Client Profile - Allen House Newarke Street
Leicester LE1 5SG
Chartwell Press Limited Telephone 0116 233 5959
Fax 0116 233 5958
The Lawns 33 Thorpe Road
Peterborough PE3 6AD
Telephone 01733 560212
Fax 01733 564542
Bill Langley (left) and Brian Carruthers www.thomasmay.co.uk
Chartwell Press, the Leicester- Chartwell Press needed to equipment, a skilled workforce
based printing company, is expand to keep up with and premises.
pressing ahead with expansion demand for its print services. PARTNERS
plans which will see the “Thomas May & Co have been David Radford
creation of new jobs and The company, which prints our accountants since Kevin Woodthorpe
relocation to larger premises. stationery, catalogues, inception and we have always Brian Carruthers
brochures and even hard sought their advice on
The firm, a general commercial bound books for customers investment and tax planning Simon Marshall
printer based on the Hamilton throughout the UK, is grateful issues at every stage of the John Calow
Industrial Estate, moved from for the sound financial and company’s development which Kaushik Bathia
Wigston in 2000 and has now taxation advice from Thomas included advice on a Graham Jones
outgrown its existing site. May & Co. management buy-out a few
years ago. Sarah Major
It is currently looking for new Mr Langley added “We operate Anthony Bedford
industrial space and is in the in a highly competitive The company is on target to
process of recruiting two marketplace which is currently increase its turnover again this
printers - bringing the total suffering from overcapacity. year and I am optimistic that
Registered to carry on audit work and regulated for a
number of employees to 12. we will soon be able to
“Our sector is capital-intensive, progress with the next stage of range of investment business activities by the
Bill Langley, the company’s but to keep pace with demand, our expansion plans.” Institute of Chartered Accountants in England and
managing director, said we need to invest in Wales
The Partners and Staff at Thomas May
would like to wish all our clients and
business contacts seasonal greetings
and a happy and prosperous new year.
This year Thomas May & Co will be making donations
to Heart Link and Sue Ryder Care Charities in lieu of
sending Christmas cards.
Many businesses in the service sector
may now find themselves facing
accelerated tax payments as a result of
changes in accounting rules for revenue
Consider the following…..
Your business has negotiated a
consultancy contract with a customer
for an agreed fee of £20,000. The
contract is halfway to completion at
your 30 September 2005 year end. The
total costs of providing the service are
The Construction Industry:
expected to be £12,000 (and this is
mostly salaries) leaving £8,000 of
A Glimmer of Hope?
profit. The new Construction Industry Scheme (CIS) and late submissions of returns. In the High
was due to take effect in April 2006 but this Court it was decided that this did not
Previously, £6,000 (ie half) of the costs
has been deferred to April 2007. In a previous demonstrate ‘a cavalier attitude’ to obligations
incurred by September 2005 would
newsletter we reported that, ahead of the under the CIS. Even if there were defaults
have been carried forward as work in
changes planned for 2007, the Revenue was they may not be significant for tax purposes
progress and no income or profit would
adopting a zero tolerance policy regarding the and it could not be inferred that the company
have been included in the accounts.
renewal of exemption certificates. In other would continue to offend. The certificate was
words renewal of CIS certificates for therefore renewed. Note however that there
The new rules
subcontractors was being denied where a have been other recent cases (see for
Application note G to Financial Reporting contractor had regularly paid over their own example Glaze & Frame Ltd v HMRC) where
Standard 5 outlined the initial rules on employees’ PAYE deduction late. In turn non- persistent late payment of PAYE led to
revenue recognition and was effective for renewal can cause severe financial hardship. renewal of the exemption certificate being
accounting periods ending on or after 23 refused.
