Winter 2009 - Foxley Kingham

Issue 12 Winter 2009
Foxley Kingham
proActivity
The latest developments in accounting and commerce and what they mean to your business
Inside
Pre-Budget
report
Back to VAT
Treats in store
... and much more
“...attention to
detail, a true
understanding of
your personal and
business needs
and foresight
in pointing out
any pitfalls or
opportunities
in the future Foxley Kingham
provide all this
and more...”
Merry
Christmas
To all our loyal clients and associates…
Christmas is nearly upon us and we’d like to take
this opportunity to thank you for your custom over
the past year and wish you a well-deserved festive break
and a happy, healthy and prosperous New Year!
In the meantime, though, there are one or two things to bring to your attention, not least
the impending VAT change and the implications for you and your business of last week’s
pre-budget report. We also bring news of a recent deal which proves that raising finance
in the current climate may be difficult but is by no means impossible; plus we turn our
client spotlight on Carnoisseur, The Car Leasing Store…
So for the last time this year please read on for all this and more, and as ever, if there’s
anything you’d like to find out more about, or you have any comments or feedback on
this publication, or, indeed, any aspect of our service, please do get in touch.
Client Spotlight: Carnoisseur
The Car Leasing Store Looks Forward
to a Happy New Year
By Neville Crow, Carnoisseur Leasing
Carnoisseur started life in 1979 with the
publication of our first mail order catalogue
selling car parts and accessories. I built the
business up over the years to be a successful
mail order business with a chain of 15
franchised stores based throughout the UK.
25 years on I started to feel like I wanted to
do something new with the brand. I felt there
was a gap in the market for a high street store
where the public and local businesses could go
to arrange the lease of a new car or van. A close
friend of mine had run a very large, web-based
vehicle brokerage in Manchester for some time,
and I visited him to see if a deal could be done.
We did the deal and opened the first
Carnoisseur Leasing store in Dunstable in
August 2008. Throughout the first year we
managed to run a profitable pilot store whilst
developing a robust franchise package. The first
franchised store opened in Belfast in December
2008, and we have since opened franchised
stores in Newport Pagnell, Swindon, Witney
and Worcester.
I’d be lying if I said it had all been plain sailing.
It’s no secret that the vehicle industry has taken
a hit over the last year, and the retail sector in
general has hardly been buoyant! Some of the
finance companies we were dealing with have
come out of the market and all of them have
tightened up on their underwriting procedure.
However the new market conditions have, to
an extent, proved beneficial; for instance vehicle
manufacturers and dealers are keener than ever
to sell their product, and are consequently
offering increased discounts for fleet purchasers
such as ourselves; the end result being better
prices for our customers (prices now start from
about £99+VAT per month!). Also, we have
had a tremendous amount of interest in the
franchise, especially from car salesmen that, in
the current climate, are looking for a change of
direction and like the idea of being their own
boss.
Our concept is centred on customer service. I
know everyone says that, but we really mean
it. We put a lot of time, energy and money
into developing the concept; making sure
that franchisees have the right tools, effective
marketing, attractive retail premises… it all
matters, but none of it makes any difference
if the person serving in the store doesn’t treat
2
their customers with complete dedication and
respect. We train our franchisees to work with
the public and local businesses to find the
vehicle and the finance package that really suits
their requirements. Most people are surprised
at the significant benefits such as no risk of
depreciation, free road tax, full manufacturer’s
warranty, low initial payment, etc. Also for
businesses there are some key features such as
the monthly rentals being 100% offset-able
against your taxable profits, and the fact that
payments on a leased vehicle can be simply
shown against your expenses, rather than
having to show a depreciating asset on your
balance sheet.
2010 is an exciting prospect. We’re looking
forward to working closely with our franchisees
and helping them further strengthen their
businesses. With new stores opening early in
the New Year in Bedford, Glasgow and Bath it’s
likely to be another busy year.
For more information on vehicle leasing or
the Carnoisseur Leasing franchise opportunity
visit our website www.carnoisseurleasing.com
or feel free to email me directly at n.crow@
carnoisseurleasing.com.
Wallmans Knockout Punch to take The Crown
infectious and nothing was going to stop him
completing the deal. We are delighted to have
helped him achieve that and look forward to
the next opportunity to assist local businesses
raise funds to exploit an opportunity. Whilst
there’s no doubt that raising funds in today’s
market can be a challenge, this goes to show
that it is possible with the right team and a good
proposal.”
Clients Paul and Janet Wallman have acquired
the Crown public house at Henlow from Punch
Tavern plc, through finance provided by RBS/
Nat West.
Paul Wallman said “We have developed a great
business here, with fantastic locally-sourced
food, a great atmosphere and a loyal clientel.
