December 2007 ~ Edition 24

 
December 2007  

Edition no. 24

 
 

 

In this issue:

  1. How can small business support employees who are parents without breaking the bank?
  2. New Health & Safety guidelines for Directors
  3. Pre-budget report - what to do

If you would like more information about any of the issues raised in this newsletter or any other people management query please contact The HR Tap on 

0870 432 43 93 

or by email on

enquiries@thehrtap.co.uk

 

 

Melissa Ritchie

The HR Tap 

www.thehrtap.co.uk

0870 432 43 93

 

 

 

John Bartlett

JRB Consulting

www.jrbconsulting.co.uk

 

 

 

 Robins & Co

www.robinsandco.com

 

 

 

 

 

 

 

 

 

 

 This newsletter is written for general interest only.  The HR Tap can accept no liability for any reliance placed on its content without further advice.  Please contact us for specific advice before acting 

 

The HOT Tap News

In December's edition of the HOT Tap News we are delighted to welcome a new contributor, Andrew Robins from Robins & Co accountants & tax consultants.  Andrew and his team specialise in supporting small businesses and have some invaluable advice for business leaders following on from the Pre-budget report.

John continues giving advice in the field of Health & Safety, this month concentrating on the new guidelines for company directors, miss this at your peril!

On the HR front we look at how small businesses can give what are often seen as 'big company' benefits without breaking the bank and therefore reap the benefits along with their employees.

Please have a fun and safe festive season and we look forward to talking to you in 2008.

How can small businesses support employees who are parents - without breaking the bank?

While there are many suggestions about how employers can retain employees who are parents a number of them are aimed at larger organisations and MDs of smaller companies just put the concept of assisting such employees in the ‘too difficult’ box.  However, when smaller companies don’t offer the level of benefits that larger companies do and are often not in the financial position to offer larger salaries and yet are competing for the same talent there have to be ways that they can be the employer of choice for these people.  Some suggestions that are worth considering are: 

Joining forces with other local employers to offer crèche facilities – as many companies are based in industrial parks or estates a co-operative could be formed to bring a crèche into the area. 

If there is a larger employer in the vicinity which offers crèche facilities to their staff ask them if there is space for the children of your employees if you contribute financially. 

There are tax concessions for the employee if you either provide childcare or vouchers for it.  Employees are exempted from income tax on the benefit of nursery care provided by the employer either at the workplace or elsewhere on the employer’s premises, domestic premises are excluded.  Nurseries run jointly with other employers, voluntary bodies or local authorities are included provided that the premises are owned by one or more of the employers.  Therefore if the child is cared for in one of the employee’s homes it would not be exempt. 

Childcare vouchers are an easily accessible solution to allowing choice for the employee and still being able to offer support.  Vouchers to the value of £55 per week are exempt from tax (both parents can claim if their employers offer such a scheme.  You must ensure that vouchers are used only for qualifying childcare, are available for all employees or all employees at a certain site and must be used to care for a child under 16 years old. 

The employee must be aware that depending on how the scheme is set up the vouchers or cash allowance may impact on the amount of working tax credit they can claim for their children. 

While being a great tool for retention and recruitment an employer considering introducing such a scheme must budget very carefully for the costs as they are likely to increase over time if it is seen to be a recruitment tool.
 

New Health & Safety guidelines for Directors

“Health and Safety is integral to success.  Board members who do not show leadership in this area are failing in their duty as directors and their moral duty, and are damaging their organisation” 

A quote from  “Leading Health and Safety at Work”, new guidelines written ‘by directors, for directors’, launched in October by the Health and Safety Commission (HSC) and the Institute of Directors . 

The aim of these guidelines is to remind directors across all sectors that they must take the lead on health and safety matters, regardless of the size of their organisation. 

Too often health and safety requirements are overlooked by business organisations who view compliance as a hindrance to productivity.  Judith Hackitt, new chair of HSC explains the necessity of the new guidelines:  

"It is visible leadership from the top of an organisation which truly makes for an effective health and safety culture which in turn delivers good health and safety performance…I am still confounded by the number of people who see ‘health and safety’ as a barrier to doing things, as experience and evidence shows that the reverse is true”.  She goes on to say, “the challenge before us is changing behaviour. This guidance makes it clear what directors need to do but it is their action and delivery which will really count”.  

The guidance takes a common sense approach, offering straightforward practical advice relating to health and safety policy in the workplace. It sets out a four-step process to establish essential health and safety principles:

  1. plan the direction for health and safety; 
  2. deliver health and safety; 
  3. monitor health and safety; and 
  4. review health and safety.  

It also provides a summary of legal liabilities, a checklist of key questions for leaders and a list of resources and references for implementing the guidance in detail.

With the Corporate Manslaughter Act coming into force next year and with it, the possibility of courts considering the ‘attitude’ of an organisation to health and safety and the extent to which it followed guidance, this publication makes for compulsive reading. 

The guidelines are available in full at http://www.hse.gov.uk/pubns/indg417.pdf 

Stay safe 

JB

 Pre Budget report - what to do

The big news from the Pre Budget report was, of course, the changes to Capital Gains Tax. The proposed changes will impact many taxpayers and investors, and most will need to decide whether to act now to make disposals or whether they would be better off waiting until after 5 April 2008. 

