Author Archives: Lauren Quinn

Flexible working in cross-border businesses

Offering flexible working could help your business attract and retain employees. However, it’s important to comply with employment regulations, says Director Michael Farrell

In July last year, the Taylor review of modern working practices noted, “As a society we should be bolder in designing flexible jobs that allow people to remain and progress in the labour market as their personal circumstances change.”

 

In our work with businesses across the island of Ireland, PKF-FPM is seeing more employers offering flexible working options. In some instances, this is due to changing business patterns and needs, in others it is a response to employee requests.

 

Examples of flexible working include:

 

• Part-time work.
• Flexi-time (employees work standard hours but have different start and finish times within certain agreed limits).
• Compressed hours (employees work a standard week in fewer days — e.g. a 35-hour week compressed into four working days instead of five).
• Job sharing.
• Career break.
• Shorter working year.
• Annualised hours.
• Working from home.
• Time off in lieu where employees work longer hours during busy periods and take an equivalent amount of time off (with pay) at a less busy time.
• Annualised hours: employees average out working time across the year so they work a set number of hours per year rather than per week.

 

Depending on the business, these flexible arrangements can benefit both employers and employees. However, it is important to be aware that there are differences in employment legislation and regulations between Northern Ireland, the Republic of Ireland and the UK. These affect matters such as employment status categories, payroll, minimum wage, annual leave entitlement, sick pay, pensions, minimum notice periods, and redundancy. It is particularly important for businesses with cross-border employees to be aware of the different rules that apply in each jurisdiction. It can be difficult for some businesses to keep abreast of regulatory requirements in HR, particularly SME, owner-managed and micro-businesses working in multiple jurisdictions. Depending on individual circumstances, outsourcing may be a good solution where businesses do not have adequate HR resources in-house. As well as providing peace of mind, outsourcing can also be cost effective.

 

With skills shortages affecting many businesses across the island of Ireland at present, it is likely that more employers will offer flexible working as a way of encouraging people into the workforce who might otherwise not be able to participate in the labour market. For information on flexible working and/or the differences in employment legislation between the UK, Northern Ireland and ROI, please contact a member of our team.

 

Michael Farrell l Director
m.farrell@pkffpm.com

Breaking down the Budget

In a Budget speech lasting over one hour, the Chancellor appeared to present a giveaway Budget to UK taxpayers. However on closer inspection, some of the headline grabbing measures are indeed temporary. in particular, the increase in the annual investment allowance and the one third cut to business rates for certain retail properties. Indeed, having moved the UK Budget to the Autumn time, in his speech, the Chancellor reserved his right to upgrade the summary Spring Statement into a full fiscal event hinting that post Brexit there will be another full UK Budget.

 

The main measures introduced by the Budget across the various taxes are summarised below:

 

On the personal tax front, the big surprise was the advancement by one year of the introduction of the increased personal allowance of £12,500 and the increase in the higher rate threshold of income tax to £50,000 taking effect from 6 April 2019. From 2021/22, the personal allowance and higher rate thresholds will increase in line with inflation. It should be noted however that your personal allowance of £12,500 is reduced by 50p for every pound that your income exceeds £100,000. This is an important planning point for high earners.

 

Class II National Insurance which is paid by the self-employed, was set to be abolished but will now remain.

 

Whilst Individual Savings Account subscription limits remain at £20,000, the lifetime allowance for pensions increased to £1.055m and there was no change to the annual amount of £40k that a taxpayer can invest in a pension despite many commentators expecting this to be reduced. Indeed, in the winter, the Department for Work and Pensions will publish a paper setting out the government’s approach to increasing pension participation and savings persistency among the self-employed.

 

On the capital gains tax side, the annual exempt allowance increases to £12,000 and while many business owners nearing retirement breathed a sigh of relief when entrepreneurs relief was retained at its generous 10% tax rate, the qualifying holding period to avail of entrepreneurs relief was doubled to 24 months which was done to tackle tax avoidance. Furthermore, from Budget Day, shareholders claiming entrepreneurs relief must be entitled to at least 5% of the distributable profits and net assets of the company in addition to the current requirement of holding at least 5% of the share capital and voting rights.

 

There were some changes to the capital gains tax around the sale of private residences and from April 2020 the lettings relief element of the capital gain arising on the sale of such a property will only be available where the owner of the property is in shared occupation with the tenant. The final period of exemption, which was once 36 months, has been reduced to 9 months except in cases where the occupant is a disabled individual or in a care home.

