Many of our clients are benefitting from the current R&D tax credits regime and this will continue.
It’s disappointing that the increase in R&D tax credits has only been extended to large businesses – rather than SMEs. However, the chancellor has confirmed a renewed campaign to alert SMEs to the fact R&D tax credits exists and we welcome this.
Corporation tax
Corporation tax rates have already been enacted for periods up to 31 March 2021. The main rate of corporation tax is currently 19%. As a reminder, the rate for future years is:
Class 2 National Insurance contributions (NICs)
The 2016 Budget announced that Class 2 NICs will be abolished from April 2018. The legislation to effect this measure was intended to be introduced this year.
In November 2017 the government decided to implement a one year delay so that Class 2 NICs will be abolished from April 2019.
The government is still committed to abolishing Class 2 NICs. The deferral allows time to engage with interested parties with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits.
Class 4 NICs
The Chancellor announced in the 2017 Budget proposals to increase the main rate of Class 4 NICs from April 2018 but was forced to make a subsequent announcement that the increase would not take place and there will be no increases to NICs rates in this Parliament.
In July 2017, the government announced significant changes to the timetable and scope of HMRC’s digital tax programme for businesses. VAT will be the first tax where taxpayers will keep digital records and report digitally to HMRC.
The new rules will apply from April 2019 to all VAT registered businesses with turnover above the VAT threshold.
As with electronic VAT filing at present, there will be some exemptions from Making Tax Digital for VAT. However, the exemption categories are tightly-drawn and unlikely to be applicable to the generality of VAT registered businesses.
Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements. In the long run, HMRC are still looking to a scenario where income tax updates are made quarterly and digitally, and this is really what the VAT provisions anticipate.
The government is investing a further £155m in additional resources and new technology for HMRC.
This investment is forecast to help bring in £2.3bn of additional tax revenues by allowing HMRC to:
There had been some speculation leading up to the Budget that the VAT registration limit would be significantly reduced. The Chancellor has announced that the VAT registration and deregistration thresholds will not change for two years from 1 April 2018 from the current figures of £85,000 and £83,000 respectively.
In the meantime, the government intends to consult on the design of the threshold.
During Budget 2017, it was announced that the government will legislate to encourage more investment in knowledge-intensive companies under the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).
The Government will:
The changes will have effect from 6 April 2018. This measure is subject to normal state aid rules.
Venture Capital
The government will introduce measures to ensure venture capital schemes (the EIS, Seed Enterprise Investment Scheme and VCTs) are targeted at growth investments. The government has announced that relief under the schemes will be focussed on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’. Detailed guidance will be issued shortly after the publication of the Finance Bill.
VCTs
The government will legislate to limit the application of an anti-abuse rule relating to mergers of VCTs. The rule restricts relief for investors who sell shares in a VCT and subscribe for new shares in another VCT within a six-month period, where those VCTs merge.
This rule will no longer apply if those VCTs merge more than two years after the subscription, or do so only for commercial reasons. The change will have effect for VCT subscriptions made on or after 6 April 2014. The government will also legislate to move VCTs towards higher risk investments by:
The personal allowance is currently £11,500. The personal allowance for 2018/19 will be £11,850.
We remind you that not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000, which is £1 for every £2 of income above £100,000. So for 2017/18 there is no personal allowance where adjusted net income exceeds £123,000. For 2018/19 there will be no personal allowance available where adjusted net income exceeds £123,700.
Tax bands and rates
The basic rate of tax is currently 20%. The band of income taxable at this rate is £33,500 so that the threshold at which the 40% band applies is £45,000 for those who are entitled to the full personal allowance.
In 2017/18 the band of income taxable at the basic rate for income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK.
The Scottish Government set the band of income taxable at the basic rate at £31,500 so that the threshold at which the 40% band applies is £43,000. The additional rate of tax of 45% is payable on taxable income above £150,000 (other than dividend income) for all UK residents.
Tax bands and rates 2018/19
The government has announced that for 2018/19 the basic rate band will be increased to £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. The additional rate of tax of 45% remains payable on taxable income above £150,000.
Dividends
Dividends received by an individual are subject to special tax rates. Currently the first £5,000 of dividends are charged to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the £5,000 allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed. Reduction in the Dividend Allowance The Chancellor has confirmed the Dividend Allowance will be reduced from £5,000 to £2000 from 6 April 2017.
The government expect that even with the reduction in the Dividend Allowance to £2,000, 80% of ‘general investors’ will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.
For specific advice on your tax affairs speak to our team now on 0161 980 8788.
We’re delighted to be advising Manchester-based football technology startup Mi Hiepa Scout, an innovative company bringing virtual reality (VR) into the professional game.
Mi-Hiepa Scout has launched the world’s first virtual reality technology aimed at rehabilitating injured footballers and scouting new talent.
Top clubs, physiotherapists and sports scientists have been involved in the development of the product, which is being rolled out this season.
Premier League clubs are already looking at the system, created by Mi-Hiepa Scout, and its founders hope that it will also be used to improve current players and scout for players in the future.
