To hear about tax planning and the things that need to change in the UK tax legislation Finance Monthly speaks with Adele Raiment, Director of the Tax Advisory team that specialises in entrepreneurial and privately owned businesses at Mazars LLP. Adele’s main area of expertise is working with privately owned businesses to develop and implement a succession plan, to ensure that any assets that the shareholders wish to retain are extracted in a tax efficient manner and she also works with all parties to assist in the smooth running of transaction.

What are the typical challenges faced by shareholders of entrepreneurial and privately owned businesses in the UK, in relation to the management of their finance?

I think the main concern on the horizon is the potential impact of Brexit on the UK economy and business confidence more widely. For privately owned businesses in the UK, many are still very cautious following the 2008/09 recession, and with the uncertainties surrounding Brexit, it is difficult to plan too far ahead. One of the main priorities of shareholders is ensuring that they have sufficient cash reserves to ride any potential downturn in the economy whilst recognising that they need to invest and innovate to thrive.

What is your approach when helping clients with tax planning?

My approach is to primarily understand the client’s commercial and personal objectives in priority to considering any tax planning. When planning for a transaction, I frequently find that the most tax efficient option isn’t always going to meet the key objectives of the shareholders or the business. It is important to consider the shareholders and the business as one holistic client, and therefore strike the right balance between personal, commercial and tax objectives. In respect of tax specifically, it is important to take all relevant taxes in to consideration whether it be corporate or personal. A good understanding of all taxes is therefore required.

My clients vary from FDs, to engineers, to self made entrepreneurs - all requiring different approaches. I believe that it is fundamental to get to know your client and adapt your approach to ensure that they understand you and what you are trying to achieve.

What are some of the day-to-day challenges of operating within tax planning? How do you overcome them?

As I predominantly work on transactions, I often work very closely with other professionals such as corporate finance professionals, lawyers and other accountants. The key challenge to this is making sure that the whole team is working collaboratively to achieve the best result for our client.

We are also under pressure to keep costs down, whilst ensuring that we provide quality advice. This can be difficult if the team has multiple transactions on the go at the same time and senior resource is constrained or if the project is wide-ranging, requiring several specialists to input in to the advice. The key to this is having a driven and supportive team, where teamwork and openness is pivotal to success. The working environment of my team at Mazars is incredible as we encourage open discussions on a variety of areas but one of the most useful ones is on technical uncertainties, which encourages consultation in times of uncertainty and technical development.

In your opinion, how could UK tax legislation be altered for the better?

Despite an exercise to ‘simplify’ UK tax legislation over more recent time, the legislation has increased in volume. A good example of this is that there are now two separate corporation taxes acts, when previously there was one. Having said this, the majority of the language used in more recent acts has made the legislation more user-friendly. However, there are still pockets of the legislation that seem to have been rushed through parliament and the practical use of the legislation was not considered fully prior to being enacted. This has resulted in several pieces of legislation being amended a year or two down the line. Although there does seem to be an element of consultation between Practice and HMRC prior to some legislation being enacted, I’m not always convinced that HMRC take on board the feedback. I therefore feel that a more rigorous consultation process should become standard to ensure that the commercial and practical elements of legislation are considered prior to enactment.

Contact details:

T: +44 (0) 121 232 9583/ M:+44 (0) 7794 031 399

Website: www.mazars.co.uk

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

To hear about tax relief claims in the UK, this month Finance Monthly reached out to the Co-founder and Director of R&D Tax Solutions – Laura Duggan.

Can you outline the process you go through to assess tax planning and tax mitigation strategies with your clients?

We have established ourselves as a leading boutique in the area of R&D Tax Relief claims. The process we lead our clients through follows 7 steps:

1. Initial Fact Finding to establish the company’s eligibility to claim R&D tax relief.
2. Allocation of a Claims Consultant: All our clients are allocated a consultant to ensure consistency in communications.
3. Preparation of Draft Report: Based on conversations with our clients we prepare their R&D tax relief report which will eventually be submitted to HMRC.
4. Finalisation: The final R&D is discussed and reviewed with our clients to ensure accuracy of all claims prepared.
5. Submission to HMRC: We submit the agreed report and revised tax calculations to HMRC. Should further queries be raised, we will discuss them raised directly with our clients before responding to HMRC.
6. Benefit obtained from HMRC: HMRC aim to process claims within 4 -6 weeks. Our clients usually receive the cash benefit of our work within 4-6 weeks of step 5.
7. Diarise Future Claim: After the successful claim has been processed, this is the perfect opportunity to diarise the following year’s claim and look to streamline the process based on our clients operations.

