Along with the England flags and hopes of World Cup success the emergency budget is becoming a distant memory, but if you are in business you shouldn’t be so hasty.

Here at George Hay, we regularly advise on the advantages of incorporation and strongly believe that for the majority of small businesses it is the most tax efficient structure, as remuneration (profit distribution) for the owners/directors can be carefully planned to benefit their personal tax circumstances.  These savings can be particularly advantageous if you are operating as a family business.

Corporation Tax reduction

One of the main headlines of the budget was the reduction in the Corporation Tax rate by 1% making the Small Companies rate 20% from April 2011. This was good news for business owners but of course it only applies to those which are incorporated. Those who operate their business as either a sole trader or partnership are subject to Income Tax and National Insurance on their business profits so will instead be hit by the rise in National Insurance rates from April 2011.

The changes in the Corporation Tax rate and National Insurance rate along with forecast reductions in the basic rate threshold for individuals poses the usual question of should those in business consider incorporating and is it beneficial for everyone to do so?

Indicators do strongly suggest that it is widely beneficial for most owner managed businesses to incorporate and when doing the sums at the new rates from April 2011 the tax savings as a result of incorporation increase even more.

Risky Strategy?

There have been many attempts to try to curb the incorporation trend in the past due to the significant tax savings that can be achieved.  Gordon Brown aired his view that business owners are not paying the ‘right amount of tax’,  and we are sure HMRC will continue their expensive and difficult case in the courts.   But I personally have been advising on incorporation for over 10 years and it continues to be a successful strategy, so why not take advantage whilst the regulations allow it?  It is not something that can not be withdrawn from if circumstances change.

Real life example

In 2007 I was recommended to a small business that was earning very handsome profits due the unique nature of its trading activity.  On engagement I quickly did some sums (good old Excel!) and explained the value of Incorporating.  The owner immediately understood and asked me to incoporate the business without delay.  By involving his wife in the business strategy, she was able to take a ‘very nice’ Company Car and between them they saved and continue to save over £15,000 per annum in Tax and National Insurance.  If only they had sought advice years before…..

It’s not all about tax

Careful consideration should be given to incorporation and expert advice sought. It is not always the right choice for everyone and other factors come into play such as legal liability, increased regulation and therefore costs, disclosure of financial information and future business plans such as sale of the business but it is always worth thinking about.

For further details on the key announcements in the ‘Emergency Budget’ download a copy of our budget summary.

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Please see below a message sent from the Executive Director of Charity Services on 23rd October 2009 about the importance of meeting deadlines despite the current postal disruption.

At George Hay we endeavour to file as much as possible online to the Commission, Companies House and H M Revenue & Customs and have done for many years.  We believe this provides a better quality service to our clients as well as mitigating costs by reducing resources.  www.georgehay.co.uk

Dear Sir

Online Service and Postal Disruption

I am contacting to you as a professional advisor of charities.  In light of the postal strike the Commission is reminding all our key customers of the services that can now be carried out on line and to strongly encourage you to use e-mail when contacting us.

The Commission has conducted research which indicates that approximately one-quarter of all its ‘hard copy’ post emanates from a professional adviser. In the majority of instances this post could have been sent to us by e-mail or through our website. We have to arrange for letters and documents to be scanned and this inevitably increases our administration costs and causes delay.

The Commission has been growing its online services in recent years and there has been an increasing uptake by our customers who value the swift service this can guarantee. The following services are offered online as an alternative to submitting hard copy:

•  Filing of Annual Returns;
• Filing of accounts and Trustee Annual Reports;
• Registering changes to the composition of a trustee body;
• Applying for registration online. It currently takes an average of 12 days to register a charity over the internet, with the same process via postal applications taking around twice as long on average.
• Online publications. The online versions of our publications are the most current whereas some hard copy may not have been recently revised.

Using the Commission’s online services speeds processes up for our customers, and even where the enquiry does not relate to an online service we are generally able to act upon an e-mail more quickly than with ‘hard copy’. We can reply to most e-mail enquiries inside 5 days. This means that you can provide a quicker service to your clients.

Finally the Commission also offers template forms for a variety of actions your clients might take. These include amending their governing document; applying for authority to pay trustees; vesting land in the Official Custodian and dissolving a charity. Because the information requested is standardised we can consider applications on these forms more quickly than when they are contained in a letter alone.

The following link will take you to the landing page where these forms are housed: http://www.charity-commission.gov.uk/common/applyforit.asp

If you have documentation to send the Commission, you can attach this to your e-mail and send to the Commission at:   enquiries@charitycommission.gsi.gov.uk

I hope that this information is of help to you

With best wishes,

Yours sincerely  

David Locke

Executive Director of Charity Services

Charity Commission for England and Wales

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

There are statistics everywhere confirming that building business with current clients is far cheaper than acquiring new clients. I know this first hand being one who invests an inordinate amount of time networking both online and in ‘the real world’.  Here at George Hay we are regularly agonising over how to best spend our marketing budget, but at the end of the day the cheapest and the best business is that done via a qualified referral.  Also, although winning new business is exhilarating, doing business with clients who like you and appreciate what you do for them is very satisfying.

So what do I do to try and maintain client loyalty and hopefully enthuse them to tell their business associates about my good work?

Stay in touch
First and formost, I have found that clients like to be communicated with and want to “belong” to our organisation.  When clients feel that they are ‘out on a limb’ they are more likely to listen to gossip, be more receptive to your competitors or simply undervalue what you are doing.

Keeping in touch could be as simple as sending a regular newsletter or  involving them in your social media circles.  Of course, your top twenty clients (you do know who they are don’t you?) need more personal and regular attention, but that does not necessarily mean expensive wining and dining.  A simple ‘phone call to find out how things are going is all that it required.

Tell your client as soon as you can if an issue does arise and make sure it is clear how you will be dealing with it.

If my top clients prepare management information (which of course I encourage) or minutes of board meetings I ask to receive a copy by email so that next time we speak I have a subject matter to discuss that makes them feel good – their business!  This keeps the service personal and hopefully tailored to their needs.  Newsletters, blogs and emails are great ways to communicate messages but they are unlikely to be 100% relevant to your entire client base.  Also in a service environment, clients are buying personalities and a perception of knowledge, not something generated by your marketing team.

Remember if clients don’t know what you are doing, they wont want to pay for it.

So keep your clients informed.

You could also use this regular communication to survey clients opinions, if they are valued clients they will be honest with you and help you to appraise your operation, just as you help them with their business, but be warned if you have not made regular contact they may question your motives.

Take responsibility
If an issue does raise it’s ugly head or a mistake happens, correct it at the highest level.  Clients appreciate it when a manager/partner who can and will take action calls, rather than a junior person or an administrator.  Don’t forget an apology is what they are looking for, so make sure you eat humble pie whilst trying to convince them that the problem wont happen again! 

Never try and assign or delegate blame.  As a business person you are responsible for making sure your team are working to look after your clients.  Don’t let one department or staff member criticise another; it is unprofessional and clients will not be reassured.   Remember you have to work with these people, there are enough challenges in business dealing with external factors with out allowing conflict with in the organisation.  If there is a problem, everyone in the business needs to work together to resolve it and implement procedures to prevent it from recurring.

One of the biggest bug-bears of most people in business, I believe, is service professionals that over promise and under deliver, particularly in the early stages of a business relationship when they are trying hard to please or trying to win your business.  This is a major faux pas that most of us, if we are honest, have fallen foul of, so keep clients expectations manageable – and the easiest way to do this? – COMMUNICATE!

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.