September 25, 2017, 11:24 pm
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  • Accountants with business expertise
  • Business Development
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Things you should know



Often Discussed

Have you outgrown your existing accountant?

As your business grows, just receiving the annual accounts and doing the business tax return is simply insufficient for day-to-day management. Some people are lucky enough to be in business with someone experienced in all aspects of the running and development of an organisation.

This is very rare, however, and many people find that they need a much more regular contact with someone who can help them with the day-to-day issues that arise.

  • Are you about to take on your first employee outside your family?
  • Do you need regular management information, giving detail useful to you (rather than just the Inland Revenue or Companies House)?
  • Running a business can be a lonely experience - do you have an independent sounding board who understands you and your business?
  • Are you about to export, or import, for the first time?
  • Do you wonder how to attract more business?
  • Do you understand your tax bills and what you can do to mitigate them?
  • Is your basic bookkeeping system creaking at the seams and you need to move on to a more robust and detailed system?
  • Are you getting out of the business what you need to have the quality of life you want?
  • Is the business controlling you?

Talk to us - we don't just do the annual compliance. With us you can have accountants as a real part of your team, understanding you and your business. We have the kind of long-standing experience and depth of knowledge that will help you move on.

Are you using a faceless firm that doesn't deliver a personal service?

While it is madness to suggest that a massive multinational can successfully engage anything much other than a massive multinational firm of auditors, accountants and tax advisers, small or medium-sized business owners need a significantly different relationship with their advisers.

Are you fed up with the audit juniors asking the same questions every year?

We ensure you have continuity of contact with a team which will work and grow with you according to your needs and understand you and your systems.

Do you find it difficult to get hold of your contact partner?

Our systems are designed to make sure that, in the absence of your main contact we can, nonetheless, deal with your query. As a matter of policy we always ring back if you ask us to!

How can a small firm have the necessary experience to advise me and my company?

We have been around for a long time. Our team has wide and long-standing experience of business and business development and we do more comprehensive tax planning, both in the UK and internationally, than most firms of similar apparent size. Our emphasis on a small but highly qualified team gives us an almost unique ability to apply our own first-hand knowledge to your particular situation.

Do you really need an accountant with an office in every town?

Most business-people need advisers who understand them and their needs. With modern technology the need to have your accountant in the next-door building is much less important. Whilst we, of course, have a good number of local clients our client base is also geographically widely spread. We have, and have had, clients as far afield as Australia, South Africa, the USA and Scandinavia as well as all over the UK, from Dumfries and Galloway to Cornwall. Distance is seldom a problem.

Do you have the resources to keep to a rigorous and rapid reporting timetable for our directors or overseas holding company?

This is no problem. We prefer to work to your timetable. For well over 20 years, for example, we have completed audited financial statements within five weeks of the year end for a UK subsidiary of a large multinational. Most organisations would rather have their compliance reporting done and dusted sooner rather than later and we deliver this routinely.

Are you able to deal with our complicated tax position?

We have dealt with everything from complex property capital gains issues, including confrontations with District Valuers, to special and complex Capital Allowances claims and substantial hive-down loss relief claims and have achieved a good success rate in dealing with complex negotiations with H M Revenue and Customs over many years.

Does your accountant talk to you?

Do you hear from your accountant more often than once a year and then only to see how you can fit in with their timetable?

Our clients view us as the first port of call when they have a query or a problem rather than the once-a-year people who only do the things all businesses have to do.

Are you conscious of never having the information you need to move development of your ideas possible?

Not only do you need advisers who can help you turn your ideas into reality but also to help you generate new thinking. With over 75 years of professional experience among the qualified members of our team, we are more than able to offer insights and strategic insight into your particular needs.

Would the availability of a willing ear and independent sounding-board be useful to you?

We act as a part of your team, helping with everything from people and property issues to strategic planning and business development.

Do you hear about major legislative changes affecting you at the last minute, or, worse, after they have happened?

In a fast-changing statutory environment it is impossible to know every tiny nook and cranny of new legislation. However, our practice of keeping in regular touch with clients often enables us to identify with you upcoming changes which might affect you and for which planning might be beneficial.

Was it your friend in the pub who suggested you incorporate your business?

Most people have a friend in the pub, or perhaps the golf club, who seems to have his finger on the pulse. Your accountant needs not just to be aware of what is going on but, more importantly, how it affects you. By the way, the apparent magical tax benefits of incorporation can be just a mirage perhaps you should consider it but carefully.

If any of this sounds familiar, why not contact us. Our particular brand of service will be beneficial to you.

Are you a special case?

No two businesses or individuals are the same.

