COVID-19: Further financial support announced by Chancellor

March 30, 2020

Many businesses are currently experiencing widespread disruption and uncertainty as a result of COVID-19. Our advisors are busy keeping up to date with all the detail and practicalities on emergency measures as they are announced by Government.

Please click the images below for information and insight into how to deal with the economic impact of COVID-19.

Government support

Supporting you and your business
A practical guide to help you navigate through some of the latest Government emergency measures.

Coronavirus Job Retention Scheme

Coronavirus Job Retention Scheme
We look at the details of the Scheme and how it will operate.

The Self-Employed and Coronavirus

The Self-Employed and Coronavirus
We explore the Self-Employed Income Support Scheme.

COVID-19: Accessing Coronavirus Business Interruption Loans

Accessing Coronavirus Business Interruption Loans
As details develop we are sharing what we know, so far, to assist you in accessing the Coronavirus Business Interruption Loan Scheme (‘CBILS’).

COVID-19: Government Grants Process in Scotland

Government Grants Process in Scotland
The Scottish Government has published details as to how some businesses can apply for help with non-domestic rates.

Deferment of VAT payments

Deferment of VAT payments
Veronica Donnelly, Partner, discusses support for businesses through deferring VAT and Income Tax payments.

How to manage your tax payments

How to manage your tax payments
Mark Pryce, Partner, looks at two facilities HMRC already has in place which could help you to manage your tax payments.

We will continue to monitor events and announcements as they occur and should you have any concerns on how your business may be affected, please get in touch with your usual Campbell Dallas contact.

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The information in this update should not be regarded as financial advice. This is based on our understanding on 30 March 2020. Laws and tax rules may change in the future.

 

Coronavirus Job Retention Scheme

March 30, 2020

The Government has now published further information about the operation of the Job Retention Scheme (JRS). Whilst further information will no doubt be forthcoming over the following days this helpfully goes some way to providing the detail which was awaited following the Chancellor’s headline announcement last week. It also provides clarity in some of the key areas where there was uncertainty over how the JRS would operate.

The key announcements may be summarised as follows:

  • The scheme will be open to all UK employers for at least three months starting from 1 March 2020. It is intended to be up and running by the end of April to support employers whose operations have been severely impacted by COVID-19.
  • Employers will be able to use a portal to claim for 80% of furloughed employees usual monthly wage costs.
  • We now have confirmation of the calculation basis; up to £2,500 per month, plus the associated employer NIC and minimum automatic enrolment employer pension contributions on that wage. This is a welcome point of clarification.
  • Employers can use this scheme anytime during this three-month period.

Eligibility

  • The scheme is open to any UK employer that had a PAYE scheme operational on 28 February 2020. The employer must operate a UK bank account.
  • Where a business is taken under the management of an administrator, the administrator will be able to access the JRS.

Directors

  • We are aware that the CBI were advised by the Treasury that owner managed businesses are included in the Job Retention Scheme based on their PAYE earnings but not their dividends. They are entitled to continue running their businesses in terms of performing their statutory duties as officeholders but must not be raising any revenue by performing other work, this is also included but, not in detail, in the self-employed guidance.

What is the employer able to claim?

  • The employer will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employer NIC and minimum automatic enrolment employer pensions contribution on the subsidised wage. More information is going to be published on this calculation basis before launch.
  • Fees, commission and bonuses are excluded.

What must the employer pay?

  • The employee must be paid at least the lower of 80% of their regular wage or £2,500 per month.
  • The employer may choose to top up the employee’s wage further but is not obliged to. If the employer does so the additional employer NIC and automatic enrolment contribution will not be funded through the JRS.

Some clarity around the pay reference period

  • For salaried employees the actual salary before tax as at 28 February 2020, excluding fees, commission and bonuses is to be used to calculate the 80%.
  • For employees with variable pay who have worked for the business for a full 12 months the grant claim will be the higher of the same month’s earnings from the previous year or average monthly earnings from the 2019/2020 tax year
  • For a variable pay employee who has worked for less than a year the claim is based on the average of their monthly earnings since commencement.

Which employees may a claim be made for?

  • Furloughed employees must have been on the employer’s payroll on 28 February 2020. Employees hired after 28 February cannot be included in the JRS.
  • They may be on any type of contract, including full and part-time employees, employees on agency contracts, and employees on flexible or zero hours contracts. Inclusion of this last category helpfully clarifies the position for this type of worker.
  • The scheme will also cover employees who have been made redundant since 28 February if they are re-hired. This again is a helpful easement for employers who needed to act before the JRS was introduced by the Chancellor and is welcome.

What about subsidy eligibility?

  • The employee may not work at all for or on behalf of the business when on furlough.
  • An employer does not need to place all of its employees on furlough.
  • The employee’s wages in the furlough period will remain subject to payroll income tax and NIC deductions
  • For employees on agency contracts it will only apply if they are not working. It will not apply if they are working but on reduced hours or you are paying at a reduced rate.

Notifying the employee

  • The employer should write to the furloughed employee to confirm that they have been furloughed and keep a record of the communication notice.
  • The employer will need to consider the employment law aspects of furloughing with an employment law specialist.
  • The guidance does not deal with employees returning from furlough to work and being replaced by a newly furloughed employee. This would seem to imply such use of the scheme is not intended or anticipated. Further clarification on this may be forthcoming as the scheme starts.

Particular categories of employee

  • If an employee is on unpaid leave he cannot be furloughed unless the leave period commenced after 28 February.
  • If an employee is on sick leave or self-isolating, he should get statutory sick pay. Whilst he cannot be furloughed in that period he can be after.
  • Where an employee is shielding in line with public health guidelines he can be furloughed.

Multiple employments

  • Where an individual has more than one job with more than one employer, he can be furloughed for each and the cap applies to each employer separately. The guidance does not specifically exclude this where the separate employments are with, for example, two companies in the same group.

Is there anything a furloughed employee can do?

  • Yes, he may do volunteer work or training with the proviso that he does not provide services to the employer or generate revenue for the business. These services are therefore not able to be provided to or for the employer.
  • There may however be ongoing requirements the furloughed employee must fulfil; an online training requirement for example. Where this is the case, they must be separately paid for the training time and at least at the national minimum/living wage. This is a requirement even if this is more than the 80% of their wage which will be covered by the grant.
  • Employees who are on or plan to take maternity leave may be furloughed.

What is the process for making a claim under JRS?

  • The employer will be required to calculate the amount claimed. HMRC have stated that they will have the right to retrospectively audit claims. We would expect this to be after the scheme has been closed.
  • In terms of the mechanics an employer will need to confirm PAYE reference, bank and contact details, the start and end date of the claim, the number of employees furloughed, and the amount claimed.
  • It appears therefore at this stage that the information required is fairly minimal, presumably in order not to delay the grant payment process. However, this does emphasise the need for an accurate calculation bearing in mind the possibility of a retrospective review.
  • If your employer chooses to place you on furlough, you will need to remain on furlough for a minimum of 3 weeks. However, your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open. The scheme will be open for at least 3 months.
  • Once the claim has been approved the employer will be paid by BACS to be included in the employee’s gross pay.

Employees seconded to the UK

  • At present, the position around the potential furloughing of employees seconded to the UK from overseas is unclear. As the individuals will typically remain employees of their home country employer it may be the case that they are not entitled to be furloughed in the UK as their employment contract is not with the UK employer. Instead, they may be able to rely on whatever measures have been put in place in their home country to compensate for loss of earnings during the pandemic.
  • The issue should be clearer for those individuals who undertake an international transfer that includes taking up employment with the UK employer as there is a UK contract of employment in place. Employees in those circumstances should qualify for furloughing.
  • Whilst this should only impact a small number of employers, we would hope to have some clarity from HMRC around this point as and when more information is published.

If you would like to discuss how this Scheme could apply to you or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 30 March 2020. Laws and tax rules may change in the future.

The Self-Employed and Coronavirus

March 26, 2020

Some of the workers most affected by the Coronavirus are the self-employed. Many have seen their workloads disappear overnight and face an uncertain future regarding their income.

It is logistically difficult to apply the Coronavirus Job Retention Scheme to the self-employed given the nature of their work, the relative lack of regular reporting around their income and the structure around a method to pay them.

As a result, the Chancellor has announced the Self-Employed Income Support Scheme, and we explore this below.

Self-Employed Income Support Scheme

The Chancellor has announced that, like the Coronavirus Job Retention Scheme, HMRC will pay self-employed people a taxable grant worth 80% of average monthly profits over last three-years, up to a maximum £2,500 per month.

The Scheme will be open to anyone with averaged annual profits of up to £50,000 and the Chancellor stated this covers 95% of all self-employed.

Only those in self-employment with a filed tax return for 2019 will be eligible for the Scheme. The Chancellor confirmed that HMRC have set a deadline of four-weeks to file the tax return, if you previously failed to do so by the deadline of 31 January 2020, in order to qualify for the Scheme.

In addition, for those who are self-employed and have other income, they can only claim if the majority of their income is from self-employment.

The Scheme will be in place by June 2020 and HMRC will contact the self-employed directly with details of the payment to be made. In the meantime, the self-employed can continue to earn and this will not affect their ability to receive the grant under the Scheme. In June, they will receive three-months’ worth of payments.

The Chancellor stated on announcing the Scheme that the tax regime for the self-employed will be brought into line with the employed in future budgets, strongly hinting that National Insurance Contributions for the self-employed will be increased.

This does not apply to contractors, personal service companies or business owners who take their remuneration through dividends. For owner-managed companies, this will be a significant gap.

Would you like to know more?

If you would like to discuss how this Scheme could apply to you or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 26 March 2020. Laws and tax rules may change in the future.

COVID-19: Business Update

March 25, 2020

With the Prime Minister’s and First Minister’s latest announcements, as a business, we have been closely monitoring the situation and considering the health and well being of our colleagues and clients as our number one priority.

We have made the decision to close our offices nationally, to help our teams to look after themselves, their families and local communities, during these unprecedented times.

Whilst our offices remain closed you can be reassured we are here to help you and continue to work remotely. Please continue to use the existing email addresses and telephone numbers to contact your usual client partner or advisory team so that we can continue to provide you with the most appropriate service to help in these challenging times.

COVID-19: Accessing Coronavirus Business Interruption Loans

March 25, 2020

We know from our conversations with many of the businesses and banks we work with there is a strong need for clarity on the detail behind the many support measures that the Government has announced in response to the COVID-19 pandemic. As details develop we are sharing what we know, so far, to assist you in accessing the Coronavirus Business Interruption Loan Scheme (‘CBILS’).

We expect most banks will have their application process refined sufficiently by the time businesses apply. In the meantime, the information below should be taken as general guidance, subject to change and there may be some differentiation between banks.

CBILS is available to businesses with a turnover of less than £45million and who do not have adequate security to raise funding from alternative means.

For businesses with turnover in excess of £45million please contact your usual Campbell Dallas contact.

What information will most banks require to assess your application?

While the specific detail will vary from bank to bank we are seeing common themes from most banks. We therefore encourage those businesses wishing to access CBILS to start collating the following information (in digital form) to prepare for your bank requesting them:

•    6 months personal bank statements
•    3 years business financial statements
•    3 years personal tax returns
•    Last 4 business VAT returns
•    Details of other finance in the business, HP, leases etc.
•    A summary of measures you have already taken to mitigate the financial impact of COVID-19 such as:

  • Reducing staff hours/furloughed staff
  • Suppliers e.g. time to pay arrangements/securing supply chain/stocking up to meet demand
  • Arrangements with other creditors e.g. landlord and utilities
  • Accessing other CV-19 support such as tax time to pay, rates relief and grants, 80% wages grants
  • Injections of funds either through shareholder capital or alternative debt funding

•    Up to date Management Accounts showing the trading period prior to the crisis
•    A ‘Hibernation Cashflow’ – in other words the ‘cash burn’ over at least a 12 week period to 30 June 2020
•    Projections available under best and worst case scenarios for your business over the next 12 to 36 months
•    Details of how the COVID-19 crisis has impacted your business – examples could include reducing staff hours, redundancies, unable to get raw materials / stock, zero sales, footfall etc.

Not all of these items will be required, and the list is not exhaustive. Your bank may also require additional information, but we would recommend these items as a guide.

We have robust remote working from home facilities and can arrange video calls with you to discuss how we can support you. We also have secure facilities for you to share information with us confidentially and digitally.

Please get in touch with your usual Campbell Dallas contact to discuss your preparedness to obtain CBILS bank funding. We are on hand and ready to help you secure the funding you need to help you through this crisis.


The information in this update should not be regarded as financial advice. This is based on our understanding on 25 March 2020. Laws and tax rules may change in the future.

COVID-19: Government Grants Process in Scotland

March 24, 2020

The Scottish Government and all 32 local authorities in Scotland have published details as to how businesses can apply for help with non-domestic rates in Scotland to deal with the economic impact of COVID-19.

The Scottish Government has introduced extra rates relief and one-off grants for some businesses and these reliefs will be available to non-domestic properties from 1 April 2020 to 31 March 2021.

To apply, you’ll need to complete an application form via your local authority website with Councils aiming to make payment within 10 working days of receiving a grant application form.

Further details can be found here on the Scottish Government website, which will also provide a quick link to the appropriate page on the relevant local authority website for your business.

Additional reliefs to help with COVID-19
All non-domestic properties in Scotland will also receive a 1.6% rates relief. This relief effectively reverses the change in poundage for 2020-21.

Retail, hospitality and leisure businesses
Retail, hospitality and leisure businesses will get 100% rates relief. To get this relief, a property has to be occupied but all properties that have closed temporarily due to the Government’s COVID-19 advice will be treated as occupied.

We will continue to monitor events and announcements as they occur and should you have any concerns on how your business may be affected, please get in touch with your usual Campbell Dallas contact.

The information in this update should not be regarded as financial advice. This is based on our understanding on 24 March 2020. Laws and tax rules may change in the future.

Deferment of VAT payments

March 24, 2020

Following the Chancellor’s announcement on 19 March and the further updates the UK Government have released since, please read the important points below, regarding the support for businesses through deferring VAT and Income Tax payments:

• All VAT payments falling due from 20 March to 30 June 2020 will be deferred to the end of the 2020/21 tax year which, for these purposes, we understand HMRC consider to be 31 March 2021.
• All UK-established VAT registered entities are eligible; Non-Established Taxable Persons must still pay as normal.
• Approval is automatic with no applications or notifications required; in fact, businesses are encouraged not to call HMRC for confirmation.
• This measure also applies to any VAT Payments on Account falling due between 20 March and 31 May 2020.
• The provisions do not currently include VAT liabilities arising from previous periods although time to pay arrangements may be available through discussion with the HMRC Debt Management Team.
• VAT returns must continue to be filed by the relevant deadlines; anyone who cannot file in time should call HMRC.
• HMRC advise that direct debits should be cancelled by 31 March 2020 and reinstated later using the online form.
• VAT refunds and reclaims will be repaid by HMRC as normal. As usual, repayment returns should be filed ASAP.
• We continue to await full details and publication of the necessary enabling legislation imminently.

In practice we understand that this is available to anyone that is VAT registered, individuals, not for profit bodies and businesses.  This is an automatic offer with no applications required. It means that no VAT payment needs to be made during this period.

Taxpayers have until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. HMRC stated that VAT refunds and reclaims will be paid by the government as normal.

Anyone that is having difficulty paying an earlier VAT liability should contact HMRC and agree an additional Time To Pay arrangement with HMRC.

This is some positive advice in a challenging time for all businesses.

If you have any questions, please contact your usual Campbell Dallas advisor or a member of our VAT team.

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The information in this blog should not be regarded as financial advice. This is based on our understanding on 24 March 2020. Laws and tax rules may change in the future.

How to stay safe when working from home

March 23, 2020

As many organisations begin to work remotely following government advice to stay home, it’s important to ensure that both you and your business stay secure. Magda de Jager, Cyber Security Manager, has pulled together some tips and resources to help you and your employees work from home safely and securely:

Have the right equipment and systems in place
It is essential that you analyse the needs of your workforce and provide them with the right equipment and systems to continue their work. This might be different depending on the job function and department. You might have a VPN set up for remote working, but can it support all of your workforce? Do you need more capacity or licenses?

Communication channels
• Clear communication is imperative where most of your workforce is out of the office. Do you have a way to communicate with them outside of work emails?

• Staff should also know how to reach the IT support desk so they can ask for help and report incidents.

• Staff should know how to report incidents, and must receive guidance on what incidents should be reported and the importance of reporting promptly.

• Continue to update your staff on potential threats such as phishing emails exploiting the COVID-19 situation.

• If your helpdesk does password resets for staff – what is your identity verification procedure?

Should you want to implement new communication tools, the National Cyber Security Centre (NCSC) has issued a security review for popular products based on their Software as a Service (SaaS) security principles: https://www.ncsc.gov.uk/collection/saas-security

Clear instructions and guidelines
It is important to remind all staff that the same process for authorisation and security still applies, even though staff might not be in the office. This is a time to remain extra vigilant.

Kids and guests
Staff should remind everyone in their household that work issued equipment must not be used for any other purpose and should only be used by the employee.

You can also view specific home working guidance from the NCSC here:
https://www.ncsc.gov.uk/guidance/home-working

Our Business Technology Consulting team have advised many businesses on how to stay safe when working from home. If you would like to discuss how to set your business up to work remotely whilst staying safe at this time please contact:

Magda de Jager
Cyber Security Manager
magda.dejager@scott-moncrieff.com
0131 473 3500

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The information in this update should not be regarded as financial advice. This is based on our understanding on 23 March 2020. Laws and tax rules may change in the future.

Customs Insight

March 23, 2020

The UK and EU customs and trade landscapes are evolving at pace with changes expected as a result of the UK’s withdrawal from the EU. These changes will place additional obligations on businesses to consider how they flex their customs operations to respond positively to the changes.

Our Customs Insight is a quarterly update which will cover some key topics, pose relevant questions and timely responses to assist businesses to move forward and build future resilience.

Click here to view our first edition.

To discuss any of the topics raised, or if you would like assistance to consider your wider customs and trade planning, please contact Lucy Sutcliffe, National Customs Duty Director.

How to manage your tax payments

March 22, 2020

As HMRC’s approach to COVID-19 continues to evolve as the crisis unfolds, we take a look at two facilities it already has in place –  ‘Time to Pay Arrangements’ and ‘Quarterly Instalment Payments’ which could help you to manage your tax payments.

Time to Pay Arrangements

A Time to Pay Arrangement is a debt repayment plan to HMRC for your outstanding taxes.  If you are considering this arrangement, we advise having the following information to hand to help HMRC make a decision:

  • Your HMRC reference number (for example, your 10-digit Unique Taxpayer Reference or VAT registration number).
  • The tax liability that you are finding difficult to pay and the reasons why.
  • What you have done to try to obtain the funds to settle the liability.
  • Your thoughts on how much you can pay immediately and how long you may need to pay the rest. Clearly, the longer the payment period, the more chance that HMRC will challenge the application.
  • HMRC may ask for evidence, such as cash flow forecasts, monthly management accounts or copies of bank statements, showing that you will be able to pay future instalments.
  • HMRC is likely to want to understand your financial position, such as your income and expenditure and your assets and liabilities.

If you have entered into a Time to Pay Arrangement with HMRC before, then it is likely that they may ask more in-depth questions. In more complex cases, they may ask for additional evidence before they make a decision.

Quarterly Instalment Payments

Companies that pay Corporation Tax by Quarterly Instalment Payments (QIPs) often base the calculation of tax payable on annual budgets or other forward-looking projections. These may have been prepared before the potential financial implications of Coronavirus were apparent. Such companies can reduce their QIPs, based upon updated expectations of profitability, without prior approval from HMRC though they should keep a brief summary of their reasons for doing so.

If ultimately Corporation Tax is underpaid, interest will be charged by HMRC at 1.75% per annum (to be reduced following the reduction in the Bank of England’s base rate) on amounts underpaid.

In such uncertain times we consider that there is little or no risk that companies will be charged a penalty if tax is underpaid. When QIPs were introduced, HMRC were clear that penalties would only apply if companies were being reckless or ignoring QIPs completely.

If companies consider they have overpaid QIPs, they can request a repayment from HMRC. This is generally paid without query within 2-3 weeks, unless there is an open enquiry. If the amount is over £150,000 additional security measures need to be complied with by HMRC before payment can be released.

Available assistance

A dedicated helpline has been set-up by HMRC to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities. Through this, businesses like yours may be able to agree a bespoke ‘Time to Pay’ arrangement.

If you are concerned about being able to pay your tax due to Coronavirus, call HMRC’s dedicated helpline on 0800 0159 559.

Please also get in touch with your usual Campbell Dallas contact if you need assistance in preparing an application to HMRC for a Time to Pay arrangement, if you think you may have overpaid corporation tax via QIPs or if you wish to discuss reducing your quarterly payments.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Direct tax ideas to help with your cash flow

March 18, 2020

In the current financial climate, cash flow is more important than ever and our tax team have identified the following ideas that could help you generate a tax refund or defer tax payments which will assist with your cashflow.

1. Research & Development – this is a valuable tax relief that can generate significant cash repayments from HMRC, if a company meets certain qualifying conditions. Companies are able to go back and refile last year’s previously submitted tax returns. If your year-end has recently finished, then you should consider accelerating the filing of your tax return to generate a potential repayment.

2. Carry Back Losses – If your company has made a corporation tax payment in the previous year, and you are now forecast to make a loss in the current period based on latest management accounts. It may be possible for the company to carry back these forecast losses to generate a tax repayment.

3. Capital Allowances – If your company has acquired a property or indeed incurred significant capital expenditure in recent years and not received advice from a specialist capital allowance adviser, it may be possible for your company to claim additional capital allowances. If this is possible, the additional allowances will be claimed in the tax computation, which could generate a corporation tax repayment.

4. Patent Box – This is a valuable relief that is available if your company owns Patents and these are incorporated in a product that you sell. The rules are complex, however, if the conditions are met the corporation tax rate applicable on the qualifying income will be 10%. In certain circumstances, this could result in a cash repayment.

5. Payment on Account reductions – both companies and individuals who are making payments on account of their current year tax liabilities should review these to consider whether they can be reduced and refunds obtains for payments already made.

6. Sheltering Capital Gains – if you have made capital gains in the current year to 5 April 2020 and have a share portfolio sitting at a loss, you may wish to realise some of the portfolio to generate a tax loss in order to shelter the tax which would otherwise be payable. Clearly, independent financial advice should be taken from you financial advisor before considering such a step. In addition complex rules surround the re-acquisition of shares by you or an associate and these need to be considered.

7. Deferring tax payments – HMRC have a dedicated helpline (0800 015 9559) for those who need to request further time to pay their upcoming tax bills. Our experience to date shows HMRC taking a positive and supportive approach.

8. Consider a change in Accounting Period – for both individuals and companies, there may be tax savings by changing your accounting period in order to take into account any losses that your business may incur over the next few months.

9. Averaging Profits – special rules apply for Farmers and those in creative works to allow profits to be averaged over a period of up to five years. If you are in these industries, you should review the application of averaging along with your tax adviser.

10. VAT –  click here to view VAT and Duty procedures that can improve cash flow

If you want to discuss your cash flow position or find out more about any of the above, please contact your usual Campbell Dallas advisor.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

VAT and Duty procedures that improve cash flow

March 18, 2020

VAT and Customs Duties affect the cash flow of most businesses. In the current financial climate, cash flow is more important than ever. We have found the following 10 VAT and Duty procedures can improve cash flow:

1. Time to Pay agreements – Subject to certain conditions you could agree an informal payment promise (or formal payment plan) with HMRC for both Indirect and Employment Taxes. HMRC has introduced a specific helpline to assist with this and we have been able to secure favourable payment arrangements for our clients.

2. Accelerate or decrease VAT repayments – VAT return periods can be changed or moved from quarterly to monthly cycles to speed up VAT repayments or delay VAT payments. It may also be time for previously un-registered businesses to voluntarily register and recover the VAT they incur on expenditure.

3. VAT accounting schemes – A number of VAT accounting schemes can be used by smaller businesses to pay less VAT or pay it later. These include the Cash Accounting, Annual Accounting and the Flat Rate Schemes.

4. VAT recovery accruals –  Where book-keeping or invoice processing results in VAT being recovered in a later VAT period accruals can be agreed to accelerate the recovery of VAT. This can apply to VAT incurred on most expenses including rent, imports and late supplier invoices. Self-billing arrangements could also be introduced to accelerate the recovery of VAT on regular costs.

5. The timing of sales invoices – While sales invoices must be issued at specific times, cash flow can be improved by issuing payment requests or demands or by raising sales invoices at the beginning of a VAT return period.  This can be a complex area and requires bespoke advice.

6. Bad Debt Relief – The VAT declared on sales invoices can be claimed back from HMRC where the invoices remain unpaid after six months. However, the opposite is also true, VAT recovered on unpaid purchase invoices should be repaid to HMRC after six months.

7. Staff expenses – Most businesses routinely under-recover the VAT they incur on staff expenses. HMRC has discretion to allow retrospective VAT reclaims, for as much as four years.

8. Import VAT and Duty – Duty Deferment and Simplified Import VAT Accounting (SIVA) procedures are two examples of measures that allow the payment of import tax to be deferred. There are a number of HMRC procedures (some as part of the BREXIT process) that can be used to defer the payment of tax and create process efficiencies/savings.

9. Sector specific VAT reclaims – Changes in VAT rules have resulted in “sector specific” opportunities for retrospective refunds (of up to four years) for overpaid VAT. This includes Hotels (cancellation charges/room hire charges), Property renovations and conversations (reduced rate VAT), Financial Services (fund management charges) and Retailers (vouchers, discounts and delivery charges).

10. Recover overseas VAT – Globally nearly 170 countries have a VAT system. Some countries have reciprocal arrangements with the EU and UK and in certain circumstances VAT incurred on overseas travel, subsistence and other costs can be recovered.

Over the years we have helped clients to maximise their cashflow and obtain favourable outcomes from Indirect Taxes. In these uncertain times we are here to support and share our knowledge, so please contact our VAT team if you want to discuss your cash flow position or find out more about any of the above procedures.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Business continuity at Campbell Dallas

March 17, 2020

As the situation surrounding COVID-19 continues to develop daily, at Campbell Dallas we are doing everything we can to ensure that we keep our people safe while continuing to deliver the high quality, personal service you are used to.

Following the latest advice from the UK Government, we have put in place measures to ensure that our business can continue to operate efficiently, should we need to close our offices in the future.

• We are ensuring that our people have the equipment, technology and systems in place to allow them to work remotely.
• Our people will be able to securely access all necessary documentation remotely whilst following our usual processes and controls.
• We receive most of our communications electronically and recommend that you continue to use email to communicate with us and that you scan in any documentation you need to share with us and attach electronically to the email. If you believe you have sent something to us in the post and we have not responded to it, please speak to your usual Campbell Dallas contact.
• As well as communications over email and the telephone, we are also able to offer meetings via video conferencing / Skype.
• If resourcing levels in any part of our business are compromised due to illness or inability to work, we will refocus our teams as necessary to deliver to deadlines. This would mean prioritisation of workloads and we would keep those affected updated, whilst making every effort to mitigate the impact should this situation arise.
• We understand some of our services (such as payroll) are vital to our clients’ businesses and we will be issuing separate guidance to clients of these services.

We also understand that the evolving COVID-19 situation will present challenges to our clients and we want to reassure you that we are with you, we are in this together and we are here to help you.

Please call or email your usual Campbell Dallas contact with any queries.

Entrepreneurs’ Relief: Budget 2020

March 12, 2020

In the Budget yesterday, Rishi Sunak, announced the lifetime limit for Entrepreneurs’ Relief (ER) would be reduced from £10m to £1m.

Although reducing the lifetime limit to £1m will affect some bigger entrepreneurs dramatically, the review was remarkably narrow in its focus, with no other qualifying criteria subject to any change. That said, the relief has already been amended in recent years with an extended 2-year holding period and additional capital entitlement conditions already in operation.

The change to ER took effect from 11 March, so if you had not completed your deal by yesterday morning it was too late. Certain clever wheezes, but not all, by which ER was crystallised before today have also been hindered by anti-avoidance measures included in the draft legislation. No changes to the newer Investors’ Relief have been announced.

Has the Chancellor achieved his aim?
The Government was compelled to make changes as ER was “expensive, ineffective and unfair” but also necessary to encourage “genuine entrepreneurs who do rely on the relief”, stimulating “risk-taking and creativity.”

Despite the Office for Budget Responsibility’s comprehensive report on the subject, Inheritance Tax (IHT) was not mentioned at all in this Budget, and there had been some discussion over whether the criteria for trading businesses to qualify for Business Relief for IHT ought to be aligned with those for ER and Capital Gains Tax (CGT). In fact, Business Relief was left unchanged, such that an ER qualifying business will likely also qualify for IHT relief at up to 100%.

If you would like to discuss these changes and how they may impact you and your business, please contact your usual Campbell Dallas advisor or:

Aileen Scott
Partner and Head of Tax
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Taxation of pension excesses for doctors

March 12, 2020

Following the Budget announcement, statements on spending pledges to fight the impact of coronavirus, freezing of duties on fuel and alcohol and business rates relief for small businesses have grabbed the headlines. However, there was some very welcome news for doctors on pension excesses and how the tax is calculated.

Currently, the maximum annual allowance limit for each individual in a tax year is £40,000 and this is tapered down to a minimum of £10,000 if income thresholds are exceeded.

The Chancellor announced that HM Treasury has reviewed the tapered annual allowance and its impact on the NHS, as well as on public service delivery more widely. He further stated that to support the delivery of public services, particularly in the NHS, the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the ‘threshold income’ will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an ‘adjusted income’ above £240,000.

This will remove the vast majority of GPs from the potential for a tapered annual allowance limit, therefore helping to reduce potential excess charges in years of high pension input growth.

