Being compliant with regulatory requirements is only one reason to have an audit. There are also a number of benefits to having your financial statements audited by Loucas.
The Audit Process
As part of the audit process, we will review and test your accounting systems and controls that you have in place and identify any weaknesses. We will sit down with you and discuss these whilst also suggesting useful improvements to ensure a robust internal control environment.
The benefits of having an audit
Regular audits can help deter fraud from occurring. Our audit tests are designed to reduce the risk of fraud and error within the company.
An audit can help provide assurance to directors and shareholders who may not be involved heavily in the day-to-day running of the company.
An audit can also help provide assurance to bank and lenders
(current and prospective).
Loucas will provide advisory services to you that can benefit management and those charged with governance. Such advice would include but isn’t restricted to, tightening internal controls, reducing the risk of fraud, tax planning, technical advice, how the business is running and what can be achieved.
An audit can enhance the credibility of the financial statements for various third parties:
Audited accounts can help with credit ratings
Suppliers can favour audited accounts when considering credit risk
HMRC when placing reliance on the accounts
Investors (current and prospective)
How we can help
At Loucas, we understand that you would like peace of mind knowing that your financial statements are in full compliance with statutory requirements. To find out more, call us on 01622 758257and speak to one of our audit experts.
Employee Ownership Trusts (“EOT”) were first introduced in 2014 to facilitate more businesses being wholly or partly owned by employees.
There are some generous tax breaks on offer to encourage business owners to consider the EOT model.
What actually is an EOT?
A trust is set up which will hold all or some of the shares in the company. In order to benefit from the tax breaks the trust must own more than 50% of the shares in the company.
The trust will be operated for the benefit of the employees of the company. The trust is run by its trustees, which could include members of the management team, but given that its purpose is to hold the directors to account, it should be sufficiently independent to enable it to do this. It is necessary to demonstrate to HM Revenue & Customs that control of the business has passed to the EOT and having the trustees dominated by the original shareholders /directors would make this very difficult.
Employee Ownership Trust Model
How does it work in practice?
For new businesses, the EOT model could be put in place from the outset. For existing businesses, the shareholders would sell all or some of their shares to the EOT.
An independent market rate valuation of the business should be obtained which would set the sale price of the shares.
The company would make a contribution to the trust enabling it to pay for the shares. Depending on the funds available, a loan may have to remain between the trust and sellers which would be repaid over a period of time as the company generates future profits.
It may be possible for the company /trust to raise finance to help pay for the shares over a shorter period. The original business owners, post disposal, are able to retain some ownership in the business, keep their posts as directors and also receive market rate remuneration packages.
The company will continue to be run by the management team on a day to day basis, although they will now be answerable to the trustees of the EOT.
Tax breaks
Shareholders are able to sell their shares to the EOT free of Capital Gains Tax. With the recent reduction in Entrepreneur’s Relief this is even more attractive.
Income tax free bonuses of up to £3,600 per year can be paid to each employee.
What are the benefits of an EOT?
There are a number of benefits for the different business stakeholders.
Existing Business Owners
Capital Gains Tax free
Ready and willing buyer for the business
Reassurance that the business will continue as a going concern
Able to retain some ownership in the business
Employees
Tax free bonuses
A sense of ownership
The Company
An engaged workforce
Ensured long term future
Can continue with minimal disruption
A more innovative and forward thinking culture
The employee ownership model may not be suitable for all businesses, but it is fast becoming a popular choice for businesses who recognise the value of their most important resource.
An EOT is just one type of employee ownership model and other options such as share schemes should also be considered.
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, 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.
We are registered as auditors and regulated for a range of investment business activities in the United Kingdom by the Association of Chartered Certified Accountants – the global body for professional accountants.
Register to receive our monthly Newswire once a month and we'll send you an email packed full of essential business news and handy tax tips to
help save you money.
