We are currently in the midst of significant political and economic uncertainty due to the result of the referendum on Britain’s membership of the EU. Businesses around the UK have been assessing what the result means for them, their clients, and their suppliers. And although former Prime Minister David Cameron assured us that ‘the British economy is fundamentally strong,’ we must acknowledge that the business landscape has fundamentally changed.

As new Prime Minister, Theresa May has a huge task ahead of her. Not only does she have to unite her party and Government, but she has the delicate task of negotiating or relationship with the EU post-Brexit. As yet, no timescale has been set for the formal dissolution of the UK’s membership of the EU. However, in the short term, as David Cameron noted just after the result, ‘for Brits living in Europe and for EU citizens living here there will be no immediate change in circumstances and no initial changes in the way people travel, or goods are moved or services are sold.’

In this uncertainty we must adopt a ‘business as usual’ approach in the UK. Once we trigger Article 50 of the Lisbon Treaty we have two years to negotiate our exit from the EU. Businesses must use this time to identify opportunities and risks and plan ahead to take advantage of these, or minimise exposure. At Foxley Kingham we are dedicated to helping our clients’ businesses survive and thrive in difficult times, and to adapt in changing circumstances.

IT’S BREXIT, BUT IT MUST BE BUSINESS AS USUAL

THE LATEST DEVELOPMENTS IN ACCOUNTING AND COMMERCE AND WHAT THEY MEAN TO YOUR BUSINESS

Brexit • Theresa May • Auto Enrolment Update • Capital Gains TaxCredit Card Fees • Bedfordshire Business • Lifetime ISA • Rent A Room Relief

Foxley Kingham

Issue 31 Summer 2016Issue 31 Summer 2016

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HOW WILL BREXIT AFFECT YOU?

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The effects of Brexit are still unclear. Businesses will, of course, be affected by wider economic changes, and fluctuations in the economy. However, there will probably be a number of regulatory changes that will impact the accountancy and the tax system.We expect there to be changes in the following areas:

• Anti-Money Laundering

• Data Protection

• Competition

• Financial Services

• Harmonisation of Product Standards

• Consumer Rights and Pensions.

In terms of tax legislation the UK would still be expected to take into account European tax initiatives when setting its UK domestic tax policy, although we do not expect any significant changes in the short term. According Allie Renison, head of trade and Europe policy at the Institute of Directors, the UK would no longer be bound by the EU’s VAT directives, and the government would have far more flexibility to set its own rate of sales tax along with which products are subject to each rate.

However, as Renison points out, there may be challenges for businesses whose products travel through the EU. Administrative costs may rise as, depending on post-Brexit negotiations, UK businesses may no longer have access to the EU coordinated VAT collection systems. Companies supplying digital content may also find administrating VAT to be more challenging.

We are devising a range of services to ensure that there is minimum disruption to your business. As clients we would encourage you to engage with any European suppliers, clients, and partners as much as possible to ensure a smooth transition to the new business landscape.

The UK’s vote to leave the EU continues to cast a large shadow over the political and economic spheres. Theresa May has now replaced David Cameron as Prime Minister. In her maiden speech, Mrs May alluded to the challenges ahead:

“We are living through an important moment in our country’s history. Following the referendum we face a time of great national change. As we leave the European Union, we will forge a bold, new positive role for ourselves in the world.”

The newly appointed Chancellor Philip Hammond has said that he did not anticipate the need for an emergency ‘Brexit’ budget as a result of the leave vote. However, he added that there has been a ‘chilling effect’ on financial markets and that the UK would face challenges in managing the economy.

The Department for Business, Innovation and Skills (BIS), has merged with the Department for Energy, to make a new Department for Business, Energy and Industrial Strategy. Greg Clark, previously secretary of state for

communities and local government, will head the new department.

