HB Blog

Welcome to our blog

Here you’ll find our take on important tax news, client success stories, and regular team updates.

Take your time, have a look around – and do share anything you find particularly interesting!

Swaffham Cyclist

Around the World in 80 Taxes

Taxes in this world differ a lot. That’s why Google and Facebook base their European operations in Dublin, why Russian Oligarchs form shell companies in the Cayman Islands, and why the extent and quality of public services vary between countries.

Looking at total tax revenues per GDP (otherwise known as tax burden), OECD countries have averaged around 33.3% over the past 20 years. Germany and France skew higher, collecting between 38% and 45% of GDP in tax revenues, while Mexico is much lower, at 11% to 17%. The United States’ tax burden stood at 25.5% in 2019, having decreased from 28% in 1998.

How a nation constructs its tax system often relates to tradition, governance, and the type of political system in place. Here are some key examples.

France

L’Hegaxone’s tax burden sat at 45% in 2020 – enough to make any libertarian red in the face! That puts it 2nd of 38 OECD countries for tax burden, with Denmark out in front. Increased social security contributions, payroll taxes, and property taxes (vs. the OECD average) is what pushes France up to 2nd – though interestingly the French exact a lower proportion of tax revenue on personal income, and on corporate income and gains.

France’s ‘social charges’ (contributions sociales) consist of general social charges, pension contributions, old-age insurance contributions, and contributions to healthcare and unemployment benefit. They are taxed at a flat-rate percentage of an employee’s total gross earnings, with no lower/higher tax bands, and with no tax-free allowance. These contributions can be high for businesses and self-employed workers (as high as 42% for the latter in some instances), though at 24.8% for most, the income of a typical working family is similar to the OECD average.

The great advantage of France’s social charges is access to an extensive social security system, with universal state healthcare, high state pensions, generous maternity and paternity packages, excellent childcare and other family benefits, and assurances for illness, disability, and unemployment.

Germany

Often lauded for its rent controls and coalition governments, Europe’s heart of efficiency had a tax burden of 38.3% in 2020, compared with a 33.5% OECD average, ranking it at 11th out of 38 countries. It skews even higher than France for social security contributions and, unlike its neighbour, taxes more on personal income, profits and gains, while taxing property and goods and services less than the OECD average.

Like France, all that money invested in its social security system means Germany offers an elaborate safety net for its citizens, including healthcare, long-range nursing care, pensions and unemployment. Healthcare is provided via mandatory health insurance, with around 86% of the population enrolled. The first iteration of the scheme was established in 1883 by Chancellor Otto von Bismarck – it is credited as the first social health insurance system in the world – and it influenced the foundation of France’s own universal healthcare provision.

United Kingdom

According to Hall & Soskice’s Varieties of Capitalism (2001), Germany is a coordinated market economy (CME), whereas the UK is a liberal market economy (LME). An LME is characterised by its competitive market arrangements, competitive inter-firm relations, unequal income distribution, and employment conditions that skew towards full-time/general skill and short-term/fluid jobs. In contrast, a CME has non-market arrangements, collaborative inter-firm relations, a more equal income distribution, and employment conditions that skew towards shorter hours/specific skill and long-term/immobile jobs. The authors also identify ‘Mediterranean capitalism’ (France, Spain, Italy etc.), which are (sort of) a hybrid of the two.

I would argue that the type of capitalism practiced in each country influences its tax system, and in the UK we experience a lower tax burden than Germany, for instance – 32.8% vs. 38.3%. We can see the UK’s ‘freer’ approach to tax play out in the OECD statistics.

Immediately, we can see that UK social security contributions are lower than the OECD average – and 18 points lower than Germany. Where the UK skews higher than average is tax on personal income and property.

One could argue that, in comparison with France and Germany, lower social security contributions affect the service provided by the state to UK citizens. In 2015 it was found that UK family benefits were in line with the middle to lower end of the range for other wealthy countries. Further, the UK’s focus on the family means less support for people without children when compared with the mixed-policy approach of other wealthy countries. While both sides of the House of Commons agree that the NHS is a great British achievement, the German healthcare system has more doctors and hospital beds per patient, and much lower waiting times for operations. On the other hand, you could argue that the UK’s reduced ‘safety net’, so to speak – and the fact that it is an LME, rather than CME – creates a more competitive environment, fostering hard work and innovation, but that really is an argument for another time!

