Steven Mugglestone

The more I learn, the less I know

Archive for the ‘Tax’ Category

Help, changes to childcare voucher scheme

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 Leicester-based chartered accountancy firm, MGC Hayles is advising that the existing tax-free employer childcare voucher scheme is to be scrapped, with a more generous system set to take its place.

The new tax-free childcare scheme (TFC) will be introduced in autumn 2015 and will be available to households where both parents (or the single parent) are working and paying tax, and neither parent earns more than £150,000 a year. 

Under the scheme, which is expected to see parents able to open an online voucher account, the Government will top up any payments made by parents. This means that for every 80p paid in by parents, the Government will top this up by 20p, up to an annual maximum of £1,200 per child.

Under the current system, employers can offer vouchers for staff with children to redeem with Ofsted-regulated childcare providers. Although these can be of any value, the amount qualifying for tax and National Insurance (NI) exemption is capped at £933 for employees and £402 NI for employers.

Steven Mugglestone, partner at MGC Hayles, said: “At present, childcare vouchers are typically offered by employers on a ‘salary sacrifice’ basis, where the employee gives up a percentage of their pay in exchange for the vouchers. Under the new system, this will stop, with employers having to pay the equivalent amount of salary which was previously being sacrificed for the vouchers. Because the salary will be subject to tax and NI, employers will lose their £402 per employee NI saving, which means some employers may wish to think about other NI-free benefits they can offer employees instead.

 “The new scheme will not affect employers who provide free onsite childcare, as this will still count as a benefit in kind, free of tax and NI.”

 For further information, please contact MGC Hayles in Leicester on 0116 333 8500, Nottingham on 0115 941 5193 and Birmingham on 0121 236 3317.

Steven Mugglestone is a partner in MGC Hayles, Chartered Accountants, members of UK200Group with offices throughout the UK and Associates overseas.

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Written by Steven Mugglestone

June 6, 2013 at 12:24 pm

How much does HMRC owe your business?

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MGC Hayles is urging business owners to check if they are due a Corporation Tax refund from HMRC now and not just at the end of each year, as delays are common, as well as asking whether they have ensured that they have claimed a number of major, basic tax reliefs, such as research and development.  They are holding a number of seminars to re-iterate what basic, legal and generous reliefs that are available, which are not taken up.

As well as many reliefs going unclaimed, MGC Hayles says that there was a large jump in the amount of refunded by HMRC over the past year – up from £5bn in financial year ending March 2011 to £7bn in 2012.

Check your payments on account

Larger companies are more likely to be owed money, as they pay Corporation Tax in advance (in quarterly payments), based on their previous year’s profits.  If profits in one year are lower than those in the previous year, due to recessionary pressures or a general decline in business, then HMRC will refund the overpaid tax.  In reality, however, many firms face a long wait to receive any refunded Corporation Tax

A partner at MGC Hayles, Jason Seagrave, reported that the CT refund system can be a bit of a “lottery”, with some companies receiving a refund quickly, whereas others have to wait a number of months before their claim is processed.  In the current economic climate, any delayed payments will put extra pressure on businesses with poor cash flow.

“When a business has overpaid Corporation Tax, refund delays can cause more pressure as the money should be in a business’ bank account, not sitting with HMRC. A missing Corporation Tax refund will add to the difficult financial situation a business might be in that led to the need for a refund in the first place.  We have seen this on numerous occasions and have stepped in to help our clients to get the money back”

Potential insolvencies

In fact, there have been rare situations where firms have gone into administration while waiting for an HMRC refund; “The refund that HMRC is sitting on could be the lifeline that helps a company stay in business, particularly when there is another large creditor to be paid.”  In the year ending March 31st 2012, almost 350,000 companies received CT refunds from HMRC, with an average payout of £20,231.

Always check the payment

Jason Seagrave urges companies of all sizes to check if they are eligible to claim a Corporation Tax refund – either due to simple over-payment, or due to loss relief or an R&D credit relief (it is worth noting that small companies can claim for an R&D credit if it has recorded no profits for the year in question).  Commenting on the significant rise in CT refunds between 2011 and 2012, Jason suggested that many companies may have been “over-confident about their profit predictions recently”, clearly expecting the economic downturn to have given way to a stronger recovery by now, but as we can see from the latest GDP figures, the UK economy is still very much struggling to grow.

MGC Hayles will be holding a breakfast seminar at the Leicester Tigers on 23rd May and the Notts County Ground on 30th May to highlight many of these areas and safe and legal reliefs that are available.



