Budget 2014 – Savings and investments

The Chancellor announced a number of important changes to benefit savers.

The first of these changes was a major reform to the ISA system. A New ISA (NISA) is to be introduced from 1 July 2014 with equal limits for cash and stocks and shares. This will allow savers to transfer funds from stocks and shares ISAs to cash ISAs allowing far greater flexibility.

The Chancellor also surprised many savers by increasing the annual investment limit for a NISA to £15,000. The Government estimates that over 6 million people will benefit from the higher limit. In addition, the limits for Junior ISAs and Child Trust Funds will be increased to £4,000. All these changes will take effect from 1 July 2014.

The second change was the announcement that the 10% starting rate for savings income is to be a replaced with a new 0% rate from April 2015. In addition, the 0% rate will apply to up to £5,000 of savings income (a significant increase from the 2014/15 rate of £2,880). This means that any savers with a total income of less than £15,500 will not pay tax on their savings taking over 1 million savers out of the tax net. These savers will be able to elect to be paid interest gross via their bank or building society removing the requirement to reclaim overpaid tax from HMRC.

The third change was the introduction of a new National Savings and Investments (NS&I) product called ‘pensioner bonds’ from January 2015. These new pensioner bonds will offer greater certainty and a better return for pensioners many of whom rely on savings income. The interest rates have not yet been set but early indications are 2.8% for a one-year bond and 4% for a three-year bond. The bonds will be taxable, but savers that are eligible can receive the interest tax-free. There will be an investment limit of £10,000 per bond.

The Chancellor also announced that the cap on investments for Premium Bonds is to be increased from £30,000 to £40,000 from 1 June 2014 and from £50,000 from 2015/16. There will also be two £1 million prizes per month from August 2014.

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Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

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The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.