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Questions & AnswersJill Hetherington
Pensions & PropertiesDerek Baty
Pointers from KirstieKirstie Somerville
Spring 2012 Newsletter
ConstructionConnecting
David AllenStrategy & Business Development [email protected]
Editorial
www.david-allen.co.uk
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The last four years have seen a lot of reshaping of businesses in the construction industry as they address the changes in the economy. There have been cut backs, pay cuts, short-time working and redundancies as firms cope with less turnover. These businesses should be in good shape to take advantage once things pick up.
Some firms didn’t address the changes quick enough and relied on tendering cheaper and cheaper to get turnover to keep staff on the books. This resulted in some buying work and this is a tricky strategy to manage - It can work in the very short term, but this dip has lasted longer and dipped deeper than most expected. Some managed to sort the situation, but some haven’t survived and more will go as time and conditions take their toll.
There are always the winners and some have been able to take advantage of the conditions.
For those that can borrow money interest rates are still low. It is going to take time for the economy to recover.
At David Allen we have continued to work with, and increased our base of construction industry clients. This is an important area of work for us and we are committed to being practical and proactive in our approach. As we strive to help our clients we very much appreciate the loyalty that our clients have to us.
We’ve expanded our range of services, including recruiting Vicki Moffat to head up our new debt recovery business. Cash flow is important in difficult times and Vicki and her team have worked with businesses, large and small, to help them with credit control procedures and debt recovery. This has been invaluable and Vicki’s practical approach is outlined on page 11.
There were some budget changes announced on 21 March, including reducing higher rate tax from 50% down to 45% from April 2013. More Enterprise Zones are to be created and there are changes to Capital Allowances. The standard rate of VAT is to apply to work on listed buildings that was previously zero rated. Some of these points are mentioned further on, but please also see our Budget Summary and Tax Cards for more detail. This newsletter covers a lot of our services to the construction industry and is ‘easy reading’. If you would like to discuss anything in more detail please give me a call.
David AllenStrategy & Business Development Partner
Here at David Allen we look to provide proactive advice and support and our construction team are pleased to present our first David Allen construction newsletter. The newsletter will be published quarterly throughout the year and will address current hot topics within the industry, helping you go about your daily business with confidence and reassurance.
www.david-allen.co.uk
Danny Roper
Corporate Tax [email protected]
Strength in our people
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Having grown up in the family construction business, I am able to contribute my experiences to the wealth of knowledge that already
exists within the David Allen construction team. Whether it is Jill Hetherington providing you with Construction Industry Scheme (CIS) advice or Julie Taylor talking you through Sage packages available to you, our team has the unique blend of knowledge and experience that will benefit you with the everyday matters you face.
If you would like any advice or maybe a simple chat about any of the articles in this newsletter, then do not hesitate to contact us on 01228 711 888. We are happy to help. I hope you enjoy our first construction newsletter and we look forward to producing more of the same.
If there any matters that you would like to see covered in future issues please let us know.
Danny RoperCorporate Tax Specialist
At David Allen we are always out and about. This summer come and find us at the following shows...
Cumberland Show9 June
Skelton Show7 July
Cockermouth Show4 August
Dalston Show11 August
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There were a number of announcements in the recent Budget which may have a significant impact on your business and we have some of these changes in this newsletter. With regards to the new tax rates and allowances these are as follows:
Chancellor’s Budget 2012What this means for you
• The standard Personal Allowance has increased to £8,105
• The 50% tax rate for those earning over £150,000 is reducing to 45% from 6 April 2013
• The main Corporation Tax rate has reduced to 24%
Sole trader/Partnerships
As expected, the personal allowance, which is the amount an individual can earn before they start paying Income Tax, has been increased from £7,475 to £8,105 for the current 2012/2013 tax year. For a basic rate tax payer this represents a tax saving of £126.
There will be a corresponding £630 decrease in the basic rate limit, which is the amount that is subject to tax at the lower rate of 20%, taking it from £35,000 down to £34,370. The higher rate threshold, which equals the sum of the increased tax free personal allowance and the basic rate limit, will therefore remain unchanged in 2012/2013 at £42,475.
What this effectively means is that if you earn more than £42,475 you are no better off as a result of the increase in the personal allowance.
Limited companies
A reduction in the Corporation Tax rates was announced in the Budget, however this will only have an impact on companies whose profits are in excess of £300,000. The rate for these companies has been reduced from 26% to 24% from 31 March 2013 onwards, whilst the tax rate for small companies with profits below £300,000 remains the same at 20%.
