Accountants & Business Advisors

- 029 2073 4100

Welcome to the Summer 2016 Newsletter from BPU Chartered Accountants

Mike Bishop Retires

It was a sad occasion end of April at BPU as Mike Bishop, a founder of BPU Chartered Accountants, finally retired after 40 years with the firm. Mike will be very sadly missed by the firm and all of his loyal clients but we wish Mike and his family every happiness in retirement. I'm sure he will be joining us again in the not too distant future at the various social gatherings.

Baby News

Our Marketing Manager, Louise Williams, recently gave birth to a beautiful baby girl, Lauren Elizabeth. Both mother and daughter are doing very well and Louise is currently enjoying her maternity leave with Lauren and big brother Lewis.

60th Birthday Celebrations

Many congratulations to our longstanding receptionist at BPU, Barbara Carter, who has been with the firm for 28 years and celebrated her 60th Birthday end of May.

Fast Growth 50 2016

A reminder to our clients that Wales's Fast Growth 50 entry applications deadline is fast approaching, July 31st. Please see link below:

http://www.fastgrowth50.com/enter

Do you let residential property, or plan to?

If you do, the chances are your finances are about to change for the worse.

There have been a number of changes to tax legislation on this matter, some of these are already taking effect and others are scheduled to take increasing effect over the next few years.

Significant changes to tax legislation

If you or your business now acquire residential property to let, rather than occupy, there is an additional 3% SDLT surcharge on top of the typical rates
The often used Wear and Tear allowance for furnished properties was abolished on 05/04/16 - resulting in higher income tax bills in most cases
From 5th April 2017 HMRC will no longer allow you to offset all of your mortgage interest against your rental income, increasing tax bills, significantly in some cases
From 6th April 2016, the rate of Capital Gains Tax was reduced by 8%. However, the tax reduction is to be denied for disposals of residential property with an 8% surcharge being applied.

We have seen many instances where the financial consequences of the above are anything but easy to swallow and have doubled the tax charge for investors in some cases. Although the amount of extra tax to pay is linked to the rental profits of the investors, it can also have serious impacts on smaller investors too.

Many people view property as an alternative or supplement to pension planning and require their properties to work for them long into retirement. However even investors with only one or two properties are facing serious implications. There are numerous examples where properties which are currently generating cash, will actually start requiring investors to top up cash rather than being able to use the properties to supplement their income.

Options available to you

There are various options open to residential property investors and these range from the relatively simple to the relatively complex, with various options in between the two extremes.

It is worth noting that the restriction on mortgage interest can only apply to individuals or partnerships and does not apply to companies. For this reason incorporating your portfolio often seems like a sensible idea as this can substantially reduce the tax burden. However a lot of care needs to be taken as there are various methods of incorporating an investment portfolio with varying degrees of tax to be paid along the way. The questions are; which options are open to you and which of those are the most beneficial? In some cases incorporation is not required, or advised, and a simple rebalancing of the portfolio can achieve the same results without the need for any further planning. However large or small your portfolio is, or even if you are about to start to acquire rental properties, you are facing significant change in your tax liabilities and finances.

How BPU can help

If this is something that will affect you, or someone you know, we would strongly advise you seek professional advice on your portfolio to understand the options available to you. Here at BPU we have extensive experience of providing bespoke solutions to each investors particular circumstances.

Should you wish to discuss any of the above with us or to arrange a meeting please speak to your BPU contact in the first instance or call Andrew Miller on 02920 734100 or email andrewm@bpuaccountants.co.uk.

Crowdfunding

Crowdfunding is an alternative or additional way of raising finance, as well as building awareness and support for a business venture or project. For many budding entrepreneurs, the excitement generated by a great new idea is soon dampened when they struggle to raise the necessary funding. This is where crowdfunding can help raise the funds needed to get your business venture off the ground.

What is it and how does it work?

Crowdfunding allows a business idea to be pitched to the general public, by creating a fundraising page detailing exactly what the idea is and why it is worthy of funding.

It can be used to generate various types of funding:

Donations - this is the traditional, and most common form of crowdfunding. It allows a project to generate funding from individuals who have a keen or personal interest in seeing your idea develop further.
Equity - there are some crowdfunding platforms available specifically to offer equity in return for investing in their projects. Crowdfunding can be used as a tool to raise money through SEIS schemes.
Debt - also typically known as Peer to Peer lending, which allows individuals and investors to lend directly to businesses and projects.

Before pitching your idea to the 'crowd', you will need to determine what level of funding you require, and then consider how much of the funding you wish to raise (or consider realistic) from crowdfunding. This funding target needs to be carefully considered, as some crowdfunding platforms operate on an 'all-or-nothing' basis. However, some crowdfunding platforms do provide the option of allowing the project to simply raise as much funding as possible, and then receive whatever was raised as funding towards the project.

Some backers may simply wish to donate to your project because they think it is a great idea that they would love to see come to life. However, in order to encourage as many backers as possible to pledge funds, rewards are typically offered to backers as a thank you (or to incentivise them) for their backing.

