007 was the natural next step for Ricky, from Market Harborough, who graduated from university with first class honours in Maths. Ricky, who has been promoted to Audit Manager, comments: I am proud to have been given this opportunity, which is the result of a lot of hard work and dedication, coupled with the training and support provided by the firm. Thanks to their broad portfolio of clients, I have gained a wealth of experience across a range of disciplines, including audits, accounts, management accounts and tax, which has prepared me for taking on new responsibilities through my new position as Audit Manager. I really enjoy working at the firm and I strongly feel I am part of a new exciting, dynamic future here. Sam, from Hinckley, has been promoted to Assistant Manager after joining the firm in June 2010 and qualifying shortly thereafter. Sam comments: Since joining the firm I ve worked with a wide variety of clients and gained a lot of experience in preparing accounts for sole traders, partnerships and limited companies, and I now look forward to taking on more responsibilities, particularly involving staff training and reviewing, within my new role. I love the variety of the job and having the chance to work alongside different clients on a daily basis. I am really happy to have been considered for promotion and proud to have the opportunity to take on this new role and all of its new responsibilities. WEST WALK BUILDING 110 REGENT ROAD LEICESTER LE1 7LT T: F: E: INFO@NEWBYC.CO.UK ELTHAM HOUSE 6 FOREST ROAD LOUGHBOROUGH LE11 3NP T: F: E: LOUGH@NEWBYC.CO.UK FORWARD THINKING ADVICE

2 NEW YEAR, NEW LOOK? CLAIMING TAX RELIEF ON REFURBISHMENT If you are considering refurbishing your business, you may be able to claim tax relief on the costs incurred in doing so. However, it is important to bear in mind that different tax rules apply to expenditure on fixtures, alterations and repairs to your business premises. Here we outline some of the effects and the potential implications for your business. CLAIMING RELIEF You can claim a full tax deduction for all expenditure on repairs to your building that are incurred in an accounting period. Alterations to a building will be treated as capital expenditure. This means that the expenditure does not qualify for a tax deduction against profits but may eventually get tax relief for capital gains tax as an improvement to the property. Some capital expenditure will qualify for relief. Expenditure on fixtures may qualify for relief under the capital allowances system. This may mean that your expenditure on fixtures gets immediate tax relief due to the Annual Investment Allowance (AIA) but this will depend on how much other expenditure qualifying for plant capital allowances you have incurred in the accounting period. The current limit for expenditure relieved by the AIA is 500,000 but this figure is scheduled to fall to only 25,000 on 1 January If your accounting period straddles 1 January 2016, the AIA limit will not be 500,000 further calculations are required. Please contact us if you are planning significant expenditure on fixtures and other plant and machinery. Not all fixtures qualify for capital allowances but many do. Expenditure on fixtures covers a wide variety of items, from lights and boilers, to toilets and other sanitary ware. Different types of business will require different fixtures and you should check whether your chosen items qualify for capital allowances. Contact us for more information and to find out how this can impact your business. POTENTIAL PITFALLS It may seem that both repair expenditure and expenditure on fixtures are equally valid ways of receiving a 100% tax break on your investment. However, note the tax treatment for fixtures if you should decide to sell your business premises. Someone acquiring a property may be able to claim capital allowances on the fixtures which were put in place by the previous owner. When the transaction takes place both parties should agree on a price for the fixtures. The price can be any amount between the original costs of the fixtures when they were installed in the building down to 1. If the price is the original cost of the fixtures the capital allowances claimed by the previous owner are effectively clawed back (but the purchaser can claim on this amount). If the price is 1 the capital allowances claimed by the previous owner are effectively retained (but the purchaser can only claim on 1). The dividing line between what is a repair rather than an alteration, and what does or does not qualify for capital allowances, can be difficult to ascertain. In addition, the rules that apply on the sale of a building which has fixtures which have qualified for capital allowances can be complex. Careful planning can help you to maximise the relief available, and help your new look business to succeed. Please contact us for further advice for your business. LEADING THE WAY - PERSONALLY

