Summer Magazine. Inside: Our New Website. Is Launched. WIN AN ipad MINI

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1 Summer 2013 Magaze Inside: Our New Website Is Launched WIN AN ipad MINI

2 2 Magaze Welcome Guest Editor Andy Beeforth OBE Writg this article gives me an opportunity to say thank you to one of the friendliest and smartest group of people I work with Cumbria. I run the Cumbria Community Foundation which is a local grant makg trust. Our deputy chairman is Dodd & Co partner Ian Brown, who has been volved with the Foundation sce its very earliest days. The Foundation exists to address local need and we work with our donors to make their money have most impact on their chosen cause or terest. Many people know the Foundation for its disaster appeals, raisg millions response to foot & mouth and floodg. But we have also built endowed funds excess of 8m and manage over 70 different grant makg funds on behalf of families, busesses and other organisations. Ian Brown is a member of our grants committee which this year gave out over 2m grants to local charities and people need. Like all good charities we try to keep our costs down. Dodd & Co help by providg meetg rooms and operatg our payroll. They re one of the 150 busesses that are members of the Foundation. They also advise us when we re promotg the tax benefits of charitable givg. This year we ve raised 250K through the Community First endowment challenge which has seen over 8 new grant makg funds created by local people. Community First provides a 50% uplift to every donation and is available until March We worked with Ian many years ago his role as trustee of the estate of a local farmer who had chosen to leave a significant sum to charity. Some of the money was used to create the George Kiplg Funds at the Foundation which makes grants every year support of projects helpg children and older people. I know Dodd & Co have clients all over the country and beyond but the firm s home is Cumbria. Cumbria is very special, not just because of the beautiful countryside but because of the people who live and work here. Dodd & Co are at the heart of our communities, raisg funds and as volunteers and workg as trustees many local organisations. I often attend the County Young Farmers AGM and enjoy the young farmers banter with their county treasurer Rob Wharton. Several of the staff have completed our own Jenngs Rivers Ride Thank you Dodd & Co your support makes a real difference to the Cumbria Community Foundation and the people we serve. To fd out more about the Community Foundation, Community First, how to access our grants, how to set up a fund, become a member or take part the Jenngs Rivers Ride visit

3 Magaze Contents 3 Page 3 Risg Star Contents Meet Emma... Know how to impress Emma is one of our traee chartered accountants and is currently studyg towards her ACA qualification. Emma joed Dodd & Co 2011 after completg an accountg & fance degree at The University of Leeds, gag a first class honours degree no less! Sce jog Dodd & Co, Emma has been gag experience all aspects of the practice, cludg preparg accounts for busesses of a wide range of shapes and sizes. She has also been puttg her corporate accountancy trag to good use a range of statutory audit work which often takes her out of the office and to other fast paced busess environments. She particularly enjoys gettg to know clients and understandg their busess, so she can help them get to grips with their fances usg regular management account formation. When she isn t studyg Emma is often found runng as she has committed to 10 (yes 10!!!) half marathons this year memory of her friend s mum, Alison Donald, who sadly lost her battle with cancer 10 years ago. The group of 6 runners has a target sponsorship for Eden Valley Hospice of 5,000. Donations can be made at Emma is also chair of the Cumberland Chartered Accountants Student Society (CCASS) and organises regular events for chartered students around the county. Guest Editor Busess Tax Know How To Specialise Healthcare Vets Protection Dodd Rescue Professional Practices Farmg Leisure Construction Charities Social Media Dodd Murray Limited About Us Sports Dodd & Co DoddAccountants This newsletter is designed as an formative guide for clients and their advisors. The articles cannot deal with any particular pot depth and they should not be used as a substitute for full professional advice. Accordgly, no responsibility for any loss or damage can be accepted by Dodd & Co Limited as a result of any person or organisation actg upon material contaed this newsletter Data Protection Policy In the future Dodd & Co Limited or Dodd Murray Ltd may contact you by mail, telephone, , fax or other means for marketg purposes. If you do not wish to receive further formation on products / services, please write to: Data Controller, Dodd & Co Limited, Clt Mill, Cornmarket, Penrith, Cumbria, CA11 7HW.

4 4 Magaze Busess Are we movg to a paperless society?? In the current fancial climate, more and more busesses are lookg to streamle their accountg function to help them save money and to ensure that they are on top of their own fances. This, together with the contug technology boom has led to big changes the way people keep their records. As we move further down the road towards a paperless society, with everythg beg done onle on your tablet or phone, more and more formation is available on the ternet. The growth of ternet bankg has meant that bank statements can now be downloaded from the ternet stead of havg to keep all the paper copies. Whilst this may fill you with horror and images of fraudsters, banks are now a lot more aware of fraud and ternet scams and are constantly developg their systems to mimise this risk. Increasgly we are startg to see that banks are stoppg automatically sendg out monthly copies of bank statements (particularly for loan accounts and savgs accounts where people still have them!) This means when we receive the formation for the year end, time is then spent havg to chase the bank for copies (which are reproduced, often at a cost to you). We will therefore be askg all of our clients who are signed up to ternet bankg to download their statements and send them to us as a CSV file future to help save time and speed up the process. In an effort to rebuild relationships between accountants, clients and bankers, more and more banks are startg to offer a lk for the accountant to access onle statements for their clients. This is somethg that we are lookg to sign up for where possible, so aga don t be surprised to receive a request from us to have access to your records. Don t worry we wont be able to access anythg other than the statements. Follow Us For Updates: twitter.com/@doddaccountants

