Businesses – What the 2013 Budget means for you

The announcement of Wednesday’s 2013 budget provided no real surprises but maybe some hope for businesses; we briefly examine changes and what they will mean.

Tax

The chancellor spoke of building the most competitive tax system in the world and wanting to support entrepreneurial spirit.

Corporation tax will be reduced by 1% to 20% in April 2015 to show that “Britain is open for business”, but the bank levy rate will increase to offset this by 0.142%

New measures against tax evasion are expected to bring in £3 billion in unpaid taxes. Three new anti-avoidance measures will target specific situations including corporate losses, partnerships and the use of off shore employment intermediaries. These measures reiterate the government’s policies creating a highly competitive but tax payer compliant system. The overwhelming majority of economic activity is already compliant but these newly announced measures are hoped to bring those that aren’t in line.

National Insurance

A new employment allowance is to be introduced that will cut the first £2,000 from employers NI bills. Around 450,000 small businesses will now pay no NI at all, around a third of all employers. This will be of little impact to larger companies but it will more than likely mean that smaller businesses can afford to hire more staff.

Infrastructure

Infrastructure will be boosted £3 billion a year from 2015-16 onwards which could provide medium term opportunities for the construction industry.

Anthony Fisher, Managing Director of Focus Insolvency Group commented, “It is encouraging to see that the Chancellor has helped businesses by reducing Corporation Tax and the costs of employing people. This should put more in the pockets of companies who will then be more willing to invest and hire employees. The UK economy must be attractive to business owners to obtain investment and growth.”

Businesses looking for safety and stability in the budget will have likely found what they are looking for, however the current economic environment will mean that growth will still be slow.

If you require any advice for your own business or for a client then please do not hesitate to get in touch.

Winding Up Petitions

Have you had a client issued with a Winding Up Petition (WUP) against their company?

In these situations it is extremely important to seek professional advice at the earliest opportunity in order to protect your client’s company and their interests as much as possible.

Due to the costs and implications involved in a WUP, issuing one to a company suggests that the creditor is very serious about recovering any money owed to them and probably sees this as a last resort after breakdowns in the business relationship. HMRC have been very quick in recent months to issue WUPs. Any creditor with a debt of £750 or more can move to issue a WUP.

A WUP, issued by HMRC or another creditor, is by far the most damaging and serious course of action that can be taken and will result in its closure and assets sold/employees dismissed if left to run its course in court with no defence or strategy/ proposal suggested as an alternative.

If the company is viable going forward and is to be saved then immediate action is essential! The very act of presenting a petition is likely to result in the bank account being frozen, which can cripple trading.

If the debt can be paid in full then this should be done immediately unless the debt is disputed, in which case legal representation is essential. Otherwise there may still be time to propose alternatives to the WUP such as a Company Voluntary Arrangement (CVA) or Administration. These are powerful tools to help rescue a company from collapse.

It is vital to seek professional insolvency advice by this stage to ascertain if the WUP can be halted and alternative arrangements made to pay the debt or risk the company being handed over to the Liquidator.

There may also be personal liability implications to the director or board members of a company issued with a WUP if personal guarantees have been made within the business or they are implicated in trading whilst insolvent.

If any of your clients have been issued with a WUP then do not hesitate to get in touch with us and we can work together to save the employees jobs and rescue the company.

Press Release – Business Insolvencies down 11% in the North West

A recent report from Experian has shown that business insolvencies in the North West of England fell by 11% in June 2012 compared to the same period last year.

The largest decrease regionally was seen in South East with 20.7% fewer insolvencies; however the West Midlands saw the largest increase with 18.2% more business failures.

SME’s were the only group to see an improvement in the insolvency figures country wide with those employing between 51 and 100 people showing the largest decrease with a drop of 35.8% of businesses becoming insolvent on the same period last year.

