According to the Daily Telegraph, it appears that many top executives at the Department of Health have arrangements to use their own companies to provide their services, potentially avoiding PAYE tax and National Insurance. It also seems likely that other government departments will have similar cases.

But Colin Tice, Tax Partner at Cassons Chartered Accountants, is quick to point out that this is only part of the story.

“The fact is that just setting up a company to replace an employment relationship – as these stories suggest – often doesn’t work and should be caught by what is referred to as the ‘IR35 legislation’ which essentially removes the tax benefits by imposing PAYE and National Insurance on the company. Of course, that requires HM Revenue & Customs to properly police such arrangements.

In the right circumstances – and fundamentally with the right implementation – there are tax benefits in running a limited company instead of suffering tax as an individual. And with the right structure even the IR35 problems can be legitimately avoided. But people need to be aware that it really isn’t as simple as some news stories seem to indicate and getting things wrong can be expensive.”

Anyone who’s met me or read any of my musings will know of my enormous respect for Sir Ken Robinson. A professor and thought-leader on educational reform (or rather ‘transformation’), Sir Ken’s most famous speech is his 2006 TED Talk on how schools are killing creativity. I find his ideas on education and creativity compelling, but I’d like to focus not on his views but his delivery style. Not without reason is he considered one of the world’s great communicators, and in this talk at the Royal Society of Arts in 2008, he’s on cracking form.

I'd like you to focus on the section 3 mins 20 secs to 6 mins 30 secs on this YouTube clip. The rest is worth listening to (as is anything he says!), but there are some things he does in this section that warrant comment.

Light and Shade

If Sir Ken ever tired of campaigning for educational revolution, a career as a stand-up comedian surely awaits! He moves so easily from the profoundly insightful to the comically rib-tickling, and this ability to juxtapose light and shade is a mark of great speakers. There’s something faintly ridiculous about a highly respected academic speaking so openly about getting married in an Elvis Chapel!

Specificity

One of the keys to successful storytelling is the provision of detail. Dickens was a master at this, and while we might not have the time to go into such precise descriptions of characters or situations, an element of detail helps put the audience where you want them to be. Psychologists speak of ‘contextual embedding’ – these details help us sense what it was like to be in a particular situation. It establishes a stronger connection with the audience. So Sir Ken gives us a date (3rd January) when he received a call from the Getty Institute. “Would you like to come to California?” they asked. “We left immediately…the phone’s still hanging off the hook!” (as he waves his arm to simulate it).

Throwing the punchlines

Sir Ken has a nice way of tossing a punchline in an unexpected direction. He turns his head at the moment of delivery and it gives the line more impact. This is a great technique for making your speaking more effective. It also shares things around the audience better.

Use of Metaphor

After the comic set-up about Las Vegas he uses a key ‘link phrase’ – “I mention it because…” This gets him into more profound territory, explaining why Las Vegas symbolises for him the unique ability humans have to use their imagination (which forms the basis of his proposition). Metaphors and analogies are great ways to introduce heavier themes, softening up the audience so they’re more likely to follow your argument.

Stillness

Sir Ken suffered from polio as a youngster and his mobility is limited to this day. For that reason he doesn’t move around too much when he speaks, but this just adds to his gravitas. It helps us pay attention to what he’s saying, with no unnecessary movement to distract us. I remember watching my own TEDx talk from 2010 and thinking to myself, “For goodness sake, stop pacing up and down!”. It’s an idea to video yourself speaking. Watch it with the sound on mute and you’ll be more aware of your movement and any issues with body language.

The beauty of YouTube (and the likes of TED Talks) is that we can study and enjoy watching great speakers like Sir Ken, and incorporate some of their techniques into our own styles. But remember, that style without substance is an empty experience – you soon get found out!

Andrew Thorp coaches business leaders in presenting and the development of authentic storytelling skills.

For more information, see www.mojolife.org

You can see details here about Andrew Thorp's Speakeasy at Cassons. The next events are 22 February and 21 March.

