SME tax corner – Edition 5

SME tax corner – Edition 5

Welcome to our fifth edition of the SME tax corner.

There have been some big recent changes to a number of taxes that will bring both good and bad news to small businesses and their owners. In this month’s SME tax corner, ahead of the 2016 Budget in a few weeks, we look at the changes to Employment Allowance, the changes to the way dividend income is to be taxed and the impact of the introduction of the new National Living Wage.

Good: Important changes to Employment Allowance

The National Insurance Contributions (NIC) Employment Allowance was introduced from 6 April 2014. It is an annual allowance which is available to many employers and can be offset against their employer’s NIC liability.

From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year.

To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.

Bad: Dividend income changes clarification now given

Draft legislation has now been published setting out how the new rates of income tax on dividends and the new Dividend Allowance which will apply to dividends received on or after 6 April 2016. This confirms our understanding of how the new regime will operate following the initial announcement in July last year.

In summary, from April 2016, the notional 10% dividend credit will be abolished and replaced by a tax-free dividend allowance of £5,000 a year. The first £5,000 of dividend income in each tax year will be tax-free, and any dividend income above this allowance will be taxed at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers. On the whole, this is bad news for entrepreneurs and small business owners as many will see a tax increase. For more information please click on the link below.

National Living Wage: The impact on wage bills and absorbing costs

The new ‘National Living Wage’ – the minimum wage for those aged 25 and over from April 2016  – has been at the forefront of many business owners’ minds since the announcement of its introduction in July 2015.

From its starting point of £7.20 per hour in April later this year (50p above the current National Minimum Wage), it is projected to rise to more than £9 per hour in 2020. The introduction of the new rate will vary from sector to sector (as the table below highlights) and has, understandably, left many employers concerned about how they will absorb their new costs.

NLW increases in wage bills by sector

Estimated wage increases by sector by 2020 (Source: The Resolution Foundation)

We have published a detailed guide to the new National Living Wage which looks at the sectors that will be most impacted by the increased rate and how business owners can mitigate challenges and absorb new costs. For more information please click on the link – your detailed guide to the new National Living Wage.

It is also very important that employers take the time to consider the knock-on effect on supplier prices and other wage costs that the new National Living Wage may bring. For example, if a barman sees a 50p increase in his hourly pay through the introduction of the new National Living Wage, then the bar supervisor may also expect to see a 50p increase.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]

Agriculture update for UK farmers – February 2016

Agriculture update for UK farmers – February 2016

Welcome to our first agriculture update for UK farmers of 2016.

Please do register for our agriculture newsletter if you would like to receive the agriculture update each month, along with our quarterly agriculture newsletter and topical sector developments.

A British exit from the EU?

What would a British exit from the EU mean for UK farmers? Leading economist, Professor Buckwell, suggests that an exit could deliver long-term benefits at the cost of a short-term hardship. However, the long-term gains would depend on the legislative and policy environment that replaces the CAP and the industry’s competitiveness.

Some form of direct payment would also have to come from the UK government, but what form is not yet known of course. An EU exit could be a wake up call for the industry and a catalyst for change.

Farm minister George Eustice is backing the EU exit campaign, putting himself in opposition to DEFRA secretary Liz Truss. At the NFA annual conference in Birmingham Mr Eustice outlined fledgling policies, suggesting the possibility of retaining an area payment together with accreditation schemes. He suggested that concerns over the level of agricultural support in a Brexit were unfounded.

Liz Truss, however, suggested that a vote to leave the EU was a leap in the dark. She pointed to the size of the single market and the ability to export products freely without trade barriers.

The Yorkshire Agricultural Society has also outlined some potential disadvantages of an EU exit:

Support payments – The Treasury may see an exit as an opportunity to reduce the cost of support payments to farmers.

Regulation – Lobby groups would continue to exert pressure for more stringent regulation of agriculture.

Labour – Labour availability may be reduced, particularly in soft fruit and horticulture.

Trade – Trade agreements, tariffs and subsidies will have to be negotiated. Farming may be overshadowed by other sectors.