Many GPs had cut their sessional commitment in order ensure their threshold income fell below the £110,000 level to protect their full annual allowance. It will be interesting to see how many GPs that took this action revert to their previous higher levels of sessions in 2020/21 and beyond.

For those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with a total income (including pension accrual) over £300,000.

There was a minor, and expected, announcement on lifetime allowance for pensions. The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will increase in line with CPI for 2020-21, rising to £1,073,100.

If you have any queries, please contact your usual Campbell Dallas advisor or:

Neil Morrison
Partner and Head of Medical
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Budget 2020: The highlights

March 12, 2020

Download our 2019/2020 Personal Tax Year End Planning Guide here.

As Rishi Sunak got up to present his first Budget, many were watching to see how he would juggle the forces of Brexit, Coronavirus, austerity and public services, in the first Budget for a brand-new Chancellor in a brand-new Government.

Coronavirus is at the forefront of most people’s minds, and Mr. Sunak prioritised measures supporting both the NHS and UK business to ensure we would get through it together. As well as committing a £5 billion emergency response fund for the NHS, with as much as 20% of the country’s workforce predicted to be off work at any one time, measures supporting small business and those unable to work were top of the Chancellor’s list.

The Chancellor also focused on infrastructure spending, education, encouraging business development and innovation, housing and the environment.

The Budget included significant spending on public services, matched with significant additional borrowings. The key points from the Budget are below. You can also view our Spring Budget guide here.

Personal Tax
• Lifetime limit for Entrepreneurs’ Relief reduced from £10m down to £1m.
• No changes to inheritance tax.

The headline change was to decimate the amount of Entrepreneurs’ Relief available to individuals selling a business, with the lifetime limit cut from £10m to £1m. There are no corresponding changes to the more recently introduced Investor’s Relief. Coupled with the lack of changes to Inheritance Tax, this could mean more entrepreneurs end up retaining their business until death, rather than stimulating growth through a business sale.

Income limits for tapering of pension contributions increased by £90k, giving an income threshold of £200k.

The increase in income limits for tapering of pension contributions is a direct response to the concerns of doctors who were being penalised for taking on additional hours and responsibilities, limits that had been described by the IFS in April 2019 as “incoherent” and as having a “damaging effect on work incentive”. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.

• Personal tax rates and allowances generally frozen at 2019/20 rates.
• ISA contribution limit also frozen at £20,000.
• Capital Gains Tax allowance increased to £12,300 per annum (£6,150 for trustees).

Other than a small increase in the lower limits for National Insurance contributions, most personal tax rates and allowances have been frozen at the 2019/20 rates, so fiscal drag will mean the overall effect is akin to a tax increase. The ISA contribution limit has also been frozen at £20,000 for another year.

Corporate Tax
Corporation tax frozen at 19 per cent

Whilst the 17% rate was attractive, this move is not at all unexpected.

• Investment in Research & Development (R&D) to increase to £22bn a year
• The rate of Research & Development Expenditure Credit (RDEC) will increase from 12% to 13%

With the aim of continuing to keep the UK at the forefront of research and innovation this is a further move to attract businesses to invest in R&D. This welcome change will mean that large companies (more than 500 employees), and some SMEs will be able to claim an increased additional deduction in respect of qualifying R&D expenditure. This will go some way to mitigating the withdrawal of the proposed 2% reduction in the main rate of corporation tax.

• R&D PAYE Cap extended for 1 year to 1 April 2021

It had previously been announced that there would be a cap on the repayable tax credits for loss making companies of three times the company’s payroll taxes. This was going to have a negative impact to start up and smaller companies. The deferral for 12 months is a benefit to such companies.

• Capital Allowances: Structures and Buildings allowance to increase to 3%
• Digital Services Tax – payments due on an annual rather than quarterly basis
• Corporate Capital loss restriction: the 50% restriction on capital losses for companies in insolvent liquidation to be removed

VAT
• Abolishing VAT on e-publications

The abolishment of VAT on e-publications will be welcomed by the publishing industry, but the extent of zero-rating still requires clarification.

• A zero rate of VAT to be charged on women’s sanitary products

The plans to remove VAT from women’s sanitary products are a result of Brexit and the UK Government’s newfound ability to make its own tax laws.

• HMRC investing in anti-tax avoidance measures

The Government will provide additional funding for HMRC to invest in tax anti-avoidance measures in an effort to prevent tax leaking out of the system and into the hands of criminals.

• Government is legislating to clarify when fund management services are exempt from VAT

The VAT on fund management introduces into UK legislation matters which were previously established in ECJ case law [ATP and Fiscale Eenheid].

• An industry working group to review how financial services are treated for VAT purposes is being set up

This review of VAT on financial services has long been mooted and its formation is welcome news.

• From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including from the EU

Postponed accounting for VAT will give a cash flow benefit to VAT registered importers and is a welcome move. Non-VAT registered businesses and individuals will still have to pay the VAT at the time of import.

• Simplified rules for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called-off

The simplification will bring a welcome cash flow saving to ‘just in time’ businesses who hold stock until their customers needs it.

• Special VAT status will be granted to the welsh-based language channel S4C.

Special VAT status allows the specified body to recover any VAT it incurs on expenditure.

Employment Tax
• Employment Allowance increased by £1,000 to £4,000 from April 2020.

The increase in Employment Allowance for eligible businesses and charities will enable them to claim an increased reduction in their secondary Class 1 NIC liability.

• Van and van fuel benefits increased to £3,490 and £666 respectively from April 2020.
• New cars provided to employees and available for private use that are first registered after 6 April 2020 will be taxed according to CO2 emissions figures measured under Worldwide Harmonised Light Vehicle Test Procedure System (WLTP).

For cars measured under WLTP the appropriate percentage is reduced by 2% in 2020/2021 compared to the current percentages for cars under the current emissions basis to support the introduction of WLTP.

• Tax guidance for the self-employed.

The intention is to make it easier for self-employed people to navigate the tax system. Government will this summer launch new interactive online guidance for taxpayers with non PAYE income.

• Apprenticeship Levy.

The Government will look at how to improve the working of the levy to support large and small employers in meeting the long term skills needs of the economy.

• £500m to be provided over the next 5 years to develop the electric vehicle charging infrastructure.

This will include rapid charging fund to help businesses with the cost of connecting high powered charge points to the grid where the cost would otherwise prevent private sector investment.

• Lower NIC threshold from which NICs payable up to £9,500 from April 2020.

This measure will take £1.1 m out of Class 1 and Class 4 NIC entirely. This is seen as the first step in meeting government ambition to increase the threshold to £12,500.

• Maximum Homeworking rate income tax deduction up from £4 to £6 per week from April 2020.
• The proposed IR35 changes for introduction into the private sector are operative from April 2020.

This confirms the position and that the new rules for review and appropriate deduction of income tax and NICs will apply for payments made for services provided post April 2020.

• An NIC holiday will be available from April 2021 for employers of veterans in their first year of civilian life.

This measure confirms employment income is exempt from NICs up to the upper earnings limit on the veteran’s salary.

• Reduction in company car and van rates.

Rates are reduced by 2% in 2020/21 for cars first registered after 6 April 2020. Rate will increase in 1% increments for two following tax years and then be frozen until 2024/25. Vans will attract a nil benefit in kind if they are zero emission vans.

• Tax avoidance in the Construction Industry Scheme. Further action is intended to raise an additional £4.7bn.

The Government is intending to legislate to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled.

Infrastructure and Environmental Measures
• Levy on gas to rise, but be frozen on electricity.
• £500m for rollout of new electric car charging points.
• Red diesel subsidies will be scrapped for most sectors, excluding agriculture, fish farming, rail and home heating.
• New plastic packaging tax on materials with less than 30% recycled content from April next year.
• Money for flood defences doubled over the next six years to £5.2bn.
• Road building and upgrading plans equal to “£27bn of tarmac”.
• Investment in broadband worth £5bn to help expand rural connectivity.
• New carbon capture “clusters” to be built by 2030, at a cost of £800m.
• Affordable housing programme expanded with extra £12bn of funding.

Coronavirus
• Fiscal stimulus package worth £30bn.
• £5bn coronavirus emergency response fund for the NHS.
• £500m hardship fund to support those who are most vulnerable.
• Statutory Sick Pay will be made available from day one, including those who self-isolate.

While the changes to statutory sick pay for those self-isolating from Coronavirus is welcome news for some employees, the impact on smaller businesses is as yet unknown. An employee receiving statutory sick pay, currently set at £94.24 per week, will now receive an extra £40.

• Government to backstop sick pay for small business for up to 14 days.

Businesses used to be able to recover statutory sick pay costs from the Government, but this was abolished from 6th April 2014. However, considering the current situation there have been calls from business unions for the Government to look to reverse this measure. These measures have also prompted workers’ unions to ask the Government to consider extending the eligibility of sick pay to zero hour and self-employed workers, as they deem the current system unfair to these groups of workers.

• Temporary removal of minimum floor for universal credit.
• Temporary loan scheme to support small and medium sized businesses, with Government guarantees of 80 per cent of losses with no fees.

Other points to note…
• Measures to clampdown on tax avoidance aimed at helping HMRC recoup £4.4bn of unpaid taxes.
• Increased lending for exporters worth £5bn.
• New safety fund worth £1bn to deal with unsafe cladding on buildings over 18m.
• Funding worth £650m to help rough sleepers.
• Stamp duty surcharge of 2 per cent on non-resident buyers. The equivalent tax in Scotland is LBTT and we need to wait and see if this measure is mirrored by the Scottish Government.
• £130m to extend start-up loans.
• Plan to move 22,000 civil servants outside central London.

What should you do next?
If you would like to find out more about how the Budget will affect you, please contact your usual Campbell Dallas advisor or:

Aileen Scott
Partner and Head of Tax, Scotland
aileen.scott@campbelldallas.co.uk
0141 886 6644

Budget Update 2020 Webinar
Our colleagues are holding a Budget Update Webinar today at 1.00pm-2.30pm to provide insight and analysis on the outcomes of the Budget and how they may impact you and your business.

If you would like to join, please register here.

IR35 and the tax compliance changes

March 6, 2020

The proposed IR35 reform due to be implemented from 6 April 2020 has been delayed for one year to 6 April 2021 in response to the COVID-19 outbreak. Details below have been updated to reflect the new date of implementation.

From 6 April 2021, there will be a radical shift and a renewed focus by HMRC towards situations where workers provide their services through Personal Service Companies (PSCs) for the private sector, aimed at medium and large employers – the end users. This follows similar rules previously introduced for public sector organisations. Coming into the spotlight will be the status of workers as either employed or self-employed. Where HMRC successfully challenge the status, these new rules set out who bears responsibility for underpaid tax in the labour supply chain.

Who will be impacted?
End users of workers’ services, intermediaries and agencies will face an increased tax compliance burden. End users will need to decide if the person providing the services through a PSC is effectively doing so as an employee. HMRC will be auditing medium and large employers from 6 April 2021 to ensure they have performed appropriate checks to determine the status of their off-payroll workforce and their compliance with the new rules.

We have already seen a knock on impact in the contracting industry following the recent public sector rules coming into effect. Given the uncertainty and complexity of the regime, many organisations have chosen not to engage contractors anymore, instead bringing workers on to the payroll or ‘playing safe’ by deducing PAYE and NIC from their invoices. This has major implications for all concerned across the related labour supply chain.

For the private sector, HMRC have just announced that penalties for inaccuracies will apply only in cases of deliberate non compliance in year one of the new regime. Although this ‘light touch’ is welcome, many businesses will face unexpected tax liabilities if they are not adequately prepared to implement the changes from the outset.

Key indicators of employed and self-employed
In determining the status of a worker, the whole picture needs to be reviewed through various factors and status indicators; and weighed up in relation to the contract. Key indicators are listed below:
• Financial risks and profit opportunities
• The time period of the engagement and contract termination
• Control or supervision and the number of engagements
• Right or ability to substitute the worker
• Equipment for the job
• Intention of the parties and mutuality of obligation

HMRC has advised that worker status can be checked using their online Check Employment Status tool (CEST); provided the contract mirrors the service carried out in practice by the worker. In our experience, CEST appears very sensitive to the data input and the outcome can be different with even a small change to the answers provided. In particular, the tool tends to point towards self-employment status where control is indicated to be minimal by the end client, without necessarily considering all the factors. This can lead to uncertainty in some situations.

How should end users and PSCs prepare for the new regime?
The end user will be legally obliged to produce a ‘status determination statement’ for each contractor based on individual decisions in line with the above. A contractor can query this decision and is able to challenge the determination in writing if they believe it is wrong. The end user then has 45 days to explain their reasoning.

Where ’employed’ worker status is determined, continuing to engage through a PSC rather than as an individual is likely to have fewer tax advantages than before and will result in significant complexities from a tax compliance perspective, therefore many existing PSCs may cease to trade.

We advise end users and PSCs to prepare for the changes now by taking measures to check the impact of the new IR35 regime.

Next steps
If you think you may be affected by the new IR35 regime either as an end-user organisation, intermediary, agency or contractor, or if you are simply concerned about your self-employed status please contact your usual Campbell Dallas contact or:

Mark Pryce
Tax Partner
0141 886 6644
mark.pryce@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Significant tax changes for rural businesses

March 5, 2020

There are some significant tax changes which have been introduced recently or are on the horizon that could impact farming and other rural businesses. Partner, Alan Taylor, explores the changes below.

Capital Gains Tax (CGT) and Residential Property
Where a residential property is sold from 6 April 2020 the seller will be required to file a new standalone online tax return and pay any CGT due within 30 days of completion of the transaction. Currently, if a surplus farm cottage is sold, the seller has between 10 and 22 months to pay any tax and the gain is included as normal in the self assessment tax return. From a practical point of view, it will be important to obtain all the information required to calculate the gain early in the selling process. It will be necessary to have accurate records of original cost, any capital improvements and in some cases valuations. Furthermore, to calculate whether the gain is chargeable to tax at 18% or 28%, it will be necessary to make a best estimate of income for the tax year and factor in any other capital gains/losses made earlier in the same tax year and any capital losses brought forward. Penalties will apply for non-compliance. HMRC will be able to monitor disposals from Land and Buildings Transaction Tax (LBTT) returns. There will also still be a requirement to include the gain in the year end self assessment return and any further tax due or repayable will be included. There is no requirement to file a return where the property has been a principal private residence throughout the period of ownership, there is a capital loss arising or the gain is covered by the annual CGT exemption (£12,300 from 6 April 2020). If any sales transaction is underway there are advantages in completing before 5 April 2020.

Capital Gains Tax and Entrepreneurs’ Relief
Prior to the Budget announcement if you stopped farming and subsequently sold your farm, provided you met all the qualifying conditions, Entrepreneurs’ Relief was available to reduce the rate of CGT to 10% on lifetime gains up to £10m. The lifetime limit has now been reduced to £1m meaning any qualifying gain will be charged at 10% on £1m and 20% on the balance. If a farm was sold and makes a gain of £2m the tax would be approximately £200k under the old rules but £300k now.

Structures and Building Allowance
If from 6 April 2020 (1 April 2020 for companies) capital expenditure is incurred on a new non residential building the rate of allowance is increased from 2% to 3% per annum.

Capital Allowances on Cars
If you buy a new business car from 6 April 2020 (1 April 2020 for companies) 100% allowances are available for electric vehicles with CO2 emissions of 0g/km. Cars with less than 50g/km will qualify for 18% writing down allowance annually and all other cars over 50g/km will attract 6% writing down allowance.

Employment Allowance
Many businesses will benefit from the increase in the Employment Allowance from £3,000 to £4,000. This allowance is given as a deduction from the Employers National Insurance contributions a business pays.

VAT Agricultural Flat Rate Scheme
The limits for this scheme are changing from 1 January 2021 to allow farmers with farming turnover below £150k to join the scheme. When farming turnover exceeds £230k there will be a requirement to register for VAT. The scheme allows farmers to dispense with filing VAT returns, charge 4% flat rate to VAT registered customers which the farmer keeps, but not recover any VAT on expenses etc.

Red Diesel
The Chancellor announced in his Budget announcement that the fuel subsidy for red diesel for most industries was to be abolished. Fortunately, the farming industry is to continue to benefit from the subsidy saving 46.6p per litre when compared to industries such as construction.

If you would like to discuss these changes and how they may impact you and your business or the advantages of these changes, please contact your usual Campbell Dallas advisor or:

Alan Taylor
Partner
alan.taylor@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Budget must stimulate overseas trade

March 3, 2020

The new Chancellor, Rishi Sunak is dealing with an unprecedented number of issues that are threatening the economy. A budget that helps stimulate global trade must therefore be a priority. The following ‘Super Six’ policy changes would help businesses widen their trading horizons and ambitions:

Relaxing EIS (Enterprise Incentive Scheme)
The EIS offers attractive tax relief but it is currently highly complex and technical. Relating the regulations for SMEs looking to establish trading links overseas would help attract investment to these businesses and help their growth ambitions.

‘R&D credits’ overseas
R&D credits also offer generous tax reliefs, to encourage development. It would be good to see a similar system extended to cover expenditure by businesses looking to break into overseas markets.

Clarity over AIA
The problem with AIA (annual investment allowance) is that there is a lack of clarity over qualifying spend and a constantly shifting ‘use-by date’, currently set at 31.12.20. The budget presents an opportunity to extend the ‘use-by date’ for additional allowances by at least five years and provide an incentive to encourage capital investment in assets that would stimulate overseas trade. Businesses need clarity and stability – and AIA needs amended to provide that certainty.

Entrepreneurs’ Relief (ER)
ER currently rewards entrepreneurs with a tax rate of just 10% up to £10m from the sale of a business and is one of the most successful policies for encouraging and rewarding growing businesses. If the relief is withdrawn or amended the government could encourage overseas ventures by allowing entrepreneurs to retain the £10m relief where there is reinvestment of the sale proceeds in businesses expanding overseas.

Better export incentives
Current State Aid rules arguably restrict the creation of grants and incentives tailored to export activities. These rules currently expire on 31.12.20, and it could be an opportune moment at which to launch a new range of grants and incentives that support entrepreneurs in trading overseas. Supporting the recruitment of specialist staff and encouraging investment in new assets that drive export activity would be well-received by businesses wanting to trade overseas.

Goodwill
Finally, tax relief for the goodwill acquired when a UK business makes an overseas acquisition would encourage overseas trade and expansion. A new tax relief for acquisition goodwill could be the key to encourage more businesses to pursue overseas growth strategies.

If you have any questions or queries regarding global trade and the policies noted above, please contact your usual Campbell Dallas advisor or:

Craig Coyle
0141 886 6644
craig.coyle@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Electric vehicles – the tax considerations

February 20, 2020

Now looks like a good time to invest in electric vehicles for both employers and employees to benefit from tax breaks and grants.

There is no denying that electric vehicles have and will continue to become more commonplace on our roads. Technological advancements have made them a more viable and affordable proposition than in prior years. Drivers are now able to benefit not only from cleaner and more efficient transport, but also from increased range and even improved performance when compared with conventional petrol or diesel alternatives. In an effort to be environmentally friendly, employers are now acquiring electric vehicles as part of a fleet or as company cars. An added benefit is also the reduced running costs.

From a tax perspective, now is arguably the ideal time for businesses to consider ‘going electric’. For employees, reducing Benefit in Kind (BIK) rates down to 0% in the 2020 tax year for pure electric cars has strong appeal given the trend for increasing BIK percentages for petrol, diesel and even most hybrid cars. For employers, generous Capital Allowances are available, not only for the purchase of electric vehicles but also for the installation of charging points.

It is clear that the UK Government is currently keen to incentivise the public and businesses to consider zero-emissions vehicles. Should electric vehicles become the default choice, the need for the Government to incentivise adoption will cease, and potentially so will the reliefs available that we see today.

We have outlined below the tax considerations and provisions in relation to using an electric vehicle(s) for your business.

Employee Benefit in Kind

Plans have now been announced to drop the BIK rate for electric vehicles from 16% currently to 0% effective from 6 April 2020 with a commitment to only increase to 1% in 2021 and 2% in 2022 an annual average of only 1%. This applies not only to pure electric vehicles but also to vehicles with CO2 emissions of up to 50g/km and at least 130 miles of electric-only range. On a £30,000 car, when compared with typical BIK rates (circa 25%) for non-electric vehicles, this would result in an annual tax saving for higher rate taxpayers of c. £3,000.

The position favours electric vehicles even further when we consider the provision of personal fuel. As with BIK percentages, the standard amount against which a personal fuel benefit is assessed has increased from £21,100 in 2013/14 to £24,100 in 2019/20. For electric vehicles provided as company cars, there is no taxing provision for private charging as “fuel” does not extend to electricity. Similarly, workplace charging (for private and company cars) will not give rise to a benefit in kind.

Taking this a step further, s149(4) ITEPA 2003 extends the exclusion from the company car fuel charge to any ‘facility or means for supplying electrical energy’. This means that an employer can, for example, pay for the following without a taxable benefit arising:

• A vehicle charging point to be installed at the employee’s home
• A charge card to allow individuals access to commercial or local authority charging points

It should be noted that these particular provisions only apply to company cars (which would otherwise have been subject to the fuel charge) and not in respect of electric cars owned privately and used for business.

The Optional Remuneration legislation introduced in April 2018 in relation to salary sacrifice arrangements does not apply to ‘ultra-low emissions vehicles’ (ULEVs) for which electric vehicles fall within. This provides flexibility to employers wishing to utilise a salary sacrifice company car scheme.

Reimbursements for business mileage

One factor discouraging adoption of electric cars for company car drivers may have been the lack of a provision for the reimbursement of electricity costs incurred personally by an employee in carrying out business travel. From September 2018 however, HMRC introduced advisory fuel rates (AFRs) for electric vehicles allowing employers to reimburse electricity costs at a rate of up to 4p per mile. Where it can be demonstrated that a higher cost has been incurred, an increased rate may be able to be paid on agreement with HMRC.

It is also worth remembering that Approved Mileage Allowance Payments (AMAPs) apply to electric cars in the same way as for petrol or diesel cars. For individuals using a private electric car for business purposes, reimbursement can still be provided tax-free at a rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter. Furthermore, where the employee is reimbursed at an amount lower than this, they can claim tax relief on the difference from HMRC.

Capital Allowances

Aside from the employee/employer considerations, there are also benefits to adopting electric vehicles from a business tax perspective, specifically the availability of enhanced capital allowances (ECAs).

New electric vehicles (and some hybrids) are eligible for first year allowances (FYAs) of 100%, comparing favourably with other cars ordinarily subject to writing down allowances of 18%/8%. Where we are considering fleets of vehicles, this could provide significant relief.

These ECAs are also available to expenditure incurred upon the purchase and installation of new and unused equipment for an electric vehicle charging point solely for charging electric vehicles. The ECAs for expenditure on charging points was due to be withdrawn on 31 March 2019 (for corporation tax) and 5 April 2019 (for income tax), however availability was extended for four years and will now expire on 31 March/5 April 2023.

If you have any questions or queries regarding electric vehicles for your business, please contact your usual Campbell Dallas advisor or:

Scott Hutchison
0141 886 6644
scott.hutchison@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2020. Laws and tax rules may change in the future.

VAT reclaims for operators of childcare holiday camps

February 10, 2020

A recent First Tier Tribunal has ruled that a provider of childcare holiday camps, RSR Sports Ltd, had overdeclared £229k of VAT on their holiday camp services. Any business with similar arrangements could be entitled to VAT refunds too.

RSR believed that its services were exempt as they are welfare and childcare services. HMRC disagreed and believed the activities were standard rated as a result of being sporting activities. RSR successfully argued at the First Tier Tribunal that childcare was the predominant service and the associated sporting activities should not affect their VAT exemption.

This is an interesting and welcome decision for those operating in the sector. The Tribunal commented on the similarities with a previous case; however, there were differences that distinguished them. An important point in RSR’s case was that the sports activities at their holiday camps were not undertaken by qualified coaches, they were provided as part of a childcare service.

We understand that HMRC are considering the decision and may well appeal against it; however, this case shows that there is a fine line between an activity being closely connected with welfare services or not.

RSR received a refund of the VAT incorrectly declared and paid to HMRC over the last 4 years. Others could be entitled to similar refunds. Equally those who already record similar activities as being exempt need to ensure that contracts and all advertising material are worded correctly to minimise any challenge from HMRC.

We would be happy to share our experience with anyone operating in this sector who is unsure of their position. If you would like to discuss this decision and how it may affect you, please get in touch with us as soon as you can.

Martin Keenan
Indirect Tax Senior Manager
0141 886 6644
martin.keenan@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2020. Laws and tax rules may change in the future.

Entrepreneurs’ Relief – considerations to make pre-Budget if you’re mid-deal

January 29, 2020

Recent speculation has gathered momentum in the media that the forthcoming UK Budget may bring potential changes to Entrepreneurs’ Relief (ER), with an expectation that the Chancellor will likely review the impact of the Relief in relation to its key objectives and the cost to Government.

ER was introduced in 2008 as a comfort to entrepreneurs who had just watched business asset taper relief disappear. Originally ER was based on the old retirement relief provisions, reduced gains by 4/9ths and was limited to £1m. Today’s version is far simpler, allowing a flat rate of 10% on gains up to a lifetime limit of £10m (subject to meeting the qualifying conditions). The aim of the relief, back in 2008, was “to encourage entrepreneurship in this country” with the then Chancellor, Alistair Darling adding that he would ensure “only genuine investors benefit from the reformed Capital Gains Tax (CGT) regime”.

Many tweaks since its introduction have ensured that it is only available on genuine withdrawals from a business, and only to trading businesses.

If you are in the process of exiting a business, we would advise focusing on a pre-11 March transaction date if completion dates are in sight and possible before that date. If that is not possible, there are some actions you can take now, which may mitigate any reduction in relief post 11 March should that happen. We have outlined some options and considerations below.

Options and considerations

Changes to ER are highly unlikely to be retrospective, so any qualifying transaction that takes place before any change is announced should still benefit from the relief as it applies today.

Taxpayers would need to make an actual disposal of a business, business asset or company shares in order to claim ER.

While these cannot be transferred to a spouse, they could be a gift to a child, where the transaction would be deemed to take place at market value regardless of any actual value transferred. Similarly, other ways of either gifting shares or developing a new company structure could work in terms of generating an ER-qualifying gain in advance of a Budget-day deadline. Note, however, the anti-phoenixing provisions that seek to charge income tax instead of CGT where a company is liquidated and another similar business is set up within two years of the demise of the first.

However, care must be taken when undertaking such options as above. If not making a third party sale for cash, a tax bill at 10% (instead of 20%) sounds like a good deal, but you still have to fund the tax payment. It may be harder to sell assets in future, or values may drop, especially in times of economic turmoil or uncertainty. Inheritance tax and stamp taxes also need to be considered.

CGT is calculated on a disposal date when contracts are unconditional, rather than on completion, so if terms could be agreed (and signed in binding terms) in full before 11 March, even if the actual transaction does not finalise for some months, ER will still be available.

If you are mid-deal, and would like to learn more about your options, please contact:

Aileen Scott
Head of Tax, Scotland
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in January 2020. Laws and tax rules may change in the future.

Brexit: Our Insight

January 27, 2020

“Get Brexit Done” was the simple message that led to a Conservative majority in December’s general election. This has meant Boris Johnson’s ‘Brexit bill’ passed easily through the House of Commons. Indeed, the bill has now received Royal Assent so the EU (Withdrawal Agreement) Act 2020 is now in place.

The UK is, therefore, set to leave the EU on 31 January 2020 and enter a 12-month transition period during which a trade deal will be negotiated and businesses will need to get ready for leaving the EU.

As things stand, the transition period will end, with or without a deal, on 31st December 2020.

During the transition period, the UK will remain part of the customs union and the single market, and all EU VAT legislation still applies. However, beyond this, many questions about the rules which will apply following UK’s departure are still unanswered. Undoubtedly, the most complicated tasks lie ahead. The UK is in an unprecedented position – no other Member State has left the EU before.

The transition period leaves the two sides with just a third of the time taken to negotiate the Withdrawal Agreement – but with much more to do.

Every EU member state will have a vote and veto over the deal – which will make negotiations more complicated for the UK. The Government may have to choose between making major concessions to the EU or walking away without a deal as the Prime Minister has so far ruled out any extensions to negotiations.

Businesses, therefore, need to prepare to say “farewell” to Brussels and the trade rules as we know them, and rise to the challenge of getting ready for Brexit.

As the amount of uncertainty shows no sign of abating in the short term, many businesses are understandably concerned about the impact of such doubt.

However, there are a number of practical steps we would strongly recommend businesses consider in the lead up to 31 December 2020. These are outlined in our ‘Planning for Brexit: Indirect Tax’ publication.

In the event that the UK’s negotiation with the EU sees the end of the UK’s participation in the ‘VAT Union’, several simplifications currently enjoyed by UK VAT registered businesses will be lost. Those businesses would need to consider their future options. Essentially, these simplifications are designed to facilitate intra-EU trade. Read more about the areas likely to be affected here.

As the Brexit process continues, we will keep you up-to-date with the latest developments that may affect your business.

In the meantime, if you would like to get advice as well as clarity on your indirect tax position to help your business get ready for Brexit, please contact:

Veronica Donnelly
VAT Partner
veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The world wants to do business with Scotland

January 14, 2020

International trade event highlights opportunities and risks

International business opportunities have never been more exciting or potentially more rewarding for Scottish businesses and the business community should explore the huge potential on offer, delegates to an international business event recently hosted by Campbell Dallas were told.

The event in partnership with experts from affiliate firms in the Allinial Global network based in the USA, China, India and Ireland explored how Scottish businesses could begin trading with the four countries.

Expert speakers outlined the different economic and political profiles of each country, how their international business and tax systems are structured, and highlighted some of the key challenges and risks to consider.

Three consistent themes emerged during the presentations:

Firstly, it was clear that many countries are open for business and would like to do business with Scottish companies. This is particularly important given that we are now heading towards some form of conclusion to Brexit.

