member

Profits (and losses) for farm businesses are known to fluctuate quite substantially year on year for a number of reasons which are often beyond the control of the farmer.  For an arable farmer, the quality and yields achieved are affected by weather patterns and the effect of uncontrollable pests and weeds, such as flea beetle and blackgrass. Global commodity prices and the value of the pound also dictate the selling price achievable for harvested crops and livestock, as well as input prices for inputs.

The current tax system also adds to the potential fluctuations with the ability to claim 100% tax allowances (the Annual Investment Allowance) on up to £200k (£1m up to 31 December 2020) of machinery purchases each year, through the capital allowances legislation. This can cause substantial peaks and troughs in taxable profits being reported to HMRC each year. The impact this has on personal tax is substantial and this is why for many years farmers and market gardeners have been able to benefit from a well-known tax adjustment known as ‘farmers’ averaging relief’.

The positive effect that farmers averaging relief can have is twofold:

• it can help to keep taxable income below certain tax thresholds and utilise tax allowances to reduce the annual tax burden; and
• there can also be a cash flow benefit with reduced payments on account for the following tax year.

Since 2017, taxpayers eligible for the relief have been able to benefit from an extension to the rules, allowing for the taxable profits to be averaged over either five tax years or two tax years, and have the option to decide which method to use on a year by year basis. This has provided welcome relief to some taxpayers from potentially onerous tax liabilities.

Aside from the headline Income Tax rates, there are other considerations to be made when deciding whether or not to claim farmers’ averaging relief in any given tax year:

• will this affect our ability to access finance?
• will child benefit be repayable in any given year?
• will this impact the ability to gain a full state pension?
• will pension contributions gain maximum tax relief?
• are Gift Aid payments being fully utilised?

If you have any questions, please get in touch with your usual contact at MHA Larking Gowen, or email enquiry@larking-gowen.co.uk

You can find contact details on the Our People section of the MHA Larking Gowen website.

Andrew Whiting

London entrepreneur Tej Kohli makes many sound real estate and entrepreneurial investments. He is passionate about the health of citizens across the world and about artificial intelligence. Kohli has taken an aggressive interest in robotics and computer intelligence since he projects it to be worth $150 trillion within a few years’ time.

Through Kohli Ventures, Kohli is able to mentor young entrepreneurs and help shape the future. He envisions artificial intelligence to leader researchers on the path to cure blindness, and he has made no qualms about investing heavily into this field.

Efforts to Cure Corneal Blindness

Kohli leads an institute that is dedicated entirely to finding a cure for corneal blindness, and it is arguably is greatest body of work. The foundation he runs, which helps to fund the institute, aims to solve more health issues than just blindness. However, it has set a goal to cure corneal blindness by 2035.

While Kohli is rooted in London, he works around the globe to invest in opportunities that will improve impoverished nations. While his expertise is in the technology sector, Kohli also has dealings in the real estate industry as well.

Philanthropic Efforts

Kohli is hitching is legacy on whether or not he leads the way to find a cure for corneal blindness. Through his non-profit foundation, he does more than just work towards this cure. His team also provides education and other resources to the under-privileged, and his foundation actively works to help third world countries.

He became interested in corneal blindness because of its effect on global health as a whole. Since most people with visual impairments and blindness are living in poor countries, finding a cure is going to help improve the entire economics of countries.

Entrepreneurship 

Kohli also has a strong desire to mentor young entrepreneurs. In fact, many of his mentees have gone on to create their own very successful business. He has a separate company, Kohli Ventures, to lead the way on his entrepreneur endeavors. Kohli Ventures primarily focuses on technological companies in areas like artificial intelligence and robotics.

It is interesting how Kohli has tied his interest in the world of global health initiatives to his interest in artificial intelligence. Investing in intelligence will help improve global health as it tackles one problem at a time.

He is relying on his investment in artificial intelligence to directly affect the other causes he cares about in global health. By improving robotics and computer intelligence, that can directly correlate to improving global health and possibly curing corneal blindness. All of Kohli’s interests are joined together to accomplish an overall goal of improving the world.

Personal

In addition to his professional pursuits, Kohli is married and a father of two teenagers. In his free time, he also enjoys ballroom dancing and is a car enthusiast. While he works and travels globally, he and his family are based out of London where his children attend school and he is an active member of the local community.

A positive start to the year

Having worked on some high-quality sales and acquisition mandates for clients throughout the 2019 and achieving a record year, the Corporate Finance team at MHA Larking Gowen were feeling positive going into 2020. The trend continued with a busy start to the year, with new transactions coming into the pipeline and then…Coronavirus struck!

