IBINBUSINESS

The Moore and Smalley magazinefor owner managed businesses

FINANCIALMANAGEMENT LOCAL LINKUPIF ONLY – A GUIDE TO STRATEGIC PLANNINGTHE EQUALITY ACTWHAT THE AUSTERITYCUTS REALLYMEAN, COMPANY TAXATIONMOORE AND SMALLEY IN THENEWS

www.mooreandsmalley.co.uk

ISSUEDINWINTER2010/11

‘FROMMETOYOU’DAVID BENNETT DISCUSSES TAX EFFICIENT WAYSOF SHARING INCOME IN THE FAMILY BUSINESS

Welcome

Cover image: Wasdale, Lake District

Sage 50 Accounts helps thousands of UK businesses managetheir money; the latest version of Sage 50 Accounts continuesto improve this tried and tested accounts software with extras

that add up to big time savings.

New feature - flat rate VATThe ability to deal with the VAT flat rate scheme is a welcome newaddition in this version. It produces the relevant VAT returns forHMRC to help you stay compliant.

Improved charities capabilityThere is a new set of reports especially created for non-profitorganisations. These include fund specific balance sheet and profitand loss by one or several funds at a time.

Improved bank reconciliationPost adjustments to customer and supplier accounts without havingto close down the reconciliation and start again from scratch. Thenew bank reconciliation report also allows you to print the bankreconciliation as you process it, allowing you to match directly withactual bank statements.

New - web store integration (using SagePay)Integrate your web store with your accounts. Using SagePay you cancreate new customers and products, sales invoices and receipts.Payments are downloaded automatically from your web store,saving you time.

New - compatibility with Microsoft Office 2010Sage 50 Accounts 2011 is the only Sage accounts program that iscompatible with the 32-bit version of Microsoft Office 2010.

Manage yourmoney with Sage50 Accounts 2011

2 welcome tech tips

Nick WetherallSage product manager

01772 821021nick.wetherall@mooreandsmalley.co.uk

Investment in the right accounting software can improve the efficiency andaccuracy of financial records

Welcome to the winter edition of In Business.Since our last issue the government has releasedits Comprehensive Spending Review, scrapped the

Pre-Budget Report and replaced it with an autumn statementto the House of Commons.

In his statement the chancellor, George Osborne welcomedthe latest economic report from the Office for BudgetaryResponsibility (OBR) which has shown the economy is ontrack for recovery. In light of the report I think that ourchances of entering a double dip recession are markedlyreduced and feel optimistic that the UK is on course foreconomic improvement.

In this issue of our magazine, David Bennett discusses taxefficient ways of sharing income in a family business and TinaClayton reviews the new Equality Act which came into force inOctober 2010.

Richard Hall follows up his last article ‘What if?’ with‘If only’, discussing an alternative, and more cost effective,strategic planning approach. I would also like to say thank youto inspirational entrepreneurs Stuart Forrest andMark Hallam for taking part in our Company Profilefeature on page 3.

I hope you enjoy reading this issue.

Andrew Norman

Partner

company profile 3

Internet company providesrisk-free link to customers

ALancaster-based internet company isgenerating significant growth byoffering an innovative and risk-free

way for local businesses to advertise online.Local Link Up, owned by Stuart Forrest

and Mark Hallam, allows local businessesand trades people to select key search enginephrases, such as ‘builder in Preston’ or‘Kendal drainage clearance’, that then linksthrough to their own low cost website.

The service makes money by chargingsmall amounts based on how high it can getthose websites to appear in internet searchengines such as Google, a process known assearch engine optimisation (SEO).

The difference between Local Link Up’ssystem, known as Pay Per Rank, to otherSEO tools is that if your company doesn’tappear on the first page of the search engineranking, you don’t pay a penny. Thecompany says it currently offers the UK’sonly Pay Per Rank service for SEO.

Stuart says: “From a small businesspoint of view, Local Link Up is a great tool asit’s totally risk free to the customer and a lowcost service. The service has provedimmensely popular and we have grown thebusiness significantly, taking on 60 stafffrom starting up 18-months ago.”

If the names sound familiar, it’s becauseStuart and Mark have been in the internetbusiness together for over 15 years. The duowere behind the popular Ufindus onlinebusiness directory which they sold to BT for£20million in 2008. Prior to that they builtup and sold a string of internet businesses,including the online hosting service BusinessServe, which they successfully sold on theeve of the dot.com crash in March 2001.