5 Magaze Busess 5 It s all on a cloud somewhere As we supposedly become more technologically mded, a growg number of small busess are lookg to move away from the traditional paper method of usg cash books, but without the upfront expense and time requirements vested a traditional accounts package. These traditional packages tend to require a solid knowledge of accountg, they take time to operate, and can cost an excessive amount given the number of transactions to be put and the formation required by the busess owner. As a result, a number of new packages are comg to market which are operated via cloud accountg. While this brgs pictures of angels with harps to md what it actually means reality is an alternative to a computerised accountg system. These traditionally store all of your accountg formation on your own mache or server via a software package that you have purchased (and update annually). However with a cloud system you would pay a monthly subscription for the cloud package with support and your formation will be stored on a remote server controlled by the developer. Clients have asked us about the risks attached to relyg on cloud accountg, and the ma thgs to ensure are that you have good ternet security to screen agast viruses and strong passwords to help prevent hackg. Of course the more established cloud accountg providers recognise that this is an area of concern for many small busesses and have vested huge amounts of time and money to ensurg that the security built to their sites is as sophisticated as possible and the majority of cases far more advanced than your own security. The systems are developed to be logical and easy to use, without some of the more advanced features of a traditional system, meang that the time requirements are reduced as well as the annual cost. These packages typically cost around for the monthly subscription. Your friendly accountant (us) can also log to your cloud to see how you re gettg on, which means that stant advice can be given throughout the year to help your busess develop. We have looked at a number of these packages recently and would be pleased to advise you on the best package for your busess. For more formation please call Claire Phillips on

6 6 Magaze Busess Keepg it simple These cloud packages don t suit everyone and while there are a number of small busesses out there that don t want to sit and write up their cash book manually anymore, they don t feel confident enough, or simply don t want to have to put everythg to a proper accountg package. So we have devised a number of Excel packages that replace these manual systems and which can be tailored to your specific busess. These clude a basic balanced cashbook, through to a balanced cashbook cludg VAT return summaries and a basic come and expenditure account to enable you to track your profitability. If you are terested havg your own Excel spreadsheets, please speak to your usual Dodd & Co contact. If you don t have one, please call Claire Phillips on or claire@doddaccountants.co.uk Right here right now So your cloud package or Excel spreadsheet is up to date, your friendly accountant has given you the advice that you need and kept up to date with your results, seasons sales, ups (and downs) and the year end is loomg..fear, dread, like a trip to the dentist. But what if you ve had all the pa as you have gone along your accountant was there for you while you rejoiced/suffered? The year end is then really just an exercise for the tax man and the signg off. You already know that you have done your tax planng, bought the van that you needed, and ensured mimum tax or maximum profit! How long does it take the accountant to turn it around? Well we have a 6 week turnaround deadle at Dodds, which kicks when the books arrive at our office. We can do that if everythg comes at the same time! If your books have been completed on cloud as you ve gone along we would hope to beat this time. If you re terested cloud accountg please let us know and we ll be touch to make it happen. You can contact us via phone, , facebook or even send us a tweet. Follow Us For Updates: twitter.com/@doddaccountants

7 Magaze Busess 7 Help from the big boys Ever wondered what s available out there to help busesses grow? Well, wonder no more. As well as fance packages for West Cumbrian busesses for capital and novative ideas, there is now also the Busess Growth Hub scheme and the Growth Accelerator scheme available further afield. If you feel your busess is growg and you need some help with some thgs, now is the time to get it! As newly launched schemes, these government itiatives want to help us grow. There may be some time needed, and maybe even a bit of vestment from busesses themselves, but lets not look a gift horse the mouth, so to speak. If you have any queries on these schemes, please call Alison Johnston on to fd out more. And don t forget the new Innovus launch on research and technological busess start ups too West Cumbria offers skills trag and facilities as well as help with busess support so if you are eligible why not get volved! We fully support Innovus and the start up busess launch! Bookkeepers unite Dodds realise how important bookkeepers are to small busesses, that s why we ve set up a bookkeepers drop day once a while, to keep touch with thgs such as what s the latest cloud package, where are the the best and worst broadband signals, and swappg tips and even client opportunities. All bookkeepers are vited. We feel it s important that we dispel the myth of what accountants are dog and what bookkeepers can do to help the accountants and vice versa. We have had some laughs and some real revelations about what bookkeepers feel about accountants! We thk the important message that has come out of this is that we all have the same goal md to do a good job and to look after our clients. After all, it is the clients who pay us, judge whether our service is better than they expect, and ultimately worth payg for! We are often asked by our clients who have maybe done the books themselves for a number of years to pass on the name of a good bookkeeper and we are even thkg of startg our own mi bookkeepg school. We believe that if busesses have access to a well qualified fance person available at the premises to bounce ideas off on a regular basis, then their busesses will grow and prosper. That s not to say they won t need their accountants advice as they would usually(!) it s just that they may fd it of benefit to swap some thoughts on a daily basis with someone qualified! Follow Us For Updates: twitter.com/@doddaccountants