Secondly, whilst their tax and trade rules are different, there is a consistent desire to see international business dealings taking the form of inward investment, preferably involving a physical presence. Attractive incentives are increasingly being offered to encourage, retain and reward sustainable inward investment.

Thirdly and most importantly, whilst the rewards of international business can be significant, the cost of getting it wrong can be punitive. All the speakers said it was critical to obtain advice, even just a phone call or email, before committing to any form of business structure or enterprise.

Cormac Doyle, Head of Tax with EisnerAmper in Dublin, said that Ireland is proving a popular inward investment location as UK companies seek a more direct springboard into the EU market. Clearly many companies want to ensure they can continue to access both the Irish market and the much larger EU market as seamlessly as possible. There are attractive incentives to invest in intellectual property and knowhow and the Corporation Tax rate is also very competitive. An Irish business presence could offer Scottish businesses a key competitive advantage.

Gerard O’Beirne, a tax partner with EisnerAmper in New York also pointed to a range of incentives designed to encourage businesses to invest in the USA. He explained: “The government wants international businesses to be part of the economy from within, not just trade with the USA. To facilitate this shift, the Trump administration introduced the FDII legislation – foreign derived intangible income. FDII is designed to encourage investment in IP and the knowledge economy, with qualifying international ventures eligible for corporate tax rates as low as 13.25%.”

Amit Maheshwari, a tax partner with Ashok Maheshwari & Associates in New Delhi pointed out that the Indian government had made investment in manufacturing a major strategic target: “India has attractive incentives for businesses wanting to establish and grow a manufacturing presence in India. The incentives have been made more attractive and include lower corporation tax rates and a benign approach to the extraction of profits and dividends. The most popular business structure we now create for clients is the LLP (limited liability partnership) as it is frequently the most suitable model for the international trade tax regime.”

Alex Xie, a Tax Director with SBA Stone Forrester in Hong Kong said that China is also reaching out to attract inward investment with its own range of attractive tax and regulatory incentives: “China wants to undertake more international trade but realises that it has to help overseas businesses commit to engaging with the world’s largest economy. Key to encouraging international trade is a wider range of tax and trade incentives, plus corporation tax as low as 15% as long as it is a qualifying business activity within the high technology sector.”

The last few years have been challenging for all of us in business but our event was a welcome reminder that there is a world of business available to ambitious Scottish companies, and we should do our utmost to help them capitalise on the opportunities. The timing is good given that many tax systems have become more flexible and accommodating, with governments having a better understanding of how businesses operate. As such, the current range of incentives for international business are as good as any for a long time. However, it is always crucial to remember to seek advice before embarking on any significant investment. It is easier to prevent problems than it is to fix them.

Campbell Dallas has a range of materials exploring the legislative, political, economic and tax systems operating in each country. Businesses considering international trade can also benefit from a free initial exploratory discussion.

Fraser Campbell Accountant

 

 

 

 

 

Fraser Campbell, Head of Family Business and International Advisory Partner

For further information on expanding your business overseas contact me at:

fraser.campbell@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in January 2020. Laws and tax rules may change in the future.

New Year brings new, welcome changes to loan charges from HMRC

December 30, 2019

The controversial loan charge was due to be levied by HMRC on loan balances from relevant planning outstanding as at 31 March 2019, resulting in a flurry of activity as taxpayers settled their affairs under the terms offered by HMRC or prepared to deal with the imposition of the charge.

However, following the recent review of the loan charge, it will no longer apply as widely as was previously proposed.

It should be noted that the fact that the loan charge is being dropped does not mean that HMRC will not continue to pursue companies for tax due under the original planning, but in some instances there will be repayments due from HMRC in due course where settlement has taken place.

The first category of change is where the loan was entered into prior to 9 December 2010. For loans entered before this date (when anti-avoidance legislation was enacted), the loan charge will no longer apply.

For loans entered between 9 December 2010 and 5 April 2016, the loan charge will not apply where the planning was fully disclosed to HMRC, and HMRC did not take any action. This will cover cases where HMRC did not open an enquiry, and presumably cases where HMRC did open an enquiry but closed the enquiry without proposing any adjustment.

Those who are still subject to the loan charge can spread the amount over 3 tax years evenly to potentially reduce the amount of the charge which will be due at higher rates of income tax. There are also certain relaxations in terms of Time to Pay arrangements.

Taxpayers who are due refunds from HMRC from settlements entered should begin contact HMRC once the amending legislation has been passed (which is forecast to be in summer 2020). Those considering what to include on their 18/19 tax return can delay filing their return until 30 September 2020 without suffering any penalties.

Each taxpayer who has been involved in relevant planning will need to take professional advice based on their individual tax pattern, and our team would be delighted to assist in this.

If you have any queries, please speak to your usual Campbell Dallas advisor.

craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Quartet of new partners appointed

December 16, 2019

The success of our pioneering apprentice and graduate trainee development programme has resulted in four long-serving staff being promoted to the partnership in the New Year. The promotions are effective 1st January 2020.

All four new partners – Kirsty Murray, James McBride, Jennifer Alexander and Alan Brown – joined as graduate trainees and have been with the business for an average of 16 years.

After joining as a trainee in 2004, Kirsty Murray has been appointed as a new Tax partner based in Edinburgh. She has extensive knowledge of corporate and business tax and is acknowledged as a specialist in the technology, R&D and performing arts sectors. The appointment reflects her high standing with clients, and her key role in driving growth across the tax practice.

James McBride, who joined the business as a trainee in 2003, has been appointed as a new Audit partner based in the Glasgow city centre office. He specialises in providing external audit and business advisory services to a wide range of clients in the property, construction, housing association, charity and education sectors.

Jennifer Alexander has been appointed as an Audit partner after joining the business in 2001 as a CA trainee. Also based in Glasgow, she has developed an expertise in the charity and housing association sectors and provides business advice to food and drink, construction and property businesses.

After initially joining Campbell Dallas in 2003 as a CA trainee, Alan Brown has been promoted to Audit partner. He qualified in 2006 and has been progressively promoted during his 16 years with the firm, becoming a director in 2013. He has played a key role running the Glasgow and Scotland-wide audit team and is highly regarded for his extensive technical knowledge, acting for many of the firm’s largest clients in the food and drink and manufacturing sectors.

Commenting on the new partner appointments, managing partner for Scotland, Chris Horne said: “We would like to congratulate the new partners on their promotions and wish them every success as they continue to develop their careers within the business It is particularly rewarding to see young talent progress all the way to the partnership and in the last two years we have promoted 9 of our people, who started out their CA careers with us to the top level in the business.

“We are focused on developing our own people and on creating outstanding career opportunities for our people looking to develop a career in the accountancy profession. Since 2015 we have recruited 235 apprentices, graduate trainees and school leavers into this successful trainee development programme.”

Scott Moncrieff joined Campbell Dallas in May 2019, creating one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 550 staff.

The rise of overseas buyers and private equity continues to drive Scottish deal market

December 16, 2019

The last 5 years has seen a significant shift in the M&A market towards overseas trade buyers and private equity purchasers in both Scotland and across the UK. It is a significant shift in who does the deals, and how they are financed.

“The rise of the overseas buyer is partly down to the attractive pricing of UK corporates as a result of the continued weakness in Sterling. That’s not to say that UK buyers aren’t still around, but the political and economic uncertainty of the last few years has made them a bit more cautious. Strategic buyers – wherever they’re based – remain confident in the medium to long term prospects for the UK economy, and are continuing to make acquisitions. There also remains a lot of private equity funding looking for investment opportunities and PE house. Those based here in Scotland and further afield are actively seeking out and engaging with business owners to help them realise their ambitions and strategies.

The future of Entrepreneurs’ Relief remains a concern for a lot of business owners and those concerns, coupled with legislative changes, growing compliance regulations and perceptions of higher risk are still driving a substantial number of entrepreneurs to sell their businesses.

Notwithstanding these issues, we should celebrate the recovery in the Oil and Gas sector where there are clear signs of deals being done and confidence returning, which is great news for Scotland’s economy.

And we should be alert to the threats facing traditional retail, which has now become a turnaround sector as businesses try to remodel in the face of the online threat and adapt to a major structural change that is clearly now underway. Several well-known Scottish retail businesses have sadly closed, and it is important that any retailers facing problems should seek early help with their strategy and financial position.

Deal watchers will be aware that deals are taking a good 2 to 3 months longer than 5 years ago, which is an interesting and probably permanent, change. The extended deal process is due to buyers and sellers wanting to spend more time on due diligence to ensure the deal is ‘right’. It is better to take longer to get the right deal, than get a quick deal that is the wrong deal. Risk and compliance have risen to the top of the agenda, with the banking crisis, data breaches, fraud and cyber security driving many businesses to invest far more on risk and compliance.”

Looking ahead, Scotland’s corporate finance scene is suffering from a shortage of experienced younger corporate finance professionals and the uncertainty caused by the ‘B’ word has acted as a brake on business confidence and frustrated investment and M&A activity.

However, we anticipate busy sectors being environmental, specialist healthcare, fintech and cyber security. There are also a lot of dynamic, more “traditional” businesses, in specialist engineering, and manufacturing, that provide design, maintenance and support as well as a product to their customers, where there is encouraging potential for an active corporate finance market.

It has been a challenging year, but the environment for deal making is in healthy shape, with plenty of opportunities, willing sources of finance and key drivers, such as Entrepreneurs’ Relief, encouraging business owners to exit.

It will be a busy 2020 – and we are up for it!

Graham Cunning
graham.cunning@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Changes to the reporting of disposals of residential property for UK residents

December 15, 2019

From 6 April 2020 changes to the way UK resident individuals, trustees and personal representatives report the disposal of UK only residential property come into effect. The changes will mainly affect those disposing of a second home, a rental property, or properties that have not been occupied as a main residence throughout the period of ownership.

Currently any UK resident individual, trustee or personal representative disposing of residential property is required to declare the disposal on a Self-Assessment Tax Return within nine months following the end of the year in which the property is disposed of.

Any Capital Gains Tax (CGT) due will also be payable by 31 January following the end of the year in which the disposal took place.

Those not within the Self-Assessment system can report and pay CGT using the ‘Real Time’ CGT service but must do so by 31 December following the end of the tax year in which the disposal takes place.

The new rule
From 6 April 2020, in a move to bring UK residents in line with non-UK residents (and to collect tax much sooner), the disposal of residential property will need to be reported to HM Revenue and Customs within 30 days of sale. Gains realised on the disposal of property that has been both residential and non-residential are to be apportioned. For the purpose of the start of the 30-day window, the date of sale is the date of completion and not the exchange of contracts, which is usually used for CGT purposes and will remain the date of sale for CGT calculation purposes. The payment of any CGT due will also need to be made within the 30-day window.

When does the rule not always apply?
This new rule does not apply in all cases. Those whose capital gain is fully covered by Principal Private Residence Relief, brought forward losses or those that have been realised prior to this disposal, their annual exemption or where a nil gain/nil loss arises, will not need to file a Return within 30 days and should report the disposal in the normal way via self-assessment where applicable.

Where a sale of a main residence which is only covered by partial relief e.g. the owner has had periods of absences, will need careful consideration to ensure the 30-day deadline is not missed.

Failure to file the Return within the 30 days will result in a late filing penalty of £100 being charged. Where a Return is still outstanding at 6 and 12 months, penalties of £300 or 5% of the tax due, if greater, will also be charged. Any late payment of the CGT due will incur interest charges. A penalty equal to 5% of the tax outstanding will be charged if the liability is not settled within 30 days of 31 January following the end of the tax year of disposal.

Additional 5% penalties will arise if the tax remains outstanding after a further 5 and 11 months respectively.

Losses available and CGT exemption
When calculating the CGT payable (for residential property gains the rate is normally 18% or 28% or a combination of both), losses available at the date of disposal and the annual CGT exemption can be used alongside a ‘reasonable estimate’ of the individual’s income for the tax year concerned. This is due to the fact that a disposal Return may have to be filed before the end of the tax year.

The estimated tax due will be regarded as a ‘payment on account’ until the actual amount can be calculated and reported to HMRC via the Self-Assessment Return. Any tax overpaid can only be reclaimed once a Self-Assessment Return has been submitted.

Therefore, if you are planning on selling a residential property after 6 April 2020 careful consideration beforehand may be required to ensure that all relevant information can be gathered, CGT calculations, and the required Return(s) prepared to allow for the submission of the Return(s), and the payment of tax due, within the 30-day window.

It is also worth highlighting here further related changes coming into effect from April 2020 which reduce the final period of ownership for private residence relief from 18 months to nine months, and in practical terms abolish lettings relief.

What happens next?
If you would like to discuss any of the above points in further detail, please speak with your usual Campbell Dallas contact or:

Aileen Scott
Head of Tax
0141 886 6644
aileen.scott@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Business Property Relief

December 11, 2019

Business Property Relief (BPR) is a very valuable Inheritance Tax (IHT) relief for privately owned businesses and was subject to a recent review by the Office for Tax Simplification (OTS). This Insight highlights some key points to qualify for the relief.

Background to BPR

The IHT legislation contains a very valuable relief known as BPR. This relief mitigates the charge to IHT on any transfer of ‘relevant business property’ during lifetime or on death. Where an asset qualifies for this relief, BPR reduces the value chargeable to IHT by either 100% or 50%. BPR is currently an unlimited relief, unlike many other tax reliefs which have a monetary cap, and there is no clawback of the relief if the recipient immediately sells an inherited asset which qualified for BPR in the transferor’s death estate (although there can be a clawback for lifetime gifts).

Given that the current IHT rate on death is 40%, over and above the IHT threshold of £325,000, it is important that owners of privately-owned businesses undertake regular IHT/BPR reviews and that actions are not taken which result in full relief being lost.

Relevant Business Property

‘Relevant business property’ is defined as:

  • A business or an interest in a business, including a partnership (100% relief).
  • Shares in an unlisted company (100% relief).
  • Shares listed on the Alternative Investment Market (100% relief).
  • Quoted shares or securities where the owner has a controlling interest (50% relief).
  • Land, buildings or machinery owned personally and used in the individual’s partnership or a company which they control (50%).

BPR generally only applies where the ‘relevant business property’ has been held for at least two years. However, on a transfer of business interests to a surviving spouse/civil partner on death the spouse inheriting can include the deceased’s ownership period. Also, incorporation of a business does not generally affect the two-year ownership.

For BPR to apply, the business must not consist ‘wholly or mainly’ of holding investments. The legislation does not define ‘wholly or mainly’ but case law has established this as a 50% or more test. A hybrid company with trading and investment activities may qualify for BPR providing that the investment activities are not the main part. The business is looked at in the round along with such factors as:

  • The turnover and level of profitability relating to each part of the business.
  • Capital employed in each part of the business.
  • Management and employee time spent in each part of the business.

Having established that there is ‘relevant business property’, BPR is restricted by the value of any ‘excepted’ assets which are defined as assets not used wholly or mainly for business purposes in the two years immediately before the IHT event or not required for future use in the business. These will include assets such as surplus cash, yachts and houses which are used personally by the shareholders.

Qualifying for BPR and Not Qualifying

For certain types of businesses, there is a fine line between qualifying for BPR and not qualifying due to wholly or mainly holding investments. Recent tribunal cases have looked at the level of activity which is necessary for a livery and a holiday letting business to qualify. As a general rule, BPR is unlikely to be available for these and similar businesses unless substantial additional services are provided.

For example, in the case of HMRC v Personal Representatives of the Estate of M Vigne [2018], it was found that additional activities supplied by a livery, such as providing the horses with hay feed during the winter months, removing horse manure from the fields, checking the general health of each horse on a daily basis and providing on-site security, were sufficient to show that the business was not mainly one of holding investments, such that BPR was available.

By contrast, it was concluded in the case of HMRC v Mrs NV Pawson’s Personal Representatives [2013] that there was nothing to differentiate the business from any other furnished holiday letting business and BPR was not available on the basis that the business was mainly one of holding an investment.

Each case is decided on its own facts and it is particularly important for a full BPR review to be carried out in borderline cases as there may be actions which can be taken to help strengthen the position.

The Office of Tax Simplification (OTS) – Inheritance Tax Review 2nd Report July 2019

The OTS in their July 2019 IHT review have proposed a number of changes. BPR is covered in this report and they have commented that the ‘wholly or mainly’ test (50% test) differs from the test used for CGT for gifts holdover and entrepreneurs’ relief where the business has to be ‘substantially trading’. The latter generally involves an 80:20 split of trading vs investment, again with several indicators to look at including assets, income, expenses, time spent by employees and the history of the business.

The OTS comment that the differences between the CGT and IHT rules can distort behaviour and conclude ‘government should consider why the level of trading activity for BPR is set so much lower than the comparable reliefs for CGT. Aligning the BPR trading test with the tests for gift holdover and entrepreneurs’ relief would be a simplification. Having one test would be easier for taxpayers to understand and would reduce distortions to decision making’. Given these comments it may be that, at some point in the future, the rules to qualify for BPR will be tightened up such that it will become more difficult for hybrid companies to meet the rules resulting in a potential loss of BPR.

In light of these potential changes, it is all the more important for businesses with a mix of trading and investment activities to keep their operations under review to ensure that BPR is not inadvertently lost.

Planning for BPR in Privately Owned Businesses – examples

The following examples illustrate pitfalls to avoid in relation to BPR.

1. All or nothing relief
Windermere Ltd, an unquoted company, has 60% investment and 40% trading activities. The company’s shares would not be eligible for BPR as the business consists ‘mainly or wholly’ of holding investments.

Restructuring the company such that it is not ‘wholly or mainly’ an investment company should be considered to meet the BPR rules. This could be achieved with appropriate specialist tax advice by reorganising matters such that a new company, with identical shareholders, held all the investments leaving the existing company just with the trade.

2. Director’s loan account
Dwayne is a director/shareholder in Grasmere Ltd, a trading company. He has owned 50% of the issued share capital for the past ten years. The company owes Dwayne £100,000 which is held in his director’s loan account. Dwayne’s shares qualify for BPR on either a lifetime or death transfer. However, his director’s loan does not qualify for BPR.

In this situation converting the debt into share capital may enable BPR to be secured. If this is done by an ordinary share subscription, then Dwayne would need to hold the shares for a two-year period before they would qualify for BPR.

The alternative approach of a rights issue with the loan account being used to take up the rights issue is generally the preferred route. This is because the shares acquired under a rights issue are identified with the existing shareholding such that the two-year time period for ownership is met straight away. Care needs to be taken that all the legal formalities concerning a rights issue are met.

An alternative is for Dwayne to have his loan account repaid by Grasmere Ltd and for him to personally invest into assets which will qualify for BPR after a two-year period. This might be a portfolio of AIM shares or shares in another unquoted trading company.

3. Excepted assets
Derwentwater Ltd is an unquoted trading company. Kim, a widow, dies having owned 100% of the ordinary share capital of the company for over 20 years.

Under Kim’s will all her assets pass in equal shares to her two children. The probate value of the shares in Derwentwater Ltd is £1m which includes surplus cash not required in the business of £150,000. The executors, of Kim’s will, are satisfied that Derwentwater Ltd is not wholly or mainly an investment company and that BPR is due as follows:

Portion of value Rate
Probate value of shares in Derwentwater Ltd – £1,000,000
Less: value of excepted assets – (£150,000)
Value of shares qualifying for BPR – £850,000

The excepted assets valued at £150,000 are subject to IHT.

In this scenario a regular review of assets held in Derwentwater Ltd would have identified the excepted assets and action could have been taken to change matters to potentially secure more BPR.

4. Business premises owned personally and used by the family company
Emma owns a warehouse used by Ullswater Ltd, a trading company selling chocolates. Emma has a 65% shareholding in Ullswater Ltd and Charlotte has a 35% shareholding (not a family member). Emma gifts 20% of company shares to her son, David, who works in the business as part of the family’s long term IHT and income tax planning.

The gift of the shares does not give rise to CGT due to the availability of hold over relief and future dividends received by David will be taxed at a lower rate than in Emma’s hands. BPR applies so there is no IHT charge if Emma does not survive seven years from the date of gift (provided David still holds the shares at the date of death and assuming that the shares are not subject to a binding contract for sale and still qualify for BPR at the time).

However, in this scenario Emma loses control of Ullswater Ltd as her shareholding reduces to 45%. BPR is available on her shareholding but, having lost control of Ullswater Ltd, the warehouse no longer qualifies for BPR. This pitfall would have been avoided if Emma had gifted fewer shares (14%) and retained control of Ullswater Ltd.

Conclusion

BPR is an extremely valuable IHT relief in relation to both lifetime gifts and on death. It should not be taken for granted that BPR is simply available for shares in privately owned businesses as there are strict conditions for relief.

Full BPR can be lost because of a technicality. Regular reviews of the business profile should be undertaken so that BPR can be preserved or enhanced based on changing circumstances.

Planning early and taking specialist tax advice in advance will give the best results and ensure that hard earned wealth is protected from IHT.

For further advice on maximising BPR, please contact your usual Campbell Dallas advisor or:

Campbell Dallas staff portraits. Katy Burke.

Katy Burke
Tax Associate Director
0141 886 6644
katy.burke@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

The tax considerations when leasing rural properties

December 6, 2019

As leasing of residential properties is becoming ever more popular within rural businesses, it is important that landlords are aware of their property tax obligations. A landlord must register with the council for the area in which the property is situated and ensure they advise HMRC of the income received, either via a tax return or a letter.

Landlord Registration
All local councils have a landlord registration department and, before you rent out any residential property, you should register with the appropriate council. Details can be found on the council’s website. There are additional requirements for HMOs (House in Multiple Occupancy).

Taxation
Property rental income must be declared to HMRC and resultant tax paid. The amount of tax depends on the level of the profit and your personal circumstances.

Profit is calculated as income less allowable expenses and you need to declare this to HMRC via a Self Assessment tax return if you have income of:

  • £2,500 or more after allowable expenses, or
  • £10,000 or more before expenses

If your income is under these limits then you must still advise HMRC by writing to them.

Generally, property income should be declared by the person whose name is on the title deeds. If title is held jointly by married couples or civil partners living together, the income will automatically be split 50:50 unless a formal election is submitted to HMRC. If title is held jointly by any other people, the income is split in the same proportions as the ownership.

Expenses you can deduct include:

  • General maintenance and repairs – but not improvements
  • Mortgage interest – but changes are in place
  • Council Tax, gas, electricity, insurance
  • Maintenance contracts for heating systems etc.
  • Letting agent’s fees and management fees, tenancy renewal fees
  • Landlord registration fees
  • Telephone calls – the proportion relating to the letting activity
  • Motor expenses – the proportion relating to the letting activity
  • Replacement of domestic items
  • Accountancy fees

For further advice on the tax aspects of renting out properties, please contact your usual Campbell Dallas advisor or:

Karen Morrison, Tax Director, Campbell Dallas

Karen Morrison
Tax Director
01563 536 319
karen.morrison@campbelldallas.co.uk

 

 

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Is your SME supply chain ripe for cyber crime?

December 4, 2019

The Office of National Statistics estimates that 4.5 million cyber crimes were committed in the UK in the 12 months up to March 2018. You are statistically more likely to fall victim to a cyber crime in the UK than you are to any other type of crime.

As the cyber security systems become more adept at preventing and pursuing consumer fraud, the cyber criminals have been targeting the public sector and larger organisations for their new revenue streams.

Amongst larger organisations, numerous cyber security breaches have occurred, impacting banks, police forces and even defence firms. Wipro, a major IT services business, recently reported a major attack on its IT systems, after it was targeted by a phishing campaign.

The problems being faced by large organisations should be a warning for SMEs, owner managed businesses, social enterprises and charities, many of whom are at high risk of becoming unsuspecting cyber victims. And it is their supply chains that offer some of the best opportunities for cyber theft. Why?

Smaller enterprises just do not have the scale, resources or systems to protect, prevent and counter cyber fraud. Furthermore, they tend to work with a much wider network of suppliers and intermediaries. A recent survey of IT risks amongst SMEs undertaken by Scott-Moncrieff (our sister firm in Scotland) highlighted the very low level of investment in cyber security, poor understanding of the processes involved, and their high levels of vulnerability to attack.

Any point in the supply chain that creates a break in the flow of relationships, information, products, logistics and services, creates a potential for weakness in systems, and a window of opportunity for the cyber crooks. Like a house purchase, the more links in the chain of suppliers, the bigger the risk, and the greater the costs, including:

  • Finding an alternative supplier
  • Business interruption or shut down
  • Scrutiny and fines from regulators
  • Loss of productivity
  • Reputational cost, loss of trust and subsequent loss of clients

Prevention of cyber crime is far more cost-effective rather than having to deal with the bureaucracy, cost and reputational damage of a security failure. Key cyber security strategies and solutions that should be considered include:

  • Adopting relevant industry guidelines and frameworks, we recommend the National Cyber Security Centre’s Small Business Guide as an excellent starting point
  • Invest in and keep investing in the latest technologies and systems, and ensure that your systems are regularly patched
  • Risk assess your suppliers and business relationships, if they are protecting your assets – do you know what their cyber security arrangements are? Have your suppliers invested in meeting cyber security standards? We recommend only working with suppliers who have complied with the UK Government’s Cyber Essentials standard, and if you are out-sourcing key processes only working with suppliers who can demonstrate compliance with ISO27001, an internationally recognised security standard.
  • Employ or engage specialists that really understand the issues, and know how to implement and manage the very best cyber security systems and solutions
  • Consider cyber insurance

Cyber risk is now a permanent feature of our lives, and increasingly so for businesses.  You need to understand and manage not just the risk to your own business but also satisfy yourself that the businesses you depend on are also taking the risks seriously.

Magda de Jager is a cyber security expert within the firm’s Business Technology Consulting team.

If you have any queries in relation to cyber security for your business and how you can best protect against cyber crimes contact:

Magda de Jager
Cyber Security Manager
0131 473 3500
Magda.deJager@scott-moncrieff.com

 

 
Scott-Moncrieff joined Campbell Dallas in May 2019 to become part of the CogitalGroup.

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Latest IR35 changes will trigger soaring employment costs for businesses

November 26, 2019

New IR35 ‘off-payroll working rules’ due to come into force next year could cause a major increase in employee costs and trigger major cash flow problems for larger companies that routinely use contractors.

Craig Coyle, Tax Partner, says; “From April next year companies who engage workers ‘off-payroll’ and have a turnover of more than £10.2m will have to determine the employment status of that worker and, where required, withhold UK tax and National Insurance from their pay. The IR35 rules are aimed at those individuals working through personal service companies (PSCs) who would otherwise be considered as employees.”

The new rules will apply to companies defined as meeting at least two of the following:

• Turnover in excess of £10.2 million
• £5.1 million or more on the Balance Sheet
• More than 50 employees

Smaller companies operating below these thresholds will not be affected by the increased costs and bureaucracy of administering the new rules.

The new rules will have a significant impact on companies that routinely engage large numbers of contractors. Sectors that commonly engage contracting staff include banking, property and construction, media, entertainment and IT.

In addition to an increased compliance burden, companies will face increased labour costs from Class 1 Secondary National Insurance Contributions. They are also likely to have to face demands from workers for larger payments to protect their take-home pay. Craig Coyle estimates that a contractor previously earning £30,000 a year from a business in a self-employed capacity could cost the business as much as £10,000 in extra charges for income tax, NIC and pension contributions.

The soaring costs to businesses arising from the new rules could encourage behavioural change by businesses to avoid breaching the new thresholds, and hence limit additional income to HMRC and act as a cap on growth.

Craig Coyle says: “There will be a considerable financial incentive to downsize or create new businesses that fall beneath the thresholds and avoid the significant financial bureaucracy and costs of the new rules. We are also unlikely to see a reduction in PSCs as contractors align themselves with SMEs that avoid the new rules. Businesses that grow, or take on substantial contracts, could adapt by creating new corporate entities or separate trading subsidiaries.”

Those companies affected by the new rules will be required to determine the employment status of the worker, however HMRC will decide whether they agree with the assessment made. There are several complex indicators that will guide the decision, including whether the company or the employee provides the tools for the job, how the worker will be paid for their services and their exposure if the company experiences financial problems.

Craig Coyle urges companies to start planning as soon as possible: “These new rules will have a significant impact on the already hard-pressed construction industry, and we would encourage all property and construction businesses to familiarise themselves with the new rules as soon as possible. Those businesses that already fall into the new thresholds should review their contracting arrangements, budget for increased costs and consider alternative methods of engaging with contractors. Failure to comply with the new rules could be costly, or worse.”

It is recommended that you check HMRC’s new online ‘Check Employment Status for Tax’ (CEST) tool, which will allow businesses to determine worker status:

https://www.gov.uk/guidance/check-employment-status-for-tax

If you have any queries, please contact your usual Campbell Dallas advisor.

Craig Coyle - qualified Chartered Tax Advisor and a Chartered Accountant

 
 
 

 

 

Craig Coyle

craig.coyle@campbelldallas.co.uk

0141 886 6644

Brexit and the direct tax implications

November 6, 2019

The UK now has an extended deadline of 31 January 2020 to achieve Brexit as the country enters a 6 week period of campaigning in the run up to a General Election on 12 December 2019. Business should review how Brexit will impact them and in this update we consider the direct tax implications for companies.

The three areas we will consider are EU Directives, EU State Aid and UK Companies in International Structures.

EU Directives

Three main directives issued by the EU have a bearing upon UK direct taxes. These are the Parent & Subsidiary Directive; and the Interest & Royalties Directive; and Mergers Directive.

The Parent & Subsidiary Directive operates so as to prevent withholding taxes on dividends between EU companies where there is significant participation. Upon leaving the EU this could mean that UK companies find withholding taxes being applied on dividends received. Of course, we do still have tax treaties with each country which could limit this effect. Due to the uncertain landscape, groups should urgently consider whether there is a case for accelerating dividends from their EU subsidiaries.

