CHARTERED ACCOUNTANTS, TAX CONSULTANTS & FINANCIAL PLANNERS

www.albertgoodman.co.uk

TAX NEWSLETTER

ContentsUpcoming tax deadlines

In the news

Good intentions for the New Year!

Paying HMRC?

Profiling AG tax staff

Tax and succession planning

Talent Management

Investing in the future success of your business

Using your business as a retirement vehicle

Maximising your appeal to purchasers

Last resort?

Proposals to extend pensions auto enrolment to younger workers

TAX NEWSLETTER JANUARY 2018

CHARTERED ACCOUNTANTS, TAX CONSULTANTS & FINANCIAL PLANNERS

www.albertgoodman.co.uk2

Happy New Year and welcome to this month’s E News

When contemplating the theme for the first newsletter of 2018, where better to start than reflecting on the past year and

planning for the future.

This month we will explore the factors owner managers should consider when developing their succession plan. Whether it involves staff, family, external investors or a combination of interested parties, there are critical steps any owner manager should take before handing over the reins.

Within this newsletter, you will hear from our specialist resource at Albert Goodman, including:

• Our very own Head of Human Resources, outlining the intricacies of managing talent.

• The financial planning team explains how your business vehicle can provide you with the necessary retirement funds.

• The corporate finance team provides an insight into selling your business and how to make it more marketable to external parties.

• Finally, the Insolvency team demystify the solvent liquidation process.

As strategic advisers, Albert Goodman prides itself on linking all of its internal resource with the tax team, who are extremely experienced at delivering your commercial objectives tax efficiently.

This month we are also fortunate to hear from Andy McCreadie, Managing Director of Sandler Training South West, who provides specialist coaching, training and mentoring solutions to facilitate business growth. Andy outlines his approach in identifying future leaders and how to support their development.

As usual, if you would like to discuss any of the articles in more detail, please get in touch.

WELCOME

Tracey WattsTax Partner

Upcoming tax deadlinesJanuary13th Payment to HMRC using credit cards is no longer possible.

14th Large companies under the quarterly instalment payments regime may need to make a further corporation tax payment.

19th PAYE, NIC, CIS and student loan liabilities for month ended 5 January 2018 are due (22nd if paying electronically).

File CIS returns online for the month to 5 January 2018.

31st Deadline for the online submission of 2016/17 self-assessment tax returns along with the payment of any associated tax liability.

February1st Companies (outside of QIPs) with April year ends are liable to pay their

2017 corporation tax liability.

2nd File form P46(car) for the quarter ended 5 January 2018.

5th Deadline for the Employment Intermediary’s quarterly (gross payment agency worker) report to 5 January 2018.

In the news• 90% of companies have yet to comply with the gender pay reporting

requirement. Companies and charities with more than 250 staff must publish their data by 4 April 2018.

• House of Fraser confirmed that it had asked for rent reductions for a number of its stores.

• China’s ban on the import of a number of recyclable materials came into force.

• All coal power stations emitting CO2 above government set thresholds will have to close by October 2025.

• John Ponsonby steps down as managing director from Leonardo Helicopters (Westlands), with finance director Geoff Munday announced as his successor.

• The Government announced the introduction of woodland creation grants, just as China publicised its intention to plant 6.6 million hectares of new forests during 2018.

3TAX NEWSLETTER JANUARY 2018

At the start of a new year thoughts generally turn to New Year’s resolutions and good intentions for the coming 12 months. As we reflect on the past year and prepare for the year ahead, friends and family are declaring the usual ‘I will eat more healthily’, ‘I will work out every day’, ‘I will save more money’. As usual only a fraction of the resolutions are likely to be successful!

This year we would like to inspire you to set some financial New Year’s resolutions which will allow you to be better advised and keep on top of your income and tax affairs. Here are our top 5 suggestions:

1. Undertake tax planning before the end of the tax year

The current tax year ends on 5 April 2018. There is plenty of tax planning that can be done towards the end of the tax year, but it is important this is not left until the last minute. Consider things such as:

• Making personal pension contributions or gift aid donations which may reduce the rate at which your income is taxed. Well timed payments could save you tax of up to 60%.