8 8 Magaze Tax End of tax planng? Whether it has been dividuals such as Jimmy Carr, or large multationals such as Starbucks, tax planng has received unprecedented media coverage durg the last 12 months. Agast this backdrop, the government has reacted by troducg a so called GAAR a General Anti Avoidance (or Abuse) Rule. HMRC will start usg this new weapon its armoury from July 2013, once the current Fance Bill receives royal assent. So will this new GAAR spell the death knell for tax planng the UK? The short answer is no. Whilst there is no doubt that this new rule will certaly make tax planng more difficult the future (and should brg an end to certa artificial tax schemes), there will contue to be a wide range of opportunities for dividuals and busesses to take tax planng action and legally mitigate their tax liabilities. So what type of tax planng will the new GAAR catch? One of the herent difficulties with any new tax legislation is that it will take several years (and probably a number of tax cases that are argued the courts) before it is clear which side of the fence any specific tax planng action falls. Statutory tax reliefs such as EIS (and the new SEIS) will certaly be fe, but will traditional tax planng actions such as limited company structures volvg the extraction of profits by way of small salaries and large dividends still be OK the future? Possibly not - there has been a relatively recent tax case New Zealand (which also has a GAAR) which does give some cause for concern. New Zealand experience The tax case of Penny and Hooper v CIR volved the corporation of busesses by two orthopaedic surgeons and the subsequent payment of large dividends and small salaries was held to fall with the ambit of the New Zealand GAAR. The New Zealand GAAR is differently worded from the UK GAAR, but it does highlight the uncertaty that the new GAAR will evitably cause the next few years before there is clarity on where the le the sand has been drawn. We will closely monitor the troduction of the new GAAR durg 2013 and keep our clients updated on developments and highlight any action that may be required. On a lighter note.. The comedian Jimmy Carr has said that with the benefit of hdsight he wouldn t enter to very aggressive tax planng action such as the artificial tax scheme K2. This may be partly because he now knows what it is like to be on the receivg end of jokes from comedians - when the news broke last year he faced a barrage of jokes from fellow panelists when he filmed an episode of his 8 out of 10 Cats show for Channel 4. Team capta Sean Lock told him: We all like to put a bit of money away for a ray day, don t we? But I thk you re more prepared than Noah! Follow Us For Updates: twitter.com/@doddaccountants

9 Magaze Tax 9 The comedian Jimmy Carr has said that with the benefit of hdsight he wouldn t enter to very aggressive tax planng action such as the artificial tax scheme K2. Follow Us For Updates: twitter.com/@doddaccountants

10 10 Magaze Tax If you thk payg come tax at the top rate of 45% is harsh, please read on. The reduction the top rate of come tax from 50% to 45% (from 6 April 2013 onwards) has been widely publicised, but what is less well known is that the complexities of the UK tax system have given rise to a much higher tax rate of 60%, which is actually payable by dividuals who have less taxable come than those who are payg the 45% top rate! The graph below shows the margal rates of come tax for each 1 of taxable come that will be earned the tax year. As can be seen, the highest margal tax rate is 60% and applies to the 19,000 of come earned above 100,000. This 60% tax rate arises because as well as each 1 of come (above 100,000) beg taxed at 40%, the personal allowance of 9,440 starts to be withdrawn (at a rate of 1 for each 2 of taxable come earned). Another feature of the complex UK tax system is that child benefit is now withdrawn to the extent that come exceeds 50,000 and this is done on a tapered basis, which aga gives rise to a margal tax rate which is much higher than the top rate of 45%. The actual tax rate will depend upon the number of children the graph shows the position for a family with three children, which gives rise to an effective tax rate of 65% (family with two children has a tax rate of 57% and a family with one child has a tax rate of 50%). Naturally with very high tax rates such as these, taxpayers would be wise to look closely at how they own come producg assets amongst their family (e.g. rental property, bank deposits and vestments, shares family companies) and also consider action such as pension contributions. If you would like to discuss tax planng more detail, please do not hesitate to speak to your usual Dodd & Co contact or rg Dean Johnston on (or dean@doddaccountants.co.uk) Taxable Income 150, , ,000 60,000 50,000 41,450 45% 40% 60% 40% 65% 40% 9, % 0% Margal Tax Rate 65% Follow Us For Updates: twitter.com/@doddaccountants

