Ashworth Treasure RSS Feed: Manufacturing

Happy New Year – are your finances in order for 2011?

Fri, 21 Jan 2011 14:56:15 GMT

Naturally a New Year brings with it hope and aspirations for the forthcoming year, as well as an opportunity to reflect on the year gone by and make improvements.

Is your north west manufacturing business ready and raring to move forward into 2011?

The finances of your business are a dual responsibility which we believe should be shared between you and your accountant.

Ashworth Treasure accountants in Lytham have what we think are some useful tips on financing which could help your manufacturing business:

Terms of business – Make these clear and don’t be shy in asking for your money.
Claim expenses/allowances wherever possible – Are you aware of what allowances can or cannot be claimed? Work closely with your accountant on this.
Tax planning – tax planning strategies could have a positive impact on you finances - work closely with your tax adviser on this.
Advertising - be savvy about your marketing strategy. With no plan you could waste valuable money for little reward.
Banking - is you’ve got excess funds make sure you get the best interest rate. There are still a few savings accounts that off a good interest rate.

If you are involved with a manufacturing business in Lancashire or the North West and would like to talk about specific tax advice with a specialist firm of accountants, then please get in touch.

Can you benefit from Bad Debts Relief?

Thu, 16 Dec 2010 16:31:10 GMT

In these difficult economic times, North West manufacturing businesses are experiencing problems in collecting all their outstanding debts. It is possible to reclaim part of the outstanding debt from HMRC in certain circumstances.

Are you making full use of VAT Bad Debt Relief?

Unless you are using the Cash Accounting Scheme you must account for VAT when you raise a sales invoice and then wait for payment. If you are still waiting to be paid over 6 months later you may claim bad debt relief i.e. claim the VAT back from the taxman.

In my experience of dealing with Lancashire based manufacturing companies, this relief can easily be overlooked. The North West is seeing difficult times and cash flow is especially tight for many businesses. I think that where possible tax relief should be taken.

Here at Ashworth Treasure Accountants in Lytham, we have dealt with this area many times and are often asked how best to account for bad debt relief. If you have incurred bad debts where the due date for payment was any time in the last 4 years and you have not recovered the VAT on the debt, it may not be too late to claim to recover this VAT.

If you are involved with a manufacturing business in Lytham, or further afield in Lancashire or the North West and would like to talk about specific tax advice with a specialist firm of accountants, then please get in touch.

The Future's Bright for North West Manufacturing

Fri, 19 Nov 2010 15:56:46 GMT

Here at Ashworth Treasure Accountants, we work with several North West manufacturing companies and their success is quite significantly due to their ability to stay ahead of the game in terms of design, innovation and technological advancements.

The UK is the 6th largest manufacturing country in the world by output. Despite this, some sectors have been in decline. This is due to other countries being able to provide goods at lower prices than the UK, and has been compounded by rising energy, material and employment costs in this country.

The Lancashire based businesses that we work with have grasped the fundamental concept of playing to their strengths.

These strengths are mainly technological and design based. Rather than trying to keep wages down, they are employing well qualified individuals who can deliver the best designs and creativity. This enables these companies to win business more easily than their competitors.

Globalisation has also offered new opportunities with the discovery of new markets and at Ashworth Treasure Accountants, we believe that our work supporting manufacturing companies in research and development by keeping them best informed about tax, grants and with general business advice is also playing a part.

2011 VAT Changes – a practical summary

Mon, 15 Nov 2010 09:47:04 GMT

The rate changes on Tuesday 4 January 2011 from 17.5% to 20%. The VAT fraction will change from 7/47 to 1/6. The way in which you complete a VAT return will not change nor will the quarter end.

The most frequent question being asked is “At what rate do I charge VAT for goods and services currently being processed?”

Obviously the supply takes place when goods are delivered or services performed. The tax point for VAT however may be different.

The actual tax point is when the invoice is issued if it is either before, or within 14 days after the supply. There can be exceptions though to the 14 day rule e.g. it can be 3 months for solicitors. Also, the actual tax point will be the payment date, if this is earlier than when the invoice is issued. There are also special rules that apply when there is a rate change and so the same supply could have different rates and to some extent you can choose. Complicated? You bet.