United States

With a tax burden of only 25.5%, the US ranks 32nd of 38 OECD countries. Nicknamed the ‘Land of the Free’, its tax system appears to reflect this moniker somewhat, with zero value added taxes. Like the UK, its social security contributions rank lower than the OECD average, while taxes on personal income, profits and gains skew very high.

When he was elected president, Donald Trump claimed that “America is one of the highest-taxed countries in the world” and proceeded to announce his tax reform plan. While you can measure tax in different ways, the OECD tax burden rating suggests Trump was wrong. While the chart above shows that much of US tax revenue comes from personal income, profits and gains, Americans do not face the highest tax rate in the world. The US top rate of income tax is 39.6%, far behind Finland (57%), Japan (56%), Denmark (55.9%), Sweden (52.9%), and the UK, France, and Germany (45%).

Monaco

Yacht rock

There is no OECD chart for this one because it is a certified tax haven. Home to Lewis Hamilton, Bono, Björn Borg, Max Verstappen, Ringo Starr and Lily Safra, the tiny island country offers a high quality of life and excellent education and medical systems. Monaco does not tax personal income, capital gains, or property (apart from a 1% tax on rentals).

Other states are well aware of individuals’ use of Monaco for tax evasion purposes. French nationals are subject to France’s income taxes if they are a Monaco resident (unless they became one before 1957).

Monaco not your thing? Try some of the Earth’s other tax havens – the Cayman Islands, Switzerland, Luxembourg, Singapore and the British Virgin Islands and more!

While we are about navigating the tax system in the best possible way for our clients, we are not about tax evasion! If you’d like help with your business finances, get in touch today!

7 Weird & Wonderful Tax Facts

I was going to start this blog with a quip about how tax isn’t a popular topic, but a quick search on Google Trends shows that it ranks as highly as ‘holidays’, and above ‘shoes’, ‘music’ and ‘tennis’ for search interest! So tax is actually quite a popular topic. Well, since everyone’s clearly so interested in the subject, here are some weird and wonderful facts about it.

The non-doms con’s on

Someone registered as non-domiciled with HM Revenue and Customs is tax resident in the UK but is not required to pay UK tax on income and capital gains earned overseas. This hit the headlines in April 2022 when the press called into question the non-dom status of Akshata Murty, the wife of UK Chancellor Rishi Sunak. Introduced in 1799 by King George III when Britain was fighting France, non-dom status initially sheltered those with foreign property from the UK’s wartime taxes. It then became a handy way for colonialists to keep all of their overseas income, while still supporting the British Empire. 

These days, non-doms report their overseas earnings in a tax return, opting for “remittance basis”, meaning they only pay UK tax on the income or gains brought to the UK. Annual charges apply after a certain amount of time – £30,000 if the individual has been in Britain for seven of the past nine tax years, and £60,000 if in residence for 12 of the past 14 years. In response to the Murty scandal, the Labour Party have pledged to close Britain’s tax loophole, but not without debate. Some argue – including former Shadow Chancellor Ed Balls – that closing the loophole would cause a net loss in revenue for the UK due to individuals moving elsewhere.

Tax-free spoils of war

The Russia-Ukraine war is no laughing matter, but the Ukrainian authorities raised a few wry smiles when they declared that any seized Russian tanks need not be declared on tax forms.

“Have you captured a Russian tank or armoured personnel carrier and are worried about how to declare it? Keep calm and continue to defend the motherland!” Ukraine’s National Agency for the Protection against Corruption (NAPC) said.

Big tech gives back

It’s common to hear grumbles about multinational companies not paying corporate tax, with the names of Amazon, Facebook, and Starbucks often thrown around. In 2020 though, Google agreed to pay £183m in back taxes to the Irish government. This was part of a move by Alphabet, Google’s parent company, to abandon its previous strategy of moving revenues made in Europe offshore to tax havens, like Bermuda, which had reduced the company’s overseas tax rate to 2.4% (as revealed by Bloomberg).

You’d have to pay me to sport that moustache!

Peter the Great’s beard tax

Russia gets another mention – this time for more light-hearted reasons. This strange tax began in 1705 in Tsarist Russia as part of a wider initiative to reinvent Russian culture. Priced at a few kopecks for peasants, or a hundred roubles or more for nobles or military officials, this tax aimed to encourage the clean-shaven look the Tsar had witnessed on his European travels a few years prior. Subjects were also ordered to wear French or Hungarian jackets, rather than their traditional overcoats, with tailors fined for continuing to sell Russian styles. The Tsar’s men would even cut citizens’ coats down to size if they were too long!