Written by Steven Mugglestone

May 9, 2013 at 10:10 am

Tax schemes, a ticking time bomb and the safe and sound alternatives

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Tax Schemes, a time bomb with a short fuse

William Pitt (The Younger) is commonly regarded as the British Prime Minister (and Chancellor at the same time) who in 1799 introduced income tax to the UK.  The tax rate then was 0.8% for annual incomes over £60 and 10% for annual incomes over £200.  At the same time, tax planning, tax avoidance and tax evasion became common place and since that day individuals, businesses, accountants and lawyers have been working to structure their affairs to be able to pay the least amount of tax whilst adhering to the law of the land.

Aggressive Tax Planning

Aggressive tax planning has hit the headlines over the last twelve months as the government and HMRC have sort to adopt a new and different approach to increasing the tax take, name and shame.  From well-known comedians to international coffee chains there has been a campaign to highlight those who have chosen to adopt strategies that, whilst legal, some would note as aggressive tax planning.  There appears to have been some success with this as the government and HMRC play the morals card.

The Key Issues of Aggressive Tax Planning

It appears to be the greatest unspoken secret of personal and business wealth management, but despite what the press has reported over the last 12 months, most people in business know someone who has taken advantage of a “tax strategy” that in some way could be seen as aggressive.

Over the last 15-20 years, and starting with film industry partnerships, a whole industry has evolved from tax planning and in particular huge sums of money have gone into various schemes and plans, which initially was the domain of bankers’ bonuses.

Some of the more “exotic” strategies are, however, not only legal, but quite robust in their commercial structures and approach.  There are common issues and pitfalls, however, surrounding a lot of the more aggressive schemes:

  • Some fail a number of years after introduction as HMRC challenge and successfully expose errors in the structures, leaving the tax payer and their advisers to negotiate a settlement.
  • Many come with Tax Counsel/Barrister opinion, which are sold as reasonable guarantees of their legal robustness.  If you care to fully read these opinions, many do not fully support the structures, as they only address a number of key areas.  Many of the opinions do, however include significant health warnings.
  • Typically providers of the schemes are a sales organisation.  The fine print will note the warnings and point to either some limited help or no responsibility, when things go wrong.  The key point to note is that this may not be for the long haul and such help will fall on your accountant and adviser.
  • Some of the providers have chosen closure and insolvency before HMRC could expose their potentially flawed structures.

Many of the largest accountancy businesses, which have built their business on the sales of such schemes have either closed the schemes, as well as seeking to ring-fence their business units which have provided the schemes.  This does not say much about how they are supporting their clients, but the clients will find out when they try and get support or when they try and make a claim against them.  We always stick by our clients as well as helping and supporting new clients who find themselves in this position.

The Safe And Sound Tax Planning Solution ©

We do not say that such tax structures and strategies are wrong or illegal and some do form part of certain solutions.  Some are both commercial and can offer users and tax payers other commercial opportunities, such as potential returns from development properties and new technologies.  Our role, however is always to make clients aware of what can be done and what is available and outline the legality and risks involved.

Our starting point, however, is always to discuss and offer SAFE tax planning ©, which is bespoke to each and every client and forms what even Mr Cameron has said to be sensible tax management.  Here are some of the legal, safe and sound tax saving approaches that we use to save our clients significant amounts of money, whilst ensuring that they also win the legal argument, the commercial argument and the moral argument, if they ever get challenged by HMRC over their affairs.  We see it as safe and morally sound tax planning:

EIS and Seed EIS for new start-up limited companies

The newly introduced Seed Enterprise Investment Scheme (SEIS) is an attractive source of funding for early stage trading companies and an exciting tax advantaged investment opportunity for business angel investors.  Key facts relevant to SEIS are as follows:

  • SEIS is available for business angel investors and early stage companies seeking seed funding
  • Investors can receive 50% income tax relief on investments up to £100,000 per year.
  • SEIS investors will pay no capital gains tax on ultimate disposal of their shares
    • Companies are limited to raising a cumulative maximum of £150,000 under SEIS – after this, they may be eligible for SEIS’s Big Brother, EIS, provided 70% of the SEIS cash has been spent.
    • An investor cannot control the investee company with share subscriptions limited to 30%. Investors can be directors but not employees.
    • Companies can obtain advance assurance on whether the company is a qualifying SEIS company from HMRC.

Incorporation of unincorporated businesses

There are many unincorporated businesses trading in the UK.  Sole traders, simple partnerships and Limited Liability Partnerships, which are still an excellent and sensible way to start a business.