 

Inheritance tax remains unchanged with the nil rate band at £325k and the residents nil rate band will increase to £150k from 6 April 2019 as already legislated.

 

On the business tax front there were surprise announcements with the annual investment allowance for qualifying plant and machinery increasing from £200k to £1m, this is to take effect for a two-year period from 1 January 2019. Furthermore, a new 2% capital allowance will apply to qualifying capital expenditure on new non-residential buildings and structures with effect from 29 October 2018. This relief looks to be calculated similar to the former industrial building allowance which was scrapped several years ago. The Chancellor maintained his commitment to reduce corporation tax which will fall from its current level of 19% to 17% from 2020.

 

There was welcome news for retailers with business rates for retail shops being reduced for a two-year period commencing in April 2019 by one third for those properties with a rateable value below £51k. Furthermore, first-time buyers relief in England and Northern Ireland is to be extended.

 

With the introduction of making a tax digital for VAT, it was unsurprising that the VAT registration threshold will remain at £85k until April 2022.

 

Finally there were several announcements in relation to tax avoidance measures that the government is taking with the most surprising being the reintroduction of HMRC’s preferential credit status which will take effect from 6 April 2020. This will mean that when a business enters insolvency, HMRC would be treated as a preferential creditor in respect of those taxes collected and held by businesses on behalf of other taxes such as VAT and PAYE.

Get in touch with Paddy Harty via email p.harty@pkffpm.com

 

Join us at the PKF-FPM and Irish News Post Budget Breakfast as we navigate through these uncertain times.

Date: Wednesday 7th November 2018
Time: 7.30am – 9.30am
Venue: The Quays Ominplex, Newry

 

To book your FREE place email Lauren Quinn l.quinn@pkffpm.com or call 02830261010

 

The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

 

UK Budget 2018

The Chancellor, Philip Hammond, delivered his last Budget before the UK leaves the European Union yesterday afternoon. He proclaimed several times during his speech that “the era of austerity is finally coming to an end” and he announced a £100bn package of public spending over the next five years as part of the largest giveaway Budget since 2010.

 

Other key points include an increase in the personal allowance and the higher rate tax band to £12,500 and £50,000 respectively a year earlier than planned and an increase in the Annual Investment Allowance for eligible capital expenditure to £1m for two years. In relation to Northern Ireland, a total of £350m was committed for a Belfast City Region Deal, negotiations to begin for a Derry/Londonderry City Region Deal and £2m earmarked for Belfast City centre to help deal with the fall-out of the Primark fire.

 

Click here to download the PKF-FPM UK Budget Summary 2018.

 

If you require assistance or have any queries on the matters raised in the budget please feel free to contact PKF-FPM Director m.mclernon@pkffpm.com

 

 

UK Budget 2018: HMRC Returning to (Partial) Preferential Status at expense of Unsecured Creditors

The Chancellor in his budget yesterday is introducing changes in respect of the collection of taxes within insolvency. From April 2020, when a business enters insolvency, funds will go towards public services rather than to other creditors. This will apply only to taxes collected by a business (i.e. VAT, PAYE, EE NIC, CIS). Corporate Tax and ER NICS will continue as unsecured creditors.

 

Budget 2018 Protecting your taxes in Insolvency

 

For more information contact our Business Recovery & Restructuring Services.

 

Alison Burnside – a.burnside@pkffpm.com

Seamas Keating – s.keating@pkffpm.com

Gary Digney – g.digney@pkffpm.com

 

 

Time is running out to file your paper tax return

Question.

 

I am a retired business owner and I have always submitted my personal tax return on paper to HMRC. I have read that the implementation of Making Tax Digital may remove the paper filing option. Will HMRC accept my paper tax return if I file it before the 31st October 2018 deadline?

 

Answer.

 

The days of the paper tax return could well be numbered as HMRC begins rolling out its Making Tax Digital initiative from next year. But until that time comes, if you do file by paper you still need to meet the 31st October 2018 deadline for the tax year ended 5th April 2018.

 

The October deadline for filing paper tax returns covering the 2017/18 tax year is fast approaching and tax payers need to make sure they submit their returns by 31 October or risk late filing penalties. The same date may also trigger further late filing penalties in relation to outstanding tax returns for the 2016/17 tax year.

 

If you are submitting a paper tax return to HMRC for 2017/18 you should complete it and submit it to HMRC by 31 October 2018. And if you still have an outstanding return for 2016/17 which you wish to submit on paper, again you must do so before 31 October in order to avoid triggering further late filing penalties for the return being more than 12 months late.