“We’ve shared in the ups and downs ofthe internet,” says Stuart, a self-confessedand self-taught technology obsessive. “Markhas always been the salesman and handledall that side of our businesses and I havealways been into the technology side. I gotinto the internet in the early days when mostpeople didn’t even know what it was or thehuge potential it had. Mark and I haveshared in the difficult times as well as thegood times down the years, but on the wholewe’ve done very well out of it.”

Stuart, a former Heysham High Schoolpupil, has had an entrepreneurial streaksince his formative years, first makingmoney by standing outside Morecambestation and carrying bags for tourists whenhe was 10-years-old and later working on thefairground rides. At 16 he worked in apottery factory, but by 18 had started hisown parcel delivery business with a friend,after buying a couple of old vans.

“My careers adviser at school hadsuggested I should be a farmer as I had oncehelped out on a farm, but I always knew Iwanted to run my own business,” says father

of four Stuart. “The parcel delivery businesswasn’t very profitable, but it allowed me tolearn the ropes. I then opened a couple ofcar insurance shops for a while too andbecause I was using computers as part of thebusiness I got into the internet.”

Looking ahead, Stuart and Mark arevery optimistic about the future of thecompany. “The internet is here to stay andif you’re innovative and creative, you’llalways be able to make a living from it,”added Stuart. “We’re a small growingbusiness, but we’re very confident that wewill continue to grow.”

‘The internet is here to stay and if you’reinnovative and creative, you’ll always be

able to make a living from it’

Stuart Forrest (left) and Mark Hallam

“If Only...”F

or many SME businesses the traditional strategic planningprocess can be time consuming, expensive and slow to react inturbulent economic times, or rapidly changing sectors such as

the technology sector.A traditional five year strategic plan will therefore not be suitable

for all SME businesses as the end goal can seem too far away and theoutput from the process can seem distant from the day to daypractical actions required to enable the business to achieve its goal.

You may have read about “unplanning your business” – thenotion of not over-strategising – just doing it! The revolution inon-line tools and digital marketing can mean that business ideascan be launched and marketing strategies can be tested and adaptedvery quickly.

An alternative solutionWhile some businesses may succeed using this unplanned

approach we have had far more success using strategic planningtechniques but in a less formal, less expensive and less timeconsuming way.

We focus on what has worked well in a business to get it to whereit is today and help owners generate small steps that need to be takento move the business towards where it wants to go – known as the”future perfect”.

This approach can be adapted more readily to changingcircumstances – broken down in to manageable actions and realistictime scales with the next step building on the previous one.

A step by step approach

Step 1Ask yourself “If only...”. What would the ‘future perfect’ look like

if there were no barriers, if you had a magic wand?What would be happening in your business if this could be

achieved? If you walked into your business in, say, three years time,what differences would you notice?

Step 2Consider the strengths, weaknesses, opportunities and threats of

the business (SWOT)Ask yourself:

• “What is working well for the business?”• “What are the top 10 things that you think the business could do toimprove?”

• “What is preventing the above from currently happening?”Think about how to:

• Exploit strengths• Rectify weaknesses• Seize opportunities• Nullify threats

Step 3What are the most important areas to work on now? This may be

evident after the first two steps but areas to consider include:• Sales and marketing• Products and services• Culture• Human resources / structure• Information technology• Financial position

Look at the detail - What can be done within a reasonabletimescale to move towards the goal?

Step 4Prepare an action plan which includes actions and

responsibilities. Set timescales and deadlines to keep you on track.

Step 5Put your plan into action. Decide on the first thing you need to do

when you get into work and ensure you and your team arecommitted to making the plan succeed.

Assistance is availableOur skills and qualifications in running these sessions combined

with all round accountancy and business knowledge enable us toassist business owners and management teams through this process.This is delivered in enjoyable and effective sessions with a clearaction plan generated at the end of each session to be followed up atthe next.

Whatever the approach taken to business strategic planning theprocess will only succeed with the commitment from everybodyinvolved to move closer to achieving the “If Only...”

4 strategic planning

Richard HallCorporate senior manager

01524 62801richard.hall@mooreandsmalley.co.uk

Mission andObjectives

CorporateAppraisal

StrategicChoice

StrategicImplementation

Environmental Analysis

Position Audit Review & Control

Traditional approach

What you want-the ‘future perfect!’

The PresentThe Past The Future

Small StepsWhat’s workedwell/strengths

Alternative solution

Now

human resources and employment 5

TheEquality ActT

he Equality Act came into force on 1October 2010 and consolidates all themain discrimination Acts and

regulations in a single act. The Equality Actcovers the same groups that were protectedby existing equality legislation – age,disability, gender reassignment, race,religion, or belief, sex, sexual orientation,marriage and civil partnership andpregnancy and maternity. These are now allcalled ‘protected characteristics’.