There is still an excellent opportunity to reduce a tax cost to 10% and less, by seeking to transfer an unincorporated business to a limited company.  This can be done with approval from HMRC and can potentially save tens and sometimes hundreds of thousands in tax.  This route often gets missed as many small businesses believe that the costs of running a limited company outweigh the savings, which is far from the reality.

Research and Development

Currently claims for research and development costs attract tax relief at 200%.  This equates to HMRC potentially providing 25% of the cash required to develop new areas with your business.

Another statistic widely quoted is that 85% of German businesses claim a similar relief, yet only 15% of UK claim R&D relief.  The chances are that your business could be eligible to make this claim and yet many businesses are failing to look at this valuable area.

Growth with LLPs

Most businesses are building new business areas, products, services and customer location.  Yet most are also missing an opportunity to reducing their tax costs in these areas to below 10%, as well as taking advantage of £10,000 annual tax free reliefs.

With some thought as to how you can structure your new business ventures using limited liability partnerships, LLPs, there are significant savings to be obtained and this can be maximised over a 3 – 5 year period.

Try Safe and Sound Tax Planning ©

Many accountants and tax advisers have sold tax schemes and plans, which whilst are legal, they do not fit the government and HMRC’s definitions of appropriate and moral tax management.

We, however, believe that before such structures are discussed and offered, many small and medium sized businesses would benefit from a number of safe and sound tax planning routes, that will save significant sums of money, but will also ensure that any moral, legal, commercial or other such disputes with HMRC are avoided.

You could call it tax avoidance avoidance!!!

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Written by Steven Mugglestone

March 18, 2013 at 8:53 am

Top Tax Tips to Consider Before April 2013

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MGC Hayles always start with safe and sound tax planning advice and solutions.  There is still much to be achieved through the use of recognised government incentives and tax breaks.  With only a month to go before the end of the tax year, now is the time to use up any remaining allowances and start preparing for some of the changes that will come into effect on 6 April.

The UK tax system still continues to incentivise the self-employed and employees to maximise their personal contributions to personal pension plans. The annual contribution limit for an individual (the total of personal contributions and those made by an employer) is the lower of 100% of net relevant earnings or £50,000. For personal contributions below this threshold, tax relief is available at the individual’s marginal rate of tax. With this in mind, the forthcoming reduction in the top rate of income tax to 45% may provide a reason for some individuals to bring forward their pension contributions to before 6 April.

A big reminder is that unused allowances from the past three tax years can still be brought forward and factored into the calculations – in other words, unused allowances in 2009/10, 2010/11 and 2011/12 will be available for carry forward into the current financial year. As a result, it may be possible to contribute up to £200,000 (or even £250,000 in some circumstances) before 6 April and obtain tax relief of as much as 50% on the whole sum. You must, however, have been a member of a registered pension scheme in the tax year from which the unused relief is to be carried forward.

Capital gains up to the £10,600 annual exemption can be realised tax free in the 2012/13 tax year, and any gains above this threshold are then taxed at either 18% or 28%, depending on the individual’s marginal rate of income tax. Unused exemptions cannot be carried forward into future tax years and are therefore effectively lost.

Married couples and civil partners can still transfer assets between themselves on a no gain/no loss basis, so making appropriate transfers can ensure that both individuals’ annual exemptions and basic rate bands are fully utilised for capital gains tax (CGT) purposes. It is important to ensure that any such transfer is outright and unconditional.

Now is the time to use up any remaining ISA allowances to which you and your family are entitled. UK residents aged 18 or over can invest in one stocks and shares ISA and one cash ISA each year subject to the overall £11,280 limit for 2012/13. Where possible, the full entitlement should be used, either by paying the full amount to a stocks and shares ISA or by paying into a combination of the two, subject to a maximum of £5,640 for cash ISAs. Holders of cash ISAs can switch the funds into equity investments at any time. The limits in 2013/14 will be £11,520 with up to £5,760 in cash.

Parents who have used their own ISA limits can invest for a further £3,600 for children under the age of 18 through a junior ISA. Junior ISAs operate in a similar way as adult ISAs – income and capital gains generated will be tax-free. This applies even where the capital is provided by the parents (normally annual income in excess of £100 is taxed on the parents in such circumstances). However, withdrawals from a junior ISA before the child reaches age 18 will result in the loss of the tax benefits.

The rules regarding venture capital investment are still complex, the basics are that investments made in venture capital trusts (VCTs) and enterprise investment schemes (EISs) may qualify for income tax relief and EIS investments can be exempt from CGT on disposal. In addition, CGT due on other assets that you have sold can be deferred if the disposal proceeds are reinvested in a company qualifying for EIS deferral relief.

