West Country Business News

Spring/Summer 2017Making our clients more successful

DORSET DEVON SOMERSET WILTSHIRE CORNWALL

West Country Business NewsWelcome to this next edition of West Country Business News, Spring 2017. A newsletter for business owners and those running local businesses.

All change, all change please – this is the phrase we are used to hearing on the train and sometimes it is not welcome as you get told that your train is being cancelled and you have to get out and wait for the next one.

So I write this as Theresa May signs the letter to trigger Article 50 and this will certainly mean change – but few of us know how much, when or what it means for us. So we have to be prepared – and this requires us to work on, not in, our businesses to build a series of interlinked strategies that can withstand change.

We also see change around us that has been clearly set out and we need to react to – the changes to pension rules for higher earners are quite challenging and require understanding and a plan. Likewise, George Osborne’s changes to the landscape for residential landlords may require some changes to ensure that the impact of his new rules (yes they were his, may his political soul rest in peace) are minimised wherever possible. There are plans that you may need to put in place for both pension contributions and your residential investment properties to ensure that both remain a viable option for funding your retirement.

Making Tax Digital was another of George’s great forward looking pronouncements – HMRC will have all your details for your tax return already and, in some cases, they will want to have access to more of your data as you go so they can move to a quarterly basis of taxation for businesses – sort of a quarterly PAYE for businesses using data that you will now have to provide them with as you go.

So just as paying pension for all your employees has outsourced the requirement for Government to provide state pensions, so will this. But the key is

not to be upset by this but to turn it around to your advantage – as you did paying employer pension contributions to help your loyal employees save for their retirement.

The idea of having real-time, accurate financial information with which to assess the businesses performance, and hence your own accountability in terms of delivering business improvement, seems to make absolute sense – we have been banging on about the benefits of Xero for some time now and we make no apology for this. The digital world offers small businesses a huge opportunity that was previously not available and we must embrace that opportunity and run our businesses better.

And finally, a word on that change that was not actually then a change at all – the increase to National Insurance contributions for the self-employed that we all got used to, albeit reluctantly, only to find out that Theresa had miscalculated – not the amount of extra NI but the irritation on her back benches. So we survive to fight another day...

Which is what we will have to do during the Brexit negotiations – we will hear lots of analysis that enables journalists to fill newspapers, television debates and indeed our heads – but beware of getting side-tracked by rumour and supposition – the best businesses deal with facts, focus on facts and deliver continuous improvement – measured by facts.

Yes it is all change - but patience and focus will be rewarded. Change what you can change and be clear about what you can’t. As Kipling said – keep your head when all around you others are losing theirs.

Yours sincerely, Jolyon.

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Your Old Mill contact

Jolyon StonehouseT: 01935 709312E: jolyon.stonehouse@oldmillgroup.co.uk

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HMRC are Making Tax DigitalMaking Tax Digital will ultimately affect many businesses, including companies, and a large number of individuals who are currently used to submitting an annual Self-Assessment Tax Return.

You may have heard mention in the press, that with effect from April 2018, businesses will be required to send updates of their accounting information to HMRC on a quarterly basis.

Old Mill want to ensure that all of our clients are aware of the changes that are due to be taking place over the coming years, and to provide an introduction as to how you could be affected, and also to let you know how we intend to guide you through the transition.

Individuals and Digital Tax Accounts

Every individual now has a Digital Personal Tax Account with HMRC, whether you know it or not. It is waiting for you to access it at https://www.gov.uk/personal-tax-account and we would recommend that you do this if you can.

This is HMRC’s answer to the announcement in the March 2015 budget, which declared “the end of the Tax Return”. The intention is, that over time, details of the majority of your sources of income will be reported directly to HMRC by third parties and will be linked to your Personal Tax Account to be checked and confirmed (by you or Old Mill), and any additional items reported here, rather than on a Self-Assessment Tax Return.

HMRC already receive a large amount of information directly from third parties, but previously their

systems had not been able to link this in an effective and timely way, to individual records. The first types of income that will be linked to the Personal Tax Accounts are PAYE income (employments and pensions) and interest from banks and building societies, from April 2018.

Old Mill should be able to access the information in the Digital Tax Accounts of our clients who have authorised us to act on their behalf.

Quarterly reporting for sole traders, partnerships and landlords

Starting from accounting periods beginning 6 April 2018, sole traders, partnerships, and landlords, with income above a specific threshold, will be required to use software to submit quarterly updates of their income and expenses to HMRC digitally. These updates will be shown on their Digital Tax Account and can be adjusted and finalised following the end of the accounting period.

The threshold has been confirmed in the Budget on 8 March 2017 as turnover exceeding £10,000. However, for those with turnover below the new VAT registration threshold of £85,000, the requirement has been delayed until 6 April 2019.

If your turnover is under the £10,000 threshold, you will be exempt from the quarterly reporting provisions, so your annual profits will continue to be reported through your Tax Return, or your Digital Tax Account.

There are a few further exemptions from this reporting, which include those deemed to be “digitally excluded”. This does not come with a set criteria, but claims to exemption on these grounds will be considered bearing in mind factors like age, disability and access to the internet.

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Future plans for Making Tax Digital

The above headings have so far mentioned the plans for Income Tax and National Insurance for individuals, landlords and unincorporated businesses. These are the areas which have recently been through a round of consultations. A number of issues are yet to be finalised and further consultations are expected.

The next instalment will be from April 2019, introducing VAT reporting to Making Tax Digital, followed by Corporation Tax from April 2020. Although these may seem quite some time away, it is important to be ready for them. We expect more information regarding the next stages of Making Tax Digital from HMRC in due course.

What do you need to do, and how will Old Mill help you?

Our key message to you is, don’t panic, but do be prepared.

Old Mill are keeping in close contact with our software providers to ensure that our systems are ready for the changes to our interaction with HMRC. We are also looking at a solution to assist our clients with the transition to the new quarterly reporting requirements, which is the Cloud Accounting Software called Xero.

We will be communicating with our clients on an individual basis over the coming months and we will be helping to ensure that you are ready for those changes that will affect you.