Examples:

Goods delivered to customer on 28 December.
If you invoice on 28 December 2010 the rate will be 17.5%. If you invoice on 5 January 2011, the rate will be 20% i.e. within 14 days of supply. If you invoice more than 14 days after 28 December the rate will be 17.5% (i.e. the date of supply).
Invoice raised (or deposit paid) on 28 December by customer for goods to be delivered in January.
17.5% will apply to the deposit and 20% will apply to the balance. You do have the option to charge 20% on the deposit which may simplify matters if your customer can recover the VAT.
Issuing a credit note in January 2011 for item sold in December 2010.
The same VAT rate should be used for the credit note as used on the original invoice. For this example it would be 17.5%
Any services you provide can be split pre and post January even if you supply continuous services where usually, payment in advance triggers the tax point.

As with previous VAT rate changes, H M Revenue & Customs will be applying a relatively ‘light touch’. The amounts of money at stake during a changeover aren’t going to be life changing. Furthermore, to the extent that you supply other VAT registered businesses, any errors are ‘neutral’.

Our advice?

Be sensible in your approach and don’t panic.
Plan ahead to maintain your profit margins.
Sort your software out – it’s easy enough with the likes of Sage.

In these strange times, you can always get some advice outside of your usual circle of advisers. Tony Cooney is a Chartered Tax Advisor and member of the Chartered Institute of Taxation. Ashworth Treasure is a practical firm, giving practical advice. Feel free to get in touch (tonycooney@ashworthtreasure.com) and we will come and see you for an informal chat to discuss your particular issues.

More Tax and Business Advice for Manufacturers and Others - Did you buy your business premises after March 2008?

Thu, 04 Nov 2010 10:35:43 GMT

If you did have you claimed all the tax allowances to which you are entitled? The answer may well be no if you have not received this piece of tax advice from your accountant. Why, because capital allowances relating to property assets is such a complex area of tax legislation and you would need to be aware of a new category of expenditure that qualifies for tax relief.

HM Revenue & Customs (HMRC) introduced in the Finance Act 2008 (FA 2008) a new category of plant and machinery expenditure which qualify for capital allowances. The new category is called integral features. For these purposes an integral feature is:-

an electrical system (including a lighting system),
a cold water system,
a space or water heating system, a powered system or ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
a lift, an escalator or a moving walkway,
external solar shading.

Of these items only (c) and (d) would have qualified for capital allowances prior to April 2008 and anyone that acquired property prior to April 2008 would therefore not have been able to claim allowances on the three remaining items of expenditure.

Due to the nature of these integral features even properties that would not have previously warranted consideration from a capital allowance prospective should now be considered. As well as a manufacturer’s research and development facility, even a High Street retail unit will usually contain an electrical system and with a cold water system.

These allowances are likely to be substantial. It has been estimated that on a typical office building these items could be worth at least 2% - 6% of the purchase price. For example, on a £5m acquisition this could equate to additional allowances of anywhere between £100,000 and £300,000 which at a corporation tax rate of 28% would represent additional tax relief of anywhere between £28,000 and £84,000.

The manner in which the additional tax relief flows through to the buyer will depend on various factors but assuming that the Annual Investment Allowance currently at 100% for £100,000 of costs (100% for £50,000 of costs for expenditure incurred before April 2010 and 100% for £25,000 of costs for expenditure after April 2012) which was also introduced by FA 2008 is available the allowance for the buyer for set off against the first year of claim will be the whole of the £100,000 (at 2%) or £120,000 (at 6%).

In addition, where the integral features contain “green” expenditure they may qualify for accelerated capital allowances at 100% under the Enhanced Capital Allowances System. The assets included within the system and those incurred on energy – saving and environmentally – friendly expenditure and include certain air conditioning, combined heat and power, solar technology and water saving devices etc.

Consequently, on the purchase of business premises after March 2008 it is important to allocate the correct sum of expenditure to the appropriate plant and machinery pool to ensure that all available reliefs are utilized to their fullest extent. The sum to be allocated is likely to be based on a just apportionment of the purchase price . We have many years experience in formulating these claims for businesses in Lancashire and the North West, and will gladly assist you in obtaining the maximum tax reliefs on this fundamental asset for your business.

North West Manufacturing Companies - Tax relief for product and software development

Thu, 21 Oct 2010 14:52:15 GMT

There is a little known tax relief for companies, called Research and Development Tax Credits.

