Steven Mugglestone

The more I learn, the less I know

Posts Tagged ‘tax strategy

How much does HMRC owe your business?

leave a comment »

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

McGregors join up with Senior Entrepreneurial Tax Consultants

leave a comment »

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.

http://uk.linkedin.com/in/stevenmugglestonefca/

T: 0845 519 5659                T: 0121 236 3317    T:0115 9415193
steven@mcgregorsbirmingham.co.uk
steven@mcgregorsleicester.co.uk

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

Top Tax Tips for 2012, without moving to Switzerland

leave a comment »


Top Tax Tips for 2012, without moving to Switzerland

We often get asked, “How can we save tax, without looking at any complicated stuff, and we do not want to move to Switzerland.”  We have, therefore, put a short but perfectly constructed list together of easy and straightforward things for all SME business to consider before 31 March 2012, and maybe beyond, depending on George Osborne.  It is not easy to say, but these are our top tax tips for 2012.

We, of course, can help you with any of these areas:

 “The tax relief that time forgot”: We have said it before, Click: http://wp.me/pQyUg-6j, Research & Development Tax Credit Relief is potentially available to businesses involved in most technological or scientific advancements. This is a 200% relief, with SMEs getting £2 tax relief for every £1 spent on qualifying R&D spend.  This is, therefore, one of the most valuable tax reliefs available to businesses today.

“The Return of Entrepreneurs Relief”: another valuable tax relief which can save entrepreneurs up to £1.8m of tax as part of the sale of a qualifying business or asset. Business owners should check with their advisers whether they can claim for any of the many reliefs that are available to them.

“How green is your transport”: We have said this before as well: Click: http://wp.me/pQyUg-6w, using ‘green’ company cars with low CO² emissions as well as bikes, can result in a saving on tax. Many car manufacturers are now rising to the challenge of the increased demand for green cars and there are a variety of ‘executive’ and even ‘prestige’ cars which have low emissions.
“Trust the Carbon Trust”; the Carbon Trust oversees a list of ‘green’ equipment for which businesses can claim Enhanced Capital Allowances. This includes low CO² emissions machines, screens for refrigerated cabinets, solar collection systems to heat water, and more recently, washroom hand dryers. The advantage of buying this equipment is that, subject to limits on Capital Allowances, the cost qualifies for full tax deduction against profits.

“The Final Countdown for First Year Allowances”; Buy machinery before April so businesses can claim Capital Allowances when purchasing qualifying items of plant and machinery. Subject to certain conditions, full tax relief can be obtained on purchases up to £100,000. But watch out because from April this year, the allowance is to be reduced to £25,000, so business owners need to consider the timing and may need to buy now or pay more tax later.

Maximise property capital allowance claims: from April, new provisions will be introduced to restrict claiming Capital Allowances on the acquisition of second hand buildings. This means that property owners should consider whether they have claimed everything they can on property acquisitions prior to this date. Those considering purchasing a new property should seek advice regarding the timing of this.

VAT moves from paper to online: from April all businesses will have to submit their VAT returns online and pay their VAT liability electronically. Any businesses not yet filing their VAT returns will need to register for online filing as soon as possible. While we’re on the subject, don’t forget that from this year an automatic penalty of £100 will be automatically issued if a tax return is filed late, and this will apply regardless of whether there is tax to pay or the tax due has been paid on time. Swap salary for benefits and a bike: this is becoming increasingly attractive for the majority of businesses struggling to give their staff a pay rise.  Employees can look to exchange part of their salary in exchange for a benefit which can result in tax and NI savings. This arrangement is available for a wide range of benefits from pensions to cycle to work schemes, again mention at: Click: http://wp.me/pQyUg-6w.

The new kid on the block…. Seed Enterprise Investment Scheme – April 2012 sees the relaxation of the conditions for companies to qualify for Enterprise Investment Scheme EIS status as well as the introduction of the Seed Enterprise Investment Scheme (SEIS).  Businesses should find it easier to raise finance in the future. Business owners can speak to us now to review their funding requirements and the qualifying criteria so that they are ready to act in April.

Watch this space as further things develop.  Also, if you do want to look at Switzerland …………

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.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

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

Written by Steven Mugglestone

January 23, 2012 at 7:59 pm

HMRC seeking 100% penalties for late Tax Returns, resistance is useless & the world recession is not an excuse for having no money

leave a comment »


HMRC seeking 100% penalties for late Tax Returns, resistance is useless & the world recession is not an excuse for having no money

Some clients complain that we badger and moan (politely) at them for their tax return information, but we do this for good reason.