In the meantime, if you have any specific queries or concerns, please do not hesitate to get in touch with your usual Old Mill contact.

Your Old Mill contact

Adam MorrisonT: 01749 683569E: adam.morrison@oldmillgroup.co.uk

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Client Profile – Wordshop

The little things that countIt all started in 1988, when four friends began a new venture into the business world, becoming directors of a brand new copywriting business – Wordshop.

Sue Clarke, Graham Norman, and Julia and Ian Elliot began their business, working from their separate homes in Somerset and Hampshire. Due to the recession, it was a challenging and slow start but with the dawn of the internet, providing an instant and direct service across the UK, an ocean of opportunities started to emerge.

The team identified a need in the market for large corporations to start communicating effectively with their employees, ensuring they were appropriately informed about their pension, what was happening with it and offering reassurance that it was protected.

The company grew from there and it wasn’t long before the team set up an office in Sherborne, Dorset.

Now, 29 years later, Wordshop is a thriving communications company. Giles Powell-Smith, Managing Director since January 2016, has been with the company for 10 years. Sue Clarke is still involved in Wordshop and they have 15 employees, all with core skills within the industry.

So what makes them so successful?

Wordshop has built an exceptional reputation within the industry, working with many household names including the Co-op, the BBC, Sony and companies in the FTSE 100. “We were the first independent communications company to offer a service specifically on pensions,” says Giles. “We are a market leader in what we do. Our main focus is to provide excellent customer service and fundamentally, that’s what we’re all about. We listen to what our clients want and I don’t think many companies realise how important this approach is in keeping clients happy.”

The majority of Wordshop’s work is carried out in-house, and any work that requires outsourcing is done by trusted local suppliers. Seeing projects through from start to finish in this way ensures that the client gets the best possible service.

With this in mind, every service Wordshop provides is unique and bespoke to meet the needs of the customer. They have built excellent, long-standing relationships with clients, knowing that it’s not just about winning new business – retaining loyal clients is equally, if not more, valuable.

“We now offer a complete communications service to our clients,” Giles says. “From the foundation of our expertise in pensions, reward and benefits, we provide innovative strategies for HR teams, putting employee engagement at the heart of everything we do.”

What’s it like working at Wordshop?

The company has a genuine ‘family-feel’ about it. Their ethos is relaxed and fun but they also work hard at what they do and creating a harmonious work-life balance for the staff is vital. Employees are well rewarded with good salaries, a pension scheme, twice-yearly bonuses and great incentives, which mean they want to put in the effort and support the overall success of the business. “It’s the little things that count, like our Wordshop BBQ, lunchtime pizza rounds and fish and chip nights.” Giles explains, “We don’t rush into hiring staff – we always make sure we have a proper role for them, so they can feel they’re contributing to the business. Not only does it help us get the most from our staff budget but it also helps our employees feel fulfilled at work.”

A key member of the workforce is their furry, black and white, wet-nosed friend, Ivy, a delightful Border collie that is a frequent visitor to the office. Having a dog around the office seems to create a calming environment. “She’s a positive distraction – the customers like her and look forward to seeing her,” says Sue. “Ivy even has her own blog on the company website!”

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So how about the future?

Being in the communications business has historically meant it was all about print. However, it’s common knowledge that things have moved on in recent times. Yes, we’re talking about digital. So how has Wordshop developed with this?

With the digital revolution, the business has built its online portfolio, which includes websites, email and a variety of multi-media, but that’s not to say print is out of the window. It’s easy to jump onto the next trend or bandwagon, and while it’s usually wise to stay in the loop, these things should never be rushed into without research and a solid strategy. “We have a great digital offering and create websites and self-service portals for pension scheme members, which help our clients and their employees access their information easily, but there is still an important place for print.” Giles explains. “People tend to respond to different channels so a good

communication campaign is all about integration and using a combination of various options to reach a wider audience and truly engage with people.”

Wordshop are advocates for businesses in the South West. Giles says, “An example of this is our relationship with Old Mill. They are a good fit with Wordshop and are proactive in finding ways to help us improve the business. Old Mill are very approachable, happy to talk through options and open to new ideas. They also take care of the important regular accounting tasks, such as running our payroll efficiently and effectively.”

Wordshop has an inspiring story and one which can teach many lessons. Their success is a true testament to Sue, Graham and their team. The owners saw an opportunity in the market, acknowledged the emerging technologies and resources available, and used their own expertise to begin what has become a highly successful business.

Alert for Users of HMRC’s Flat Rate VAT Scheme for Small Businesses – Changes from 1 April 2017 The proposed changes to the small business flat rate scheme (“FRS”), announced by HM Revenue & Customs in The Autumn Statement in November 2016, have now come into operation.

As of 1 April 2017, regardless of whether the month of April 2017 falls at the beginning, middle or end of a VAT quarter, an FRS VAT rate of 16.5% must be used where the business concerned is defined under FRS rules as a “limited cost business”.

HMRC have been issuing letters notifying FRS users of the change. These have been sent out only fairly recently and may not yet have reached all parties calculating VAT recovery under the FRS.

Some businesses are still unaware of these changes. The risk in doing nothing to establish the position is that HMRC will seek the additional VAT payable by way of assessment, if the new FRS VAT rate is applicable but not used.

If your business uses this particular VAT accounting scheme, please read on to gauge whether you may be impacted financially by the changes and what actions need to be taken.

We cover broad rules regarding what a limited cost business is below. If you are not operating a limited cost business, the changes may not relate to you currently. We cannot over-emphasise enough that it is nonetheless important to keep track of the position.

It should be noted that some businesses may fall under the “limited cost business” definition in some VAT periods but not in others. It is therefore possible that in some VAT periods the higher (i.e. the 16.5%) FRS VAT rate is applicable, and in other periods the “normal” FRS rate for the business’ particular sector is relevant.

How do I know if my business is a “Limited Cost Business” and impacted by the changes?

