“Powered by Mazars”
Amy GooldTax Director, South WestResponsible for tax compliance and advisory acrossBristol and the South West region.Speci...
Tim GillinghamDirector Mazars Employee Benefits, South WestTim is a Director in our Employee benefits team.He is a Fellow ...
Ian BartonDirector, Mazars Financial Planning LimitedIan is a Chartered and Certified Financial Planner. He isalso an Asso...
Share schemesupdate                Contents                • Share schemes recap                        EMI              ...
Why options?•   Incentivise•   Retention•   Recruitment•   Expected (industry norm)•   Succession planning•   Instead of p...
Enterprise Management Incentive• Approved scheme – most tax efficient• Trading company (excluded trades)• Gross assets < £...
Enterprise Management Incentive cont’d                        EMI                     Unapproved                          ...
Company Share Option Plan•   Approved scheme – second choice•   No size limits•   Less flexible•   Qualifying employee    ...
HMRC in Consultation•   Role of employee ownership•   Self certify CSOP, SIP & SAYE (by 2014)•   Is CSOP still relevant?• ...
Alternatives to Approved Schemes•   Deferred shares•   Flowering shares•   Split interest share plan•   Partition shares• ...
Employee Benefits                    Contents                     • Auto-enrolment – planning                       ahead ...
Why reform?• Millions of individuals not saving adequately for retirement• State Pension reform alone is not enough• Peopl...
The Evolving Pensions Landscape                                                                                        Gro...
Pension Reform: The Facts• Employers must automatically enrol UK employees into a  qualifying workplace pension who:   –  ...
Pension Reform: Minimum Contributions        £42,475                                        •   Salary                  Qu...
By when ?• Its started…• Large employers first• All employers complying by October 2018 Oct 2012          Apr 2014        ...
How does it affect employers?• Increased costs• Review and change processes• Increased administration / workload• Communic...
ImpactOver 1 million SME employers will automatically enrol employeesfrom mid-2014 onwards…                               ...
How we can help• Overview of employer duties• Assessment of workforce to identify employees affected• Provide financial mo...
Summary• Workplace pension reform has arrived• Employers will have to comply and understand their duties or risk  facing p...
Other Hot topics• Salary sacrifice on pensions• Group risk schemes and auto enrolment• Closing down sale for commission on...
Mazars FinancialPlanning                   Contents                      • Maximising pension relief                      ...
01     What are the current pension allowances?     • Annual Allowance is £50,000.     • Annual Allowance charge is a rate...
01     So, what are the opportunities?     Carry Forward     • You must have been a member of a Registered Pension Scheme ...
Maximising contributionsCarry Forward Case Study• James is aged 45,• His recent contributions record is as follows;   Tax ...
01     Maximising contributions cont’d     Pension Input Period (PIP) Planning     • Pension contributions in excess of £5...
01     So, what are the opportunities? cont’d     PIPs – Case Study     • Julie sets up a personal pension on 1st December...
01     Maximising contributions cont’d     Paying higher pension contributions     • For many high earners, the £50,000 ma...
01     Maximising pension contributions cont’d     Case Study     • DB SSAS – Malcolm, aged 50, wants to secure a guarante...
01     Using Commercial Property for Tax Planning and     Cash Generation     Using a pension plan to purchase a commercia...
01     Commercial property and pensions     Benefits     • No capital gains tax payable on the future sale of property    ...
01     Case study     • John is aged 45     • He owns a successful packaging business     • The business owns their tradin...
01     Summary     • Use annual allowances, carry forward and pension input periods to       maximise contributions     • ...
Mazars Financial Planning Ltd is wholly owned by Mazars LLPMazars Financial Planning Ltd is authorised and regulated by th...
RemunerationPlanning               Contents                  • Tax efficient profit extraction                  • Alternat...
Tax Efficient Profit Extraction                    Large Company paying CT at full rate     Small company paying CT at 20%...
Alternative Planning Ideas• Defer income (matched with loans)• Salary sacrifice• Contract for differences                 ...
Any questions?                 39
Should you require any further information, pleasedo not hesitate to contact:Amy Goold                                    ...
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Share schemes, Employee benefits, Pensions & Remuneration planning