What differentiates R&D Solutions from other companies that help clients with tax relief?

We have set out to be the nation’s champion in the formulation and completion of Research & Development (R&D) tax relief claims. Whilst there is stiff competition within the industry, we believe that the first-class service we provide by taking the time to understand a client and their activities sets us apart from competition.

We set out to understand the core of a client’s business and their future plans which we believe allows us to identify additional qualifying R&D activities and thus, provide further tax benefits for our clients. Our approach at looking into the future allows companies to more accurately log development expenditure which can have significant financial benefits as a result of the pre-planning and expert input.

In the last 12 months, we set out to grow the company by obtaining new clients and maintaining stature within the market by investment into our highly skilled staff. Our continued expansion plans within R&D tax relief with other areas of specialist tax reliefs allows us to compete on a larger scale with well-established companies within the industry.

We offer a flexible service, being on hand to assist and prepare a claim with our clients at a time to suit them, early morning or later into the evening. We believe that this approach has allowed to access avenues and obtain tax relief for clients that would otherwise not pursued with a claim due to time constraints.

Additionally, we have set the ball rolling to finalise our online portal. This will allow clients to log into a portal, upload information, whether this be financials or technical data and then able to work, save and revisit the portal to provide information at a time convenient for the client throughout the process.

This will create a service that will provide a client with certainty as to where their claim is up to and timescales when the claim will be finalised and submitted to HMRC. This will allow for claims to be submitted more efficiently and move away from the traditional piece meal email-based approach for providing information. We are aware that clients require a personal touch, as a result this portal will not simply be a ‘computer says’ approach, but an enhancing service in our wider customer experience.

What are the main challenges that you and R&D Solutions are faced with, considering the ever-changing nature of the sector?

A four-fold in competitors working in the industry has put a significant focus on a first-class service leading to retention of existing clients whilst seeking to grow and obtain new clients, whether they be first time claimants or unhappy with their current consultants.

Providing a professional, seamless process for clients from start to finish is a challenge experienced to date, which relates to building a client base and reputable company within the competitive industry. We have enhanced our reputation and presence within the sector. Clear signs of this are the increase in overall traffic to our website by 300% and the increase in Google searches by over 800%

Website: https://rndtax.co.uk/

Odoi Yemoh is the Founder and Executive Director of Reality Capital Management. Established in 2009 and based in Toronto, Canada, the firm offers tax preparation and planning, accounting, payroll, unemployment consulting, personal household budgeting, loan analysis, product management and marketing, as well as QuickBooks training and support.  

What would you say are the advantages and challenges of providing effective tax advice in Canada? In your opinion, how complex is the tax system in the country?

Providing effective tax advice in Canada is done through tax planning, which helps Canadians with reducing their income tax burdens through pension income splitting, RRSPs, Registered Disability Savings Plan (RDSP), Open Tax Free Savings Accounts (TFSA) and many more. There are also other benefits for employers, however, the generally expenses incurred by an employee are not deductible and there are certain specific exceptions. However, depending on the employee’s relationship with their employer, there may be unforeseen tax problems too, such as purchase employment assets, the benefit of using company car, loans from your employer, etc.

Canadian business owners find the tax system unfair because:

• Most new businesses have losses in their first few years after incorporation. However, the losses will be retained by the corporation and can be used against future corporate income.
• Corporate owners may have personal assets in the corporation or may be using money from the corporation for personal purposes, which may include unintended tax issues.
• Some owners tend to take out assets from the corporation, which then triggers personal tax consequences.
• Investments held inside the corporation are subject to tax rates, which typically are higher than the top personal tax rates
• Corporate income is taxed and the income flowed out by dividends is taxed too. While there is a measure of integration to reduce double taxation, some double taxation on dividends is still evident.