Even as a leading North West accountant, this doesn’t sound too exciting to me as it conjures up visions of laboratories and test tubes, but this is not the case.

Where expenditure qualifies, a company, including those in the Lancashire area, can get an additional 75% relief on its costs e.g. if you spend £100K, then tax relief is given on £175K

The relief largely covers staff costs and consumables, but also some other expenses.

The North West is seeing difficult times and cash flow is especially tight for many businesses. I think it is therefore imperative that where possible tax reliefs should be taken.

What are the criteria for Research and Development Tax Credits?

The project must seek to achieve advancement in science and technology through the resolution of scientific uncertainty. Our experience tells us that the taxman is likely to ask the following questions:

What was the scientific or technological advance?
What were the scientific or technological uncertainties?
How were these overcome?
Why was the knowledge not readily available?

These questions may seem a bit daunting, but here at Ashworth Treasure Accountants in Lytham, we have dealt with this area many times and would be able to help you with the answers.

I have a few examples of projects that could qualify and hopefully, they will help you to see that the some of the work your manufacturing company does may well be eligible for this tax relief.

Automation of a manual production process
Software project resolving conflicts within hardware or software, where existence of a problem area and the absence of a known solution have been documented
Development of new improved spark plugs to use in an existing petrol engine
Finding a new active ingredient for a weed-killer and developing a formula to incorporate this into a commercial product
Design of a new DVD player which is an appreciable improvement on others in the market place. It incorporates a new control mechanism for the laser that ‘reads’ the disc.

If you are involved with a manufacturing business in Lytham, or further afield in Lancashire or the North West and would like to talk about specific tax advice with a specialist firm of accountants, then please get in touch.

North West Manufacturing – Cash Management is Key

Thu, 09 Sep 2010 14:08:50 GMT

So, how has the manufacturing industry in the North West been coping in 2010 - Has it been hit hard by the recession or showing its strength and pulling through?

My experience in working closely with several manufacturing business in the Lancashire area shows that those businesses which were healthy before the recession are coping well, but some of those which were already struggling have fallen. Through my client meetings and telephone conversations the feeling from manufacturing business owners and management is that it is going to take several years before things get back to how they were before the ‘credit crunch’. Furthermore, there is concern over whether the recession is really over, or are we just limping along?

Management needs to make sure they don’t take their eye off the ball. I believe that the top dogs in the future will be those who concentrate on their cash management policy and look for sustainable business. Where possible they should also dedicate significant time in aiming to move their resources from underperforming contracts into more profitable areas. This sounds very simple, but of course it is far from it. However keeping this ideal in the forefront of your mind will bear fruit in the long term. It is a difficult balancing act, but one which must be pursued to achieve results.

As accountants and tax advisers providing business advice to the manufacturing sector, we at Ashworth Treasure work closely with our clients and play a vital role in business planning, cash management and maximisation of tax relief. We are fully behind the idea of keeping hold of your cash rather than giving it to the taxman!

Many of the manufacturing companies we work with in Lancashire and the North West are becoming aware that financing their businesses is more difficult than in recent years. This is due mainly to bank lending becoming more expensive and difficult to obtain. By focusing time on cash management businesses should be able to keep uncomfortable bank discussions and unexpected charges to a minimum.

We think that the manufacturing sector should be optimistic for the future. If we can manage our liquidity in these difficult times, we should be set up ready for the upturn in the economy which we hope will arrive sooner rather than later.

How will business tax changes affect your business?

Tue, 29 Jun 2010 17:06:22 GMT

In the recent emergency budget there have been various changes in the business tax world - some good and some bad. Overall we’d say “phew!” it could have been a lot worse.

It is proposed to cut the main corporation tax rate from 28% to 24% by reduced it at 1% each year over the next four years. This is clearly a positive step.

Manufacturing businesses will no doubt, have to make significant purchases of plant and machinery in order give their business a competitive advantage. The news on changes to the capital allowances rules is not so good for businesses which invest significant resources into plant and machinery.

The 100% annual investment allowance expenditure limit is to be reduced from £100K to £25K from April 2012.

The rates of writing down allowances will also be reduced from April 2012.

Both these changes mean that it will take longer for businesses to gain relief. For example, for general plant the relief will be spread over 12 year (previously 10).

On a positive note, these changes only take effect from April 2012 so there is plenty of time to plan ahead and make any significant purchases sooner rather than later.

