"Powered by Mazars", A series of seminars for independant accounts. This presentation focuses on share schemes, employee benefits, pension planning and remuneration planning.

1. “Powered by Mazars”

2. Amy Goold
Tax Director, South West
Responsible for tax compliance and advisory across
Bristol and the South West region.
Specialisms include share schemes, transactions,
corporate restructuring and other complex corporate tax
planning.
Focused on tax planning for owner managed
businesses, assisting both the shareholders and the
directors on tax planning across potentially conflicting
responsibilities.
2

3. Tim Gillingham
Director Mazars Employee Benefits, South West
Tim is a Director in our Employee benefits team.
He is a Fellow of the Pensions Management Institute
and specialises in Group pensions as well as employee
benefits.
Prior to joining Mazars he previously ran his own
Consultancy based in the South West.
3

4. Ian Barton
Director, Mazars Financial Planning Limited
Ian is a Chartered and Certified Financial Planner. He is
also an Associate of the Chartered Insurance Institute. He
has over 24 years experience as a financial adviser and has
worked in the financial services industry for 29 years.
Ian’s experience covers financial planning advice to private
and corporate clients, in particular investment and
retirement planning advice to high net worth individuals,
trustees, partners of professional firms, business owners
and company directors.
4

5. Share schemes
update
Contents
• Share schemes recap
 EMI
 CSOP
• Changes in the last twelve
months
• Changes in consultation
• Alternatives to approved schemes
5

6. Why options?
• Incentivise
• Retention
• Recruitment
• Expected (industry norm)
• Succession planning
• Instead of payrise
• Often a win/win situation!
6

7. Enterprise Management Incentive
• Approved scheme – most tax efficient
• Trading company (excluded trades)
• Gross assets < £30m, employees <250
• Limit £250,000 per employee (increased 16 June 2012)
• Employment condition – 25 hrs pw or 75% of working time
• Concession for “academics” – academic working time counts
towards 25 hrs, employed by both co’s (in consultation – probably
effective 6 April 2013)
• ER concession for <5%, but still 12mth condition
7

8. Enterprise Management Incentive cont’d
EMI
Unapproved
£1,000
Income
CGT tax
Value - £10 Price paid
Grant Exercise &
Sale
8

9. Company Share Option Plan
• Approved scheme – second choice
• No size limits
• Less flexible
• Qualifying employee • Limit £30,000 per
employee
• Can’t exercise for 3 years
• Must grant at market value
9

10. HMRC in Consultation
• Role of employee ownership
• Self certify CSOP, SIP & SAYE (by 2014)
• Is CSOP still relevant?
• Merge CSOP & EMI? (not yet consulting)
• Various minor changes (to implement 2013)
• 1 combined annual return (exploring further)
• Online annual return filing (& documents)
• Eventual Real Time recording and iXBRL!
• Unapproved consultation 2012/2013
10

11. Alternatives to Approved Schemes
• Deferred shares
• Flowering shares
• Split interest share plan
• Partition shares
• Unapproved options
11

12. Employee Benefits
Contents
• Auto-enrolment – planning
ahead
• Other hot topics
12

13. Why reform?
• Millions of individuals not saving adequately for retirement
• State Pension reform alone is not enough
• People are living longer
• Decline in final salary scheme membership
• Barriers to saving
13
13

14. The Evolving Pensions Landscape
Group
Defined Benefit Schemes GPPs Auto-Enrolment
Stakeholder
Pension tax relief on
dividends abolished
S226 Personal
Stakeholder
Pensions
C/out C/out – all C/out ceases
DB Schemes schemes (except DB)
Apr
78 88 97 01 12 Oct 12
Compulsory occupational pensions Voluntary pensions Compulsory
14

15. Pension Reform: The Facts
• Employers must automatically enrol UK employees into a
qualifying workplace pension who:
– are not already in a qualifying pension scheme
– are aged 22 or over
– are under State Pension age
– earn more than £8,105 a year
• Employer must make minimum contributions
• Individuals can choose to opt out, but employers…
– cannot opt-out, or
– induce / coerce employees to do so
15

16. Pension Reform: Minimum Contributions
£42,475
• Salary
Qualifying Earnings • Wages
(2012/13) • Commission / Bonus
• Overtime
£5,564 • Statutory Pay
£0
16