The Interest & Royalties Directive similarly prevents withholding taxes on payments between EU companies. As with dividends we would therefore need to revert back to tax treaty rates with the individual countries and groups should urgently consider whether there is a case for accelerating royalties and/or interest payments.

The Mergers Directive essentially works so as to ensure cross border mergers within the EU are offered the same tax breaks as wholly UK mergers. This of course seems perfectly sensible in the context of the EU model and therefore the UK did legislate to comply with the directive However with the UK ceasing to be a member state of the EU, the domestic legislation would not provide protection for UK companies. Therefore, any group presently undergoing restructuring or merger transactions and expecting to benefit from this Directive should urgently review their position.

State Aid

Whilst the loss of application of EU Directives could mean a potential tax increase for UK companies, there could be some better news from the UK no longer being bound by EU rules on State Aid limitation. In particular, the UK government could potentially make the following tax reliefs more generous:

• Research & Development Tax Credits (R&D)
• Enterprise Investment Scheme (EIS) relief
• Enterprise Management Incentive (EMI) share options
• Venture Capital Trust (VCT) relief.

UK Companies in International Structures

Notwithstanding Brexit, the UK remains a very tax effective holding company regime, with key exemptions for certain gains realised and dividends received.

Coupled with a main rate reducing to 17%, exemptions for overseas branch profits, and no withholding tax on dividends paid, the UK continues to be competitive in attracting international groups.

In the meantime, if you would like to discuss the potential implications for your own business, please get in touch with your usual Campbell Dallas contact.

Mark Pryce
mark.pryce@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in November 2019. Laws and tax rules may change in the future.

Tax relief for farmers and landowners

October 21, 2019

Farmers and landowners have enjoyed a tax system that has allowed succession to take place with little or no tax liability. Generous reliefs from Inheritance Tax (IHT) and Capital Gains Tax (CGT) are available, and even on death the family farm usually passes to the beneficiaries with little or no tax due.

The Office for Tax Simplification (OTS) recently reported to the Chancellor outlining eleven recommendations for the reform of IHT, therefore some changes to these tax reliefs may be ahead.

What might these changes look like?

The OTS reported findings that show IHT is little understood, and when you consider that fewer than 25,000 estates are liable to IHT each year, this is perhaps not surprising. This figure represents less than 5% of deaths, however more than 10 times as many estates are required to complete and submit forms.

The recommendations cover three primary areas – lifetime gifts, the interaction between IHT and CGT, and businesses and farms. Many people are aware of the 7-year clock that starts when one individual makes a gift to another. Many people are also aware of the annual IHT exemption of £3,000, a figure which hasn’t changed since the 1980s. The OTS has recommended replacing the annual exemption and the marriage gifts exemption with an overall personal gifts allowance, and recommended that the level of this exemption and the small gifts exemption are reviewed. There is also a recommendation to reform the normal expenditure out of income exemption or replace it with a higher personal gift allowance.

A further key recommendation is a reduction in the 7 year period to 5 years, along with the abolition of the taper relief provisions that apply if tax becomes payable on a gift that has failed the 7 year test. The taper relief provisions are complex and not easily understood.

The second area considered by the OTS relates to the interaction between IHT and CGT. The OTS has concluded that the complexity of this interaction can distort decision making. Currently there is generally no CGT on death. Instead, assets form part of the estate subject to IHT and the value of the assets passed to the beneficiaries is rebased to the market value at the date of death. This means, for example, assets that are inherited by a spouse are free of IHT and can be sold shortly after with little or no gain over the date of death value. There is therefore no CGT due either.

The OTS has therefore recommended that the CGT rules be amended rather than the IHT ones, so that assets covered by any sort of IHT exemption will not be rebased to market value on death but will be inherited at the deceased’s original base cost. This would mean if they were sold by the recipient there would be a far larger gain, most likely giving rise to a capital gains tax liability.

If any of these recommendations are followed through by the Government, there are likely to be winners and losers. Whilst the reduction in the 7 year period following a gift would certainly be welcome, the change to the rebasing provisions would almost certainly see the tax liability of beneficiaries rise substantially, perhaps resulting in fewer disposals of inherited assets.

Based on current political uncertainty, a new Government could take a more radical approach. A “wealth tax” is a realistic option and probably a vote winner. Several European countries have adopted a wealth tax, where individuals pay an annual tax based on their total wealth or property owned.

Our advice to farmers who have succession options available is to make use of the generous tax reliefs available as they may not be available if legislation changes.

If you have any queries please contact your usual Campbell Dallas advisor.

Andy Ritchie
andrew.ritchie@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in October 2019. Laws and tax rules may change in the future.

Perth accountancy firm achieves 60% growth

October 14, 2019

A pioneering apprentice and graduate trainee recruitment programme and a strategy of developing internal talent has helped drive expansion of the Perth office of fast-growing accountancy firm Campbell Dallas.

The Perth office currently generates fee income of more than £4m, an increase of 60% since 2017 when Campbell Dallas opened a new £1m office in Perth city centre.  Total staffing has risen to 5 partners and 61 staff, and a new recruitment drive is planned for additional professional staff at all levels.

The Perth office currently has 19 trainees working towards accountancy qualifications, and overall 25% of the staff currently are completing a professional qualification.

Andy Ritchie, Head of Campbell Dallas’ Perth office said:

“The last two years have seen rapid expansion of our business in Perthshire, and the decision to focus on developing our own talent and supporting an extensive trainee programme has been key to our growth.  Looking ahead, there are encouraging prospects for the Perth office and we have expanded our range of services and specialists in order to help our clients capitalise on the opportunities ahead.”

He continued: “The Perthshire and Tayside economies are highly diversified and several key sectors, such as tourism and services are performing strongly.  Several major infrastructure projects, such as the A9 upgrade, could help drive further economic activity, and complement the success of the Dundee Waterfront development.  The Perth office has the capacity to support further expansion and we plan to recruit additional staff during the next 6 months.”

John Todd, who recently qualified as an accountant in the Perth office, said: “The level of support and motivation I received from my team and the whole Perth office was crucial in helping me pass my professional exams.  The wider student network across the firm is also very helpful as it allows us to discuss exam tips and strategies and to benefit from the mentoring and advice that is on offer.”

In the last 5 years Campbell Dallas has recruited 119 apprentices and graduate trainees across Scotland.

Campbell Dallas and Scott Moncrieff recently merged, creating one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 600 staff working from 10 offices.

Andy Ritchie

Andy Ritchie

andrew.ritchie@campbelldallas.co.uk

01738 441 888

 

Tribunal rules that locum GP was entitled to sick pay and holiday

October 10, 2019

A judge has ruled that a locum GP who was working for an out-of-hours provider should have been treated as a worker who was eligible for sick pay and holidays following an appeal from the provider.

Under the current system of employment law, individuals are either employed, self-employed, or have ‘worker’ legal status. This determines whether they have access to employment rights such as sick leave, paid annual leave, protection from discrimination and national minimum wage.

In this case, Dr Narayan, regularly worked the same shifts, had no obligation to accept work and could take holiday when she wished to, while Community Based Care Health was not obliged to provide any work.

Community Based Care Health argued that Dr Narayan was self-employed and therefore not entitled to receive paid holiday. However, the judge reviewed 13 different factors – including equipment, indemnity, who supplied medication and the ability to work for other organisations – and concluded that she should have been classed as a ‘worker’.

It should be noted that there is a difference between employment tribunals and tax law. Worker status is not recognised in tax law and the doctor concerned in this case would have remained self-employed, with no consequent IR35 liability.

The Government has promised to introduce new tools to help individuals understand how to determine their status in light of upcoming changes to the off-payroll working rules by April 2020.

Practices need to be aware in light of this decision of the potential for locums that have a long-standing relationship with the Practice, to claim holiday pay over a number of years. It is therefore essential to have documentation in place in such instances that correctly set out each respective sides’ responsibilities.

If you have any queries please contact your usual Campbell Dallas advisor.

Neil Morrison
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in October 2019. Laws and tax rules may change in the future.

IR35 Off Payroll in the Private Sector Rules Published

September 27, 2019

The draft reforms for the off-payroll legislation, commonly known as IR35 have now been published by the Government and are contained in the Finance Bill 2019-20. These provide that private sector firms who enter into contracts or make payments to workers engaged through a Personal Service Company (PSC) on or after 6 April 2020 will need to check the individual’s “deemed” employment tax status.

Reforms in the public sector were introduced in April 2017 with the prospect of this extension into the private sector introduced in the 2018 Budget. The legislation will come into force from 6 April 2020.

Where the individual’s role does look akin to an employment type one the engager, agency or third party paying the worker’s company will need to deduct income tax and national insurance contributions (NICs) and pay Employer NICs.

The responsibility for determining whether the off-payrolling rules apply will move to the organisation receiving the individual’s services.

The proposed reforms
A company that qualifies as a “small” business will not be required to apply the new rules. In these circumstances there is no change and the PSC will assess their own IR35 position, as they are required to currently, and be liable for income tax and NIC deductions, as appropriate.

A company will be regarded as small for this purpose if it has two (or more) of the following:

• Turnover – not exceeding £10.2 million.
• £5.1 million or less on the Balance Sheet.
• Number of employees not exceeding 50.

Any business so identified as small using the above guidance will still be required to apply the new rules if it is a subsidiary of a large or medium sized parent.

Further, anti-avoidance provisions are intended to ensure a business will not be able to contrive a situation which artificially creates a small business exemption.

The impact

Where an individual works for a medium or large sized engager outside of the public sector, through their own PSC and falls within these rules:

• The party paying the worker’s PSC (the fee-payer) will be treated as an employer for the purposes of income tax and Class 1 NICs.
• The amount paid to the worker’s intermediary for the worker’s services is deemed to be a payment of employment income.
• The party paying the worker’s intermediary (the fee-payer) will be liable for secondary Class 1 NICs and must deduct tax and NICs from the payments they make to the worker’s intermediary in respect of the services of the worker.
• The person deemed to be the employer for tax purposes must remit payments to HMRC and to send HMRC information about the payments using real time information (RTI).

Client-led disagreement process

A status determination statement outlining the end-client’s IR35 status decision must be provided to both the contractor and any party directly engaging the contractor (typically an agent). Until this is provided the end user will remain responsible for collecting income tax and national insurance. If the contractor does not agree with the IR35 status decision, there is a new client-led disagreement process. This requires the end-client to review a decision and provide a reasoned response within 45 days. If this deadline is not met the end-client will assume the IR35 liability.

The responsibility to deduct the payments for tax and NIC are therefore effectively transferred from the fee-payer to the end-client if the end-client defaults. This is a crucial aspect; the end-client could quite easily find themselves in a situation where they are technically in breach of the rules through an administration mistake.

Guidance

HMRC will be publishing detailed guidance for organisations and both general and targeted education packages, including webinars, workshops and one-to-one sessions with businesses in particular sectors.

Improvements are also expected to HMRC’s Check Employment Status for Tax (CEST) tool and, following testing by legal and operational experts and stakeholders, are expected to be available later in 2019.

Good News

On a positive note the Government has confirmed that the reform is not retrospective and that HMRC will not carry out targeted campaigns for earlier years where a PSC falls within the new IR35 rules from April 2020.
Instead HMRC are indicating that they will be ensuring businesses comply with the reform for new engagements. As such, an organisation’s decisions about whether workers are within the rules should not automatically trigger an enquiry into earlier years.

Next Steps for Businesses

Businesses that are caught by the new rules must act now by carrying out employment status assessments of their contractor workforce and establishing suitable administration systems and protocols.

Whilst these reforms might seem somewhat draconian, there is no doubt that businesses will still be able to engage legitimate contractors who will fall outside of the new rules.

We can support a business through the entire process and are specialists in complex IR35 and employment status reviews.

If you have any queries, please contact your usual Campbell Dallas advisor or:

aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Proposed Inheritance Tax changes for Excluded Property Trusts

September 18, 2019

Draft legislation in Finance Bill 2019-20 includes changes which could result in higher inheritance tax charges for some excluded property trusts from the date of Royal Assent onwards.

The current position

Under current legislation, non-UK assets within a trust qualify as ‘excluded property’, meaning that they are outside the scope of UK IHT, where the settlor was neither UK domiciled nor deemed domiciled (by virtue of being a long-term UK resident) at the time the settlement was made.

Where non-UK assets are transferred between trusts, these will only be treated as excluded property in the second trust if the settlor of the second trust was neither UK domiciled nor deemed domiciled (as a long-term UK resident) when the settlement was made.

The 2017 Court of Appeal decision in Barclays Wealth Trustees (Jersey) Limited & Michael Dreelan v HMRC confirmed in relation to transfers between trusts that the ‘time the settlement was made’ refers to the initial creation of the settlement, not the date of the transfer. Therefore, excluded assets transferred between trusts created while the settlor was non-UK domiciled should retain their excluded property status.

A logical extension of this principle might suggest that when determining the excluded property status of later additions to an existing excluded property trust, only the domicile status of the settlor at the time the trust was created is relevant. However, the court did not specifically rule on this point.

What is proposed?

Draft Finance Bill 2019-20 clarifies that non-UK assets cannot be excluded property where the settlor was actually UK domiciled or deemed domiciled (as a long-term UK resident) at the time the assets were added to the trust (this is opposed to considering the domicile of the settlor at the time the settlement was first created).

In addition, it is proposed that non-UK assets transferred between trusts will not be treated as excluded property where the settlor was UK domiciled or deemed domiciled (as a long-term UK resident) when the transfer occurs.

The draft legislation was published on 11 July 2019 and was open for consultation until 5 September 2019. It was proposed that the legislation would apply to all chargeable events, being IHT ten year charges and exit charges, from the date of Royal Assent onwards. It is intended that this will be the case regardless of whether trust additions were made before or after the date of Royal Assent. The proposals for transfers between trusts are only intended to apply to transfers which take place on or after the date of Royal Assent, so do not have a retrospective effect.

Example

Ravi settled two offshore trusts, the first in 1995 and the second in 1998, when he was neither resident nor domiciled in the UK. He moved to the UK in 2001 and became deemed UK domiciled from 6 April 2017 as he had been UK resident in at least 15 of the previous 20 tax years. In 2021, the 1998 trust received a transfer of non-UK assets from the 1995 trust.

The next ten year anniversary of the 1998 trust will occur in 2028. Under the proposed new legislation, the funds added in 2021 will not be excluded property at this date as the transfer was made when Ravi was deemed UK domiciled. These funds will therefore be subject to a ten yearly IHT charge at a maximum rate of 6%. In addition, if any of the transferred funds leave the trust, they may be subject to an IHT exit charge. Relief would be available to reflect the fact that the property added in 2021 has not been held in the trust for the full 10 years.

The transfer of assets from another trust with the same settlor will also have ‘tainted’ the trust from an income tax and capital gains tax perspective, which could result in higher income tax and capital gains tax charges in the UK.

Had Ravi left the excluded property in the original trust, it could have continued to benefit from IHT protection as it was settled before he became deemed UK domiciled as a long-term resident. The trust would also have retained its protection for income tax and capital gains tax purposes, provided it had not been tainted in any other way.

Action points

Individuals considering settling non-UK assets into trust and offshore trustees should take advice to ensure that they preserve the excluded property status of assets currently held in trust and do not inadvertently fall foul of the new rules.

Offshore trustees should also notify affected clients of the changes.

Campbell Dallas has substantial experience in working with non-domiciled individuals and offshore trustees and can assist with matters such as the following:

• Maximising IHT protection where possible by advising upon the segregation of trust assets where transfers in and/or additions have previously been made.

• UK tax planning for additions to settlements. Where an individual has become UK domiciled or deemed domiciled as a long-term resident, particular care is needed when adding funds or value to trusts. In addition to the potential IHT consequences, settling new assets or adding value into an existing trust can ‘taint’ that trust such that it loses its protected status, with adverse income tax and capital gains tax implications. There may be alternative options which are more efficient from a UK tax perspective.

• UK tax planning for trust restructures, particularly in the light of the proposed changes which could result in assets transferred between trusts losing their excluded property status.

• Reviewing existing and proposed trust structures from a UK tax perspective.

If you have any queries please contact your usual Campbell Dallas advisor or:

aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

VAT update: HMRC policy U-turn on certain no-show deposits for tour operators

September 12, 2019

The VAT treatment of payments for unfulfilled supplies has been a topical area in VAT for many years. In the latest policy paper from HMRC dated 6 September 2019, HMRC has admitted to making an error when updating its policy affecting the Tour Operators Margin Scheme (TOMS).

Background

Prior to 1 March 2019, HMRC accepted that certain retained deposits for unfulfilled supplies were deemed to be compensation payments and outside the scope of VAT. This treatment was widely seen within the travel and hotel sectors.

Following the EU Court ruling involving Air-France-KLM, HMRC changed its policy advising that from 1 March 2019, output VAT would be due on all retained payments for unused services and uncollected goods. The policy change would be wide-reaching and HMRC changed many of its VAT Notices accordingly, including the TOMS VAT Notice 709/5 – where HMRC advised that cancellation fees and forfeited deposits should be included within the selling price under TOMS, which subsequently increased the VAT liability.

HMRC’s recent policy paper (Revenue and Customs Brief 9 2019), advises that HMRC made an error when changing the policy for TOMS supplies. The paper explains that the tax point rules under TOMS are different to other types of supplies, and certain deposits should still be excluded from the TOMS calculation.

Under TOMS, there are two methods of determining the tax point of supplies – Method 1 and Method 2. We have replicated these from the policy paper below:

•    “method 1 and account for VAT when the traveller departs or the accommodation is occupied”
•    “method 2 and account for VAT when taking payment if it exceeds 20% of the sale price – if they receive a deposit of 20% or less then the treatment in method 1 applies”

Opportunity

If you use TOMS Method 1, no tax point is created until the traveller departs or the accommodation is occupied, therefore you must not include deposits within the TOMS calculation for supplies which customers fail to take up. In addition, if you use Method 2, deposits representing 20% or less of the price of the supply should be excluded from the TOMS calculation.

If you have accounted for VAT on such deposits, then you should be entitled to a refund from HMRC.

If you think you could be affected by this policy change, or if you have any wider VAT questions, please contact:

martin.keenan@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

HMRC delays implementation of VAT reverse charge for construction businesses

September 10, 2019

HMRC has announced a one year delay on the implementation of VAT reverse charge to 1 October 2020. Whilst this is good news for construction businesses who were not yet prepared, it may cause additional work for those businesses who were ready to go.

HMRC has said they recognise that some businesses will have changed their invoices already to meet the needs of the reverse charge and cannot change them back in time. Therefore they will take the change in implementation date into account where genuine errors have occurred. This does not mean that businesses can continue to issue such invoices, and steps should be taken to revert to pre-implementation invoicing.

Also, where businesses have already opted for monthly VAT returns, they should reverse this as soon as possible.

Those businesses not yet ready for the original implementation date should now take advantage of the extra time available and consider the software changes required, and extra funding requirements – if applicable.

Veronica Donnelly - Chartered Tax Adviser and Associate of the Institute of Indirect Taxation

Veronica Donnelly

veronica.donnelly@campbelldallas.co.uk

0141 886 6644

 

 

The information in this article should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Will VAT now be added to Botox procedures?

September 3, 2019

A recent VAT tribunal decision has led to headlines such as “Botox is not a medical procedure so VAT will have to be added”.  However, this is not necessarily the correct interpretation and caution should be exercised.

Skin Rich lost at a VAT tribunal in June 2019 because some of its treatments were not diagnosed by a medical professional and for those that were, the court was not satisfied that the evidence produced was sufficient to prove a medical purpose for the treatments.

The test for medical exemption in relation to VAT remains the same; the supply must be made by a person on a medical register, or someone supervised by that person, and the treatment must be one of medical care. The appropriate records must be kept to evidence these treatments and their purpose, and it is on this evidence that HMRC will rely.

The Court agreed that a treatment may have a cosmetic benefit but this does not preclude it also having the principal purpose of protecting, maintaining or restoring health. This should have resulted in an agreement to VAT exemption except that the Court went on to say “on the facts we do not find that this principal purpose has been established”. The issue was ultimately one of record keeping and evidence.

On a more positive light, the case clarified that it is not necessary for medical practitioners to have detailed specialisms on their medical registrations in order to demonstrate the required expertise. They do, however, have to provide other evidence to demonstrate their qualifications, experience and training.

Also, the discussion around the provision of care in any hospital or state regulated institution provided some useful insights. In this circumstance, where injectables “were administered by trained practitioners to improve a client’s appearance and make them feel better about themselves,…such treatment is of a medical nature and can comprise ‘care’”.  This is useful for Care Quality Commission (CQC) or Healthcare Improvement Scotland (HIS) registered clinics.

Our advice continues to be for businesses to look very carefully at their record keeping and evidence of medical purpose. There are no shortcuts. Where you can clearly evidence a medical purpose then VAT is exempt.

If you have any queries, please speak to your usual Campbell Dallas advisor.

veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Getting a net bang for your buck?

August 30, 2019

Current exchange rates make investment in UK commercial property cheaper for overseas investors, but the tax environment is less friendly than it previously was.

The current exchange rate for US dollar investors in UK commercial property would seem to make investment in the sector from overseas an attractive proposition. At the time of writing, the exchange rate is £:$1.23. This compares to a rate of £:$1.66 just five years ago. To put this into context, a commercial building valued at £2.3m would now cost $1m less than it would have 5 years ago.

The investor still has to consider rental yields, capital growth and the risk of sterling devaluating further, but on paper the investment seems considerably (just over 25%) more attractive than it was back in 2014 – all other things being equal.

One thing which is not equal, however, is the tax treatment of the investment in UK commercial property.

April 2019 changes

Since 6 April 2019, gains made on the disposal of UK commercial property will be taxed on non-resident individuals at 20% and (since 1 April 2019) on non-resident entities at corporation tax rates (currently 19%). The rules can also apply where the shares in a UK company which is “property rich” are disposed of.

Properties held prior to this date are rebased to their market value on the date on which the new regime was introduced, such that only increases in value from April 2019 will be taxed. It is therefore worth obtaining a valuation for any property held at that date as this will be helpful on eventual disposal.

The benefits of holding UK property through offshore structures have therefore been removed, and it is worth considering moving structures onshore to reduce the costs of maintaining offshore structures.
Those with such structures should seek advice to consider what the best way forward is before there is time for significant gains to accrue.

If you have any queries, please speak to your usual Campbell Dallas advisor.

craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

VAT on cottages for farms, estates and holiday lets

August 26, 2019

The VAT rules on rented houses on Farms and Estates can be complex. If a house is occupied rent free by an employee who is engaged in taxable activities of the business then VAT on repairs and improvements can be recovered on your VAT return in the usual way. If the house is let to the employee or to a third party, the rental income is exempt and therefore partial exemption rules should be followed.

Partial exemption can be complicated but, in simple terms, if the VAT inclusive spend on cottage repairs and improvements along with any other ‘exempt’ expenditure exceeds £45,000 in one VAT year, then all the VAT on the costs will be dis-allowed. This ruling is often misunderstood because spending £45,000 on a rental property is not a regular occurrence.

Normally Farms and Estates spend modest amounts on cottage repairs and therefore fall under de-minimis rules and receive full VAT recovery without having to apply the rules. If there are regular projects to renovate and upgrade rental properties then it can make sense to have a rolling program doing one house per partial exemption year to take advantage of the £45,000 upper limit under partial exemption. If the house has been empty for over two years or you are converting a non-residential property into a residential one, then the VAT could be charged at 5% instead of 20% giving an immediate saving.

Holiday lets

As the rural tourism market has grown, there has been an increasing trend to develop holiday letting businesses on Farms and Estates. The supply of holiday lets is a service and a standard rated supply for VAT purposes, unlike the letting of a surplus cottage to a third party. For that reason it is not unusual to separate the holiday letting business from the VAT registered Farm or Estate business for VAT purposes, but any planning needs to take into account the initial capital expenditure incurred to create the holiday lets.

This type of VAT planning applies to Farms and Estates with perhaps two to three holiday lets. However, for those businesses looking to develop the luxury caravanning and camping sector, the likelihood is the turnover associated with that will exceed the VAT registration threshold and the VAT rules will apply. There is specific VAT legislation dealing with caravan pitch fees and any rural business involved in this sector would be well advised to ensure they are applying the rules correctly.

We recommend you seek advice from a VAT specialist when carrying out work to any property. Our VAT team at Campbell Dallas would be happy to discuss your project with you and advise on how to minimise your costs. Please contact your usual Campbell Dallas advisor or:

ian.craig@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

Is the new ‘Sustainability’ model for GP premises unsustainable?

August 23, 2019

Younger GPs seem to be turning their backs on the proposed ‘sustainability’ financial model for GP premises. Neil Morrison, Head of Medical with Campbell Dallas, explores the issues, the pros and the cons.

Aside from pensions, the other hot financial topic across Scotland’s medical profession is the proposed “National Code of Practice for GP Premises”.

The code was first issued in Scotland in November 2017 and is part of the new GP contract introduced in April 2018.

The document outlines the Scottish Government’s strategy to create a sustainable environment and market for the ownership and use of GP premises. The ownership and transfer of ownership of medical ‘bricks and mortar’ has become an increasingly onerous issue. Traditionally, when they retired, GPs would sell their equity in a medical practice building to a younger partner.

Owning and managing premises is time-consuming, costly and bureaucratic. GPs want to focus on patient care rather than on thorny and draining issues such as valuations, dilapidations, surveys and roof repairs. The premises problem is proving an issue for younger GPs and disrupting the traditional transfer of premises ownership model. Essentially, too many younger GPs do not want to know.

The new premises strategy aims to mitigate the premises problem by gradually moving towards a model where GPs do not own (or lease) their premises.

The financial mechanism is the new ‘GP Sustainability Loans’. From 2018 to 2023 each property-owning practice will be eligible for an interest free loan of up to 20% of the value (assessed on an existing use basis). Further loans of up to 20% of the premises value will be available every 5 years thereafter.

As capital repayment is not required and the loans are interest free it seems an attractive proposition. Furthermore, the GP practice retains the full entitlement to notional rent, providing for very positive cash flow.

However, problems began to surface when property-owning practices started to receive initial valuation letters based on the Sustainability Loans. The valuations tended to be considerably higher than those provided by independent surveyors who were using the same ‘Existing basis’ methodologies. The long-term funding implications for the Scottish Government were shaping up to be unsustainable!

If it is too Good to Be True
The subsequent lack of detail and the commitments required from GP led to a growing concern, particularly amongst younger GPs. More and more were mulling over the viability of the new model. If it looks too good to be true, then it probably is!

Whilst virtually all property-owning practices registered an interest in the Sustainability Loan Finance, a large number have chosen not to progress an application.

The younger GPs are most concerned about the potential problems and issues. The feedback we are receiving from our wide medical client base indicates widespread anxiety about the risk, which is in turn acting as a blockage to the GP premises market. If younger GPs are unwilling to adopt the proposals, it will impact significantly on the sustainability of GP practices, GP recruitment and career progression, and in turn on medical care.

The Scottish Government clearly has a major problem on its hands.

In the meantime, the good news for younger GPs is that the traditional providers of finance for GP practices, namely banks, remain very keen to lend. The terms offered compare favourably with virtually every other business sector with finance available up to 100% of property values, a lower rate of interest and capital repayment profiles over many years.

As a result, more and more GP Practices, including many of our clients, are deciding to renew their loan facilities with their banks rather than entertain the Sustainability Loan finance product.

Arguably, more considered consultation could have helped prevented the ‘Sustainability Loan’ proposals from looking increasingly unsustainable.

The Medical Practice team at Campbell Dallas has extensive experience researching, negotiating and managing the finance and loan requirements of GP practices.

For further information, please contact Neil Morrison.

Neil Morrison
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

The Office of Tax Simplification’s (OTS) review of Inheritance Tax

August 22, 2019

The Office of Tax Simplification (“OTS”) has recently published their second report following the review of Inheritance Tax (“IHT”) which included 11 recommendations. These recommendations can broadly be categorised into three areas, namely, lifetime gifts; interaction with Capital Gains Tax (“CGT”); and IHT reliefs associated with businesses and farms. Some of the key recommendations have been summarised below.

Lifetime Gifts – time limits and taper

When an individual makes a gift to another individual for IHT purposes this gift is only a Potentially Exempt Transfer (“PET”) because it is necessary for the donor to survive seven years from the date of the gift to be completely free of IHT. If the donor does not survive the gift by seven years the IHT that may be chargeable is reduced on a sliding scale (known as taper relief) depending on how long they survived.

At the time of death, obtaining information relating to gifts made seven years ago can be difficult as it is difficult for executors to obtain bank statements and other financial records more than six years old.

Furthermore, the application of taper relief is complicated and not understood properly – it is a reduction in the tax payable not a reduction in the value of the PET.

OTS therefore recommends that taper relief should be abolished and shorten the survivorship period from seven to five years.

Lifetime Gifts – normal gifts out of income

Another significant reform that was included in the report relates to exemption for normal expenditure out of income. Where an individual has excess income, they can gift that excess income free of IHT if a pattern can be established.

OTS recommends either this relief is reformed to reduce the administrative burden in calculating the excess income. One of their suggestion is to limit the amount of income to a fixed percentage based on the most recent tax return.

The alternative recommendation is that the relief is abolished altogether and replaced with a higher personal gift allowance. OTS has not suggested a limit but a £25,000 personal gift allowance apparently covers the value of 55% of all normal expenditure out of income claims.

Interaction with CGT

Currently, when an individual inherits assets on death, these assets benefit from a market value uplift for CGT purposes so that the inherent gain is wiped out. The reason for this uplift is to mitigate double taxation on the basis that the asset would be subject to IHT on death. Therefore, the individual inheriting the asset does not pay CGT in relation to the growth in value associated with the asset whilst it was previously owned by the deceased.