Typical businesses which are likely to be impacted include business advisers, IT consultants, software developers, actors, authors, builders and other construction industry service providers, and holiday letting businesses, to name but a few.

Businesses will be impacted if they fall into the HMRC FRS definition of a “Limited Cost Business”.

HMRC state that a Limited Cost Business is one whose expenditure on “relevant goods” (on a VAT-inclusive basis) is either:

n Less than 2% of VAT inclusive sales turnover in a prescribed accounting period; or,

n More than 2% of VAT inclusive turnover but less than £1000 annually.

n If the prescribed accounting period is less than a year, the £1000 is apportioned accordingly. For example, if you are on quarterly returns, the quarterly limit is £250 for each of the four returns in the year.

HMRC provide a link in their VAT Notice 733 on the FRS to help you check each period if you are over or under the above limits which can be found on their website www.gov.uk.

“Relevant goods” are defined by HMRC for the purposes of this test as items used wholly (i.e. exclusively) for business purposes.

The following items are not treated by HMRC as “relevant goods” for the purpose of the limited cost trader test:

n capital expenditure (this includes goods costing over £2000 on which input tax can be claimed under the FRS or goods to be used in the business for some time such as printers, furniture, tools, etc.);

n food or drink which is consumed within the business or by employees;

n vehicles, vehicle parts and fuel (except if the business provides transport services – such as a taxi business – and uses its own or a leased vehicle to carry out those services);

n goods used partly or wholly for non-business/private purposes.

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HMRC provide further guidance on what is or is not a “relevant good” in section 4.6 of their FRS VAT Notice 733.

I appear to be a “Limited Cost Trader” under these rules – what do I do?Should I stay?

If, under these rules, your business is defined as a Limited Cost Business, as from 1 April 2017 you must change from using the FRS VAT rate you use currently and apply the rate of 16.5% when calculating output tax payable to HMRC. This is only if you decide to remain on the FRS.

It is possible under this scheme change that not all VAT return periods will fall under the FRS – it will depend if the level of eligible goods purchased keeps the business out of the “limited cost trader” limits.

A permanent change back to “normal” VAT accounting might mean an additional time/ administrative cost for some businesses, so this needs to be taken into account even though the amount of VAT payable to HMRC under the FRS will rise.

Or should I go?

Alternately, you may be better off leaving the FRS, perhaps because being able to claim all business input tax under normal VAT accounting rules may now be more beneficial, given the increase in output tax payable to HMRC.

If this is the preferred option, you must notify HMRC in advance that you will be leaving the FRS. This needs to be done in writing, confirming the future date you wish to leave. The notification must be received by HMRC before the date the change is to be effected. Please note that HMRC can take several weeks to deal with correspondence.

The HMRC correspondence address for this notification is:HM Revenue and Customs - National Registration UnitImperial House77 Victoria StreetGrimsbyDN31 1DB

Is deregistration an option?

It might be more cost effective, if you are already trading below the current annual VAT deregistration threshold of £83,000, or could trade below this limit to deregister for VAT. The implications of this would need to be thought through carefully, though, if you have claimed VAT whilst on the FRS scheme on capital goods scheme assets/capital expenditure assets. You might have to repay some of this VAT back to HMRC on deregistration.

Seek Advice

The above is intended to highlight and outline the position on the FRS changes, but is not intended as advice, which needs to be specific to each business’ position.

The financial and other costs and benefits need to be taken into account for each business when deciding a course of action.

You may also need more guidance on whether you are a “limited cost business” as many businesses using the FRS will not be and so will not be impacted by the rule changes.

As the rules are new and fairly complex, we highly recommend that you speak to your regular contact here at Old Mill to confirm the position and the bespoke next steps for your business, as applicable. Alternately, our VAT specialist Marianne Hawksworth, is happy to advise.

Your Old Mill contact

Marianne HawksworthT: 01935 709316E: marianne.hawksworth@oldmillgroup.co.uk

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Guest Spot – Tom Webb, Mogers Drewett

A Guide to Selling a Business Regardless of the reason for selling a business, the rewards, if negotiated well, can be substantial.

However, selling a business can be a very complicated and time-consuming process, and the preparation and negotiations will undoubtedly include frustrating administration and legal considerations.

The first thing you need to address is the drawing up of an ‘Information Memorandum’. This is an official document that represents the formal advertisement and announcement that you intend to sell.

The aim of this document is to provide interested parties with a complete understanding of the financial and market health of your business.

The Information Memorandum summarises in some detail your businesses, specifically its strengths and health, as well as its history, heritage and how it differs from other businesses in your marketplace. This document should also outline details of the ownership structure of the business, as well as staff, terms of employment, routes-to-market, suppliers and other operational summaries. It should also include details of any property ownership or lease obligations.

This document will also provide detailed information on income streams, details of your customer base, and how you market and sell your products or services. There is always a risk when preparing such a comprehensive summary that it offers business rivals an insight into how you run your business. Therefore it is important to employ the services of an expert to help draft this document.

Once this key document is ready, and assuming the business is attractive enough to warrant serious interest from potential buyers, the next step is the negotiation to establish a price and conditions of sale.

A formal sale document will be founded on a ‘heads of terms’ agreement, otherwise known as a letter of intent. Your advisers or lawyer will be responsible

for drawing up this document and it will set out the details of the transaction, including what will be paid, when and how. It will also detail the assets to be included in the sale; any contractual obligations in place; as well as liabilities, employment details and contracts. It is, in effect, the full details of what the buyer is buying.

Many people selling their business prefer to let their representatives work out the details of negotiation. For a busy business owner this is the best way to approach this final stage as it ensures they are free from getting personally bogged down in negotiations.

With correct advice and representation from experts in the field, a sale can be considerably simplified for the vendor, and ultimately very rewarding.

Tom Webb is Partner in the Company Commercial Team at Mogers Drewett, specialising in transactional work, largely for private companies and typically for entrepreneurial businesses, and assisting clients with strategic acquisitions and successful exits. For more information go to www.md-solicitors.co.uk.

Tom Webb, Mogers Drewett

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XeroSmall business owners are being put under increasing pressure to be experts in a vast range of different subjects.