I am delighted that we now own the freehold
rather than lease from Punch and are able to
move forward on our own terms... I can’t say
it’s been easy – the negotiations have been a
roller coaster ride with a seemingly impossible
deadline imposed upon us. However with
excellent support from our accountants Foxley
Kingham and RBS/NatWest we managed to
get the deal done. I would like to say that the
drinks are on me, but the bank is not too keen
on that type of promotion!”
Sample the Wallmans’ hospitality for yourself at
The Crown, 2 High Street, Henlow, Beds SG16
6BS.
Foxley Kingham’s Steve Sansom commented,
“Like all good landlords, Paul’s enthusiasm was
If you are thinking about any type of
transaction, whether it be buying or selling,
raising finance for growth or just simplifying
the existing business structures then give
Steve Sansom a call on 01582 540800. It’s
never too early to talk things through…
What’s your story?
Call us on 01582 540800 or e-mail us direct if you think your story
would interest other readers. We’d love to hear from you!
The Pre-budget Report and what it means
for your business
Although certain measures, such as the return of the VAT rate to 17.5%
and further increases in NIC contributions from April 2011 may not
appear to be particularly helpful, on the whole the Chancellor is thought
to have presented a welcome pre-Christmas message for small businesses
today.
Although there were no new measures, there were further deferrals or
continuation of already in-place schemes which should be welcomed by
small businesses, especially start ups. The following is a summary of the
main points that might affect you:
• Cashflow support for businesses through the HM Revenue and
Customs (HMRC) Business Payment Support Service will continue
for as long as is necessary. This service allows businesses to agree more
time to pay certain tax bills to HMRC, and we have already negotiated
on behalf of our clients to defer payment of approx £8million of tax.
To find out more, or if you think you could benefit from the scheme,
please contact Garrie Brandon-White on 01582 540800.
• The planned increase in the small companies’ tax rate will be deferred
for an extra year so that it remains at 21 per cent until April 2011
• An additional £500m of credit will be made available to small and
medium sized businesses through a 12-month extension to the
Enterprise Finance Guarantee Scheme.
• The rate of VAT will return to 17.5 per cent from midnight on 31
December 2009, see article right, on pages 6-7.
• £3.5bn of regulation will be delayed until April 2011, with a
commitment that new regulation will be introduced only where there
is a clear case for action now, easing burdens on businesses.
• In addition to the 0.5 per cent increase in the employee, employer
and self-employed rates of National Insurance Contributions (NICs)
announced in PBR 2008, there will be a further 0.5 per cent increase
• A reduced rate of Corporation Tax on income derived from patents
from April 2011. There will also be an increase in the point at which
from April 2013 has been introduced to strengthen the incentives to
individuals start to pay NICs, meaning that 15 million people with
invest in innovative industries and ensure the UK remains an attractive
incomes below £20,000 will be protected from this change.
location for innovation.
3
Tax Tips
Furnished Holiday Lets
The tax year 2009-10 is the last year the present
advantages that apply to the letting of furnished
holiday lets will exist. These advantages include
the following:
• Profits are deemed to be trading income and
are taken into account for pension purposes
• Certain capital expenditure will qualify for
the Annual Investment Allowance. (100%
tax deduction)
• Losses are deemed to be trading losses and
available to set off against any other income
of the owner(s)
• Gains on sale may qualify for rollover relief
and entrepreneurs’ relief.
What are the implications?
If you are contemplating the sale of FHL
property it may make sense to complete the
transaction before the present capital gains
tax concessions expire on the 5 April 2010.
Potentially the gain on the sale may qualify for
Entrepreneurs’ Relief. This could reduce your
tax on any gain to just 10%, as long as the sale
meets the required criteria.
If you are a long term investor and have
no intention of selling, you could consider
bringing forward any capital expenditure that
may qualify as part of your Annual Investment
Allowance. For 2009-10 you are allowed to
claim a 100% deduction for expenditure up
to £50,000. If this claim either created or
enhanced an overall loss, you could set off the
loss against your other earnings and reduce your
liability for 2009-10. (You may also be able to
carry losses back if this is more advantageous.)
Planning tip
If you own FHL property now would be a good
time to take a hard look at the tax planning
advantages that are still in date. As soon as we
cross the 5 April 2010 threshold all the present
options are lost! Please call if you would like
more information on this topic.
50% Income tax rate 2010-11
On the 6 April 2010 the 50% income tax rate comes into being - those with income over £150,000 beware. There are options, however so if you are
concerned about the impact of this new tax band on your taxed income, please call us NOW as there may be planning opportunities we could discuss
with you prior to the end of the current tax year.
High income earners are also facing two further, adverse tax changes.