Investing in start-up enterprises qualifying for the seed enterprise investment scheme (SEIS) carries even more risk than EIS and VCT investments, but it is now possible to obtain substantial tax relief to offset a large part of any potential losses.   Under the SEIS, an individual can invest up to £100,000 in small start-up companies in a tax year and claim income tax relief at 50% – even if he or she is not a 50% taxpayer. In addition, a special rule for capital gains made in 2012/13 potentially provides relief from CGT at 28% as well.

If a loss is ultimately made on the investment, this can be claimed against income in a later year and could trigger tax relief of as much as 100.5% on the original investment.  SEIS investments, however, are not regulated by the Financial Services Authority, so should only be considered by experienced business owners and investors practiced at making direct investments.

HMRC has already started issuing tax coding notices for 2013/14 to employed individuals and those receiving occupational or personal pensions. It is important that these are checked carefully to ensure that the best possible estimate of the amount of tax due is deducted from your monthly income for 2013/14.

HMRC will often include an adjustment for higher rate tax due on the investment income that it expects an individual to receive during the year. You do not have to accept such deductions and you should let HMRC know if you want them removed from your tax code; you will instead have to pay via self-assessment on 31 January following the end of the tax year. If you do decide to let such adjustments stand, it is important to ensure that any such adjustment in your tax code is based on a realistic estimate of your likely income. Similarly, individuals whose annual income will exceed £100,000, or whose pension contributions will be changing significantly, should check that the correct allowances or reliefs are shown.

Call Hardika Dholakia in Leicester on 0116 233 8500 to find out more about safe and sound tax planning and advice.

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Written by Steven Mugglestone

March 5, 2013 at 1:00 pm

Posted in HMRC, Tax

Forget the spin for 2014, here are some of the key tax changes for 2013:

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Tax and spending changes get announced well in advance of their impact dates and all governments prefer to point to key favoured changes for the future.  To bring us all back to reality, here are some of the key changes that will affect businesses, their owners and individuals alike coming into effect in 2013:

Personal allowances

There is a target to get the personal income tax allowance increased to £10,000 by April 2015.  The April 2013 rise to £8,015 has already been announced but if there is any scope to show a continuing upward path it will help provide some comfort to those on lower income levels and a little comfort for those who are due to lose their child benefit from January 2013

Entrepreneurs’ relief and negative tax

Employee share option schemes through the Enterprise Management Incentives (EMI) were a tax favoured share option, initially very efficient.  Following the introduction of Entrepreneur’s Relief most people who had EMIs could not benefit from the 10% tax rate as they did not have the required 5% of the company’s shares nor they did not own the shares for a year prior to sale.

From April 2013 both of these requirements have been relaxed meaning the individual can access a 10% tax rate whilst the company gets tax relief at 20%…….. This gives a negative tax rate.

Patent tax relief

This will reduce the tax rate for those who have income from patented products or processes down to 10% on qualifying profits.

Changes will be phased in starting from April 2013 and will apply to pre-existing patents as well. The impact of this is that it may encourage those working in research and development to patent their products or technology.

Tax relief capped

From April 2013, there will be a cap on income tax reliefs to ensure that those on higher incomes cannot use income tax reliefs excessively.

This will mean that anyone seeking to claim more than £50,000 of relief, a cap will be set at 25% of earnings of income.  This new cap does not extend to charitable donations as previously suggested it might but it does, however, limit relief from trading losses against general income and interest on certain loans, including loans to buy an interest in a company or invest in a partnership.

Corporation tax

The tax rate for large organisations will be reduced to 23% in April 2013 and will then go down to 21% in 2014. This will mean that businesses will get to keep more of the money they make and will so have more to invest – they can also take the lower tax rate into account when structuring group operations and the number of companies owned. 

Residential property

A new annual charge will be introduced for high value properties (valued over £2m) owned by non-natural persons to further discourage ownership of property through envelope structures. Various reliefs have been introduced for the annual property charge and the 15% SDLT charge for property developers and those exploiting property as a source.

Statutory residency test

This has been delayed for a year but the SRT will come into force on 6 April 2013. This is an historic landmark for tax in the UK, as for the first time we have clear and definitive legislation on this critical area. Historically whether someone has been resident or not has been decided by application of practice and an evolution of tax cases that have been interpreted in different ways.

As expected, there will be matters of interpretation that will evolve but it represents a significant advance from the current position.  The anti-avoidance clauses around this are quite large and complex.

Annual Investment Allowance

The big surprise announcement of the Autumn Statement – the AIA increased tenfold from 1 January 2013 to £250,000 for the next two years. Companies considering investing in capital equipment over the next couple of years should review the timing of that expenditure in the light of this additional relief now available.