A recent report from Mark-to-Market titled ‘April 2020 valuation barometer’ painted a positive picture in terms of deal volumes and values achieved across the UK mergers and acquisition markets (M&A) for the period 1 January to 31 March 2020 (Q1). Deal volumes in March were in fact up by 15% on March 2019 and were consistent with the trailing 12 month average of circa 300 deals per month. So, no impact from Coronavirus? Unfortunately, this is not the case.

Nearly all completed deals in this timeframe would have been a long way down the track before Coronavirus really hit home and the effective “lockdown” since 23 March. Most of these deals completed in early March before Coronavirus, there was a perfect storm of circumstances that led to an acceleration of deals in the period to early March which has inflated the deal numbers.

So why was that?

There was a flurry of deal activity in the lead up to the Budget announcement on 11 March with lots of speculation around potential restrictions or even the abolishment of Entrepreneurs Relief. We were operating in a marketplace where the single biggest tax relief for business sellers was under threat. Therefore several deals were accelerated to complete prior to 11 March 2020, to make sure Entrepreneurs Relief was “banked” whilst it was still available.

The relief previously applied to a lifetime limit of capital gains of £10,000,000, but post Budget this was slashed to £1,000,000. With potentially significant sums of tax at state it was important for advisors to get deals done for their clients before the Budget announcement. At MHA Larking Gowen we had two transactions complete the week before budget day, with one completing on 10 March. As a result of the changes made the next day, we saved the sellers hundreds of thousands of pounds in Capital Gains Tax.

So what now?

Many transactions that were about to go live or were in the early stages are either now on hold or have been abandoned all together due to the current uncertainty. Speaking with peers across the board it would seem as though Q2 could be slow for transactions being completed. M&A deal sourcing specialists, Dealsuite, recently issued a report titled “Impact of the corona outbreak on the UK Mergers & Acquisitions mid-market”. In the report dealmakers were surveyed about what they felt the impacts of coronavirus would be on deal activity going forward. This painted a bleak picture with four out of five respondents thinking the market would take three-six months to stabilise again and almost two thirds of advisors expecting at least a 25% reduction in activity.

Is it all bad?

Whilst it might seem a bleak picture for M&A activity in the current climate, there will always be exceptions to the rule and deals will still be done. Some businesses involved in staple foods and goods, software and tech, and those involved in medical and care are still performing well and in a lot of cases better, due to the current crisis.

We’ve seen this firsthand with most transactions that are still actively in progress fitting the business sectors above and we completed a deal in the tech sector only last week.

Once we emerge from lockdown it is likely that there will be opportunities for those well positioned businesses to gain market share through acquisition of complementary businesses who perhaps have not managed the down-turn as well. So, we would expect to see some accelerated M&A activity moving into Q3. In addition, business owners will still need to retire, and corporate groups will still need to restructure and buy and sell subsidiaries, so this pent-up demand to sell will release again in due course. However, this crisis is likely to have a downward impact on business valuations and many business owners might be reassessing their aspirations against potentially facing another crisis or down-turn in the future.

What can we be doing now?

Regardless of whether you’re looking to buy or sell a business in the short, medium or long term, there are lots of things that can be done now. James Lay’s recent blog ‘Selling your business amid COVID-19’ highlights some of these and is well worth a read.

There is also some great content available from our business advisory team around surviving the current climate, adapting to the new climate and thriving once markets return which can be found here.

For acquirers, I expect that we will see accelerated M&A processes in the next few months as things start to transition back to normal and government support is withdrawn. Therefore, for successful businesses or serial investors there could be bargains to be had on the acquisition front. If you would like to be made aware of potential acquisition opportunities as they arise, please get in touch.

For potential sellers there is still lots that can be done in this downtime and preparing for the due diligence process would be time well spent. Likewise, if there are key members of staff that need incentivising to help bring the business value back up to what it was pre-COVID-19 then now might be a good time to get an exit focused Enterprise Management Incentive (EMI) scheme in place.

The Corporate Finance team are also highly experienced in advising SME business owners on business planning and exit services and profit improvement programs. If you’d like to explore any of the above in further detail, then please get in touch.

Call 0330 024 0888 or email corporatefinance@larking-gowen.co.uk. You can also find contact details on the Our People section our website.