Larger companies didn’t fare as well with those employing 101 to 500 people seeing 0.16% failure rate compared to 0.08% the year before and those with 500+ employees saw an increase from 0.12% to 0.15%.

Overall however there has been a slight improvement on the amount of businesses becoming insolvent in June 2012 at a rate of 0.08% compared with 0.09% in June 2011.

Managing Director and Insolvency Practitioner at Focus Insolvency Group, Anthony Fisher commented:

“Whilst on the face of it these figures look good, as they indicate fewer companies are going insolvent, there is less money around and that in itself can impact on insolvency figures. If a company has no assets or cash then it effectively becomes a ‘zombie’ company until a creditor or companies house liquidates or strikes it off the register. HMR&C ‘time to pay’ arrangements have also helped to reduce insolvencies and banks are reluctant to appoint administrators at the moment due to more bad debts and costs. As the economy recoveries, it is likely that insolvencies will increase to remove the companies that are not viable.”

For further information please contact:

Anthony Fisher, Managing Director and Insolvency Practitioner

Tel: 01257 257037 email: a.fisher@focusinsolvencygroup.co.uk

Notes to editors:

• Focus Insolvency Group provides tailored, specialist advice and guidance to Limited companies, sole traders, partnerships and individuals who are experiencing financial difficulties. Please see our websites www.focusinsolvencygroup.co.uk and www.debtproblemsuk.com for further information.
• Anthony Fisher heads the company with a wealth of experience in both corporate and personal insolvency. Anthony has worked within the insolvency profession for over 18 years, qualifying as an Insolvency Practitioner in 2006 and starting his own practice in 2007.
• Anthony Fisher comments on a wide variety of personal and corporate insolvency issues and is licensed to act as an Insolvency Practitioner in the UK by the Insolvency Practitioners Association.

Business Insolvency: Frequently Asked Questions

We are currently in one of the most difficult and unpredictable financial climates that businesses have ever had to endure and the fear of insolvency is very real. However making the decision of talking about the problem is one that is often feared by many directors and business owners typically because they still don’t understand what Insolvency Practitioners are there for and hence remain afraid of them.

Quite simply, a Licensed Insolvency Practitioner is a professionally qualified person with the necessary expertise and experience to deal with and help businesses in financial difficulty.

As Licensed Insolvency Practitioners Focus Insolvency Group specialises in helping and advising all types of businesses whether they are a large limited company or a small sole trader; and in whatever situation they may find themselves in. The following are details of common questions on which our clients have sought our advice:

Q. A lot has been heard on the news about businesses being affected by the downturn in the economy, what should I be watching out for?

A. Increasing overdraft levels, banks reducing or eliminating funding, unpaid bills and no provision for accrued liabilities particularly to HMRC. Sole Traders or Partnerships can find the owners threatened with bankruptcy, whilst limited companies can find themselves having winding up petitions against them for non-payment of debt. Debt collectors and bailiffs can effectively stop businesses trading by taking the remaining working capital or the assets of the business.

Q. What do I do at the first signs of trouble?

A. If debts cannot be paid then it is essential that an Insolvency Practitioner is involved to look at the various options available. The act of taking professional advice at an early stage will mitigate any losses to creditors and protect directors personally. Failure to take advice and implement appropriate procedures can make directors potentially personally liable for the company debts as a result of the wrongful trading provisions in the Insolvency Act 1986.

Procedures can be implemented immediately to protect the company from creditor action including bailiffs and winding up petitions. Once the pressure is off, we can sit down and look at the company trading position and see if it is viable to continue trading going forward. It may then be possible to make a proposal to the creditors, which although may not pay them back all their liabilities will be better than the company being placed into Liquidation and employees made redundant. The company will then be free from debt in 5 years.

Q. Will going bust always be the answer, with the loss of jobs?

A. No. the strategy at Focus Insolvency is to always look at rescuing a viable business and save jobs. Naturally, this is as long as the business is viable going forward and we have management support. We can provide FREE initial advice by sitting down with the business owners and seeing what is available to the creditors perhaps by way of monthly contributions and formulating a proposal to creditors for rescue.