However it is not all doom and gloom for small companies, here at David Allen we can assist your business with efficient and effective tax planning that will suit you and your company. If you have any queries relating to the Budget or you would like any general business advice, please call 01228 711888, we are happy to help.
“Budget may have significant impact on your business”
• Research and Development credits have increased from 200% to 225%
• Capital Allowances rates have reduced however certain environmentally-friendly plant and equipment qualify for unlimited 100% first year allowances
• The VAT registration threshold has increased to £77,000 and the de-registration threshold to £75,000
• Stamp Duty Land Tax increased to 7% on transfers of residential property for more than £2m with a 15% charge if the property is bought in a company.
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Apprenticeships Construction trade apprenticeships went out of fashion which has led to a shortage of tradesmen. The tables are turning and there is now more focus on the benefits of construction apprenticeships.
This means it’s a great time to take on an apprentice. With around one million young people not in employment, education or training, the government has released funds to support education on an apprenticeship scheme. A new incentive of £1,500 is aimed at small employers new to apprenticeships and this will go some way towards reducing their costs.
Everyone should be eligible for a place on an apprenticeship scheme (unless they have a Level 4 or higher qualification or have not been a UK/EU resident for 3 years) and
age isn’t a barrier. Under 19’s are fully funded via the government, however over 19’s may require a contribution from the employer towards fees.
Carlisle College can support the recruitment of a new member of staff. The college has a construction team that can support employers and apprentices to become bricklayers, joiners, plasterers, plumbers and electricians. The college will also be introducing painting and decorating in the near future.
Carlisle College have recently launched a new website which includes a “job page” to allow employers to advertise positions in their company and a portal for young people to register their interest in apprenticeships which can be forwarded onto employers who may have a position for them. This is all designed to make the process of recruitment easier and allow access to a network of organisations that have resources in place to publicise vacancies. www.cumbriaapprenticeships.co.uk
Gen II is another training establishment who also offer a number of apprentice schemes throughout the county. The company have bases at, Workington, Carlisle and Furness and offer apprenticeships such as, electrical, fabrication, mechanical, welding and pipefitting to name a few.
An apprenticeship with Gen II will allow the employee to receive on the job training whilst gaining a qualification that will give them great career prospects and also, benefitting you, the employer. www.gen2training.co.uk/apprenticeships
To help promote the benefit of employing apprentices David Allen has been appointed as an Apprenticeship Ambassador for the North West and David is happy to talk to any employer thinking of taking on an apprentice for the first time. Phil Bell, the National Apprenticeship Services Local adviser is also happy to advise. If you are interested in taking on apprentices please get in touch.
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Kirstie SomervilleBusiness [email protected]
The budget came and went with very few surprises. The VAT registration threshold rose from £73,000 to £77,000 which will allow some contractors to maintain a competitive price. There was one VAT change to be introduced in October 2012 which will impact on those working on listed buildings. Alterations to listed buildings were charged at a zero percent VAT rate and this will be increased to the standard rate of 20% bringing it in line with normal renovation work. This decision may have grave consequences to the development of some of our listed buildings in the future.
Simplifying your VAT
Do you find the calculation of your VAT each quarter a time consuming exercise? The flat rate scheme for VAT is available to businesses with a VAT inclusive turnover of £150,000 or less and can reduce the VAT liability.
You must apply to join the scheme and you will continue to charge the relevant VAT rate for the work or services carried out. The simplification comes in when you calculate the VAT liability; instead of calculating the amount of VAT owed on your sales and deducting the VAT incurred on your purchases, you multiply your total VAT inclusive sales by the trade sector flat rate percentage that is relevant to your specific sector.
The flat rates are generally updated when the main VAT rates change and the rates relevant to construction include:
• Architect, civil and structural engineer or surveyor 14.5%
• General building or construction services* 9.5%
• Labour only building or construction services* 14.5%
• Management consultancy 14%
Do you find the calculation of your VAT each quarter a time consuming exercise?
* ‘Labour only building or construction services’ means building or construction services where the value of materials supplied is less than 10% of relevant turnover from such services; any other building or construction services are ‘general building or construction services’.
VAT can be claimed using the normal standard rated methods for assets purchased for a VAT inclusive price of £2,000 or more (subject to a few restrictions).
The scheme is not available to those who regularly receive VAT repayments and you must leave this scheme when your turnover exceeds £230,000 following an annual check or if you expect your turnover in the next 30 days will exceed £230,000.