From Phil Kelly, Director, Petty Chartered Surveyors

From April 2011, the empty property Business Rates threshold reverted to rateable value of £2,600 from the previous level of £18,000.

This is of great concern for SMEs and commercial property owners who have empty premises in their portfolio.

This will result in businesses with empty properties facing the prospect of having to pay thousands of pounds extra in business rates from April 2011. The Federation of Small Businesses has warned that this will place a very significant burden on companies struggling in the current economic climate.

After a short holiday of six months, when no rates are paid on empty industrial buildings (and three months for offices), owners or former occupiers are liable for full rates payment irrespective of their efforts to lease the buildings. Business Rates are basically a tax, similar to Council Tax on residential property.

In opposition, both the Conservative and Liberal Democrat parties were opposed to this tax but since coming into power they have yet to do anything about it, except for a marginal increase in the threshold of those small properties which are exempt from paying Business Rates. This may in some part be due to the higher than anticipated revenue raised by the initiative and the Government's requirement for income to finance public expenditure.

Empty rates on commercial buildings are effectively a tax on the landlords' or owners' failure to attract an occupier. In the current climate the continuing lack of finance and a shortage of business tenants have stalled speculative development, with many developers being further discouraged by the potential burden of empty rates payments whilst the property is being marketed to let.

There are many foreseen adverse results of empty rates:

Firstly, taxation should generally be levied on profit or income, but in the case of empty rates it is being levied on failure, making a bad situation even worse. Building owners never intentionally leave a building empty, regardless of whether the owner is a large institutional landlord or a small business. If a property does not generate rent, then there is no income from which the owner can pay his tax.

It is also important to appreciate that many buildings remain empty due to comanies restructuring to reduce costs in order to survive this downturn and empty rates penalise this strategy.

If a tenant is paying Business Rates as well as rent on a surplus vacant building, it represents a substantial drain on their business.

Secondly, in the current economic climate buildings remain empty due to the fact that there is a surplus of commercial properties and limited demand, regardless of price.

The argument that increasing the financial penalties of holding empty buildings will encourage greater competitiveness in the market is therefore mistaken. Companies which hold leases on vacant surplus buildings are tied into a rental commitment by their lease, which generally cannot be avoided.

Thirdly, institutional investors often include pension funds, which now face additional costs of holding empty buildings when no income is generated and this, in turn, will reduce the amount of money paid to pension pots when many funds are already depleted due to the downturn.

Fourthly, empty rates are acting as a deterrent to investment in building projects at a time when there is a general shortage of good quality new commercial stock. This will certainly adversely impact on the future competitiveness of the North West as a region.

Whilst the Government is under pressure to raise tax revenues from all sources, empty business rates penalise investment and development and substantially reduce the ability of SMEs to not only survive these difficult times but also to plan further expansion. The Government has the opportunity to put measures in place to aid the recovery by the abolition of this penal tax.

Phil Kelly
Director at Petty Chartered Surveyors
Email: p.kelly@petty.co.uk:
Twitter: @PettyCommercial

Following the Government's announcement late last year, that small businesses would be given extra time to prepare for auto-enrolment, a new timetable has now been released.

Companies employing 250+ individuals will not see any change to their staging date.

"Automatic enrolment will begin on time this October, taking up to 10 million people into pension saving - many for the first time ever, and all employers will be part of it" said pensions minister Steve Webb.
"We have done all we can to ease any burden on business the reforms will bring and employers of all sizes now know the date they need to start enrolling their staff."

The UK's largest employers will be expected to lead the way this October as scheduled, followed by medium sized employers and ultimately small companies. All existing companies, regardless of size will have to have introduced auto-enrolment by April 2017, with any new companies by February 2018. The new timescale means that 70 per cent of individuals will have been automatically enrolled by the next general election.

The level of pension contributions will be phased in over time to help employers and individuals adjust. Full contributions will have to be paid from 1 October 2018.

The table below sets out the revised automatic enrolment dates for all employer sizes.

HMRC has announced that late filing penalties will be waived for anyone who files their tax returns by 2 February. A similar grace period is in place for any tax payments which are also due by 31 January.