The Canadian Government has been imposing strict rules and regulations, which are preventing individuals and business owners from making profits. Individuals gain more from tax saving due to the benefit given to them. This makes it difficult for business owners to create jobs for the young people or strategize their business, because they are taxed based on their revenue and they’d rather lose in tax saving.

In what ways has the Canadian tax system transformed throughout the last 2-3 years?

Each year, the Canadian tax system becomes more complicated. The personal income tax was extended to most of the working population at high, progressive rates, and the corporation income tax was raised drastically and applied to excess wartime profits. Through the tax rental agreements, income tax jurisdiction was transferred from the provinces to the Federal Government. The point was to make income taxation the principal source of federal government revenue for financing Canada’s war effort and to lay the basis for financing the post-war welfare state. For a few years, the Federal Government has been mandating to make amends on the tax system for small business owners and this makes us think that there is a legitimate issue in trying to create tax fairness for all Canadian people. The Government has been trying to improve the fairness of Canada's tax system by closing tax loopholes and amending existing rules to ensure that the rich pay their fair share of taxes and that people in similar circumstances pay similar tax.

As the Executive Director at Reality Capital, how are you developing new strategies and ways to help your clients?

Reality Capital Management helps clients with accounting, taxation, auditing and financial services with the oversight of experienced accountants. We offer defining the profitability of companies through our financial education courses. Our clients are usually individuals and small businesses including Non-profit organizations in Greater Toronto Area (GTA) and outside of Ontario. Currently, Reality Capital Managements expanded on budgeting and debt consulting courses to the public, allowing students to make valuable financial management decisions. Developing these strategies helps us to serve our current and future clients better.

Contact details:
Odoi Yemoh
205-2200 Martin Grove Road
M9V 5H9
Toronto, Ontario.
647-388-5751.

Ian Borley heads up KPMG’s Leicester and Nottingham offices as East Midlands Senior Partner and he’s also head of the firm’s Enterprise practice in the Midlands. By day, he’s an audit partner and leads several of KPMG’s client relationships with a wide variety of companies across the region. He qualified as a Chartered Accountant in 1989, having joined from Leicester Polytechnic - now De Montfort University, and he has worked in the Midlands for most of his career.

KPMG has a worldwide presence as one of the Big Four professional services firms, and its network of member firms provide Audit, Tax and Advisory services. In the UK, the firm has over 600 partners and over 13,000 outstanding professionals who work together to deliver value to clients across its 22 offices.

As a professional whose extensive experience covers a number of sectors – from accounting advisory and risk consulting, to tax planning and transfer pricing – how has the financial services industry evolved in the past two decades?

The two big changes over the last twenty years have been technology and regulation. Technology continues to change the way our industry works, and this is certainly a positive. The use of data analytics, for example, makes professional services more efficient because it’s now much easier to make sense of huge amounts of client data and we can even test the whole population, rather than just samples. IT also means that we can quickly get to the relevant reference material online. Developments like these enable us to be more forward-looking for our clients, and gone are the days of using pencils, calculators and huge sheets of paper to do forecasts, or looking up tax legislation in weighty tomes.

The second major change is regulation, particularly for accountancy and audit. Compared to how it was over a decade ago, the way financial services are regulated and supervised has been completely reformed. In many ways, this is in response to some of the high profile business failures of the past and, as a result, there are numerous restrictions now in place. Although this can be frustrating sometimes, it’s definitely a good thing for our clients, their shareholders and for confidence in capital markets generally.

What are the biggest challenges that UK businesses are facing in 2017? In your opinion, what lies on the horizon for them in the near future?

While most people are probably bored of talking about Brexit, I don’t think the Sterling devaluation that resulted from the UK’s vote to leave the EU has fully come through yet. A lot of manufacturing businesses, for instance, will have had stock in warehouses or in transit that they bought at higher exchange rates earlier in 2016. They may also have hedged, but not many will have hedged into 2017. As a result, raw material inflation is starting to come through, and this will probably ring true for other industries too, so a lot will depend on companies’ ability to pass rising costs onto customers. On top of that, many businesses are wrestling with labour inflation, and things like the Apprenticeship Levy, National Living Wage and Stakeholder Pensions will all start to hit around the same time. The cumulative effect of so much happening in a short space of time could be quite severe for companies that have a big workforce.