 

If you intend to submit a paper return for 2017/18 and do not do so by 31 October 2018 you still have the option of submitting an electronic return by 31 January 2019 to avoid late filing penalties.

 

However if a tax return for 2016/17 is submitted after 31 October 2018 in paper form rather than electronically then the maximum automatic late filing penalties of at least £1,600 (or £1,000 plus 10% of the tax due if greater) will eventually be charged.

 

You may have missed the tax return deadline due to an unforeseeable event. This would be classed as ‘reasonable excuse’ and grounds to appeal a penalty charge. If the appeal is successful then the penalties will be cancelled.

 

If you have not submitted your tax return because you are unable or cannot afford to pay any tax due, then be aware that HMRC regard submitting a return and paying the tax due as two separate and distinct obligations. Penalties will continue to build up if you do not submit the return and you will not be able to arrange a debt payment plan with HMRC while the return is outstanding.

 

HMRC’s guidance states that a reasonable excuse is something unexpected or outside your control that stopped you meeting your tax obligation for example an unexpected stay in hospital or the death of your partner shortly before the tax return deadline.

 

If HMRC reject your appeal you can request a review of their decision. The review will be carried out by another team from HMRC who have not been involved in making the original decision. If you lose at statutory review, they will provide you with details about how you can make a further appeal to the independent tax tribunal.

 

The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

 

Get in touch with Malachy McLernon m.mclernon@pkffpm.com

 

Six hiring tips for SMEs and owner-managed businesses

With skills shortages affecting many businesses across the island of Ireland at present, making good hiring decisions is more important than ever, says Teresa Campbell.

The key to successful hiring is planning ahead and allowing sufficient time to check that potential candidates are a good fit for your business. While it can be tempting to make a quick decision to overcome an immediate problem, choosing the wrong candidate will almost always cost you time and money in the long run.

 

These six hiring tips will help you avoid common pitfalls

 

1. Clearly define the role that you want to fill and make sure that you know what skills are needed. Think about which of these skills are necessary from the outset and which can be obtained through training.

 

2. Plan ahead and allow sufficient time to find the right person. Hiring is a time consuming and expensive process and mistakes can damage your business — for example, an employee’s poor quality work may impact your customers while employees who have to be dismissed or who leave because they were never the right fit in the first place will mean you have to go through the hiring process again.

 

3. When screening candidates, check their CVs carefully and note down any issues that need to be followed up such as reasons for leaving a previous employer and gaps or inconsistencies in employment dates.

 

4. Verify qualifications. This is extremely important. If it turns out that someone you hired was not properly qualified and they subsequently run into trouble with one of your clients, this could potentially damage your business’s reputation.

 

5. If the candidate has a LinkedIn profile, check that their contacts and experience support the information presented in their CV.

 

6. Be careful when using LinkedIn and social media to screen candidates. It is advisable to let the candidate know if you intend to view their profile and obtain their permission. Remember that your use of data is subject to data protection regulations.

 

Keep in mind that potential candidates will also check your business out online. In a market where candidates are in short supply, it is important to review how your online and social media presence compares with your competitors.

 

Finally, remember that not all roles need to be filled in-house. Many businesses today outsource administrative roles such as HR, payroll and accounts so that their in-house teams can focus on the core business. For information on PKF-FPM’s HR and other outsourcing services, please contact myself or any member of our People and Culture team.

 

Teresa Campbell l Director 
t.campbell@pkffpm.com

Incorporation of Rental Business

Question.

 

I own a few rental properties and due to recent restrictions on mortgage interest I am thinking of transferring the properties into a Limited Company, will I get incorporation relief?

 

Answer.

 

It will be a question of whether your rental property portfolio is classed as a business or whether the rental properties are just held as investments. There must be a genuine business carried as this is one of the conditions to qualify for incorporation relief.

 

As there is no clear definition of business in the Incorporation Relief legislation this can be subjective. Following a recent case, HMRC now accepts that business has a wider meaning than a trade being carried on and that where an individual spends 20 hours a week or more carrying out “business” activities in relation to the properties then incorporation relief would be available. For example, if you collect your own rent and arrange repairs, etc, then you could prove that you do spend considerable time per week on the business, however, if you use management companies to look after your rental income then it would more than likely be the case that you are not carrying on business activities. Each case is different and we would advise that you examine the facts before claiming incorporation relief. There are other issues that need to be considered when transferring properties into a Limited Company. For example, stamp duty, the requirement to report annual accounts to Companies House and preparing a Corporation Tax return.