From our experience of working with businesses in the manufacturing sector, the general feeling is that they want certainty and stability. Let’s hope that the government bears this in mind over the next five years.

Employment costs – What’s changed?

Tue, 29 Jun 2010 16:59:45 GMT

In the recent emergency budget there were various changes to employment taxes which may effect your business and your staff.

As an employer I’m sure you’re used to your staff moaning about their pay and always angling for a pay rise, especially at the Christmas party! Well, there is going to be an increase in the personal allowance by £1,000 in 2011/12 to £7,475. This will effectively give them a pay rise so you don’t have to. Please be careful though, higher rate taxpayers will not benefit from this change because the basic rate limit will be cut.

If you are a new business in Lancashire, or in fact anywhere outside of London there is some great news regarding National insurance contributions.
Employers will not have to pay the first £5,000 of class 1 employer NICs that would otherwise be due in the first 12 months of employment. This new concession applies for each of the first ten employees hired in the first year of business.

The magic date is 22 June 2010 i.e. any new business setting up on or after this date will benefit from this NI holiday. The scheme will last for 3 years.

On the downside, National insurance contributions for employees and employers are increasing by 1% from 6 April 2011. This is to some extent mitigated by the announcement that the level at which employers start to pay NIC’s will increase by £21 per week above indexation. The cost of the combined measures will therefore be disproportionately borne by businesses employing relatively higher paid employees.

How do the changes to capital gains tax affect your company?

Tue, 29 Jun 2010 15:58:04 GMT

The short answer is that they have no effect at all because companies don’t pay capital gains tax! Companies pay corporation tax on their capital gains. Am I stating the obvious? The owner of a manufacturing business rang me the other day and he was frantic about how the changes would affect his company – so not everyone will think it is an obvious statement.

The bones of the changes are that the rate of tax for higher rate taxpayers has gone up from 18% to 28%. For business owners Entrepreneurs Relief now means that lifetime gains of up to £5m are taxed at 10%, whereas previously this was £2m at 10%.

A higher rate taxpayer may still think that 28% is attractive but you need to remember that you may have owned the asset for some time and hence you are effectively being taxed on inflation. For example if you bought a property in 1990 and its value only kept pace with inflation then you are not actually any better off now, but you will be taxed on the sale on effectively the inflation amount. This doesn’t really seem fair.

For the manufacturing entrepreneur who owns the shares of the company, the (potential) good news in the budget is the extension of Entrepreneurs Relief. So, how does it work now compared to before?

Let us say that ‘A’ and ‘B’ are selling their respective successful manufacturing companies for £4million and £20million.

Before: ‘A’ would pay about £560,000 in capital gains tax (an effective rate of 14%)

After: ‘A’ would pay about £400,000 in capital gains tax (an effective rate of 10%)

Nice.

Before: ‘B’ would pay about £3.44m in capital gains tax (an effective rate of 17%)

After: ‘B’ would pay about £4.7m in capital gains tax (an effective rate of 23.5%)

Not so nice.

If you sell the shares in your trading company for £5m or less, then the rate of 10% is very attractive.

If your company sells its business and assets (as distinct from you selling the shares) then the company pays corporation tax on the gain and you pay further tax when you get the money out of the company! So make sure that any future sale is done correctly.

I like getting in my car and going to visit my clients - am I weird?

Tue, 22 Jun 2010 09:11:19 GMT

Manufacturing businesses will no doubt, have close contact with their accountant. Maybe it is discussing business generally, receiving tax advice, or discussing the annual accounts. Have you ever been to your accountant’s office to have these meetings? Why?

What is there at your accountant’s office? Nice chairs? Nice cup of tea? It amazes me how much advice from a traditional accountant is given at their office. (Mind you, there will be some who still deal with the accounts by post!)

Your accountant or tax advisor cannot learn an awful amount about your business from his/her office. The only way to truly understand a business is to conduct work and meetings at the client’s premises. After all, the meeting is about YOU and YOUR business, not your accountant’s business.

What benefits can be gained from meeting at your premises? From my experience of travelling around North West manufacturing businesses, I get to know each and every client’s business thoroughly. I will notice if there have been any changes. For example, new equipment; an extension; new staff; new vehicles. More often however, I actually get to know proposed changes in advance.

The ultimate benefit to your business is that you receive well-targeted, specific tax and business advice on a proactive basis.