3 SHARED PARENTAL LEAVE AND PAY: WHAT EMPLOYERS NEED TO KNOW New legislation significantly changes the rules about family leave here s what you need to know as an employer. The new Shared Parental Leave regulations greatly increase the flexibility for parents when taking leave to care for children with inevitable consequences for employers when it comes to dealing with the admin issues. Eligible mothers, fathers, partners and adopters will be able to choose how to share a pot of time off work to look after new children, so they can both be off at the same time, or take turns to have blocks of leave over a total 52 week period. HOW DOES SHARED PARENTAL LEAVE WORK? The new rules apply to babies due or adopted on or after 5 April Employers could start to receive notice of the intention to take Shared Parental Leave from employees from February Employed mothers will continue to be entitled to 52 weeks of Maternity Leave and 39 weeks of statutory maternity pay. However, under the new rules a mother can opt to end her maternity leave early and, with her partner or the child's father, opt for Shared Parental Leave instead of Maternity Leave. Shared Parental Leave may be taken at any time following the initial two weeks of compulsory maternity leave (four weeks in the case of manual workers) within the period which begins on the date the child is born (or placed for adoption) and ends 52 weeks after that date. Each eligible parent can give their employer up to three separate notices to book or vary leave. A notice can be for a block of leave or for a pattern of discontinuous leave involving different periods of time. Employers cannot refuse requests for a continuous block of leave but can turn down requests for discontinuous blocks. It is recommended that employer and employee discuss a solution that works best for both parties. During discussions, employers may wish to consider: y important company events y upcoming busy periods y covering the role y impact on customers. Employees must provide their employer with a notice of booking at least eight weeks before the leave is due to start, detailing how much leave they are entitled to and how much they intend to take. WHO CAN QUALIFY? To qualify, the mother or adopter must be eligible for statutory maternity or adoption entitlements and must share the main responsibility for caring for the child with the child's father or their partner. For a parent to qualify for Shared Parental Leave they must be an employee and they must pass the continuity of employment test, whereby they must have worked for the same employer for at least 26 weeks at the end of the 15th week before the due/matching date and still be employed in the first week that Shared Parental Leave is to be taken. In turn, the other parent in the family must meet the employment and earnings test, whereby they must have worked for at least 26 weeks in the 66 weeks leading up to the due date and have earned above the maternity allowance threshold of 30 week in 13 of the 66 weeks. SHARED PARENTAL PAY From April 2015 Statutory Shared Parental Pay is paid at or 90% of average weekly earnings (whichever is lower). If the mother or adopter curtails their entitlement to maternity/adoption pay or maternity allowance before they have used their full entitlement then Shared Parental Pay can be claimed for any remaining weeks. To qualify for Shared Parental Pay a parent must pass the continuity of employment test and also have earned an average salary of the lower earnings limit of 111 for the 8 weeks prior to the 15th week before the expected due date or matching date. The other parent in the family must meet the employment and earnings test. More information and advice for employers and employees can be found at the ACAS website www. acas.org.uk and at (search for shared parental leave). FORWARD THINKING ADVICE

4 NEW RULES ON OVERTIME AND HOLIDAY PAY Employers are being advised to review their employee holiday pay arrangements, following a recent landmark Employment Appeal Tribunal ruling that overtime should be taken into account when calculating holiday pay. THE RULING Until recently, it was generally considered that only basic pay and overtime that was guaranteed to be paid counted for the purposes of calculating holiday pay. However, the Tribunal found that under the UK Working Time Regulations (WTR) holiday pay must also include pay for non-guaranteed overtime. The ruling applies only to non-guaranteed, compulsory overtime - ie, overtime which an employee is contractually required to work but which the employer does not promise to offer, as opposed to overtime that is undertaken voluntarily. The ruling applies to the first four weeks of holiday in a given holiday year, as provided under the EU Working Time Directive, and does not take into account any additional holiday provided under the WTR or an employee s contract of employment. THE LIKELY IMPACT Up to five million people currently work overtime in the UK and the ruling could potentially impact on many businesses. While it may yet be referred to the Court of Appeal, experts believe that the underlying principle is unlikely to change. Furthermore, following the ruling businesses could also be vulnerable to claims for additional holiday pay to cover previous periods of compulsory overtime, although the Government has since announced new rules meaning that from 1 July, holiday pay claims can only be backdated for a period of two years. Until that date, workers will be able to make claims under the existing arrangements. This is not the only case on holiday pay that has found its way to the courts. A recent European Court decision held that commission payments constituted an intrinsic link to an employee s tasks he was required to perform. The payments therefore should also be included when calculating holiday pay. PROTECTING YOUR BUSINESS In the light of these recent rulings, business owners are advised to review their holiday pay arrangements with a view to minimising the potential financial