Devout Orthodox Christians were not happy with the tax, believing that man was created in the image of God, including his beard, and therefore to shave it was a sin. Such discontent led to a revolt in Astrakhan, which was brutally crushed, and the tax continued. Peter would continue to feud with the church throughout his reign. He formed a club called the “All-Jesting and All-Drunken Synod of Fools and Jesters” where members dressed as cardinals and bishops and staged mock marriages and ceremonies. Sounds silly, but in such pious times, this friction between church and state was a serious matter.

The Window Tax

Have you ever looked up at an old building and thought “there really should be a window there”. Often you will see a bricked-up space where there clearly was a window before. There are no doubt a few instances in Hamilton Blake’s hometown of Swaffham – an old Norfolk market town. The tax was introduced in 1696 and sought to levy more money from the rich, who had more windows, than the poor, who had less. This worked for the rural poor, but unfairly taxed those on lower urban incomes who lived in multi-windowed tenements, which were counted as one dwelling under the terms of the tax, despite being subdivided between families.

What was initially conceived as a clever method of progressive taxation ran into problems when the rich started to block up windows to get under the lower tax threshold, and new buildings were increasingly built with insufficient windows. No definition of a window was set out, so even the smallest apertures could – and would – be taxed. This led to a further lack of ventilation, making residents more susceptible to outbreaks of typhus, cholera and smallpox. The tax had such an impact that, after a 1766 amendment to include properties with seven or more windows, England and Wales saw the number of houses with exactly seven windows drop by two thirds!

A room without windows is just a walk-in wardrobe darling!

Football wins

Now you’ve got this far, I should reveal that ‘football’ has about three times the search interest of ‘tax’.

Maybe tax should be taxing

Now this one’s from Wikipedia so take it with a pinch of salt, but apparently Adam Hart-Davis – the scientist/broadcaster who fronted HMRC’s “tax doesn’t have to be taxing” adverts – was dropped from his contract when he said in an interview that the tax system was in fact too complex. He said he thought a 30% tax rate should apply to everyone. While that would make things a lot easier for the Hamilton Blake team, we rather like the UK’s complex tax system – and enjoy advising our clients on how to best navigate it 😊

Top 10 Songs About… Money

It’s funny, musical artistry and financial advice do not often occupy the same space. Whether it’s rock stars splashing out in hotels, rappers’ buying eye-wateringly expensive gold chains, or pop starlets appearing at awards shows in seriously pricy dresses, the music world is known for its opulent glamour. Accountants… we’re more known for telling people when to stop spending!

Riffing on this theme, we thought we’d pull together our top 10 songs about money as a bit of fun, ahead of the Easter Bank Holiday.

Jamie T – If You Got The Money

Most people know indie brat Jamie T for the song Sheila, but he takes on the green stuff on this single from his debut album Panic Prevention. The chorus seems to be Mr. T wondering how much fun he’d have with a rich guy’s girl, if said rich guy gave him some of his vast wealth. The rest of the song is a spew of lyrics about him being broke, running around getting drunk and fighting… I think.

ABBA – Money, Money, Money

That zinging piano intro sets up the tension in this ABBA classic. Perhaps not the most poetically able pop band (likely due to English being a second language) ABBA sure make up for it with about seven hooks per song, and in this banger they rhyme ‘money’ with ‘funny’. Complete with references to Las Vegas and Monaco, the ABBA gals set out their goal to find a wealthy man. Certainly a fictional tale because all of ABBA became ludicrously wealthy – and justly so!

The 1975 – M.O.N.E.Y

Any 1975 fan will know that singer Matt Healy’s lyrics have this no filter intensity to them, and the band’s early songs are tales of being twenty-somethings in Manchester – all awkwardness, hedonism and young love. M.O.N.E.Y is about a character (presumably Healy himself) going out on the town and getting involved in some rather expensive illegal activities, let’s just say… It doesn’t go very well for him. A cautionary tale to spend your money wisely, if I ever heard one.

Pink Floyd – Money

A simple title, for a relatively simple song (for Pink Floyd at least) and definitely one of the more accessible tracks on their iconic album Dark Side Of The Moon. Roger Waters sardonically lists the perks of having money and impersonates the super-rich: “Money, it’s a hit / Don’t give me that do goody bullshit”. The rhythmic tape loops of cash registers, tearing paper and bags of coins weave this song into the album’s weird sonic tapestry.