Whilst they have always needed to deal with areas of running a business such as ensuring compliance with Health and Safety and Data Protection Act regulations, as well as paying employees and maintaining business records, over the past three years H M Revenue & Customs and other government bodies have started implemented changes that may have increased the pressure felt by small businesses.

These are frequently felt more heavily by small business owners than larger businesses as often they have the resources to allow in house expertise, such as legal, marketing and accounting departments, which few small businesses have, instead relying on the owner managers to carry out all administrative tasks and responsibilities. This of course takes an incredible amount of time which leaves less time for the business owner to concentrate on the day to day business activities and keeping a competitive advantage in order to grow the business.

In April 2013 HMRC made it a requirement to file payroll details under the Real Time Information scheme. Designed to collect and submit data to H M Revenue & Customs about employees and their earnings on a regular basis, many small business owners found it an administrative burden, taking a considerable amount of time to implement and update systems and processes to accommodate the change in filing requirements.

Many small business owners have or will be facing the prospect of implementing Auto Enrolment deductions and reporting, which is a huge change to payroll and requires several months advance planning to ensure correct set up by the relevant Staging Date.

H M Revenue & Customs have also announced early plans for Digital Tax Accounts, a system by which financial data must be submitted to H M Revenue & Customs on a regular basis. Expectations are that Digital Tax Accounts will be in place by 2020, with some earlier plans being implemented from as early as 2018.

With all of these and other administrative burdens, small business owners seemingly need to be experts in Human Resources, Accounting and Taxation, Law and Financing as well as keeping focus on the business activities.

Improvements in technology are helping dramatically, in particular the development of Cloud Accounting Software such as Xero.

Xero has the ability to run payroll and deal with Auto Enrolment deductions, being technical and compliant at the same time as being simple and easy to use. Xero reports, in particular the Budget Manager and Business Dashboard tools equip small business owners with valuable financial data to determine exactly how well the business is performing in real time, and these are just a few of the useful features Xero has!

As well as being able to assist with the administration of staying compliant with H M Revenue & Customs and the Pensions Regulator, and providing data useful to finance lenders such as banks, Xero also has tools to save business owners time in running their businesses.

Bank feeds ensure that bank transaction data can be fed into the system, speeding up the time taken to reconcile the bank and maintain the bookkeeping records.

Sales invoices can be produced and sent from within the system with embedded payment links to encourage fast payment terms. Customer statements and invoice reminders can be sent out to chase money owed, saving time and also improving cash flow.

There are over 500 apps that can feed directly into Xero that allows a bespoke software eco system tailored to the specific needs of the business. Apps range from CRM systems to time sheet software, stock control and management tools to receipt scanning tools, all designed to save time and assist with maintaining full business records.

If you are interested in finding out more about how Xero can help you and your business please get in touch.

Your Old Mill contact

Stacey MorrisonT: 01749 335023E: stacey.morrison@oldmillgroup.co.uk

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Changes to loan interest relief on residential property income – be aware and be preparedAs you may be aware, there have been significant changes announced with regards to the rules for those taxpayers with residential buy to let properties.

One of these is how loan interest is utilised as an expense against rental income.

For the years up to the 2016/17 tax year, in order to arrive at a figure for taxable rental profit, allowable expenses were deducted from the amount of rental income due for the period.

These expenses have historically included:

n Rents, rates, utilities and insurance

n Repairs and maintenance

n Finance costs, including mortgage interest

n Legal and professional fees – e.g. agent’s fees

n Services supplied to your tenants, e.g. gardening, cleaning

For a large number of landlords, the main expenses incurred on a rental property, which would usually reduce the profit subject to tax, are mortgage interest and agent’s fees.

However, the relief available in respect of the mortgage interest will change with effect from 6 April 2017. From this date, HMRC will be phasing in measures to reduce the relief that is given for this cost, and the amount of interest that can be deducted as an expense.

The ultimate result will be that, by the tax year 2020/21, finance costs (mortgage interest) will no longer be an allowable deduction when calculating rental profits. Rental profits will be calculated by ascertaining the rental income due for the year and deducting all allowable expenses, other than finance costs. The tax due on the rental profits will then be calculated at the relevant rate of tax. Relief for the

finance costs will be taken into account by way of a deduction from the tax liability calculated, of 20% of the finance costs incurred (however this will be restricted if the profits calculated are lower than the interest charged).

This change will have the biggest impact on landlords who are higher rate and additional rate taxpayers, with a significant amount of borrowing against their rental properties. Whereas previously, by deducting finance costs to arrive at the net rental income subject to tax, each individual was effectively receiving tax relief at their marginal rate, relief will now be restricted to the basic rate of 20%. As a result, this new treatment could result in a higher taxable profit, and therefore an increased tax liability.

Basic rate taxpayers should also be aware, that they too could be significantly affected by these rules. By removing the deduction for finance costs from the calculation of rental profits, their total taxable income will be inflated, which could result in them exceeding the basic rate threshold and actually being charged to tax at the higher rate.

The phasing of the changes will take effect as follows:

It is advisable to ensure that you are aware of these changes and how they may affect your tax position. It may be necessary to consider the options available if you are adversely affected.

Please get in touch with your usual Old Mill contact to confirm your position and explore any potential options.

2016/17

2017/18

2018/19

2019/20

2020/21

Loan interest deductible from rental profits

100%

75%

50%

25%

0%

Amount of loan interest subject to new 20% relief

0%

25%

50%

75%

100%

Your Old Mill contact

Liz KinderT: 01935 709306E: liz.kinder@oldmillgroup.co.uk

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Property LandlordsFollowing the wear and tear allowance removal, the extra stamp duty charges and the reduction in the tax relief available on mortgage interest, landlords may well be hoping for some good news, which I am pleased to offer, but as is normally the case, the bad news comes first.

‘Making tax digital’ will mean you will very shortly be required to inform HMRC of your property income and costs every quarter rather than annually through your tax return. A recent story in the Financial Times asked if this would mean accountancy fees would become four times as high!