Responsibility for global trade has gone to Liam Fox, who will become secretary of state for international trade

David Davis has been appointed as the secretary of state for exiting the EU. Davis has previously held positions of party chairman for the Conservative party and shadow duty prime minister. Details on Brexit are still emerging but Davis will be responsible for leading negotiations in UK’s departure from the EU.

Despite speculation to cut down interest rates, the Bank of England (BoE) has held interest rates at 0.5%. Rates have remained on hold since cutting down to the record low of 0.5% in March 2009. The BoE has commented that the precise size and nature of any stimulatory measures will be “determined during the August forecast and inflation report round.”

Please contact us to discuss any concerns you have about your business finances.

THE THERESA MAY GOVERNMENT: BUSINESS IMPACTS

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Are you one of the many UK small or medium sized businesses required to put your staff into a pension scheme and contribute towards it, by 1 April 2017 at the latest?

This is called automatic enrolment and you need to do this by your “staging date,” which is the deadline the Pensions Regulator has set for you according to the size of your business.

In additional to fines for non-compliance starting at £400 for a fixed penalty notice, companies with 1-4 people can be fined £50 per day and companies with 5-49 people £500 per day, so it is best to plan early.

We have a dedicated auto-enrolment staging service and payroll team who can guide you through the process. Below is a summary checklist of key obligations for employers. Call Christine or Tara for help in any step of the process!

Your auto-enrolment checklist1 By now, you should know your staging date and be working out a plan to implement auto-enrolment. You should also nominate a contact person with the Pensions Regulator.

2 A few months before your staging date, decide on your pension scheme(s) & ensure your payroll software supports automatic enrolment.

You could use an existing qualifying pension scheme (or more than one) provided it meets the auto-enrolment requirements. We can help you assess this or put you in touch with an independent financial advisor if you need a new scheme.You’ll need to assess your workforce to see who is eligible to be enrolled. SAGE payroll software provides an auto-enrolment module to make things easier, but you will need to check other systems with your provider or contact us for assistance with assessing your employees.

3 On the staging date, the eligible employees need to be enrolled in the pension scheme. You will have legal obligations to communicate changes to employees within certain deadlines, and these can be an opportunity to highlight any benefits for staff.

4 Within 4 months of the staging date, you’ll need to fill out a declaration of compliance on the Regulator’s website showing you have met your obligations. We can help with this.

5 Now that you have an auto-enrolment scheme in place, you’ll need to continue with all the usual obligations of paying contributions, assessing employees, and adding or removing them from your scheme. You will also need to keep carry out reporting, re-certification and automatic re-enrolment.

AUTO ENROLMENT UPDATE

VISA CREDIT CARD FEES ON THE INCREASE

From 1st September 2016 there will be a significant fee increase for businesses with average transaction values over £245, as Visa remove the interchange cap on debit fees. The increase will apply for both consumer and business to business transactions using Visa Business Debit.

Currently Visa charges 0.2% transaction value plus 1p capped at 50p for chip and pin with higher caps on business debit and other transactions, with many businesses passing these charges onto customers. But, if your customers have a high average transaction value you could really feel an impact from this fee increase. For example, a £500 – £1,000 transaction value so will see debit processing costs double or quadruple.

Our advice is to:1 Shop around and switch acquirer if you need to get the best rate.

2 Look at alternative payment methods such as bank transfers where suitable.

3 Pass the cost to customers as sometimes already happens for credit cards, appreciating this isn’t a popular solution.

HMRC has announced that it is continuing to allow some leeway on the submission of payroll returns. Current legislation states that employers are required to make a full payment submission (FPS) detailing payments made to employees, on or before the date of payment under the new Real Time Information (RTI) regime. However, the HMRC introduced a three-day window so returns submitted up to three days after the deadline will not be subject to a penalty. This extension was due to run out in 2016, but will continue until April 2017.