Whatever your situation, although it may resemble other people's it will be unique and you will need support and advice which deals with your particular needs. Standard thinking is all very well but it way well be that your aims or aspirations render the usual ideas useless or, worse still, counterproductive or even damaging.

We approach all our clients as being individual and important in their own right and we always tailor solutions and advice to particular circumstances.

We build long term relationships with our clients so that you not only have somebody to complete their Tax Returns but, more importantly, you have a first contact for any worries, an independent sounding board for your thoughts and a source of innovative solutions and ideas.

Are you in need of an exit strategy?

Most people in business will, one day, wish to retire, sell or pass on the business. Even if it is your intention to die 'in harness' then doing nothing is still not usually sufficient to deal with any issue which might arise for your executors! If you are thinking of selling or retiring one day you should start planning now. You need a good lead time, ideally at least 5 years. If you don't have this long and circumstances have changed then there still may well be useful things you can do.

  • Think about all available options, and there are many.
  • Quite probably you will need to restructure.
  • There are a lot of taxes to consider. Ignore them and the value of a lot of your hard work may be lost to you.
  • Get good advice, it's cheap at the price.

Get a Plan. Whatever you have in mind write it down and consder, is it what you really want to do? Share it with advisers who can help. Maybe have a Plan 'B' as well. Your plan probably cannot be set in stone anyway, it may change, above all it's your plan.

You need those 5 years; things change, keen buyers drop out just as they may when selling a house. You need to stay in control, usually you only get to sell a business successfully once.

Broadly the options are (or are a combination of):

  • Do nothing. This may be fine if that is the Plan, but ensure perhaps that any borrowings are covered
  • Succession by family
  • Arrange a Management Buy Out
  • Build for sale, probably within your own Trade
  • Float on AIM, or a full listing
  • Liquidate, and realise asset value

Each case is different but there are some rules of thumb which generally apply -

You don't get paid out on both an earning basis AND on an assets basis. It is surprising how many people think they do, until they think about it. Because of this some restructure of the business and/or its assets may be important, perhaps early on.

For example, no-one pays cash for cash held in the business so think about extracting the cash first.

Again if there is a freehold think about extracting that, perhaps into another company. A purchaser may not be able to afford or may be unwilling to tie themselves to freehold. Yes, there may be tax to pay, or at least to be considered. Better if that is considered when there is time to think, and not in a panic, later on.

Think about whether there is the possibility land has been contaminated in some way. There may be tax breaks if it has, to offset the aggravation and costs.

There may be arguments for paying large dividends, or doing a hybrid of the options available above.

There may be arguments for not paying dividends but liquidating the Company, and claiming Taper Relief. You have to consider, with help, which is best.

Consider putting in place confidentiality agreements at a very early stage, otherwise you may find the business disappearing over a period to a competitor who appeared interested originally in buying. These may have to be carefully drafted.

Trying to improve the figures by reducing your remuneration is unlikely to succeed as don't forget that a purchaser will have their own view of the profitability of the company, dependant upon their own circumstances, both now and in the future. Second guessing how a prospective purchaser may view your business is difficult.

Bear in mind that if you are selling a trading company, say for cash, you are probably selling shares that would be free of Inheritance Tax (after Business Property Relief) for assets that will be fully chargeable to Inheritance Tax at 40%. Again some restructuring early on can sometimes be useful to mitigate this.

Make sure all the profits are correctly reported. Saving say 20% or 30% tax for 5 years could cost maybe 100% on that bit of the purchase price for 5 years, on a 5 years earnings valuation basis.

Tax treatment can vary widely on a sale. Just one obvious example of this is Stamp Duty; 1/2% on shares, or it can be 4% on Property (over £500,000). Others are more subtle and/or less predictable. You need to consider the position carefully. It may be necessary to adjust group structures, ownership etc. before a sale.

Think about Health and Safety aspects, and get records up to date and correct, before the purchaser even comes round the corner.

Consider what the position is on continuing staff; some may be invaluable if you don't plan to be there long term. Make sure they are onside and in step. Some may be less valuable.

Make sure all the records and documentation stacks up and is available.

Floating in the Stock Market is not suitable for many businesses but it can allow you to have your cake and eat it! We have helped clients to float their companies.

The Alternative Investment Market is not just a junior market, but was established primarily to obtain seed or working capital for developing companies. The AIM may not therefore be the place to float a successful cash generative company, especially if the prime-mover is intending to retire, but there are circumstances in which it may be.

In negotiating with purchasers or brokers, in many cases you are best not to regard them as professional gentlemen, however well you know them! Think of them as well dressed barrow boys because that is how it can really work out! Note that this is nothing personal to brokers or barrow boys, we like you all, and every one is different.