17. By when ?
• Its started…
• Large employers first
• All employers complying by October 2018
Oct 2012 Apr 2014 Apr 2015 May 2017
17

18. How does it affect employers?
• Increased costs
• Review and change processes
• Increased administration / workload
• Communication to employees
• Financial penalties
– £400 fixed penalties
– Up to £10,000 per day
18

19. Impact
Over 1 million SME employers will automatically enrol employees
from mid-2014 onwards…
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20. How we can help
• Overview of employer duties
• Assessment of workforce to identify employees affected
• Provide financial models showing different scenarios
• Review of existing pension schemes and identify any changes that
are required
• Provide strategies to reduce costs / the administrative burden
20

21. Summary
• Workplace pension reform has arrived
• Employers will have to comply and understand their duties or risk
facing penalties
• Early preparation is key
21

22. Other Hot topics
• Salary sacrifice on pensions
• Group risk schemes and auto enrolment
• Closing down sale for commission on new schemes
• Final salary de-risking
22

23. Mazars Financial
Planning
Contents
• Maximising pension relief
• Property in pension
23

24. 01
What are the current pension allowances?
• Annual Allowance is £50,000.
• Annual Allowance charge is a rate linked to an individual’s marginal
tax rate.
• Tax relief on contributions continues to be available at an individual’s
top rate of income tax (even 50% tax payers!). But for how long?
• Defined Benefit accrual valuation is now 16:1.
• Three year carry forward provision (tax years 2009/10, 2010/11 and
2011/12). Carry forward allows contributions of up to £200,000 to be
paid in the 2012/2013 tax year.
• From 6 April 2012, the standard lifetime allowance has been 1.5
million (the level it was at A-Day).
24

25. 01
So, what are the opportunities?
Carry Forward
• You must have been a member of a Registered Pension Scheme in
the carry forward year.
• You must deduct contributions actually paid in each tax year.
• To the extent that those contributions exceeded £50,000, the
balance does not have to be deducted from the carry forward
allowance from earlier (but not later) tax years.
• It is not required for you to have had relevant UK earnings in that
tax year.
• Do need relevant UK earnings in year contribution actually paid (if
member contribution).
25

26. Maximising contributions
Carry Forward Case Study
• James is aged 45,
• His recent contributions record is as follows;
Tax Year Contribution Deemed Annual Available Carry
Paid Allowance Forward
2009/10 £20,000 £50,000 £30,000
2010/11 £20,000 £50,000 £30,000
2011/12 £20,000 £50,000 £30,000
• In 2012/13, his Relevant UK Earnings are £170,000
• James can therefore make a maximum tax relievable pension contribution,
without resulting in an annual allowance tax charge, of £140,000 (i.e. £50,000
annual allowance in 2012/13 plus the carried forward annual allowance of
£90,000).
26

27. 01
Maximising contributions cont’d
Pension Input Period (PIP) Planning
• Pension contributions in excess of £50,000 in a tax year can be made
by manipulating your Pension Input Period (PIP).
• A PIP is the period over which you calculate the amount of your
pension saving.
• Any new pension plans taken out since 6th April 2011 will have a PIP
aligned with the tax year, although a different date can be nominated.
• A PIP does not have to be exactly the same period as the tax year and
does not necessarily have to be a year.
• Manipulating PIPs won’t allow you to pay more into pensions overall
but will allow earlier payment of contributions thus benefitting from an
additional year’s investment growth.
27

28. 01
So, what are the opportunities? cont’d
PIPs – Case Study
• Julie sets up a personal pension on 1st December 2012 with a £50,000
pension contribution.
• Julie could nominate to end the input period earlier on 31st January 2013.
• As this input period ends in the 2012/13 tax year, the contribution is tested
against the annual allowance of £50,000 for the 2012/13 tax year.
• Julie’s second input period now starts on 1st February 2013 and ends on 1st
March 2014.
• Julie can therefore make a further £50,000 pension contribution on 1st
February 2013 which would be tested against the annual allowance for the
2013/14 tax year.
28

29. 01
Maximising contributions cont’d
Paying higher pension contributions
• For many high earners, the £50,000 maximum tax relievable
pension contribution is restrictive. However, there are opportunities
to make pension contributions above £50,000
• A Defined Benefit SSAS provides an allowable level of contribution
which can often be significantly greater than £50,000
• This is because employer contributions are actuarially calculated,
using the 16:1 DB accrual valuation, for an appropriate level of
annual, secure benefit.
29