I went to see a client recently in order to give some taxation advice. Whilst there, we were talking about asset purchases. It was an opportunity for me to discover that the current year had very little spending and the following year there was to be significant spending. Through our discussions, we decided to alter the spending pattern to ensure that we would receive 100% tax allowances on assets as opposed to 40% on the total spend.

So, am I weird? Maybe so. But surely to a client’s advantage.

Recession – where are we in Manufacturing?

Mon, 21 Jun 2010 17:31:10 GMT

When he was chancellor, Gordon Brown declared that his prudence meant “no more boom and bust” - and yet here we are...

Tony Blair famously declared that Saddam Hussein had weapons of mass destruction that could be deployed within 45 minutes. It turns out my 4 year old son had more dangerous weapons.

There is so much press speculation, political lies and spin on so many matters these days. The latest is that the economy grew last quarter by 0.1%. That’s because of that chocolate bar I bought in December. Had it have been chewing gum then we may not have made 0.1%.

What does the current state of play mean for manufacturing businesses in the North West?

Well, I don’t think it means that much. Some manufacturing businesses are suffering still, whilst others are flourishing. Why is that?

Put simply, individual owner managed businesses in Manufacturing are less likely to be subject to the general trends of the UK economy.

As a Tax accountant, I act for a business in Lancashire whereby one of its competitors went bust. Our client picked up quite a bit of work as a result. Great for our client, but disastrous for the competitor.

Manufacturing businesses in the North West that are well managed, with the ‘wool on their backs’ to weather the storm should be feeling a little more confident than they did one year ago. There are still risk factors though. I think the largest of these are 1. The banks and 2. Reliance on large customers.

Whist we may be technically out of recession now, remember that recession can hit an owner managed business at any time. Likewise some manufacturing businesses may say ‘recession, what recession?’ The clue is that your business is bespoke to you. Make sure you listen to the right professionals. Your accountant should be well placed to advise on the risks to your business.

The Changing Face of the Manufacturing Industry in Lancashire

Mon, 21 Jun 2010 17:21:52 GMT

The manufacturing industry in Lancashire is as important as it has ever been. A bold statement, you may think. However, I believe it to be true.

Lancashire is sentimental about its history and its role at the forefront of the Industrial revolution. Now we see the global economy forcing the export of manufacturing to the likes of China and forcing a long term decline in businesses and jobs. But, what is there left and what can we hope for the future?

Well, let us face it, only the fittest have survived. The fittest are the most likely to survive in the future.

So what does it take to be the fittest? In my opinion, it is diversity and innovation. Although there are some exceptions, we cannot compete on price with the likes of the Far East for ‘run of the mill’ (if you pardon the pun) items. Hence diversity and innovation.

Lancashire now plays a leading role in the whole of the manufacturing process. By this, I mean that we do not just ‘produce’ items, we are involved in the Research & Development process, the Design process, Marketing, Logistics etc

Lancashire is unique. It benefits from its history, reputation and location. It benefits from producing innovative/unique goods with a skilled workforce. There is still a long way to go but I genuinely believe the entrepreneurial skills of modern businesses will prove a solid foundation for the future.

Now we are feeling positive, you need to think about help for your business. The politicians have been good at maximising their expenses. Are you maximising your tax expenses? Are you taking advantage of 100% tax relief on the purchase of certain assets? Are you taking advantage of Research & Development tax credits whereby for every £1 you spend you get a tax deduction for £1.75!

Accountancy and taxation does not have the appeal of manufacturing, because we do not ‘make’ anything. However if we can help you minimise your tax and thereby maximising your profit, and then you have more cash to reinvest. Therefore, maybe we can play our little part.

Small firms 'turn to sales and marketing' to beat recession

Tue, 30 Mar 2010 13:28:07 GMT

Profit is a key driving force for manufacturing businesses, so business owners are looking at ways to maintain profitability in these difficult times. As accountants to the manufacturing sector, we have also seen a steady increase in marketing spend as maintaining profitable sales becomes ever more important for our Lancashire based clients.

Small businesses are stepping up their sales and marketing strategies in a bid to thwart the effects of the recession, according to a recent survey.

The study, carried out by the Forum of Private Business (FPB), revealed that while many small firms have cut their operational costs, they are now hiring additional sales staff, boosting their marketing activities, and carrying out improvements to their websites.

