Business Growth

Do you know enough about your suppliers?

1 min read

If you fail to carry out checks on suppliers of labour to your business, you could become liable for unpaid National Insurance Contributions and denied input VAT claims.

HMRC expect businesses to carry out adequate checks on their suppliers to allow them to make informed decisions as to their integrity.

HMRC’s guidance on the matter is based around three principals:
Check – Know your own risk – legal, financial, tax and social obligations, and those of your suppliers.
Act – Carry out robust due diligence on your suppliers. If risks are identified do not ignore them, act to mitigate or remove the risk completely.
Review – Effective due diligence needs continuous monitoring and review.

HMRC have recently updated their extensive guidance on their website to assist businesses in following these three principals. It could prove very costly for businesses that fail to meet these obligations, as should HMRC look to recover unpaid taxes from the business, the amounts involved are likely to be very large. It is also possible that HMRC would seek to impose a penalty and fine.

How we can help

We aren’t just your average accountants. We offer a wide range of business advisory services to help you make the right decisions for your business to grow and improve. With over 40 years experience our team is dedicated to really understanding your business. We believe by staying up to date with not only current but changing legislation and industry news we are better placed to help our clients and their businesses succeed.

If you would like to know how Loucas can assist you please do not hesitate to contact us.

Read our related blog on 5 ways to make sure your business gets paid faster

Why Consider a Bounce Bank Loan

2 min read

In an attempt to help businesses that were unable to access funds through the Coronavirus Business Interruption Loans (CBILS), the treasury recently announced the Bounce Back Loan Scheme (BBLS).

The terms of these loans have now been confirmed as follows:

  • Loans range from £2,000 up to 25% of a business’ turnover to a maximum of £50,000
  • 100% Government backed loan with no other security required
  • The loans are for a period of six years
  • There are no interest charges or repayments due in the first year
  • A low interest rate of 2.5%
  • No early repayment charges
  • No arrangement fees

To be eligible for the BBLS, in general terms, you need to be a business in the UK, have been affected by Coronavirus and not using CBILS.

Why consider taking out a Bounce Back Loan?

  • Cash flow

A Bounce Back loan would provide cheap working capital for your business. 

  • Repayment of existing borrowings

Perhaps consider whether you have any current business borrowings such as hire purchase agreements, bank loans and overdrafts or credit card debt that could be settled by using the funds raised from a Bounce Back loan.  It would be important to check that there are no early repayment charges on existing agreements before doing this.

  • Funding of capital expenditure

If you are considering investing in new equipment for your business, a BBLS loan could be a more attractive alternative to traditional business borrowing options.

Although at the time of writing it has not been announced how long the BBLS or CBILS will be available, it is unlikely that it will be indefinitely and therefore it is sensible to consider this sooner rather than later.

You can find more details on the Bounce Back loans and indeed the larger Coronavirus Business Interruption Loans on the British Bank Website.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

Business Asset Disposal relief (Previously known as Entrepreneur’s Relief)

2 min read

Business Asset Disposal Relief, is available for those in business, which may reduce the tax rate on the first £1 million of qualifying lifetime gains to 10%.

This is targeted at working directors and employees who own at least 5% of the ordinary share capital of the company and the owners of unincorporated businesses.

BADR is available to individuals on the disposal after two complete qualifying years of:

  • all or part of a trading business carried on alone or in partnership
  • the assets of a trading business after cessation
  • shares in the individual’s ‘personal’ trading company
  • assets owned by the individual used by the individual’s personal trading company or trading partnership where the disposal is associated with a qualifying disposal of shares or partnership interest.

New 5% rules for company shareholders

To qualify for BADR, the company needs to be an individual’s personal company where the individual must:

  • be a company employee or office holder
  • hold at least 5% of the company’s ordinary share capital and
  • be able to exercise at least 5% of the voting rights.

For disposals on or after 29 October 2018, they must also satisfy one of the following tests:

  • a distribution test – an individual is entitled to at least 5% of the company’s profit available for distribution to equity holders and 5% of the assets available for distribution to equity holders in a winding up; or
  • a proceeds test – an individual is entitled to at least 5% of the proceeds in the event of a disposal of the whole of the ordinary share capital of the company.

Thought should be given to the structure of your company at the outset to ensure that the tax benefits of Business Asset Disposal Relief are not lost.

Investors’ Relief (IR)

If you do not meet the criteria for Business Asset Disposal Relief (BADR) you may still be able to take advantage of the ow 10% rate of tax through IR.