• Making capital disposals which use up your capital gains tax annual exemption (£11,300 for the current tax year), or to use up capital losses brought forward.

• Maximise the use of ISA allowances.

• Undertake remuneration planning to ensure income is withdrawn from your personal company in the most tax efficient manner.

2. Talk to your accountant This seems like an obvious one but on many occasions

a transaction can be structured in a different way to reduce the tax exposure. However this cannot be done retrospectively, therefore it is wise to seek advice before you undertake a transaction. Keeping us in the loop with regard to your investments, business interests and intentions is critical to us being able to provide proactive advice and mitigate any potential tax liabilities arising. Often simple planning such as placing an asset

into joint names with a spouse before a sale, can save thousands of pounds of tax. We always have your best interests in mind and promise we don’t bite!

3. Finalise your tax return earlier At this time of year our tax team are very busy ensuring

all our client’s personal tax returns are submitted before the deadline of 31 January 2018. I’m sure many late offenders put off the task of sorting their paperwork in favour of other much more exciting things! So what are the advantages of finalising your tax return earlier?

Filing the return early gives you good notice of any tax payment that is due by the end of January. If you file the return in April, straight after the end of the tax year, this gives you 9 months to plan and budget for the payment that is due. Alternatively, if you are due a refund of tax for the year, submitting the return early will mean that this is repaid to you much earlier.

Tax returns can be enquired into by HMRC for up to 12 months after they have been filed. Submitting the return earlier means the enquiry window will close that much earlier and you can have peace of mind that no further questions will be raised regarding your return.

Finally, preparing the return closer to the end of the tax year means that it is generally easier to remember that one off bit of income you received, or that asset you disposed of, rather than having to cast your mind back just under two years previous to remember what was going on! This means that actually collating all the details to prepare the return should be that much easier.

4. Think about the future We all lead busy lives and most of us are thinking about

our plans for next week, next month, or next year. Rarely do we stop to consider what we will be doing in 5 or 10 years time.

Considering the longer term can help focus the mind and ensure the actions you take now, put you in good stead to meet your future financial aspirations, whether that is making provision for your retirement or providing for future generations of your family.

Good intentions for the New Year!

4 www.albertgoodman.co.uk

A significant amount of individuals do not have an up to date will resulting in their assets not necessarily ending up where they want them to. Wills should be considered in conjunction with your inheritance tax (IHT) exposure, to make sure that they are tax efficient and minimise any IHT liabilities on your death.

Considering your IHT position at an early stage also means that you have much longer to take action to mitigate the IHT liability following your death. It is worth making a list of your current assets along with their values and discussing this with your accountant to quantify the position, should the worst happen tomorrow. With this information you can then consider what actions can be taken to improve the situation.

5. Set up your Personal Tax Account Making Tax Digital (MTD) is part of HMRC’s plan to

“revolutionise” our tax system and make it one of the most ‘digitally advanced’ tax systems in the world. Ultimately MTD will fundamentally change how and when businesses and landlords provide information to HMRC. In the summer it was announced that the proposals are currently on hold until 2020.

Whilst this is a relief for many in the short term, business owners and landlords with turnover or gross rents of

more than £10,000 and under the VAT registration threshold, may still be required to keep their accounting records in a digital format from April 2020 under the revised proposals. Although 2020 may seem a long way off, you should consider altering the way in which you keep your records in advance of the changes being introduced so that you are prepared.

Beyond this, we do not know what the provisions will mean for many private tax clients although we are led to believe the current tax return may be replaced at some time in the future.

A further part of MTD is the introduction of the “Personal Tax Account” (PTA). Your PTA brings together much of your tax information in one place and includes useful information such as PAYE coding notices, which you are able to go in and change if you consider are incorrect, and your state pension entitlement. Activating your PTA will also mean any tax refunds due are paid to you more quickly.

Whilst the MTD provisions have been temporarily suspended, we would still recommend that you activate your PTA with HMRC. If you need any assistance in activating your account please get in touch. Tara Hayes

With many individuals having tax payments to make at the end of this month, it is important to be aware that HMRC have announced that they will no longer accept payments made at the Post Office or by credit card.