The capital gains uplift applies to all assets and therefore it also applies to assets that would not otherwise be subject to IHT by virtue of certain exemptions. These exemptions could include spouse exemption, or other IHT reliefs such as Business Property Relief (“BPR”) and Agricultural Property Relief (“APR”). Where assets qualify for IHT reliefs, the recipient of the inheritance would inherit the asset free of IHT and is potentially able to sell the asset with no CGT. This circumstance gives rise to zero taxation.

The OTS mentions in their report that the CGT uplift on death distorts decision making when it comes to giving assets away. This is because, if an asset qualifies for IHT relief, it is usually more beneficial for the individual to pass these assets on death to benefit from both the IHT exemption and the CGT uplift.

The OTS therefore recommends removing the CGT uplift for assets that benefit from IHT exemption so that the recipient acquires the asset with the original acquisition cost of the deceased.

IHT reliefs

Many business owners and farmers have relied on a form of IHT relief called Business Property Relief (BPR) and Agricultural Property Relief (APR) when planning to pass their business to the next generation. One of the main conditions for BPR to apply is that the business must be wholly or mainly trading. This test considers a trading business to be one where its trading activities is greater than 50%.

For CGT purposes, when an individual gives away or sells their business to a third party, they may qualify for CGT reliefs such as gift relief or Entrepreneurs’ Relief. To qualify for such reliefs, the business must also qualify as a trading business. However, unlike BPR, to qualify for CGT reliefs the bar for assessing the trading activities is higher as it is necessary for the business to be substantially trading which HMRC suggests is greater than 80%.

OTS recommends that the Government should consider whether it is appropriate for the business test to be different for IHT and CGT.

Summary

It is still early days whether these recommendations may be introduced as law but they are certainly suggestions the Government will consider in an attempt to simplify the IHT regime. This can only mean that changes are afoot and it will be necessary to consider the impact on an individual’s estate and review one’s Will. Please get in touch with your usual contact for further details regarding the above or information relating to the other recommendations contained in the report.

If you have any queries on IHT, please speak to your usual Campbell Dallas advisor.

Aileen Scott
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this article should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

‘No quick fix’ for Scots’ doctors in UK review of medics pensions

August 8, 2019

Doctors and GPs in Scotland are likely to have to wait for some time before they see any positive changes to their taxation as a result of a commitment by the UK government to review how doctor’s pensions are taxed, a leading accountant specialising in the medical sector has warned.

Neil Morrison, Head of Medical with Campbell Dallas said:

“It is good news that Government ministers are proposing to change pension rules so that doctors can work additional shifts and treat more patients without suffering financially. A new consultation will be undertaken by the Department of Health and Social Care on the new proposals which will give senior doctors flexibility over the amount their personal and employer pension contributions.

“It should allow senior clinicians to do additional work without breaching their annual allowance and incur higher taxes. The Treasury will also review the highly unpopular tapered annual allowance, which has also led to much higher taxes for doctors. However, this whole process is going to take a considerable amount of time to finalise and for new pension rules to be adopted. As such, there are no quick fixes for Scottish doctors,” said Neil Morrison.

He added: “Doctors and GPs in Scotland will have to continue managing their income, pension contributions, finances and tax within the existing tax framework. We have many clients working in the medical sector that have suffered significantly higher tax bills in the last couple of years, and it is likely that these challenges will remain for the time being. It is essential that doctors ensure they arrange their income and pension in the most tax efficient manner.

“The situation is also slightly different in Scotland, and it will be up to the Scottish Government to decide how best to adopt the proposed revisions to pension rules. Unfortunately, this will also add further time to the process, however, we should welcome the fact that the current unpopular pension regime is being overhauled.”

Neil Morrison - a Partner in our Perth office

 

Neil Morrison

neil.morrison@campbelldallas.co.uk

01738 441 888

 

The information in this article should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

Major changes to the ability to reclaim import VAT

July 30, 2019

HMRC has issued Revenue & Customs Brief 02/19 which seeks to clarify its policy regarding who can act as the importer of record and recover the associated import VAT.

The brief advises that HMRC has become aware of situations where agents and non-owners of goods are acting as the importer of record and reclaiming import VAT. HMRC has confirmed that the correct procedure is for the owner of the goods to act as the importer of record and to seek VAT recovery in accordance with section 24 of the VAT Act 1994.

HMRC accepts that its previous guidance was unclear on the correct procedure, therefore it will not take retrospective action provided the parties involved acted in good faith and there is no risk of duplicated VAT claims.

HMRC’s new policy will be adopted from 15 July 2019. Claims for import VAT recovery will only be permitted where the legal owner of the goods acts as the importer of record and is entitled to reclaim the import VAT.

The clarification represents a significant change for organisations involved in the importation of goods.

How could you be affected? 
• If you purchase goods from outside the EU where ownership of the goods passes to you following importation into the UK (for example on incoterms DDP delivered duty paid), the supplier of the goods will be responsible for importing the goods into the UK, and the customer can no longer act as the importer of record for VAT purposes. The supplier may also have a requirement to register for UK VAT.

• If you purchase call-off stock where title to the goods remains with the supplier until you call-off following importation into the UK, the supplier would be responsible for importing the goods and the customer can no longer act as the importer of record for VAT purposes. This could result in wider commercial and contractual issues between the parties. There are customs procedures such as ‘customs warehousing’ which can help to mitigate the exposures.

• If you are involved in work on goods where the goods are temporarily imported into the UK and then exported back to the owner, you should consider the use of VAT Duty relief schemes such as Inward Processing Relief.

Organisations should consider the impact of these changes and make arrangements to ensure contractual terms are constant with the VAT policy and any costs and disruptions are minimised.

We are pleased that HMRC are unlikely to take retrospective action prior to 15 July 2019. If you have received assessments from HMRC within the last 4 years in relation to import VAT recovery, our team are on hand to help with any queries you may have. There may be scope to query assessments where import VAT was reclaimed in circumstances similar to those described in the brief.

This represents a significant change which could adversely affect suppliers and customers in the supply chain both practically and financially. If the UK leaves the EU without a deal, the impact of this change may well be greater.

For more information, please speak to either Martin Keenan within our Indirect Tax team or your usual Campbell Dallas contact.

martin.keenan@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in July 2019. Laws and tax rules may change in the future.

Aberdeen-based Williamson and Dunn to join Campbell Dallas

July 26, 2019

Long-established Aberdeen accountancy firm, Williamson and Dunn, is to join one of the UK’s leading business advisory groups Baldwins to become part of the fast-growing CogitalGroup on 2 August. Based on West Craibstone Street, the firm was founded in 1880, employs 5 partners and 36 staff and has a fee income of more than £3m.

In October 2017, Campbell Dallas and Springfords became the first Scottish firms to join Baldwins followed by Sinclair Scott in May 2018 and Scott-Moncrieff in April 2019.

Baldwins, a Cogital Group company, now has 88 offices throughout the UK as part of its national strategic expansion plan, employing 2,700 staff with an annual turnover of approximately £200m.

This latest deal underlines Baldwins’ further investment in Scotland as all staff and partners will transfer to Campbell Dallas, joining one of Scotland’s most innovative and fastest growing accountancy practices with 47 partners, nearly 550 staff and a combined fee income of circa £40m. The enlarged business will trade as Campbell Dallas from the West Craibstone Street offices whilst the Campbell Dallas office on Carden Place, which employs 2 partners and 10 staff, will continue business as usual.

After Baldwins’ deal with Campbell Dallas, plans were announced to drive growth in Scotland through a combination of acquisitions and organic expansion.

Williamson and Dunn provides accountancy, advisory, tax, audit, financial planning and compliance services to more than 1,000 owner managed businesses, entrepreneurs, and private individuals. The firm is known for its expertise in the family business, farming, fishing, property, healthcare, construction, estates and charity sectors.

George Flett, senior partner of Williamson and Dunn said: “Joining Baldwins and the CogitalGroup will enable us to provide our clients with access to a full range of accountancy services and specialists across Scotland, the UK and internationally. We will also gain access to industry-leading financial technology that will allow us to provide outstanding customer service. Our staff will also gain access to challenging and rewarding career opportunities at all levels across the wider group. The accountancy market is changing rapidly, and we hope our clients will quickly see the benefits of the deal.”

Chris Horne, managing partner of Campbell Dallas said the deal was a good move for both firms: “Williamson and Dunn is a highly respected Aberdeen firm with a long history of advising businesses and private clients, and we are delighted to welcome them to Campbell Dallas. The deal provides Campbell Dallas with further scale to expand our client base in Aberdeen and throughout the North East and provides staff with the chance to develop their careers across a larger business. Working together, we will offer the best technology driven services to our clients.”

Scott-Moncrieff joined Campbell Dallas in April this year, adding 16 partners and 220 staff. Campbell Dallas is now one of the largest full-service accountancy firms in Scotland outside of the ‘Big 4’.

Shaun Knight, Board Director at Baldwins, added: “Expanding in the North East is a significant move and underlines our commitment to further growth in Scotland. We welcome our new colleagues and look forward to working together as we continue to build a progressive and disruptive business in the fast-changing accountancy market.”

Entries open for young entrepreneur awards

July 18, 2019

Scotland’s next generation of entrepreneurs are being urged to enter a competition that offers substantial cash and mentoring support to kick start their business.

The KickStart awards, which are open to 18 to 25-year-old entrepreneurs, offers the winner a grant of £10,000 along with £10,000 worth of mentoring and accountancy advice. Two runners-up will each receive £5,000 worth of mentoring and advice.

Chris Horne, Managing Partner, said: “KickStart offers a generous package of cash and advice to young Scots’ entrepreneurs with an exciting business or innovative idea.

“Scotland is famed for its young entrepreneurial talent but with so much economic uncertainty at present it is essential that we support the next generation of entrepreneurs as they build their businesses. We hope as many new Scots’ entrepreneurs will take up the challenge and showcase their talent, and their ideas, on a national stage.”

Ten entrepreneurs will be interviewed about their ideas, with a final three being invited to present to more than 400 people at Edgbaston Cricket Ground in Birmingham on Thursday, November 14.

Last year’s Scottish winner, Michael Harkins from Livingston, landed the £20,000 investment for his shell-shaped swimming aid, known as Turtle Pack, that sits on a child’s back and allows them to swim freely without the need for armbands and handheld floats.

Michael said: “This money is going to go a long way and allow me to scale up the manufacturing of the product so I can fulfil large scale orders.”

David Baldwin, Director at Baldwins, added: “The KickStart programme has developed an enviable reputation for developing talented home-grown entrepreneurs, and the growing standard of entries that we receive year-on-year shows us that there is still more to come.

“Our 2018 winner Michael Harkins was a classic example – he spotted an issue with existing swimming apparatus while going about his daily routine as a swimming instructor, and with the right help and advice, he has turned a concept into a product that is now on the market.”

The deadline to apply for the Awards is Saturday, August 31. To enter, click here.

New talent programme success drives 25% expansion of Campbell Dallas Glasgow office

July 12, 2019

The success of Campbell Dallas’ pioneering apprentices and graduate trainee recruitment programme has resulted in the firm announcing a 25% expansion of the Glasgow office at Braehead by 4000 sq. ft with the capacity for up to 80 staff.

The internal transfer of 30 staff from the existing ground floor offices together with 15 new apprentices and graduate trainees being recruited in 2019 under the Campbell Dallas’ ‘Earn and Learn’ next generation development programme will account for around half of the additional space.

Since 2013 Campbell Dallas has recruited 119 apprentices and graduate trainees, including a record intake of 13 school leavers joining in 2018.

In addition, a recruitment drive for additional professional staff at all levels is expected to see the extra space fully occupied by the year end, taking staff working from the Glasgow office to more than 200. The firm is investing over £250,000 on the installation of utilities, cabling, technology, work-stations and office equipment.

Peter Gallanagh, partner in charge of the expansion, said: “The extra space will be a huge asset to the Glasgow office, which has seen double digit organic growth over the last five years. The additional capacity will allow us to continue our strategy of investing in our people, the latest technology, office systems and mobile working facilities.”

Top 100 Global listing for Campbell Dallas high flyers

July 10, 2019

David Booth, a newly appointed partner with Campbell Dallas, and Shahbaz Mirza, Campbell Dallas’ Digital Transformation Leader, have been named as rising stars in the ICAS Top 100 Young global CAs, a prestigious list of emerging talent identified by ICAS as the next leaders in the accountancy profession.

Peers across the industry were asked to nominate CAs under 35 that they believed to be excelling and showing leadership in their careers, thereby representing the best of ICAS across business, industry and public life.
Aberdeen-based David Booth, who was appointed a partner on 1st July, specialises in advising SMEs, owner managers and private equity backed businesses across a range of sectors including farming, oil and gas, retail, construction and property.

Glasgow-based Shahbaz Mirza is driving Campbell Dallas’ digital and cloud accounting offering. He has delivered digital innovation strategies for many government bodies and has extensive experience advising FinTech businesses in the UK and Middle East. This is the second year he has been named in the top 100 global CA’s list.

Chris Horne, Managing Partner at Campbell Dallas said, “We are delighted that David and Shahbaz have been recognised by ICAS as being amongst the best emerging talent within the accountancy profession. At Campbell Dallas we have a proven track record in developing emerging talent across the business and the achievements of David and Shahbaz reflect the quality of our people and the firm’s commitment to supporting our staff as they build their careers”.

Debbie Brodie promoted to Director in personal insolvency team

July 9, 2019

Campbell Dallas has promoted Debbie Brodie to the new post of Director within the firm’s Glasgow-based personal insolvency team. In the new role she will be responsible for directing the personal insolvency team and developing the range and scope of services provided by the firm in the personal insolvency market.

Debbie has more than 16 years experience of providing specialist advice and management of personal debt issues for a wide range of clients in Scotland. She has also played a key role managing the growing personal insolvency team, which consists of specialist debt advisers and insolvency experts. She has experience in all forms of statutory personal insolvency, the Debt Arrangement Scheme and post-appointment trading cases.

Commenting on her promotion, Debbie Brodie said: “I am delighted to have been promoted to the position of Director. Personal Insolvency is a highly complex area in which we are dealing with frequent changes in legislation whilst working with a wide range of clients who are often facing difficult issues. The team at Campbell Dallas adopts a very sensitive, client-focused approach, and I look forward to continuing to grow the department and extend our range of services.”

Commenting on her appointment, Derek Forsyth, Head of Campbell Dallas Restructuring and Insolvency department said: “Debbie is a major asset to the firm and in particular to our personal insolvency clients and to the team of specialist staff that she has carefully developed over the years. She has also made a significant contribution to the expansion of our personal insolvency department and to Campbell Dallas’s standing as a major player in the personal insolvency market. As such her promotion to Director is very well-deserved.”

Campbell Dallas announces new Partner appointments to support Aberdeen and Stirling growth

July 1, 2019

Campbell Dallas has appointed David Booth and John Gold as partners effective 1st July as the firm ramps up plans to expand the Aberdeen and Stirling offices. The new partner appointments are the first to be announced by the firm following the merger with Scott-Moncrieff in late April.

Based in the Aberdeen office, David Booth is a qualified CA specialising in advising owner managers and private equity backed businesses across a range of sectors including farming, oil and gas, retail, construction and property. He joined Campbell Dallas in 2018 from a Big 4 firm since when he has worked closely with Aberdeen senior partner Ian Williams to expand the client base and develop the firm’s services. David Booth comes from a well-known local farming family and has extensive knowledge of the business issues facing the rural sector.

John Gold is both a qualified CA and a Chartered Tax adviser. He is based in the firm’s Stirling office where he specialises in advising SME’s and owner managers on tax and financial strategies including succession planning, IHT and wealth planning. He qualified as a CA with Campbell Dallas in 1999 and has played a key role driving the growth of the Stirling office.

Commenting on the promotions, Scotland Managing Partner Chris Horne said: “David and John have made a major contribution to the growth of the Aberdeen and Stirling offices and played a key role in delivering excellent client service. Campbell Dallas, as part of the CogitalGroup, is leading the change in the profession as compliance becomes more automated and valued accountancy services becomes more advisory focused. Great technology still needs great people and I am delighted that John and David will be joining the partner group at Campbell Dallas to help deliver further growth.”

Following the new appointments there are now 47 partners across the business. The recent merger between Campbell Dallas and Scott-Moncrieff created one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 500 staff working from 10 offices.

Construction SMEs face mounting pressures

June 28, 2019

The Construction industry is an important part of the Scottish economy, employing around 175,000 people with an annual output value of around £14bn.

Despite this, some recent high profile insolvencies and reports highlight an increasing number of small and medium sized construction companies are showing signs of critical distress, once again drawing some negative headlines for the sector.

Concerns about the UK economy and whether it can withstand a no-deal Brexit, coupled with longer running issues such as high import costs and skilled worker deficits, have been cutting through and impacting key investment decisions. A recent report by the Federation of Master Builders highlighted that the first three months of 2019 saw the first fall in workloads for SME construction firms in six years.

In addition to the ongoing political uncertainty and its impact on workload, there are many other challenges facing SME businesses in the sector. Labour shortages and rising material costs are eating into margins, and intense competition for the little work that is being put out to tender is forcing contractors to bid exceptionally low.

With increased pressure on wages, an expected increase in material prices and still the widespread issue of poor payment performance, it is an industry with real cause for concern.

Changes to the way in which construction businesses will account for VAT, which come into effect from 1 October 2019, will add to these existing pressures for a large number of sub-contractors in the supply chain. Many firms will no longer be able to charge, collect and declare VAT which may reduce cash flow in their business by up to 20%. The impact will be significant for many. A recent article by Greg McNally, VAT Partner, goes into these changes in more detail.

While these issues are worrying, there are ways to manage the impact. Our Business Improvement Services team is vastly experienced in working with businesses in the construction sector and can assist in areas such as profit improvement, cash flow management and external funding. Our team can explore various ways in which you can improve the performance of your business, increase agility and the options available to help you. Analysis techniques can help you understand where gaps are and help inform a range of solutions.

For more information, please contact Blair Milne, Business Recovery Partner, or a member of our Property & Construction team.

blair.milne@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.

MTD for VAT: Registration action required and your how to guide

June 21, 2019

Many businesses will be aware of the MTD requirements for VAT which came into force on 1 April 2019 and may already be using compatible software or be in the process of setting this up. It is likely that you have already discussed what you need to do with your usual contact at Campbell Dallas, however please read the following to make sure you are fully compliant.

Please note, if Campbell Dallas prepare and submit your VAT returns, everything will be done on your behalf and you do not need to worry about the steps detailed below.

As a reminder, VAT registered businesses with a taxable turnover above the VAT threshold (currently £85,000) are now required to use the MTD service to keep records digitally and use software to submit their VAT returns.

If you are already submitting VAT returns through software such as Xero, Farmplan, Farmdata, Sage or Quickbooks, or are about to use bridging software, such as our CoZone client portal solution, you may think you are already MTD compliant. However, there are a few things you need to do before this is the case.

Firstly, consider when you need to register for MTD. This is determined by your VAT return periods and if you have a direct debit set up for paying HMRC or not. Please see the table below:

First MTD VAT return periodMTD VAT return due dateTime frame to register for MTD (direct debit payers)Time frame to register for MTD (non-direct debit payers)
Quarterly (1 April 2019 – 30 June 2019)07-Aug-1915 May 2019 – 30 July 20198 May 2019 – 04 August 2019
Quarterly (1 May 2019 – 31 July 2019)07-Sep-1917 June 2019 – 29 August 20198 June 2019 – 04 September 2019
Quarterly (1 June 2019 – 31 August 2019)07-Oct-1915 July 2019 – 27 September 20198 July 2019 – 04 October 2019

You can register earlier than the dates above, however, we strongly recommend you make sure you have given yourself plenty of time to complete the whole process before the next VAT return is due, in case you encounter any technical difficulties. Allow at least 24 hours after submitting the last non-MTD VAT return before registering. As the system is new and due to the significant volume of sign ups, we have in some cases seen delays of up to 10 days to complete the registration process.

You may have received a letter through the post from HMRC with details of how to register. If not, please use this link: https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat

When registering, you will need your HMRC login details, VAT number, UTR number for the business and company number (if applicable). Once this has been done, you should receive an email from HMRC within 72 hours confirming you have registered for MTD. Please do not try the next steps or attempt to submit an MTD VAT return until you receive this email. Check your junk mail if it has not appeared in your inbox.

Once you have received this email, ensure your accounting software is set up for MTD. This may be as simple as clicking a button to enable MTD, however additional steps may be required depending on the software used.

If you have a direct debit set up for paying your VAT to HMRC, update your details on the new HMRC portal once you have received the confirmation email. Again, leave plenty of time to update the system as some of our clients have experienced delays and technical difficulties when submitting these changes. Once all of the above is done, you should be ready to submit your first MTD VAT return.

If you are concerned about any of the above and have not already spoken to your usual contact at Campbell Dallas regarding the next steps, please get in touch now to discuss what may be required.

If you wish to discuss our CoZone MTD bridging solution, please let us know.

Amy Weatherup
amy.weatherup@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.

‘It’s our own Uber moment’

June 14, 2019

Our Digital Transformation Leader, Shahbaz Mirza believes accountancy is fast approaching its own “Uber moment” as the profession faces up to significant disruption as result of technology. The challenge is how a traditionally “bricks and mortar” business can go digital.

Shahbaz says “My role is constantly evolving and changing over time, because technology is constantly evolving and changing how business operates. It is my responsibility to drive change initiatives that are going to improve the business model, the technology model, and the people model for the firm as a whole.

This means that “digital transformation” is about more than apps – it’s about the people too. Shahbaz says: “If you look at some traditional accountants, they can be very siloed… we’re trying to ensure that our people can learn collaboratively, through teamwork and problem solving.”

On being #ProudtobeaCA, Shahbaz says: “Just because you’re a CA doesn’t mean that you have to fit into a stereotype… when you go to ICAS events you appreciate how many different types of CAs there are, and what they do, and what they’ve achieved, and that’s really inspiring.”

For anyone thinking about becoming a CA, visit our careers section.

Buying a Dental Practice?

June 6, 2019

Buying a dental practice can be exciting, profitable and rewarding. It can also be fraught with risk and become a costly mistake. Roy Hogg, Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL, offers some key buying tips.

If you’re at the stage of considering purchasing your first Dental Practice, or even looking to expand by opening in another location, there are some crucial points to consider. It is undeniably an exciting step forward, but it is incredibly important to think about and plan for the potential risks that may be involved.

If the purchase involves a practice which is already trading, this can easily make the transaction more expensive. This type of purchase will also require more financial and legal due diligence.

Another option may be to open a ‘squat’ practice. This option allows you to effectively start with a blank canvas and create a practice that matches your vision. While this way may seem tempting, there is also the added pressure of having no previous foundations to support you. Everything down to the last detail needs to be planned and thought out – people, training, equipment, hours, marketing and even uniforms.

Building a team that can support you from the initial steps of acquiring a brand to it becoming a reality, is a very significant step. As in the example of a ‘squat’ practice, every little detail needs considered, and having specialist support behind you that has extensive Dental sector experience will undoubtedly make this easier.

This support team will include the likes of:

• Dental Accountant (must be NASDAL member)
• Dental Solicitor (must be NASDAL member)
• Dental Bank
• Dental Valuer / Agent

As the transaction progresses, every GDP (General Dental Practitioner) should invest time to ensure they fully understand the process and the management of each step of the transaction.

Checking whether there is a sales prospectus for the practice helps give an early indication of how professional the seller is, or not. Ensuring that who you’re buying from is reliable and organised will certainly help. At the very minimum, you should ask to view the last 3 years trading accounts. It’s important that these are finalised and have been signed by a qualified accountant.

I would actively encourage preparing a financial projection, and in many circumstances these will be a mandatory request by the bank. Documenting the financial viability of the project is hugely important. It’s expected that the acquisition will cost a significant sum, so every possible assurance that the business can run successfully is highly advisable.

Ultimately, it’s important to emphasise the need to get the process right. I’d highly recommend avoiding taking any shortcuts – no matter how tempting – as this will only increase the potential future risks.

If you are considering buying a dental practice and would like to discuss what to look out for and your options, contact:

Roy Hogg
Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL
roy.hogg@campbelldallas.co.uk
01786 460 030

The information in this article should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.

Taxation of Vans – Employer Tax Update

May 17, 2019

The tax treatment of vans has become more complicated following a recent case which has been upheld at the Upper Tribunal (UT) in favour of HM Revenue & Customs (HMRC) relating to what constitutes a “van” for benefit in kind (BIK) purposes.

HMRC challenged Coca Cola’s treatment of three vehicles: a first and second generation of the VW Transporter T5 Kombi and a Vauxhall Vivaro.

The case relied on two factors in deciding whether the vehicles could be considered goods vehicles as defined by legislation. The first being whether the vehicle was of a construction to transport goods and the second being whether the vehicle was primarily suited for the transport of goods.

Although all are constructed for the transport of goods, the inclusion of the second row of seats, which are removable, and side windows meant that there was a question whether transporting goods was the primary purpose.

The UT supported the First Tier Tribunal’s (FTT) decision that the VWs were not suitable vehicles and that the Vivaro was. The difference being that the second row of seating in the VWs stretched the width of the vehicle and was bought in this form. Given the dual purpose, it could not be said to be primarily suited for the transportation of goods.

The Vivaro’s scenario was slightly different as it did not have the extra seats included in production but was subsequently modified to add them. Its second row of seats only covered half the width of the vehicle with an area left for goods alongside which was sufficient to allow the UT to accept the FTT’s decision.

What’s the impact?

This decision will potentially affect employers and employees using such combi style vans.

The employee may now have an income tax liability as they will be treated as having a car benefit. A van benefit itself may not have been applicable for the employee if private use was insignificant. As a car however, commuting would be considered a private use and so a BIK will likely be reportable on form P11D. The benefit value is calculated based on the vehicle’s CO2 emission and its list price. The value placed on the benefit can therefore be substantial.

The charge to the company is the Class 1A National Insurance which is payable on the value of the benefit provided.

For capital allowances purposes, the same construction and primary purpose tests apply. It is therefore likely that where 100% annual investment allowance in the year of purchase applied previously, only writing down allowance at 18% or 8% will now be available annually.

There should be no change to the treatment of vehicles for VAT purposes with its car definition unchanged.

What to do now?

HMRC have yet to update their guidance in relation to the approach that should be adopted for combi vans as a result of this case. However, in light of the judgement, a fuller understanding of the vehicle is needed to establish whether it falls into the van or car category.

We expect to see HMRC challenge the treatment of more vans where a second row of seats are present.

In practice, however, our recent experience shows that HMRC are on some occasions willing to consider other factors such as the type and nature of business, industry sector and factors surrounding actual use. This recent case gives HMRC additional weight to their challenges on whether a vehicle should be treated as a car rather than a van.

You may wish to review your current fleet and keep the above in mind if looking to acquire new vehicles.

We always recommend that accurate mileage records are kept for your company vehicles.

If you have any queries regarding this, please do not hesitate to get in touch with your usual Campbell Dallas contact.

Mark Pryce

mark.pryce@campbelldallas.co.uk

0141 886 6644

The information in this article should not be regarded as financial advice. This is based on our understanding in May 2019. Laws and tax rules may change in the future.

How can you know what you don’t know?

May 3, 2019

Having spent 33 years advising businesses on how best to procure something they frequently needed (debt), and then helping the business owners look after what they had accumulated (cash), it is only when you move into a different role that you realise what a great educator the passage of time can be.

Businesses and their shareholders have seen significant change from their banks in recent times, whether it involves their debt being sold, a requirement of growth funding, being moved to specialist lending (sometimes referred to as bad bank), sector over-exposure, limited appetite for the lending opportunity or the often-heard refrain of: ‘It’s too early’.

Since leaving the banking world, during which time I learnt a huge amount and worked with some great people it never ceases to amaze me how that knowledge and network can help businesses with one of their most critical business relationships – namely managing their bank, or banks.

Entrepreneurs want to run a successful business, but it does not always mean they are fully equipped (they can’t know what they don’t know), on how best to engage with their banking partner to achieve the most appropriate outcome.

A major change in recent years has been the growing importance of language – how to best understand the credit appetite and sector position of the lender, how to position your request, benchmark your total facility and spend time maintaining or creating alternative relationships.

No lender ever wants to lose a customer if they can help it, as winning a new one or a re-bank as it is now called is increasingly challenging and costly against a market in which there is currently more supply of debt than demand.

It is very important that business owners should focus on creating a strong multi-layered relationship with their existing lender even if they hold cash as you never know when you may need to make that call.

However, should you encounter challenges in any aspect of your requirement or are just looking for a sounding board, it is a good plan to consider asking someone who will ‘Know what you don’t know’ – saving you time, money and pain.

For more information contact:

Murdoch MacLennan

Partner, Banking Specialist and Head of Brewing & Distilling

murdoch.maclennan@campbelldallas.co.uk

0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in May 2019. Laws and tax rules may change in the future.

Scott-Moncrieff joins Campbell Dallas to become part of the CogitalGroup

April 17, 2019

Scott-Moncrieff, Scotland’s longest established accountancy firm, is to join forces with Campbell Dallas to become part of the fast-growing CogitalGroup.

The deal, which is for an undisclosed sum, will see all 16 Scott-Moncrieff partners and 220 staff transfer, creating one of Scotland’s largest accountancy and business services firms. The joint business will employ 45 Partners and over 500 staff in Scotland, operate from 11 offices from Inverness to Ayr, and have a combined fee income of approaching £40m per annum. The deal will take effect from 3 May.

The deal with Scott-Moncrieff follows on from Campbell Dallas joining Baldwins and the CogitalGroup in October 2017. At that point, plans were announced to drive growth in Scotland through a combination of acquisitions and organic expansion.