A few pointers from Kirstie
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Government funding
The government are encouraging companies to develop new build properties, roads and infrastructure by offering the opportunity to apply for funding of up to £4.5 million for developments in Cumbria. This is not a grant and the funding is to be paid back on the completion of the project. More details on this can be found at www.cumbrialep.co.uk.
Stamp Duty Land Tax (SDLT) – Budget update
The Government is to increase the tax charge when an individual purchases a residential property over £2,000,000. This new rate of SDLT will be 7% and will apply to contracts entered into from 22 March 2012.
In order to ensure a fair share of SDLT is paid, the Government will introduce a new rate of 15% for ‘non-natural persons’ such as companies who purchase UK residential property for a value in excess of £2,000,000. Examples of other ‘non-natural persons’ defined by HMRC are collective investment schemes and partnerships in which a ‘non-natural person’ is a partner. The new rate will apply where the effective date of the transaction is 21 March 2012 or later.
Enhanced Capital Allowances (ECA’s) enable a business to claim unlimited 100% first year Capital Allowances on their spending on qualifying plant and machinery.
The 100% allowance allows the whole of the capital cost of the investment in the qualifying asset to be written off against the business’s taxable profits of the period during which they make the investment.
Enhanced Capital Allowances HM Revenue & Customs believe the scheme aims to reduce the consumption of energy and water by businesses, by providing an incentive to invest in efficient plant and machinery.
The list of qualifying technologies can be found at www.eca.gov.uk and every year this list is reviewed to ensure that the qualifying technologies, and the criteria that technologies must meet if they are to qualify for the relief, are still relevant.
There are currently plans in place to amend the current list of technologies that qualify for the energy-saving scheme to include one new sub-technology: Heat Pump Driven Air Curtains. In addition three technologies: Combustion Trim Controls, Energy-Saving Controls for Desiccant Air Dryers and Sequence Controls will be removed from the scheme.
The changes to the ECA scheme for energy saving technologies will come into effect in the autumn of 2012; the specific date is to be announced.
Energy Saving Technologies
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Our Guest EditorialEnviroHomes
Most people who construct a building have everything delivered to their site, item by item. The building is then constructed piece by piece, come sun, wind and usually in Cumbria – rain!! EnviroHomes completely revolutionises this approach. Instead of constructing a building through the rain over a number of months, most of their buildings can be erected on site and made water tight in a day. This includes heating, windows, kitchens, bathrooms, electrics etc. The company call this modular construction.
The company operates across all construction sectors. In the past 18 months alone the following have been delivered and completed.
1. An award winning, 2 classroom, science building for Haydon Bridge High School. This building is the only zero carbon modular school in the country
2. A number of domestic contracts including single storey extensions and 2 storey houses and LoftPODs
3. A village hall extension, designed to help the building achieve an energy ‘A’ rating
Chris Hill, one of the directors of the company explains “We manufacture all our buildings in our purpose built factory in Aspatria. This approach allows outstanding quality and work continues whatever the weather. Every building is unique and individual to the specific client. Any finish, shape and layout can be specified. However one of the corner stones of the company, as the name EnviroHomes suggests, is designing and constructing buildings that have exceptionally low running costs.”
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The most recent installation is a 2 storey 170m2 extension within the National Park near Keswick. This required an 80 tonne crane to erect the building and access was down a ¾ mile track, which was only just over 3m wide. Although this was a local contract, EnviroHomes operates throughout the UK. Nationally there is great demand for their LoftPOD product. Using LoftPOD allows a house to have a loft conversion carried out in a day!
Simon Astill, also a director at the company added “EnviroHomes’ approach and products are unique in the UK. This has meant that we continue to have an increasing level of enquiries and business. In addition, we are always innovating and have a number of new products and approaches that will be launched during 2012”.
If you would like to find out more about EnviroHomes then please call Karen Mitchell on 01228 575 080 or visit the websiteswww.envirohomes.co.uk and www.loft-pod.co.uk
“We are always
innovating and
have a number of
new products that
will be launched
during 2012”
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Housing – laying the foundations
The Government have recently devised a number of schemes in an attempt to increase house building, stabilise the housing market and enable more people to own their own home.
One of the schemes is the ‘Right to Buy’. Up to two million
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tenants in council housing will have the option to purchase their home at an agreed discount from 2 April 2012. The money received from this scheme will be used to build new homes which, once built, will become available to rent.
The ‘Get Britain Building Fund’ is another current scheme introduced by the Government.
This is set to benefit construction firms as they are to receive support in the form of development funding. The scheme is set to help create over 12,000 new homes. For more details go to www.getbritainbuilding.co.uk
What is the Annual Investment Allowance?