HMRC have announced that with effect from 15 December 2017 it will no longer be possible to make payments to HMRC at a post office. The reason for this change is that the contract with Santander, which allowed this method of payment, has expired. HMRC are advising that where electronic payment is

Paying HMRC? Not at the post office or by credit card

not possible, payments can still be made at bank branches using a payslip and payments for self assessment income tax can still be posted to HMRC.

From 13 January 2018 it will also no longer be possible to pay HMRC using a personal credit card. The timing of this change coincides with the date from which HMRC will no longer be permitted to charge fees for payment by credit card.

Internet link: ICAEW blog

5TAX NEWSLETTER JANUARY 2018

Profiling AG tax staffTo introduce you to our eclectic mix of tax team members, we will interrogate

members of the AG team each month.

Next up is Albert Goodman’s Managing Partner, Richard Bugler.

Thanks for giving up some of your time for this Q&A Richard.

1. The firm has developed a pretty remarkable tax team wouldn’t you say Richard?!

Yes I would agree! We have a fantastic tax team that have the broadest range of tax skills we have ever had at Albert Goodman.

2. In your view, why is the tax team such a vital component of the AG client service offering?

In an ever more complex world, our clients seek creative yet understandable solutions to their needs and tax planning is an important part of most decisions and transactions.

Furthermore, our clients work exceptionally hard to generate their profit or income, so ensuring they retain as much of this as possible, by minimising their tax liabilities, is just one area the team can assist our clients with.

3. Which attributes do you consider a priority for any tax professional wanting to join the AG tax team?

Our tax professionals have many qualities; being able to work as part of the wider Albert Goodman team is critical. The ability to communicate and share ideas effectively both internally and to our clients is also important. In addition, the skill of striking a balance between complex tax planning and commerciality ensures our advice adds value yet remains practical and workable.

4. Was there a point in your career when you considered specialising in tax?

I have always had an interest in tax; however my family business background probably led me down the career route of providing a range of advisory and accounting services to business owners.

5. What is your main frustration with respect to the government’s approach to tax policy?

The lack of consistency in tax policy makes it hard for business owners and individuals to plan for the long term. For example, we have seen the annual investment allowance (AIA) rise and fall since its introduction, which gives mixed messages to businesses who should be encouraged to invest. The fixing of the AIA at £200,000 from 1 January 2016 was a sensible move, albeit a higher figure would have been welcomed.

This month it is the turn of Tracey Watts, Albert Goodman’s Head of Tax.

1. Can you provide a brief summary of how your tax career developed to the present day, with you heading up this fine tax team?

I passed my chartered tax exams after qualifying as a chartered certified accountant but wasn’t ready to commit to the world of tax for a few years, concentrating instead on looking after professional partnerships for a few years; dealing with the intricacies of capital and current accounts for doctors and solicitors.

I finally saw the light and joined our fine firm 17 years ago as a tax manager and can honestly say I have never looked back.

Hard work and a willingness to take ownership of a multitude of client and partnership issues and offering solutions (plus a bit of luck) saw me progress to partner in 2009, before finally heading our team up three years ago.

I feel privileged to be a part of our tax team, which has expanded beyond recognition over the 17 years, with each and every member bringing something different to our offering.

2. Those in the office know that your skills do not lie in keeping plants alive, but tax advisory is a different matter altogether. What area do you enjoy the most or is it the challenge of each new situation you face?

All I can say is that spider plants never, ever die, and nor does my love of tax! Whilst the constantly changing legislation can sometimes feel overwhelming,

saving clients tax and generating refunds never fails to brighten my day. I also love dealing with enquiry work and particularly enjoy protecting clients

during the enquiry process, which is all too often a highly stressful experience for anyone not used to dealing with HMRC.

I also enjoy being part of our corporate finance team, and relish the cut and thrust of deals and reorganising companies as part of the acquisition or disposal process.

3. Name three things you would take to a desert island.

A photo of my children; my ipad to watch anything with Mark Wahlberg or Matt Damon in, and a van load of shortbread.

4. Shortbread and Marky Mark, interesting combination! There may be individual’s looking to come back into the job market after a break or those just in need of a career change. Why should the more mature folk consider a career in tax and more particularly with AG?