The HMRC is also now taking a ‘risk-based approach’ to RTI late filing penalties i.e. it is actively targeting businesses that are consistently late making their FPS. However, this could also include businesses that regularly file within the three-day grace period. All these measures will be reviewed in April 2017 as part of a wider consultation on HMRC penalties.

Remember:

• The three day grace period is due to run out in April 2017.

• Even if you are within the grace period, you could still be monitored by HMRC.

• You can also use the FK payroll services to avoid late filing penalties.

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Changes to Capital Gains Tax are always significant, and the adjustments in April this year could have a range of repercussions for your business. We would like to highlight how the changes will affect buy-to-let landlords and entrepreneurs.

The factsFollowing the CGT rate cut from 6 April 2016:capital gains are charged at 10% (down from 18%) to the extent chargeable income and gains fall within the basic rate band (£32,000 for 2016/17); and at 20% above this (down from 28%).

What does this mean for Buy-to-let?This cut will hit buy-to-let investors, as gains on residential property or carried interest continue to be taxed at 18% (up to the basic rate band) and at 28% beyond. These gains are now called ‘upper rate gains’ and should be set against the annual exempt amount (remaining at £11,100 for 2016/2017) to minimise CGT.

What does this mean for entrepreneurs relief?When gains arise on the sale of businesses, entrepreneurs relief may reduce a CGT liability from 20% to 10% and this relief has now been extended to business investors. Capital gains subject to entrepreneurs relief are always the first gains to be taxed and therefore use up the lower rate band, so that lower rates of CGT on other gains may not be available. Because of the lifetime gain limits, we advise clients to assess the availability of relief and plan ahead well ahead of any potential sale.

CAPITAL GAINS TAX – A NEW ERA

PAYROLL DEADLINE EXTENSION

The National Audit Office’s report on HMRCThe National Audit Office has released its report into the quality of service for personal taxpayers. The report noted that there was a deterioration of service in 2015 when staff reductions took effect, and somewhat unsurprisingly, service levels went up with the recruitment of 2,400 additional staff later in the year. The report also highlighted that HMRC moved staff from maintaining PAYE records to call centres to help improve service levels.

One concern raised in the report is that HMRC has made over-optimistic assumptions about the number of people using the online service instead of the phone service. HMRC has invested a further £1.3bn in online services and expects the number of calls to reduce from 38 million in 2015/16 to 15 million in 2019/20, as customers increasingly use online services. However, this is a change that will have to be closely monitored to ensure continued quality of service.

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In the wake of debates about Brexit and the fast moving changes in business it can be easy to overlook what else is happening in the financial world. Here are a couple of topics that have got us talking at HQ.

The Panama Papers

It may sound like something out of a John le Carré novel, but the leaking of approximately 11.5 million files from the world’s fourth biggest offshore law firm has thrown light on methods used to exploit offshore tax regimes. The papers also gave details of the legal affairs of individuals connected to the highest levels in the governments of countries such as Russia, Pakistan, Iraq, Ukraine, and Iceland.

In response to the information gleaned from the leak, there is to be a European Parliamentary Inquiry. A committee will look at public authorities and whether they have properly applied existing anti-money laundering and tax laws. The committee will also examine and banks and other financial institutions (potentially including advisors) that facilitated the set up of offshore accounts and structures.

Tax planning in the light of the Panama papers leakThe Panama papers leak and the news that David Cameron had money sheltered off shore has highlighted tax avoidance once again. How can you be confident that your tax affairs are in good order? Foxley Kingham offer comprehensive tax planning advice to help you keep your tax bills down. For example:

Entrepreneur’s relief – benefit from a reduced capital gains tax rate of 10% available for up to £10million in lifetime gains. This is available when selling your company providing you own more than 5%, including disposals to family members.Structuring your business – sole traders are liable for income tax whilst companies pay corporation tax. Corporation tax is currently 20% (reducing to 17% by 2020), while income tax is set at 20% basic / 40% higher rate taxpayers. Would you be better off setting up a company?Capital Gains Tax – if you can transfer some of your assets to your partner you can reduce or avoid a CGT bill, as married couples have an allowance of £22,200 before you’re required to pay any CGT. Dividend allowances for spouses as Directors – you can reduce your own income tax liability by using both your own and your spouse’s £5000 dividend allowance before tax.Remember to make sure you’re claiming all eligible business expenses and using your investment allowance to reduce your tax bill by offsetting against tax.

