FD Accelerator Sharing Knowledge & Insight

Transcription

1 FD Accelerator Sharing Knowledge & Insight Tuesday 1 April 2014 Accounting Changes Melvin Leech Technical Director Overview Recent legislative changes UK accounting standards Recent Changes Audit exemption Guarantees for subsidiaries (s479a) Proposed uplifts Recent Changes Strategic reports Micro entities UK GAAP FRS 102 Replaces all current FRS s, SSAP s and UITF s Consequential amendments to FRSSE 2015 Mandatory for A/P s commencing

2 UK GAAP Why do I need to be concerned now? First balance sheet at Comparatives needed Start of comparative year Main Changes Goodwill Revaluations Deferred tax Foreign exchange contracts Holiday pay accruals Lease incentives Main Changes - Goodwill Current default maximum period 20 years New default maximum period 5 years Reliable estimate of useful life FRSSE 2015 Main Changes - Revaluations Investment property gains and losses - go through profit and loss for the year - no longer a revaluation reserve - may a dramatic effect on result for year Main Changes Deferred Tax Currently deferred tax does not apply to revaluations Under FRS 102 there is deferred tax plus Deferred tax will be charged on revaluations Offset against revaluation reserve - unless already utilised. Main Changes Foreign Exchange Contracts Not previously recognised Now need to be brought onto the balance sheet Fair value 2

3 Main Changes Holiday Pay Requirement to accrue for outstanding employee holiday entitlement Non coterminous holiday and financial year ends Holiday entitlement rules Main Changes Lease Incentives Current treatment - spread over the period to the first break clause New treatment - spread over the length of the lease Actions needed Check accounting policies Consider effect on: - distributable reserves - dividend policies - remuneration planning - banking covenants - shareholder expectations Questions NOW Recap Audit exemption Limit changes UK GAAP Think about it now Blue Richard Rankin Partner 3

4 BLUE What is it? Why should I use it? What benefits will it bring? BLUE What? A strategic tool for your business Understand Develop Support BLUE Understand You Your Business Objectives BLUE Develop Road Map Key Actions Responsibility Measured BLUE Support Active Board Support Challenge Mentor BLUE Why? A fresh perspective Removes the noise Understand your business partners there is no downside! 4

5 BLUE Benefits Identify what s important Questions Refocus your effort Achieve your objectives Protecting your Business Nathan Glaister Financial Planning Consultant Think about your business. What if a Key Person or Owner died or suffered a Critical Illness.. How would this affect profitability? What would happen to their share of the business? How would their family cope financially? Why business protection? In April 2013, there were almost 2.8 million active registered companies in the UK* 59% of limited companies have no key persona protection** 61% of limited companies have no share protection in place** Why business protection? 54% of limited companies have no corporate debt protection** 63% of business owners have never heard of Relevant Life Plans** Sources: * (as at 29/05/2013) ** Legal & General Business Protection Research

6 The 3 areas of business Protection Key Person Protection Protect the business Business Protection Protect the business owners Protect the employees Identify ANYONE whose loss, either PERMANENT or TEMPORARY, would affect the company s ability to maintain turnover and generate profits Key Person Protection Shareholder Protection Relevant Life Policy Replace lost profits or Enable the business to recruit and train replacement Business Liabilities Directors Loan accounts repayable on death, Key Person Protection Business Liabilities Directors Loan accounts repayable on death, Business Loans, Overdrafts, HP, leases, Redundancies. Shareholder Protection Business Succession Planning Protects the shareholders Protects the families Protects the employees Protects the business Shares purchased by surviving shareholders - Own life in trust - Double Option Agreement Shareholder A Policy in Trust Surviving Shareholders Relevant Life Policy Policy taken out by the employer to provide death in service benefits for an employee (must be in receipt of schedule E earnings) Shareholder B Shareholder C Policy in Trust Policy In Trust Surviving Shareholders Surviving Shareholders Company owns the policy and pays the premiums 6

7 Relevant Life Policy Corporation Tax Relief available for the employer Not classed as additional income for the employee Written under Relevant Life Policy Trust for the benefit of nominated beneficiaries Example John Smith, shareholding director, currently pays 200 a month for his life assurance out of his net income. Cost to John as a Director paying personally Monthly premium = 200 Pre tax income to fund Income Tax rate of 40% and = Cost with employers on this salary = Gross Salary and NI are allowable deductions against Corporation 20% Thus total Monthly cost to John and the business = However: If the business pays premiums through a relevant life policy Auto - Enrolment Experiences so far Monthly premium = 200 No Employee Income tax or NI No employer NI Relevant Life policy is an allowable deduction against corporation Thus total cost to business = 160 So cost to if paying personally = Cost of business paying via RLPT = 160 Saving = or 49%!! Questions Tax Update Nigel Holmes Tax Partner 7

8 Corporation Tax Rates From 1 April 2014: Main rate 21% Small Profits rate 20% Effective marginal rate 21.25% From 1 April 2015: Flat rate of 20% Associated Companies Less of an impact 51% group definition for POA Patent Box Rate 10% (phased in) Annual Investment Allowance Increase to 500,000 from 1 April 2014 Ends 31 December 2015, thereafter 25,000 > 98% of businesses will achieve full tax relief for capex with AIA Allocation to AIA vital to maximise if exceed AIA water/energy saving assets; R&D Allowances Sale of a Trading Division Trading group can dispose of investments in trading companies tax free if criteria met But what if 2 trades in a stand alone company and wish to sell one? Asset sale = tax arising Can be restructured into a tax free sale by using a subsidiary Take steps now as need 12 month ownership Enterprise Management Incentives (EMI) Tax efficient share option scheme Useful mechanism to retain and reward key employees until exit Recent CGT changes: 10% on disposal 12 mth holding applies to option period No minimum shareholding requirement R&D Tax Relief Not Just for Men in White Coats! Very generous, under-claimed relief Budget increased the cashback rate for SME scheme to 14.5% (nearly 33% cashback on costs) For large scheme so far RDEC is better option than 30% uplift method Lots of examples many in engineering and manufacturing Company Purchase of Own Shares A useful mechanism to buy back shares from shareholders CGT treatment often favoured to tax at 10% Beware rules need 5 year holding for CPOS to be capital Beware timing of ceasing employment 8

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