Stewart MacDonald, Managing Partner at Scott-Moncrieff, said: “Joining Campbell Dallas and the CogitalGroup presents an exciting opportunity for our clients and our people. CogitalGroup leads the industry in using technology to deliver cutting edge services to clients, with the ability to adapt quickly to changing client needs. Together, Scott-Moncrieff and Campbell Dallas will be able to provide our clients access to a wider range of additional services and to more efficient ways of working.”

Scott-Moncrieff provides a broad range of audit, accountancy and business advisory services to SMEs, public sector organisations, charities, entrepreneurs and private individuals. The firm’s sectoral strengths lie in financial services, technology, manufacturing and the public sector. The expanded business will provide the full portfolio of accountancy and advisory services together with an extensive expertise in industry sectors ranging from brewing and distilling to farming, education, professional partnerships, dental and medical practices.

Chris Horne, Managing Partner of Campbell Dallas, added that the merger is a pivotal deal for the firm and for Scotland’s accountancy sector.

He said: “By joining with Scott-Moncrieff the whole UK business gets access to one of the country’s strongest public and third sector firms as well as expanding our geographical footprint in the North and East of Scotland. The combined business will have the largest VAT team in Scotland and provides us access to specialist services in areas such as IT strategy and cyber security. All services we see our clients needing more of in this time of rapid change. We will also be providing our staff with more opportunity for rewarding and varied careers whilst we remain focused on being the leading adviser to entrepreneurial businesses and providing the best technology driven client services.

“The deal with Scott-Moncrieff adds significantly to our credentials and adds their expertise in the public sector and charities to the portfolio. We welcome our new colleagues and look forward to working together as we continue to build a progressive and disruptive business in the fast-changing accountancy market.”

Shaun Knight, Board Director at Baldwins, added: “This exciting news underlines our commitment to further growth in Scotland and will give businesses the ability to access our specialist services including banking and finance, insolvency and forensic accounting.

“We are looking forward to welcoming our new colleagues who share a similar ethos to our own and this is a fantastic opportunity to strengthen our position in the country.”

Stamping out Missing Trader Fraud

April 11, 2019

The Government has prepared draft VAT legislation, expected to come into force from 1 October 2019, to tackle an estimated £100m tax loss in missing trader fraud.

This will mean sub-contractors in the supply chain will no longer be required to charge, collect and declare VAT. For sub-contractors this could mean simplified VAT accounting, but a reduced cash flow in their business of up to 20%. For larger firms there may be cash flow benefits, but increased accounting responsibilities.

What is the problem?
Missing trader fraud, also known as carousel fraud, has been around for 20 years. At its simplest form, a business is created and enters into a supply chain. Sometimes these supplies take place and on other occasions the whole supply chain is fabricated. At one point in the chain, VAT may be collected which is not remitted to HMRC. In addition, HMRC are concerned about businesses that register and reclaim input tax on projects that do not exist. By the time HMRC realise the fraud, the VAT repayments have been taken and the fraudulent parties have moved on.

What steps have the Government put in place?
Missing trader fraud is common across a number of sectors including mobile phone supplies, and gas and electricity commodity trading. HMRC introduced legislation to utilise a “reverse charge” to tackle this problem, and it is has been successful in these sectors. It is this legislation that will be extended to the construction sector.

What is the reverse charge?
Ordinarily it is the supplier in any transaction that is required to charge and account for VAT. The reverse charge moves this responsibility onto the customer. Essentially the supplier will only charge and receive the net amount, whereas the customer will charge itself VAT which it can then recover according to normal rules.

Let’s say that a subcontractor was due to charge £100k on a standard rated project. It would normally collect £20k as output tax and remit this to HMRC on its next VAT return. Following the changes, the subcontractor would only charge and collect £100k, and therefore any intent to ‘go missing’ would be avoided.

As for the contractor, they would have normally paid out £120k to the subcontractor, and reclaimed the £20k of input tax on its next VAT return. Following the changes, it would now only pay £100k and would charge itself £20k on its next VAT return. Assuming this relates to a taxable supply, and there is no partial exemption, then this £20k would be recoverable on the VAT return. This would therefore have a net nil effect on the return, and would effectively be a paper exercise.

As for fraudulent traders who fabricate supplies – they could normally make a claim stating that they had paid subcontractors say £120k, reclaiming £20k of VAT before disappearing. Following the change, there would be no VAT to pay or claim on the supply, which would prevent fraudulent claims from being made.

Want to find out more?
The draft legislation that has been published would see the reverse charge apply to ‘specified supplies’ of services. The type of services that are included and excluded are based on the definition of ‘construction operations’ and the rules that are currently in place for the Construction Industry Scheme.

For more information please contact Veronica Donnelly, Partner and Head of VAT. Our specialist VAT and Property & Construction teams are also able to advise you on this area.

The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2019. Laws and tax rules may change in the future.

Superannuation: Employer Rate Change

April 8, 2019

As all Practices will now be aware, the employer rate of superannuation increased on 1 April 2019 from 14.9% to 20.9%. This will impact on GP partners as well as Practice staff.

It has been confirmed that this increase will not be a cost to Practices as funding will be provided to meet the increase. What is still not clear however, is the mechanism for calculating the refunds and timing of payments.

A further update was issued on the week beginning 25 March which advised discussions were ongoing between PSD, Scottish Government, SGPC and BMA to find a resolution. AISMA firms have also been consulted and we provided our comments.

Practices have been advised that their payroll systems require updates now for the employer rate change. They have also been requested to continue to remit the monthly superannuation contributions to the Scottish Public Pensions Agency (SPPA) by the due date of the 19th of the following month.

It is possible that Practices may receive funding for the increase in relation to GP partners that have opted out of the superannuation scheme. This would therefore be a net gain for such individuals and Practices. We have been notified that the legal position is currently being checked as to whether there is an obligation or not to provide such funding.

If you have any queries on superannuation, or any other financial matters, please do not hesitate to contact your usual Campbell Dallas advisor or:

Neil Morrison
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2019. Laws and tax rules may change in the future.

Employment Tax Changes 2019/20

April 4, 2019

With the start of a new tax year on 6 April 2019, there are some changes to bear in mind going forward.

PAYE and NICs – Scotland v rUK

There is an acceleration in the increase in the personal allowance from £11,850 up to £12,500.  Originally expected to rise to this level by 2020/21, this increase has been brought forward to April 2019. There have also been increases in the basic rate and National Insurance thresholds which are all set to benefit the taxpayer.

Although the personal allowance is decided by the UK government, income tax thresholds are determined by devolved parliaments. The rates payable by Scottish taxpayers are out of sync from rUk in the 2019/20 tax year with 5 income tax rates adding considerable complexity. Tax rates are determined by where the tax payer resides, not where they work and are indicated on tax codes by a prefix of “S” for Scottish taxpayers. HMRC will notify employers of any amendments via P6 or P9 notices.

Scottish ratesRate  Taxable income band   Tax on band
%££
Starter rate19First £2,049389.50
Basic rate20Next £10,3952,078.80
Intermediate rate21Next £18,4863,882.06
Higher rate41Next £119, 07048,818.70
Additional rate46Excess

Pensions & Scottish Taxpayers

“Net Pay” pension schemes members have their pension contributions deducted before Income Tax is applied to their pay and are therfore largely unaffected by the above noted devolved Scottish tax changes.

However, pension schemes using the “at source” mechanism, will continue to claim tax relief at the rate of 20% for members who are Scottish taxpayers. For pension scheme members who are Scottish taxpayers liable to income tax at no more than the Scottish starter rate of 19%, or who pay no tax, current tax rules will continue to apply. This means that scheme administrators will continue to claim relief at 20% in respect of these individuals, and HMRC will not recover the difference between the Scottish starter and Scottish basic rate.

Scottish taxpayers liable to income tax at the Scottish intermediate rate of 21% will be entitled to claim the additional 1% relief due on some or all of their pension contributions above the 20% tax relief paid to their scheme administrators. HMRC have indicated that whilst they will not be able to correct this directly with the pension scheme, they will adjust the tax code to provide tax relief through the payroll.

Scottish taxpayers liable to Income Tax at the Scottish higher rate (41%) and Scottish top rate (46%) will be able to claim additional relief on their contributions up to their marginal rate of tax. This should be done either in their Self-Assessment tax return or by contacting HMRC.

Pension Contributions

April 2019 sees the final increase in the Automatic Enrolment minimum pension contributions rate. From April, the minimum contribution rate increases to 8% of which a minimum of 3% must be an employer contribution.

Student Loans

There are increases to the thresholds for both Plan 1 and Plan 2 Student Loan deductions. April 2019 will also see the first Post Graduate Loan (PGL) deductions. Employers will continue to apply student loan deductions based on the information contained within the P45, Starter Checklist or SL1 notice from HMRC. Instructions to operate a PGL will come from HMRC in the form of PGL1 notification.

National Minimum Wage and Statutory Payments

Increases to the National Minimum Wage across all age groups take place from 1 April 2019. The new rates are as follows:

Aged 25 and above                          £8.21

Aged 21-24                                         £7.70

Ages 18-20                                          £6.15

Aged under 18                                   £4.35

(but above compulsory school leaving age)

Apprentices aged under 19          £3.90

Apprentices aged 19 and over     £3.90

(but in the first year of their apprenticeship)

Increases for statutory payments such as Statutory Maternity, Paternity, Adoption and Shared Parental Pay and Statutory Sick Pay take place from 6 April 2019.

Payslips

From April 2019, the statutory right to receive an itemised payslip will be extended to all workers, not just employees. For those whose pay varies depending on the number of hours worked, their payslip must show the amount of time they are being paid for. Employees are defined under the Employment Rights Act 1996.

Company Cars

Increases of 3% on the calculation percentages used on all CO2 emission rates and an increase in the fuel benefit charge will see company car drivers pay more for their benefit. The diesel surcharge increased from 3% to 4% from April 2018. However, new diesels that comply with the Euro 6d emissions standard (also referred to as RDE2) do not attract this surcharge.  With Euro 6d testing not being mandatory on new cars until January 2021, it is unlikely that diesel company car drivers will benefit from this just yet.

For 2019/20, the 3% increase applies to all cars including electric and Ultra Low Emissions Vehicles (ULEV’s).  ULEVs are cars with CO2 emissions below 75g/km. However, from 2020/21 all electric cars attract a benefit in kind percentage of just 2% – a reduction from 16% in 2019/20.  The calculation percentage of hybrid cars will be assessed by the number of miles they can be driven in all-electric mode ranging from 2% for electric range of over 130 miles to 14% for less than 30 miles. These represent significant savings for the tax payer and worth considering if you’re looking to change company car soon.

Other expenses and benefits

Employers who reimburse subsistence costs at HMRC benchmark rates will no longer have to check receipts from April 2019. However, they will still need to keep records demonstrating the expense was incurred for qualifying business purpose.

Currently where employers pay contributions to a life assurance policy or a qualifying recognised overseas pension scheme (QROPS) and the beneficiary is the employee (or certain members of the employee’s family), no benefit in kind exists. From April 2019 this exemption is extended such that the provision of death or retirement benefits will not be subject to tax when the beneficiary is any individual or a registered charity.

Working Practices

Following the Independent Taylor Review of Modern Working Practices and the subsequent release of the Good Work Plan, the gig economy and employment status continue to receive attention. There have been promises of clearer guidance from HMRC along with developments to its Employment Status Indicator tool but with many cases still being decided by the courts, uncertainty looks likely to continue into 2019/20 and beyond.

The Good Work Plan also outlined changes to the holiday pay reference period for the calculation of holiday from 12 weeks to 52, a ban on employers making deductions from tips and gratuities and a right to a written statement outlining contract and rights from day one for all workers, not just employees.

The Future

Whilst there remains much uncertainty ahead, there are some changes already announced for April 2020. These include:

  • extension to the off-payroll working legislation to those engaged through personal service companies to most of the private sector
  • Secondary Class 1 NICS (employers) payable on termination and redundancy payments above £30,000
  • Executive Pay Ratio reporting

For more information, contact:

Mark Pryce

mark.pryce@campbelldallas.co.uk

0141 886 6644

The information in this article should not be regarded as financial advice. This is based on our understanding in April 2019. Laws and tax rules may change in the future.

VAT Brexit Guide for Business

April 3, 2019

As you may already be aware many VAT registered businesses have been receiving letters from HMRC recommending that an EORI number should be applied for in preparation for Brexit.

In the current climate, subject to further votes, a no-deal Brexit outcome still remains a possibility and regardless of what and when any current rules may change we recommend that all businesses involved with the movement of goods, should apply for an EORI number as soon as possible.

What you do need to do:
•    Apply for an EORI number now, which takes 2-3 days
•    Apply for Transitional Simplified Procedures, a quick, same day process
•    Communicate with your current agent or get one
•    Take advantage of Postponed accounting for import VAT

For our full VAT Brexit guide, click here

Veronica Donnelly
veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2019. Laws and tax rules may change in the future.

Increase of automatic enrolment contributions

March 29, 2019

As of 6 April 2019, the minimum contributions you and your staff pay into an automatic enrolment workplace pension scheme will increase. With the deadline fast approaching, it is expected that you’ll have made your staff aware of the changes. Businesses could face a fine if the right minimum contributions are not being paid from 6 April 2019.

Does the increase apply to you?

If your staff are in a pension scheme for automatic enrolment, you need to take action. All employers are required to make sure at least the minimum amounts are being paid.

For those businesses that don’t have staff in a pension scheme for automatic enrolment, or if you are already paying above the minimum amounts, you are not required to act. Likewise, if you’re using a defined benefits pension scheme the increases do not apply.

What are the increases?

Contribution percentage

Employers will be required to make at least the minimum contribution of 3%, while staff must make up the difference. For those employers that have decided to make the total minimum contribution, staff will not need to pay anything towards their scheme.

The amount paid into the pension scheme will vary depending on the type of scheme and the rules of that scheme. The amount staff contribute could also vary depending on the type of tax relief applied by the scheme.

There are certain considerations that must be taken into account when calculating contributions for the minimum 8% rate:

• Salary
• Wages
• Commission
• Bonuses
• Overtime
• Statutory sick pay
• Statutory maternity pay
• Ordinary or additional statutory paternity pay
• Statutory adoption pay

What actions are required?

Under the Pensions Act 2008, it is the responsibility of the employer to make sure the right minimum contributions are being paid. To ensure the right contributions are made from 6 April 2019, follow the steps below:

1. Work out which increases apply
2. Work out which staff it applies to
3. Make sure the way you calculate contributions and pay them to the pension scheme is ready to apply the increases

To discuss how to implement these changes, please contact your usual Campbell Dallas advisor, or:

Carol Wright - Partner, Edinburgh, and Head of Payroll in Scotland

Carol Wright

Partner and Head of Payroll

carol.wright@campbelldallas.co.uk

0131 440 5000

The information in this article should not be regarded as financial advice. This is based on our understanding in March 2019. Laws and tax rules may change in the future.

Case opens doors for significant tax relief claims for silos in Scotland

March 18, 2019

The result of a recent high profile tax case has opened up the opportunity for farmers to save significant amounts of money by being able to now claim tax relief on specialist buildings and structures, according to Andy Ritchie, head of Rural at Campbell Dallas.

The case was based on tax relief claimed on a new grain drying and storage facility by Mr Stephen May, a farmer in North Devon. Mr May required a facility for drying and conditioning of the grain after it had been harvested, and for storing the grain until it was sold. The facility was constructed on his land and he asked the supplier “to manufacture and supply a grain store building purposely designed for the customer to include control of temperature and moisture levels for grain”. Although based in Devon this was a grain store facility very similar to many throughout Scotland. The findings of the case should encourage cereal farmers to review future and even previous expenditure on similar buildings.

Crucial to the decision was that the structure needed to be classed as a ‘grain store’ or ‘silo’ – Tax Legislation allows silos to be claimed as plant and machinery. HMRC challenged the claim arguing the facility was a “building”. HMRC were willing to accept that 20% of the costs should qualify for allowances, the tax payer arguing that the entire expenditure should qualify.

The evidence demonstrated that expenditure on the structure cost was approximately double what a general purpose agricultural building would have cost, and was unsuitable for use as a livestock building. The tribunal was also happy to accept that the storage was temporary even although the grain could be in store for 9 months.

In reaching their findings the tribunal noted that “to an observer with no specialist knowledge of agriculture, it simply looked like a large steel-framed barn or shed with a concrete floor, in which piles of grain were lying on the floor, however, the facility was specifically built and designed to serve the purpose of drying the grain following harvest and maintaining it below certain temperature and moisture levels pending sale.” The tax tribunal concluded that the whole structure, not just the moveable items within it, were integral to its function of drying, conditioning and the storage of grain.

Prior to the decision, most grain buildings and structures were deemed not eligible for capital allowances. Since the abolishment of the Agriculture Buildings Allowance in 2011 most agricultural buildings constructed have not been eligible for capital allowances. Under the new Structures and Buildings Allowance, it is possible to offset 2% of expenditure on buildings each year for the next 50 years but qualifying for plant and machinery allowances is far more advantageous.

Andy Ritchie of Campbell Dallas warned that “the decision in this case does not allow any farm building to be treated as Plant & Machinery, it does however create opportunities for some structures and buildings to be treated as plant.” He advises “farmers should review recent expenditure on any buildings that are specialist in their purpose such as grain store and cold stores. The key to a successful claim is to seek professional advice to ensure they fully understand the Capital Allowances legislation, case law and understanding farm processes”.

For more information, contact:

Andy Ritchie

Andy Ritchie

andrew.ritchie@campbelldallas.co.uk

01738 441 888

The information in this article should not be regarded as financial advice. This is based on our understanding in March 2019. Laws and tax rules may change in the future.

Contractors face loans tax hit

February 27, 2019

On 5 April contractors paid by loans could face significant tax charges.

Many contractors have been engaged through structures whereby part of their remuneration was as a loan rather than PAYE. New legislation introduced by the UK Government means that for any loans which remain outstanding as at 5 April 2019, the amount of the loan will be subject to income tax as earnings in the current tax year.

As a result, many contractors will face significant tax liabilities where they have participated in this type of planning for a number of years. Those with the funds available may still be able to settle with HMRC ahead of the deadline date (although the official date by which HMRC were accepting settlement offers has passed, it may not be too late to reach an agreement), or alternatively the loan can be repaid.

Income tax would then be repayable when those funds are drawn down at a later date, but this could be done over a number of tax years rather than the full amount being taxed in the one year (and therefore more likely mostly at the higher/additional rate of tax).

However, many contractors will find themselves in a position where they are not able to do so, and it is highly unlikely that criticism of the fairness of the legislation in the House of Lords and elsewhere will result in any material changes.

Whilst HMRC will allow time to pay for those agreeing a settlement, it may still be that some simply are not able to meet their liabilities; in which case they should take professional advice on how best to approach the position. Whilst the three options of settlement, paying back the loan or paying the loan charge may not be available to all, simply doing nothing is not an option.

There are a number of personal debt solutions available, depending on your individual circumstances, and usually the earlier you seek professional advice the more options remain available.

If you are affected, speak to one of our tax or personal insolvency advisors to make a plan of action for your individual circumstances.

Craig Coyle - qualified Chartered Tax AdvisorCraig Coyle, Tax Partner
craig.coyle@campbelldallas.co.uk
0141 886 6644

Blair Milne - qualified Insolvency PractitionerBlair Milne, Restructuring & Insolvency Partner
blair.milne@campbelldallas.co.uk
0141 886 6644

The information in this article should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.

Digital tax deadline being ignored by Scottish businesses

February 19, 2019

The vast majority of Scottish SME’s are not ready for the ‘Making Tax Digital’ (MTD) revolution, according to our research across a broad section of Scottish businesses.

MTD affects VAT registered businesses including sole traders, partnerships, companies, LLPs and charities with a taxable turnover above £85,000. In limited cases there is a six-month extension, otherwise all affected businesses must comply from 1st April 2019, which means keeping digital books and records and filing VAT returns using MTD compatible software.

Only 13% of all VAT returns are currently submitted via software, highlighting the scale of change required, irrespective of other pressures businesses are currently facing. There will be a ‘soft landing’ for HMRC penalties during the first year, but only in respect of certain digital links for transfer or exchange of data between software programs or applications used in the MTD for VAT process.

Businesses will be liable for fines that will vary according to the nature, and extent, of any non-compliance. MTD is being rolled out as part of the Government’s drive to digitise the tax system and reduce some of the estimated £33bn tax gap caused by issues including error, lack of care and criminality.

Fraser Campbell, Head of Family Business at Campbell Dallas, said: “MTD is being overlooked by too many businesses and it is going to become a costly oversight if there is little change to the current low rate of engagement. The media focus on the business community is understandably Brexit-centric, however, the reality is that MTD is equally pressing, if not more so. We would urge any companies that have yet to tackle MTD to do so with some urgency.”

At Campbell Dallas we have been raising awareness around MTD for the past 2 years and have just launched a further series of seminars, drop in days and workshops across Scotland for any business requiring support to become MTD-compliant, and to understand the processes involved, and the costs of inertia.

Find an MTD event near you

With MTD events across all of our offices; including seminars, drop in days and training workshops, contact us at communications@campbelldallas.co.uk to sign-up and find out more.

You can also find out more information here about what MTD is and how to become compliant.

By submitting your details, you consent to Campbell Dallas contacting you to notify you of events you may be interested in. We won’t share your information with any third party organisations.

The information in this article should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.

Buy-to-Let or Buy-to-Lose?

February 18, 2019

Tax rates and legislation have increasingly been used as a matter of policy in recent years to make ownership of buy-to-let residential properties less attractive to individuals.

The Government introduced changes such as ADS (Additional Dwelling Supplement) and the restriction of mortgage interest relief to discourage the purchase of second homes by property investors and buy-to-let landlords. The rationale behind this was to ease the UK-wide housing shortage and prevent housing prices being driven up by investors with multiple properties and holiday homes.

The most recent change in the current Scottish Budget is to increase the rate of ADS from 3% to 4%. A buy-to-let investor buying a flat for £200,000 will now pay £8,600 more in LBTT (Land & Buildings Transaction Tax) than a first-time buyer.

Together with the restrictions on relief for mortgage interest, and increasing income tax rates in Scotland, both the tax costs of entry to the sector and ongoing tax costs have significantly increased.

Those looking to invest should consider using a limited company structure to lower the ongoing tax cost, given comparatively low corporation tax rates and the availability of full tax relief for interest. However, lenders may seek a higher rate of interest for corporate debt.

Investors with existing portfolios should consider whether moving these to a corporate structure is the right thing to do. Depending on the individual fact pattern, the cost in terms of LBTT, Capital Gains Tax and refinancing may give rise to a favourably short or inimically long payback period compared to any ongoing income tax savings. There may be steps which can be taken to mitigate that cost which our tax specialists would be happy to advise on.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

Craig Coyle
craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.

Annual Allowance tapering: beware the potential impact on your tax bills

February 14, 2019

A significant number of Hospital Consultants have contacted us in recent months requesting tax advice in relation to Annual Allowance charges. In most cases they weren’t aware of the change made on 6 April 2016 which has resulted in unexpected pensions savings tax liabilities for the first time.

The Annual Allowance tapering rules introduced for the 2016/17 tax year meant that instead of a pensions savings limit of £40,000, this could be reduced to as little as £10,000 depending on levels of ‘threshold income’ and ‘adjusted income’. It is not just salary and pension growth that is considered. Other income such as private fees, dividends, bank interest or property rents are included in the calculation.

There is the ability to use unused relief brought forward from the three previous fiscal years to mitigate against any excess arising, and in the 2016/17 tax year this covered most pension savings excess charges that arose for our Consultant clients. However, much of the unused relief available for that tax year was used, leaving little to carry forward to the 2017/18 tax year.

For 2017/18, we have seen several significant liabilities arising – generally five figure sums. There has also been a knock-on impact to the assessment of Payments on Account due for the next tax year (2018/19) which has essentially added the same liability again, split between January and July 2019.

One way to avoid the significant cash flow impact caused by the pension savings charge is to elect for “scheme pays”. Consultants should seek advice from their IFA before opting for this, but it is important to note that for those wishing to use this option for 2017/18, the deadline for making the election is 31 July 2019.

Under Self Assessment, the onus is on the tax payer to correctly complete their tax return. Whilst SPPA will issue Annual Allowance statements to those individuals exceeding pension savings of £40,000 in a year, they do not know who will have a tapered Annual Allowance limit and who will not. Therefore, Consultants with tapered Annual Allowance limits will need to specifically request their pensions savings information from SPPA. It should be noted that such information will, as a matter of course, be forwarded direct to HMRC for all Consultants.

If you would like to discuss your own personal circumstances regarding the taxation of your pension savings please contact a member of our specialist medical team.

Neil Morrison
Partner and Head of Medical
neil.morrison@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.

Dundee-based Land & Building Services in Administration

February 6, 2019

A long-established Dundee-based construction company, Land & Building Services Limited, has been placed in administration with Derek Forsyth and Blair Milne, partners with Campbell Dallas, appointed joint administrators.

Founded in 1990, Land & Building Services provided a broad range of services to the construction sector and had worked on several award-winning projects, including Scotland’s oldest iron bridge, and winning recognition for its work from the Saltire Society and Historic Scotland.

The administration has been caused by difficult trading conditions and the loss of a major client, resulting in severe and unsustainable cash flow problems.  Land & Building Services Limited has ceased trading with immediate effect, and all 27 staff have been made redundant.

Commenting, Derek Forsyth, Business Recovery Partner with Campbell Dallas said: “The trading and cash flow problems affecting the construction sector are well-documented, and unfortunately Land & Building Services has been affected by these issues, together with the loss of a major client (McGill & Co Limited) in the Tayside market.

“We will now be marketing the company’s assets for sale, including remaining contracts, and a wide range of plant and equipment, and would urge interested parties to contact us as soon as possible.  We will also be working closely with the relevant agencies, including the Redundancy Payments Office, to ensure the employees receive as much support as possible.”

For more information contact:

Campbell Dallas Glasgow staff. Derek Forsyth.

Derek Forsyth

derek.forsyth@campbelldallas.co.uk

0141 886 6644

 

 

This information should not be regarded as financial advice. This is based on our understanding in February 2019.

Time claims right to benefit from increased Annual Investment Allowance

February 4, 2019

Annual Investment Allowance (AIA) allows you to deduct the full value of a qualifying item from your profits before tax and can be claimed on most plant and machinery up to the AIA amount.

From January 2019, the allowance was increased from £200k to £1m, therefore businesses purchasing plant and machinery should consider the allowance and the timing of claims.

I was recently speaking with an arable farming client who grows a substantial area of potatoes and the topic of AIA came into discussion. Due to good cereal and potato prices and yields, which were more substantial than he had anticipated in the middle of the dry summer, his profits for the year to 31 March 2019 could be between £500k and £600k. Some of the client’s tractors and potato equipment needed to be replaced and he was keen to take advantage of the increased AIA threshold. He enquired if spending £600k on new equipment between 1 January 2019 and 31 March 2019 would eliminate his taxable profit, which would mostly be chargeable at tax rates of 40%.

On further discussion he told me the cost of the new equipment was £600k and he was to gain £100k from trade-ins. He had also bought a tractor at a cost of £50k in May 2018.

Unfortunately it isn’t as simple as spending £600k to eliminate £600k profit from tax. Firstly he needed to consider the level of AIA available to the partnership. This is calculated as:

1 April – 31 December 2018 £200k x 9/12£150k
1 Jan – 31 March 2019 £1m x 3/12£250k
Total AIA available£400k

The client’s gross expenditure on plant and machinery in the year to March 2019 would be £50k on the new tractor plus £600k on the new plant. He would also have plant disposals of £100k for the trade-ins. This meant there was no pool of unclaimed allowances brought forward.

His maximum capital allowances claim would be:

Additions£650k
Qualifying for AIA(£400k)£400k
£250k
Less disposals(£100k)
£150k
Writing Down Allowances (WDA) x 18%(£27k)£27k
Pool carried forward£123k
Allowances Available£427k

Although the proposed purchases would make a big dent, they wouldn’t eliminate projected profits entirely.

AIA can only be claimed in the period that you bought the item and if the AIA has changed in the period you’re claiming for, then you need to adjust the amount you can claim. Timing of capital expenditure and your accounting year end needs to be carefully considered to maximise claims during the two year window where AIA is £1m.

For further information or to discuss making an AIA claim, contact:

Alan Taylor
Partner
alan.taylor@campbelldallas.co.uk
01738 441 888 | 01224 623 111

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2019. Laws and tax rules may change in the future.

Campbell Dallas are not responsible for content contained on 3rd party websites.

Preparing your business for Brexit

January 30, 2019

Although changing daily, we are fast approaching the March Brexit date without an agreement with the European Commission. One thing that remains clear however, is that a pro-active approach to strategic contingency planning is the best way to prepare your business. This approach will place businesses in the best position to take advantage of opportunities in new domestic and overseas markets. In this blog I will look at the key areas I believe are vital to take into consideration to ensure continuity and success for your business.

Get an EORI number

If the UK leaves the EU without a deal, you will need an EORI (Economic Operator Registration and Identification) number to be able to import or export goods to, or from, the EU. This will come into force from 11pm GMT on 29 March 2019. It makes sense to apply for an EORI number now. If you trade internationally you will already have one. For more information and to apply, visit the Government guidance here.

Achieve AEO accreditation

A widespread lack of AEO accreditation (Authorised Economic Operator) across Scotland’s businesses could result in a dramatic reduction in exports to Europe. As a former AEO specialist with HMRC, I would urge companies trading with the EU to address the AEO issue as soon as possible, and develop a plan to ensure they can undertake ‘frictionless’ post-Brexit exporting.

AEO status endows a business with a ‘Trusted Trader’ badge, which is expected to provide a fast track customs process in a post-Brexit EU. The AEO status will help provide frictionless trade with the EU, and will be the benchmark for compliance with customs systems, controls and financial solvency. Exporting without AEO status is likely to become increasingly onerous, costly and unattractive, with the risk that many of Scotland’s businesses will find exports less attractive.

