Category Archives: Business

Key Tax Points You Need to Know

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1 Employment Allowance
This is increasing to £3,000 from £2,000 from April 2016. However, sole director companies will no longer receive any of the allowance. Consideration should be given to appointing another director of a spouse/partner.

2 Savings Income
For basic rate tax payers, from April 2016 interest will be paid gross and the first £1,000 will be tax free. Dividends will no longer be paid with a tax credit and up to £5,000 will be tax free. So these two, together with the personal allowance of £11,000 will mean that is possible to earn £17,000 without paying any tax.
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3 Self Employment
(i) Control – does the employer have significant control over you
(ii) Mutuality of obligations – Does the employer have to offer work and you are obligated to perform it
(iii) Substitution – who decided who can do the work if you are unable to do it?
(iv) Insurance – Do you pay public liability, professional indemnity and product liability insurance?
(v) Mistakes – Are you require to correct and rectify your work in your own time, for no further payment?
(vi) Does a proper self-employed contract exist?

 

Shareholder Agreements

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When setting up a company it is easy to assume that a bright future lies ahead.

You have a great, profitable idea and you have chosen a business partner you trust. So what could possibly go wrong? A shareholder agreement will protect you from arguments resulting in costly and acrimonious legal battles that could leave you with nothing – in effect, a business pre-nuptial agreement.

Some key reasons for setting up a shareholder agreement are as follows:

1. The shareholder agreement sits alongside the company’s articles of association, which includes the main provisions defining how the company operates. However, the shareholder agreement can be more dedicated to the particular needs and concerns of shareholders. It is also a confidential document as it is not a public document, unlike the articles of association.

2. You can reduce the potential for future disputes between shareholders. The shareholder agreement defines how decisions should be made and outlines the responsibilities and obligations of different parties. If a dispute does occur, it can include procedures for dispute resolution which is a cheaper alternative to legal action.

3. The agreement can force shareholders to give up their shares when they cease to be a director or employee of the company, if they die, if they are made bankrupt or they breach contain terms. It can also stipulate how the shares are valued in such circumstances.

 

Top 10 Tips for Growth Businesses Seeking Finance

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1 Prepare a business plan
A robust business plan helps potential investors understand the vision and goals of the business, and brings focus to management’s understanding of the business strategy.

2 Do your research
The funding landscape has evolved considerably over recent years; think about how appropriate and attainable the various forms of finance may be.

3 Utilise tax-relief
When seeking investment your business may wish to make potential investors aware of three HMRC tax relief schemes – the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trust Scheme.

4 Invest in management
A strong management is the backbone of a successful company. Businesses with a full management team and advisory board in place will increase investor confidence and become more attractive investment propositions.

5 Manage your cash
Before seeking external capital, it is vital your business is managing cash effectively. A weekly cashflow forecast is essential, as is an understanding of the volume of cash and working capital required to grow.

6 Use external advice
In the early stages a business is likely to require outside advice to ensure that it is ‘investment ready’. Sources of advice include trade associations, such as ICAEW, whose Business Advice Service offers micro businesses free advice.

7 Set realistic targets
Ensure your business sets realistic KPI and milestone targets that can be relayed back to investors. Doing so will help you implement your business plan as you grow, and help investors monitor the progress of their finance.

8 Work with investors
In some investment circumstances, such as receiving equity finance, growth businesses should be aware that investors may wish to input into the strategic direction of the business.

9 Know your market
A review of the potential upturns and downturns in your respective market needs to be carried out and their impact assessed. Doing so will ensure your business is prepared for any unforeseen market developments.

10 Be flexible
Your business plan may have been produced when the business was little more than an idea. Circumstances change, so you must ensure you make regular fresh assessments of where your business is and what new challenges you may face.

Summer Budget 2015

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Some main points from the Summer Budget 2015

The personal allowance will increase to £11,000 from 6 April 2016 and to £11,200 from 6 April 2017.  Tax at the higher rates will start at £43,000 of income from 6 April 2016 and £43,600 from 6 April 2017.  The aim is to reach a personal allowance of £12,500 and a higher rate threshold of £50,000 by the end of this parliament.

From April 2016 dividends will be taxed more heavily, with only the first £5,000 exempt from additional tax.  A quick calculation suggests that a 40% taxpayer taking a dividend of £100,000 would pay £7,125 more in tax than at present.  It seems likely that it will still be more effective for family companies to pay minimal salaries and top up with dividends but shareholders may wish to take a significant dividend on or before 5 April 2016, even if they immediately lend the money back to the company.

Corporation tax will reduce to 19% from 1 April 2017 and to 18% from 1 April 2020.

From 1 January 2016 full tax relief will be available on purchases of plant and equipment up to £200,000 per annum in total.

Companies will not be able to write off goodwill against corporation tax for business acquisitions on or after 8 July 2015.

Rent-a-Room relief increases from £4,250 to £7,500 per annum from 6 April 2016.

Relief for buy-to-let interest will be gradually reduced to basic rate for higher rate taxpayers over the period from 6 April 2017 to 5 April 2020.

Individuals with income in excess of £150,000 will have their allowance for tax deductible pension contributions reduced on a tapered basis down from £40,000 per annum to a minimum £10,000.

An additional inheritance tax (IHT) relief will be given where a residence is passed on death to a direct relative.  This starts at £100,000 on 6 April 2017 and increases to £175,000 by 6 April 2020.  It means ultimately that a couple will have a total exemption of £1 million.  The additional relief will be indexed after 5 April 2021, but the relief will be gradually withdrawn where the total estate exceeds £2 million.

The remittance basis for non-doms will be removed from 6 April 2017 where they have been UK resident for more than 15 of the past 20 tax years.  They will also be subject to IHT on their worldwide assets.  Any existing offshore trusts will still be safe unless they hold UK residential property.

The exemption of £2,000 from employer’s national insurance contributions will be increased to £3,000 from 6 April 2016.