11 Magaze Know How 11 to specialise The Dodd & Co team are known for their specialist skills various dustries and their volvement selected Special Interest Groups ( SIG ) for the Institute of Chartered Accountants proves this. Know how to specialise Alison Johnston, Robert Wharton, Jackie Kirsopp and Claire Hebdige have all been selected as committee members for SIGs that meet frequently London to discuss all the major fancial issues affectg their subject areas. Part of the Rescue and Recovery SIG is Jackie Kirsopp. The aim of this group is to provide support for professionals workg with the restructurg dustry by providg resources and an annual conference to highlight and provide guidance on legislation and key issues. Robert Wharton is part of the Farmg and Rural Busess SIG. Robert has been chairman of this group for 2 years and has been volved for around 13 years. The group aims to improve the accountancy and tax advice given to farmers throughout the country by ensurg all accountants actg for farmers are aware of all the specialist rules you need to be aware of when workg with this sector. Claire Hebdige is a member of the Healthcare SIG which seeks to offer support and advice to chartered accountants workg with clients all areas of the sector cludg doctors, dentists, pharmacists and care homes. As well as attendg regular group meetgs, Claire is a regular presenter at semars teachg other accountants about the healthcare issues of the day. Alison Johnston, one of our partners, was a foundg member of the Solicitors Special Interest Group. The group was formed to ensure that all accountants actg for Solicitors were up to date on all changes takg place with the legal profession. Annual conferences are held to make sure that all relevant topics such as Jackson reforms affectg PI forms, and changes to Legal Aid, as well as the new SRA regulations are discussed and understood by legal sector specialist accountants. Two of our partners, Mart Ward and Jeanette Brown, also contribute to stitute affairs. Havg just stepped down from beg a member of both the Auditg Practices Board and the Fancial Reportg Council, Mart has been recently appoted to the Disciplary Committee. Durg his tenure of membership of APB and FRC, Mart was the only practisg member from a firm outside the Big 4 and was selected to advise on matters relatg to SME s. Jeanette Brown, havg served 6 years on the Insolvency Licensg Committee, switched to membership of the Investigation Committee which deals with assessg serious complats agast members of the chartered accountancy profession. Jeanette will also take over as president of the Northern Society of Chartered Accountants June As part of her presidential year, Jeanette will host a professional dner to be held at the Civic Centre Newcastle upon Tyne on 10 October 2013 which she hopes will be the premier busess event of the year and a superb opportunity for networkg across all sectors. If you are terested attendg the event, further details can be found at or by contactg Marie Rice on Dodd & Co are committed to deliverg high quality, expert advice and our brand know how says it all. Follow Us For Updates: twitter.com/@doddaccountants

12 12 Magaze Healthcare Goodbye NHS, Hello RHS the Regional Health Service The Department of Health (DH) proposed changes to GP contracts for 2013/ As a result each country has negotiated a separate deal for its GMS contract holders and there is no longer one UK contract. We outle some of the differences below. One change that affects all English and Welsh practices is changes to Locum employer superannuation. Responsibility for fundg employer superannuation costs for GP locums has been transferred from primary care organisations (PCOs) such as the now abandoned PCTs, or Health Boards. The locums themselves will be responsible for makg the payment of both the employer s and employee s superannuation payments to the NHS Pensions Agency. To enable this to take place, ex-pco fundg is beg transferred to GP practices, by way of a 1.12% crease on the GMS price per weighted patient. This gives an crease to every practice of 0.72 per weighted patient. This elimates the grey area of long term locums and puts the onus firmly on practices to manage their locum budgets. Based on a weighted list size of 6,500, this will provide a practice with 4,680 towards their locum employer superannuation cost. This translates to locum fees for the year of approximately 37,143, so practices which pay more than this each year to locums who are members of the pension scheme will lose out from the change. England There was a contract uplift of 1.32%. The DDRB origally recommended a 2.29% crease contract payments, which allowed for a 3.4% crease pay for practice staff. The DH dicated this would be at odds with public sector pay policy, which caps pay rises at 1%. The fal contract uplift allows for a 1% crease practice staff pay. The uplift was achieved by creasg global sum payments from 1 April onwards. MPIG is beg scrapped and taken from practices over a 7 year period, startg from 1 April The 120 million currently beg used for MPIG will be released to global sum. This will be phased over the same time period and result an crease global sum of approximately 6.3% by the end of the period. MPIG is still paid to a very large number of practices and figures from the NHS Information Centre report that MPIG payments totalled 117m 2011/12. Changes are beg made to QOF to crease dicator targets and reduce times to deliver them. Most dicators will now need to be delivered with a 12 month period rather than the current 15 month wdow. Organisational QOF domas have been scrapped. The 164m released from this will be used to fund 4 new DESs coverg dementia case-fdg, patient risk profilg to reduce hospital admissions, monitorg patients with long term conditions and givg patients on le access to GP services. There will also be new rotavirus and shgles vaccation programmes allocated a budget of 10m. Scotland Scottish GPs have been awarded a 1.32% uplift global sum, the lowest uplift the UK. MPIG is not gog to be removed just yet. A review is takg place to exame the

13 Magaze Healthcare 13 variations practice fundg and what the impact would be on services. QOF changes will affect some more than others. Increasg the thresholds for some QOF dicators, and brgg new dicators with relatively high upper thresholds will make practices work harder to mata QOF come. Scottish thresholds are not to be set above 90% and exception reportg will help make it possible for practices to mata QOF come. The organisational doma is also beg scrapped. No new DESs are beg troduced, stead the pots are beg redistributed between the global sum, a new public health doma, a new medices management doma and some will rema for patient experience. Wales There was a global sum contract uplift of 1.5%. As with England this allows for a 1% crease practice staff pay. The additional 0.5% is to cover creases expenses. MPIG is beg contued, but discussions are to contue about equitable fundg. The new English DESs are not beg troduced, although there will be a new mental illness DES. Changes to QOF are very similar to those England, the ma differences beg there will be a more lenient method to calculate thresholds; some of the organisation doma remas; some new dicators are beg troduced; and the period for deliverg dicators will not be reduced, so remas at 15 months. What does the future hold? It would appear that 2013/14 will be a period of relative calm for Scottish GMS contract holders, with the bulk of the changes hittg England and Wales. What happens if we look further to the future? We have to ask, are Scotland and Wales delayg the evitable deferrg a decision on MPIG? Changes of this nature don t make it easy for practices to plan for the future and can create uncertaty. Just the opposite is needed, especially at a time when wider reform of the Health Service will potentially create opportunity to expand services. Responsibility for fundg employer superannuation costs for GP locums has been transferred from primary care organisations (PCOs) such as the now abandoned PCTs, or Health Boards.