More than half of firms reported that they expect turnover to increase in 2010, while 44% expect their business to grow.

The survey was the first to be conducted by the FPB's new Economy Watch panel, a group of members who are sharing their experiences of the recession and its aftermath.

Overall the results were positive, with just 13% of firms reporting that they were concentrating their efforts on cost-cutting measures. Meanwhile, 80% of firms said that they found that the cost of borrowing was 'affordable'.

However, many do expect the difficult times to continue, with 60% of businesses anticipating increases in costs and 75% expecting tax increases.

Thomas Parry, FPB Research Manager, said, 'These findings are quite encouraging and show there's a healthy amount of fighting spirit among smaller firms'.

'However, much of this optimism is based on the hope of a recovering economy and increased business and consumer confidence.'

Employment law 'stifling UK businesses'

Tue, 30 Mar 2010 13:24:57 GMT

This article originally posted on our main website provides some interesting business advice for our manufacturing clients in the North West. One of the most significant costs for any manufacturing business is its employment expenditure, which not only includes wages but also training, health and safety and so on.

The 'relentless flow' of complex employment law is stifling UK competitiveness and jeopardising future job creation, a leading business group has warned.

A new report published by the British Chambers of Commerce (BCC) argues that basic workplace protection rules have been replaced by 'burdensome' rights to request and extended time-off provisions. It also suggests that 'unreasonable' health and safety restrictions are adding to the red tape burden.

'There is an emerging consensus that employment law is now weighted too far in favour of the employee,' said David Frost, Director General of the BCC. 'Many rights come from EU legislation, which is informed by and aimed at labour markets very different to our own. The result is that the UK and the EU are becoming increasingly uncompetitive due to the rising cost of labour.'

The study, entitled Employment regulation: up to the job?, outlines a number of proposals which the lobby group claims will 'reduce and rebalance' the burden of employment legislation.

Calling for an 'urgent overhaul' of the UK's 'dysfunctional' tribunal system, the BCC recommends that employers should not have to wait more than 16 weeks for a first tribunal hearing.

It also suggests that the law should be changed to allow employee dismissal if an employer 'reasonably believes' that a member of staff’s actions constituted gross misconduct.

'Encouraging job creation - and therefore wealth creation - must remain the Government's priority as economic recovery continues,' added Mr Frost. 'A three year moratorium on the implementation of new employment law is crucial, as is cancelling the 1% hike in employer National Insurance contributions, planned for April 2011.'

Our first blog post!

Thu, 26 Nov 2009 20:04:40 GMT

I love manufacturing and engineering type businesses. They are complex and interesting. They ‘make’ things, which are tangible. They have plant and equipment. They own or rent premises. The range of taxation and accountancy issues and problems is vast. I sometimes wish I was the manufacturer as opposed to the tax advisor, but my vocation is now set!

Having been involved in the manufacturing sector for over 20 years, providing taxation advice and business support, I have met quite a lot of entrepreneurs of owner managed businesses. ‘Profitability’ and ‘tax’ are two words never far from their lips.

There is nothing exciting to see in an accountants’ office (not ours anyway), so I travel throughout Lancashire and the North West generally, where I meet all sorts of organisations and people. I like to get to know businesses, become familiar with their processes, and provide constructive advice in profit planning, taxation and business issues generally. I see it as being a part-time non-executive partner to businesses.

I hope to provide a series of blogs over time where I will share my views on matters. Not necessarily just on accounting and tax matters, but maybe observations generally. I’ll try not to comment much on Chartered Accountants or Chartered Tax Advisors as I want to try and hold your attention!

Tax Relief on Equipment - 100% in Year One?

Thu, 26 Nov 2009 20:01:28 GMT

One of the problems with purchasing equipment is that tax relief is normally spread over many years.

In 2008, the Government introduced a relief of 100% in year one for up to £50,000 of plant, machinery & equipment acquisitions. This is known as the Annual Investment Allowance.

Whilst this allowance is valuable, some businesses do spend considerably more on plant, machinery and equipment.

Question: How can you get more 100% allowances if you have already spent £50,000?

The problem that belies most small and medium sized businesses is that they leave the calculations to their accountants. Sometimes this can lead to the balance of assets over £50,000 all being treated the same. This can result in assets then receiving much less of an allowance.