It’s a gas

Dire Straits – Money For Nothing

With, in my view, the best guitar riff in this list, this 1985 track was a huge hit for the ‘Straits. The lyrics were inspired by the comments of a delivery man Mark Knopfler met in an appliance store in New York. This man thought that the MTV stars on that he observed on-screen within the store were paid stacks of cash for doing absolutely nothing, which Knopfler found interesting, jotting down the man’s comments there and then. I wonder if this man ever realised he’d inspired such a mega hit?

The Beatles – Can’t Buy Me Love

It was this one or Taxman (one of the few pop songs explicitly about tax), but I just prefer the simple message of this one – that money simply can’t buy you love. Paul McCartney, who wrote and performed lead vocals on the track, has never fully explained the song’s meaning, but has referenced the fact that material possessions can’t buy you what you really want. Though he did comment later that it should be called Can Buy Me Love when reflecting on the good life that his fame and fortune had granted him!

Rihanna – B**** Better Have My Money

The Barbadian songstress takes an aggressive tone on this trap-influenced song. It was allegedly written about her accountant that she sued in 2012 for causing her to lose $9 million within a year. In the video RiRi kidnaps an accountant’s wife because he’s refused to pay her! They do say arguments about money are the worst…

Kendrick Lamar Money Trees

Probably the cleverest rapper ever, ‘Kung Fu Kenny’ takes on the quest for wealth in this track off his first album, good kid, m.A.A.d city. In it, he describes how those in poverty strive to get rich quick, but lose their morals along the way, and how people within such communities struggle to make enough money to get out. This he contrasts with his own hard work to make it to the top of the music industry. 10 years on, Lamar has given back to his home city of Compton, CA in various ways, including donations to music, sports and after-school programmes to keep kids off the street. Good kid.

Lana Del Rey Old Money

Lana Del Rey has always channelled a bygone age in her music, with her 50s aesthetic. This song is all nostalgic references to Hollywood. “Cashmere, cologne and hot sunshine” – it’s the stuff of Mad Men, Great Gatsby, and the like; when people wore hats and drove big gas guzzlers and didn’t have Twitter.   

Parliament Wizard of Finance

“If I was a wizard of finance / Speculating every day on Wall Street / My dividends would be so tremendous, baby / Even Dow Jones would find it hard to believe”

Enough said.

We helped save a pub!

At Hamilton Blake we’re not only about manufacturing, wind energy and architects’ practices. After a hard Friday’s accounting, there’s nothing better than a pint at the local, and we are proud to have played our part in saving the Hare & Hounds pub from closure.

Located in Harlton, south Cambridgeshire, the Hare & Hounds faced an uncertain future in 2017 when the exiting landlord wished to sell the pub off for housing. Horrified at the prospect, villagers gathered and started a campaign to buy the pub as a community asset. With over 1,000 shareholders located within and around the village, the pub is now group-owned and has become a thriving business once more.

Leading the campaign was Patrick Phelan, founder of Energy Business Catalyst, who has employed Hamilton Blake’s accounting services for several years. He asked us to take a look at the books and we were more than happy to help.

‘Pop-up Pub’ events became a key part of the campaign. While the save-the-pub committee were putting their case to the local authorities, the pub remained closed, so the villagers would periodically take over Harlton Village Hall, serving drinks from the hatch and inviting a food truck to pitch up outside each time. There would even be live music to entertain the pub-deprived crowd.

The publicity worked. In September 2017, not more than a year after the previous landlord retired, the villagers announced their purchase of the Hare & Hounds with the £350,000 they had raised. Local MP Heidi Allen said the result was “just brilliant” and the hunt began for a new tenant to manage the operation.

Sadly, many stories like this do not have such a happy ending, with pubs sold off to developers to be converted into or replaced with housing. In 2019, CAMRA estimated that 14 pubs were closing their doors each week, and the pandemic’s lockdowns and distancing measures created further challenges for the hospitality sector, despite government assistance. In a country suffering an unending housing crisis, it is easy to see why public houses would be turned into domestic residences – there’s an acute need, and therefore a sizable profit to be made. In a similar, but far more urban story, The George Tavern – a favourite music venue of mine in London – has seen off developer plans for years with the grit and determination of a steadfast landlady and lots of music-loving campaigners.