14 14 Magaze Healthcare Clearg the NHS pensions fog Heidi Marshall sums up the rules regardg the pension scheme contribution limit of 50,000, which will reduce to 40,000 April As with most thgs surroundg the NHS pension scheme the rules are pretty confusg! I've been asked a lot of questions about this over recent months and an attempt to "simplify" what it's all about, here is how a typical conversation might go. Dentist: I've heard about the new 50k pension limits. My total superannuation bill last year was 8,500, so I've got nothg to worry about, right? Heidi: Wrong. It's got nothg to do with what you pay to the scheme. It's all about your "deemed crease pension" also known as your DIP. Dentist: What on earth is my DIP? Heidi: It's a fairly convoluted calculation, but very broad terms, you look at your expected pension at the begng of the year and compare it to your expected pension at the end of the year. You then look at the difference between them, and multiply that figure by 19 if you are an old scheme member, or multiply it by 16 if you're the new scheme. Dentist: Hmmm. I may need to thk about that one for a while! Can you do me some calculations? Heidi: We can do you some estimates if you have a relatively recent pension forecast. The pensions agency will automatically issue a statement to everyone who has gone over their 50k limit, but not until around October Dentist: How do I get an up to date pension forecast? Heidi: Go on the pensions agency website to the followg address: contact_us.cfm You ll need your employg authority code, national surance number and scheme reference number. Dentist: What happens if I go over the 50k limit? Heidi: You pay a tax charge on the excess of your DIP over 50k. If the tax charge is over 2,000 the pensions agency may be able to pay this for you, however the details of how this will work have yet to be falised. Dentist: Does this rule replace the "Lifetime Allowance of 1.5 million" rule? Heidi: No that stays and it's somethg entirely different! Broadly this will affect anyone who has accrued a pension of more than 65K, although the lifetime allowance is reducg to 1.25million April Dentist: The government keeps talkg about "pension simplification". When is this comg? Heidi: This is it! Dentist:!!!!!!!! Follow Us For Updates: twitter.com/@heidi Marshall

15 Magaze Healthcare 15 Maximise your NHS pension producg an accurate Annual Reconciliation Report It s that time of year aga, when dentists England and Wales need to declare their annual pensionable come on the practice s annual reconciliation report. This sounds a lot simpler than it actually is and we often get queries from clients with regards to how to calculate the figures for the return. It is important that the form is completed correctly, as these are the figures used to calculate your future pension. Followg the discovery by the pensions agency that over 3,000 dental associates have understated pensionable pay, all performers will now need to confirm the figures on the return. This is good news for associates, who previously never had access to the annual reconciliation reports submitted by their prcipals. The correct procedure for completg the annual reconciliation report is: 1) Calculate the maximum pensionable earngs ceilg. This is 43.9% of the contract value. 2) Identify any performers who are not members of the pension scheme, such as: a. Dentists who are already receivg their NHS pension b. Dentist who have opted out of the pension scheme c. Dentists who have corporated and cannot pension their earngs 3) Deduct the net NHS pay of the performers identified pot 2 above, from the maximum pensionable earngs figure. 4) Deduct the net NHS pay of performers who are members of the NHS pension scheme from the maximum pensionable earngs figures. 5) The balance remag represents the prcipal s pensionable earngs, as follows: a. As a sole trader the whole of the balance b. As a partnership the balance can be allocated between the partners as agreed c. If your contract is held with a company, your pensionable earngs are restricted to the lower of the balance remag or the salary and dividends you have been paid durg the year. The guidance notes on how to complete the form are now much more detailed and give examples of associates net NHS pay. To download the guidance visit: Due to the changes this year, the annual reconciliation report deadle has been extended from 31 May to 30 June. Follow Us For Updates: twitter.com/@heidi Marshall

16 16 Magaze Healthcare Mixed practice utopia or hell Vets are facg pressures from all sorts of angles at present, whether that be reducg margs on drugs due to onle sourcg by customers, or consolidators pushg cheaper services. This is puttg pressure on margs, fact many mixed practices are startg to fd that profits don t exceed salary levels for some of their senior vets. Do mixed practices benefit from the best of both small and large animal practices or are they hdered by the worst of each? Dodd & Co s benchmarkg data shows that small animal practices have higher overall gross margs as a result of better margs on drugs. In fact, their gross margs are some 22% higher than those of large animal practices! Large animal practices on the other hand benefit from much lower wage costs which are a staggerg 40% less than those of their small animal counterparts. So where do mixed practices fall these key areas? It might not surprise you to fd that their gross marg falls almost exactly half way between that of the small and large animal practices. What emerges as the key factor is the level of wages which is still on a par with that found small animal practices. So where does this leave the dustry? The economics suggest more specialised large and small animal practices. Pressure on comes mixed practices makes them harder to sell to the next generation of vets and succession becomes the key stumblg block. Why be a partner a busess if you could earn as much as an employee with fewer headaches? Is it time that some mixed practices looked at how they are organised and whether there is a better option?

