Category: Financial

Egan Roberts joins national network of Handpicked Accountants

Posted on by Gabrielle

We are delighted to announce that we have been selected to join the UK’s most reputable firms on the Handpicked Accountants website.

As a leading accountancy firm in Ribchester, Lancashire, we have been recognised for our personalised customer service and specialist knowledge of the industry. Established in 1986, our team of chartered accountants and business advisors have developed our services over the years to embrace technology.

We specialise in delivering our services to start-ups, academies, medical professionals, manufacturing businesses and SMEs.

As a registered auditor, we also carry out audits for a number of businesses across the country.

Our services include bookkeeping, VAT returns, tax planning, tax returns, payroll and accounts management using cloud based software, Xero.

The team at Handpicked Accountants choose only the strongest performing accountancy firms to participate in their network. Handpicked Accountants features specialist firms which have been tested for reliability and knowledge, filtered down to location to make the online customer journey more efficient.

As a provider of Xero accounting software, we can ensure that you have 24/7 access to your accounts from any device. The shared dashboard will also mean that you will be able to view the same financial data as your accountant. Xero is compatible with Making Tax Digital so you are able to complete VAT returns and submit other financial documents directly to HMRC.

David Tattersall, Head of Client Relations at Handpicked Accountants, said: “After careful consideration, we are really excited to announce that Egan Roberts is now part of the Handpicked Accountants family. The team have years of experience dealing with small business owners, so you can be reassured that the Ribchester based business can be depended upon.
“We aim to simplify the process to source a local accountant which fits the bill in terms of trust, reliability and high service standards. The Handpicked Accountants website makes it easy to filter for accountants in your local vicinity, helping you take control of your financial affairs.”

Our profile can now be viewed on the Handpicked Accountants website.

If you would like more information about our services, an initial meeting and quotation free of charge with no obligation then call us on 01254 583515, email accounts@egan.co.uk or complete the form below.

Investment Schemes: Company and Investor Perspectives

Posted on by r3df3rn
At Egan Roberts we provide year round tax advice on income tax, capital gains tax, inheritance tax trust and estates and non-domiciliary tax issues.
If you are interested in growing your business or making an investment, the below investment schemes may be available to you.

Enterprise Investment Scheme (EIS)

The company’s perspective

An EIS raises money for your company to help grow your business.

It offers tax reliefs to individuals who buy new shares in your company.

You can receive up to £5 million per year up to a company lifetime maximum of £12 million. However this does include any amounts received from other venture capital schemes.

Can my company apply?

If your company is less than 10 years old, has less than 250 full time employees and less than £15 million of assets, you may be eligible.

All conditions of application for EIS are set out here.

The investor’s perspective

An investor can receive the following incentives:

  • Income tax relief being 30% of the investment up to a maximum investment of £1 million.
  • Capital gains tax exemptions
  • Inheritance tax exemptions
  • Reinvestment relief
  • Loss relief

Note: If your income tax liability is lower than the 30% relief, you must relinquish the excess relief.

Seed Enterprise Investment Scheme (SEIS)

Similar to the EIS, if your company is less than 2 years old, has less than 25 full time employees and less than £200,000 of assets, you may be able to receive up to £150,000.

All conditions of application for SEIS are set out here.

The investor can receive income tax relief of 50% of their investment up to a maximum investment of £100,000.

Reinvestment relief, loss relief and capital gains tax relief are also available with a SEIS.

An overview of venture capital schemes for investors is available here.

If you would like to get in touch, please use the contact form below, visit our website www.egan.co.uk or call us on 01254 583515.

HMRC Investigations: What to Expect

Posted on by r3df3rn

Whether you are the chief executive of a multi-million pound company or a small business owner, HMRC may open an investigation if they suspect false reporting or underpayment of tax.

Triggers

Reasons for you or your business drawing the attention of HMRC are:

  • HMRC receives a tip-off
  •  your business regularly receives payments in cash
  • tax returns are consistently filed late
  • you operate in a sector HMRC has specifically targeted
  • you are randomly selected
Taxes

The taxes investigated by HMRC include but are not limited to:

  • Income tax
  • Capital gains tax
  • Corporation tax
  • Landfill tax
  • National insurance
  • VAT
Stages

There are three levels of an investigation; random, aspect and full.

As above, HMRC have the ability to choose to investigate your business completely at random.