If you have a letting agent, they will probably begin reporting your rental income to HMRC, but unfortunately your agent will be unaware of any costs and mortgage interest you incur, so it will be important to continue reporting these to avoid paying too much tax.

The good news, however, is that by using the cloud accounting software – Xero, (which you can use yourself, or we can use for you) we are able to keep our costs as low as possible, and this will also allow us to see on an ongoing basis what your profit should be throughout the year, to minimise the risk of surprise tax bills at the end of the year.

So although this means a little bit more organisation, we should be able to keep our fees to a minimum, meet the new HMRC requirements, and better plan your personal finances and tax liabilities throughout the year.

Your Old Mill contact

Adam MorrisonT: 01749 683569E: adam.morrison@oldmillgroup.co.uk

Your Old Mill contact

Liz KinderT: 01935 709306E: liz.kinder@oldmillgroup.co.uk

Client Profile – West Country Windows

Celebrating their 40th yearWe love to see when our clients are achieving great things, that’s why we wanted to make a special mention in this edition of the West Country Business News as Yeovil manufacturer, West Country Windows, celebrates their 40th year!

For a business to have reached the wonderful age of 40 and still be going strong, they must be doing something right.

West Country Windows have had the same directors since they began back in 1977. Tim Earle and Ken Ashplant have lead the business, selling high quality conservatories and windows across the South West. They have grown the company organically, Ken explains “I think that part of our success can be attributed to our emphasis on having control over the product from start to finish. We firmly believe in controlling the quality of everything we do. Around 90% of the market comprises of one man bands, often builders, who are buying in from a range of big trade suppliers more often governed by price than quality or performance.”

Another factor to their success is their loyal employees, some of which have been with the business since the 1980’s having spent their lives with the company. The result of a tightly knit, well-managed team means that they can keep up with the high demand of the industry.

The business has welcomed generations through the door, a genuine business provider for the community, Ken says “what’s so interesting is we are often asked to fit windows for the same family as they move from

house to house. Then we are asked to do the same for their children as they have grown up and had families of their own.”

West Country Windows are no stranger to the rise and fall of trends “The power of programmes like Grand Designs and other lifestyle programmes and publications play a really important role in shaping what people are going to ask for.”

Tim and Ken are determined to continue their success and, as a way of saying thank you, they are offering various promotions for their loyal customers.

If you would like to find out more about West Country Windows, take a look at their website www.westcountrywindows.com or call 0800 378 371.

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Tim Earle and Ken Ashplant

The WestCountry Windows Team

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Pension Tax Relief: Remember to claim what is yoursYou can get tax relief on private pension contributions but if you can claim higher rates of tax relief these may need to be claimed from HMRC and you could be one of the hundreds of thousands of people not doing so.

You get the tax relief automatically if:

n your employer takes workplace pension contributions out of your pay before deducting Income Tax

n your pension provider claims tax relief for you at a rate of 20% and adds it to your pension pot (relief at source)

You get relief at source in all personal and stakeholder pensions, and some workplace pensions.

When you have to claim tax relief

You may be able to claim tax relief on pension contributions if:

n you pay Income Tax at a rate above 20% and your pension provider claims the first 20% for you (relief at source)

n your pension scheme isn’t set up for automatic tax relief

n someone else pays into your pension

If you pay 40% Income Tax

Claim tax relief on the extra 20% in your Self-Assessment tax return if you pay Income Tax at the 40% rate. If you don’t fill in a tax return, call or write to HMRC.

If you pay 45% Income Tax

You can only claim tax relief on the extra 25% in your Self-Assessment tax return if you pay Income Tax at the 45% rate.

If someone else pays into your pension

When someone else (for example your partner) pays into your pension, you automatically get tax relief at 20% if your pension provider claims it for you (relief at source).

We often hear from clients who weren’t aware of the need to reclaim higher rates of tax. It is possible to backdate claims for a number of years. If you have any questions or would like Old Mill to help please speak to your usual contact.

Source: HMRC

Your Old Mill contact

David RiceT: 01935 709373E: david.rice@oldmillgroup.co.uk

Client Profile – SMARTech energy

Successful Momentum – doing it rightWhen starting a business, there are three questions to ask. What am I going to sell, how am I going to sell it, and, most importantly, why am I going to sell it?

After a nine year career as a Royal Engineer, Stuart Pearce left the forces and began a new journey working within the energy management sector. He soon realised that not enough was being done for businesses and he wanted to provide a more holistic service. So in 2014, after discovering a golden opportunity in the market, Stuart decided to set up his own business and became founder and Managing Director of SMARTech energy in Corsham.

As energy management and reduction specialists, they help businesses to minimise their energy consumption, reduce their carbon footprint and, ultimately, become a more sustainable business. Using a nine step methodology enabled the business to excel ahead of the competition, offering a unique service which hadn’t been seen before.

In 2016 a need became apparent for an Operations Director to join the company. Simon Williams joined the team with the vital role of managing the processes, people and the marketing within the business.

Simon explains exactly what it is that makes their service valuable to clients, “Not many energy companies do a holistic approach with their service or go as in-depth. We look at the how, when and, most importantly, where the company are wasting their energy.” This approach allows them to work with clients throughout the whole journey. SMARTech energy don’t just give a consultation, they implement an energy savings strategy which also compliments their client’s business strategy.

“We can help our clients reduce their energy consumption by up to 30 – 50 %.” Simon explains. And they know what they’re talking about. Business is doubling year on year and they won the Enterprising Wiltshire Award 2016 in two categories – Best Green Business Award and Business of the Year. They are also a partner of Inspire Wiltshire, a forum of local businesses, and now have nine dedicated staff in the

team. Not forgetting the business is a carbon trust accredited supplier and can even help eligible clients with grant funding.

With a business that has achieved so much in three years, the momentum is still spinning. Simon explains how much of their business is now brought in through word of mouth and referrals, once again proving how vital it is to build on client relationships – clients, after all, are your advocates.

So how is the future looking for SMARTech energy, and what challenges do they face?