Above all, the biggest challenge for many businesses is unpredictability. As well as Brexit, our clients are trying to predict what will happen to oil prices, trade relations with the US in a post-Trump era, and continuing political turmoil in parts of the Middle East. Nevertheless, many management teams are still investing in capital expenditure and making senior recruitment decisions, and we’re seeing that the M&A market is still very busy. This is, in part, a response to the continued resilience of the UK economy and is also encouraged by the availability of relatively cheap finance. However, it may also be that people have stopped trying to predict the unpredictable.

Why do companies need to keep pace with technology? How would you say technological change is playing its part in driving change in the services KPMG offers?

 In virtually all of our clients’ sectors, there’s some disruptor or new technology that stirs up the mix in terms of production techniques, routes to market, supply chain or customer experience. As a result, traditional business models are being challenged and people are increasingly looking all over the World to find ways to do business more efficiently.

The tailored customer experience piece is also having a massive impact, not just on consumers but for B2B businesses as well, so being able to stay ahead of the curve is really important. Indeed, this impacts on our own sector and we are continually re-evaluating what we do at KPMG, and how we do it.

You joined KPMG over 30 years ago - what were your goals in driving change within the company?

Having been a partner for 20 of those 30 years, my goals were, and still are, to offer the best possible service to our clients. To do this we need to be a firm of talented, knowledgeable and trusted advisors, and a lot of my career has been about building and developing teams with these attributes. It’s also about keeping up with the fast moving world and how we adapt to meet different client demands, while providing services in an efficient way.

The work environment has changed massively since I first started working at the firm. It was a completely different world back then. Flexible working and the benefits our people have is really important, and we’ve come a long way with diversity and inclusion, but I don’t think any organisation has completely cracked it yet. It’s not for want of trying but it certainly looks a lot better than it did in 1985.

What has the impact of your role been as a head of KPMG’s East Midlands practice to date?

 When I took over as Senior Partner for the East Midlands, we were in a position where many of the older and more experienced partners were either at or near retirement. So we had to bring new partners and directors through, and I’m delighted that most of them are home-grown. I’m pleased that we’ve invested in the team and looked after our clients, and we’re still on that journey as I’d like to build the capability of the team even more.

What goals are you currently working towards at KPMG in the East Midlands?

We have a strong market share in the region but there are hundreds of businesses that we don’t work with in the East Midlands that we could really add value to. So it’s all about being proactive and sharing ideas with them about how we can help them, and this comes back to investing and growing the team, while we develop relationships with prospective clients.

Can you tell us about your involvement in the business community?

One of the great things about KPMG is that the firm is very supportive of people giving back to the community, which is one of our core values. Over the last few years, I’ve held non-executive director positions at the National Space Centre and King Richard III Visitor Centre in Leicester, and the National Forest. For a number of years, I was chairman of Leicestershire Voice and I also sit on the CBI’s East Midlands Regional Council. I really enjoy being able to contribute something to the wider business community through these forums but it’s also been a fantastic experience for me personally, enabling me to meet some very talented people and learn new things along the way.

What is the role and importance of the SME business community in the UK?

SMEs are the cornerstone of the UK economy, and you only need to look at the statistics* to see why. There were 5.4 million SMEs in the UK in 2016, employing over 16.5 million people, accounting for 47% of the £3.8 billion turnover from private sector UK businesses.

They’re particularly good at being able to respond quickly to changes in the market and their decision-making lines are generally short. While SME businesses are almost always very impressive at what they do, they also have their own challenges. Take management bandwidth as an example; smaller teams can really be stretched when unusual situations occur, such as an acquisition or entry into a new market - they need to respond but they may not always have enough people on board, or people with the relevant experience and skills. That’s why it’s so important at times like these to have a good professional advisor on hand to help.

In the past, SMEs have also faced challenges with access to finance and they’re no stranger to the skills shortage. In comparison to their larger business neighbours, who perhaps have the back office capacity to recruit and train new talent, SMEs don’t often have the time to do so. Despite this, the SME community continues to thrive and is crucial to the success of our economy.