Jack Minns

The application process for the Bounce Back Loan Scheme opened on Monday 4 May. The scheme has been set-up to help smaller businesses impacted by coronavirus and is open to companies, partnerships or sole traders who are based in the UK, employ fewer than 250 people and have an annual turnover of no more than £45 million.

Details of the loans are as follows;

• loans range from £2,000 up to 25% of a business’ turnover capped at £50,000
• the loans have a six-year term but early repayment is allowed, without any early repayment fees
• the Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments
• the borrower must pay the interest for the remaining period of the loan. The interest rate on the loan is 2.5%
• no capital repayments are required for the first 12 months
• lenders are not permitted to take personal guarantees, the loans are 100% guaranteed by the government
• there is a one-page application that can be completed online
• no forecast financial information is required for the application
• the applicant’s business needs to derive more than 50% of its income from its trading activity (this does not apply to charities or further-education colleges)

You’re not able to apply for a Bounce Back Loan if you already have a loan in place under the Coronavirus Business Interruption Loan Scheme (CBILS).

However, if you’ve already received a loan of up to £50,000 under CBILS, you can transfer it to the Bounce Back Loan scheme. This needs to be arranged with your lender and you have until 4 November 2020 to do so.

How to apply

You can see which lenders have been accredited for the Bounce Back Loans here.

If your current banking provider is on the list, you need to apply for a loan with them in the first instance. Should they not approve your application, you can then apply to other lenders.

The application process can be completed online so visit your bank’s website to find out more.

If you have any questions, please get in touch with your usual contact at MHA Larking Gowen, or email enquiry@larking-gowen.co.uk

You can find contact details on the Our People section of the MHA Larking Gowen website.

James Caley

Tudor Lodge Consultants have recently started working with Herts Flooring and Interiors, an independent, family run business specialising in high-quality flooring and stylish interiors (e.g. rugs, blinds and curtains).

The Herts Flooring and Interiors showroom is located in Hemel Hempstead, and works with industry-leading brands to deliver excellent quality items at competitive prices.

Our SEO specialists have recently started working with this client, using a range of different tactics to boost their website’s search engine rankings and thereby promote online visibility.

What Are Tudor Lodge Doing for Herts Flooring and Interiors?

Our team are helping Herts Flooring to better their search engine rankings in various different ways. Firstly, we begun by creating a list of keywords relating to flooring and carpets, and started plans to optimise the site for these keywords.

We’ve also worked with this client to enhance their site’s user experience, utilising strong images to improve aesthetics and draw people in. Additionally, we have also introduced call-to-action (CTA) buttons on the headers and footers of the pages, better guiding users towards the client’s conversion goals. 

Tudor Lodge have also explored content ideas with Herts Flooring, help to further optimise the site. This has included plans for landing pages with useful, optimised content to boost the site for certain keywords, in addition to discussing blog posts that would help to do the same.

Tudor Lodge have also been working on link research for this client, using majestic to find relevant sites involved in home and design, and approaching these sites for opportunities such as guest blogging.

Through guest blogging, we can then write high-quality, informative pieces for other sites that relate back to Herts Flooring through mentions and links. By having enough reputable sites link back to Herts Flooring, we can help to improve their trust flow, further optimising the site and improving its search engine rankings.

Transport & Logistics Finance – Why?

According to Global Industry Classification Standard (GICS), transportation is a subgroup of the ‘Industrials’ sector. Incorporating several industries such as road, rail, logistics, marine, and air freight, it can also be broken down into smaller microcosms such as; trucking, marine port operations, postal and courier activities as well as warehouse storage and handling.

As transportation has continued to grow, so has its dependents. Now a key component of society and a key earner for the British economy, it is important that transportation is holistically supported in its operation and development.

Asset Finance in its simplest form, is a tool that supports and transforms transport businesses by enabling them to stay ahead of trends, changes and predictions. As an alternative method of funding, Asset Finance provides flexibility for businesses that wish to invest in themselves or simply rediscover a healthy cash flow.

Asset Finance Products:

Description:

Why do businesses choose this product?

Hire Purchase

Hire Purchase (HP) is simply a hire agreement which offers a straightforward way of spreading the cost of your vehicle or company asset, with the benefit of ownership at the end of the agreement.

You decide:

• The length of your agreement.

• How much deposit you wish you pay.

• Your preference of fixed monthly instalments.

At the end of your agreement once you have made your final monthly repayment including a nominal Option to Purchase Fee, the title of the asset will be transferred into your name.

• Flexible deposit to conserve your personal or business cash.

• Fixed monthly payments for ease of budgeting.

