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Our special delivery for Barnardo’s

Murray Patt accountant makes special delivery to Barnardos

We were pleased, alongside our friends Gresham Wealth Management, to bring some some much-needed Christmas cheer to children at Barnardo’s in Wythenshawe.

Alison and Murray dropped off boxes of presents, including food and toys for girls and boys, which will be distributed this week to vulnerable families supported by Barnardo’s in Wythenshawe.

Ragen Fallon, team manager at Barnardo’s Children’s Centres, said:

“We are delighted to receive these gifts which will go some way to bringing some festive cheer to some of the most vulnerable youngsters in our local community. We appreciate the support of local businesses like Alexander Knight & Co.”

We are very happy to support this important charity and we are pleased to bring smiles to the faces of youngsters who receive amazing support from the hard-working staff, volunteers and other donors.

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Autumn Statement 2017: our summary

The Chancellor Philip Hammond presented his first Autumn Budget on Wednesday 22 November 2017. His report set out a number of actions the government will take including support for more housebuilding.

His view is that the economy continues to grow and as a result the UK is creating more jobs.

The major attention-grabber was aimed at first time buyers who will not have to pay Stamp Duty Land Tax on homes costing up to £300,000.

Our summary focuses on the tax measures which may affect you, your family and your business.

Overall, it was a rather low-key budget for businesses. It’s a no-gain, no-loss budget for many of our clients. There was a lot of bluster about ‘looking at this’ and ‘thinking about that’, but not really much action, although this is really as we expected.

The increase in the research and development (R&D) tax credit scheme for large companies is good but an increase should have also been extended to SME’s who qualify. We wanted to see more incentives for SMEs not just the large corporates.

The uplift in EIS relief to £2m could be interesting to our entrepreneurial clients, although the application of more anti-avoidance measures may counter the benefit.

The raising of the basic and higher rate income tax threshold is positive for the economy and means more money can be spent on goods and services providing a tangible boost but it’s not major news.

Most SMEs will welcome a crackdown on the levels of taxation paid by multinational competitors operating outside UK jurisdictions.

On the negative side we want to see a reduction of red-tape for small businesses – the fact that the Chancellor is considering reducing the threshold at which small firms need to be registered for VAT is concerning. Any adverse changes to the VAT regime must be carefully considered.

The Budget proposals may be subject to amendment in the Spring Statement and subsequent Finance Act. You should contact us before taking any action as a result of the contents of this summary.

You can find our full summary of the Autumn Statement here.

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R&D Tax Credits update 2017

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.

For more details about how to claim R&D tax credits for your business please speak directly to Murray Patt on 0161 980 8788.

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Corporation tax and NICs

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:

  • 19% for the Financial Years beginning on 1 April 2018 and 1 April 2019
  • 17% for the Financial Year beginning on 1 April 2020.

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.

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Making tax digital (again!)

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.

We are on hand to support you through this process.

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More HMRC investigations

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:

  • transform their approach to tackling the hidden economy through new technology
  • further tackle those who are engaging in marketed tax avoidance schemes
  • enhance efforts to tackle the enablers of tax fraud and hold intermediaries accountable for the services they provide using the Corporate Criminal Offence
  • increase their ability to tackle non-compliance among mid-size businesses and wealthy individuals
  • recover greater amounts of tax debt including through a new taskforce to specifically tackle tax debts more than nine months old.

Speak to our team about our tax investigation service to ensure that you are not met with unexpected costs on 0161 980 8788.

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New VAT thresholds looming?

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.

Talk to our team on 0161 980 8788 about your current VAT arrangements to ensure that you are complying in a tax effective way.

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Increased limits for knowledge intensive companies

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:

  • double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies
  • raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million, and
  • allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of the first commercial sale.

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:

  • removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018
  • requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018 • increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019
  • increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019, and
  • introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent.

For further advice on EIS, VCT and Venture Capital speak to Murray Patt on 0161 980 8788

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Personal tax thresholds after Autumn Budget 2017

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:

  • 7.5% for basic rate taxpayers
  • 32.5% for higher rate taxpayers
  • 38.1% for additional rate taxpayers.

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.

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Alexander Knight & Co advises football startup business in Manchester

Mi Hiepa Scout advised by Alexander Knight & Co

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

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.

Joint venture

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.

Strong credentials

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.

If you are a startup business in Manchester – and wish to be formed as a joint venture initiative between investors and/or other companies – speak to Murray Patt at Alexander Knight & Co. 

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