When I qualified, you could easily carry tax legislation around with you – you now need a small cart or good internet access. General practitioners now dabble in tax at their peril and even those of us in tax increasingly have to specialise given the complexities facing us. If you want a challenge in your working life, and you enjoy hard work, solving problems and saving people money, tax might be for you.

If you enjoy working as part of a team where your voice matters, and love everything that the glorious counties of Somerset and Dorset have to offer, then joining the tax team at AG is a must.

5. Share a secret talent with us.

I can dress a crab and gut and fillet a fish, blindfolded – a benefit of having worked in a fishmongers when I was a teenager - smelly but practical!

www.albertgoodman.co.uk6

Ten years into your business, retirement may seem a distant milestone, yet this can be the ideal time to start the development of your succession plan. But how and where should you begin?

Admittedly there is very little benefit in formulating a succession plan, if you have not already devised the overall vision for the business. For instance, if the vision is for your business to become the UK market leader for exports of cut flowers, how this is to be achieved may influence the succession plan.

Evaluating your successors & tax considerationsThis step can be split into two distinct groups for private companies, family and employees.

Family successionWhere there is a desire for family to succeed the current owners of the business, independent assistance in reviewing their capabilities is arguably more of a necessity. In addition, with many next generation owners having acquired little or no experience with other employers or sectors, external training is likely to be more valuable in this respect.

Other factors which will need consideration:

• How to approach succession where there is more than one family member that wishes to take on the family business.

• How the business will fund the existing owners’ retirement without asphyxiating its business plans.

• For those family members not involved in the business (if it is your wish to provide them with some capital), how to fund any equalising of family gifts.

Inheritance Tax planning will invariably play an important factor with any family based succession. For gifts of business interests there are a number of tax reliefs which will assist with a tax-free transfer. If the company is cash rich and the current owners wish to extract further value from the business, a combination of gifts with the company buying the remaining shares could be an option.

Trusts can also be a useful vehicle to ensure family members can benefit from the income associated with the share capital, whilst those family members working within the business are provided with an appropriate remuneration package.

Employee successionWhen considering the possibility of employees being part of your succession plan, the first step could involve dividing the business roles internally in order to evaluate the skills of each candidate. Using our example of a business vision to become the UK market leader for exports of cut flowers, the business could be split into:

• Logistics (objective – to fulfil all orders under £1,000 within 24hrs by 2021),

• People management (objective – to increase the employee retention rate by 20% by 2021),

• Production (objective - increase yields on existing land by 15% by 2021),

• Sales (objective – to generate 10 new key commercial contracts within existing markets and sign 1 new contract within 5 new countries by 2021).

• Systems (objective – by 2021 to develop a system which provides up-to-date key data to management which can also adapt, as the way in which customers wish to interact with the business alters over time).

To link the meeting of objectives to the first stage of succession, a key HMRC approved employee share scheme could assist with this.

An EMI option is in essence a promise, offering employees to acquire a number of the company shares by reference to exercise terms being satisfied (which could include a business objective).

EMI share options allow the business to agree the current market value of the shares from the outset, with this price being paid by the employees on exercise. The benefit of which (hopefully as a result of meeting the business objectives), when they buy the shares the value has already increased i.e. they are buying at a discount.

Initially, EMI options can be used to provide a smaller percentage of share capital whilst the individuals acclimatise to their new shareholder status. This can then be used as a spring board for an eventual full management buy-out or indeed a secondary set of EMI options.

Alternatively it may be your wish that a management board is developed but that an all employee share plan is introduced instead. An employee-ownership trust could be one of a number of solutions; however this specific plan allows the owner to dispose of a controlling interest in their company completely tax-free.

A combination of the above, for instance, producing a strong employee-based management board (potentially with minority shareholdings), to continue producing value for the current and future family shareholders could be a further option.

Having reviewed the successors, it may become apparent that there are no internal candidates with the necessary potential. In this instance, at least undertaking this review identifies the business need to source new recruits or indeed that a third party sale is the most desirable option to the shareholders.