impact of the changes. Some of the steps you may wish to consider taking could include: y making appropriate adjustments to ensure that compulsory overtime is included in calculations for holiday pay y considering the potential impact of any potential claims for past unpaid holiday y reviewing employment contracts to allow for voluntary overtime, as opposed to nonguaranteed overtime y employing alternative staff resources, such as agency staff, to cover overtime needs. This article is for general information only and you are advised to seek professional guidance before taking any action. Acas also offer a free support helpline: NEW VAT RULES COME INTO EFFECT 1 January 2015 saw the introduction of the new place of supply rules for VAT, affecting those businesses supplying digital services to consumers within the EU. Under the new system, VAT on digital services (including broadcasting, telecommunications and e-services) is now payable in the country where products are bought, rather than the country in which the seller is located. A new VAT Mini One-Stop Shop (VAT MOSS) also came into effect on 1 January, with the aim of minimising the additional administrative burdens, by removing the need for suppliers to register in each Member State in which digital services are provided. However, following concerns over the impact of the rules on small businesses, HMRC recently announced a transitional period for the smallest firms, stating that until 30 June 2015, micro-businesses that are below the current UK VAT registration threshold, and which register for the VAT MOSS online service, may base their customer location VAT taxation and accounting decisions on information provided to them by their paymentservice provider. LEADING THE WAY - PERSONALLY

5 CAN YOU SAVE TAX WITH COMPANY MOBILE PHONES? Mobile phones have become increasingly important both in and out of the workplace. With more features than ever, if used properly they can effectively act as little mobile offices. Many employers know that providing mobile phones as part of employee salaries can be tax-efficient, with their provision being both a tax and national insurance-free benefit. Here we outline some strategies to get the most rewards at minimal cost. For many years company mobile phones (or SIM cards) for employees have been a tax-free benefit. In 2006 the exemption was limited to one mobile phone provided to each employee for private use and specifically excluded the employee s family and household. In 2012 HM Revenue & Customs (HMRC) decided that smartphones were technically mobile phones rather than computers and thus potentially qualified for the mobile phone exemption. The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone. One of the key requirements in order to qualify for tax exemption is that the mobile phone contract must be in the company name. This means employer reimbursement for personal mobiles does not count, nor does simply adding the company name and address to the invoice of a personal phone. There is no taxable benefit on an employee if an employer reimburses them for the cost of any business calls made on their personal mobiles. LIMITED CONTRACTS To make sure employees do not excessively use their mobiles to the point where it becomes too expensive for the business, consider a limited contract with a set number of free call minutes per month. Should an employee exceed their limit, the business can request them to pay back any additional charges. Any reimbursements they make will, however, come from their net pay. One way around this is to set up an employee salary sacrifice scheme for mobile phones, although the administrative burden of setting this up may make it an unattractive option. SALARY SACRIFICE While salary sacrifice is not a tax-free benefit in kind, it may be another option to consider since it can help reduce employee tax and national insurance contributions (NICs). Much like salary sacrifice for pensions, an employee chooses to give up the cost of the mobile phone contract from their salary. This means no cost for you and an increase in net pay for the employee. Current income tax and NIC levels mean salary sacrifice offers a saving of 32 for every 100 spent for basic rate taxpayers. This figure is 42 for higher rate taxpayers. This may prove to be enough of a benefit for your employees. Salary sacrifice arrangements are effective when the contractual right to cash remuneration has been reduced. So, for example, the employee does not have the right to give up the benefit and revert to the original salary at any time. This does not stop employers and employees reviewing and adjusting the contractual arrangements at a later date. TAX DEBT RECOVERY POWERS WATERED DOWN Plans to give HMRC the power to take unpaid tax directly from bank accounts were recently revised, following controversy over the proposals. Chancellor George Osborne has agreed to the introduction of safeguards in order to prevent the direct recovery powers from affecting innocent taxpayers. The new safeguards include the right to appeal to HMRC and then, if unsuccessful, through the courts before debts are removed from bank accounts. Face-to-face warnings must be given, and a specialist unit will also be set up for cases involving vulnerable individuals. David Gauke, Financial Secretary to the Treasury, said, We re strengthening the guarantees we can offer taxpayers that the powers will only be used when debtors have consistently refused to talk to HMRC and settle their debts, and their use will be subject to the toughest scrutiny and oversight possible. The original plans were outlined to tackle the estimated 17,000 individuals who are thought to owe an average of 5,800 each. FORWARD THINKING ADVICE