17 Magaze Protection 17 Protect your busess It is both prudent and sensible to review what risks could have an impact on your busess, family and staff the event of death or the diagnosis of a serious illness. You can then decide how to mitigate these risks and hopefully reduce any effect to manageable levels. Whether life cover or a policy that pays out if a director or key person is diagnosed with a serious illness it is vital that not only suitable cover is arranged but that a structure is place to ensure that any policy proceeds are paid to the beneficiaries promptly. The use of trusts and other mechanisms such as cross option agreements can help. In the event of the death of a director, the survivg busess owners can potentially buy back their former director`s shares and their beneficiary could opt to sell them back to the company without loss of Busess Property Relief. What can the impacts be? Loss of earngs if orders are not completed The loss of expertise could lead to reduced orders the future, The costs of recruitg a replacement director or specialist employee Creditors could become nervous The bank may call les of credit and loans. How will these be paid for? A 100,000 life policy for a male mid 40`s for 20 years costs approximately 18 a month and with critical illness added 72 per month, for a non-smoker. It is possible for some policies to be paid for through the busess to maximise tax efficiency. Most of the banks have now closed their fancial adviser teams down and due to changes the IFA sector there are far fewer Independent Fancial Advisers the UK. Dodd Murray Limited is an IFA firm focused on personal levels of advice. Please either contact us direct on or via Dodd & Co if you would like our help. We will provide an itial half hour consultation at our own cost and if you would then like us to act on your behalf we can agree a suitable basis of remuneration.

18 Magaze Dodd Rescue 18...we u o Y... answered d e ask g n i e b s e o d What? n a e m n o i t a admistr e legal procedur n is a Admistratiohe panies lp rescue com designed to me solvent. An that have beco oner is appoted titi solvency prac s to ensure that es to run the bus es defed objectiv certa legally nd hi be s ea id a are met. The m g the clude allow d admistration an de tra to ntue company to co if a company, so Al. savg jobs a good part (ie perhaps has a g ak m ss lo a d an profitable part) n tio ra ist m part, then the ad used to save be procedure can the good part. But what is a pre-pack? Are these legal? Basically yes they are legal. A pre-pack is where the so lvent company s assets are sold very shortly after the admistrato r is appoted. They ve received lots of bad press, as it is often the former directors of the company who buy the assets back and immedia tely start to trade the day after the old company goes under. How ever behd the scenes, the pro cess is not as simple as it may sou nd as it is very tightly regulated by the Insolvency Service and othe r regulators. Anyone thkg this is an easy process nee ds to thk aga and make sure they are properly advised by reputable solvency professionals such as Dodd Rescue. ow n K ow h we ca he

19 Magaze Dodd Rescue 19 What is a zombie company? What is a voluntary arrangement is it true I can write off my debts? The defition of a zombie company is applied to any busess that is only just survivg. That is, it can pay its current bills and mimum repayments on its loans, but is neither makg any significant profit nor makg any -roads to its overall debt. Generally, busesses this category only manage to cover terest charges on their borrowgs. The worry for the zombies is what happens when terest rates do (eventually) start to rise. Also there is a view that says that zombies are effect tyg up assets that could be recycled to start-up busesses with the potential to grow. It s also why there has been a general decle formal solvency appotments despite the economic downturn fewer busesses are gog bust and they are hangg on, but not really achievg anythg. Fancy a BIMBO? An MBO (Management Buy-Out) or an MBI (Management Buy-In) basically volves a purchase of the shares, or assets of, a company by its (or another) management team with the aid of fance from external funders (often a venture capitalist). MBOs/MBIs can often be very high profile busesses beg sold for many millions, but can also be used for the change of ownership with a small owner managed busess, where the owner wishes to retire but there are no obvious trade players to purchase the busess. The key is to have a strong management team either with the current busess, or who wish to buy- to the busess, that can persuade the funders that they can grow the busess and repay the borrowgs that they will take on board to buy the busess. A voluntary arrangement can apply to dividuals, partnerships and companies. It s a formal solvency procedure, governed ultimately by the courts. Basically, you come to an agreement with your creditors that return for them not takg solvency proceedgs agast you, you will pay them so many pence the pound full and fal settlement of their debt. Creditors with security ie secured bank loans, hire purchases and mortgages etc are excluded from voluntary arrangements and therefore no, it s not true that debts can be written off or avoided. Also it s worth notg that the Office of Fair Tradg has recently cracked down on companies that advertise sayg that debts will be written off. 75% of your (unsecured) creditors have to agree to any proposals made before the arrangement can go ahead. n lp If you or your busess are any sort of fancial difficulty & need real life rescue or recovery advice, call: Follow Dodd Rescue For Updates: twitter.com/@doddrescue