A recent case (Cormack v CBL Cable
December 2003. UITF Abstract 40
Contractors Ltd) appears to offer a glimmer Please talk to us if you have any concerns
clarified this treatment in respect of
of hope. The Revenue had refused renewal of over renewal of exemption certificates or any
service contracts and is effective for
a CIS5 certificate on the grounds that the other aspect of the CIS.
periods ending on or after 22 June 2005.
company in question had made late payments
Now, instead of any work in progress
being included, a proportion of income
(£10,000) and therefore profit (£4,000) New accounting treatment for
must be included in the accounts to
September 2005. dividends
And…you guessed it, the tax treatment New accounting rules are being introduced We suggest that companies with a year end
will follow suit and at the time of for accounting periods beginning on or after of December 2005 and after should review
writing there is no provision to allow 1 January 2005 so that it will now only be their dividend policy in the light of these new
any spreading, although the possible to include proposed dividends in a rules.
professional bodies continue to push particular accounting period if the dividend
for this. has been declared and approved at a meeting Extra care is needed when calculating
of the directors or shareholders prior to the dividends from draft figures. In order for a
Some thoughts if you are likely to be year end. If the dividend is declared at a dividend to be legal, there must be sufficient
affected: directors’ meeting and there are other distributable reserves available. In other
shareholders, a letter should be sent to these words, the balance on the profit and loss
• given the choice, focus on completing
shareholders prior to the year end informing reserve in the balance sheet after deducting
existing contracts as your year end
them of the dividend. the dividend must be in credit.
approaches and defer new work until
after the start of your next financial year
Dividends which are declared after the balance Please contact us if you require any
• ensure you have efficient invoicing and
sheet date but before the accounts are signed assistance with these calculations.
cash collection procedures so that at
will need to be disclosed in the accounts but
least you have the funds to pay the tax.
cannot be recognised as a liability.
Calling all Farmers
The EU Common Agricultural Policy (CAP) reforms What about capital gains tax (CGT)?
have led to ten major CAP payment schemes being PE originally springs from the land. However it is a
replaced by one new single payment - the Single tradable asset and so in the Revenue’s view it is a
Farm Payment (SFP). The SFP is considered by freestanding asset not permanently linked to any
many to be the most fundamental change to particular parcel of land. It is treated as having
farming for many years. One of the most notable come into being on 1 January 2005 at nil cost.
changes is the introduction of ‘decoupling’ - ie Gains arising from transactions in PE are liable to
payments to farmers are no longer linked to CGT. If the PE is linked to a farming trade it is
production. In effect this means that a farmer can likely to be treated as a business asset and
cease to produce agricultural products altogether therefore potentially eligible for taper relief at 75%.
and still receive financial support. Gains may be deferred under the rollover relief
There is a one-off opportunity in 2005 to receive
payment entitlement (PE). Thereafter SFPs can Will inheritance tax reliefs apply?
only be received by acquiring entitlement from PE itself is not eligible for agricultural reliefs but so
another farmer. long as it relates to a farming trade, it will
generally qualify for business property relief at
How is the SFP to be treated for tax purposes? 100%.
There are variations in the precise detail of the
scheme across the UK but the tax implications are Will I have to pay VAT?
broadly the same. If PE is sold without land, VAT is due at 17.5% on
the sale. Where PE is sold with land, the position is
Is the SFP taxable? more complex and VAT may or may not be due.
Yes, whether or not it is linked to the production of
saleable produce. Expenses are deductible if they This is only a very brief outline of a complex
are incurred ‘wholly and exclusively’ for trading scheme. Please talk to us if you have any
purposes. questions or require more detailed advice.
Pensions Regulation Offshore Bank Accounts
Last year we reported that the Revenue were starting to use targeted
Those of you who had dealings with the Occupational Pensions Regulatory
letters to taxpayers as part of their compliance activities. They began
Authority (Opra) in the past may have noticed that earlier this year, Opra was
with letters to small businesses regarding the possibility of incorrect
replaced by the Pensions Regulator (TPR).
recording of income or expenses. This was followed with letters to
those in the construction industry regarding status. More recently
The introduction of TPR came about through a wider review of the pensions
letters have been sent to holders of offshore bank accounts. The
sector generally, which included a new Pensions Act and the introduction of
Revenue have said that this is part of an exercise to tackle the
the Pension Protection Fund.
problem of offshore accounts being used in tax evasion or to hide
the proceeds of crime. Whilst this is admirable the method leaves
The new regulator deals with any pension scheme made available by an
something to be desired. The letters are strongly worded and
employer, which includes occupational, personal and stakeholder schemes. Its
request a response within 30 days. You should be aware that receipt
main objective is to tackle risks to scheme members’ benefits. In this respect
of such a letter is not an indication that there is anything wrong and
TPR is a more proactive organisation than Opra and will concentrate its
does not constitute the opening of an enquiry into your tax return.
resources on schemes where there is greatest risk to the security of
members’ pensions. Any schemes assessed as high risk will be closely
Please talk to us if you receive one of these letters.
monitored by TPR in the future.