6 A GIFT HORSE? AVOIDING THE INHERITANCE TAX TRAP With the inheritance tax (IHT) charge standing at 40% where a person s wealth exceeds the 325,000 threshold (the nil rate band ), the charge represents a significant issue for many people who own their own house and have other assets. Proper IHT planning is essential if you want to maximise the assets that will pass to your loved ones on your death. One effective way of reducing the final tax bill can be to make a series of gifts from your estate during your lifetime. However, it is important to note that gifts made in the seven years before an individual s death could still be considered part of the estate for the purposes of IHT. Here we take a look at some key IHT planning points. THE SEVEN YEAR RULE Many gifts made to individuals during an individual s lifetime will be exempt from IHT as long as the donor survives for seven years after making the gift. However, should this not be the case the gift may affect the calculation of IHT on the estate at death. IHT is charged on an individual s personal wealth, together with any lifetime gifts that were made in the preceding seven years. While the full rate of tax payable is 40%, it is reduced on a sliding scale for gifts made between three and seven years before the death. IHT TAPER RELIEF Under taper relief, if an individual survives for at least three years after making a gift, the associated IHT will be scaled down on the following basis: Number of years by which gift is survived Taper relief applying % % % % However, it is important to understand that the IHT charge only applies to lifetime gifts where the total value of gifts made during the seven year period exceeds the nil rate band. This is because such gifts are charged before the actual estate at death. So taper relief will not apply unless the gifts made were worth in excess of the nil rate band. The practical effect of many gifts is therefore to use up some of the nil rate band that would have been available for the estate assets. With this in mind, you may wish to consider taking out an insurance policy to cover the effect of substantial gifts in the event of death occurring within the seven year period. SOME OTHER IHT PLANNING OPTIONS y Trusts can allow the transfer of assets out of an estate for the purposes of reducing IHT, while still allowing a degree of control over the assets, with potential IHT charges being 20% on assets over the nil rate band y Lifetime gifts and gifts on death to a spouse or civil partner are generally IHT exempt, and any proportion of the nil rate band that is unused on the first death can normally increase the nil rate band on the death of the survivor y Small gifts are free of any IHT liability, including regular gifts from surplus income, small annual gifts of up to 250 per recipient, and certain gifts in contemplation of marriage. An annual exemption of 3,000 is also available y Up to 100% relief may be available on qualifying business assets y A reduced rate of 36% applies to death estates where 10% or more of the net estate is left to charity. When considering your IHT plan, it is important to take into account your own financial security as well as your family s likely future requirements. For a professional review of your IHT planning needs, please contact us. TAX TIP DIVIDEND VERSUS SALARY/BONUS A dividend is paid free of NICs, whilst a salary or bonus can carry up to 25.8% in combined employer and employee contributions. However, a salary or bonus is generally tax deductible to the company, whereas dividends are not. 5 April 2015 is the last date for paying a 2014/15 dividend, and any higher or additional rate tax on that dividend will not be due until 31 January Contact us for more information. LEADING THE WAY - PERSONALLY

7 2014 AUTUMN STATEMENT: AT A GLANCE SUMMARY Chancellor George Osborne presented the 2014 Autumn Statement on 3 December. Here we summarise some of the main announcements that could affect you and your business. STAMP DUTY LAND TAX (SDLT) Reform of SDLT on residential property immediately replaced the existing system with a new set of graduated rates. SDLT is payable at each rate on the portion of the purchase price which falls within each band, rather than at a single rate on the whole transaction value. BUSINESS RATES The doubling of Small Business Rate Relief will be extended for a further year from 1 April In addition, the business rates discount for retail and food and drink premises with a rateable value of 50,000 and below (the high street discount ) will be increased from 1,000 to 1,500 up to the State aids limit for one year from 1 April EMPLOYER NICS FOR APPRENTICES In a move designed to further encourage employers to take on apprentices, from April 2016 employer national insurance contributions up to the upper earnings limit will be abolished for apprentices aged under 25. ACCESS TO BUSINESS FINANCE The Government will provide 400 million to extend the British Business Bank s Enterprise Capital Funds programme, to be committed over the next three years, and will enable the Enterprise Finance Guarantee to support up to 500 million of new lending in 2015/16. RESEARCH & DEVELOPMENT (R&D) The rate of the above the line credit will