“One of our biggest challenges is getting businesses to recognise the opportunity that energy consumption can provide.” According to Simon, a 20% reduction in energy cost can equate to a 5% increase in sales growth. Once they have engaged with a prospect, it is down to their nine step method to show the business exactly where they can save money, Simon continues “It’s all about evidence and hard data, giving the customer the facts, that’s when they come on board.”

SMARTech energy are clients of Old Mill and there is certainly a mutually beneficial relationship between the two businesses. Stuart explains “Old Mill’s approach is refreshing. They take a real interest in your business and actively look for opportunities to help your business grow and develop. A true partnership.” As a result, they have also helped Old Mill with their energy consumption as Richard Haines, Director in their Melksham office comments, “we asked SMARTech energy to ensure our new offices would not only be energy efficient, but also a comfortable environment for our clients and staff. In our previous offices, poor lighting resulted in many staff needing eye tests, but since SMARTech energy designed and implemented LED lighting for our new offices we have had no further issues and productivity has increased.”

SMARTech energy have succeeded because they know exactly what they’re selling, how they’re selling it and why they’re selling it. They have differentiated their approach and offered a holistic service, going above and beyond for their customers. With the momentum of success still rolling, watch this space! If you would like to know more about SMARTech energy, please contact Simon Williams at simon@smartech-energy.co.uk.

14

Stuart Pearce and James Read

15

What comes to mind when you hear the term ‘Recordkeeping’?A bag, a box or a file full of receipts and invoices, maybe a cheque stub or two – sound familiar?

Maybe, maybe not. However, we are here to help you become more successful in your lives and business, so please allow us to give you some inside knowledge on what information we require and how best to present that information. Furthermore, guidance on maintaining tidy records at home and in the workplace.

Why is this so important, you may ask? Well, timesaving (for you and us) aside, just over the horizon is the imminent arrival of “Making Tax Digital”. We have good reason to be making a point of this as it may start as early as 2018 and getting into good habits with records is the foundation of making the change as smooth as possible.

Maintaining your manual records.

Consider ordering your invoices and receipts into months for each financial year with a summary sheet for each month, this should include a breakdown of your expenses and income into relevant titles for example motor, materials, telephone and so on. Then another sheet collating the information for the year based on the information you have on each month’s summary sheet. This allows quick reference for each year and then each month, and as for your yearly summary sheet, yes please - we’ll take a copy!

If you can keep all of your bank statements, ideally in date order, whether online or on paper format, that’s all we require to get the ball rolling for your accounts and tax return. If we require anything more our teams will contact you and you’ll have quick reference to your information in a structured fashion.

If you use accounting software, initially all we require is a copy of your year-end backup and your closing business bank figures per your bank statement, yes, that’s it. Once we have drafted your accounts we will likely have a few queries relating to particular transactions. To assist with these, we’d suggest storing your invoices and receipts, as above, in one folder or more if the size of your business warrants it, this will allow easy retrieval.

In this digital age we strongly recommend the use of accounting software, if that would be very difficult, then we can use the software for you, it really is the backbone of business, allowing you to keep up to date on your business’ performance. You may feel your business needs to bridge the gap between manual records and an accounting software to bring everything together, with this in mind we’d encourage you to speak to our teams regarding Xero. This handy piece of software brings all the suggestions above into one place, you can record receipts and invoices with your computer or mobile device, assign them to expenses or income. Furthermore you can link your bank accounts so all you have to do is assign the incomings and outgoings to a relevant code and, here’s the best bit, we can access your Xero information remotely. This will allow us to get straight to work with your accounts and tax return with no effort required on your part, and we can check throughout the year to give you the best, most up to date advice possible.

“Making Tax Digital” is coming, and we wish our clients to be in the best possible place for when it arrives. In the meantime, if you have specific queries or concerns, please do not hesitate to get in touch with your usual Old Mil contact.

Your Old Mill contact

Alex WrenT: 01749 683599E: alex.wren@oldmillgroup.co.uk

16

Tax efficient business financeMost businesses need investment and capital to help them grow, or to develop new products and services, however securing finance remains an obstacle.

Companies invariably look to external sources which can include private individuals, venture capitalists, business angels and banks. Many directors are finding that lending criteria has got tougher as aversion to risk continues to dominate lending decisions.

But there is a source of funding considerably closer to home; namely the director’s own pension assets.

n Is your bank your first port of call when you need to raise capital? Who would you prefer to pay interest to: Your bank or your own pension fund?

n Does the company own, or is it thinking of buying its own commercial property? If so, would you like to avoid tax on the eventual disposal?

n Do you need to raise money quickly for important projects/expenditure?

n Would you wish to shelter profits against Corporation Tax, whilst retaining access to the fund for business purposes?

Certain schemes - commonly known as Small Self-Administered Schemes (SSAS) can buy commercial property and also lend money to its sponsoring company and many business owners are using their pension funds as an alternative source of funding to purchase commercial property or help secure loans to their business.

Property Purchase

UK pension funds are permitted to purchase commercial property – either from a third party, from the directors or from the business itself.

SSAS may borrow money from lenders to enable them to purchase particular (business) assets. The maximum the SSAS can borrow is 50% of the net fund value at the date of the loan.

SSAS Loanbacks

The ability of the SSAS to lend to a sponsoring employer at commercial rates has provided a lifeline to business owners whose bank may not entertain further lendingSSAS rules allow up to 50% of the net assets of the pension fund to be lent to the member’s business. The loan must be secured and the SSAS Trustees will charge the business a commercial rate of interest. This can be attractive as, rather than paying interest to the bank, the interest is paid into the members’ pension fund and will grow tax free.

Use your existing pensions

This pension vehicle can also receive transfers from the directors existing pension assets which may be currently held in a pension that is not permitted to make loans or purchase property.

All this and Tax Relief too...

The SSAS will also enjoy considerable tax benefits including Corporate Tax Relief on contributions paid by the company, Income Tax Relief on contributions paid by the member and investment growth free from Income Tax and Capital Gains Tax.