IR is available to external investors (other than certain employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions need to be met:

•        shares must be newly issued and subscribed for by the individual for new consideration

•        be in an unlisted trading company, or an unlisted holding company of a trading group

•        have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016

•        have been held continuously for a period of three years before disposal.

An individual’s qualifying gains for IR are subject to a lifetime cap of £10 million.

Talk to us about your BADR planning

Loucas can help you to build a tax-efficient financial plan that ensures you are making the most of the reliefs and allowances available to you. 

If you would like to discuss any of the issues raised in this guide please call 01622 758257 or contact us.

Enterprise Management Incentive Scheme (EMI) Options

3 min readAn Enterprise Management Incentive (“EMI”) scheme is an HMRC approved share option scheme aimed at smaller businesses to retain and motivates key employees. This guide will discuss what EMI schemes are and how they work.

So what is an EMI share options scheme ?

A share option gives the right to someone to purchase a share in a business at an agreed price at some point in the future.  Typically, but not necessarily, this would be at the point of sale. The option holder must be an employee of the company and must spend at least 75% of their working time at that company.


Why would you consider using an EMI scheme ?

EMI schemes are becoming more and more popular with businesses with HMRC reporting a marked increase in the number of business implementing the schemes during 2017.

The main reasons businesses consider introducing EMI schemes are to motivate and retain key members of their workforce.

Employees will have a sense of ownership and will also benefit from the increased value of the business.


Is an EMI scheme complicated to implement ?

At the outset there is a procedure that needs to be followed which is likely to require the assistance of professional advisors.
Outline of Procedure:

  • Prepare a market value valuation of the business and agree with HMRC
  • Agree the terms of the scheme and set out in an option agreement
  • Possibly minor amendments to the company’s Articles of Association
  • Grant the options to the employees and get them to sign the option agreement
  • Notify HMRC of the options that have been granted

Other than an annual declaration that has to be made to HM Revenue and Customs (HMRC) each year notifying them of any changes to the options that have been granted there is no on-going work required to maintain the scheme.

Much of the documentation that is mentioned above can be used for further granting of options at a later stage.  It may be necessary to obtain a further agreement from HMRC as to the value of the shares.


What are the Tax Advantages of EMI share options ?

EMI schemes have a number of tax advantages attached to them over unapproved share options.

  • Providing the options have an exercise price which was no less than the market value at the time of granting then there is no income tax or national insurance contributions payable.
  • Once the options have been exercised and sold then the employee will pay capital gains tax on any gain. The gain should qualify for Entrepreneurs Relief which will mean they will be taxed at a rate of 10%.  This is far less than if they were to pay income tax on the gain as they would do for unapproved options, which could be as much as 45% or possibly more if NICs were to become payable.
  • Key employees are likely to stay with the company as the probability of a profitable capital return, motivates them. Employee’s motivation and interests are aligned towards the shareholders and the board when they have a tangible interest in the company’s ownership. As a result, everyone is focused on adding more shareholder value.
  • Employees feel more valued in a share option scheme in the long term. Employees have an incentive to grow of the business and make themselves more accountable.


What will it cost me ?

Typically to implement an EMI scheme will cost around £2,500 to £3,000 plus VAT.  This may vary depending on how many employees are to be included in the scheme.


What are the downsides of an EMI scheme ?

If the trigger point for exercising the options is based around the sale of a business and the owner subsequently decides not to sell this can act as a demotivator for employees as the scheme may no longer be fit for purpose.

There are a number of disqualifying events laid down by HMRC which could affect the tax status of the scheme.  Whilst in most cases these may not be relevant, consideration needs to be given to them when making some business decisions.

The initial setup costs are high if options are only going to be granted to a small number of employees.

How we can help  ?

As an accounting firm, we are able to provide a wide range of services tailored to your particular industry. With over 40 years experience our team at Loucas has set up many EMI schemes for a variety of businesses in numerous business sectors. We have a dedicated team to ensure that you are guided though share option schemes with ease.

We believe by staying up to date with not only current but changing legislation and industry news we are better placed to help our clients and their businesses succeed.

If you would like to discuss you options with EMI share option schemes or how Loucas can assist you please do not hesitate to contact us.

Enterprise Management Incentive Scheme (EMI)

Further Information

The information contained in this publication has been prepared for general guidance and is not intended as advice. Whilst every care is taken to ensure the accuracy of the information, no responsibility can be accepted by Loucas for any loss resulting from acting or refraining from acting as a result of any material in this publication. The information in this publication is not designed as a substitute for seeking professional advice.

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