Elaine Grose

You will have probably seen or heard in the sporting, political and business worlds how one manager or leader can take the same people and resources and succeed whilst another

will fail? Whether it relates to the next generation of family members or the core workforce, talent management has so much to do with business success or lack thereof.

Recruitment“Right People, Right Attitudes, in the Right Place at the Right Time with the Right Skills, the Right Flexibility in the Right

Talent Management

Tax and succession planning

7TAX NEWSLETTER JANUARY 2018

defined, long-term development plan. This plan must identify skills gaps and address training needs around key leadership and management competencies such as goal setting, accountability, problem solving and coaching in order to follow in your footsteps.

Tips to identify and facilitate your emerging leaders: • Assessment: tailored assessment tools can be used to

help give an accurate profile of an employee’s strengths and weaknesses and whether they have potential as a manager or leader.

• Values: compare the core company values with those of your potential emerging leader. Is there a strong enough cultural fit?

• Improving performance: most managers and team leaders simply don’t have the tools and skills to maximise team performance. Companies must identify these gaps and provide support through on-going training to ensure their success.

Sandler works with clients to create inspiring leadership and high-performance cultures. Improve your work/life balance and work smarter by developing your next tier of management. After all, a leader’s success is measured by those who follow them…

Numbers at the Right Price”! Recruitment is a foundation for future success. As accountants we need to make sure the numbers add up and the same is in recruitment planning. Consider what you want to achieve as a finished team + what you have at the moment - forecasted changes to what you have got at the moment = required recruitment.

PEST factors will need to be considered:

• Political e.g. is your current and potential workforce made up of non U.K. citizens, what affect will Brexit have?

• Economical e.g. the living wage impact over the years and how can this be afforded by the business?

• Social e.g. what diversity mix are you aiming for ages, sexes, education, life experiences and how will you attract certain groups?

• Technological e.g. what impact will AI have on your workforce over the next 10 - 20 years?

It is common for not all vacancies to be filled at the same time or for some people to leave, do you plan for a recruitment margin? Remember to look within, recruitment is not just about external candidates, it is identifying within the team the potential of others to develop; take a chance on people as they took a chance on you.

DevelopmentIt is unlikely that your staff will join you or have the skills now, that they will need over their employment lifetime to be the most effective for your business. It is important to ensure that your staff are developing as fast (if not faster), than technological changes. “The fastest way to go backwards is to stand still”.

Technical and behavioural development (including leadership skills and emotional intelligence), are equally as important.

To develop an effective team when creating a Management Board, ensure skills sets complement i.e. Belbin Team types; co-ordinator, shaper, plant, monitor evaluator, resource investigator, completer, team worker and implementer. External consultants, such as Andy McCreadie who you will hear from next, can be used to help coach and enhance these areas, and in particular they will provide objectivity with respect to family members’ skills set.

Engagement and RetentionEngagement and Retention go hand in hand. The more your staff are engaged with working for you, the more likely they will excel at their job, further the interests of the business and less likely to leave. Get the basics correct first; Maslows Hierarchy of needs theory is that before you can become truly engaged, you must make sure the biological, physiological, safety and belonging needs satisfied. Following these needs being satisfied, there are the esteem needs and self-actualisation of realising personal potential to get to true engagement.

The development of your leaders’ skills are crucial here as the most common reason people leave organisations tends to be their leader or direct manager. You can gauge engagement with staff surveys, listening groups, staff forums, appraisals, absence trends and exit interviews. Retention is aided by constant communication; informing, consulting, involving and listening. Simon Irvin

Many business owners and leaders are so immersed in the day-to-day running of their businesses that they struggle with their work/life balance and fail to dedicate the time to plan for the future. Every business should have a five-year plan with clearly mapped out strategies and processes to get them there.

Have you defined where you want the business to be in three to five years’ time? If you’ve done this, do you know who beyond the existing leadership team will help you get there? Furthermore, what skills will they need to learn or develop in order to help you successfully achieve these long-term goals?

Identifying your emerging leaders is critical for any business; skills can be taught but they must have the right raw ingredients and attributes, be willing to learn, grow and fit the company culture. If you have identified these people, are you committed to supporting them in learning and developing the skills and disciplines they need to thrive in their roles?