The company’s proprietary limb tracking mechanism enables the system to track the movement of a player’s feet and shins independently in 3D space. With no need for handheld controllers to move feet, accuracy and immersion in the virtual reality experience is first class.
The company was created as a joint venture by leading Manchester developers Mi and sports data experts Hiepa and we’ve been appointed as their accountants and will be assisting the company moving forwards.
Adam Dickinson, Production and Development Director of Mi-Hiepa Scout, said:
We’ve been delighted with the reaction by football clubs in the professional game. We’re operating at the elite level of sport and clubs are keen to explore any advantage they can bring to their squad.
For the first time, coaches, managers, scouts and sports directors can produce rapid, standardised, measurable and comparable results from talent pools that may have been previously unmanageable.
Our system helps get players better mentally and physically through individual training drills.
From a talent spotting perspective, it provides an objective, sterile environment, meaning all players have exactly the same conditions and can be compared equally. A youngster could go through our tests in thirty minutes and you would get objective data about their ability and performance. You could test 1,000 players a week as a first point of filter.
One of the problems many clubs are trying to solve is player engagement during rehab after an injury has occurred. This product certainly does that while providing valuable data for players, coaches and club performance analysts.
Murray Patt, founder of Alexander Knight & Co in Manchester, said:
The professional world of sport is increasingly looking at technology to amplify the recovery time of injured athletes. The management team at Mi-Hiepa Scout has got strong credentials and connections in the world of football and there is no doubt that the growth plans for the business are impressive. We’re delighted to be advising the team.
Gary Black of Manchester law firm Freeman Fisher, who is advising the company, said:
It’s great to see a local company making huge waves in the VR world within the sporting arena. Manchester is already known as being one of the leading cities in sporting success and Mi-Hiepa Scout is making sure that our city is seen as the leading city when it comes to technology in sport.
We were pleased to advise the owners of a successful Stockport-based business when it was acquired by a major PLC on their tax liabilities.
TF Solutions, (TFS) is one of the UK’s leading air conditioning and refrigeration distributors and was recently acquired by the country’s largest builders’ merchants, Travis Perkins.
The purchase enables Travis Perkins to expand its offering through the sale and supply of air conditioning units. Our specialist tax role on the deal was highlighted by North West Business Adviser magazine – you can read all about the deal here.
TFS was founded in 2001 and distributes a range of refrigeration and air conditioning products from three sites in Stockport, Burton on Trent and Dunstable. It will continue to trade as TF Solutions following completion of the deal.
Murray Patt,, founder of Alexander Knight & Co, said:
We were delighted to provide our client with the tax advice on this transaction and expect them to go from strength to strength as part of one of the most trusted brands in the building materials marketplace.
Andrew Cherrill has been confirmed as the new managing director at TF Solutions. He said:
We fully intend to continue operating as we have always done giving our customers a service level which is second to none in the industry. The acquisition deal will allow us to grow as a company and expand that service.
Frank Elkins, CEO of Travis Perkins’ Contracts division, added:
“TF Solutions have an extremely strong identity within the air conditioning and refrigeration market.”
The business currently employs 48 people at its three branches trading across the whole of the UK.
Tucked away on an industrial estate in Bredbury is a business that experiencing huge international growth at the cutting edge of the competitive audio-visual industry.
In 1997, Aquavision pioneered in-wall and waterproof televisions.
Since making the world’s first waterproof television, the innovative team, led by managing director Alastair Benn, are now market leaders and have developed a vast network of professional partners worldwide.
It’s a real British success story lead by a man who started the business from humble beginnings in his own garage. Soon after making his first waterproof television, he won his first order for a hotel project and had the entire family assisting him in boxing and dispatching the televisions.
Alastair Benn continues to drive the team forward and remains instrumental in the development of new, innovative products.
“Today, with the support of our distributors and industry relations, the Aquavision brand is well established and successful. This fuels our passion to continue to produce high quality, luxury televisions. We never compromise on quality and this is why we remain the number one British manufacturer of in-wall and waterproof televisions. We work hard at maintaining this reputation and we’re proud of the work we’re doing here.”
Now operating from 10,000 sq. ft. premises, the business exports 50 per cent of its sales to almost every country in the world. Aquavision serves four core markets: bathrooms, custom integrations, hotels and the marine industry.
Products range from 16” to the massive 85” screens manufactured onsite by a team of specialists. The hardware and software in the televisions integrates with all the main manufacturers and the business is successfully developing partnership with top-end audio brand Bang & Olufsen.
And how are they coping with Brexit? Alastair, is pretty confident that all will be OK:
“We’ve not been affected at all by the Brexit decision or the recent general election. We’re still growing, we’ve got an international outlook to business and we’re certain our European and Worldwide partners will continue to do business with us as long as we maintain our innovation and customer service. The exchange rate has been great for our export market and we see no reason why any business which strives for innovation and has a global outlook can’t succeed.”
For more information about Aquavision visit www.aquavision.tv
If you want to feature in ‘A brew and a chat with…’ email alison@alexanderknightaccountants.co.uk
