Finance Tools - UK200 group
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Finance Tools - UK200 group Presentation Transcript

  • 1. #Finance4SUBWifi Code – R3port1ng
  • 2. #Finance4SUB www.uk200group.co.ukUK200Group members presenting: Price Bailey LLP Haslers Anderson Barrowcliff LLP
  • 3. #Finance4SUB• A leading UK professional member association• Established 1986• Independent chartered accountants and lawyers• Over 150 member locations throughout UK• Over 500 partners• Combined client base over 150000 businesses• Annual quality review of a high standard• Specialist technical expertise• International reach
  • 4. #Finance4SUBFinance Tool for Small BusinessCorporate Finance Structures relevant to small business start up and growth companies
  • 5. Introduction • Simon Blake • Head of Corporate Finance and a Partner in Price Bailey LLP – London and East Anglian Chartered Accountants – 75 years old, 300 staff including 23 partners – Growing by acquisition and organic efforts – Focussed on private owner management businesses – Clients from start ups to mature family business and overseas subsidiaries. A few AIM/Plus listed clients #Finance4SUB www.pricebailey.co.uk 5
  • 6. Simon Blake and UK200Group • Chairman of the UK200Group Corporate Finance Panel • Representing independent accountancy firms nationwide • Specialist corporate financiers working on new business funding, structures, M&A for owner managed private businesses from Cardiff to Castleton, Leeds to London and Maidstone to Manchester #Finance4SUB www.pricebailey.co.uk 6
  • 7. Setting up the Business • You have the innovation • You have decided to run with it • You have raided the piggy bank/mortgaged your mothers house #Finance4SUB www.pricebailey.co.uk 7
  • 8. What Structure? • Sole Trader • Partnership • LLP • Limited Company • PLC #Finance4SUB www.pricebailey.co.uk 8
  • 9. It depends! • What is the business going to do? • UK Trading or International? • Aiming for £10,000pa sales or £10m in the first 3 years? • Funded entirely by you, multinational corporate, venture capital…. #Finance4SUB www.pricebailey.co.uk 9
  • 10. Fundamental differences • Partnership and Sole Trader – transparent to individuals • for liability and taxation – simple to administer • Limited Company, LLP, PLC – Separate legal entity – Liability falls on the company – Taxed corporately – Requires more administration – PLC requires £50k share capital. Does not mean listed. #Finance4SUB www.pricebailey.co.uk 10
  • 11. On shore or offshore • Offshore companies are only appropriate where – Much of the business trading is being offshore – Most of the investment/funding is coming from overseas – The founders are non UK resident/domiciled – Acceptance of complicated accounting/tax/structure issues (Apple, Facebook etc) #Finance4SUB www.pricebailey.co.uk 11
  • 12. Most common approach • Limited companies are the most common entity used in the 21st century – Whether for a one man start up or an MBO of a non core division being bought from a multinational • Can be formed by one director with £1 share capital • No limits on number of directors/shareholders • Easy to adapt, but publicly accessible information #Finance4SUB www.pricebailey.co.uk 12
  • 13. Funding angles • All funders recognise Limited companies as the easiest vehicle to fund • Banks will often require director/shareholder guarantees which breaks the liability protection for bank borrowing (but not other liabilities, e.g.. Contractual disputes) • Different structures of shares can accommodate almost any arrangement of equity funding solutions • Easily convertible to PLC for listing requirements #Finance4SUB www.pricebailey.co.uk 13
  • 14. Pitfalls and planning • Easy to set up, but what about when things are less rosy? • Avoid 50:50 shareholding where possible, as this risks a deadlock • Always have a private shareholders agreement (not on public record) • Keep companies clean – respect it’s individual entity status, and – don’t confuse personal and business #Finance4SUB www.pricebailey.co.uk 14
  • 15. Shareholders / Investors Agreements • For companies, a shareholders agreements provides a framework and a fall back position in dispute • Vital where mixture of shareholders working in the business and pure investors • Sets the parameters for – Dealing with disputes – Transfers of shares – What happens when a shareholder wants to leave – What happens when other shareholders want a shareholder to leave – Who makes what decisions – management or shareholders – How are shares valued for internal transfers of shares #Finance4SUB www.pricebailey.co.uk 15
  • 16. What do buyers want? • When you come to sell your business, what structures do buyers want? • Buyers want clean assets and no liabilities • Sellers want typically cash now and walk away! • Taxation of shares v assets on exit #Finance4SUB www.pricebailey.co.uk 16
  • 17. LLPs • Limited Liability Partnerships • A company for legal purposes, a partnership for tax purposes • Common for “special purpose vehicles” e.g. single asset businesses • Heavily used by professional partnerships, albeit trend perhaps beginning to head towards Ltd and PLC for them as well now #Finance4SUB www.pricebailey.co.uk 17
  • 18. Key contactsSimon Blake PartnerHead of Corporate Finance0207 065 2660Simon.blake@pricebailey.comPrice Bailey is a trading name of Price Bailey LLP, a limited liability partnership registered in England and Wales,number OC307551. Registered by the Institute of Chartered Accountants in England and Wales to carry out companyaudit work. Authorised and regulated by the Financial Services Authority for corporate finance business. Financialservices work is undertaken by Price Bailey Private Client LLP, an appointed representative of PB Financial PlanningLtd, which is authorisedand regulated by the Financial Services Authority.
