Finance Clinic

 

 

It’s been a busy few weeks in the finance world with: The Budget, run up to the new tax year, and many companies starting their financial year ends.  Here our finance director Paul Hebden gives his highlights and advice:

 

 

 

The Budget

This was the penultimate one before the General Election. It was interesting to see The Coalition taking credit for initiatives which were most likely pushed by their opposite number but which had popular reception.

The now well reported, “rabbit out of the hat” by The Chancellor was the radical reforms announced to the Pension Framework for April 2015 and beyond. These changes should be broadly supported, in particular the removal of the requirement for a person of pensionable age to invest the majority of their hard earned fund into an annuity. Many of these annuities appear to have been un-competitively priced, making the matter of a pension somewhat of a lottery.

The new rules will still allow an individual - that reaches retirement - to extract 25% of the pension fund as a tax-free lump sum. However, we believe that the removal of the requirement to buy an annuity will make it much easier for future Chancellors to chip away at the 25% allowance. A gradual reduction in the 25% towards 20% or less may be one consequence over future years.

Whilst we believe that pension reform is necessary, the removal of the requirement for annuities altogether may be a step too far. There has been much discussion about the possibility of some people fluttering away their entire pension pot on a luxury holiday or similar, leaving nothing to supplement the state pension thereafter. A more sensible approach may be to require that a minimum level of annuity be bought, providing a top-up to the state pension but leaving the surplus to be used at the discretion of the pensioner.

Our client Hurst Accountants have an excellent summary of local entrepreneurs and experts views on the Chancellor's highly anticipated Budget which you can view here. 

Tax Year End

As we approach the end of the tax year (5^th April), payroll departments will be busy processing year end payrolls and submitting their returns to HMRC. Companies have been reporting their PAYE information to HMRC in real time (RTI) over the past year and this appears to have been generally well handled. From March 2014, employers will be able to file a Full Payment Submission (FPS) or an Employer Payment Summary (EPS) to report PAYE information for the forthcoming tax year. Further information is available here.

For companies with a 31^st March year end, April is a busy time as preparation takes place for the annual audit. Comprehensive preparation for the audit is essential to minimise the disruption to the business, to minimise the time and cost associated with an audit and to ensure the timely publishing of your financial results.

You will most likely have read much about pension auto enrolment over the last 12 months. For those companies that have not yet implemented a scheme, it is imperative that you understand what is referred to as your companies “Staging Date”. The Staging Date is the date that the legislation becomes effective for your company. The Pensions Regulator has a web site which is extremely helpful and we would strongly recommend that you take a look at it. The website can also be used to determine your Staging Date by entering your PAYE reference. The website can be found here.