1. If your income exceeds £100,000 the basic
personal allowance will be withdrawn at the
rate of £1 for each £2 your income exceeds
£100,000. If personal allowances stay at
the present level £6,475, you will lose your
allowance completely when your income
exceeds £112,950. As you will be taxed at
40% on your income between £100,000 and
£112,950, whilst progressively losing your
personal allowance, the marginal tax rate in this
banding can be up to 60%.
2. From 6 April 2011 higher rate pension relief
is being withdrawn from individuals who earn
in excess of £150,000 a year.
4
Planning tip
If you have a legitimate strategy to keep your
taxable income below £100,000 in 2010-11
and so potentially save 60% tax this would be
an opportunity not to miss. Please call us to
discuss the options that may be available to
you.
Christmas Treats – The Taxman’s take…
on the whole amount. If you run several
events for staff in the year, then any which
total less than £150 will be tax free. Any
further events will be taxable in full. E.g.
If you have three events in the year costing
£40 per person, £60 per person and £100
per person, events 1 and 3 totalling
£140 will be exempt; however the
£60 event will be taxable.
We’ve said most of this before but just a
reminder of the tax implications of spreading a
little Christmas cheer amongst your employees
this Christmas…
• The cost of a staff party or other annual
entertainment is allowed as a deduction
for tax purposes. Also, provided the
cost per head (including transport and
accommodation) comes to under £150
there will be no taxable benefit charged
to employees
• The cost is only tax deductible for employees
and their partners (which would include
directors in the case of a company) but not
sole traders and business partners in the case
of unincorporated organisations
• Partners and spouses of staff attending are
included in the head count when computing
the cost per head of attending
• The £150 limit can apply to any event
during the year and is not an allowance; if
the figure goes above £150 you will be taxed
• With regard to providing
employees with gifts,
something ‘trivial’ such as a
turkey, an ordinary bottle of
wine or a box of chocolates
is regarded as a trivial gift
and as such not taxable.
• VAT is chargeable
by the employer when
an employee receives gifts
totalling more than £50 in a year,
turkeys however are
zero rated for VAT purposes!
Merry Christmas!
Look to the Big Screen for Exciting
Specialist Tax Planning Opportunities
Last year we brought to your attention the
investment and tax planning opportunities
afforded by film partnerships, and with the help
of Andrew Norman of FK Financial, several
clients have since entered into schemes of
this type.
In fact, one of the partnerships we’ve been
working with is behind the star-studded
St Trinians II: The Legend of Fritton’s Gold,
which premiered last week in London’s Leicester
Square and is due for general release on
18th December.
Film partnerships offer the opportunity to
participate in the production and exploitation
of feature films made by leading producers with
proven track records of commercial success.
In addition to the investment potential, and
potential tax advantages, these schemes bring
additional benefits:
•
The Film sector is one of the few areas that
performs well even in difficult economic
conditions.
•
Preferential recoupment positions in
film productions and co-productions are
negotiated to help ensure an equity return
when average Net Sales reach just 50% of
production budget
If you’d like to find out more about film
partnerships and other specialist tax
planning schemes available, please call
Andrew Norman (or your usual advisor)
TODAY on 01582 540800. Alternatively
use the fax back form on page 8 and we’ll get
back to you!
5
Increase in the Standard VAT
The standard rate of VAT, which was temporarily reduced to 15 per cent on 1 December 2008, will return to 17.5 per cen
If you have a cash business and calculate your VAT using the VAT fraction 3/23, you need to revert to the VAT fraction o
Below we look at some of the scenarios you may face and how to apply the changes in each case.
Retail
If you run a retail business which mainly makes
cash sales to customers not registered for VAT
(e.g. a shop, restaurant, takeaway, hairdresser,
etc.) the new rate applies to all takings that
you receive on or after 1 January 2010. If,
however, a customer pays for something they
took away (or you delivered) before 1 January
(for example, where customers have an account
with you), your sale took place before 1 January
and you must use the old rate of 15%
See also ‘Getting the Price Right’.
Business to business sales
If you are a business that sells mainly to other
VAT-registered businesses and have to issue
VAT invoices, the new rate applies for all VAT
invoices that you issue on or after 1 January
2010, except where the goods or services were
provided prior to the rate change (and more
than 14 days before you issue the VAT invoice)
or you were paid before 1 January. In these
cases you must use the old rate of 15%.
Continuous supply of
services
Special arrangements for
pubs & clubs
For continuous supplies of services, such as
leasing of equipment (e.g. computers), you
should account for the VAT due whenever
you issue a VAT invoice or receive payment,
whichever is the earlier. In these cases, invoices
issued or payments received on or after 1
January will be subject to 17.5% VAT.