Our specialist tax advisers have many years experience of helping businesses and individuals meet their tax obligations and deadlines, and keep the amount they have to pay to a minimum.

TALKING POINTS

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NEWS IN FOCUS

Red tape is real problem for small businessesOver half of smaller business owners say their company is being held back by the amount of time they have to dedicate to administration, according to new research from the Federation of Small Businesses (FSB). And the problem is set to get worse with the introduction of new Government plans around tax reporting which will require small businesses and the self-employed to keep digital tax records and report electronically every quarter.

According to the survey, 55 per cent of small business owners say that growth is being sacrificed for admin, with owners spending on average 33 hours every month on internal business administration – almost a quarter of an individual’s working hours. This is on top of around 70 hours of employee time that is tied up with admin.

Dave Stallon, Commercial Director at FSB, explained: “It is a common frustration amongst owners of smaller companies that they are unable to find the time to work on their real business activities, because they are too busy completing administrative tasks, however essential they are. These businesses need expert support they can trust…

If they do this, they can maximise the time spent making their businesses bigger, better and more profitable.”

The Government claims that it is trying to cut £10 billion of red tape for small businesses with the introduction of the Enterprise Act. The act includes measures that

should simplify regulatory issues, the appointment of a small business commissioner to help resolve problems such as late payments, and the introduction of an Institute for Apprenticeships to

ensure apprenticeships meet the needs of business.

However, in the meantime the FSB study reveals that three-quarters

of business owners (76%) still spend more time than they would like on

business compliance, tackling issues ranging from tax, employment law issues and insurance to dealing with

workplace pensions, accounting tasks or health and safety issues. Nearly half of respondents to the survey (46%)

said they would be prepared to hire external advisors to help them with these

tasks.

For more details on how we can help you cut through the red tape, please call your usual contact.

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Bedfordshire Business holds its ownBedfordshire’s top businesses have performed well in the last year, despite a challenging economic climate, with SMEs proving to be particularly resilient. The Bedfordshire Limited report, compiled by Grant Thornton, shows that that Bedfordshire’s top 100 businesses have experienced a growth, with earnings up 13% although there have been some falls in profitability.

However, despite healthy increases in turnover (3.5% to £3.9 billion) and employment, there has been a significant fall in earnings before interest, tax, depreciation and amortisation (EBITDA) of 23%. Some of the fall can be attributed to significant events at certain companies and 66 out of 100 companies saw profitability increase. SMEs saw a greater increase in turnover (4.7%) than large corporates (2.6%) but also suffered a decrease in profitability (14.8%).

Rod Calvert, Chairman of the Bedfordshire Chamber of Commerce said: “Even against a back drop of uncertain times, Bedfordshire has never been better placed to overcome the

potential challenges that lay ahead…. From the expansion at London Luton Airport, world leading innovation at Hybrid Air Vehicles, Lockheed Martin and Millbrook Proving Ground, to Bedfordshire seeing six companies achieving the Queens Award for Enterprise demonstrates the determination of businesses within Bedfordshire to strive to be the very best they can be.”

NEWS IN BRIEF

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Lifetime ISAThe new lifetime ISA will be introduced from April 2017.It will enable first-time buyers to use the ISA towards a residential property; and cash to be taken out when you reach 60. There is no tax to pay when you take the money out!