I often come across business owners who are desperately trying to figure out why their mid-level managers aren’t performing as they had hoped. Typically, they were either promoted too early, they lacked the necessary key values and attributes, or they weren’t effectively supported with a clearly

Andy McCreadieSandler Training South West

andy.mccreadie@sandler.com01395 203 050

Investing in the future success of your business

Whether planning to sell your business to a third party or gifting it to the next generation, devising a structured plan long before exit can reap benefits now as well as later. New pension freedoms mean a pension pot can not only benefit you, but also your family and your business.

Pay into a pension pot before gifting or selling your business – paying into a pension can be very tax efficient, personal and company contributions can attract tax relief. There’s no tax on you, provided contributions are within Annual Allowances. It is possible to carry forward unused allowances from previous years but careful planning is needed not to go over the limits, therefore it is advisable to pay in every year rather than wait until your exit approaches.

Benefit to you – aim to build £1m in a pension. It’s not necessary to “retire” to draw on the pension pot, it can be drawn from age 55, 25% can normally be taken tax free and benefits accessed flexibly. This will be incredibly useful if your income drops after gifting the business to the next generation or the sale proceeds are less than needed for a comfortable retirement.

A pension pot can save inheritance tax – on death a pension pot can be left to whoever you wish, such as a surviving spouse/partner, then to future generations – potentially all tax free. Generally no tax is payable when death occurs before age 75. If death occurs after 75, the recipient will be subject to income tax, but with careful planning, tax can be mitigated. Be aware, however, there are limits on the amount that can be passed on tax-free and not all pension plans offer the freedoms. Furthermore, you should ensure that you correctly document to whom you wish to pass the pension pot to, otherwise the pension wrapper will fall away wasting all the careful planning.

In short, compared to holding £1m of capital in your own name, having £1m in a pension pot on death potentially saves up to £400,000 in inheritance tax.

Have your cake and eat it? Potential to provide company finance – using a special type of pension means the business also benefits without diverting cash flow away from growth plans.

How it works – a limited company can set up pension under a special trust for the directors of the company, they become member trustees. The pension offers greater flexibility than traditional personal pensions and it can invest in a much broader range of investments, notably commercial property and land. Directors can pool their pensions to generate one large fund and employer contributions are normally fully deductible against company profits.

Key benefits

• The pension fund can purchase commercial property and lease it back to the company. The company pays rent to the pension fund, with the rent paid being tax deductible. This can also be helpful where a director is restricted on his or her contribution level.

• If the property is already owned by a director or the company, it could be sold to the pension scheme, resulting in valuable cash flow.

• The Trustees can borrow to buy the property up to a maximum of 50% of the net value of the pension, e.g. if a pension fund was worth £300,000, maximum borrowing is £150,000 allowing purchase of a commercial property of £450,000.

• The pension fund can invest back into your company through secured loans, providing 5 key requirements are met.

• The new tax treatment of death benefits now means that commercial property held in a pension does not have to be sold on death. The pension wrapper and its assets can be retained for future generations.

You can therefore put in place the ultimate tax planning wrapper – fund your retirement, mitigate inheritance tax and provide business finance!

www.albertgoodman.co.uk8

Claire Musson

Using your business as a retirement vehicle

9TAX NEWSLETTER JANUARY 2018

Whilst the notion that attractiveness or beauty is ‘in the eye of the beholder’, this often rings true in the mergers and acquisitions world. The fact that seemingly comparable businesses often achieve quite different sale values is evidence in itself that any action that can be taken to maximise the appeal of your business to purchasers, is time and money well spent.

Setting aside the appeal of different business sectors, the attractiveness of your business often comes down to its ‘sellability’. Sellability itself is determined by a range of factors, many of which can be actively managed to improve the likelihood of a successful sale. Indeed we have been able to successfully assist our clients in improving the sellability and attractiveness of their businesses, which has ultimately helped to improve and maximise the sales price achieved.

Placing yourself in the ‘shoes’ of a potential buyer will help business owners to identify a number of areas in the business that could limit its attractiveness and sellability. However, some points are less obvious so here are the top 10 attributes that you should be aiming for, in order to maximise the appeal (and sales value) of your business:

1) Visibility: Have a good, easy to navigate website. Maximise PR opportunities in the local press etc and establish a social media presence if appropriate.