Q. My business has a lot of debt and I do not wish to continue trading. There is a buyer for the assets but he is not willing to take on all those debts, what can be done?

A. An option is to put the company into Administration and sell its assets to an interested buyer. The money received will then be used to pay creditors (after deducting costs). An Administrator only sells the assets of the company not the liabilities and this is far more attractive to a potential purchaser and can be the best result for all rather than Liquidation.

Q. How can I pay for Professional help if my business is struggling?

A. As funds are tight, it is essential that you obtain a FREE consultation from a Licensed Insolvency Practitioner to discuss the options available. Any formal insolvency procedure to rescue or wind up the business will involve costs that are generally paid out of asset realisations.

Remember that legal protection from creditors is available, and it is likely that creditors will accept less than full payment over a period of time given the financial position of the business.

Focus Insolvency Group welcome personal and business enquiries direct and also offers a Professional Partners referral facility to advisors who need help with their clients. If you can identify with anything within this blog for yourself or your client, then it is important that you act immediately, do not be afraid of seeking our advice.

If you have any opinions or questions about this blog, please leave a comment below or get in touch

image from freedigitalphotos.net

MVL – A Tax Efficient Exit Route

A Members Voluntary Liquidation (MVL) is the formal procedure for winding up and liquidating a ‘Solvent’ company.

This means that the company has sufficient assets to cover its debts and everyone will be paid in full, with any remaining funds distributed to shareholders. As the company is solvent entering into MVL is voluntary.

Because the process is voluntary and the business is solvent, the process is often relatively straightforward and often costs less than a creditor’s liquidation.

When a company is ‘dissolved’ through Companies House it is often a forgotten fact that a creditor could apply to have the company restored within a period of 20 years from dissolution, however this is not the case if the company is closed through Members Voluntary Liquidation.

As from 1st March 2012 if a company undergoes an informal winding up procedure, HMRC will allow distributions up to a maximum of £25,000 to be treated as capital. Should total distributions exceed £25,000 then distributions will be treated as dividend income.

However, should the company enter into Members’ Voluntary Liquidation, the £25,000 limit will not apply and distributions will be treated as a capital receipt and have the tax advantage of being subject to capital gains tax rather than income tax.

The costs of an MVL will be paid from the funds at bank and will significantly save you money when compared with the tax savings.

We strongly recommend that independent professional tax advice is taken prior to a company entering an MVL for this reason (we can help you find the best advice).

MVL Benefits

•  Provides a potential tax efficient exit route to shareholders
• Provide a managed exit as the shareholders control the process
• Useful for shareholders who are considering retirement
• Closure of a company when it has come to the end of the project it was formed for
• Enables a group of companies to close down a subsidiary which is no longer required

The MVL Process

Firstly, the Directors must make a ‘Declaration of Solvency’ which states that the company is solvent and is able to repay its debts together with statutory interest within 12 months.

Once the ‘Declaration of Solvency’ has been made, a meeting of the shareholders is called to pass the necessary resolutions and appoint a liquidator. An authorised Insolvency Practitioner must be appointed as the liquidator and it is their role to realise all the assets of the company and distribute to creditors in the correct order.

Following settlement of all the companies’ debts, the Liquidator will then distribute the remaining funds between the shareholders.

If, during the course of an MVL, the liquidator finds that the company will be unable to pay its debts in full within the period stated in the ‘Declaration of Solvency’, he must call a meeting of creditors to take place not later than 28 days after the day on which he formed the opinion. The process is then converted to a ‘Creditors Voluntary Liquidation (‘CVL’)’

What Next?

If you would like to discuss any of the options available to your company including a Members Voluntary Liquidation then remember that Focus Insolvency Group can offer free impartial advice and guidance. Get in touch or leave a comment below.