The Hare & Hounds now has the look and feel of a modern pub, with a good menu, decent ale selection, and a well-kept beer garden. It is the work of manager Tom and chef Tim, with the consultation of the pub committee – and it was work that needed doing, the pub having languished for three years under the first tenant since its saving. Custom is up, especially in the summer months, where outdoor events such as mini music festivals pack out the garden. Our own Conor and Darryl dropped in for a client meeting there recently and enjoyed the food and atmosphere.

*Car park may not be as huge as wide-angle lens suggests

Senior Accounts Manager Max Child, who has handled the Hare & Hounds account, says how Hamilton Blake “were delighted to offer our support to Patrick and the villagers in their mission to save the Hare & Hounds pub and are pleased to see that the pub has gone from strength to strength despite the obvious recent set back being the pandemic.”

He adds, “It’s a pleasure dealing with both Patrick and Fenella (Secretary) with the statutory reporting requirements and appreciate their religious efforts in keeping the pub’s books organised on behalf of the community.”

Hot weather is fast approaching and that means drinks and music in the beer garden. We hope that the Hare & Hounds has an even better summer than the last.

The HB view on the Spring Statement

The Chancellor’s Spring Statement was delivered yesterday against a backdrop of rising inflation and fuel costs. This was always going to be a tough one for Rishi Sunak, who last year had the (now seemingly less) tough task of delivering a budget a year in to the Covid-19 pandemic. Our clients are always keen to understand what the financial year ahead looks like, so we’ve broken down the key points of the Spring Statement – and how it relates to business – below.

The financial environment

Inflation is currently at 6.2%, set to rise to 7.4% later this year. Interest rates have risen again, from 0.5% to 0.75%. Borrowing is to become more expensive, which will have an effect on businesses looking to grow. Sunak is well aware of these pressures and has made attempts to help businesses through a tougher trading environment.

Fuel duty

This one, on the surface, is for all the car drivers who have filled up with increasing horror over recent months, with petrol prices really spiking after the outbreak of war in Ukraine. All businesses use fuel in some way though – for transporting their own goods to customers, ordering supplies, and pretty much anything that requires the movement of goods or people. In the Statement, Sunak revealed that fuel duty will be cut by 5p per litre, the largest reduction in history. This will reduce the cost of filling up an average tank, which has risen to £98.43 for diesel and £91.87 for petrol, by £3.30, according to the RAC.

Our view is that this is a nice touch to help a situation that is very much out of the chancellor’s hands. There is only so far the UK government can edit the price of fuel when it comes from a global market. We will have to see if Boris Johnson’s Saudi mission brings in a new supply of oil, though we do not expect fuel prices to decline any time soon, sadly.

Regardless of the fuel duty cut, businesses will see the fuel price increase cut into their bottom line, and prices will have to be raised to preserve profit. It will especially affect delivery, logistics and online retail firms, for whom delivery is a large part of their product offering. We will, of course, work with our clients to find a way to balance costs so that long-term sustainability and growth is achieved.

Baby you can drive my car (but only at 55mph please as it’s the most efficient speed for petrol consumption)

Zero VAT on energy-related materials

Such materials include solar panels, heat pumps and insulation. “A family having a solar panel installed will see tax savings worth over £1,000, and savings on their energy bill of over £300 per year”, Sunak told MPs. Wind and water turbines will also receive a zero VAT rate, in a reverse of the previous “red tape” imposed by the EU.

This action is more aimed at homeowners than businesses. Due to the increase in hybrid working, many companies have already saved large sums by downsizing offices and, consequently, paying less to heat them. Zero VAT couldencourage architects or existing landlords to incorporate greener heating/insulation methods into office buildings, but the effect of that will be felt years down the line, we would argue.

National insurance threshold increase

National insurance thresholds are to be increased in line with the personal allowance limit of £12,570, which is set to save 30 million taxpayers £330 each per year. This is a boon to many workers, considering the government announced a rise in national insurance last year of 1.25%, which will take effect from April. The chancellor has effectively increased and decreased national insurance at the same time.

Business rates discount of 50% for hospitality businesses

Coming into effect from 1st April, this is, in our view, the biggest positive change in the Statement for business owners in the hospitality sector. Hit hard by the pandemic initially, then given a little boost with Sunak’s ‘Eat Out To Help Out’ (remember that?!), then hit hard again during Christmas 2021, pubs and clubs will benefit from this temporary discount on business rates, which should allow them to recoup some of their losses from the pandemic (though government support was generous, as we learned from our work with the Hare & Hounds, Harlton).