H M Revenue & Customs (HMRC) is now looking to introduce new increased, and some say far more draconian, penalties for late submission of tax returns and for the late payment of tax.  In some cases the penalties may be up to 100% of the tax shown on the Return.  There is, therefore, an incentive to ensure that you pay tax on time and submit your tax returns on time, which is why we carry out the gentle badgering.  Late Tax Return penalties for partnerships may also prove to be an expense for each partner as they will be charged a penalty each rather than there being one penalty for the partnership itself.

The changes are part of the numerous changes that have been made in recent years to the UK’s tax administration legislation including:

  • Increased HMRC powers for obtaining information and inspecting business records,
  • Increased penalties for errors and the introduction of rules to enable HMRC to publish the names and details of those who are charged a penalty for deliberately evading tax
  • Increased task forces and “own up and pay up” amnesties for a variety of sectors including plumbers, electricians, tutors, doctors and landlords
  • The new penalties, however, for late submission of tax returns and late payment of tax have the potential to affect the greatest number of taxpayers.

The late return penalties apply to personal, partnership and trust returns for 2010/11 onwards.  If the return is submitted after the filing deadline (31 October 2011 for paper returns and 31 January 2012 for electronic returns) then a £100 penalty will automatically be charged.

If the Return is more than three months late then HMRC may also impose a £10 daily penalty.  If the Return is still outstanding 6 months after the submission deadline then HMRC will charge an additional penalty of £300 or 5% of the tax liability shown on the return, whichever is greater.   To top it all, a further penalty can be imposed if the Return is submitted over 12 months late and this can be up to 100% of the tax shown on the return, so much for those of you that think that there is a cash flow benefit of not submitting your returns and paying your tax bills.

The penalties for failing to submit a tax return on time apply regardless of whether the tax has been paid, so paying first and then not filing the return is not really a sensible option.

For those partners in traditional partnerships or LLPs amongst you, if a partnership return is submitted late then each partner is charged a penalty.  If a partnership of 10 partners files its return two months late then the total penalty will be £1,000.   If I were HMRC, I know where I would be looking to find some money.

The late payment penalties apply to income and capital gains tax liabilities whether included in tax returns for 2010/11 and subsequent years or separately assessed, which includes amendments to returns made in 2010/11 and after.  On top of all that interest is also charged on the late paid tax.

The late payment penalties are:

  • 5% of the tax that is not paid within 30 days of the due date,
  • A further 5% of the tax that remains unpaid 6 months after the payment date, and
  • An additional 5% of the tax that is still unpaid 12 months after the payment was due.

Late payment penalties can be avoided by contacting HMRC before the payment is due to let them know that the taxpayer is experiencing cash flow difficulties and reaching an agreement as a “time to pay agreement”.  These agreements, however, are not as easy to obtain as they once were.  If the revised payment deadlines, however are not met then late payment penalties will be charged.

You can, however, appeal against the amount of any penalty and it is also possible to ask for a penalty to be reduced to nil if you have a “reasonable excuse”, whatever that is.   The legislation, however, states that having insufficient funds cannot be a reasonable excuse unless it is caused by events out of the taxpayer’s control… world recession, the Euro crisis and the continuing credit crunch seem all to be within the taxpayer’s control.

Also the reliance on another person may not be a reasonable excuse and that once the excuse ends then the penalty will be charged unless the failure to pay tax or submit a return is corrected without unreasonable delay.

If a taxpayer submits their Return late and pays their tax after the due date then both late payment and late return penalties will be charged unless they have a reasonable excuse.  Failing to comply with tax obligations will rapidly become expensive…. Resistance is useless!!

It is, however, easier to organise your tax affairs so that you get your information to your tax adviser, and reduces our moaning and badgering, to be in good time to enable your tax return to be submitted before the deadline.

Even if you are preparing it yourself, leaving it to the last minute will mean that things are done in a rush and, even with the best will in the world, mistakes can and will be made which give HMRC even more opportunities to charge tax geared penalties for errors.  You also risk suffering late payment interest and penalties if HMRC do not receive your payment in time, especially as HMRC cannot receive payments via the Faster Payments Service so bank transfers usually take at least three working days to reach them.  The “cheque’s in the post” is also not a get out and will not work.