Grants for farm-based projects

Countryside Productivity Scheme (CPS)

  • Targeted at improving productivity e.g. automated feed systems, real-time animal monitoring or LED lighting
  • Grants are £2,500 to £1m, for up to 40% of costs
  • Administered by RPA

Growth Programme

  • Aims to create rural jobs
  • Target is £25k of funding for one job
  • Generally targets larger projects over £100k
  • Administered by LEP’s

Leader

  • Smaller projects is the focus
  • Administered by Local Action Groups (LAGs)

Other agriculture news…

  • The RPA wants the bulk of BPS claims submitted online in 2016.
  • December 2015 was among the mildest on record in the UK and 2016 is forecast to be among the warmest years globally.
  • Farm Business Income (FBI) is expected to fall significantly in the year to February 2016. FBI is defined as profit before unpaid labour or reinvtesmnets. Cereals £34k (down 24%); general cropping £43k (down 17%); pigs £26.5 (down 46%) and dairy £46.5k (down 45%).
  • UK farm income per worker fell by 19.3% in the UK between 2014 and 2015. On average in the Euro zone it fell 4.3% according to Eurostat estimates. The largest fall was Germany at 37.6%. Croatia saw a rise of 21.5%. In total, 13 Euro countries saw a rise.
  • Land values in Yorkshire and The Humber will be difficult to predict in 2016. Average values remained the same throughout 2015 and 2015. Average value for all types were £6,800 per acre with prime arable land £10,100 per acre. Low commodity prices will make land less attractive in general.
  • The last Land Rover Defender has been produced after 67 years.

More from our agriculture experts

You can find all of our latest agriculture sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Martin Wilmott is a partner at Hawsons

Martin Wilmott acts as lead engagement partner for a wide range of corporate and non-corporate clients in the Doncaster office, especially in the Legal and professional, agricultural, transport, property and construction, manufacturing, healthcare and hospitality sectors. For more information or advice on anything covered in this article please contact Martin on [email protected] or 01302 367 262.

Is now a good time to outsource your payroll?

Is now a good time to outsource your payroll?

As the tax year draws to a close we ask: what actions could you take to make your life easier from 5 April, taking some of the stress out of running your business and giving you more free time on evenings and weekend? Outsourcing your payroll will not only likely save you time and money, but it’s actually probably easier than you think too.

Once you have decided to switch, let us know and we will take care of the rest.

An accurate and efficient payroll service

Many small business owners are finding running their payroll an increasingly complex and time-consuming task, particularly as the compliance obligation on employers has never been greater! Whatever size of business you run, now is a good time to consider outsourcing your payroll.

At Hawsons we provide a friendly and personal service that is accurate and will save your company time and money. We have a dedicated team of experienced staff who will liaise with your company to ensure the payroll is completed by the deadline and is compliant with the ever-increasing rules and regulations, particularly with the onset of auto-enrolment.

You can also rest assured that we will take care of your auto-enrolment obligations and ensure your staff are paid accurately and on time. Our team act for a large number of clients, ranging from small businesses with only 1 or 2 employees up to large business with more than 200 employees.

Our aim is to replicate the benefits of in-house payroll services, so you can be sure that:

  • We are not a bureau or call center
  • You will have the rigid benefits of an in-house payroll function i.e. flexible and responsive
  • You can tailor our service to meet your specific needs and base our pricing structure accordingly
  • No hidden costs!
  • You will be provided with an integrated and fully comprehensive service
  • You will have a dedicated personal contact that is readily available if issues arise

Your next steps – book a free initial meeting

As well as having impacts on cost and time, attending to the payroll in-house can be a heavy burden to carry.

Spending your evenings and weekends worrying about whether the details are right, your business is fully compliant or if you’re going to meet the strict deadlines can be extremely stressful. Outsourcing your payroll services to Hawsons can take away the headaches and stress of doing it in-house and give you peace of mind to carry on what you do best – running and growing your business.

More from our payroll experts

You can find all of our latest payroll articles here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, you can request a free initial payroll quote online here.

Free initial meeting

Scott Sanderson

Partner, Sheffield

0114 266 7141
New farmers’ averaging rules – five year averaging optional

New farmers’ averaging rules – five year averaging optional

Following the announcement of changes in last year’s March Budget, the government has now confirmed the details behind the new farmers’ averaging rules.

In summary, farmers will have the option of averaging losses for tax over a two year or a five year period.

In an article we published after the initial announcement last year we mentioned that the government was set to hold a consultation to confirm the details of the potential changes to farmers’ averaging. Following the publication of details from that ongoing consultation the government has confirmed the changes, effective April 2016.

New farmers’ averaging rules

The government has now confirmed that the current two year averaging period will not be replaced (as was speculated) but it will be added to. From 6 April 2016 farmers will now have the option to elect for either a two year or a five year averaging period.

This extension to the current farmers’ averaging rules (from April 2016) – rather than a replacement – will bring even greater flexibility to farmers and will help them better manage potential fluctuations in income.