Special arrangements will apply to some
businesses which remain open for business
across midnight on 31 December and normally
account for VAT at point of sale. In order to
smooth the transition, they will be permitted
to account for 15 per cent VAT on the
supplies they make into the early mo rning
of 1 January 2010. The rate change must be
applied at the earlier of the end of trading of
the 31 December 2009 session, or 6am on the
morning of 1 January 2010.
The normal rule is that you should account for
VAT on a deposit or pre-payment at the rate
in force when you receive it. If you receive a
deposit before 1 January for goods or services
that you will supply on or after that date, the
15% rate of VAT will apply to the deposit and
17.5% will apply to the balance. You do have
the option to charge 17.5% on the deposit
which may simplify matters if your customer
can recover the VAT.
Hence a pubs and clubs will be able to cash
up and adjust the tills from after close on New
Year’s Day morning, and account for the higher
rate of VAT from the next opening.
What happens if the supply
spans the change of rate?
Under special change of rate rules, if you
provide goods or perform services before 1
January 2010 and raise a VAT invoice after
that date you can choose to account for VAT
at 15%. You don’t need to tell HMRC if you
do this.
We hope to have
covered the most likely
queries here but of
course if there’s anything
you’re unsure of please
contact your usual advisor.
Comprehensive guidelines
are also available on HMRC’s
website at www.hmrc.gov.uk
However, if you make a single supply of
a service, carried out over a period which
commences before 1 January but is not
completed until after that date (e.g. decorating
a house), and unless you’ve received payment
or issued a VAT invoice before 1 January,
the whole supply should be charged at the
17.5% rate under the normal rules. You may,
if you wish, charge VAT at 15% on the work
done up to 31 December 2009 and 17.5%
on the remainder but you’ll have to be able to
demonstrate that the apportionment between
the two amounts accurately reflects the work
done in each period.
15%>17.
6
Rate
nt on 1 January 2010.
of 7/47 from that date.
SAGE Software Users
As was the case when the VAT change came into
effect, businesses will need access to both the
15% rate of VAT and the 17.5% rate for some
time after the change happens to allow for any
credit notes or delayed purchase orders relating
to goods supplied prior to the rate change to be
credited or have VAT recovered at the old rate.
For this reason, when the reduced rate first
came into effect we advised our clients NOT
to overwrite the standard tax rate on their
accounting software, but instead to set up a new
rate for use during 2009 (or as long as the 15%
tax rate applied). If you followed this advice
you should be able to manage the return to
17.5% with relative ease.
If you do need further help please
contact our SAGE expert, Christine
McAneney on 01582 540800.
7.5%
Getting the
Price Right
If you own a retail business,
whether or not you increase
your prices on 1 January 2010,
you will have to account for
VAT at the 17.5% rate from then on.
If you decide not to adjust prices in line with
the rate change, you will suffer an immediate reduction in
margin, so what should you do?
Basically you have a mix of three alternatives
•
Hold prices and take the profit hit
•
Increase prices to maintain margins, or
•
A mix of the two – increasing prices by less that the VAT hike to avoid
hitting sales too hard, and accept some margin reduction.
Then there is the practical side of re-pricing to consider...
The law requires that prices in the retail sector are shown including VAT, but
the Price Marking Order 2004 (SI 2004/102) allows a period of 14 days for
prices to be adjusted, during which time a general notice to customers must
be displayed (e.g. advising that a price adjustment will be made at point of
sale to reflect the increased VAT). There is a proposal to allow this period to be
extended to 28 days, but for the sake of your customers you should probably
aim for sooner rather than later.
Web based suppliers
Similarly those supplying goods and services over the internet will need to
consider what work will be needed to implement price changes, and whether
any outside help in re-pricing on the website will be necessary. Businesses which
have pre-printed price lists and order forms may also need to take steps to
prepare.
Tickets to events
Tickets, including season tickets, to events are liable to VAT when the ticket is
sold rather than when the event happens. Organisers of events should therefore
ensure that any printing on the tickets which will be sold across the date of the
change in rate reflects their intentions. This would need to be taken into account
when setting the price of the tickets.
7
proActivity
Foxley Kingham
Christmas Closure
Please note that our offices will be closed on the
afternoon of Friday 18th December (from 12.30pm
onwards) for our office party, and from 24th – 28th
December over the Christmas break.
FAX BACK
01582 480901
For more information on any of the items featured in this
issue, please tick the appropriate box(es) below and fax this
page to 01582 480901
 HMRC’S Business Payment Support Service
 CorporateF inance
Your editorial
team
Lisa Taylor
Editor
[email protected]
 Tax planning opportunities
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Director
[email protected]
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