If you are unable to submit your Return and pay your tax on time, do talk to a tax adviser and we will be happy to help in a relatively painless way and we will not moan at you too much, …… honest.

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.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

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

Written by Steven Mugglestone

December 9, 2011 at 8:00 am

Family Trusts making way for Family Investment Companies

leave a comment »

Family Trusts making way for Family Investment Companies

After the changes to the taxation of trusts in recent years, family businesses and any planning for succession should consider all the viable options for family wealth and succession planning including alternatives to trusts.

Changes to taxation for trusts

Trusts have traditionally been a basis of family wealth and inheritance tax (IHT) planning, offering wealthy individuals and families the chance to pass assets down generations in a tax-efficient manner.

In recent years, however, there have been significant changes to the taxation of trusts, making them a much less efficient route.  The key points are as follows:

  • The highest rates of income tax and capital gains tax currently apply to most trusts (50% and 28% respectively)
  • Gifts made by individuals to nearly all new trusts will trigger a 20% upfront IHT charge, after the donor’s nil-rate band or IHT threshold has been exceeded.
  • Most trusts fall into the relevant property regime, which means that IHT charges at up to 6% on the value of the trust less reliefs are suffered every 10 years and when assets are disposed.

Trusts still, however, remain popular as they allow individuals to pass wealth down generations without providing access to it at too young an age, and they allow for changes in beneficiaries’ entitlements under the trust without triggering tax charges.

When trust work

Key issues in using UK trusts tax-efficiently is to fund the trust without triggering the immediate 20% IHT charge by considering the following:

  • An individual can gift up to £325,000 (current nil rate band) into a trust every seven years.
  • Excess income can be gifted into trust.
  • Assets qualifying for business property or agricultural property reliefs can be transferred to trust, enabling significant value to pass into trust. This may not reduce the immediate IHT charge to nil unless the asset qualifies for 100% relief on the whole value.
  • Reversionary interest trusts can be used to pass significant sums into trust without an IHT charge, although there is risk to this planning as it seeks to circumvent the legislation.

With these options, UK trusts are likely to remain a key tool in wealth planning. However, there are individuals and families for whom the above options are not available or sufficient to deal with the assets they wish to shelter from IHT.

The alternative to trusts

Current alternative to trusts are, for example, structures like Family Limited Partnership (FLP) or Family Investment Company (FIC).

FIC is simply a private company whose shareholders are members of the same family, and whose memorandum and articles of association can also be drafted to suit the family’s needs.

Similar to a trust, this enables the founder to retain control over family investments, but FICs do not suffer the 20% entry charge or six per cent 10-yearly inheritance tax (IHT) charges applicable to trusts.

Estate planning

In terms of estate planning, FICs have some attractive features.

  • No immediate IHT charges on transfer of property to the FIC, and no on-going 10-yearly IHT charges.
  • Gifts of shares in the FIC to other family members fall outside of the IHT net (providing the donor survives seven years).
  • The donor can gift shares in the FIC up to the value of the available nil rate band into trust without triggering an immediate IHT charge.
  • A share class can be created into which future growth in value of the FIC passes, and these shares can be gifted to a trust or an individual with minimal tax charges.
  • If the donor holds shares on death, IHT will be payable, but the value of the shareholding is discounted to reflect its relative size (for example, minority shareholdings often attract significant discounts).  It is possible, in certain circumstances that no IHT is payable on death.

Tax within the FIC

The FIC is subject to corporation tax – currently a maximum of 26%, falling to 23% by April 2014 – (payable on income and capital gains generally). This tax charge can be mitigated to varying degrees by the fact that UK and most overseas dividends will not be taxable within the FIC, and it will also benefit from an indexation allowance on gains, meaning that only returns above the level of inflation will be taxed.

If profits are to be accumulated within the company, this makes FICs very attractive, as the rate of 26% or less compares favourably with personal and trust income tax rates of up to 50%.

There are two main disadvantages of a FIC from a tax perspective.

  • If capital assets, as opposed to cash, are transferred to the FIC then there may be a capital gains tax (CGT) charge on the transfer, although there are various ways in which this charge might be mitigated and specialist advice should be taken.
  • There is a double tax charge when profits are extracted by shareholders, who may pay further tax of up to 36.11% on dividends – this can be mitigated to some extent

Overall

While not offering the same degree of flexibility as a trust, FICs are nevertheless a credible vehicle for holding and passing down family wealth where the 20% trust entry charge cannot be avoided, or in circumstances where it is anticipated that profits are likely to be reinvested within the structure.