Cyber Security – what should you do?We’ve highlighted the issue of cyber security before in proActivity, but a recent survey by Barclaycard indicates it remains a major issue for small businesses, with 54% of small and medium sized enterprises (SMEs) being concerned about being targeted and 50% indicating that they had already experienced a cyber-attack. The study found that attacks can cost small businesses between £75,000 and £310,000 in business disruption, sales, asset recovery and compensation.

So what should you be doing to protect your business and its data?

• Keep your software up to date. Hackers are constantly scanning for security vulnerabilities so don’t give them an easy way into your systems.

• Educate your employees on how cyber criminals operate, what to look out for and how to work safely on your systems.

• Introduce formal security policies, such as strong passwords which are regularly changed.

• Make sure you’ve got an incident response plan and then practice it regularly just like you would your fire drill – that way you’ll be quicker to respond should an incident occur.

Rent a room limit increased by £3,250This April saw an increase in the annual Rent a Room limit to £7,500 for the tax 2016/17 tax year. The scheme allows owner occupiers and tenants to receive tax-free rental income if they provide furnished accommodation in their main home. Automatic exemption from rental income occurs if the gross receipts are less than £7,500. (e.g amounts received for meals, good services, rental income before expenses). If you go over this threshold you can calculate the tax two different ways:

• Pay the tax on the actual profit – total receipts less any expenses and capital allowances.

• Pay tax on the gross receipts over the Rent a Room limit – gross receipts minus £7,500. Expenses or capital allowance cannot be deducted using this method. Tax payment automatically stops if the rental income drops below the limit.

You can opt in to the scheme at any time if you are a resident landlord, run a bed and breakfast or a guest house, but the scheme is not available for home converted into separate flats. If your receipts are significantly less than the limit, you may find it better to pay your tax in the normal way, informing HMRC before 31 January.

HMRC has updated the advisory fuel rates again, which employers can use to reimburse employees for fuel consumption when on business travel in company cars. This is with effect from 1 June 2016.

In some cases, the new rates represent a slight increase on last quarter. Hybrid cars are treated as either petrol or diesel cars for this purpose.

Engine Size Petrol LPG Diesel

1400ccor less

10p 7p -

1401-2000cc 13p 9p -

1600ccor less

- - 9p

1601-2000cc - - 10p

Over 2000cc 20p 12p 13p

HMRC ADVISORY FUEL RATES – FURTHER UPDATE

IT’S BREXIT, BUT IT MUST BE BUSINESS AS USUAL

FKCA LimitedRegistered office: Prospero House, 46-48 Rothesay Road, Luton LU1 1QZ

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Please note that we cannot be held responsible in any way for any consequence arising from the information provided in this newsletter. Whilst every effort is made to ensure the accuracy of the content of all FK publications, no decisions should be taken on the basis of information given without reference to specialist advice.

Who’s in Your Address Book...Do you know anybody else who would like a free subscription to ProActivity?Perhaps a supplier or customer?Simply give us their details and we will invite them to subscribe free of charge as a gift from you.Call Tara Aldwin on 01582 540800 ore-mail tara.aldwin@fkca.co.uk

Tara Aldwin

Editor and Director

tara.aldwin@fkca.co.uk

Chris Howe

Director

chris.howe@fkca.co.uk

Foxley Kingham

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To thank you for taking part in our research, for every completed survey we receive, we will make a donation to Keech Hospice Care. Keech provide

invaluable support to patients, families, carers and health professionals of adults and children living with life-limiting and terminal illness. The charity work to enrich the lives of patients and those who care for them through activities and care. Keech offer at home and in-patient care, day support, art and music therapy and bereavement services, along with a range of additional services free of charge to those in need. We are delighted to be able to support such a good cause.

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Innovate UK is to invest up to £15 million in innovation projects in manufacturing and/or materials.

These projects will focus on

identified technical or commercial challenges. They will fund projects that aim to lead to increased UK SME productivity, competitiveness and growth. For more information seehttps://www.gov.uk/government/publications/funding-competition-manufacturing-and-materials

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