The AIA is a form of Capital Allowance which offers tax relief for your business at 100% on all qualifying expenditure on plant and machinery in the year of purchase. Cars and any plant and machinery gifted to your business do not qualify for the relief.
How much can I claim?
Prior to 6 April 2012 (1 April 2012 for companies) the maximum relief you could receive was £100,000.
Changes to the Annual Investment Allowance (AIA)
However, from these dates the amount has been reduced to £25,000. The AIA is adjusted for short or long accounting periods, and for any accounting periods that span the rates and dates of different AIAs.
Accounting period examples
12 months to:
31 March 2012 – AIA of £100,000
30 June 2012 – AIA of £81,250
30 September 2012 – AIA of £62,500
31 December 2012 – AIA of £43,750
31 March 2013 – AIA of £25,000
If you have any queries or would like a chat about the AIA, please contact Ricky Taylor or Danny Roper on 01228 711 888, we would be happy to help.
Get Britain Building Fund
Credit Checks/Improving Cash Flow
There were 16,871 compulsory liquidations and creditors’ voluntary liquidations in 2011, an increase of 5% on 2010. A percentage of these businesses entering liquidation do so as a result of bad debt and an almost domino effect.
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Vicki MoffatManaging Director Recovery Solutions
David Allen Recovery Solutions
www.davidallen-recoverysolutions.co.ukDavid Allen Recovery Solutions is the trading name of Debts-In Ltd. Company Number 07884710. Registered in England and Wales
The construction industry, in particular, is suffering from slow payments and bad debts. Now that Spring is upon us, what better time to review your in-house credit control procedures and put in place new effective strategies to reduce bad debts and improve cash flow.
I cannot stress enough how important cash flow is and I am constantly telling clients on an almost daily basis that bad cash flow can kill a business.
There are always slow payers and those who won’t pay until pushed and avoiding these potential debtors is not always possible. What you can do to help avoid this scenario in the first place is find out who you are dealing with before you start work and carrying out a quick credit check can sometimes mean the difference between getting paid on time or at all. Your new potential business contact may well look good and sound good but the Directors (or person giving you instructions) may not be who you think they are, there
may already be various unpaid Judgments or there may be Winding Up Petitions or other factors which would be a cause for concern.
A credit check can take a couple of minutes, be emailed to you and for very low cost and its importance should never be overlooked.
For further help and advice, please give me a call on 01228 713 070 (Source of figures was Insolvency Service website statistics page).
”There are always
slow payers and
avoiding these
potential debtors
is not always
possible”
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Construction of a Will
If you are a sole trader or are a partner in a business, the assets will be treated as part of your estate when you die and as a business owner it is important that you consider making a Will.
Carrie TaylorWills [email protected]
Wealth Management
www.davidallen-ifa.co.uk
A Will is a legal document which is written during your lifetime but only comes into action when you die. It is a tool to ensure the people you want to inherit, get what you want them to have and, more importantly – the people who you do not want to get your assets - don’t get them!!
You may have a specific person in mind that you would like to take over running your business or to benefit from all of your hard work. By making a Will you will have the opportunity to ensure that this happens.
If you don’t make a Will, then generally your assets will pass according to the rules set by law and this may not be in accordance with your wishes.
Whilst planning for the future, your Inheritance Tax position should be reviewed. Inheritance Tax is a tax which is payable on the value of your total assets exceeding £325,000 (2012/2013) and this tax is paid at a rate of 40%.
Sometimes Inheritance Tax is not payable even where an estate exceeds the threshold. This is because there are certain exemptions and reliefs available. One of these reliefs is Business Property Relief (BPR). If you own a business or a share of a business, BPR may enable you to pass on some or all of the business free of tax.
It is never too soon to make a Will as once it has been drawn up, it can be changed and you can alter the provisions as much and as often as you like. This gives you flexibility as your circumstances change.
By making a Will you get to say who gets your assets. You will also have the peace of mind that you have utilised all available relief and reduced any tax that may be payable.
“Whilst making a Will your Inheritance Tax position should be reviewed”
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Derek BatyIndependent Financial Consultant
Wealth Management
Pensions and PropertiesAlthough property investment may not be the flavour of the month that it once was, a lot of investors still prefer to put their money into something more tangible than the stock market - something they can touch and know will still be there in years to come.
www.davidallen-ifa.co.uk Company Number 4030020. Registered in England & Wales. David Allen Wealth Management Limited is an appointed
representative of Network Direct Limited which is authorised & regulated by the Financial Services Authority
There are many ways to invest either directly or indirectly in property and some investors are aware that it is possible to buy a property using a pension, which it is, but what are the restrictions?