2) Credibility: Ensure that your business holds and keeps up-to-date the relevant industry accreditations and be an active member of relevant trade bodies.

3) Profitability: Profitable businesses are easier to market and a steady and consistent pattern of growth demonstrations that the business is on the right track. Any non-

essential costs should be stripped out to reflect the true commercial profitability of the business.

4) Cash generation: Cash continues to be king and ultimately provides the return on an acquirers’ investment. Cash generation and cash flow can often be improved through better working capital management.

5) Organisation and preparation: Maintaining accurate organisational charts and ensuring key documents/contracts are in order; along with up-to-date management information/budgets will be crucial in helping a potential acquirer to understand and gain confidence in your business.

6) Consistency: ensure that information about your business is prepared on a consistent and comparable basis to help an acquirer understand how the business has developed.

7) Be forward looking: short, medium and long term business plans/projections and an awareness of potential risks with an associated plan of action to address such risks, will demonstrate a more robust proposition

8) Be well managed: a structured management team with responsibility for the strategic direction of the business and which acts autonomously from the current owners will add considerably to the appeal of the business. This is likely to provide a potential purchaser with the confidence that the ‘value’ of the business relates to the business and not its current owner.

9) Be aware: although existing owners may already have a good

idea of the likely buyer for their business, having an awareness of the how such potential buyers perceive your business will place you in a stronger negotiating position.

10) Flexibility: be flexible in terms of exit route and timescales to maximise the eventual sales price of your business.

Whilst many of these points can be addressed internally, having ideas and a helping hand to keep you on track is often key in helping improve the attractiveness of your business. Similarly, the fact that many owner managed businesses do not have the spare resources to manage such a project means that outside assistance from Albert Goodman has been invaluable in helping our clients identify, design and implement an appropriate and effective succession plan, be it an internal family transition or an external exit.

But these things cannot be implemented overnight; the sooner you start thinking about this, the better! Drawing on the extensive resources both within Albert Goodman as well as the resources available to us via our membership of the Corporate Finance Network (which provides further Corporate Finance support and national coverage), we offer a confidential, personalised one hour exit planning workshop, where we can determine the priorities for your business, produce some benchmarking statistics, and help you decide how to best approach succession planning for your business.

Neil Hutchings

Maximising your appeal to purchasers

www.albertgoodman.co.uk10

Last Resort?So you’ve tried to find a buyer without success – where do you go now in order to retire and extract the value stored up in your business?

The answer could be to cease trading and place your company into solvent liquidation. After all, it may well be possible for shareholders to receive their money using Entrepreneur’s Relief at a tax rate of 10%, or less after allowances. This could yield considerable savings compared to paying the funds to shareholders as dividends outside of liquidation, which would then be taxed as income.

These benefits can also be obtained following a sale of the business trade and assets, leaving the company as a cash shell. Although in this eventuality advice should be sought in advance to ensure that the asset purchase agreement does not impose long-term obligations, which can then make liquidation tricky.

However, assuming a sale has not been possible the first step will be to cease trading; this in itself gives rise to some practical problems.

Firstly, choosing the right time to cease may be important in order that work for customers is completed, which will help avoid contractual claims and maximise the value of work in progress. Similarly, the bulk sale of stock upon cessation is likely to realise only 10 to 25% of cost, and therefore it makes sense to run this down as far as possible beforehand.

Secondly, the rights of employees will need to be honoured. These will obviously include any final salary and holiday pay due to them, but also notice pay (one week’s pay for each year of service up to a maximum of 12 weeks) and redundancy (between ½ and 1 ½ week’s pay for each year of service dependent on age, up to a maximum of 30 weeks with pay capped at £489 per week). Depending on the age, length of service and size of the workforce, this can add up to a sizeable amount which must be paid by the company. However, this can be minimised by planning as far in advance as possible, in order that employees work their notice period whilst the company is continuing to trade. Should funds not be immediately available to meet the payments required, whilst other assets are realised a Government scheme may well be able to temporarily step into the breach once the company is in liquidation.