AEO status currently confers fast-tracking of goods at border customs. It can also help reduce costs and delays, with AEO accredited companies likely to enjoy priority treatment. We are concerned at the low awareness of AEO in Scotland, and that application levels for AEO status are negligible. Companies need to start the process now, as there will soon be a bottleneck of applications and delays for a process that currently can take up to a year to complete. AEO authorisation embraces customs simplifications, security and safety or a combination of both, and companies can choose which level is most suitable. Businesses must meet strict criteria set down by HMRC, who require several days on company premises to review procedures and personnel.

In Germany, in 2017 over 6000 companies had AEO accreditation, but in the UK the figure was just 600. We have a long way to go and Scotland’s businesses need a great deal of support from the business community to ensure they become AEO-compliant as soon as possible.

Take advantage of subsidised training

The UK government have released new funding to help businesses prepare for the processes needed to export. HMRC is making up to £8m available to help businesses already involved or intending to become involved in import or export customs declarations. The grants are available on a first come first served basis, with £2m allocated for Staff Training and £3m for IT improvements. Businesses could be entitled to up to 70% towards training on Customs compliance including declarations, clearance procedures and Customs regimes such as warehousing and inward processing, all of which are eligible under the grant scheme. The IT grants are up to a maximum of nearly £180k to help create “ready-made” IT solutions that will help make customs declarations more efficient. Applications will close on 5 April 2019, or earlier once all the funding is allocated, so I would encourage applying for the funds as soon as possible. For more information and to apply, visit the Government guidance here.

What else can you do?

There are many other things that can be done now in order to prepare for Brexit. Key areas that should be reviewed and invested in now include:

  1. Supply chain analysis
  2. Customs data tidy-up (in-house systems and controls)
  3. Customs regimes such as inward/outward processing and Customs warehousing
  4. Currency risk level
  5. Contract reviews
  6. Impact of limited availability of labour from EU

At Campbell Dallas we can support with contingency planning and cost-benefit analysis, including calculation of potential new duty liabilities and assisting with improving all areas of Customs and trade to reduce exposure; helping put in place efficient customs facilitation with the correct level of competence.

Uncertainty is high, specifically for the SME market and we believe that businesses who engage in Brexit planning and future scenario business planning will be better equipped to deal with the new frameworks, regardless of the Brexit outcome.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

Veronica Donnelly
veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in January 2019. Laws and tax rules may change in the future.

Campbell Dallas are not responsible for content contained on 3rd party websites.

2019 Resolution: capitalise on low business tax rates and invest

December 27, 2018

Scotland’s businesses should capitalise on historically low corporate tax rates by investing in their businesses during 2019. There has probably never been a better time to take advantage of various tax incentives for business investment.

Whilst changes to corporate interest deductions are hitting large businesses hard, there are very attractive incentives for certain expenditure suitable for all companies, including capital allowances, investment in R&D and a new regime designed to encourage investment in buildings and structures. There are also tax incentives for investment in energy/efficiency-savings related projects, which attract accelerated or even 100% tax relief.

We now have one of the lowest corporation tax rates for many years, and the rate is set to fall to 17% in 2020, with speculation that it could fall even further to encourage post-Brexit inward investment. However, businesses need to be mindful that several of these allowances will stop in April 2020, so there are compelling reasons to take advantage of these deals sooner rather than later.

Due to the complexity of some of the incentives it is easy to fall foul of HMRC and incur significant charges and penalties.

HMRC is supportive of computations which include well laid out cost analysis and facts documenting and underpinning claims, but they take a grim view of unsubstantiated and arbitrary allocations, and where the paperwork is not robust. Long-life assets, whilst often highly subjective, can be a trap for the unwary as recent Revenue challenges have shown. Effective use of Annual Investment Allowances rules speeds up tax relief and will be increased to £1m for two years from 1 January 2019. The timing of spend and ensuring correct documentation are therefore crucial.

That said, a sound tax relief strategy boosts cash flow, sharpens competitiveness and enhances profitability. Notwithstanding the economic uncertainty, we should all resolve to make 2019 the year in which we take advantage of low corporate tax rates by investing in the future of our businesses.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

Mark Pryce
mark.pryce@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.

There’s a Brexit Brewing…

December 19, 2018

Fuelled by the increasing popularity of craft beer and artisan gin, the Brewing & Distilling sector has grown vastly in recent years. With Christmas and Brexit upon us, this could well be the making or breaking of those established and new to the industry.

An article [1] last month voiced ambitious growth plans for Scottish brewers. The strategy, coming from an industry body, urges Scottish drinkers to ditch imported beer for local brew. This, together with other initiatives such as cost cutting and financial efficiencies, aims to grow the sector to £1bn by 2030.

The backbone of the plan is to create a strong Scottish brand which would be recognised and desired worldwide. The plan would involve successful utilisation of the export/EU movement market.

As an industry VAT expert, EU movements and exports are very much the focal point of both drinks businesses and their supply chains. We are seeing drinks businesses looking to streamline their EU VAT obligations. For some this will be the use of Fiscal Representation overseas, or clever use of different Incoterms within business contracts, to pass the VAT burdens on to their customers and avoid unnecessary EU VAT registrations.

On the flip side, we have EU businesses contacting our UK storage and logistics companies looking to stock pile product ahead of March 2019. These businesses are stocking up in the UK to avoid potential UK Duties in the event of a no-deal Brexit. Some might say this is a wise move, but do our logistics companies have capacity to store such quantities?

Below are key areas in relation to VAT which those in the brewing & distilling sector should be aware of:

  • Place of supply – Consider the place of taxation of your international sales. Ensure you are aware of your overseas VAT liabilities and plan ahead of large contracts or proposals.
  • Incoterms status – Linked with the place of supply, your Incoterms status will have a big impact on your liability for overseas’ import VAT and Duty. Where commercially possible, consider the different options available.
  • VAT registration status – If you do have a potential EU VAT registration requirement, take advice in advance. Some EU countries require formal fiscal representation. It is also worth noting that there are some generous EU warehousing options available, however please be aware that there are often subtle differences between member states.
  • Bonded warehouse facilities – Efficiencies are available for both UK and overseas businesses within the sector. These can be achieved either through your own facility or through your storage/logistics provider.
  • Brexit – We will all be keeping our eyes on the seemingly endless possibilities Brexit could bring, including changes to Duty, VAT and EU movement/distance selling rules. To highlight one interesting point from the many HMRC publications….a promise from HMRC that “UK VAT-registered businesses will be able to account for import VAT on their VAT Return rather than paying import VAT on or soon after the time that the goods arrive at the UK border.” This will be welcomed by many in this ‘unlikely’ event from a VAT/cash flow perspective, however, we would note that Duty would continue to be due at the point of entry, unless you have use of a Bonded Warehouse system.

If you would like to discuss this or other concerns affecting your business, please contact me here, or another of our Brewing & Distilling industry specialists.

Martin Keenan
martin.keenan@campbelldallas.co.uk
0141 886 6644

[1] https://www.bbc.co.uk/news/uk-scotland-scotland-business-46451060

Campbell Dallas are not responsible for content contained on 3rd party websites.

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.

Campbell Dallas secures sale of business and assets of Cairngorm Mountain Limited (in administration) as a going concern

December 17, 2018

Highlands and Islands Enterprise (HIE) is to resume control of operations at Cairngorm Mountain with immediate effect.

HIE owns Cairngorm Estate and had leased the resort to operator Cairngorm Mountain Limited (CML), which went into administration on 29 November 2018.

The agency established a new subsidiary and has now reached agreement with the joint administrators, Blair Milne and Derek Forsyth, partners at Campbell Dallas, to acquire the business and assets of CML.

Staff and other assets will transfer to the new company, which will trade as Cairngorm Mountain (Scotland) Limited. The new company will honour season tickets purchased for this winter season.

Charlotte Wright, HIE chief executive, said engagement with local business and community groups will continue to be important going forward. She added:

“We are very pleased to have worked with the administrators to achieve a really positive outcome from a highly challenging situation. The deal that we’ve reached will protect jobs and bring stability to the business, which plays an important role in the wider local economy.

“The immediate focus of the new operating company is to ensure the best possible experience for visitors this winter, particularly while the funicular is inactive, and bring some stability for staff and local businesses that rely on Cairngorm. This includes operating the new snowmaking equipment and ski tows, as well as catering and facilities at the base station.”

Blair Milne, joint administrator and business recovery partner at Campbell Dallas added: “We are pleased to have secured an early sale of the business and assets of CML. The deal ensures continuity of operations and employment at Cairngorm Mountain and we would like to thank all parties for their support as we worked towards securing a going concern sale.”

Image credit: dnaveh / Shutterstock.com

Scottish Budget fails to grab headlines

December 17, 2018

The Scottish Budget took place last Wednesday but was rather overshadowed by events at Westminster that day, and perhaps therefore failed to attract much attention. However there are some key points that are worthwhile reviewing.

Income Tax
The announcements around Income Tax were much less dramatic than in the previous year, when we had the introduction of several new bands and rates for Scotland. The main measure this year is that the higher rate threshold is unchanged, thus increasing the differential between Scottish and English taxpayers.

This means that Scottish taxpayers earning between £43,430 and £50,000 will now pay a higher rate of income tax than those in England by some 21%.

This becomes more of a disadvantage when we then consider the difference between the higher rate of Scottish income tax and National Insurance Contributions (NICs). This means that someone earning a salary in the range of £43,430 to £50,000 will pay 41% in income tax and a further 12% in NICs on the top slice of their earnings, equivalent to a marginal tax rate of 53%.

Those earning up to £26,990 should pay less income tax than other UK taxpayers.

However, someone earning £50,000 will pay more than £1,500 per annum in additional tax, increasing to almost £200 per month for those earning £120,000.

It remains to be seen whether this will drive any behavioural changes, such as a move to incorporation and pay by dividends.

LBTT
The rates and bands for non-residential buildings are to change, with the lower rate reducing from 3% to 1% but with this band reducing in its scope by half. The higher rate will increase from 4.5% to 5%. The net outcome is that transactions for less than £350,000 will cost less in LBTT, whereas those for above that amount will cost more.

The other proposed change relates to residential property and is to increase the Additional Dwelling Supplement (‘ADS’) from 3% to 4%. ADS is intended to apply to all purchases of residential property other than the purchase of a main residence, and this increase is targeted to further support first-time buyers or penalise the buy-to-let sector, depending on your point of view. On the purchase of a £200,000 property, the LBTT cost will be £8,000 higher for someone acquiring the property as an investment or second home.

The Scottish Budget is subject to a final vote in February 2019 and may be amended before this given it requires the support of other parties to pass through the parliament. The Scottish Government have also said they may revisit matters in the event of a no-deal Brexit.

For more information on the contents of this blog, please contact me here, or speak to our tax team to discuss how changes in the draft Scottish Budget may affect you or your business.

Craig Coyle
craig.coyle@campbelldallas.co.uk
0141 886 6644

Full details of the draft budget announcement can be found on the Scottish Government’s website here.

Campbell Dallas are not responsible for content contained on 3rd party websites.

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.

CogitalGroup Update

December 17, 2018

Our parent company CogitalGroup provides an update on progress since its launch two years ago and publishes its Annual Review, Blue 2018 as it reveals it is in current talks on a potential American deal with a business with annual revenues of between $250m and $500m.

Annual review highlights:

  • In its second year, CogitalGroup has established itself as a leading provider of business services to entrepreneurial and private companies in the UK and Nordics
  • Rapid expansion in core UK and Nordic markets with over 90,000 clients, and 6,000 employees operating from 177 offices in seven countries
  • Increasingly diversified offering clients a wide range of critical business support, BPO and related advisory services
  • Continuing to deliver on its growth strategy with the largest acquisition since the launch of the Group, Wilkins Kennedy, bringing significant strength in the key south of England markets
  • Strong financial performance with annualised revenue and earnings before interest, tax. depreciation and amortisation now at £453m and £68m, 64% ahead of the levels at launch in December 2016

For further information contact:

Hannah Anderson, CogitalGroup
hannah.anderson@cogitalgroup.com
+44 (0) 203 668 0344

What a tax relief it’s Christmas!

December 10, 2018

There’s no better time to be nice to staff and customers than at Christmas. There are some decent tax reliefs available to add some festive spirit! However, it can be easy to get carried away and be left with a big red face later on when HMRC and their elves inspect which taxpayers should be put on the naughty list. There are certain (Santa) clauses you need to keep a close eye on during the holiday period.

1. Christmas parties
The cost of these or another annual function is an allowable tax deduction for businesses. This doesn’t however apply to sole traders or business partners of unincorporated organisations (but it will apply to their employees). There will be no chargeable taxable benefit for the employee as long as:

  • the party or social event is open to all employees, or all at a particular location if you are a multi-site operation. If the event is only open to the Directors, however, a tax charge arises.
  • the cost per head isn’t more than £150 including VAT, transport or accommodation provided.
    • Beware though – the £150 isn’t a tax allowance! If you provide two or more annual parties or functions and the £150 limit is exceeded, a tax charge arises (and not just on the difference) of the additional one(s) in full on a cost per head basis.
    • Further, where staff bring guests along to the party and you meet their costs too then if the cost per head exceeds £150, there is additional tax.
    • Note: total cost should be divided by the total number of employees and guests attending to arrive at cost per head.
    • Additional tax liabilities can be dealt with by either (a) agreeing a PAYE settlement agreement whereby the employer agrees to pay the extra tax or (b) reporting on the individual’s P11D as a benefit in kind.
  • VAT is recoverable on staff entertaining expenditure but not for guests so input VAT will need to be apportioned.

2. Client entertaining
This is never an allowable deduction for business tax purposes and input VAT cannot be recovered on it.

3. Business gifts to customers
These are only allowable as a tax deduction if the total cost to one individual per year is less than £50, the gift bears a conspicuous advert for the business and it isn’t food, drink, tobacco (unless they’re samples of your products) or exchangeable vouchers.

4. Gifts to staff
HMRC will consider a benefit exempt if it is deemed to be a trivial benefit. For it to be considered a trivial benefit, it must cost £50 or less, and not be part of the employees contract or a reward for performance. It must not be cash or a cash voucher. Therefore seasonal gifts such as a turkey, bottle of wine or box of chocolates are likely to be exempt.

5. Vouchers
Cash vouchers are subject to tax and National Insurance. Non-cash vouchers up to £50 may be considered a trivial benefit and therefore exempt provided they are not given as a reward for performance.

6. Christmas bonuses
These are subject to PAYE and NI as additional salary.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

Mark Pryce
mark.pryce@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.

Contractors and Tax – where are we?

December 6, 2018

In 1999 Chancellor Gordon Brown was fairly new to his role. As well as cutting Corporation Tax to “the lowest rate amongst major industrialised countries” of 30%, he also undertook to “introduce rules to prevent individuals avoiding income tax by providing personal services through intermediaries, such as service companies”.

These rules became known as IR35.

Almost 20 years later and corporation tax is set to drop to 17%, and we are still talking about IR35, originally introduced to tackle the problem of “disguised employment” through an intermediary company.

The press release itself identifies the problem of an individual engaged as an employee on Friday, returning on Monday to perform the same role through a limited company, and less tax/NI being paid as a result. 18 years on from when the rules were introduced, there still seem to be lots of one man service companies operating in what could be considered to be grey areas in terms of IR35 compliance. How did this happen, and what is the likely resolution?

The Present

Principal Limited is a limited company. Sue wants to provide services to Principal. If Sue engages with the company, the company will have to decide whether or not the relationship is one of employment for tax purposes, and therefore whether or not PAYE should apply to payments made to Sue.

However, if Sue provides her services to Principal Limited via an engagement with Sue Limited, then Principal Limited do not have to consider whether or not Sue is an employee. The tax analysis is pushed back on to Sue/Sue Limited in terms of whether or not IR35 applies.

The difficulty of this for HMRC is that there are thousands of Sues, and that having the resources to police IR35 then becomes challenging, as the amount of tax at stake in each case is relatively small, but each is particular to its own facts and circumstances, and so there can’t be a single decision at tribunal which helps HMRC establish a firm basis for dealing with what they consider to be non-compliant contractors.

This changed in the public sector from April 2017. In the example above, if Principal Limited was a public sector body, it would be required to consider whether or not there was effectively an employment relationship – Sue Limited can no longer be used by it as a shield.

Public sector bodies have interpreted the rules cautiously and often prefer to apply PAYE (sometimes on a blanket basis where it should not actually be due). The online tools provided by HMRC to help guide compliance are too crude to function effectively. There is anecdotal evidence that this has led to contractors who have the option of working in the private sector of seeking the same “net” pay, and therefore either making it more difficult for the public sector to obtain the best people or increasing costs, such that any extra tax take is in effect lost.

However, HMRC/the Treasury wish to introduce something similar in the private sector, and issued a consultation document (Off-payroll working in the private sector) in May 2018, with intention to legislate from April 2020.

The Future

It is clear that IR35 has not been effective in solving the problem which it sought to address, as non-compliance rates are estimated at 90%, and instead simply acts as something which creates uncertainty. HMRC effectively acknowledge that they are unable to effectively police the system, hence the wish to bring in something akin to what they have in the public sector whereby the burden of compliance will in effect fall on the engaging company, leaving HMRC with fewer customers/targets to check the compliance position of.

As many respondents to the consultation have pointed out, this is an unfair burden on businesses, particularly at a time where the status of employees and the self-employed is increasingly complicated. The courts recognise there is now something called a “worker” for employment law purposes which is not however recognised by the tax system.

There is likely to be an adverse impact on cash flow, and also a risk of a competitive disadvantage against other businesses which apply a more “liberal” interpretation of the new rules.

The correct answer is surely to increase HMRC resource in order to properly monitor a new, more transparent system. However, it is more likely that we will end up with something similar to the public sector rules moving into the private sector in 2020.

Construction Industry Scheme

Of course, those in the construction sector already have a similar set of rules in terms of the Construction Industry Scheme (CIS). CIS broadly applies where a business spends more than £1m a year on construction operations in furtherance of a business. Construction operations is widely defined, and so the rules will have to be applied to most payments made.

Payments must be made net of tax (at 20%) unless the sub-contractor is registered with HMRC and has gross payment status. The aim of the rules is to prevent payments disappearing into the black economy. Taxpayers can be both contractors and sub-contractors in respect of a project, if for example they are paid by the developer and then pay sub-contractors in turn.

Loss of gross payment status can have significant cash flow impact, and care must in turn be taken by any contractors that they operate the scheme correctly to ensure they do not face penalties or lose their own gross payment status.

Anyone operating in construction should ensure they are therefore aware of and complying with their requirements under CIS, whether they are contractors, sub-contractors or both.

For more information on the contents of this blog, please contact me here, or speak to our Property & Construction team to discuss how you can ensure a robust business model fit for the future and competitive, growing industry.

Craig Coyle
craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.

Campbell Dallas appointed administrators to Cairngorm Mountain Limited

November 30, 2018

Cairngorm Mountain Limited, the company that operates the Cairngorm Mountain Funicular Railway and associated visitor attractions, has been placed in administration.

Joint administrators, Blair Milne and Derek Forsyth, partners with Campbell Dallas, will continue to trade the business whilst progressing discussions with a potential purchaser for a sale of the business and assets as a going concern. There are no immediate plans to make any redundancies.

Opened on Christmas Eve in 2001 following an investment of around £20m, the Cairngorm Funicular Railway carries around 300,000 tourists and sports visitors every year. Extending to 2 kilometres in length, it is the highest mountain railway in the United Kingdom. The funicular has been closed since Monday 1st October to allow for a detailed assessment of the structure that supports the tracks. These investigative works remain on-going.

The administration has been caused by unsustainable cash flow problems. Cairngorm Mountain Limited employs around 70 staff and had a turnover of £3.5m to 31st December 2017.

Commenting, Blair Milne, Business Recovery Partner with Campbell Dallas said: “Due to the extended closure of the Funicular Railway at Cairngorm Mountain, for safety reasons, the business has become unsustainably loss-making. The Directors of the business had been in discussions to try to find suitable solutions, including a managed transfer of the business to another party, however those negotiations did not progress. Under mounting cash flow and creditor pressures the Directors were left with no alternative other than to place the business into administration. The joint administrators will be seeking to achieve a sale of the remaining business on a going concern basis as early as possible.”

The Cairngorm Railway and Mountain Snowsports centre are owned by Highlands and Islands Enterprise (HIE) and operated on its behalf under a lease by Cairngorm Mountain Limited.

For more information contact:

Blair_WebsiteBlair Milne
0141 886 6644
blair.milne@campbelldallas.co.uk

 

 

This information should not be regarded as financial advice. This is based on our understanding in November 2018. Laws and tax rules may change in the future.

Image credit: dnaveh / Shutterstock.com

Record deal flow drives expansion of Campbell Dallas Corporate Finance

November 14, 2018

We have expanded our Corporate Finance team after recording a record number of deals and a marked rise in fee income during the last 12 months.

The firm has completed 15 international and domestic deals across a variety of sectors, advising on disposals, acquisitions, fund-raising and financial due diligence, with fee income rising by a record 40%.

Graham Cunning“We have never been busier” says Graham Cunning, Head of Corporate Finance in Scotland for Campbell Dallas. “The deals market in Scotland has been buoyant and we have seen an encouraging increase in client referrals and new business wins. The expansion of our firm in Edinburgh and Ayr has brought new opportunities and is also allowing us to offer clients access to the full range of specialist corporate finance expertise from across the business.”

Campbell Dallas has made three new appointments within the Corporate Finance team – Andrew Rennie joined as a Manager from global advisory firm AlixPartners; Jessica Orr joined as an Executive and George Wait became the first corporate finance Graduate Trainee.

Graham Cunning added: “Our expanded team will not only allow us to do more deals but will also give us capacity to initiate more transactions, a skill that has been in short supply in Central Scotland in recent years. Our deal pipeline remains strong with several larger transactions on the horizon, despite the ongoing Brexit uncertainty. It is interesting to note that we have seen a continued flow of buyers making unsolicited approaches to high quality Scottish companies, with foreign buyers continuing to take advantage of the weakness of sterling. There are also many Scottish businesses that have made acquisitions in the UK, Europe and further afield.”

Deals advised on by Campbell Dallas Corporate Finance include:

  • Sale of GP Green Recycling to Enva
  • Sale of 2 care homes owned by the Balmer family to Renaissance Care
  • Sale of insurance broker Clark Thomson to Marsh Group
  • Incremental’s acquisition of Gap Consulting
  • Cefetra’s acquisition of Premium Crops
  • Daabon’s acquisition of Glasgow-based Soapworks

Commenting on sectoral trends, Graham Cunning said: “We have seen a lot of activity in healthcare, IT services and the wider environmental industry. We are also seeing technology driving increased deal activity in the biopharma, financial services and online learning/education sectors.

“Looking ahead, we are working with many business owners on more strategic matters, such as planning for growth, succession, or a sale or MBO in a couple of years. This pipeline of activity augurs well for deal-making in Scotland, as businesses and entrepreneurs are clearly looking beyond Brexit, and focusing on opportunities rather than the uncertainty.”

For more information contact graham.cunning@campbelldallas.co.uk or call 0141 886 6644.

The information in this article should not be regarded as financial advice. This is based on our understanding in November 2018. Laws and tax rules may change in the future.

Improve cash flow through your capital allowances

November 7, 2018

In recent times we have seen an unprecedented level of investment in the Brewing & Distilling sector as producers seek efficiencies and capacity to meet demand. Whether you are a start-up, entering production for the first time, an existing producer expanding your capacity, or one of the majors, getting your capital allowances strategy right from the outset can have a significantly positive impact on your cash flow in the short and long term.

Depending on the size of your investment you may have the cash or, more typically, you will require some external debt to enable the project to be completed. So the less net cash you need to spend or the more you have to service your debt, the better it is for stakeholders.

Capital allowances on moveable plant and equipment are well documented and are a useful incentive for companies to invest, however not so commonly known or utilised are the opportunities to claim for embedded capital allowances. Following the Autumn Budget, certain new qualifying non-residential structures and buildings will be eligible for a 2% flat rate allowance over 50 years on original expenditure. This applies where all new contracts for the physical construction work are entered into on or after 29 October 2018.

Most projects differ substantially in nature and one size does not fit all. However having a strategy in place as early as possible gives you the best chance of maximising the best outcome. This involves a deep understanding of the project and all the costs (ground works/professional fees, plant, land, equipment and now on structures and buildings) to clearly understand what is qualifying and what is not. Many are surprised at what can qualify when the right approach is adopted by someone who has much experience in dealing with capital allowances.

Projects which include elements of energy saving giving rise to enhanced capital allowances are particularly attractive, couple these with short life assets, integral fixtures and granular cost apportionment results in a greater level of allowances being achieved saving cash, reducing debt or generating more free cash. However, time is of the essence for making claims on certain energy saving or environmentally beneficial assets as the 100% first year allowances will end from April 2020. Additionally, from April 2019 the special rate pool allowance reduces from 8% to 6% on certain additions such as integral features.

HMRC are taking a closer look at what assets are classed as qualifying and if your analysis and paperwork is not as robust as it should be you may be under potential threat of having some of your allowances disqualified. Long life assets treatment can be a hidden danger for the unwary. Proper consideration of the availability of the £200,000 Annual Investment Allowance (AIA) can bring forward tax relief in some situations. In particular, the AIA will be temporarily increased up to £1m for a two year period from 1 January 2019 therefore the timing of  capital expenditure spend is crucial.

Think about capital allowances as early as possible, engage someone who has the experience and expertise to maximise them and you will benefit from additional cash flow.

If you would like to discuss the benefits of allowances or if your business can qualify please contact:

Murdoch MacLennan

Partner and Head of Brewing & Distilling

murdoch.maclennan@campbelldallas.co.uk

0141 886 6644

This information should not be regarded as financial advice. This is based on our understanding in November 2018. Laws and tax rules may change in the future.

Personal insolvency cases rise 23% whilst construction, retail and hospitality are majority of corporate insolvencies

November 2, 2018

UK Government statistics* just released have revealed that there were 3067 personal insolvencies in Scotland in the quarter to 30th September, an increase of 23% on 2017.  There were 232 corporate insolvencies, which is on a par with 2017, however construction, retail and hospitality accounted for more than 50% of the total.

Derek Forsyth, Head of Business Restructuring and Insolvency at Campbell Dallas, expressed concern: “On the personal insolvency side, this shows a substantial increase in the number of people who are now no longer able to make ends meet, and reflects to a large extent factors such as the lack of wage inflation, zero hours contracts, high utility costs and the general uncertainty over employment prospects”.

On the corporate side, Derek Forsyth highlighted that more than half of the companies going through an insolvency process in the quarter were in either the construction, retail or hotel and leisure sectors.  “This trend is alarming, particularly as we go into a traditionally difficult quarter for the construction and rural hotel sectors, and whilst retail sales will generally be up, the traditional high street stores continue to be affected by high costs and online sales. The impact of the budget increase in the National Living Wage will affect margin, making trading conditions even more difficult”.

He added: “The construction sector in Scotland has seen a number of high profile casualties in the last few months, with a large number of creditors losing out, and employees losing their jobs. There has been much commentary recently about the potential adverse impact of Brexit on EU citizens working in the hotel and leisure sector, and on the retail side, whilst such as House of Fraser will always attract headlines, there are many medium and smaller outlets similarly being affected. The proposed reintroduction of Government preferential claims from 2020 in the Budget will adversely affect the returns to the ordinary creditors.”

Derek Forsyth urged companies to plan ahead for the next quarter, which is traditionally challenging, with cash flow problems being a frequent cause of failure:  “It is vital that directors and stakeholders take all steps to plan ahead and ensure that their businesses are robust and financially viable, and do not become part of the next quarter’s statistics.”

For more information, contact Derek.Forsyth@campbelldallas.co.uk or call 0141 886 6644.

The information in this article should not be regarded as financial advice.  This is based on our understanding in November 2018. Laws and tax rules may change in the future.

Government stats for Scotland see pages 16/17.

Campbell Dallas are not responsible for content on third party sites.

Your 2018 Autumn Budget Summary

November 2, 2018

Following the UK Autumn Budget announcement on Monday, please find a Budget Summary here highlighting the key issues likely to affect you and your business.

Fraser Campbell, Head of Family Business, was a guest panellist at the recent Herald Budget Briefing Breakfast discussing the impact of the Budget for businesses in Scotland.

Some key themes are highlighted below:

  • The widening tax gap between Scotland and England means Scottish businesses will need to think how to bridge this gap to attract talent.
  • The budget has been described as an artificial budget ahead of Brexit and advice to businesses is to prepare and plan for Brexit now. Fraser commented that businesses with a complex supply chain should carry out analysis now with a warning that a lack of preparation will slow the economy down.
  • Tax Partner, Craig Coyle noted the changes to Entrepreneurs’ Relief that shares will now need to be held for two years rather than one for disposals on or after 6 April 2019. He advised those thinking of a sale to organise their structure earlier as a result. Also, with some changes to what types of shares qualify, anyone whose shares have non-standard rights should seek advice.
  • For the brewing & distilling sector, the panel agreed that the government were doing the right thing to freeze tax on spirits, beer and cider to help the Scottish economy grow.
  • Fraser also highlighted that the impact of reforms to individuals working under IR35 is hugely significant and a hidden tax rise.

The Scottish Budget will be presented by Derek Mackay MSP, Finance Secretary on 12 December 2018 with Scottish tax rates for the year ahead announced then.

If you would like to discuss any Budget implications for you and your business, please contact your usual Campbell Dallas advisor or any of our service or sector line specialists listed on our website.

Springfords Accountants to be known as Campbell Dallas

October 31, 2018

With effect from 1 November 2018, Edinburgh-based Springfords Accountants will change its name to Campbell Dallas.