It is also vital that the project has a strong (but not necessarily costly) marketing campaign behind it. If a project can generate a lot of publicity on social media, then it can potentially reach thousands of individuals through the page being 'shared' and discussed.

Be aware that crowdfunding is not a free method of raising finance. When using the traditional route of crowdfunding, fees typically reach around 10% of the funds raised (crowdfunding platforms usually charge circa 5% of funding received, with transaction fees from donations e.g. PayPal, making up another 5%). These costs need to be incorporated into your overall budget.

Benefits

Crowdfunding gives an indication as to whether the idea is likely to be a success. If there is little interest, then this may be a good indication that it simply will not work. Conversely, if a project generates considerable interest and the donations come flooding in, this goes a long way to show that the idea could be a great success, especially as the public are not just expressing an opinion but investing their own money.

The backers will generally have a personal interest and feel that they have a real involvement in your project. If they can convey a passion for your idea to others, then this is additional promotion of your project.

Other considerations

The tax implications of raising finance through crowdfunding can be complicated. It can vary depending on exactly what the idea being promoted is and what rewards are offered to backers in return for donations. These tax implications should be considered in detail prior to undertaking any crowdfunding as it is important that you not only comply with tax rules but are also aware of all potential costs.

How BPU can help

Here at BPU we have extensive experience in providing bespoke tax advice to ensure that our clients both comply with tax rules as well as ensure they legitimately minimise the amount of tax they pay.

We also have extensive experience in assisting clients in complying with investment schemes to enable them to raise equity funding, for example through the Government's Seed Enterprise Investment Scheme (SEIS), ensuring that all necessary steps are taken to ensure compliance and encourage investment.

Whether you are looking to raise funds to get your new idea off the ground, or are considering crowdfunding as a method of investing some of your funds and diversifying your portfolio, BPU have the experience and expertise to assist you!

Change to Zero Hour Contracts

Zero hours contracts are still used frequently, despite having been criticised for their inability to provide employees with financial stability. On a zero hours contract, an employee is not guaranteed any set number of hours and is only paid for the hours which they work.

They may be called in at short notice and, although they can refuse the hours, in practice this may result in fewer hours being offered to them in the future. Zero hour contracts are convenient for some employers, especially those whose businesses are seasonable, since they do not have to worry about paying salaries if there is insufficient work available. They also appeal to employees wishing to work flexibly or seasonably and who see the wages earned as pocket money, rather than relying on this income in order to meet regular financial commitments and to pay bills.

Previously, employers could write exclusivity clauses into contracts, ie state that employees must not work for any other employers from the time they sign the zero hours contract until the time they have served their notice. It has been argued that this is unfairly restrictive and may create financial hardship if a zero hours employee is receiving no or very few hours but unable to seek employment elsewhere. Therefore in May 2015, it was held that any such clauses would be void and unenforceable.

On 11 January 2016, The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 (SI 2015/2021) came into force. These Regulations allow employees who have been dismissed or treated unfairly due to their refusal to abide by an exclusivity clause to bring about an Employment Tribunal claim for unfair dismissal. Any zero hours employee can bring such a claim, even if they have been employed for under two years.

Employers should be aware that any exclusivity clauses which are included in their current zero hours workers' contracts are no longer valid and should ensure that they are deleted from any zero hours contracts issued in the future. They should not seek to discourage zero hours employees from taking on work from other sources unless there is a good business reason to do so, for example the protection of confidential information when working for a rival company in the same industry.

BPU Financial Solutions News

Pensions Freedom - What's changed?

Basically, you have more choice with what to do with the money you save in your pension. From age 55 you will now be able to access all the money that's in your pension pot. Before the changes were made you were limited to what you take out from it each year.

Your choices

The following diagram shows just how much flexibility there now is:

You don't have to do anything with your pension pot now. You can leave it invested until you need it. And it's at that point you can see which of the options available to you that will best suit your circumstances.

It's important you fully understand all the options and the different tax implications they have. A professional financial adviser will be able to help you with this and give you advice that suits your own needs.

Building your pension pot

You can see the amount of choices you have to take money from your pension pot. But to have those choices you'll need to have first built up a pension pot.

You have old pension plans that you may wish to take financial advice on, as to whether or not they may be better served within a new plan.

Summary

The pension changes have had a positive impact on people's feelings towards retirement and do give them more choices to help achieve the retirement they want.

They're also encouraging more people to seek professional financial advice.

How you take advantage of the changes is up to you but speaking to a financial adviser can help you find out more about the changes and whether your current circumstances mean you might be able to build up your pension pot faster.

Please contact Ian Sinclair at BPU Financial Solutions on 02920 734100 or email ians@bpufinancialsolutions.co.uk.

Essential Dates and Deadlines

1 June

New advisory fuel rates applicable.

30 June

End of CT61 quarterly period.

Annual adjustment for VAT partial exemption calculations (March VAT year end.)

Quote of the Month

'Relying so heavily on the Bank of Mum and Dad...risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can't afford to buy even with parental help.'

Nigel Wilson, CEO of financial services group Legal & General, commenting on a study suggesting that parents lend £5 billion annually to their children for house-buying purposes.