Although the newspapers talk about the reducing amounts that can be put into pensions, it is important to remember the potential opportunities for individuals to use the carry forward rules to allow them to make pension contribution of more than the annual allowance tax efficiently by rolling up unused allowance from previous years and these rules remain in place, for the time being.

Old Mill have been involved in many carry forward calculations over the last couple of years and will be happy to help and provide any further information.

The current annual allowance is £40,000 and takes account of personal contributions and employer contributions to pension scheme for an individual. The carry forward rules allow Tax Relief on contributions in excess of the annual allowance to be obtained by using any unused annual

allowance from the previous three qualifying tax years, providing the individual was a member of a registered pension scheme.

Example

During the previous three tax years Thomas (Managing Director of a Property Development Company) made pension contributions of £10,000, £20,000 and £15,000. He carried forward up to £90,000 to 2016/17.

During the 2016/17 tax year the property development trade picked up and his profits amounted to £150,000, the company contributed £130,000 into his pension arrangement. He used the £40,000 Annual Allowance for the current year and carry forward allowance amounting to £90,000 of the unused annual allowance up to 5 April 2016. The payment of the £130,000 contribution resulted in a Corporation Tax saving for Thomas’s company of £26,000 (20%).

Old Mill Financial Planning is expert in the installation and maintenance of Self-Administered Pension Schemes for companies such as yours.

The past few years have seen a number of changes to pension legislation. To avoid tax penalties it is essential that registered pension schemes comply with the new regulations and reporting requirements. Old Mill Pension Consultancy (OMPC) can assist you

and ensure that your pension complies with the updated legislation no matter how complex your scheme is. We give you all the information you need to make informed decisions about your scheme and make certain that the administration runs smoothly.

OMPC act as scheme practitioner and can deal with the responsibilities of a scheme administrator on your behalf. The Scheme Administrator has a highly responsible role and protects the member trustees

from falling foul of making unauthorised payments or breaching tax regulations which would result in potential penal tax charges. We have over 25 years of experience running schemes and now look after over 250 self-invested arrangements.

Should you wish to discuss your existing SSAS or would like to find out more about SSASs, please speak to your usual Old Mill contact and a Pensions Manager would be happy to discuss your individual circumstances.

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Year Annual Allowance Pension input amount Carried forward AA

2013/14 £50,000 £10,000 £40,000

2014/15 £40,000 + £40,000 c/f £20,000 £60,000

2015/16 £40,000 + £60,000 c/f £10,000 £90,000

Your Old Mill contact

Steve WoodhamT: 01935 709027E: steve.woodham@oldmillgroup.co.uk

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What are the key points in the Spring Budget 2017 and how will they affect me?You have probably heard a lot of people talking about the budget over the last few weeks, but it can be hard to establish the facts.

You may find yourself thinking ‘will I have less money left in my pocket?’ or ‘will I have to pay more tax?’

We have put together a brief summary of the main points that may affect you below:

Personal allowance increase of £500 to £11,500 for the 2017-18 tax year. This means that you could earn up to an extra £500 tax free per tax year.

Extension of £2,000 to the higher rate tax threshold. This means that you can earn more before you are taxed at 40%, potentially saving you £400 per year.

The planned increase for the class 4 NIC percentage rate to 10% is no longer taking place. It will remain at 9% for self-employed people earning between £8,164 and £45,000.

Corporation Tax is reducing from 20% to 19% from April 2017, and eventually down to 17% in 2020. This is a big positive as it will save all companies a lot of money.

The compulsory VAT registration limit is going up to £85,000, and deregistration limit is going up to £83,000.

The Introduction of a ‘Lifetime ISA’ on 6 April which will mean that young adults (under 40) can save up to £4,000 and receive a bonus of up to £1,000 a year, which can then be withdrawn tax-free to put towards their first home before the age of 50, or when they turn 60 for a pension.

The tax-free dividend allowance is going down from £5,000 to £2,000 in April 2018, but it is worth noting that the £3,000 that will become subject to tax will be at 7.5% for basic rate tax payers with a cost of £225.

If you would like to know how the above, or any other issues, affect you and your business please do not hesitate in contacting us.

Your Old Mill contact

Aisha PerrottT: 01935 709427E: aisha.perrott@oldmillgroup.co.uk

Guest Spot – Jim Durrant, Handelsbanken

Is buy-to-let still worth the investment? Is there still any value in buying property to let as an investment? In April of last year the Government began the process of phasing out higher rate tax relief on mortgage interest payments for buy-to-let landlords.

Over the next four years – by 2020 - the amount of mortgage interest tax relief that buy-to-let landlords can claim will fall to just 20%.

Previously landlords could set the cost of the mortgage interest payments against the rental income, and they only had to pay tax on the profit, at their current rate of income tax.

For example, if the rental income over the course of a year was £20,000 and the mortgage interest payment was £14,000, landlords would pay tax on the profit of £6,000, at their marginal rate of tax.

However, by 2020 tax will be payable on the full rental income, less a tax credit equivalent to basic rate tax of 20% on the mortgage interest. This means investors will be paying substantially more tax on their income from their buy-to-let. If the base rate rises and mortgage rates follow suit, then buy-to-let landlords could see any profits further reduced.

The changes also follow an increase in Stamp Duty Tax of three percentage points introduced in April 2016 for buy-to-let landlords. While most people will have factored in the effect of the increase in stamp duty on buy-to-let purchases, many may be less aware of the knock-on effect of the changes in terms of leading to this higher taxable income.

Under existing pension rules it is possible to contribute up to £40,000 a year into a pension and gain tax relief on these contributions. However, since April 2016 the annual allowance has been tapered for those with an annual income of £150,000 or more.

These changes mean that those with an annual income of £150,000 or more will start to lose their pension allowances as well as being unable to benefit from personal allowances.

However, those who have already maximised their pension contributions having reached their lifetime allowance may be looking at alternative places for their money, and buy-to-let property may seem a natural place to invest, in particular as a long-term investment.