Thirdly, in order to minimise the work required by a liquidator (and therefore liquidation costs), it will generally make sense for debtors to be collected, the company’s physical assets to be sold and creditors paid if possible beforehand. This is particularly true of debtor collection, as liquidation itself can impair collection rates and it will be difficult for a liquidator to deal with detailed queries.

Finally, thought needs to be given as to how long-term financial commitments will be dealt with. These can include property leases and finance, rental and supply agreements. In terms of the former, these may be able to be surrendered back to the landlord on agreed terms, which could necessitate a substantial damages payment being made, or a replacement tenant found. Until then, provision will need to be made for the continued payment of the rent. With regard to the latter, any damages arising upon the early termination

of the agreements will need to be paid. To reduce the impact of these issues, when cessation is being considered it makes sense to avoid entering into such long-term commitments (if possible) and to try and transfer property leases at the earliest opportunity.

The liquidation processHaving successfully negotiated such issues hopefully the company will be a cash shell, or as close to this as possible, ready for the liquidation itself.

The first step is to determine the financial position of the company, as this forms the basis of the declaration of solvency, (basically a balance sheet in a different format), which needs to be sworn by the directors.

Once done, it is necessary for directors’ and shareholders’ meetings to be held, to pass various resolutions including those to place the company into liquidation and to appoint a liquidator.

Upon appointment the liquidator may be willing, upon receipt of acceptable indemnities, to distribute the bulk of immediately available funds to the shareholders (after providing for amounts due to creditors and allowing for a contingency), even though the liquidation is some way from completion at this stage.

The liquidator will then proceed to realise any remaining assets and pay the amounts due to all the company’s creditors. Meanwhile, the company’s final accounts and tax return up to the date of liquidation can be prepared and, upon agreement by the directors, they can be submitted to HMRC and any final tax paid.

Upon completion of all the aforementioned issues, tax clearance can be applied for and, once granted by HMRC, the liquidator can proceed to close the liquidation and pay any remaining funds to shareholders. In simple cases with no unanticipated issues, this process might take around nine months.

Following closure, the company will be dissolved and the circumstances in which any other creditors of the company can take action to recover amounts due, are limited. This, highlights another benefit of undertaking a formal liquidation, rather than opting for the informal striking off route.

Laurence Russell

11TAX NEWSLETTER JANUARY 2018

The government has announced proposals to extend pensions auto enrolment to include younger workers and to amend the way in which contributions are calculated.

According to the press release:

‘The review’s recommendations, which will now be progressed and legislated for where necessary, will see:

• automatic enrolment duties continuing to apply to all employers, regardless of sector and size;

• young people, from 18 years old, benefiting from automatic enrolment, introducing 900,000 young people into saving an additional £800 million through a workplace pension;

• workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit – this will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in, and simplifying the way employers assess their workforces and calculate contributions;

• the earnings trigger remaining at £10,000 for 2018/19, subject to annual reviews;

• contribution levels reviewed after the implementation of the 8% contribution rate in 2019;

• the government testing a series of ‘targeted interventions’ – including through opportunities to work with organisations who act as ‘touch points’ for the 4.8 million self-employed people, such as banks and those who contract labour – to explore how technology can be used to increase their pension saving.’

Under auto enrolment, employers are required to automatically enrol all eligible workers (generally employees) into a workplace pension scheme and pay a minimum

contribution into their pension. Employees do, however, have the right to opt out of auto enrolment.

Currently workers who are aged between 22 and the State Pension Age with earnings of £10,000 per annum are eligible to be auto enrolled. Younger employees and those who do not meet the minimum income requirement can opt to make pension contributions.

The government plan to reduce the lower age limit to 18 by the mid 2020s, in order to encourage younger workers to get into ‘the habit of saving’.

David Gaulke, Work and Pensions Secretary said:

‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.’

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated:

‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year. ‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’

Contact us if you would like help with payroll and auto enrolment.

Internet links: GOV.UK news FSB press release

Andy Hopper

Proposals to extend pensions auto enrolment to younger workers

www.albertgoodman.co.ukCHARTERED ACCOUNTANTS, TAX CONSULTANTS & FINANCIAL PLANNERS