• Ownership at the end of the agreement.

• No mileage restrictions.

• Fixed interest rate.

• Monthly repayments do not attract VAT.

• Tax allowances for business users.

• Option to defer a final lump sum to reduce monthly repayments (Lease Purchase).

Refinance

Refinance can be a useful way for an individual or business to restructure existing finance agreements.   

The asset is purchased by a new finance provider and refinanced on a new agreement.  The duration of the agreement and repayments can be tailor made to suit your individual requirements, resulting in a lower monthly payment, whilst still providing use of the asset.

Refinance is available on vehicles and assets which are currently financed.

• Provides further financial stability.

• Restructure monthly repayments.

• Ability to purchase additional assets.

• Flexible terms available.

• Agreement is secured against the asset value.

• Viable alternative to traditional banking options.

Operating Lease

Operating Lease is a common form of ‘off-balance sheet’ financing, it enables you to equip your business with a broad spectrum of high value assets or equipment through a rental agreement, reducing any of the attached risks of ownership and costs to your business. 

With an operating lease your monthly rental payments are based on the difference between the price of the asset at the start of the agreement and its projected residual value, plus any interest charges.  As you only repay a proportion of the asset’s value, you avoid a large initial outlay, reduce your monthly rental payments and instantly boost your business cash flow.

At the end of the lease you simply return the asset to the lender, alleviating any of your disposal and depreciation concerns.

• Fixed monthly rental – you acquire the asset for immediate use.

• Low initial capital outlay.

• Boosts your cashflow.

• Asset usage without resale or depreciation risk.

• Off Balance Sheet Funding – Operating lease acts purely as a business rental cost.

• VAT on rental is reclaimable depending on your usage & VAT Registration.

• Flexibility at the end of the term to return the asset or extend the lease agreement.

Lease Purchase

Lease Purchase also known as Hire Purchase with a Balloon, is similar to a standard Hire Purchase (HP) finance plan.  However, your monthly repayments are reduced by deferring a proportion of your balance, a balloon payment, to the end of your finance agreement. 

Lease Purchase is available to business customers and private individuals.  It helps you spread the cost of your asset with lower monthly payments to suit your budget, with the option to purchase at the end of the agreement.

At the start of the agreement you simply decide an initial deposit, typically 10%-50% of the purchasing price and choose your agreement term usually between 12-60 months. 

Your equal monthly payments including interest payable, and a final agreed deferred balloon payment are then calculated.

At the end of the agreement you then have a number of options.

You can choose to either:

• Pay the deferred final balloon payment, plus an Option to Purchase Fee, the title of the asset will then be transferred into your name. 

• Part-exchange the asset subject to settlement of your existing credit agreement. 

• Refinance the final balloon payment.

• Sell the vehicle or asset privately, once the balloon payment has been paid.

• Flexible deposit and term with no mileage restrictions.

• Fixed monthly payments for ease of budgeting and to conserve your cash flow.

• Ownership at the end of the agreement.

• Deferred balloon payment reduces your monthly instalments.

• Tax allowances for business users.

• Asset appears on business balance sheet and can be wrote down against taxable profits.

• Monthly repayments are not subject to VAT.

Asset Finance can be used for:

Working Capital/Cash Flow Solutions

Finance solutions, such as Commercial Loans, can be used to help cover the financials involved in everyday operations such as bills and rent. This can be especially beneficial to businesses that are having to invest in other areas, or for seasonal businesses that are busier in some months more than others. Other forms of Asset Finance such as; Operating Leases, Contract Hire and Seasonal Payment Plans can also help to protect your cashflow and promote a healthy working capital. 

Expansion

Growth is vital for successful businesses that want to achieve operational excellence and Asset Finance can help businesses to achieve this. Expansion can take the forms of; hiring new employees, becoming a franchise as well as expanding your premises. If you have the desire to grow your business, discuss your options with Chatsbrook on 01603 733500.

Renovation and Equipment

In recent months, there has been further pressure for the transportation sector to align itself with global targets and to implement contemporary devices in order to achieve optimum efficiency and productivity. The growth and proven assistance of AI, as well as the shift to cleaner models of transport, means that there is now a requirement to invest in the UK transport Industry. With the support of Chatsbrook, you can achieve customised solutions based on company-specific requirements.

The flexibility of Asset Finance enables our clients to grow exponentially…

Typical Assets that we can finance are:

• Drawbar Vehicles
• Rigids
• Trailers
• Tankers
• Curtain Siders
• Specialist Vehicle / Recovery Vehicles
• Buses & Coaches
• Vans (LCV’s)
• Forklifts

(This list is not exhaustive, we offer specialist car and technology finance for businesses in the transport industry too.)