  • 19. www.uk200group.co.ukUK200Group members presenting: Price Bailey LLP Haslers Anderson Barrowcliff LLP
  • 20. VAT – the basics and some money saving tips Debra Dougal VAT Partner, Haslers Chairman of UK200Group Tax Panel #Finance4SUB
  • 21. • Award-winning, Top 60 firm of chartered accountants, dedicated to meeting the needs of the SME sector for 60 years.• 13 Partners, 100 staff• Based in Loughton, Essex• We act for a wide range of clients, including owner- managed and family businesses #Finance4SUB
  • 22. • VAT Partner• 26 years’ VAT experience• HMRC and practice• Broad technical and practical VAT experience• Pragmatic approach to problem solving• Present on various VAT topics for trade groups, professionals and clients• Chairman of the UK200 Group Tax Panel #Finance4SUB
  • 23. VAT is a simple tax (Anon 1972)• Transaction tax not an income tax• Goods and services• Taxable person• In the course or furtherance of business• Where the supply takes place #Finance4SUB
  • 24. VAT Registration• Compulsory if exceed threshold £77,000 from 1.4.12• Voluntary if under threshold• Intending if not yet commenced• Deregistration threshold £75,000 from 1.4.12 #Finance4SUB
  • 25. Categories of supplies VAT on sales VAT on associated purchasesTAXABLEStandard 20% claimableReduced 5% claimableZero 0% claimableEXEMPT 0% not claimableO/S 0% claimable #Finance4SUB
  • 26. Zero-rated supplies• Food but not catering (or pasties!)• Books and newspapers• Residential new build• Exports of goods #Finance4SUB
  • 27. Zero-rated supplies cont/d…• Childrens clothing and footwear• Residential caravans and houseboats• Goods and aids for the handicapped• Certain goods and services to charities• Qualifying ships and aircraft #Finance4SUB
  • 28. Exempt supplies• Land and existing buildings• Insurance services• Betting and gaming• Financial services• Education if business• Health• Burial and cremation• Trade Unions #Finance4SUB
  • 29. Outside the scope supplies• Supplies of services taxed where the customer belongs• B2B• Exceptions for  Land  Admissions to events  Passenger transport  Hire of transport  Restaurant & catering #Finance4SUB
  • 30. Money saving tips• Timing sales and purchases• Applications for payment• Cash Accounting• Flat rate scheme for small businesses• Special partial exemption methods• Bad debt relief #Finance4SUB
  • 31. VAT Period END RSTART E SALES T U R N PURCHASES D U E #Finance4SUB
  • 32. Applications for payment• Don’t create tax point for sale so VAT not due• Widely used in construction sector• Continuous supplies of services• Pro forma invoicing• Beware of tax points #Finance4SUB
  • 33. Cash Accounting• Restricted to businesses with turnover under £1.35m – tolerance to £1.6m• Account for both sales and purchase VAT on cash basis• Ideal if you offer credit terms but pay your suppliers promptly• Not a good idea if you receive and take up longer credit terms #Finance4SUB
  • 34. Flat Rate Scheme for Small Businesses• Restricted to businesses with turnover under £150,000 – tolerance to £230,000• Marketed by HMRC as a simplification scheme• Can have real financial benefit if Low VATable expenditure Associated businesses Expenditure is on capital items £2000+• Need to look at specific flat rates for your sector• Beware rules on including exempt income #Finance4SUB
  • 35. Special Partial Exemption methods• If make both taxable and exempt supplies• Standard method may be less beneficial• Must be fair and reasonable• De minimis limit £7500 and less than 50% #Finance4SUB
  • 36. Bad Debt Relief• Not on cash accounting• Debtors over 6 months• Reclaim VAT owed to you• Beware of the flip side if you owe your creditors for more than 6 months #Finance4SUB
  • 37. VAT – the basics and some money saving tips Debra Dougal VAT Partner Debra.dougal@haslers.com Direct dial 020 8418 3426 #Finance4SUB
  • 38. www.uk200group.co.ukUK200Group members presenting: Price Bailey LLP Haslers Anderson Barrowcliff LLP
  • 39. A MEDLEY OF PAYROLL ISSUES PRESENTED BY MHAIRI CHARLTON #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 40. MEDLEY constituentsPayroll compliance  Minimise the damage of an Employer Compliance Review [ECR]Changes to the operation of payroll  Real time information – RTITax efficient remuneration  How to give your employees a pay rise without increasing staff costs #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 41. Payroll compliancePAYE and NIC collected by employer’s accounts for about 50% of the total tax paid in the UKHMRC carries out around 30,000 payroll inspections each year and with an annual average tax of £300mHMRC carries out very few truly random reviews and most are triggered by an event or reasonThe employer is generally the person who pays #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 42. Payroll - common errorsNot operating the correct tax codes/implementing changesExpenses reimbursed e.g.  