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.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

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

Written by Steven Mugglestone

December 5, 2011 at 10:29 am

Autumn 2011 Statement Headline Bits

leave a comment »

Autumn 2011 Statement Headline Bits
The Chancellor delivered his Autumn Statement to Parliament, on 29 November 2011, together with the Office for Budget Responsibility’s updated growth and borrowing forecasts.  Reductions in spending were announced to ensure that the country meets its fiscal targets, with some of the savings being used in the short term to fund investment in infrastructure resulting in the generation of long term growth. The Chancellor also announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is fairly implemented.

The statement comprises numerous announcements, with key headlines of R&D tax credits being extended to large businesses and extension to tax relief for seed investment in start-up businesses.  Other initiatives and announcements include the following:

  • The State Pension Age is to rise to age 67 between April 2026 and April 2028. This is due to the increase in average life expectancy since the original State Pension Age timetable was produced. Future increases in the State Pension Age will be based on demographic evidence.  The Government will consult on the proposed process and take into consideration the views of all interested parties when these decisions are made.
  • The standard minimum income guarantee in Pension Credit increases by 3.9 per cent in April 2012 (to £142.70) per week for single pensioners and £217.90 a week for pensioner couples.
  • The full basic State Pension will rise from April 2012 by £5.30 to £107.45 per week. The full- rate for couples for those whose entitlement is based on their spouse/civil partner’s pension will rise by £8.50 to £171.85 per week.
  • The threshold for Savings Credit will rise to £111.10 for single pensioners and £177.20 for pensioner couples.
  • The Government has also published its National Infrastructure Plan 2011. The Autumn Statement announces a new strategy to bring to £20 billion of private sector investment. To do this a Memorandum of Understanding has been signed with two groups of UK pension funds to support additional investment in UK infrastructure.
  • The Government is also working with the Association of British Insurers to prevent employers gaining excessive tax relief for asset-backed pension contributions to their pension schemes.  The Government will introduce legislation in the Finance Bill 2012 (that takes effect on 29 November 2011) to ensure no excessive relief can arise for new arrangements.  Transitional rules will apply to existing asset-backed arrangements that have already received tax relief to ensure the correct amount is given by the end of an arrangement.  Asset backed contributions are those being made by large employers to fund their defined benefit (DB) schemes and manage pensions deficits by means of a series of payments guaranteed with security over the assets from which the payments derive, rather than making a one-off lump sum contribution.
  • Introduction of the Seed Enterprise Investment Scheme (SEIS) from April 2012. This will enable individuals to invest in qualifying new start-up companies and receive income tax relief at 50% with an annual investment limit of £100,000. In addition gains realised on disposal of an asset in 2012/13, which are then invested in SEIS in the same tax year, will be exempt from capital gains tax.
  •  The annual exempt amount for capital gains tax is frozen at £10,600 for 2012/13.
  • The Chancellor announced an indefinite delay on “auto-enrolment” for pensions for any firm with fewer than 50 employees.  Pension campaigners will to say that it undermines the Government’s attempts to encourage people to save more for their retirement.
  • Larger businesses are still be obliged to automatically enrol their employees into pension schemes from next year which is an additional cost as companies have to match the contribution made by their employees.

Other areas included in the autumn statement includes:

Growth

  • 2011 forecast revised down to 0.9% from 1.7%
  • 2012 forecast revised down to 0.7% from 2.5%
  • In 2013, 2014 and 2015, forecast growth will be 2.1%, 2.7% and 3%

Borrowing

  • Extra £11bn borrowing over the next 5 years
  • Borrowing forecast to be £127bn in 2011-2, falling to £120bn, £100bn, £79bn and £53bn in following years
  • Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards

Transport Costs

  • The average rise in regulated rail fares to be capped at 6% – 1% above inflation – in January, rather than the 8% cap expected
  • Planned 3p fuel duty rise in January to be scrapped.
  • But duty will go up by 3p in August.