While the Chancellor has set out a number of proposed changes, business representatives continue to lobby for the proposals to be delayed or amended. As we go to press there are indications that relief may be granted to those disposing of businesses, but it is clear that the Chancellor (and indeed the Treasury) are firmly wedded to the principle of simplification. There is no doubt that the changes will be a very significant simplification – most capital gains will be calculated on “the back of an envelope” after April 2008, and indeed without the aid of a calculator. 

So what should be done? How to cope with the changes? 

There are some obvious winners and losers, but there is no doubt that the window of opportunity is now there, and anyone who may incur a capital gain over the next few years should take advice about the impact of the changes. Some will decide to defer disposals until after the changes commence, and some will be looking to secure their position now, making disposals if possible to secure preferential treatment under the present rules. 

Indexation allowance 

The effect of the loss of indexation allowance will rob all of those with assets purchased before 1982 of an allowance equal to 105% of the cost of the asst. Owners will also be in the position of having maximum taper relief (whether on business assets or investments) and therefore losing more than the taper relief. Exactly who will be better off depends on whether business or non business taper would apply to their sale, but if business assets are owned then all taxpayers will be worse off through the loss of taper relief. If the assets are investments then basic rate taxpayers will also be worse off, having a net rate of CGT at the moment of 12%, which will rise to 18% after April. This is in addition to the loss of indexation allowance. For those paying tax at higher rate – 40%, the loss of indexation may be sufficient to turn the potential advantage of a net rate of 24% reducing to 18% into a disadvantage. 

Those owning investments which have been long held will need to consider realising these if possible to secure a beneficial tax rate now. 

Taper relief 

Objections to the proposed changes have been most vocal from those business owners who hoped to dispose of their businesses in the near future and secure a tax charge of only 10%. This would apply if the maximum rate of business asset taper of 75% was available, irrespective of the tax rate applying to the gain. This would produce a net rate of only 10% to higher rate taxpayers, and 5% to basic rate taxpayers.

Business owners will be keen to secure relief at rates applying now instead of paying the new 18% rate on their gross gains. To do so, they will need to secure a willing purchaser for their business, whether they are ready to retire or not. The identification of a willing buyer may indeed be a problem, but there may be a whole range of reasons why the business owner may not be ready to sell. 

Such business people would be well advised to wait a little longer before making firm decisions. There are indications that the Chancellor is, on reflection, receptive to their predicament, and may be willing to introduce some form of retirement or other relief to help them. There are options available to them to secure their taper relief now, such as through the use of trusts, but these need careful consideration, not least in view of the potential costs involved. Those who want to secure disposal under the current regime can hold themselves ready, but it is likely that waiting until early 2008 would be a sensible option, as we may have draft legislation by that point, and then taxpayers and their advisers will be better placed to make an informed decision. 

Two areas where the decision may be a little more obvious are those currently trading as self employed, and those who incorporated their business at some time recently, leaving the property used by the business in private ownership. In both cases, there is now the opportunity to dispose of the asset they own - either goodwill or the premises – to the company in return for cash proceeds, or a loan account credit, and secure taper relief on the disposal. In the case of goodwill, the taxpayer must be certain that he has “free” goodwill, capable of disposal to a company, and for the property, the problem of Stamp duty land tax payable on the disposal will introduce additional costs. In any event these are worth considering. 

Shares 

In future, all shares of the same class in the same company will be pooled together, so investors wishing to exploit the current rules will need to sell all of the shares in the company – the more recent acquisitions may produce a worse result under the current rules than the older shares, and the advice will need to balance the outcomes. 

Older assets 

The proposals also include a provision to abolish what in known as the “kink test”. This applies where assets have been owned since before 1982, and the cost of the asset exceeds the market value on 31 March 1982. This is somewhat unusual, but in this case, the taxpayer would lose out further on a disposal under the new rules. It is possible to calculate how this would affect the taxpayer using information about the cost and 1982 market value of the asset, together with the expected proceeds. 

Other changes 

Announced just after the Pre Budget date, but clearly intended for inclusion in the announcements, were the new personal allowances and NIC limits for 2008-09. As expected, the NIC upper limit has been increased by £100 per week, or £5,200 a year, meaning that as a result employed taxpayers earning at least £40,040 per annum will pay an extra £10 per week next year. After taking into account the rise in the lower limit, the net increase will be £9.45 per week. For the self employed, an increase of around £350 per year. The personal allowance has been increased y the rate of inflation to £5,435 and the age related allowances increased by considerably more, once again carrying out proposals announced in march this year. 

Drivers receiving free fuel for private motoring will see their first tax increase for several years next year when the base figure used in calculating the benefit in kind will increase from £14,400 to £16,900, an increase of £2,500 or 17%. 

VAT relief on refurbishing empty residential property is extended by reducing the waiting period to two years. In future (from 1 January 2008) refurbishing a property which has been empty for two years will attract only 8% VAT, whereas now the period is three years.

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