Travel & subsistence  Mobile telephoneMileage recordsHome telephoneStaff entertaining #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 43. How to avoid an ECROperate tax codes as soon as receivedPay PAYE & NIC by the due date – late payment carries financial penalties as well as increased Revenue interestDevelop procedures for dealing with expenses  no receipt no reimbursement  details of why the expense was incurredApply for a dispensation #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 44. RTI & PAYE WHY WHAT HOW WHEN #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 45. WHYCurrent PAYE system was introduced in 1944 – the job market of 1944 is much different than that of todayTechnology has vastly improved – the introduction of NPS (National Insurance and PAYE Computer System) in 2010 enables RTIReduce costs for both HMRC & the Employer (?)Avoid overpayment & underpayment of PAYEPrevent Tax Credit Errors & fraud #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 46. WHATEmployers will report to HMRC all payments as part of their normal payroll activity – Monthly or weekly depending on payment period for employees Gross pay PAYE & NIC deducted Employees bank details & net payment madeNo more P45s for joiners & leavers  Employers will need to provide a leaving statementNo more P35  Employers will need to provide employees with details currently provided on the P60P11Ds will remain (for the time being) Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 47. HOWInitially Internet through the Government Gateway using HMRC Basic PAYE tools which will be developed to enable RTI Electronic Data Interchange (EDI) using commercial software (will be available at least until 2014)Ultimately it is intended that the majority of RTI will be submitted via Bacs #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 48. WHENApril 2012: Test system with a small number of PAYE schemes (large, medium and small employees)April 2013 to October 2013: Employers will begin to use the RTI serviceOctober 2013: All employers will be using RTI #Finance4SUB Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 49. Tax efficient remuneration Current position Remuneration package & outgoings Annual £ Salary 25,000 Outgoings £ Childcare 100 per w eek 4,600 Pension 100 per month 1,200 Car parking for work 7 per w eek 322 Mobile phone 15 per month 180 Spends on average 2 days out of the office - site based #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 50. Tax efficient remuneration Employees net disposable income after outgoings £ £ Salary 25,000 Less: Income tax 3,379 Employees NIC 2,088 (5,467) Take home pay 19,533 Less: Outgoings Childcare 4,600 Pension 1,200 Car parking for work 322 Mobile phone 180 (6,302) Disposable income 13,231 #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 51. Tax efficient remuneration Cost to Employer £ Cost Salary 25,000 Employers NIC 2,416 27,416 Less: Corporation Tax relief 20% (5,483) 21,933 #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 52. Tax efficient remunerationRevised positionRemuneration package & outgoings Annual £ Cash Salary 19,238 Subsistence 480 Benefits Childcare vouchers 2,530 Employer pension contribution 1,200 Car parking 322 Mobile phone 180 Total "gross" remuneration 23,950Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 53. Tax efficient remuneration Employees net disposable income after outgoings £ £ Cash salary 19,238 Less: Income tax 2,226 Employees NIC 1,397 (3,623) Take home pay 15,615 Add: Subsistence payments 480 Less: Balance of Childcare (2,070) Revised disposable income 14,025 Original disposable income 13,231 Increase in Employees disposable income £794Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 54. Tax efficient remuneration Cost to Employer £ Cost Salary 19,238 Employers NIC 1,621 20,859 Add: Cost of benefits Childcare vouchers 2,530 1 Employer pension contribution 1,500 Car parking 322 Mobile phone 180 Subsistence payments 480 Administration 126 25,997 Less: Corporation Tax relief 20% (5,199) Revised cost to employer 20,798 Original cost to employer 21,933 Decrease in cost to Employer £1,1351 Employee w ill have made the contribution to the pension net of basic rate tax. The employer makes a gross contribution.Anderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 55. Contact Mhairi Charlton Senior Tax Manager t: 01642 660 300 m: 07855 791 430 e: mhairi@anderson-barrowcliff.co.uk #Finance4SUBAnderson Barrowcliff LLP, Waterloo House, Teesdale South, Thornaby Place, Thornaby TS17 6SA t: 01642 660 300 www.anderson-barrowcliff.co.uk
  • 56. www.uk200group.co.ukThank you for listening #Finance4SUB