An aspect investigation means HMRC is concerned about a particular part (or parts) of your accounts. This could include something as straightforward as forgetting to include all of your savings income within your self-assessment tax return. An aspect investigation can be upscaled to full at the discretion of HMRC.

A full investigation is when HMRC considers there to be a significant risk of error in your tax return. This would include a comprehensive review of your records including personal finance records as well as business-related.

The process

1. HMRC will initially contact you via letter or phone call with a query. They will specify what information they require for the investigation.

2. You will be expected to supply the information HMRC require which may include obtaining replacement copies of documents if you no longer have them.

3. Informing HMRC at this point of any mistakes you have knowingly made will benefit you further down the line.

4. HMRC will formally begin their investigation

What happens next?

Some common resolution include:

Underpaid tax

You will have 30 days to settle the underpayment with HMRC.

Failure to do so will result in a penalty ranging from 20% to 100% of the extra tax due.

The severity of the penalty depends on whether the underpayment was due to a lack of reasonable care, a deliberate error or deliberate and concealed errors.

Overpaid tax

If you have paid too much tax, HMRC may send you a rebate through the post.

If they do not, you will need to make a claim for a repayment.

Deliberate wrongdoing

If HMRC believe you have committed fraud, you may be subject to criminal proceedings.

You may also be charged a penalty depending on why you underpaid tax, how soon you informed HMRC of any mistakes and whether you were fully co-operative during the investigation.

Resolution

A decision notice will arrive in the post explaining the assessment and any penalty details.

Alternatively, HMRC may issue a contract settlement which legally binds you to pay the money that is owed to HMRC.

Tips to avoid an investigation

Nothing can prevent a random investigation but the following tips will help you to avoid becoming under HMRC’s microscope.

  • Maintaining accurate records
  • Putting money aside to cover your tax bill and pay it on time
  • File your tax returns accurately
  • Explain any changes or unusual transactions from one year to the next

If you are under HMRC investigation or have any questions please contact us via the contact form below or call us on 01254 583515.

Take a look at our blog outlining what accounting records you should keep.

Enquiry About My Tax

If you think there might be anything amiss with your Tax, or you’re setting up a new business and don’t want to get in any uncomfortable positions with HMRC, contact us for a free meeting to discuss your situation and how we may be able to help now and in the future.

Gift It or Keep It? The Capital Tax Implications

Posted on by r3df3rn

At Egan Roberts Accountants based in Ribchester, Lancashire we can provide you with year round tax advice on capital gains tax and inheritance tax.

Capital Gains Tax (CGT)

CGT is the tax payable on the ‘gain’ you have made from selling an asset which has increased in value.

The gain (proceeds less cost) is reduced by your annual exempt amount of £11,100.

Any remaining gain is taxed at 10% if you are a basic rate tax payer or 20% if you are a higher rate tax payer.

Gift Relief

If you have given the asset away or received less than market value proceeds, you may be able to claim gift relief.

This means the amount chargeable to CGT is the real proceeds you have actually received.

However, this only defers the CGT. The amount of gift relief claimed will become chargeable when the donee sells the asset.

So by reducing your gain, the donee will have a bigger gain later.

More information on gift relief is available here.

Entrepreneur’s Relief (ER)

There are certain criteria which must be met for you to qualify for ER.

The full list is set out here.

In summary, if you are selling all or part of your sole trade or partnership, you must have owned the business for at least 12 months prior to the sale. If you are selling shares (of which you hold at least 5% of total shares), the company must be trading and you must be an employee or officer of the company.

ER reduces the CGT rate to 10% regardless of whether you are a higher rate tax payer.

Gifts to Spouses / Charity

Any assets you gift or sell to your spouse or civil partner are not subject to CGT unless you separated and did not live together for the whole tax year or you have them goods for them to sell on as part of their business.

CGT is not charged on assets given to charity. You may pay some CGT if you sell an asset to charity for more than you paid for it but for less than market value.

Find further information about this here.

Inheritance Tax (IHT)

Lifetime Gifts

If you make a gift during your lifetime to a person, this is known as a PET (potentially exempt transfer), meaning no IHT is payable on the gift.

However, if the donor dies less than 7 years after making the gift, IHT then becomes chargeable at 40%.

Death Estate

If you leave the asset as part of your death estate rather than selling it or gifting it, IHT may be payable at 40%.

Items left to your spouse/civil partner/charity are exempt from IHT.