When both firms joined the CogitalGroup the business has worked seamlessly with Campbell Dallas’ offices in Aberdeen, Ayr, Glasgow, Kilmarnock, Perth and Stirling. Since October last year this has provided clients with an extended range and depth of services and advice in areas such as cloud accounting, corporate finance, tax planning and VAT, together with strong industry knowledge in the brewing & distilling, healthcare and rural sectors.

Chris Horne partner at campbell dallas chartered accountantsCommenting, Managing Partner Chris Horne said: “This is simply a change of trading name to align with the rest of the Scottish business and I believe a positive step for our clients and for our fast-growing business, with decision making and planning continuing to be made at a local level by the current Edinburgh Partner team.”

“We are committed to maintaining a very high level of client service as we develop one of Scotland’s most entrepreneurial accountancy firms.”

Campbell Dallas promotes Nicola Campbell to Partner in Kilmarnock

October 31, 2018

Campbell Dallas has promoted Nicola Campbell to Partner, based in the firm’s Kilmarnock office.

Nicola joined Campbell Dallas in 2006 as a trainee accountant, and has since progressed rapidly through the business, qualifying as a CA in 2010. She now leads the development of the Kilmarnock office, working closely with colleagues in the Ayr office on the expansion of the firm’s client base across Ayrshire.

Nicola specialises in advising owner managed businesses and advises on a wide and diverse mix of management issues as well as the normal full suite of corporate and personal compliance services. Additionally, Nicola has participated in the HG Capital rising female leadership forum, a career development programme for emerging talent.

Campbell Dallas promotes Nicola Campbell to Partner in Kilmarnock

Chris Horne and Nicola Campbell (L-R)

Commenting on her appointment as Partner, Nicola Campbell said: “I am delighted to have been promoted to Partner, and would like to pay tribute to the outstanding training I have received with Campbell Dallas. 15 out of the firm’s 30 partners have been promoted from within, illustrating the quality of opportunity available to everyone that chooses to join Campbell Dallas.”

Chris Horne, Managing Partner, added: “Nicola is a major asset to the firm and our clients, and her promotion to Partner is the deserved reward for her talented work with clients and colleagues. I am delighted to have her join me in the firm’s Partnership group. Nicola is well-known in Kilmarnock and will continue to play a key role with clients as we develop our business across Ayrshire.”

The changing digital age & the future of business

October 17, 2018

It is 10 years since Lehman Brothers collapsed and marked the start of an international banking crisis. Over the last decade the banks have rebuilt their balance sheets and worked through issues arising from years of bad lending and poor practices. Pre-2008 the paperwork and agreements from many lending institutions were inadequate. Nobody wants to return to irresponsible lending, but the consequences of stricter lending policies is the significant increase in time taken and costs of raising finance.

It is not only the banking sector that has experienced increased costs and administration. For accountants, solicitors and other professional firms there has never been more legislation to contend with. Anti-Money Laundering, Data Protection and the Criminal Finances Act are only some of the recent changes that have fundamentally changed how professional firms manage clients, data and their workforce. Some of these changes are necessary, but it is clear that legislative changes are struggling to keep pace with the new digital age.

With an ever increasing amount of data held electronically professional firms need to invest heavily in technology and training. To do this needs strong leadership as investment in technology can go badly wrong and is costly. The majority of professional firms in Scotland are partnerships with less than 10 partners. For some firms there may not be consensus amongst the partners that their business is changing. Older partners close to retirement may naturally not see a return for long term investment in technology. The speed of change in technology is so quick that even if the commitment is there from the leaders in the business the decision on systems and implementation will be difficult.

The way that accountants communicate with clients will change hugely in the next 10 years. In 2016 it is estimated only 40% of all transactions were in cash. By 2026 it is predicted this will drop to below 20%. The millennial generation do virtually all their banking, shopping and socialising online. Many millennials are running and managing businesses, and within a decade many more of them will be. Their expectations will be completely different from the generation before.

For the accounting profession, software is increasingly removing the manual work to prepare accounts, payroll, VAT and tax returns. Banks will now feed transactions direct into accounting software, which removes data entry. Software can read and match invoices received, and increasingly artificial intelligence will be used in accounting and auditing. The importance of adding value will be vitally important, as large international businesses will do the simple processing far quicker and cheaper than smaller local firms.

A decade from now, businesses and how they operate will have changed even more. At Campbell Dallas we are already helping our clients future proof their business in the digital age by migrating to the cloud ahead of Making Tax Digital, which for VAT registered businesses begins in April 2019. We believe those firms that manage to embrace technology and make the relationship with their clients easy, secure and with added value will flourish in this fast-paced digital age.

If you want to discuss any of the points raised in this blog please get in touch with me here, or:

01738 441 888
andrew.ritchie@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in October 2018. Laws and tax rules may change in the future.

Countdown to Making Tax Digital – a conundrum for rural businesses

September 28, 2018

Making Tax Digital (MTD) affects VAT registered businesses with turnover greater than £85,000

From April 2019, all affected businesses will be required to keep digital books and records and must set up a digital tax account with HMRC to submit VAT returns online.

As the accounting system must interact digitally with the HMRC business account, entering VAT return figures manually into the Government Gateway system will no longer be viable. All affected businesses who cannot comply with these new rules risk financial penalties and business disruption associated with being classified as “non-compliant “ by HMRC.

The new MTD regime poses special challenges for rural businesses. In 2017, during the MTD consultation phase, the National Farmers Union (NFU) proposed an exemption for the 5% of the population without access to highspeed broadband.

However, this plea was largely ignored as under MTD for VAT a business will not have to adopt the MTD rules where HMRC is satisfied that:

“It is not reasonably practical to use digital tools to keep business records or submit returns for reasons of age, disability, remoteness of location or for any other reason”. An application process will be required.

Recent announcements from HMRC of how businesses will adopt digital and software links suggests that HMRC are likely to take a tough stance when it comes to granting exemption on the grounds of location. Although where a business currently has an exemption from online VAT filing it is anticipated this will be rolled over for MTD for VAT. The situations where a remote location exemption will be given is likely to be only in very limited circumstances. A further consideration for all businesses is that the new MTD for VAT regime coming into effect next April is just the initial instalment under HMRC’s digital plans. Electronic submission of quarterly income tax and corporation tax figures are expected to be required by HMRC during 2020.

Furthermore many farms and landed estates are subject to special tax rules, partial exemption and other complexities. This makes development of appropriate and relevant software and APIs much harder given it is a niche market.

What options are available to rural businesses to comply with MTD?

  • When HMRC discuss MTD and “Digital Tax”, the mention of laptops, smartphones, tablets and Application Programming Interfaces (“APIs”) is always high on the agenda. APIs let software systems talk and interact with each other electronically, rather than manual data input. HMRC believe that by insisting on the use of APIs in business’s accounting systems there will be a significant reduction in tax return errors, leading to better tax compliance. It will also inevitably make it easier for HMRC to conduct Audits and allow their software to interrogate data to look for mistakes and inconsistencies that currently demand a huge amount of Tax Inspector resource. Therefore, for all businesses, including rural businesses to reach full compliance with HMRC what is required is a new approach to digital accounting and record keeping plus access and connectivity to the internet either directly or indirectly.
  • Whilst some desktop accounting software packages and local area network (“LAN”) based systems (and in very limited cases even some spreadsheet based approaches to preparing VAT returns) will be feasible in the short term, the consensus in the tax and accounting profession is that businesses will need to move to some form of Cloud accounting package.
  • In recent months, competition in the market for Cloud accounting services has become fierce, resulting in providers reducing licence fee subscriptions to entice businesses to adopt the Cloud. The key players being Xero, Sage, Quickbooks and FreeAgent and larger/ more sophisticated businesses opting for enterprise platforms such as Netsuite and SAPbyDesign.
  • To run Cloud, fast internet speeds are necessary and for rural business this is the major barrier. The lack of land based broadband services in countryside locations is problematic but new remote satellite highspeed broadband with fixed price upload and download data allowances from the major satellite providers could provide adequate and more affordable online access to allow Cloud Accounting to be adopted for the rural sector.
  • For those rural businesses not moving to Cloud Accounting there is certainly a conundrum to be solved and choices to be made as the countdown to April 2019 ticks ever closer.

Consider the following for MTD compliance:

  • Retaining a manual book-keeping system is no longer an option from April 2019.
  • The use of spreadsheets is limited and only available as a short term measure; there is considerable uncertainty over whether such an approach will be available and how it will work in practice;
  • Investigate whether your existing desktop accounting package meets MTD criteria and speak to your software provider about their developments. Some providers will no longer support certain non cloud products. For many rural businesses, the existing VAT return / accounts outsource process and relationship with the accountant will need revisited for MTD compliance – in the absence of internet access, “physical” information such as paper invoices, receipts, other manual records will still need to be sent to your accountant, however under MTD this will now need to be transformed into the required digital format which adds more time, effort and inevitably cost to the process. Delivering data to your accountant via encrypted USB or similar device may be a short term solution.
  • We are not expecting any further delays or deferment of MTD; so now is the time to take action.

For more information, please contact our MTD expert Mark Pryce. Our specialist Cloud Accounting team will also be able to help you prepare for April 2019.

The information in this article should not be regarded as financial advice.  This is based on our understanding in September 2018. Laws and tax rules may change in the future.

Drinks exports threatened as Scots’ companies fail to adopt AEO status, warns customs expert

September 26, 2018

A widespread lack of AEO accreditation (Authorised Economic Operator) across Scotland’s brewing and distilling sector could result in a dramatic reduction in exports to the EU, a leading Customs trade expert is warning.

Allan Bird, a Customs & Excise manager with Campbell Dallas, and former AEO specialist with HMRC, is urging B&D companies trading with the EU to address the AEO issue as soon as possible, and develop a plan to ensure they can undertake ‘frictionless’ post-Brexit exporting.

He said: “AEO status endows a business with a ‘Trusted Trader’ badge, which is expected to provide a fast track customs process in a post-Brexit EU. The AEO status will help provide frictionless trade with the EU, and will be the benchmark for compliance with customs systems, controls and financial solvency. Exporting without AEO status will become increasingly onerous, costly and unattractive, with the risk that many of Scotland’s thriving drinks businesses will find the export market less attractive.”

Allan Bird added: “AEO status will confer fast-tracking of goods at border customs. It will also lead to a dramatic reduction in costs and delays, with AEO accredited companies likely to enjoy priority treatment. We are concerned at the low awareness of AEO in Scotland’s brewing and distilling sector, and that application levels for AEO status are negligible. Companies need to start the process now, as there will soon be a bottleneck of applications and long delays for a process that currently can take a year to complete”.

AEO authorisation embraces customs simplifications, security and safety or a combination of both, and companies can choose which level is most suitable. Businesses must meet strict criteria set down by HMRC, who require several days on company premises to review procedures and personnel.

Allan Bird pointed out that in Germany, in 2017 over 6000 companies had AEO accreditation, but in the UK the figure was just 700. “We have a long way to go and Scotland’s brewing and distilling companies need a great deal of support from the business community to ensure they become AEO-compliant as soon as possible.”

For more information please contact Allan Bird, Customs & Excise Manager here. Our specialist VAT and Brewing & Distilling teams will also be able to offer you support on this.

Campbell Dallas has scheduled events across Scotland during October on AEO and Brexit-related exporting issues. Click the links below to register to attend:

Aberdeen – 31 October

Edinburgh – 24 October

Glasgow – 3 October

Perth – 23 October

Stirling – 24 October

This information should not be regarded as financial advice. This is based on our understanding in September 2018. Laws and tax rules may change in the future.

How to thrive during the ‘Peak Gin’ period

September 18, 2018

Gin has been a phenomenon in the last few years and as I walk down the drinks aisles of many a supermarket the choice of spicy, floral, sloe, navy is vast.

Gin is huge and gin is popular. This popularity has fuelled the exponential growth of businesses such as Fever Tree which is now valued at £4billion on a forward price earnings of 79 times earnings (as at 5 August 2018). There are now shortages of lime, pink grapefruit and pink peppercorns – showing how our tastes have changed. This is an excellent example of disruptive businesses riding high on a change in consumer tastes.

So is this gin boom here to stay?

In my opinion tastes have changed forever. However like many a ‘boom’, there will be winners and losers – new sustainable businesses and others that will struggle to survive.

I’m not sure we are at ‘peak gin’ but it may be some time soon as customers start to understand the quality variances between the various gins.

If you are growing your gin businesses you need to look at the sustainability of the product and ensure you have the appropriate working capital structure and funding.

If you are worried about ‘peak gin’ then you need to ensure you have a robust business model that will survive the top of the market and is future proof. Below are just some of the factors to consider for business growth:

• Are you appropriately capitalised?
• Have you got the right funding package both asset based and other?
• Have you maximised your capital allowances?
• Have you reviewed your R&D tax credits?
• Is your excise duty right?
• Is the culture of the business right?
• Do you have the right leadership team in place?
• Do you know your customer and your market?
• How are you different from the other gins out there?

Having considered these factors and having a plan in place will ensure that you survive ‘peak gin’, whenever that comes. Who knows, you could be the gin version of Fever Tree with 80 times multiple!

For more information on the contents of this blog, please contact me here, or speak to our Businesses Improvement team to discuss how you can ensure a robust business model fit for the future and competitive, growing industry.

Donald Boyd
donald.boyd@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2018. Laws and tax rules may change in the future.

Eligibility for Rollover Relief during a Compulsory Purchase process

September 10, 2018

Where the owner of land is obliged to sell because an Authority exercises a statutory power to require the sale, the owner may claim a special form of Rollover Relief on any gain which arises, provided the proceeds (not just the gain) are reinvested in other land.  Neither the land disposed of, nor its replacement, needs to have been/be used for a trade or any particular purpose.

The special Rollover Relief can be claimed by individuals, trustees and companies. The owner (including sitting tenants) must make the claim in writing within four years, following the end of the tax year to which the sale relates. The time limits for reinvestment are the same as the normal Rollover Relief, which is 12 months before and 36 months after the sale.

Points to bear in mind:

  • You cannot roll over into your Principal Private Residence (PPR) or into land which becomes your PPR within six years of you acquiring the land. If you do, the Rollover is undone.
  • Land is defined as an interest or right over freehold and leasehold land and includes buildings on the land which were already there when you acquired the land. Buildings subsequently constructed do not qualify.
  • For the relief to apply, the land must be acquired by an Authority exercising its Statutory Powers.
  • The owner must not have taken any steps, by advertising to dispose of the land or made his/her willingness to dispose of it known to the Authority.
  • The consideration (proceeds) must be applied by the landowner when acquiring new land.
  • The tax legislation makes no reference to “territory”; meaning this would apply to the UK and EU, however, if your reinvestment ambitions extend beyond the EU, you should seek an advanced non-statutory clearance from HMRC, just to play safe.

If you become the subject of a Compulsory Purchase, our experts at Campbell Dallas can advise on your eligibility for Rollover Relief.

For more information contact:

Ian Williams

Partner

01224 623 111 | 01738 441 888

ian.williams@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice.  This is based on our understanding in September 2018. Laws and tax rules may change in the future.

Declare offshore income in September, or face punitive fines warns tax expert

September 5, 2018

Taxpayers with undeclared income generated from offshore assets and investments only have September in which to declare their earnings, or potentially face a standard penalty of 200% of underpaid taxes, a surcharge of 50% for deliberate avoidance, and the prospect of being named and shamed, a leading tax expert is warning.

Ian Williams, a partner with Campbell Dallas, says taxpayers and trusts with undeclared income can take advantage of a disclosure ‘window’ before the new rules come into force on 1st October 2018.

Campbell Dallas, Perth. Staff Portraits. Ian Williams.He said: “Disclosure will apply to undeclared offshore income, assets, transfers and investments, and the applicable taxes include Income Tax, Capital Gains Tax and Inheritance Tax.  Qualifying disclosures will be subject to interest charges and the ‘general’ penalty regime, ranging from 0% to 30%, but deliberate behaviour will attract significantly higher penalties.  In the latter category, taxpayers or trusts should seek urgent assistance to notify HMRC.”

He added: “If HMRC has not received disclosures by 30th September, the new punitive regime comes into force.  Penalties may be negotiated down to 100% if there is full disclosure and co-operation, and the defence of ‘reasonable excuse’ is available, but there is little room for manoeuvre due to ignorance or human error.

“We would urge any taxpayers or trusts that may be in this position, to seek advice as soon as possible.  The financial consequences of not doing so could be ruinous, and the reputational damage from being named and shamed could last a lifetime.”

Campbell Dallas has highlighted other points that will apply from 1st October.

  1. Further penalties of 50% will apply if a taxpayer has been moving assets between jurisdictions to deliberately avoid taxes.
  2. An ‘asset-based’ penalty for serious cases of fraud, with penalties of up to 10% of the asset value.
  3. The ‘Naming and Shaming’ option will apply for tax owing over £25000.
  4. HMRC will be able to extend the current timeline of 6 years up to 10 years
  5. In the event of fraud, the extension will be up to 24 years.

Ian Williams added: “With global sharing of data and information, HMRC is increasingly aware of offshore investments and assets, and therefore of the income that is being generated.  The only way to deal with this new tax order is to comply with the legislation, and to resolve any unpaid taxes sooner rather than later.”

This information should not be regarded as financial advice. This is based on our understanding in September 2018. Laws and tax rules may change in the future.

Customs implications for brewers and distillers post-Brexit

August 31, 2018

With growth in the drinks industry expected to continue, established companies are thriving while craft beer and creative gins are increasing their market share. Consumers flock in numbers to try the endless options available from unique production.

From existing large scale operations to up-and-coming brewers and distillers, Brexit could prove to be an obstacle for growing businesses. Successful trade negotiations with the EU will be vital to avoid a ‘no deal’ scenario. While much of this is outwith a company’s control, there is still opportunity to plan carefully and adopt the most efficient customs procedures.

Companies could be forced to trade with the EU as a third country, subject to declarations in and out of the UK. The UK would have to forfeit EU commercial policy benefits and preferential arrangements bringing additional costs and time management. The movement of excise goods, spirits, beer and malt, could become more complicated. To and from the EU, new cross border customs procedures could result in increased costs and potential delays for businesses. As a result, the EU will expect the UK to adopt efficient control measures to supervise cross-border movements. We therefore cannot underestimate the dangers or overestimate our ability to do this successfully.

The Government have recently initiated the release of a series of technical notices providing businesses with scenario based guidance: ‘Trading with the EU if there’s no Brexit deal’.

Two key areas to consider for international trade operations are:

  • Authorised Economic Operator (AEO) status

AEO accreditation is becoming more prevalent commercially and with customs authorities. Having AEO approval may well become the route for frictionless trade. There are many benefits that come with AEO status including simplified declaration procedures, guarantee waivers/reduction and EU-wide recognition. As subject experts and ex-customs officers, we are trained in AEOC simplifications and AEOS security and safety to help brewing & distilling businesses prepare for a smooth and successful application.

  • Customs/excise warehousing procedure

Excise warehouse approval and warehousekeeper authorisation allows you to store spirit production until the duty point is passed, normally when released for sale. A customs warehouse enables suspension of import VAT and duty payments until released to free circulation. Both options have a clear cash flow benefit. Having an approved warehouse ensures efficient processes are adhered to and that there is effective maintenance of records. Waste can be accounted for and reclaimed with this facility.

For more information regarding the customs implications for brewers and distillers and guidance on what you can do to prepare for Brexit, contact:

Veronica Donnelly

VAT Partner

0141 886 6644

veronica.donnelly@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice.  This is based on our understanding in August 2018. Laws and tax rules may change in the future.

The disposal of assets in historic houses – to VAT or not to VAT?

August 24, 2018

Running a historic house and its associated lands as a family estate or trust has become the most popular way to ensure estates, their history and stories survive for future generations.

Often, this means the house and many of its rooms & contents are opened to the public. Where a historical house charges admission, any of the assets on public display, such as furniture, antiques or works of art are viewed as business assets. HMRC has recently updated its guidance on assets used by historic houses.

If the business is VAT registered, output tax would be due upon disposal. An exception to this is where the disposal is either by private treaty sale (privately arranged sale to UK national museum, gallery or Art Collections Fund), or for acceptance in lieu of estate duty, capital transfer or inheritance tax. In these cases, the disposal is exempt from VAT, however, in order to qualify for this exemption, the work must be of national, scientific, historical or architectural interest.

Alternatively, if the assets were treated as private assets, any subsequent disposal would be outside the scope of VAT. Newly acquired assets can be treated as private assets by contacting HMRC’s VAT helpline and providing them with the relevant information. It should be noted that if the asset is treated in this way, any input VAT incurred on the acquisition cannot be recovered. Existing business assets can be reallocated as private assets however it must be shown that the asset is no longer used for business purposes, for example, by moving it to a part of the house used for private purposes only.

It should be noted however that if the owner was entitled to recover input VAT when the asset was acquired, then output VAT must be accounted for when the asset is reallocated as a private asset. If VAT was not charged on the acquisition (such as an inherited asset), then no VAT is due on the reallocation.

Where goods are bought partly for business and partly for non-business use the portion of their input tax in relation to their business use of the asset can be reclaimed. If the asset is used partly for private use, all the input VAT can be recovered however output VAT should be accounted for each quarter for the private use.

For more information on the contents of this blog, please contact me here. Our specialist VAT department will also be able to offer you support on this or any other area of VAT.

Ian Craig
Ian.craig@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice.  This is based on our understanding in August 2018. Laws and tax rules may change in the future.

New VAT Partner and International Customs Specialist as Campbell Dallas expands Indirect Tax Practice

August 6, 2018

Campbell Dallas has appointed a second VAT Partner and a specialist Customs International Trade specialist within the firm’s fast-growing Indirect Tax practice.

Glasgow-based Greg McNally has been promoted to VAT Partner and will provide specialist VAT and Indirect Tax advice to clients and intermediaries across Scotland. He has over 18 years’ experience working on a broad range of VAT assignments and has developed particular expertise in land and property transactions, and the construction, sports, leisure and charity sectors.

Greg is Chair of the Scottish Chapter of the VAT Practitioners Group, is a Chartered Tax Adviser and a regular speaker on VAT and Indirect Tax at conferences and events.

Allan Bird is a Customs International Trade specialist and joins Campbell Dallas as a Manager from HMRC where he dealt with VAT compliance and legislation on numerous complex cross-border transactions. He has also worked across the whisky, oil and gas, and aircraft sectors providing risk assessments, compliance reviews, AEO certification and international trade support. He will advise Campbell Dallas’ clients on complicated VAT issues expected to arise from Brexit, including inward processing relief, end use, warehousing, temporary imports, tariffs, valuations, origin and legislation.

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Pictured left to right: Greg McNally and Allan Bird

Commenting on the appointments, Veronica Donnelly, Head of VAT with Campbell Dallas said: “Greg is a highly skilled and experienced VAT and Indirect Tax practitioner with a strong commercial focus. He is a major asset to our growing client base, and I am delighted to confirm his promotion to Partner.

“Allan’s detailed knowledge of Customs compliance will bring a new dimension to our business and will be of considerable benefit to clients engaged in or planning to export. Post-Brexit, the export/import business will be much more complicated, and costly mistakes will be much more probable. Both Greg and Allan will help clients navigate VAT legislation, identify efficiencies in the transactional nature of the VAT supply chain, and generally help ensure our clients are compliant with the law.”

If you would like to discuss any VAT or Customs related queries and how they may impact you or your business, please contact our VAT team here.

This information should not be regarded as financial advice. This is based on our understanding in August 2018. Laws and tax rules may change in the future.

Proposed changes in VAT legislation

August 1, 2018

HMRC recently announced proposed changes to be introduced in the Finance Bill 2018-19.

Changes to VAT Grouping Eligibility

The draft legislation proposes to allow non-corporate bodies, such as a partnership or an individual to join a VAT group.

Under the previous rules, in order to join a VAT group, an entity was required to be a corporate body established or with a fixed establishment in the UK. Following the changes, a non-corporate entity will be able to join a VAT group provided they have a business establishment within the UK and share common control.

HMRC has published a policy paper containing the VAT grouping eligibility criteria changes. These changes are due to take effect from Royal Assent.

New Late Filing and Late Payment Penalty System for VAT

The default surcharge regime for VAT is being replaced from 1 April 2020. The new penalty system will introduce separate penalties for late payment and late filing. This new system will be harmonised across Corporation Tax, Income Tax Self-Assessment and VAT.

For late payment penalties, the penalty will be based on the lateness of the payment:
• No penalty will apply if the tax due is paid within 15 days of the due date.
• A reduced penalty will apply to payments made between 16 and 30 days from the due date.
• If the tax is not paid after 30 days, two penalties will be due. The first on day 30, based on the payment activity in the month and the second, when the outstanding balance is paid in full.
The above penalties can be suspended if a Time to Pay can be agreed.

Late filing penalties will be based on a points system, where a business will earn a penalty point for failing to file a return on time. Once the business reaches the maximum amount of points, they will be liable to a financial penalty. The maximum points threshold will vary depending on whether the business submits annual, quarterly or monthly returns.

New Draft VAT Legislation on Treatment of Vouchers

Changes are being introduced to the VAT treatment of vouchers issued on or after 1 January 2019. The purpose of the legislation is to provide clear definitions between Single Purpose Vouchers (SPV) and more complex Multi-Purpose Vouchers (MPV), and to harmonise the treatment of vouchers across the EU.

From 1 January 2019 a voucher will be considered an SPV where the ‘place of supply’ of the ultimate goods or services is known at the time of issue, and where the voucher can only be used for goods or services at a single rate of VAT. VAT will be due at the appropriate rate on the sale of the SPV.

Any voucher that is not an SPV, will be considered an MPV. VAT on this category of vouchers will be due when the voucher is redeemed in exchange for the goods or services. Intermediaries distributing MPVs will not be making a supply for VAT purposes, and this may have an impact on their VAT recovery position.

Under the new legislation, postage stamps and tickets, including travel or admission to a venue or event are specifically excluded and will not be considered vouchers. These will be treated under the normal tax point rules.

If you would like to discuss any of these changes and how they may impact you and your business please contact our VAT team here.

This information should not be regarded as financial advice. This is based on our understanding in August 2018. Laws and tax rules may change in the future.

Campbell Dallas advises GP Green Recycling on sale to Enva

July 27, 2018

Campbell Dallas’ Corporate Finance team advised the shareholders of GP Green Recycling Ltd on its recent successful sale to Enva, a provider of end-to-end waste management solutions in the UK and Ireland for an undisclosed sum.

GP Green Recycling, based in Blantyre, South Lanarkshire, is one of Scotland’s largest recoverers of organic wastes, recycling organic waste materials into a soil conditioner and high-grade compost certified to British Standard PAS 100.

Graham CunningJim Gilchrist, founder of GP Green Recycling who will retire following the sale, said: “This is a very exciting time for GP Green Recycling, customers and staff. A lot has been achieved during my tenure and I am confident that Enva can further develop the business, serve our customers well and provide opportunities for our employees.”

Graham Cunning (pictured left), Head of Corporate Finance at Campbell Dallas said, “The deal is a great example of a buoyant M&A market for quality businesses. Funding is readily available for deals, and Scotland remains an attractive economy for buyers. Vendors just need to ensure they prepare their business for sale and take time to do so.”

UK Aesthetics sector targeted by HMRC Hidden Economy Team

July 17, 2018

One of the UK’s leading experts on tax rules in the Aesthetics sector is warning that HM Revenue and Customs Hidden Economy Team is targeting aesthetics businesses to ensure correct taxes are being paid, particularly VAT.

Cosmetic businesses that have provided treatments on which VAT is due, but not charged the VAT, will be at most risk of investigation, possibly resulting in fines and penalties. The main risk to a business is the attempted backdating of VAT registration, which can in some cases go back to the business’s first trading year.

Veronica DonnellyVeronica Donnelly, a VAT partner with accountants Campbell Dallas, and the UK’s leading Aesthetics VAT specialist, is urging businesses to ensure their treatments comply with guidelines that VAT can be exempt when a treatment is undertaken as part of a health care programme. She explained that there are two essential tests that must be applied to ensure the treatment is VAT exempt:

“The first test is that the practitioner must be on a statutory register and working within their area of expertise as a surgeon, doctor, dentist or nurse.

“The second test is more open to interpretation, as it focuses on patient health, and whether the treatment provided is of medical care. This is the area that can cause most difficulty, with some businesses applying the wrong test in relation to VAT, potentially making incorrect decisions that leave them exposed to enquiries from HMRC, and the risk of falling foul of VAT laws.”

Veronica Donnelly added: “VAT is a European Tax and importantly, HMRC in the UK does not have the final say in how VAT law should be interpreted. HMRC’s focus on the patient perspective was successfully challenged in a landmark ruling by the Court of Justice of the European Union. The CJEU determined that whether a treatment qualifies as ‘purely cosmetic’ is a matter for the medical professional providing the treatment, not the patient’s opinion. Despite the ruling, VAT in Aesthetics remains a complex area, and is open to interpretation by the treatment provider, and in turn by the Tax authorities.”

Aesthetic businesses are being urged to use the two tests to help ensure that they correctly apply VAT exemption to a treatment. Any treatment that does not pass the tests must be charged at the standard prevailing VAT rate, currently 20%. Treatments provided and decisions on VAT exemption must be accurately and properly recorded.

Veronica Donnelly stressed that whilst well-managed clinics have little to fear, the Aesthetics sector has grown rapidly, and there will be many practitioners and businesses that are at risk of an enquiry:

“Public finances are under considerable strain, and HMRC is looking to dramatically increase tax revenues. The Hidden Economy team is a specialist group that targets sectors where there are likely to be good recovery rates, and the Aesthetics sector is on their radar. We would urge any practitioner or business that is concerned to contact us as soon as possible. We have an extensive team and a quick VAT health-check could help avoid serious financial problems. The only way to deal with tax is to comply with the law, and ensure the correct taxes are paid.”

For more information, contact a member of the Campbell Dallas VAT team here.

This information should not be regarded as financial advice. This is based on our understanding in July 2018. Laws and tax rules may change in the future.