We calculated that a café in Swaffham would save just over £4,000 over the year with this change. That is a useful sum for a business sector that often operates on small margins.

Dog days are over

Employment allowance to increase to £5,000

Sunak has delivered a £1,000 increase here from the previous £4,000. This constitutes a tax cut of £1,000 for up to 500,000 small businesses. Every little helps!

In sum

Overall, I believe this Spring Statement is aimed at supporting those struggling most with the cost of living. Small businesses will benefit the most from the new measures. We look forward to advising our clients on how to navigate this newly amended financial environment and make it work for them.

A Day In The Life Of… Conor Murray

On the face of it, accounting can seem like a lot of spreadsheets and jargon – from an outsider’s perspective anyway. At Hamilton Blake we strive to be as approachable as possible for our clients, and as part of this, we’ve launched a series of blogs that chart the workdays of our team members.

First up is me, Conor Murray. Having worked at the firm for five years now, I’ve seen over 200 Mondays! So come with me now on a journey through time and… spreadsheets!

6:30am

On a typical Monday I get up early. I jump straight in the shower, brush my teeth, and aim to be out of the house by 7am, trying not to wake my girlfriend on the way out. My commute takes around an hour, with the usual traffic.

8am

Once in the office, I make myself a cup of tea (milk and two sugars), some breakfast (whatever floats the boat that morning) and sit down at my desk to get caught up on emails from the weekend. If there is anything relatively quick to action from those emails, I’ll jump on it straight away. Any tasks which are not urgent, I will flag them to follow up when appropriate. I will also create a to-do list for the forthcoming day to focus my efforts on those tasks which are urgent. By the time 9am comes, and everyone else filters into the office, I’m ready to crack on with my main tasks for the day.

Hamilton Blake Towers

9am

From 9am to 12pm, this is where I typically get most of the urgent tasks completed. This workload consists of company accounts preparation, corporation tax return preparation and the preparation of management financial reports which are supplied to clients monthly. The process for preparing management accounts for clients is as follows:

  1. Client sends across all information required including sales invoices, purchases invoices and bank statements.
  2. I will review the information provided to ensure it is complete.
  3. I will input all documents into Xero, the accounting software package we use with 90% of our clients.
  4. Reconciliation of sales invoices, purchase invoices and bank statements will occur, ensuring all bank transactions have either a corresponding piece of documentation or an explanation from the management as to what the transaction relates to.
  5. Review of Xero generated reports, including profit and loss and balance sheet, to ensure completeness. I will also examine these reports for any discrepancies. If any crop up, I will investigate and contact the client if required.
  6. Once any discrepancies are cleared up, I will either send the Xero reports directly to the client with my commentary or will transpose the data from Xero to a separately held Excel spreadsheet to aid comparison. This is really important if the client wishes to compare information across multiple financial years or have their own format that they would like to see the data in.
  7. If required, I will jump on a call/zoom meeting with the client to discuss the performance from the past month and the future business prospects for the client.

I find management accounting the most fulfilling part of being an accountant due to the relationship you can build with the client and the impact your business advice has. It’s so rewarding helping business navigate not only tax and accounting difficulties, but business complexities.

12pm

I religiously take lunch between 12pm and 1pm simply to refresh the mind. I will normally walk to a local supermarket to source a sandwich, a bag of crisps and a snack. After lunch, I will return to my desk, review any emails received from the morning, and start to plan the workload for the afternoon.

Swaffham Town Square – look out for hungry accountants…

1pm

Early afternoon, I like to schedule in my meetings with new and existing clients. The reason being is since I have achieved the bulk of my main tasks in the morning, this opens a lot of free space in my mind to discuss clients’ tax, accounting, and tax affairs. Pre-pandemic, these meetings used to be in-person but more have transitioned onto Zoom, which is great due to us being based in Swaffham with clients all over the country, cutting down on significant travel time. However, I’m very much looking forward to more in-person meetings taking place as they truly allow us to build better relationships with clients.

3:30pm

Towards the end of the day, I make a conscious effort to catch up with my team. This involves discussing any issues that have arisen that day, how everyone is progressing with their work and if anyone would need any assistance with any tasks they have in progress. This is a great opportunity to engage with each other and build good relationships with my colleagues.