You may have to consider [dispassionately] breaking up your business and selling any trade or goodwill separately to the assets.

Avoid the 'fire sale' aspirations of predators. If a prospective purchaser is going to buy on an assets basis anyway, apart from any tax penalties there is nothing lost in this route, and tax wise it can sometimes be better, infact.

So some keys to EXIT ROUTE planning are:

  1. Get a Plan that is in your best interest. Write it down, confidentially, including a plan 'B'
  2. Build the business up, make it well worth buying. In the meantime of course you can live quite well out of it.
  3. Be relaxed, point out to everyone early on that you don't need to sell [unless you do, then all the rules change].
  4. Be prepared to take quite a lot of time, and spend a long time, steadily marketing the company.
  5. Talk to Gowers Limited, or other competent advisors, early on. Tax planning can be very cost effective indeed, and we, or they, may have some commercial ideas that help. Commercial ideas can be at least as cost effective as the tax planning.
  6. Be prepared to stay around, if necessary, after the sale, to get the maximum price. A purchaser who thinks you are about to do a runner may think they smell a rat even if there is not one there.
  7. Be realistic don't hold out for the last penny and jeopardize the deal.
  8. Enjoy the process and make your own luck. Have FUN processing the sale or you will just find it to be a traumatic time, it is hard work but should be worth it in the end.

Generating the benefit from a long-term business in retirement is a significant goal for many business people. Many fail to achieve it through a lack of forethought and advice. Sometimes all it takes are small changes and a modest amount of planning to realise this goal.

Do you get your accounts on time?

Statutory fines

There are very few reasons why a statutory fine for late filing should be incurred in a well run business. Your accountant should be part of your team and, like other members of staff; you cannot afford to not have a good working relationship. If you feel that your relationship is not as good as it could be then you may wish to think about changing accountants.

I wonder what tax I have to pay

Even if you have your accounting under control, it can still be baffling when you receive your tax bill. Having your accounts or tax return prepared as soon as possible after the year-end will give you the maximum possible planning time for your tax bill.Understanding how your tax bill is calculated will inform you where the tax has come from and perhaps highlight areas where savings can be made. These can then be discussed further with your accountant.

Can the Company pay a dividend?

This will depend on the results of the Company to date and, to some extent, expectations of the results in the future. Being in a position to have accounts prepared shortly after the year end can enable you to set dividend levels which will be based on real performance figures.

Will my accounts prove my feelings?

It is inevitable that you will have a 'feeling' for how the business has performed during the year. Sometimes however the annual accounts have an uncanny way of showing unexpected results, good and bad. Even if your feelings are borne out by the accounts it is comforting to know that you are close to the key indicators for your business.Unexpected bad news is bad news! You could have already committed to expenditure, which perhaps you wouldn't have, if you were in possession of the final facts. Your bank may be concerned if your business is not achieving your own expectations. You may have paid too much tax on account. All bad news.

Unexpected good news is obviously nice but could you have missed out on an investment opportunity? Perhaps if you were aware of the good news earlier, you may have decided to take up an opportunity sooner. The opportunity could have passed if the delay of information is too drawn out. If you have regular management figures to refer to during the year, these can be an extremely effective way to gauge the performance of your business. Having your accountant involved in the preparation or review of these can give you a useful point for discussion.

I wonder how much the bill will be this year?

Do you live in fear of receiving your next invoice from your accountant? Worse still, are you unsure when this may arrive or how much it may be? Any invoice is unpleasant if it is unexpected. Cash-flow difficulties can also arise if unexpected payments are needed. Communication of expected fee levels and timing of invoices could help with the planning process. Any business relationship can suffer if communication breaks down or never existed! Paying your accountant should be no different from buying other services or products. Value for money is key!!

Will I receive more feed back this year?

Your accounts (annual or otherwise) should be a useful opportunity to explore areas of your business that perhaps need addressing. This input should add value to your accounts.

When will I get the draft accounts?

Unless there are particular issues that need time to be addressed, your accounts information shouldn't be stuck at your accountants for any great length of time.

All businesses need to plan and this includes accountants! Workloads need to be booked and therefore you should be able to obtain an estimated date that your draft accounts should be available. If this is unobtainable for some reason this should be communicated to you with the reasons.

As a start-up are you in fear of the unknown?

Starting in business can be a scary thing.  There always seems to be so much to know and consider.  Sometimes it is even difficult to know what the right questions to ask are.  Here's a selection that might look familiar to you:

Is my business idea a good one? - A fundamental question but one that is often never asked. Ask as many people as you can. This is the beginnings of market research but is, in the first instance, just good old-fashioned common sense.