20 20 Magaze Professional Practices Better, faster, cheaper With so much talk about ABS structures, changes to PI firms followg Jackson, the impact of the legal aid changes, firms crisis talks, not to mention renewg of professional demnity surance, solicitors might be forgiven for just takg a moment or two to wonder what it is they should really be tacklg first. Solicitors are blamed for havg outdated structures and creasg bank debts, as well as no succession planng and little appetite for sellg their services. We are told that banks now no longer see them as safe bets for creased overdrafts and loans. This is not good news for Personal Injury firms who are facg cuts and evitable redundancies followg the recent new rules on fixed costs. We are seeg more attempts at mergers when we know that these only work if there is new blood at least one of the firms. There is very little pot mergg with a firm where all the partners wish to retire. And now, followg the terventions top firms, we are asked by the SRA to prepare and adapt a contgency plan, and perhaps more importantly, to understand the market. What types of thgs should we be planng? It is suggested that it is the responsibility of the COFAs to ask detailed questions. These might be to assess the current policy on distributg profit to partners light of the firm s current position or they might want to assess if there is enough capital the busess to support the firm s current work and fancial commitments. There was much discussion regardg this at the recent National Solicitors Annual Conference of the Institute of Chartered Accountants England and Wales. Most importantly though, and somethg that cannot be emphasised enough is the relationship a firm between cases opened, fees expected, work progress time lags, bills issued, and ultimate recovery (Cash Flow). If fees are decreasg on a monthly basis, and costs are stayg the same, the knock-on effect of this can take a few months to materialise. The cash flow can be still lookg reasonable for a few months as the old work contues to flow through and be paid. It is only when the new work is not there to be billed, and therefore paid, that the real effect comes to light. And this is when the panic sets. Some solicitors are ahead of the game on this one. Keepg note of the cases opened each week, as well as the likely fee note and time of the job are imperative the current climate. Havg this built to a simple cash flow forecast (excel will do only one page is needed) givg the solicitor the formation needed to plan for the ups and downs the busess. The fact that the cash flow crisis may be spotted a few months ahead of when it will actually happen gives a bit more breathg space to plan what the busess needs to do. For help on the simple Excel sheet please contact Alison Johnson on

21 Magaze Professional Practices 21 On the up? Recent national surveys for 2012 showed that the trend was still to show an creased fee come, an crease on terest received and an crease profitability, explaed by a contued control over spendg. In addition, practices were fairly positive on fee predictions for So the question that must be asked is, how and why has opion changed so much such a short space of time? Perhaps unsurprisgly the employment costs with the surveys show that figures have remaed fairly stable. If we compare this with the creased fee come, then this is perhaps easily sustaable. However if we have experienced a reduction fees over the last few months, then creasg salaries and expectations based on a positive fee crease will most defitely knock the balance with firms quite considerably. Survey results on a more regional scale will be available shortly please contact us if you would like a copy of the latest results. Fally, the structurg and future of the busess seems to be the thg to discuss at present. Should solicitors go for the ABS model, which will make it easier to be more busess like and adapt a more sales orientated firm? Surprisgly, the surveys reveal that 57% of practices are still operatg under partnership or sole trader structure, while only 27% have the limited liability structure. With corporation tax rates fallg considerably for the larger companies, huge savgs are to be made on limited structures. Solicitors may feel more obliged to explore these avenues, which may prove to be a much needed significant cost cuttg measure and life saver durg the comg months and years. For further details relatg to any of these topics above, please contact Alison Johnston on or alison@doddaccountants.co.uk

22 22 Magaze Farmg Inheritance tax rulg a blow for holiday home owners So where are holiday cottage owners left after the recent successful appeal by HMRC the Pawson case? The late Mrs Pawson owned a 25% share of 'Fairhaven' a large bungalow on the Suffolk coast. Her daughters, who owned the remag share of the property and who were the executors of her will made a claim to Busess Property Relief (BPR) from heritance tax followg her death. HMRC refused the claim so Mrs Pawson's executors took the case to the First Tier Tax Tribunal. At this hearg, held November 2011, the executors of Mrs Pawson demonstrated services beg provided with the holiday let. These cluded advertisg for and securg tenants, cleang between lets, provision of bed Ien, provision of telephone and television along with matag the garden by employg a gardener - services commonly provided by most holiday cottage owners. At this hearg the tribunal found that the holiday lettg could be taken to be a busess and not simply the exploitation of an terest property. To many observers this was a surprisg decision given there was only one holiday unit and mimal services were provided. Needless to say HMRC disagreed and sought leave to appeal on various grounds but were only allowed to appeal on a pot of law, beg; 'It (the tribunal) formulated and applied the wrong test assessg whether the property was held wholly or maly as an vestment.' HMRC appealed to the Upper Tier Tribunal which January announced its decision. This time the tribunal came down firmly agreement with HMRC and decided that the property was fact an vestment busess, therefore denyg the availability of BPR and brgg the value of Fairhaven to the late Mrs Pawson's estate. Who will this affect? Owners of sgle holiday cottages, and possibly owners of several separate units. Those who run sites with more than one property are less likely to be bound by this rulg but HMRC may seek to extend the restriction of BPR further. What action should be taken? The rulg only affects the heritance tax status of holiday cottages. Capital gas tax reliefs are still protected, but owners of properties should consider the followg; 1. Review wills to ensure assets not attractg BPR are dealt with promptly. 2. Consider switchg borrowgs to holiday properties. 3. Review ownership to see whether BPR can be secured other ways. 4. Keep detailed records of the work volved with runng the holiday cottage. Some owners with other tradg busesses may be able to secure heritance tax relief by transferrg ownership to their tradg busess. Obviously there will be capital gas tax and particularly VAT implications of this. Follow Rob Hitch For Updates: twitter.com/@rob Hitch