Some key notes are:Discrimination by association –

This already applies to the areas of race,religion or belief and sexual orientation. TheEquality Act has now extended this to coverage disability, gender reassignment and sex.Discrimination by association is directdiscrimination against a person because theyassociate with someone else who possesses a‘protected characteristic’.

Perception discrimination – Thisalready applies to age, race, religion or beliefand sexual orientation. The Equality Act hasnow extended this to cover disability, genderreassignment and sex. This is again directdiscrimination against someone becauseanother person thinks they possess aparticular ‘protected characteristic’. Itapplies even if the person does not actuallypossess that ‘protected characteristic’.

Harassment at work – Harassment iswhen an individual engages in unwantedconduct that violates another individual’sdignity or creates a hostile, degrading,humiliating or offensive environment forthat individual. Employers will now be atrisk of liability for the harassment of anemployee by a third party, includingcontractors and clients in the workplace if itoccurs on more than one occasion. Thedefinition of harassment has been widenedto include harassment based on perceptionor association.

Pre-employment health questions– Employers will not be entitled to askcandidates to complete healthquestionnaires, except in very limitedcircumstances for example to enable theemployer to decide whether an applicant cancarry out a function that is essential(intrinsic) to the job.

Secrecy clauses – The Act makes itunlawful for an employer to prevent or

‘Employers will now be at risk of liability for theharassment of an employee by a third party’

Tina ClaytonHR consultant and employer services manager

01772 821021tina.clayton@mooreandsmalley.co.uk

The Equality Act consolidates all the main discrimination Acts and Regulations into a single Act

restrict its employees from having adiscussion to establish if differences in payexist that are related to ‘protectedcharacteristics’.

Additional paternity leave and pay –sharing leave between partners

Regulations came into force earlier thisyear which invoke additional paternity leavefor fathers of, and partners of mothers tochildren due on or after 3 April 2011. Duringadditional paternity leave, an employee mayalso be entitled to additional statutorypaternity pay for the time his/her partnerwould have been receiving statutorymaternity or adoption pay had he/she stayedon leave instead of returning to work.Equivalent rules will apply to partners ofadopters of children who are notified of thematch on or after 3 April 2011.

To be eligible employees must meet thesame eligibility criteria for standardpaternity leave. The minimum amount ofadditional paternity leave that can be takenis two weeks and the maximum period is 26weeks. Additional paternity leave must betaken in multiples of complete weeks andmust be taken as one continuous period.

The latest that additional leave can endis the date at which his/her partner’sadditional maternity or adoption leavewould have ended. Employees who wish totake paternity leave must give theiremployer at least eight weeks written noticebefore taking the leave together with asigned declaration. A written declaration isalso required from the mother/mainadoptive parent.

Default retirement ageThe coalition government has confirmed

that the default retirement age of 65 will bescrapped by October 2011. The new plansallow for a 6 month transition from theexisting regulations, so that the defaultretirement age will be phased out from April2011. Employers can still operate acompulsory retirement age in that they canset a normal retirement age but they must beable to objectively justify it – an area whichwill hopefully be made clearer through case-law in the future.

6 viewpoint

The austerity cuts andwhat theymean for you

On October 20, 2010 the chancellor,George Osborne, presented theGovernment’s Spending Review and

there are some significant cuts across allGovernment departments. Stephen Gregson,corporate finance director discusses thecoalition’s spending review and what itmeans for businesses.

How will the cuts impact businesses inthe private sector?

At this stage it is very difficult to say oneway or the other, however there willdoubtless be direct and indirect impactsto business.

The direct impact could be positive ornegative depending on what you do. Forexample, if you are ultimately supplying intoareas dependent on government funding,and this is cut, then it could be quite painful.

The indirect impact is on the widereconomy and consumer confidence. If theannouncements made at the end of Octoberhave the desired effect of stabilisingconfidence levels then that should have apositive effect on demand and hence theoverall economy. Conversely if it doesn’thave that impact and confidence levelssuffer then there could be a widespreadripple effect.

Some commentators are expecting thecuts to tip us back into recession

sometime in early 2011. Where wouldthis leave the economy?

The glib answer is that it would leave theeconomy in a very bad place indeed. Mysuspicion is, and I say this not as aneconomist, that we are unlikely to go into adouble dip recession. I don’t expect to seeany great take off in growth and I feel thatwe will stay at the same level as the last sixmonths or so for the foreseeable future.

What about people who have beenplanning to buy or sell a business.Should they be worried by thesedevelopments and what shouldthey do?