When the Public and Commercial Services Union confirmed that its one-day strike in HMRC call centres was going ahead on 31 January – the deadline for filing tax returns – it followed that tens of thousands of taxpayers would struggle to file their tax returns in time. HMRC expected around 90,000 calls on the last day of filing, and that only about 20% of those calls would be answered in the event the strike proceeded.

Filing by the deadline is important, because there are automatic penalties for late filing – this year, for the first time, the penalties are charged even if there is no tax due.

HMRC has just announced that anyone who files their tax returns by midnight 2 February will not receive a ‘late filing penalty’.

This is a complete change from the previous official line, which was that anyone who struggled to speak to a call centre operator on the 31 January would have to claim a “reasonable excuse,” that the industrial action prevented them from filing their return.

“This is primarily of benefit to taxpayers that don’t have an adviser, and have to rely on HM Revenue & Customs to help them to navigate the complex forms”, said Colin Tice, Cassons’ Tax Partner.

“We are pleased that HMRC has recognised the difficulties that a strike would have caused and have allowed a couple of days’ grace so that people can get the help they need. This was always going to be a difficult year for people filing tax returns, particularly with the new, more stringent penalty regime. It’s good that they have also allowed more time for people to pay their tax, as of course you generally need to finish your tax return, in order to work out how much tax is owed.”

Colin appeared on Radio 5 live this lunchtime (Thursday) to advise on the new rules for filing tax returns and the problems the strike would cause for people struggling to file their tax returns by 31 January. Perhaps someone from HMRC was listening?

The ABC of R&D tax credits

Generous tax reliefs are available for companies that incur qualifying expenditure on eligible Research and Development (“R&D”) activities. The reliefs could take the form of an enhancement of the amount deemed to be spent for tax purposes, meaning more tax relief, or even an actual tax repayment.

Since the introduction of the R&D tax credit scheme in 2000, only 2% of British companies are actually claiming the relief. This equates to around £9 billion which is left on the table unclaimed each year.

One of the reasons is that most companies think they’re not eligible for the scheme because R&D tax credits are only for companies with R&D departments and “men in white coats”.

What exactly are “eligible activities” for R&D?

It’s as easy as ABC for R&D experts Jumpstart. Here are three companies that have recently received a substantial monetary return from the R&D tax system.

A is for Apps. Companies writing software for applications on mobile phones are eligible when they:

1. Make substantial improvements to existing products (where those improvements relate to the performance or capability of the product rather than its functionality); or
2. Incorporate new or untested technology into products, where experimentation is required to select the best implementation route; or
3. Make existing products work on new platforms (e.g. making an iPhone game or app work on an Android device), where this involves overcoming technical problems that haven’t been solved before; or
4. Work to create games engines or application frameworks where these represent a measurable and objective improvement over existing systems; or
5. Overcome bugs or limitations in existing technology; or
6. Test new technology where there is little information on their usage in the public domain.

B is for Blind Manufacturers. Textile companies are often eligible for R&D tax relief as they regularly attempt to overcome technical or manufacturing problems in a variety of areas such as:

1. Attempting to increase the abrasion resistance of a material; or
2. Improving chlorine stability (in swim suits, for example); or
3. Changing the blending ratio of a material to try to achieve increased strength or other desired physical properties; or
4. Attaining a higher stability e.g. maintaining colour or water resistance after a set number of machine wash cycles; or
5. Development of weaving processes for the production of a material with a new composition.

C is for Cake Manufacturers. Or other food manufacturing businesses that regularly work on new projects (often because of changes to legislation, consumer trends and specialist dietary requirements), such as:

1. Eliminating allergens and food additives;
2. Extending the shelf life of goods;
3. Product development for specialist dietary requirements (Low salt, sugar etc.);
4. Resolving technical problems with production processes (e.g. seasonal variation in product quality);
5. Retaining the same look, taste and texture after changing ingredients/ raw materials; or
6. Developing new processing methods after the introduction of new equipment.