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

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Share schemes, Employee benefits, Pensions & Remuneration planning

  1. 1. “Powered by Mazars”
  2. 2. Amy GooldTax Director, South WestResponsible for tax compliance and advisory acrossBristol and the South West region.Specialisms include share schemes, transactions,corporate restructuring and other complex corporate taxplanning.Focused on tax planning for owner managedbusinesses, assisting both the shareholders and thedirectors on tax planning across potentially conflictingresponsibilities. 2
  3. 3. Tim GillinghamDirector Mazars Employee Benefits, South WestTim is a Director in our Employee benefits team.He is a Fellow of the Pensions Management Instituteand specialises in Group pensions as well as employeebenefits.Prior to joining Mazars he previously ran his ownConsultancy based in the South West. 3
  4. 4. Ian BartonDirector, Mazars Financial Planning LimitedIan is a Chartered and Certified Financial Planner. He isalso an Associate of the Chartered Insurance Institute. Hehas over 24 years experience as a financial adviser and hasworked in the financial services industry for 29 years.Ian’s experience covers financial planning advice to privateand corporate clients, in particular investment andretirement planning advice to high net worth individuals,trustees, partners of professional firms, business ownersand company directors. 4
  5. 5. Share schemesupdate Contents • Share schemes recap  EMI  CSOP • Changes in the last twelve months • Changes in consultation • Alternatives to approved schemes 5
  6. 6. Why options?• Incentivise• Retention• Recruitment• Expected (industry norm)• Succession planning• Instead of payrise• Often a win/win situation! 6
  7. 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. 8. Enterprise Management Incentive cont’d EMI Unapproved £1,000 Income CGT tax Value - £10 Price paid Grant Exercise & Sale 8
  9. 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. 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. 11. Alternatives to Approved Schemes• Deferred shares• Flowering shares• Split interest share plan• Partition shares• Unapproved options 11
  12. 12. Employee Benefits Contents • Auto-enrolment – planning ahead • Other hot topics 12
  13. 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. 14. The Evolving Pensions Landscape GroupDefined 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. 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. 16. Pension Reform: Minimum Contributions £42,475 • Salary Qualifying Earnings • Wages (2012/13) • Commission / Bonus • Overtime £5,564 • Statutory Pay £0 16
  17. 17. By when ?• Its started…• Large employers first• All employers complying by October 2018 Oct 2012 Apr 2014 Apr 2015 May 2017 17
  18. 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. 19. ImpactOver 1 million SME employers will automatically enrol employeesfrom mid-2014 onwards… 19
  20. 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. 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. 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. 23. Mazars FinancialPlanning Contents • Maximising pension relief • Property in pension 23
  24. 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. 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. 26. Maximising contributionsCarry 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. 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. 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. 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. 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. 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. 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. 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 33
  34. 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 34
  35. 35. Mazars Financial Planning Ltd is wholly owned by Mazars LLPMazars Financial Planning Ltd is authorised and regulated by the Financial Services AuthorityThe information contained in these slides do not constitute individual advice. Mazars Financial PlanningLtd will not accept any responsibility for decisions taken or not taken on the basis of the informationpresented. 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 21stNovember 2012 which may be subject to change. 35
  36. 36. RemunerationPlanning Contents • Tax efficient profit extraction • Alternatives for higher rate tax payers 36
  37. 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%InterestDividend 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. 38. Alternative Planning Ideas• Defer income (matched with loans)• Salary sacrifice• Contract for differences 38
  39. 39. Any questions? 39
  40. 40. Should you require any further information, pleasedo not hesitate to contact:Amy Goold 0779 403 1527amy.goold@mazars.co.ukTim Gillingham 0777 242 3335Tim.gillingham@mazars.co.ukIan Barton 0779 403 1239Ian.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

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