TPR has begun to issue guidance for the pensions sector, most notably in the
form of codes of practice and supporting guidance. These provide practical
The Cost of Forgetfulness
guidance to help trustees understand and meet their legal responsibilities. A recent survey for the Prudential found that nearly half of those
surveyed didn’t know exactly how much they were paying each
The regulator has also publicised a free e-learning scheme for trustees. month by direct debit and standing order or to whom they were
Successful completion of all the modules of the scheme will help trustees making payments. Furthermore almost 20% continue to pay old
meet the requirements for trustee knowledge and understanding, required by direct debits and standing orders averaging £53 per month. Worse
the 2004 Pensions Act. The first sections of the e-learning scheme are still, many of those continue to pay for at least six months! The
expected to be available in January 2006. cost nationally is estimated at over £400 million a month.
The message is simple - review your direct debits and standing
Further information about the e-learning scheme and TPR generally can be
orders and put an immediate stop to those that are out of date or
obtained from www.thepensionsregulator.gov.uk
Beware USB memory
sticks and the like
We are able to provide a broad range of IT
services both from our own staff and in
conjunction with nominated service
providers. The explosive take-up of USB pens/sticks, CD- pen/CD/DVD can be even easier to ‘lose’. If
write and DVD-write media, with a reciprocal corporate data is to be stored on these types of
Our IT services include: drop in price/mb, is good news. However, due media then appropriate access controls should
to the ease with which huge amounts of data be employed. This could include the use of
can be copied onto these devices, they can passwords to gain read/write access, the
• Set up of e-mail facilities
become an unsecured repository of corporate encryption of data files and the disabling of
• Specification and installation of new data. certain devices. Staff should be briefed on these
issues, their responsibilities for corporate
computer systems including networked Those of us who have managed to leave a security and any access controls they need to
systems mobile lying around will appreciate that a USB adhere to.
• Assistance with upgrading hardware and
software on existing systems New
• Installation and training on bookkeeping Backups releases,
A recent survey has found that one in three
• Microsoft Word and Excel installation organisations in the UK do not have basic backup patches and
procedures. The survey also found that of those
and training firms that actually performed regular backups, a updates
large majority of them stored their backup media
As an approved distributor for Sage in-house. Microsoft various patches for
software we can offer you the following Office, Windows and Internet
additional services: Apart from the legal responsibilities of complying Explorer
with the Data Protection Act, a loss of corporate Office 2003 - SP2
• Sage Instant Accounting data can often paralyse a business for days, Windows Vista - Beta 1 (also see
weeks and even permanently in the worst cases. article ‘Windows celebrates 20
• Sage Line 50 years’)
• Sage Payroll Sage Line 50 v.12 various
hotfixes for v.12.00
• Sage Training Financial Forecasting v.5.30
(hotlinks to Line 50 v.12)
If you would like to know more about our
Apple - various patches for Mac
computer services either complete the
enclosed faxback sheet and fax it to your
local office or call one of our IT partners, Sun - StarOffice 8 - new release
Brian Carruthers at Leicester on 0116
Arts - Nitro PDF Desktop
2335959 or Graham Jones at
Peterborough on 01733 560212. Winzip - v.10.0 Beta
Disclaimer - for information of users
This newsletter is published for the information of clients. It provides only an
overview of the regulations in force at the date of publication, and no action should
be taken without consulting the detailed legislation or seeking professional advice.
Windows celebrates 20 years
Therefore no responsibility for loss occasioned by any person acting or refraining
from action as a result of the material contained in this newsletter can be accepted by 20 November 2005 saw the which was released in October around then. In the meantime,
the authors or the firm.
20th anniversary of the 2001. a Beta 1 version of Vista has
Windows operating system. just been released to 10,000
Since Windows 1 was Autumn 2006 will see the 21st beta testers. Vista is the new
launched in November 1985, anniversary of Windows and name for the system
there has been a new version Microsoft are provisionally codenamed ‘Longhorn’ by
Visit our website about every 18 months, planning to release the latest Microsoft.
www.thomasmay.co.uk culminating in Windows XP version of Windows, Vista,