Why choose Chatsbrook?

Operating business with a live network of productive contacts, such as leading UK and world-renowned lenders, Chatsbrook is a well-supported business that is proud to connect transportation businesses with lending opportunities that are both unique and affordable. Our proven expertise in tailored financial services, as well as our solution-focused approach, has helped to support thousands of individual clients and businesses up and down the UK.  

“Chatsbrook aim to make the process of getting finance as seamless as possible- enabling our clients to focus on running their business. We get to understand the workings of a business, which helps us to tailor products to be most suitable for their growth. Talk to us on 01603 733500 about expansion, renewals and replacements of equipment, or how we can aid your cash flow by releasing equity from unencumbered assets”- Chris Hudson, Business Development Manager for the Commercial and Haulage sector.

Employers have until 6 July to report any taxable benefits and expenses provided to their employees (including company directors) during the 2020 tax year on the forms P11D, and will have to settle any National Insurance arising on these by 19 July.

These forms cover everything from company cars to employee loans and Mat Waters, a Manager in our Halesworth and Lowestoft offices, has written this series of articles to cover the main areas to be considered when it comes to both providing and reporting benefits and expenses.

The series concludes by looking at payments to or on behalf of employees which can potentially be exempt from reporting.

Mobile telephones

An employer is able to provide its employees with a mobile phone on a company contract without a benefit needing to be reported to HM Revenue & Customs (HMRC), even if there is an element of private use. The phone will need to remain the property of the employer and not gifted to the employee as otherwise a tax charge will arise on the value of the phone.

Home telephones

If an employer puts in place a home phone contract for an employee to be used for solely business calls then this qualifies as exempt from being reported. However, where there is an element of private use by the employee then a benefit is incurred based on the private proportion of the total phone contract (line rental and calls).

Where the employer pays for the employee’s personal home phone contract, then the total cost of package will need to be reported, although National Insurance (NI) will only be paid on the full cost of the line rental (as this is deemed to be wholly relating to the employee) and the element of private call charges.

Travel, accommodation and subsistence

One of the most familiar expenses is the HMRC mileage rates, which are currently 45p per mile up to 10,000 miles and 25p per mile above this. These rates are paid to employees for business journeys, cover the fuel and running cost of their personal vehicle and will not need to be reported to HMRC. However, should an employer wish to pay the employee in excess of these rates, then the additional amount paid will need to be reported.

Where an employee has use of a company car but pays for all the fuel personally, there are separate HMRC advisory fuel rates based on the fuel type and engine size which should be used in place of the 45p/25p. These rates only cover the fuel for business journeys as the employer will be responsible for the running costs of the vehicle.

When an employee is required to work away as part of their employment, these will be treated as exempt so long as the company only pays directly for, or reimburses to the employee, the exact costs of the travel and accommodation. Should employees be provided with a flat rate amount not agreed in advance with HMRC then the excess should be added to the employee’s earnings and taxed through the payroll.

Any private travel arranged and paid for by an employer will need to be reported as a benefit on a P11D, or if it is arranged by the employee but paid for on their behalf by the employer then this will need to be reported on the form P11D and the cost subject to PAYE and NI through the payroll.

When employees incur subsistence expenses to cover food and drink bought on business journeys, HMRC provide benchmark rates which can be paid based on the length of the journey. These start at £5 for travel of 5 hours or more and go up to £25 for travel of 15 hours and where travel is ongoing after 8pm. Employers can agree bespoke rates with HMRC but otherwise any amounts paid in excess of the benchmark rates are subject to PAYE and NIC.

Record keeping

Previously, an employer would need to apply for a P11D dispensation from HMRC to confirm that they were only paying either exempt rates or actual costs, that adequate records were being maintained and that formal procedures were in place to ensure all expense claims were verified.

Although HMRC has moved to a self-certification system rather than requiring for a dispensation to be held on file, it is still the employer’s responsibility to ensure that suitable controls and record keeping are in place for expenses claims. These will need to be in place for both for payment of benchmark rates and actual expenses incurred.

Protecting your business

All of the benefits and expenses covered in this series fall within the remit of PAYE inspections and records checks and so, if you are running a business where several of the matters covered apply, you may want to ensure you have adequate Tax Investigation Cover in place in the event of HMRC wanting to review yours records.

If you have any questions, please get in touch.