The value of your remaining estate chargeable to IHT could be reduced with the use of business property relief.

Everybody has a nil rate band of £325,000 which also reduces the amount chargeable to IHT.

This £325,000 is reduced by the gross chargeable transfers of any gifts made within the 7 years before death.

If your spouse did not use all or some of their nil rate band on their death estate, the amount unused can be transferred to you in addition to your £325,000.

The remaining value is then subject to IHT at 40%.

If you would like to get in touch with us, please use the contact formbelow, visit our website www.egan.co.uk or call us on 01254 583515.

What Accounting Records Should I Keep?

Posted on by r3df3rn

As Chartered Accountants and Financial Advisors based in Lancashire, a question we often get asked here at Egan Roberts is what accounting records we need in order to complete your year end accounts and tax returns.

The most important thing is to be as organised as possible. Accounting software packages such as Xero make this much easier for you.

At Egan Roberts, we are all Xero Certified Advisors to help and support you through your Xero journey. Some may call us Xero Heroes.

Records must be kept for a minimum period of 6 years. Xero has the ability to digitally store images of your invoices and can feed directly through from your bank. This makes record keeping for such long periods of time much easier and will no longer clutter up your spare room!

If HMRC open a tax enquiry into your business within the last 6 years, Egan Roberts offer a fee protection scheme which acts as a type of insurance against any additional work we may need to undertake to assist with the enquiry. See our more detailed blog here for more information about this service.

If you would like to speak to us about any of the above, please call us on 01254 583515 or visit our website www.egan.co.uk

Inheritance Tax: Residence Nil Rate Band (RNRB)

Posted on by r3df3rn

At Egan Roberts Chartered Accountants & Financial Advisors we offer estate planning services including the related tax advice. It is important we now think carefully about the residence nil rate band (RNRB) when estate planning. Please read on if you would like to find out more.

What is the RNRB?

The RNRB was introduced in Finance Act 2015 and applies to deaths after 5 April 2017.

The basic nil rate band currently stands at £325,000 as it has since 6 April 2009 and will not change until 5 April 2021.

Rather than increase the £325k nil rate band to adjust for the effects of inflation and increases in house prices, the RNRB was announced.

The RNRB provides an additional nil rate amount when a person’s main residence is passed to their direct descendant on death.

It is worth noting here that the RNRB is only available on death; it cannot apply to a lifetime gift.

How much is the RNRB?

The RNRB is in addition to the basic nil rate band (£325k) and will be gradually introduced as follows:

Tax Year      RNRB
2017/18    £100,000
2018/19    £125,000
2019/20    £150,000
2020/21    £175,000

After 6 April 2021 the RNRB will increase annually in line with the consumer price index.

When is the RNRB available?

The RNRB is available when a qualifying residential interest is closely inherited.

A qualifying residential interest is a residential property which at some point was occupied by the deceased as their residence.

It will be closely inherited if it is passed to any of the following:
• The deceased’s children or grandchildren and their spouses
• Widowers of those children/grandchildren if they have not remarried
• Step-children, adopted or foster children
• Children for whom the deceased acted as guardian whilst they were under 18 years old

Other information

In the same way as the basic nil rate band, if a person does not use their RNRB in full, any unused percentage can be transferred to the surviving spouse to be used in addition to their own RNRB.

The RNRB will be reduced by £1 for every £2 by which the deceased’s net estate exceeds a threshold of £2m. This threshold will also increase in line with the consumer price index.

As many people move into a smaller home or into residential care, the RNRB is still available on the estate if the person sold their home on or after 8 July 2015.

We hope you found the above information useful. If you would like to discuss estate planning or inheritance tax further, please contact Egan Roberts on 01254 583515.

Further guidance and information is available at https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

Making VAT digital: What does it mean?

Posted on by r3df3rn

Is your business registered for VAT? Is your taxable turnover over £85,000? If you answered ‘yes’ to both of those questions then from 1st April 2019 your business needs to comply with the new Making Tax Digital VAT rules.

Filing your VAT return

Businesses must use a system which allows the VAT return information to be reported directly to HMRC. So any returns commencing 1st April 2019 cannot be submitted using your government gateway account.
Also software must be used which communicates with HMRC using an Application Programming Interface (API).
If your software is not compatible, you may be prevented from submitting your VAT return and could face penalties of up to 15% of VAT due.