D is for Do We Need to Say More? We could exhaust the alphabet many times over!

How can Jumpstart help?

Jumpstart are specialists on R&D tax credits, 100% focussed on helping companies make successful claims.

Jumpstart’s analysts derive from many scientific backgrounds enabling them to identify eligible activity that is often hidden in the daily routines of a company’s production and processes, and then translates what can be exceptionally technical detail into meaningful reports that are consistent with HMRC’s R&D guidelines.

Working together with Cassons, Jumpstart seeks to find and maximise a company’s R&D eligibility while Cassons utilise the tax benefits for their clients. Jumpstart always seek to complement not to compete.

Jumpstart has consistently found R&D eligibility in companies’ processes where the R&D legislation did not seem to be relevant.

So if you are a manufacturer and your industry sector starts with a letter of the alphabet then Jumpstart your cash flow now! See us at www.jumpstartuk.co.uk or call 0131 240 2900.  Alternatively you can begin your conversation with Cassons chartered accountants on 0845 337 9409.

Following a recent case, HMRC have changed their stance on the recovery of VAT on the cost of entertaining overseas customers. The block on the recovery of VAT incurred on the cost of entertaining UK customers continues, but if you entertain overseas clients then you can make a claim. HMRC will consider claims for previously restricted VAT in respect of the entertainment of overseas customers over the last four years. If you need assistance on making such a claim then please contact us.

Bear in mind that it is only the recovery of VAT that is affected. The normal tax disallowance of business entertaining as a deduction from your assessable taxable profits will continue, so you will not obtain direct tax relief for entertaining overseas customers.

In August I posted a blog about the new agreement between the UK and Switzerland designed to prevent UK taxpayers illegally evading UK tax by hiding money in Swiss bank accounts. (Click here to see earlier blog.) I reported that if you had a Swiss bank account on 31 December 2010 (and still have it on 31 May 2013) you will suffer a one-off tax charge in the range 19% to 34% of all your Swiss funds. At that time the Revenue had not explained how the charge would be calculated. They have now done so. Frankly, the calculation is difficult to understand – even for a professional. The Revenue give two examples, in which the actual rates would be 23.3% or 26.7%. Pretty scary!

In my earlier blog, I also suggested that it might be better to move the funds to Liechtenstein so as to qualify for the Liechtenstein Disclosure Facility, with the possibility of a lower tax rate. Since then the Revenue have tightened the rules, so that it is now harder to qualify for the Liechtenstein Disclosure Facility. But it is still possible.

Significant changes, as introduced by the recent Pensions Act, will take effect on workplace pension schemes  from October 2012.  In this webcast, John Davenport, Cassons Pensions Manager explains the obligations of the employer and how to start planning now.  Information correct November 2011.  Some dates have changed and have been updated in John's blog December 2011 - Click here to see it.

George Osborne announced in the autumn statement that two key elements of Workplace Pension Reform will be delayed.

Staging dates

Employers with fewer than 3,000 employees will see their staging put back, whilst employers with fewer than 50 employees will have staging dates delayed until “the next parliamentary session” (i.e. until after May 2015).

Employers with more than 3,000 employees will not see any changes to their staging dates. The pensions minister, Steve Webb, said the final timetable would be issued in January 2012.

Phasing

Phasing is the gradual increase in both the minimum employer contributions and the minimum total contributions required to satisfy the duties under Workplace Pension Reform.

The original plan required 1% employer contributions and 2% total contributions from an employers’ staging date until October 2016. From October 2016 until October 2017 minimum contributions of 2% employer and 5% total were required. From October 2017 the minimum contributions would have been 3% employer and 8% in total.

The rise in employers’ minimum contributions from 1% to 2% from 1 October 2016 will not now take place. There has been no confirmation of a new date and no clarity as to whether increases to total contributions will also be delayed.

Our comprehensive guide to Workplace Pension Reform is now available as a webinar - click and follow link.   Other new dates will be communicated as soon as the timetable is released. In the meantime, if you have any further questions please contact me!

John Davenport, Cassons Pensions Manager