What is my ultimate goal? - People go into business for all manner of reasons, make sure you have a clear idea of what you are trying to achieve. With aims and goals firmly in mind, planning the development of the business will be much more effective. Trying to start and grow a business without any real objectives in mind makes things much harder.

Will it be profitable? - Make sure you have a hard look at the realistic possibilities. It can be too easy to start up and make lots of sales, but if you need to make a living then it is the bottom line, the profit, which is key as well as the top line.

Surely I need a limited company? - Maybe. But, there are a number of possible structures, which is appropriate and why?

How will I get money out? - There are a number of ways. Salaries, dividends, drawings, pension contributions, all, or none, may be relevant for you. You will need to look not just to your personal financial needs but also the ability of the business to pay.

Do I need to register for VAT? - It depends on likely turnover and what it is you are going to do in business. Some activities are exempt, others outside the scope of VAT.

Who should own the business? - This might be just you or you might be in business with someone else, your spouse or a business contact, perhaps. Proportions of ownership will depend on the structure and the activities but future planning is key too.

How does the tax work? - Companies pay Corporation Tax in their own right and the directors/shareholders pay tax on salary or dividends received from the company, but individual sole traders/practitioners, partners in partnerships and members of LLPs pay income tax on their part of the profit.

I bet I need accounting software? - Not necessarily. In many cases the best way to start is with a very simple cash book. The last thing you want when you are starting-up and learning how to run a business is the steep learning curve that accounting software needs.

I've heard of IR35, what is it? - A particular piece of tax law dealing, broadly, with businesses which deliver the services of one individual.

Now I am confused! It all sounds very technical. What do I do now? - Give us a call. We will help you through the technical minefield and help you get going.

Is your year end coming up?

With your year end approaching you are probably asking yourself some familiar questions......

Will my accountant call?

If you are asking yourself this question then either you wish your accountant would call more or that they would call less. Either way the relationship you have is not as you would wish.

Your accountant should be part of your team and, like other members of staff; you cannot afford to not have a good working relationship. If you feel that your relationship is not as good as it could be then you may wish to think about changing accountants.

Why donít I hear from my accountant more often?

Good question!

Even with the most simple client-accountant relationship there are usually plenty of opportunities for your accountant to inform you of how your affairs are progressing.

This may only be to inform you that the Revenue has processed your tax return but the contact should be regular.

I wonder what tax I have to pay?

Even if you have your accounting under control, it can still be baffling when you receive your tax bill.

Having your accounts or tax return prepared as soon as possible after the year-end will give you the maximum possible planning time for your tax bill.

Understanding how you tax bill is calculated will inform you where the tax has come from and perhaps highlight areas where savings can be made. These can then be discussed further with your accountant.

Can the Company pay a dividend?

This will depend on the results of the Company to date and, to some extent, expectations of the results in the future. Being in a position to have accounts prepared shortly after the year end can enable you to set dividend levels which will be based on real performance figures.

Oh no, not the same questions from the auditors again!!

Although audits are a legal requirement for certain businesses, some business owners decide to have an audit, even though they are not required by law to have one.

It is probable that the experience of these people is that audit can actually be useful and not just an expensive necessity. Audit is a service that can provide valuable insight into how a business is run and where improvements perhaps can be made.

It can be disheartening to be asked the same question from year to year by a seemingly junior member of the audit team. Understanding why these questions are asked and having explained to you why this might be useful will hopefully help you to understand what the auditors are doing for their money.

Reasons for voluntarily deciding to have an audit, or some other form of assurance work, can range from owners being divorced from the day-to-day control of the business to merely seeking the comfort that someone else is reviewing your systems and procedures. This may particularly be important if the accounts function is new or has changed in some way.

Will I receive more feed back this year?

Your accounts (annual or otherwise) should be a useful opportunity to explore areas of your business that perhaps need addressing. This input should add value to your accounts.

When will I get the draft accounts?

Unless there are particular issues that need time to be addressed, your accounts information shouldn't be stuck at your accountants for any great length of time.

All businesses need to plan and this includes accountants! Workloads need to be booked and therefore you should be able to obtain an estimated date that your draft accounts should be available. If this is unobtainable for some reason this should be communicated to you with the reasons.

Are you getting value from your accounts?

Having accounts prepared can seem like a costly necessity. However, all businesses require some form of accounts, and you should try to get as much use from them as you can. "Accounts" can mean annual accounts, management accounts, statutory accounts all of which should have some use to the business owner. The extent of this use can depend on how quickly the accounts are prepared after the period to which they relate, this can be key as 'old' accounts may not reflect the current position of the business.