Digital record keeping

VAT registered taxpayers covered by the Making VAT Digital rules will no longer be able to keep manual records.
For those who use a combination of software and spreadsheets, digital links must be in place by 1st April 2020 to transfer data between each function.

What software should I choose?

At Egan Roberts we are all Xero Certified meaning we are able to give you guidance and advice on how to use Xero to get the best results out of the software.

What accounting records should I keep?

With the changes coming into place putting a stop to manual record keeping, take a minute to read our blog on what accounting records you should be keeping.

If you would like any further information about Making Tax Digital or Xero software please contact us by filling in the form below, call us on 01254 583515 or visit our website www.egan.co.uk

How can you value your business?

Posted on by r3df3rn

There are various different ways to value a business. Each method will give a different figure from floor to ceiling values. This blog outlines a selection of valuation methods and in what circumstances they are most useful.

Asset basis

This is the value of the net assets of the business and is seen to be a ‘floor’ value. It is quick and easy to calculate however there are some drawbacks.
If your business uses historical costing as opposed to revaluation, historical depreciated costs do not necessarily reflect what the assets are really worth in their market. Also, this method doesn’t take into account the value of any intangible assets such as brands.

Dividend basis

This basis is useful for valuing minority shareholdings. The value of one share is calculated as the present value of future dividends being generated by the existing management team.
A cost of equity and estimated growth rate are required for the calculation so it is not as simple as the asset basis. Growth can be estimated based on historical dividend patterns or by calculating profit retention divided by reinvestment.

Cash flow basis

The cash flow method is more useful for majority shareholdings and will give a ‘ceiling’ value. The value calculated is the discounted value of the future free cash flows. Two different methods can be applied; free cash flows or free cash flows to equity.
Free cash flows is the after-tax operating (pre-interest) cash flows less net investments in assets. Whereas free cash flows to equity is the free cash flows less net interest paid.
The discounted value is to calculate what the future cash is worth in today’s terms.

Earnings basis

This method creates a market value using a price/earnings (P/E) ratio multiplied by the business’ earnings. Again, this method is useful for valuing majority shareholdings.
However, P/E ratios are only available for quoted companies. If you business is unquoted you would need to use a ‘proxy’ ratio i.e. an industry average or a ratio from a similar business to yours which is quoted. If you choose to do this, the ratio should be discounted as appropriate to reflect the fact that your business does not have the advantages of being on the stock market.

Hedging Foreign Currency Risk

Posted on by r3df3rn

Are you concerned about your exposure to foreign currency risk? This blog discusses the different derivatives available to reduce the risk of adverse currency movements.

Forward Contract

This is a bespoke contract to buy or sell foreign currency at a future date but at a fixed exchange rate. A forward contract will eliminate all downside risk and they are fairly easy to obtain.
These contracts are used to limit potential losses however this does also mean that no exchange gain would be made if the currency rates actually moved in your favour.
The other point to note is that everything about a forward contract is fixed being the date, the currency, the amount and the exchange rate. So if you find you no longer require it or want it for a different date, the original contract must still be adhered to.

Money Market Hedging

A money market hedge fixes the cost of a foreign payment by making a deposit in the spot market now; and fixes the revenue from a foreign receipt by borrowing in the spot market now. By depositing or borrowing prior to the payment or receipt, you are essentially fixing your own exchange rate.
This type of hedging may be useful if you are an importer with a cash surplus or an exporter with a cash shortage. However, money market hedges can be quite complicated and time-consuming to control so experience in this area would be advantageous.

Futures Contract

Similar to the forward contract where the future date and exchange rate are fixed. However unlike the forward, futures contracts are standardised amounts so you may have to under or over hedge.
A futures contract would require an initial margin deposit and also maintenance margin deposits.

Options

An option is the only derivative that gives you the right but not the obligation meaning if the markets move in your favour and you would have an exchange gain, you can decide not to exercise the option and take advantage of that gain.
This upside potential does come at a cost being a non-refundable premium, payable upfront whether or not you exercise the option.

Currency Swap

A currency swap uses interest rates with cash flows in different currencies. So you would make a loan in one currency and receive a loan in another currency.
This type of hedge involves another party as you are ‘swapping’ interest rate payments over the life of the agreement. However you are still liable for the principle amount of debt you have borrowed and are therefore exposed to counterparty risk if the other party does not complete the interest swap payments.