Greater flexibility brings some good news for farmers

Richard Marsh, Partner at Hawsons, welcomed the announcement, commenting: “Farming profits are often affected by external matters outside of the business owner’s control; erratic weather conditions, disease and price movements are just some of the factors that can make farmers’ profitability fluctuate from year to year. The ability for farmers to average profits over consecutive years is an important provision and this confirmation of an extension to those rules is certainty welcome news for the farming community.”

“The idea of a longer averaging period will hopefully give farmers that additional flexibility and security they need during those particularly volatile years. As I said when the initial proposals were announced last year, the new rules are a real positive for farmers and will help reduce excessive tax bills that may arise from fluctuations, especially as a good year can often be followed by a poor one.”

“The decision to retain the two year averaging option as well as introduce a new five year averaging option is the right choice. It is likely that, although the majority of farmers will use the extended five year averaging option, some business will still prefer the two year averaging system.”

More from our agriculture experts

You can find all of our latest agriculture sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Martin Wilmott is a partner at Hawsons

Martin Wilmott acts as lead engagement partner for a wide range of corporate and non-corporate clients in the Doncaster office, especially in the Legal and professional, agricultural, transport, property and construction, manufacturing, healthcare and hospitality sectors. For more information or advice on anything covered in this article please contact Martin on [email protected] or 01302 367 262.

Are we heading towards energy efficiency in the care sector?

Are we heading towards energy efficiency in the care sector?

The opportunities for care home operators to achieve reduced running costs by becoming more energy efficiency are considerable. In this article we look at how care homes could reduce their energy bills through energy generation systems and/or more effective energy management.

The recent Annual Investment Allowance certainty, as we covered in our previous newsletter, will also significantly aid this process as items such as lighting and electrical systems all now qualify for enhanced tax relief – reducing your tax bills!

Is now the time to become more energy efficient in care?

The recent NatWest care home performance benchmarking report highlighted what many care home operators already knew: they are spending too much money on lighting, heating and other utilities.

Healthcare is one of the UK’s most energy intensive sectors. The NHS currently spends £750m on energy costs every year; a figure which could be reduced by as month as 20% through using energy efficient measures the UK Green Investment Bank (GIB) reports. The care sector specifically could also noticeably reduce energy overheads.

There are many opportunities for care homes to generate their own energy power in the future, not only cutting the home’s long-term energy overheads, but also reducing its environmental footprint. Energy generation isn’t the only option either. Care homes looking for more immediate, cheaper energy efficiency can achieve it by identifying, reviewing and reducing their current energy spend and implementing much smaller systems and procedures.

The NatWest report recognises that “even low and no-cost actions can usually reduce energy costs by at least 10% and produce quick returns” in the healthcare sector.

Energy generation to achieve energy efficiencies

  • Biomass boilers are a potential replacement for oil/gas boilers in order to generate heat. As well as qualifying for subsidies through the Government’s Renewable Heat Incentive (RHI), these boilers could reduce yearly bills by almost 50%.
  • Combined Heat and Power (CHP) systems are used to simultaneously generate both electricity and heat; converting useable heat that’s produced during the process of generating electricity. CHPs can increase energy reliability and reduce energy costs.
  • There are a range of other energy generation sources that care homes may wish to consider, including solar power, wind power, Heating, Ventilation and Control systems (HVACs) and Air Source heat Pumps (ASHPs) to name but a few.

Energy management to achieve energy efficiencies

  • Audit your current energy spend to analyse processes and identify potential opportunities to reduce energy overheads.
  • Create a culture of energy efficiency. Use notices and stickers around the home to raise awareness of ‘switching off’ lights.
  • Consider investing in LED bulbs (and any other high efficiency lighting). LED bulbs are often seen as a more cost-effective solution, but are also an extremely effective way to achieve energy-savings by upwards of 50%.

The diversity of care homes – by size and facilities used – means that there is no universal energy efficiency methodological. When thinking about implementing energy efficiency projects/processes in the care sector, consider your own energy output and operations primarily.

Tax-savings available to care homes investing in energy efficiency

With the potential significant initial set-up costs involved in funding new energy efficient redevelopments in the care sector, the availability of generous tax-saving opportunities could provide welcome relief to operators throughout the UK.

You can find more information on Annual Investment Allowance and its impact on the care sector here.

More from our care sector experts

You can also find all of our latest care sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Scott Sanderson

Scott Sanderson Partner

Scott Sanderson began his career with Hawsons and trained as a Chartered Accountant, becoming a partner in 2015, specialising in the healthcare sector and small businesses. For more details and advice, please contact Scott on [email protected] or 0114 266 7141.[/author_info]