* Business population estimates for the UK and regions 2016 from the Department for Business, Energy & Industrial Strategy

To hear about tax practices in the UK, this month we spoke with Rebecca Potton - a Chartered Tax Advisor with 15 years’ experience and Head of the Private Client department at Myers Clark, Chartered Accountants.

 Established in 1912, Myers Clark is one of the largest independent firms of chartered accountants in Watford, UK. Myers Clark offers a broad range of services for thousands of businesses and individuals, as well as national and local organisations in the Not-For-Profit sector.

Can you tell FM a little about the services you provide and the kind of clients you deal with?

 We are able to provide a full range of services including accounts, tax returns, tax planning, trustee and executorship. I also act as an expert witness often in cases of matrimonial disputes.

Myers Clark is very fortunate to have a varied client base, comprising sole-traders and partnerships to high net-worth individuals and top executives.

What are the most common tax planning solutions that you offer to your clients?

 Assuming the role of a trusted advisor and professional friend, our clients seek our guidance on trusts, inheritance tax and estate planning, together with the routine compliance matters such as self-assessment tax returns. Many clients utilise the expertise of our department to arrange their affairs tax efficiently whilst also maintaining their current standard of living.

We frequently act on behalf of a director both in an individual and business capacity, which affords us a unique perspective from which to advise. Such cases require us to consider a mutually beneficial tax solution for the business and the individual without incurring increased tax liability to either party.

What would you say are the specific challenges of assisting clients with tax-related matters?

 Many of our clients seek tax planning because they wish to pass their wealth to their families, however in most cases they wish to do so without comprising their current standard of living. Similarly, there are a number of clients who prepare their finances to facilitate a comfortable retirement whilst achieving the greatest tax efficiency. We ensure that tax is not the sole motivation behind our advice, it needs to be the most effective solution for that client’s individual needs.

Do you have any examples?

 A client, let’s call her Alison, was widowed in her early sixties and was worried about her inheritance tax liability because she was still earning a significant salary. Not unlike many people in the South East, Alison’s home fully utilised the inheritance tax reliefs available. Alison also had a stock market portfolio and an investment property, which was becoming cumbersome to manage. When organising her affairs, Alison was clear that she did not want to distribute her assets to her children immediately, but wanted to prepare effectively.

As a result of the planning, Alison was able to sell her rental property and decided to invest in products which gave her sufficient income to maintain her lifestyle, retained her capital and reduced her exposure to inheritance tax.

Another example is Bill, who sought advice on an exit strategy from his trading company to minimise this tax liability and whilst enabling him to access sufficient funds to spend his retirement sailing. Like many individuals, Bill had not worried about inheritance tax nor had he made sufficient provisions for his retirement. An issue for Bill, which is also faced by many other clients, is that the value of his shares in his company were exempt from inheritance tax by virtue of business property relief. However, as soon as he retired and sold his shares, Bill would have a cash asset liable to inheritance tax, in his case generating a tax liability of approximately £300,000.

Our priority for Bill was to ensure he would have enough capital to buy his boat and built this into the planning, which when completed saw Bill with a pension providing him with income for his retirement and an inheritance tax saving of £60,000.

As a thought leader, how are you ensuring that clients are engaged and informed about the development of new tax regulations or permissible strategies in the UK?

 We pride ourselves on being the go-to accountants for many businesses and individuals in Watford, and have established a reputation of excellence, integrity and innovation. Our specialists are trusted by clients to provide accurate information about tax regulations. We provide our clients with the opportunity to actively engage with this information through a calendar of seminars and events, as well as targeted communications.

Can you tell FM about your involvement in the community?

 Myers Clark has a CSR policy which includes charity fundraising events, being involved in corporate charity partner networks and establishing partnerships with local schools. This year we are introducing a new programme of work experience and summer job placements to local students in Year 10, Sixth Form and University Students.

In terms of market competition, where does Myers Clark stand nationally and what are its goals moving forward?

 Myers Clark is one of the largest independent firms of Chartered Accountants in Watford with a well-established reputation for highly skilled specialists. Our goal moving forward is to continue to provide support to individuals and businesses navigating the complex maze of tax and facilitating tax planning to ensure a profitable future.