30. 01
Maximising pension contributions cont’d
Case Study
• DB SSAS – Malcolm, aged 50, wants to secure a guaranteed pension income at
age 55.
• By dividing the Annual Allowance limit of £50,000 by the DB accrual factor of
16:1, a pension of £3,125 per annum can be obtained.
• The required DB contribution to provide this is actuarially calculated as
£105,000. This sum is fully relievable for the Company making the contribution,
there is no spread of relief and no tax implications for the member.
• If no pension contributions had been paid in the previous 3 years then carry
forward would be available.
• A pension of £3,125 per annum could be obtained for each carry forward year.
• A total contribution of £420,000 could therefore be paid.
30

31. 01
Using Commercial Property for Tax Planning and
Cash Generation
Using a pension plan to purchase a commercial property
• Applicable to both existing commercial property or new purchases
• Releases capital held in the pension scheme back to a company or
the individual owner
• Tax efficient way of owning a commercial property
• Enables certain types of pensions to hold commercial property as an
investment to provide future retirement benefits
31

32. 01
Commercial property and pensions
Benefits
• No capital gains tax payable on the future sale of property
• Rental income received by the pension is free from income tax
• Property can potentially be free from IHT
• Creditors have no access if the company goes into liquidation
• Company funds that would be used for property purchase are
released for other use
32

33. 01
Case study
• John is aged 45
• He owns a successful packaging business
• The business owns their trading premises valued at £300,000
• He has a number of personal pension plans – total value of £210,000
• John transfers his PPPs into a SIPP
• The SIPP can borrow up to 50% of the scheme assets held by the SIPP -
£105,000
• The combined the value of the SIPP assets and borrowing total £315,000
• This sum is sufficient to cover the purchase of his warehouse [£300,000] by
the SIPP, plus have surplus to cover costs and expenses
• Property is now owned by John’s SIPP and £300,000 of cash has been
released back into John’s company
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34. 01
Summary
• Use annual allowances, carry forward and pension input periods to
maximise contributions
• Defined benefit route can allow companies to get even more into a
pension scheme
• Pension schemes can present a tax efficient way of holding
commercial property and can also release cash back to a company
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35. Mazars Financial Planning Ltd is wholly owned by Mazars LLP
Mazars Financial Planning Ltd is authorised and regulated by the Financial Services Authority
The information contained in these slides do not constitute individual advice. Mazars Financial Planning
Ltd will not accept any responsibility for decisions taken or not taken on the basis of the information
presented. Always obtain independent, professional advice relevant to your own circumstances.
The presentation is based on our understanding of current legislation and HMRC practice as at 21st
November 2012 which may be subject to change.
35

36. Remuneration
Planning
Contents
• Tax efficient profit extraction
• Alternatives for higher rate
tax payers
36

37. Tax Efficient Profit Extraction
Large Company paying CT at full rate Small company paying CT at 20%
Effective tax
rates
AR AR AR AR
BR HR BR HR
(50%) (45%) (50%) (45%)
Salary 40.2% 49.0% 57.8% 53.4% 40.2% 49.0% 57.8% 53.4%
Loan account
20.0% 40.0% 50.0% 45.0% 20.0% 40.0% 50.0% 45.0%
Interest
Dividend current 24.0% 43.0% 51.4% 47.2% 20.0% 40.0% 48.9% 44.4%
(from April 2013) (23.0%) (42.3%) (50.8%) (46.5%) (20.0%) (40.0%) (48.9%) (44.4%)
Pension 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Use of home 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
37

38. Alternative Planning Ideas
• Defer income (matched with loans)
• Salary sacrifice
• Contract for differences
38

39. Any questions?
39

40. Should you require any further information, please
do not hesitate to contact:
Amy Goold 0779 403 1527
amy.goold@mazars.co.uk
Tim Gillingham 0777 242 3335
Tim.gillingham@mazars.co.uk
Ian Barton 0779 403 1239
Ian.barton@mazars.co.uk
The contents of this presentation are confidential and not for onward distribution. Disclosure to third parties cannot be made without the prior written consent of Mazars LLP.
Mazars LLP is the UK firm of Mazars, the international advisory and accountancy organisation. Mazars LLP is a limited liability partnership registered in England with registered
number OC308299.
© Mazars LLP 2012 40