 

The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

 

Get in touch with Maria Crudden via email m.crudden@pkffpm.com

 

The HMRC Let Property Campaign for landlords not paying their taxes

Question.

 

I own a couple of residential properties and I have just received a letter from HMRC asking me to make sure I disclose my income and expenses in relation to let residential properties. What is the Let Property Campaign and how do I avail of it?

 

Answer.

 

HM Revenue and Customs (HMRC) is continuing to issue letters to resident and non-resident landlords across the UK whom it believes have failed to declare their rental income.

 

HMRC’s Let Property Campaign was launched in the autumn of 2013, with a clear remit to provide residential landlords with a platform to disclose previously undeclared rental income. Thousands of landlords have already taken the opportunity to bring their income tax affairs up to date with HMRC and secure the best possible terms to pay the tax outstanding.

 

Five years on, the Let Property Campaign is still in full swing, with HMRC recently issuing a fresh batch of letters to landlords it suspects are failing to disclose their rental profits.

 

Anyone who is a landlord and has undisclosed income who notifies HMRC about unpaid tax via this scheme will have three months to calculate and pay the amount owed. The scheme is open to those that have multiple properties, landlords with single rentals, specialist landlords with student or workforce rentals, and holiday lettings. It is not open to those landlords who are letting out non-residential properties such as a shop, garage or commercial property, and cannot be used by those wishing to disclose income on behalf of a company or a trust.

 

Unlike previous campaigns, there is no disclosure ‘window’ requiring landlords to notify their intention to use the scheme by a specific date. HMRC says this campaign will be ongoing for some time; however, the tax authority warns that landlords intending to come forward who delay risk higher penalties if they are subject to an enquiry and they have not made an earlier disclosure.

 

HMRC also says it is currently increasing its targeted compliance activity across all landlord types and will start to identify and write to landlords who it considers may not have declared all their rental income. Anyone contacted as a result of this activity will not then be able to make use of the opportunity offered as part of this campaign.

 

Anyone who registered for self-assessment and completed tax returns within the appropriate time limits, but have simply made a careless mistake when declaring lettings income, will only pay for a maximum of six years, no matter how many years they are behind with their tax affairs.

 

However, HMRC says that if someone fails to come forward and is then found to be behind with their tax, HMRC can go back for up to 20 years. Penalties can be up to 100% of the tax liability.

 

However, for the Let Property Campaign, if landlords submit an accurate voluntary disclosure, the rates are 0%, 10%, 20% depending on the circumstances. Higher penalties of up to 200% can be charged for an offshore liability.

 

HMRC says that if it writes to a landlord about Let Property Income and the landlord has not made a voluntary disclosure, any disclosure will be treated as ‘prompted’ and the person will not receive the same favourable penalty conditions. The full reduction available to the higher penalty, which is between 35% and 70%, will be offered if a landlord makes a disclosure by the date included in the letter.

 

The advice above is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

 

Get in touch with Feargal McCormack via email f.mccormack@pkffpm.com

 

Why prepare your business for sale?

Even if you have no immediate plan to exit, it is advisable to prepare your business for sale, says Michelle Hawkins.

Regardless of whether you plan to sell your business, pass it on to the next generation or continue to develop and grow, it is good practice to prepare your business for sale. By making the business as lean as possible you will maximise its returns.

 

The first step in preparing your business for sale is to de-risk the business by putting the correct systems and processes in place. This will give comfort to the market that the business can continue to thrive without you.

 

Practical steps to prepare your business for sale

 

• Invest in a strong management team
• Ensure all employment contracts up to date and documented
• Clearly define key roles and responsibilities of staff
• Ensure that contracts are in place with customers where possible
• Ensure that leases for premises are in order
• Help your business stand out by highlighting your quality accreditations, awards, etc
• Prepare good management information (Real time cloud accounting can help with this)
• Prioritise good internal communication to bring your team along
• Optimise financial performance ensuring that your accounting policies are appropriate
• Ensure up to date accounts are available
• Identify any surplus assets in the company
• Check any contingent liabilities or claims that need to be addressed
• Ensure that the intellectual property assets are properly registered and protected

 

Businesses should be focusing on these practical actions all the time. However, they are especially important when you are considering a sale within the next 5-10 years. It takes time to prepare your business for sale so you cannot leave it until the last minute.

 

By following the steps outlined above, you will ensure that your business is running efficiently and this in turn will maximise its value. If you would like to more information or assistance on how to get your business ready for sale, please get in touch.

 

 

Michelle Hawkins l Director
m.hawkins@pkffpm.com