Finance (No.3) Bill published

As expected, the government published Finance (No.3) Bill on Wednesday, 7 November 2018. The Bill is so named as it is the third Finance Bill in the current special two-year session of Parliament. The Bill contains the legislation for many of the tax measures announced by the Government at Autumn Budget 2017 some of which have since been the subject of further consultation. The Bill also includes other measures that were first announced in the recent autumn Budget on 29 October 2018.

The Bill extends to some 315 pages whilst the accompanying explanatory notes add another 266 pages. The Bill is colloquially known as Finance Bill 2018-19, and will become Finance Act 2019 after Royal Assent is received which is expected in March 2019 before the Brexit deadline.

Some of the measures included within the Bill are:

  • The Income Tax rates, thresholds, and allowances for 2019-20. This includes, meeting the government’s commitment to increase the basic personal allowance to £12,500 and the higher rate threshold to £50,000.
  • The setting of the Corporation Tax rate for 2020-21 at 17%. The rate for 2019-20 remains at 19%.
  • The temporary increase in the Annual Investment Allowance (AIA) from £200,000 to £1m for two years from 1 January 2019.
  • The introduction of a new 30 day reporting and payment deadline for CGT on UK residential property gains from 6 April 2020.
  • A number of changes to entrepreneurs’ relief including an increase in the minimum period during which certain conditions must be met to qualify for ER from one to two years.
  • A reduction in the tax writing down allowance from 8% to 6% from April 2019.
  • The current VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

The proposed introduction of a new two tiered penalty system for Making Tax Digital has been dropped from the published Finance Bill. The legislation had been included in the draft Bill, but it appears the government needs more time to consider the complexities before including the measure in future legislation. In addition, and as announced at the Budget, the expected change to require shared occupancy to qualify for rent-a-room relief has been shelved.

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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

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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.