increase from 10% to 11% and the rate of the small and medium-sized enterprise (SME) scheme will increase from 225% to 230%. These will take effect from 1 April LONG TERM PLANS FOR UK INFRASTRUCTURE Prior to the Autumn Statement, the Government announced that it will provide funding for a specific set of infrastructure projects under the National Infrastructure Plan These include: Roads A total of 15 billion has been designated for road improvements, which the Government describes as the biggest package of improvements undertaken in the modern age. Houses Bicester has been confirmed as the second garden city with Government support for the construction of up to 13,000 homes. Flood defences 2.3 billion has been allocated as part of a major project to improve some 1,400 flood defence systems. SCIENCE AND INNOVATION The Government has allocated 5.9 billion of science capital funding over the next Parliament. The funding will support a range of projects and institutions, including 95 million for the UK to take the operational lead in the next European mission to Mars. LOANS FOR POSTGRADUATE MASTERS The Government will introduce income contingent loans of up to 10,000 for under 30s to undertake a postgraduate taught Masters course in any subject. The loans are planned to be available from 2016/17. ANTI AVOIDANCE MEASURES A range of measures were announced aimed at tackling tax avoidance. Incorporation Individuals are to be prevented from claiming entrepreneurs relief on disposals of the reputation and customer relationships associated with a business ( goodwill ) when they transfer the business to a related close company. Loss relief Effective from 3 December 2014, legislation will deny loss relief where a miscellaneous loss, or miscellaneous income, arises from relevant tax avoidance arrangements. Legislation is also to be introduced, with effect from tax year 2015/16, to limit relief to miscellaneous income of the same type as the loss. FORWARD THINKING ADVICE

8 SOCIAL INVESTMENT TAX RELIEF FOR YOU AND YOUR COMMUNITY The social investment tax relief (SITR) offers investors upfront tax breaks and capital gains tax exemptions, similar to those given for buying shares in Enterprise Investment Schemes (EIS). Potentially you could reclaim one or more of the following, subject to various conditions: y Income tax relief: This is available at 30% of the amount you invest. There is no minimum investment limit but the maximum annual limit is 1 million. y Capital gains hold-over relief: You can defer payment of tax on a capital gain if the gain is reinvested in shares or debt investments that would also qualify for SITR income tax relief. y Capital gains disposal relief: If you ve had income tax relief on the cost of your investment, and you dispose of your investment after you ve held it for at least three years, any gain you make on your investment is free from capital gains tax. SITR will be in place for investments made, or capital gains arising, in the period from 6 April 2014 to 5 April It is available for investments by individuals (but not companies or partnerships) in Social Enterprises. In essence, the company or organisation in which the investment is made must provide services for the benefit of society, such as housing, community transport, youth organisations, sporting facilities or healthcare, so typically they will be charities or community benefit companies. The Social Enterprise need not necessarily be in the UK, and there is no defined list of what qualifies, however there is a list of activities that do not qualify. The good news is that if you are an investor you will not need to worry about judging whether the recipient of your investment meets the conditions, because any organisation offering SITR qualifying investments to the public should have already gone through an HMRC clearance process in order to be able to do so. This process has only been available to social investment organisations since July 2014, so the options for investment are currently limited, but the numbers are expected to grow. When you make an investment, the Social Enterprise will give you a Compliance Certificate in respect of your investment in it, confirming they have met the conditions. You won t be able to claim for any of the tax reliefs without such a certificate. None of the reliefs is available if you have had relief for the investment under the EIS, the Seed Enterprise Investment Scheme or Community Investment Tax Relief. There are numerous qualifying conditions and complications, so professional advice is essential. REMINDERS FOR YOUR SPRING DIARY MARCH 2 Last day to pay any balance of 2013/14 tax and Class 4 NICs to avoid an automatic 5% late payment penalty. 31 End of Corporation Tax financial year. End of CT61 quarterly period. Filing date for Company Tax Return Form CT600 for period ended 31 March APRIL 5 Last day of 2014/15 tax year. Deadline for 2014/15 NISA investments. Last day to make disposals using the 2014/15 CGT exemption. 14 Due date for income tax for the CT61 period to 31 March /22 Quarter /15 PAYE remittance due. 20 Interest will begin to accrue on unpaid PAYE/NI for 2014/ Normal annual adjustment for VAT partial exemption calculations (monthly returns). MAY 1 Start of daily penalties for 2014 online Tax Return not yet filed. Additional penalties may apply for further delay. 3 Submission date of P46 (Car) for quarter to 5 April. 31 Last day to issue 2014/15 P60s to employees. LEADING THE WAY - PERSONALLY