Here are some ways in which you could utilise your accounts:

Set levels of bonuses, dividends or drawings for the coming year

Your historic accounts show the results of your business to date. This will enable you to decide what amount can be taken out of the businessWith a good business plan in place also, you will be able to address targets and goals.

Planning for tax liabilities

It is inevitable that the performance of your business will have a major impact on the level of your upcoming tax payments.Although it may not be possible to reduce the tax liability, timely accounts can provide you with the ability to plan for the resultant cashflow.

Assessing an investment decision

Whether you are thinking about buying a new computer, employing a member of staff or acquiring another company your accounts can be used to see if your business can support the investment, or if it needs the investment.Perhaps you are looking to sell your business, in which case the accounts will be extremely useful for a potential purchaser.

Comparing your feelings of the performance of your business to the reality

This can have extremely interesting results but will ultimately provide you with a better understanding of the key performance indicators

Do you know what your next tax bill will be?

Do you know what your next tax bill will be? Do you understand it when it comes? It is not uncommon to have no real grasp of what how the tax calculation works. Indeed, taking one look at the multi-page tax calculation guide which accompanies the annual Tax Return is quite enough for most people.

  • Many people are mystified by tax and ask a whole range of questions in an effort to try to unscramble it for themselves. This is just a sample!
  • I am self-employed, on my own or in partnership. How can I avoid the yearly dread of the January tax bill?
  • Can you tell me more about how the self-assessment tax system works?
  • I run my business through a limited company. How long before I have to pay the tax on this year's profit?
  • I own a number of rental properties. Am I paying too much tax on the rents I receive?
  • I am employed. How exactly does Pay As You Earn work?
  • My business has made a loss this year. How can I use it to my best advantage?
  • I am thinking about investing in a pension for my retirement. What are the options open to me?
  • I am thinking of disposing of an asset (maybe part of my business). What are the tax implications, and is there a best way of going about it?

Talk to us. We help you not only with theTax Return itself but, crucially, to understand your tax position.

Are you concerned about succession planning and inheritance tax?

Passing a business on within the family is often a very effective piece of commercial and tax planning. There are many reasons for this. There are some tax advantages which can be planned in, but it is in other areas that there can be real benefits.

So why consider it at all?

  • If they join in with the business then, commercially, the next generation are not tossed about by the job market. Assuming they are competent the potential to enjoy high income is there.
  • For the family the return on capital is often much higher if the business is retained within the family as opposed to a one-off disposal.
  • Other members of the family can enjoy the fruits of the business. Don't forget, if other members of the family are not going to be involved think carefully to avoid conflict now or later. We help with relationships as well as just money. Some early planning now can be much cheaper emotionally and financially.
  • In tax terms there is no Capital Gains Tax [CGT] on death so at the least that tax can be avoided. Shares, or the Business may be passed earlier than that, with some care of course.
  • In Inheritance Tax [IHT] terms if the entity is trading, with no complications, the Owners or their Estate usually enjoy 100% Business Property Relief . If so then there is no IHT chargeable.

Otherwise the inter-relationship between CGT and IHT often have to be considered carefully. Some definitions and rules are similar, some far from it.

Ask us for our detailed IHT Questionnaire. You many find it useful. Interestingly one frequent comment is about the section listing where assets or documentation can be found. Do your nearest and dearest know where all yours can be found?

Increasingly there is an overseas element to Estates and Estate planning. We help with this and have overseas contacts if a specialist is required.

Sometimes owners are reluctant to just pass everything on immediately to the next generation. There are various ways some can be passed on, some not. Some of these are referred to below.

  • Although restrictions have been put in place Pension Funds can still sometimes be used in part as a form of quasi IHT planning vehicle.
  • Trusts can still be useful, perhaps owning some shares, in some cases even themselves trading!
  • The Pre-Owned Assets tax needs to be considered in any Succession planning. This legislation has different rules again. As it is relatively new there are areas of clarification awaited. No doubt over time cases will be brought to court.
  • New classes of shares can be issued as part of succession planning. This is a progressively difficult area however, as a result of recent legislation.

Every case really is different. Sometimes innovative suggestions [we are not talking about tax schemes] can help avoid problems or costs.

 

Gowers is a team of professionals specialising in business development and strategic financial planning.

As well as helping people in business and families who need and value a high quality personal service, we do all the usual things. But unlike other accountants, Gowers helps you get control of your business and your life. Because of that, what we do is valued, rewarding and cost-effective.

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