With so many variables to consider, the best guidance is to seek professional advice in order to understand the impact on your own individual circumstances, particularly in light of the recent changes described.

Jim Durrant, Handelsbanken Yeovil says: ‘’since the announcement of these changes, we have seen an increase in the number of enquiries from landlords considering restructuring their financial affairs. Our ability to take a holistic view, and consider both the business and personal banking needs of customers, coupled with our ability to make the majority of decisions at the local branch, means time savings for those customers in terms of not having to deal with multiple providers for all of their different needs.’’

If you would like to find out more about Handelsbanken’s relationship-led approach to banking and how we may be able to help, please contact us at handelsbanken.co.uk/yeovil.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Handelsbanken is the trading name of Svenska Handelsbanken AB (publ). Registered Office: Svenska Handelsbanken AB (publ), 3 Thomas More Square, London, E1W 1WY. Registered in England and Wales No, BR 000589. Incorporated in Sweden with limited liability. Registered in Sweden No, 502007-7862. Head Office in Stockholm. Authorised by the Swedish Financial Supervisory Authority (Finansinspektionen) and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request.

Handelsbanken Wealth Management is a trading name of Heartwood Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority in the conduct of investment business, and is a wholly-owned subsidiary of Svenska Handelsbanken AB (publ). Registered Head Office: No.1 Kingsway, London WC2B 6AN.Registered in England Number: 4132340.

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Jim Durrant, Handelsbanken

Your Old Mill contact

Aisha PerrottT: 01935 709427E: aisha.perrott@oldmillgroup.co.uk

Motor Vehicles – making the right choiceWe are commonly contacted by our clients with queries in respect of purchasing a new vehicle, these are the common questions:

n Do I purchase a vehicle privately or through the business?

n Do I buy a vehicle or lease a vehicle?

n Do I go down the route of hire purchase?

n How much tax will I pay?

n What car should I buy?

Firstly, these are all very sensible questions you should be discussing with us. It will allow us to have the conversation with you to find out what suits you and your business needs as well as giving you clarity on your tax position.

At Old Mill we don’t want you to be caught out by buying a motor vehicle to only discover you are hit with a tax bill you would rather not have had. Remember, the business will have to pay National Insurance on any benefit in kind, with the employee being taxed individually subject to their own personal tax position, and if they are a higher rate

tax payer it will cost them more than a basic rate tax payer. Ultimately, there is no right or wrong answer that covers everyone, the key things are to make sure you know the options available and the implications they have.

When you look to discuss those options with Old Mill there are some points that may be beneficial to consider beforehand.

n What type of vehicle does the business need?

n What usage will the individual have, the number of miles and how many private miles will they incur?

n Does the business have the cash reserves to purchase outright? Or even the cash flow to support monthly repayments or rental payments?

n You may also like to look at the latest green cars available.

Over the last few tax years we have seen big increases with benefit in kind charges on motor vehicles, and the bandings for low emissions vehicles also seeing the impact of rate increases. Not only has it had a big effect on those already with higher emission cars, but businesses and the vehicle users have found themselves in a position whereby a low emission vehicle purchased 2/3 years ago at what was then deemed to be with lower tax implications, now has year on year rises in the National Insurance and tax payable. This trend is still continuing:

20

Emissions of CO2 g/km

0-50

up to 75

up to 94

Multiple applied to list price2016/2017

7%

11%

15% plus 1% for every5g/km (max 37%)

2017/2018

9%

13%

17% plus 1% for every5g/km (max 37%)

2018/2019

13%

16%

19% plus 1% for every5g/km (max 37%)

2019/2020

16%

22%

22% plus 3% for every5g/km (max 37%)

There has also been another change over the last few years. Long gone are the days where “greener cars” were small unappealing cars that few wanted. All the main manufacturers are now producing low emission cars, across a variety of models, meaning there is a wider choice available.

There are many articles online about the latest green cars, and the manufacturers themselves are now really pushing the marketing on their green cars so there is lots of information out there with the car dealers. It is worth checking to see if any of the green vehicles available meet your needs both in terms of requirements and pricing.

Whilst the tax charges for greener cars will also see rises over the coming years the potential tax savings compared to a higher emission car could be signifi-cant and worthy of consideration.

You may even be in a position to go down the route of an electric vehicle with zero emissions, and there are currently grants in place to help purchase certain vehicles. Go to the following website to look at the current approved cars for which grants apply:https://www.gov.uk/plug-in-car-van-grants/eligibility

2020/2021 will see the introduction of rate bandings for electric cars, not only based on CO2 emissions but also the electric range (see opposite).

This means that although an electric car could see the percentage rises impact the benefit in kind charges short term, long term the percentage could drop to as low as 2%.

With the potential rises to tax over the coming years it is worthwhile knowing your options, call your usual contact at Old Mill, or call one of our offices, for us to answer your queries, discuss the options, and explain the tax implications.

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Emissions of CO2 g/km

0

1-50

1-50

1-50

1-50

1-50

51-54

55-59

60-64

65-69

70-74

Electric Range(miles)

>130

70-129

40-69

30-39

<30

2020/2021

2%

2%

5%

8%

12%

14%

15%

16%

17%

18%

19%

Your Old Mill contact

Kim MaugerT: 01935 709372E: kim.mauger@oldmillgroup.co.uk

Leeward House, Fitzroy Road, Exeter Business Park, Exeter, Devon EX1 3LJTel: 01392 214635 Fax: 01392 214690

Wessex House, Challeymead Business Park, Melksham, Wiltshire SN12 8BU Tel: 01225 701210 Fax: 01225 709817

Bishopbrook House, Cathedral Avenue, Wells, Somerset BA5 1FDTel: 01749 343366 Fax: 01749 344986

Maltravers House, Petters Way, Yeovil, Somerset BA20 1SHTel: 01935 426181 Fax: 01935 431852

Contact Old Mill

www.oldmillgroup.co.uk

The content of this newsletter is for general information only. It should not be relied on and action which could affect your business should not be taken without appropriate professional advice. Please contact your usual Old Mill contact or local Old Mill office.