Even in the midst of an economicdownturn, there are still businesses wherethere is a compelling logic to undergo atransaction. Whether that is to acquiresomething to bolster what you currentlyhave, or to sell your business, there will stillbe business sales and business acquisitionsirrespective of how the economy performs.

The Government cuts are likely toexacerbate businesses’ requirementfor private sector borrowing. Whatcan small businesses do to make astronger case for securing funding?

I’m not convinced that cuts will directlyexacerbate the need for private sectorfunding. However when pitching for

funding, be it debt or equity, a business hasto clearly understand why it wants thatmoney, why it needs that particular amount,what the return is going to be, and clearlycommunicate that to the potential funder.

A business’ track record and that of itsmanagement team (if indeed it has one, itmay be a start up) and the security that isavailable to funders will continue to be keyto determining the mix of funding a businesswill be able to secure.

If there’s one message you could giveto business owners in light of thespending review what would it be?

While I see the glass as half full, I wouldcaution against breathing too deep a sigh ofrelief; I don’t think it will be business asusual in 2011 and beyond. Businesses needto really start to understand and think aboutall the ramifications the announcements willhave, and how they might be affected bothdirectly and indirectly.

Risk management continues to beabsolutely key. The process of identifyingrisks will allow you to recognise which applyto your business and how you can managethem. If possible use your specialist advisorsto get another perspective on the situationand to help determine where those risks areand what you can do to address them.

Stephen GregsonCorporate finance director

01772 821021stephen.gregson@mooreandsmalley.co.uk

There will still be business sales and acquisitions irrespective of how the economy performs

‘From me to you’ – Sharingincome in the family company

It is no secret that the most tax efficientway of carrying on a business is througha limited company. For the majority of

small or start up businesses, the savings innational insurance alone will more thancover the additional costs of running acompany. For established businesses, thefact that retained profits are taxed at 21percent to 28 per cent instead of 41per centresults in further savings.

Married couplesBut it doesn’t stop there. Married

couples and civil partnerships can make useof two sets of personal allowances and basicrate bands to draw up to £86,000 a yearbetween them without paying higher ratetax, or £300,000 a year without paying thenew 50 per cent additional rate. This can beachieved through a simple gift of shares, sothat dividends can be paid to both spouses.

Non-married couplesWhat about non-married couples? Their

position is not quite as straightforward.Take, for example, a one-person consultancycompany, where all the profits are generatedfrom a single person. Sharing the dividends50:50 with an unmarried partner would becaught by anti-avoidance legislation,resulting in all the dividends being taxed onthe working director. However, where theearning capacity of the company is more of a‘team effort,’ involving several employees,trading premises etc, the anti-avoidancerules are less likely to bite. With care, thesame tax savings can then be achieved.

Adult childrenTaking matters a stage further, we can

also consider giving shares in our ‘teameffort’ company to adult children. Asuniversity fees are set to escalate, it couldwell make sense for income to be received inthe child’s name, making use of his or hertax allowances, to save higher rate tax. It isimportant to note that this requires the childto be 18 years old or more, and that anoutright gift is made. If the thought of givingone’s ‘not-yet-entirely-trustworthy’ offspringa stake in the family company is toofrightening to contemplate, the shares mayinstead be held in trust for them, andtransferred at a later date.

HMRC OpinionWhat do the Revenue make of this?

They have fought and lost two cases in thisarea in recent years, and drafted legislationto counter what it calls ‘income shifting.’The Labour government shelved these planstwo years ago, and the new coalitiongovernment has said nothing more than itis ‘reviewing small business taxation.’We await the Budget on 23 March 2011 tofind out their plans.

CarsFinally, a word on cars. Although it

rarely makes sense to run the ‘main’ familycar through a company, if you have a second‘runabout’ there are some very tax efficientpossibilities. An increasing number of lowemission (sub 110 g/km) cars are availableoffering a full tax write off in the company inthe year of purchase, while the personal taxpayable can be as low as £600 a year for a£15,000 car.

These tax saving opportunities areall perfectly legal, but there are trapsfor the unwary, so do contact us beforetaking action.

tax 7

David BennettTax Partner

01772 821021david.bennett@mooreandsmalley.co.uk

‘It is no secret that the most tax efficientway of carrying on a business is through

a limited company’

Married couples and civil partnerships can draw up to £86,000 a year without paying higher rate tax

Our offices

Preston (head office):Richard House, 9 Winckley Square, Preston,Lancashire PR1 3HP Tel: 01772 821021

Blackpool: Tel: 01253 404404

Kendal: Tel: 01539 729727

Kirkby Lonsdale: Tel: 015242 71402

Lancaster: Tel: 01524 62801

Nottingham: Tel: 0115 972 1050

Central fax: 01772 259441

www.mooreandsmalley.co.uk

Moore and Smalley LLP is a limited liability partnershipregistered in England and Wales: No. OC313896. RegisteredOffice: Richard House, 9 Winckley Square, Preston, LancashirePR1 3HP. The term “partner” indicates a member of Moore andSmalley LLP who is not in partnership for the purpose of thePartnership Act 1890. A list of members is available from ourregistered office.