23 Magaze Farmg 23 HMRC appealed to the Upper Tier Tribunal which January announced its decision. This time the tribunal came down firmly agreement with HMRC and decided that the property was fact an vestment busess, therefore denyg the availability of BPR and brgg the value of Fairhaven to the late Mrs Pawson's estate.

24 24 Magaze Farmg Budget announcements The fallout from George Osborne's budget seems to be mostly favourable. Headle cuts to corporation tax and the raisg of the personal allowance to 10,000 next year have won plaudits, not to mention the CUT beer duty! But also announced by the chancellor was a raft of anti avoidance measures. Two items that haven't received many headles may have a significant impact upon the affairs of farmers. IHT Changes The first is the troduction of legislation to prevent the claimg of IHT relief on some loans. Whilst this appears a sensible approach, a closer readg of the proposed rules pdf shows that this will also have an impact on those with loans to buy assets that qualify for IHT reliefs such as Agricultural Property Relief (APR) and Busess Property Relief (BPR). It seems that HMRC are lookg to set any loans agast the asset for which they were taken. This differs from the current legislation that sets loans agast the assets that they are secured agast. In recent years this has led to many farmers with debt to secure their loans on property that doesn't qualify for IHT reliefs. So whilst a farmer might borrow money to buy land they would secure the loan agast a let house or valuable farmhouse to reduce the value of any chargeable assets on death. The proposed legislation suggests that this treatment will no longer be appropriate, exposg many assets to IHT. No doubt HMRC will be lookg at the purpose for which loans are taken out rather than what they are secured on. Partnership profit shares The other issue raised was the announcement of consultation to the sharg of profits partnerships. In recent years partnerships, which you can share profits as partners agree, have proved very flexible for families mimisg their tax burden. Whether this has been by allocatg profits to a corporate partner or an elderly partner to avoid national surance, significant tax savgs have been achieved. This has been even more evident with tax credits as young families have been allocated restricted profits order to claim tax credits and elderly/company partners have shared profits and paid reduced rates of tax. This is particularly prevalent family busesses owned by several generations, which farmg busesses almost always are. We will await the consultation document with terest as it might provide one of the biggest changes to the taxation of farm busesses for many years. Coupled with the IHT changes announced we can't help feelg that this wasn't the best budget for farmers. Update - Loans to Participators The anti avoidance troduced for loans to participators might also have a big impact on corporate partners, not just the farmg world. As a firm we have alwaystaken a cautious view of corporate partners but some people have troduced them to partnerships, and allocated them all the profits. Over time the company capital account the partnership creases with the dividuals capital accounts reducg and sooner or later becomg overdrawn. New legislation will treat these overdrawn capital accounts as an overdrawn director s loan, givg rise to a 25% S455 tax charge. This should be repayable but already there is speculation that this repayment might end givg rise to a permanent tax charge. Follow Rob Hitch For Updates: twitter.com/@rob Hitch

25 Magaze Farmg 25 Sprg is here, fally!! At the time of writg we are still waitg for some sprg-like weather which will enable lambs to flourish and the grass to grow. The sights of bare fields and more seriously large snowdrifts and buried sheep have not been welcomed by the farmg world. However at the time of readg this we hope that the bitter cold wds are a distant memory. Let s look forward to a good summer! Dodd & Co will be out force aga at the local shows and for your diary the dates are: - Cumberland Show, Carlisle Racecourse 8 June 2013 Penrith Show, Brougham Hall Farm, Penrith 27 July 2013 We look forward to seeg you and enjoyg a craic and our hospitality. Robert Wharton will be very busy on Cumberland Show day as Robert is the new Vice-Chair of the show. We wish Robert all the best his role and if you do manage to catch him on show day for a chat, well done! Our volvement local shows does not stop there. We sponsor all the other local shows and will be attendance walkg around and presentg prizes. The farmg team will be busy on the sportg front aga this summer. You will fd the team takg part all manner of thgs from: - Rob Hitch cyclg around the county Andrew Barnes burng up the fairways on a golf course near you Lynne Hume brandishg her badmton racquet Andrew Sims runng up and down fells Robert Wharton venturg back to the wrestlg rg!! On the work front the team are busier than ever. In the period after February, which cocides with tax bill headaches, the team have been busy signg up new clients. These have come from the local area but also as far afield as Cheshire, SW Scotland and Co Durham! We are always busy on the speakg and lecturg front. With the changes capital allowances, RTI, pensions, tax credits and CAP reform we always like to keep our clients and the wider audience well formed. So wherever you fd yourself this summer Dodd & Co know how will be out force! xxxxxxxxxxxxxxxxxxx: Follow Rob Hitch For Updates: See page twitter.com/@rob Hitch xx