Share Incentive Scheme

There will be a new share incentive scheme, under which the recipient gives up employment rights, to get tax efficient gains on a final disposal.  However, reservations regarding the income tax and NI treatment seem to have fallen on deaf ears and all are left wondering just how attractive this scheme will be.

Steven Mugglestone BA FCA
FD Services

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Leicester               0116 233 8500
Nottingham           0115 941 5193
Birmingham           0121 236 3317

Written by Steven Mugglestone

January 9, 2013 at 12:24 pm

Posted in HMRC, Tax

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McGregors join up with Senior Entrepreneurial Tax Consultants

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McGregors join up with Senior Entrepreneurial Tax Consultants

McGregors Corporate, the independent firm of Chartered Accountants and Business Advisers, have agreed a consultancy contract with The Ironbridge Tax Consultancy Limited and its managing director, Keith Richards, to add to the firms tax support for Nottingham and Leicester.

Mr Richards is formerly a tax director for RSM Tenon and Grant Thornton and is well known amongst the business communities of Nottingham and Leicester.

McGregors Corporate who recently started to operate in Leicester, have already built a senior team with partners from the likes of Grant Thornton and PKF, together with a mix of former finance directors, are looking to establish themselves as an independent alternative to the large accountancy firms in Leicestershire and Nottinghamshire.

Director, Steven Mugglestone, said, “I am certainly extremely pleased to be working with Keith and his company in helping us support our clients and building our presence in Leicester and Nottingham.  Keith has significant tax advisory experience within the SME sector, as well as helping individuals with all aspects of their personal tax planning and we see our relationship with his company as providing a huge benefit to both of us, together with both of our respective client bases as well as potential future clients. We are also very keen on building on the success that we are achieving in winning new clients in the Leicestershire area and establishing our practice in the city.”

Keith Richards of Ironbridge continued, “Ironbridge has agreed a working relationship with McGregors, as we see them as a really good fit of pro-active and experienced business advisers and accountants.  All of their directors have worked with the same types of growing owner-managed businesses as we have and our outlook and approach are very similar.  I think that together, we can help support many clients and I am certainly looking forward to working with Steven and his team in the Nottingham and Leicester areas.”

McGregors are a full service firm of Chartered Accountants and business advisers, providing a varied range of services to SME businesses in the Midlands region.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317    T:0115 9415193

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.


Written by Steven Mugglestone

June 15, 2012 at 10:08 am

Improvement to the Enterprise Management Incentive Scheme?

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In his last budget, the Chancellor announced changes to the Enterprise Management Incentive (EMI) scheme.

EMI share options awarded at market value are a tax-efficient way to incentive employees of a small or medium sized businesses as there is no tax or national insurance due on the grant or exercise of the options, with employees only paying capital gains tax (CGT) when they come to dispose of their EMI shares.

The first proposed change will increase the amount of EMI options an individual can hold from £120,000 to £250,000.  Therefore, an amount of up to £250,000 of share options can be granted to an employee with effect from 16 June 2012.

It was also announced (again subject to state aid approval but expected to be introduced in Finance Bill 2013) that an individual who sells shares acquired from the exercise of an EMI option will be entitled to Entrepreneurs’ Relief (ER).

At the present time, an individual benefits from ER when he meets the following three conditions throughout an ownership period of at least one year.

  1. The company must be the individual’s ‘personal company’ (i.e. he holds at least 5% of the ordinary shares and voting rights.)
  2. The company must be a trading company or the holding company of a trading group.
  3. The individual must be an officer or employee of the company or a group company.

The proposed change for those holding EMI shares will remove the first condition so that an individual will not need to meet the ‘personal company’ test to qualify for ER on an eventual sale.  (Therefore, he will not need to hold 5% of the ordinary shares and voting rights although the other conditions will still apply.)

In order to qualify for ER, the EMI option will need to be exercised after 6 April 2012.  The EMI shares themselves must held for at least one year and so cannot be disposed of until 6 April 2013 at the earliest.

For those employees who are in a position to hold the shares for a period of 12 months rather than disposing of them on or around the time of exercise, such shares will qualify for ER and be subject to CGT at the rate of 10% (rather than the highest rate of CGT of 28%) on the first £10 million of qualifying lifetime gains.

At the present time, these proposals are at consultation stage with more details to follow.  As with all such transactions, advice should also be sought before proceeding.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Written by Steven Mugglestone

May 30, 2012 at 1:58 pm

Posted in Tax

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