Business

  • OBR forecast of total public sector job losses up from 400,000 to 710,000
  • Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
  • £1bn business finance partnership to raise money for medium-sized firms
  • Regional Growth regeneration fund to get £1bn in extra funding£250m support package for energy-intensive firms, £500m for science
  • Business rate holiday relief for small firms extended to April 2013New time limits for planning applications£1bn “youth contract” to subsidise six-month work placements for 410,000 young people
  • Bank levy to increase in January

Infrastructure

  • £5bn new spending over three years, including £1bn for the rail network
  • Go-ahead for 35 road and rail projects across England
  • Aim to unlock a further £20bn in investment from pension funds.

 

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.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

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

Written by Steven Mugglestone

November 30, 2011 at 5:34 pm

75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients ..… And R&D Tax Credits Is One Such Area

leave a comment »


75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients
..… And R&D Tax Credits Is One Such Area

This statistic is quite remarkable, but is being quoted around at the moment.  Rightly or wrongly, it does highlight that many accountants, whatever the percentage is, do not claim all the relevant tax reliefs that are available for their clients.  One such tax relief is R&D tax credit and this is a relief that could result in an actual refund of cash from HMRC, which in the current climate is very welcome.

In essence, Research and Development (R&D) Relief is a Corporation Tax relief that may reduce your company or organisation’s tax bill by more than your actual expenditure on allowable R&D costs.

Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HM Revenue & Customs (HMRC), but your company or organisation can only claim R&D Relief if it is liable for Corporation Tax. Full details are available on the BIS site below and we have highlighted some of the key points in this article:

http://www.bis.gov.uk/policies/innovation/business-support/rd-tax-credits

The key headline to bear in mind is that you may be able to claim an additional 100% of your costs against your tax and potentially receive a cash refund from HMRC.  Given the statistic above, there are clearly many businesses which do not claim this and so are missing out on potential substantial cash refunds.

Many companies are claiming R&D tax credits successfully, but despite the substantial financial benefits available, many others also do not realise that they have eligible projects or worry that the claim process is too onerous and costly or, most commonly, include the R&D claim as part of their broader tax and accounting affairs without a rigorous effort to optimise its scope.  Businesses need to take advice and consider what they do as they often miss the fact that they are already incurring R&D costs for commercial activities but do not include them as such and so miss out on the relief.

Not only is the tax legislation associated with the scheme a specialised area in its own right, it is unique in that a successful claim is based on its scientific or technological merits, meaning that the claim process cannot be fully handled by tax personnel alone and we certainly work with specialist in this area to assist and our clients with the relevant claims.

Qualifying criteria

  • Attempting to achieve an advance in science
  • Resolution of a scientific uncertainty
  • Technological advances
  • New knowledge – not just for their company

Typical R&D opportunity sectors (but not exhaustive)

  • Companies developing new products
  • Digital marketing – database software development
  • Games companies / Electronics / Instrumentation
  • Food manufacturers
  • Medical devices manufacturers
  • Technology industries e.g. aerospace
  • SMEs with a reasonable number of employees
  • Software – security, performance, packages together to make a system
  • Software development

So the question really, in respect of R&D Tax Relief – is your company claiming it’s full entitlement?

·         Do you employ scientists, engineers, software developers or technicians?

·         Have you developed a new or appreciably improved product or process?

·         Have you developed software in-house?

·         Are you a Small or Medium-sized Enterprise (SME) that has subcontracted out any of the above?

If the answer to any of these questions is ‘yes’, and you are a UK Corporation Tax payer then you could be eligible to claim R&D tax relief.

The benefit can be a cash credit to your business that is worth as much as 25% of your company’s expenditure on Research and Development. In short, if you employ only four engineers or software developers performing eligible  work at £25,000 each, under the UK R&D Tax Credit scheme you could be entitled to a cheque from HMRC for £25,000 each year.

We have been Finance Directors within business and involved in similar claims from the other side of the desk and we carry out this type of review for our clients on a regular basis to ensure that we understand what they are doing and picking up where eligible R&D is being carried out to ensure that the appropriate claims may be made and where we can, cash refunds obtained on behalf of our clients.  We are always endeavouring to ensure that we are firmly in the 25% of accountants that do claim all relevant tax reliefs for their current and future clients.

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.

http://uk.linkedin.com/in/stevenmugglestonefca/
http://twitter.com/McGsCorporate
http://www.youtube.com/watch?v=nhC0wlglePE
http://www.mcgregorscorporate.co.uk/

T: 0845 519 5659                T: 0121 236 3317
steven@mcgregorsbirmingham.co.uk

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

Written by Steven Mugglestone

November 30, 2011 at 1:16 pm