Returning to the question, businesses need to carefully analyse their asset purchases and identify any further assets that can qualify for 100%. Alternatively, let us come along, review your assets or plant register, and see what we can identify as qualifying.

Question: What does qualify for 100% relief in year one?

We have all heard of ‘climate change’ and to most, it seems to involve inconvenience and cost.

Well, here we have a benefit!

If a business buys energy saving plant that is shown on an approved list, then it qualifies for 100% tax relief in year of acquisition. Saving the environment and saving costs – sounds like something you can live with.

Question: What types of items are on the list?

Some examples are:

Boilers and boiler equipment
Combined heat and power equipment
Compressed air equipment
Lighting
Air conditioning
Motors
Insulation
Refrigeration

Only specific products qualify. Ring us for practical advice on how to go about securing this very valuable relief.

Tax Relief on Cars

Thu, 26 Nov 2009 19:57:39 GMT

Manufacturing businesses typically either run a fleet of vehicles and/or pay car allowances to certain staff. However, tax relief for cars bought by companies on or after 1 April 2009 has changed completely. Emissions, as opposed to cost, is the main factor.

High emission cars (>160 g/km)
Cars bought before 1 April 2009 costing over £12,000 qualified for a maximum annual allowance of only £3,000. When the car was sold there was a ‘balancing allowance’, so total allowances equated to the cost of the car less proceeds.

Cars bought on or after 1 April 2009 qualify for 10% annual allowance on a reducing basis. However, balancing allowances have been scrapped so when the car is sold, the balance of the cost continues to be written off at 10% per year.

Example:
A car that costs £50,000, with emissions of over 160 g/km, is sold for £20,000 after 4 years. The net cost therefore is £30,000.

If bought in March 2009 the allowances would be £12,000 and a balancing allowance of £18,000 making £30,000 in total.

The same car bought in April 2009 would qualify for allowances of about £17,000 but with no balancing allowance the remaining cost of £13,000 (after deducting the £20,000 sale proceeds) would not be fully written off for many years.

Summary:
Allowances in first 4 years under old rules: £30,000
Allowances in first 4 years under new rules: £17,000

Low emission cars (<110 g/km)
At the other end of the scale is a 100% allowance in year one for low emission cars. Certain models of Mini, Fiesta, Polo, Golf, Volvo and Toyota qualify for 100% allowances.

The inbetweeners
Cars with emissions between 110 and 160 g/km are given tax relief similar to the higher emission cars, but with a rate of 20% per annum as opposed to 10%.

Vans
Some double-cab pickups and commercial versions of SUVs qualify as vans. Vans get allowances in the same way as other plant and machinery, which can be as much as 100%.

Conclusion
You should be reviewing the impact of the above on your company car policy and decide whether there should be changes to the types of car acquired; frequency of change; position with regards to vans; or whether you scrap company cars altogether.

Property Aspects in the Manufacturing Sector

Thu, 26 Nov 2009 19:52:13 GMT

Do you own, or are you considering acquiring commercial property from which to run your business?

Have you considered, or been advised on, the ownership structure of the property and the various taxation and commercial considerations thereof?

Often, companies see the property they wish to acquire, appoint a solicitor and off they go. By default therefore, the trading company owns the property. However, it really does need some detailed thought.

Who should own the property?

Well, it is not necessarily the trading company. Other vehicles are:

the shareholder(s) personally
another company, either separate or part of the group
a pension scheme

Each vehicle has very different taxation and commercial considerations.

What are the taxation considerations?

You need to consider:

corporation tax
capital gains tax
stamp duty land tax
inheritance tax

The various combinations of the above, depending on the ownership structure, can give very different outcomes. Get it wrong and it can cost a lot of tax. Alternatively you could engineer a very favourable tax outcome, particularly using pension schemes. The effects will also be different depending on whether the property already sits on the company balance sheet.

What are the commercial considerations?

You need to consider:

ring fencing (i.e. protecting the valuable safe assets from potential creditors of the more risky manufacturing business)
the future plans for the property and potential sale (who should benefit from capital uplift?)
the future plans for the company (for example one may wish for the company to be sold but for the property to be retained as a source of retirement income)
funding

What do you need to do?

Seek advice from your accountant or us, before you enter into a transaction.

Even if you have ‘made your bed’, you do not necessarily have to lie in it. Undertake a review and seek advice for a potential restructure.