Moore and Smalley are registered to carry on audit work in the UK bythe Institute of Chartered Accountants in England and Wales.Authorised and regulated by the Financial Services Authority.

Moore and Smalley C.A. Limited is a limited company registered inEngland and Wales: Company No. 5373155.

Registered Office: Richard House, 9 Winckley Square, Preston,Lancashire PR1 3HP.

Man

agingEditor:D

annyHough

tonWritten

andMade

inFresh

field.www.fresh

field.com

SmalleytalkMoore and Smalley looks to future with trainees

The firm has swelled its ranks with theappointment of seven new trainees.

Charlotte Counsell, Paul Spencer, JoannaGrundy, Ben Harrison and Michael Wallinghave all joined the Preston team, whileAbigail Bland and Matthew Hutton havejoined the Kendal team.

Joanna, a UCLan graduate fromClitheroe, and Charlotte, a LancasterUniversity graduate from Fulwood, have bothjoined Moore and Smalley’s financialplanning team as technical support traineesand are now studying on-the-job for theirCertificate in Financial Planning.

Paul Spencer, a Lancaster Universitygraduate from Churchtown, Southport, andMichael Walling, a Manchester MetropolitanUniversity graduate from Myerscough, haveboth joined the firm’s corporate team as

trainees. Both are studying at KaplanFinancial College in Manchester for theirACA qualifications.

Ben Harrison, a Lancaster Universitygraduate from Lytham, has joined thefinancial planning team as a traineeconsultant. Ben, who holds a degree inbusiness management studies and a diplomain financial planning, joins the firm fromAegon Insurance in Lytham.

Abigail, from Holme, Carnforth, is aformer pupil at Queen Elizabeth School,Kirkby Lonsdale, where she gained threeA-levels. Matthew, from Kendal, is a formerKirkbie Kendal School sixth form pupil andalso gained three A-levels. Both are nowstudying for their NVQ Level 3 AATqualifications at Kendal College.

Quiz raises £400 for Kendal musiciansBusiness brains from across Kendal have raised over £400 to support an annual event aimedat young musicians.

The money was raised at a Moore and Smalley quiz evening at The Hawkshead Brewery,Staveley, Kendal, in aid of Westmorland Arts Trust charity.

The trust is donating the money to the Mary Wakefield Festival, funding an orchestralworkshop for young players from the area by providing music hire and a percussion tutor.

Teams from Barclays, HSBC, NatWest, Temple Heelis, Lloyds TSB, Handelsbanken,Westmorland Arts Trust, Hayton Winkley, Moore and Smalley and Pearson & Pearson tookpart in the quiz.

Hayton Winkley Solicitors were crowned winners on the night, while runners up wereTemple Heelis, who lost out by just half a point. A total of £456 was raised.

Janet Thompson, secretary to the trustees at the Westmorland Arts Trust said: “Thesevital funds raised will go towards funding an Orchestral Workshop for young players whichwill take place next March as part of the Mary Wakefield Westmorland Festival in Kendal,and will help pay for a percussion tutor and the music hire for all the players. Thanks toMoore and Smalley for hosting the quiz and all the teams for their generosity.”

HMRC’s blunder on PAYE underpaymentswas one of the biggest business and personalfinance stories of recent months.

Moore and Smalley tax consultant JamesCornthwaite took part in a live interview onBBC Radio Cumbria’s breakfast show toprovide expert analysis on how this wouldaffect taxpayers.

The firm continued to make theheadlines following the launch of the thirdannual Lancashire Business Survey. Mooreand Smalley wrote the report on businessand finance in the county. This year one ofthe main findings was that the majority ofLancashire businesses had plans for growthin the next 12-months.

On the day the results were launched,partner Damian Walmsley was interviewedlive on BBC Radio Lancashire’s breakfastshow and the event was also reported in theBlackpool Gazette, Lancashire Evening Postand TheBusinessDesk.com.

Following the ComprehensiveSpending Review, Moore and Smalleyexperts provided further analysis of howit would impact the economy withinterviews appearing in a number of localbusiness publications.

Making the news

L-R Ben Harrison, Paul Spencer, Joanna Grundy, Michael Walling & Charlotte Counsell