Some years ago the government announced that they were going to allow residential property to be placed in a pension wrapper but quickly back tracked on the idea when they realised the problems that this might raise and so today only commercial property can be purchased by your pension, but what is a commercial property and what is residential?
“Possible to buy a property using a Pension”
What is a commercial property and what is residential?
In simple terms any property that is, or could be lived in is classed as residential. This also includes the garden or grounds and any building on this land related to the property such as a garage or other outbuildings. The definition of residential also includes holiday homes and timeshare.
Development land can be purchased by a pension and residential property built on the land. However, the land and buildings must be removed from the pension before the house(s) are fit for habitation.
Property ownership within a pension is a complex area of financial planning but David Allen Wealth Management has the expertise and experience to help.
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Julie TaylorBusiness Software [email protected]
Sage, making your life easier in the construction industry…At David Allen we recognise that operating within the construction industry requires a high level of compliance and efficiency. Sage offers various packages which help you to keep up to date and compliant with the Construction Industry Scheme (CIS) legislation.
Sage Job Costing provides true business control by helping you to understand the precise cost breakdown of a job. It allows you to save time, retain control of your costs and avoid costly overruns.
Sage 50 Forecasting can provide you with regular forecasting information which is essential in any business. It allows you to see the impact of potential business changes, assess their impact and make decisions based on the outcome.
This software also integrates with Sage 50 Accounts and Sage Payroll, meaning that costs, timesheets and billing information need only be entered once, removing duplication and saving time.
Sage job costing provides true business control
You can save valuable time, reduce your paperwork and be compliant with HMRC regulations by simply adopting Sage 50 CIS, which is an additional module of Sage 50 Accounts.
As one of Cumbria’s leading Sage accredited partners David Allen would like to help you and your business develop. If you have any questions or would like further information, please contact our Business Software Specialists Rachael Percival or Julie Taylor on 01228 711 888 or email [email protected] or [email protected]
Julie Taylor Rachael Percival
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Jill HetheringtonEmployer Services Specialist
Construction Industry Question & Answers
Q: How do I register for the Construction Industry Scheme (CIS) as a subcontractor?Registrations should take place prior to working in the construction industry. If you fail to do this then deductions will be made from you at the higher rate of 30%. Once you have registered with HM Revenue & Customs (HMRC) for self assessment you can register for CIS by calling HMRC’s CIS Helpline on 0845 366 7899.
KEY DATES
CIS month - Starts from 6 of the month to 5 of the following month.
Contractors CIS300 Monthly Return - Needs submitted to HMRC either in paper form or online by 19 of every month following the 5 of the month that it represents, even if it is a nil return.Penalty for late submission of CIS300 Monthly Return is £100.00, this penalty is repeated for every month the return remains outstanding.
You should send your monthly amount of CIS tax deducted from subcontractors to HMRC by 19 of the month or 22 if paying online. Don’t get caught out with a late payment penalty - if 22 falls on a weekend or bank holiday then your payment must reach HMRC by the previous working day.
Annual Return Form P35 For those submitting a Form P35, it needs to be sent online to HMRC by 19 May following the end of the tax year.Penalty for a late submission of Annual Return Form P35 is £100.00 minimum.
Reclaiming CIS for Ltd Companies… the wait! 4 June is when HMRC matches CIS suffered recorded on your Form P35 with CIS deducted on CIS300’s sent in from contractors you have worked for. Do not expect any CIS suffered back from HMRC until the end of June at the earliest!
Q: What is the CITB Levy return and when do I need to submit one?This is a form for employers in the construction industry to complete annually, each April. This Levy is used to help deliver grants for training, training support and to help deliver apprenticeships in the industry. Employers in the construction industry with a total wage bill of £80,000 or more are liable to pay the Levy.
Q: Do I need to be VAT registered and what impact has the budget had on this?If you are supplying goods or services in the UK and your turnover of VAT taxable goods and services supplied within the UK is more than the current registration threshold of £77,000 or you expect it to go over that figure in the next 30 days alone, you must register for VAT. Prior to 1 April 2012 the registration threshold was £73,000.
www.david-allen.co.ukThis newsletter is for guidance only and professional advice should be obtained before acting on any information contained herein.
ContactsDalstonDalmar HouseBarras Lane EstateDalstonCarlisleCA5 7NY
Tel: 01228 711 888
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Tel: 01768 877 000
WorkingtonProsper HouseRegents CourtGuard StreetWorkingtonCA14 4EW
Tel: 01900 878 000
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