5pm

Due to my commuting time, I tend to leave the office at 5pm. I find by doing this, I have a good work-life balance. As I’m still studying my ACA-CTA joint pathway, I will usually spend a couple of hours in the evening studying. I’m currently preparing for the Corporate Reporting and Strategic Business Management exams within the ICAEW. After study, my girlfriend and I will prepare something to eat and then spend the rest of the evening watching TV and just catching up. However, I am rather guilty of monitoring emails in the evening to ensure nothing urgent has arisen!

That summarises a Monday in the life of Conor Murray. Roll on Tuesday when I can hopefully help more clients get on top of their tax, accounting, and business affairs.

The EBC Story So Far

At Hamilton Blake we look after clients in a wide range of verticals, especially those in manufacturing, architecture, and engineering. One of these is Energy Business Catalyst (EBC), an engineering consultancy, set up in 2015 by long-time engineering manager Patrick Phelan. As we’ve been proud partners of this growing business from the start, we thought we’d share the EBC story with you, so here goes…

With over 35 years in the oil and gas and renewable energy sectors, in 2015 Phelan decided to become his own boss and get into consultancy. Hamilton Blake provided a small business accounting system and then, when it became apparent that EBC’s clients were struggling to understand their own costs, Hamilton Blake provided tailored accounting support to each of them.

He recalls the challenge of starting the new venture: “Giving up the regular salaried income that I’d had for 35 years, starting with no income… getting out there looking for clients … I didn’t know how successful it would be and whether there would be continuity of work”. These are challenges that many new businesses on our books face.

Clients did appear though, and soon EBC were supervising the sale of offshore wind turbine installation and repair specialists, Rotos 360. The founder’s experience at Norwich-based offshore engineering firm Aquaterra Energy was a good fit; and with Rotos 360 located in coastal Grimsby it was like a homecoming for the new consultant, who in a previous role had overseen major offshore sites in Hartlepool and, notably, Thailand (for Littleport-based JDR Cable Systems).

You spin me right round baby right round

The successful Rotos 360 sale led to an expansion of the EBC umbrella. Knowing that he could confidently oversee the sale of one company, Phelan reached out to some former colleagues to pool their resources and EBC Enterprises was formed. Via this holding company, the team of consultants would go on to acquire and develop several SMEs within the manufacturing and offshore wind sectors.

One such company is Pegasus Welfare Solutions (PWS). While we marvel at the rows of wind turbines lined up along our shores, we are unlikely to wonder about the sanitary situation for the crews that maintain them, but it is a going concern. Until PWS brought their ultra-sturdy weather-proof portaloo to the market, the toilet options on a wind turbine platform were… primitive. In the punishing offshore environment, a standard portaloo risks leaking, or even tipping over completely in the wind. Use of Pegasus’ toilet tech means less human waste entering the sea, but there is also a side-benefit – potential for increased diversity in offshore engineering personnel. A lack of private toilet space has been a barrier to the recruitment of female technicians and, with the wind energy sector now employing over 7,200 full-time employees in the UK, PWS should help widen the talent pool that feeds into these important jobs. It is clear from talking to Phelan that such altruistic side-notes are a source of pride for the experienced engineer.

Cleaning up our seas, one turbine at a time

“There were no other companies advising the directors on how to go about selling their business,” Phelan remarks. “Often founders of businesses founded them in their 30s and then they’re in their 50s or 60s and want to retire and sell their business. EBC have the contacts at a senior level in the larger companies who may be interested in buying. We provide the ‘catalyst’ to bring the parties together and bring the best deal… prepare the company so it’s showing itself in its best light, ensuring there are no surprises along the way that could derail completion of the deal. Hamilton Blake are also part of that process, of course.”

“It was obvious that we all as consultants missed the cut-and-thrust of running a manufacturing company. By acquiring companies between us and selling them on, we get to scratch that itch while remaining an independent enterprise.”

As the EBC roster grows and develops, Phelan faces increasingly varied workweeks. “In one day, I could be advising on providing paramedics to offshore wind farms, to subsea cable repair technology, to robotics for wind turbine inspection.”

Hamilton Blake’s own Conor Murray has witnessed the expansion first-hand, handling much of the accounting work associated with EBC’s various projects: “I first became involved with EBC in the March of 2019. At this point, the accounting system in place consisted of a couple of spreadsheets. Since then, we have implemented Xero giving both Patrick and me real time access to key financial information. During EBC’s expansion, both through the addition of new clients and acquisition of new companies, we have continued to provide support with monthly bookkeeping, management accounting and annual statutory requirements. We have always been on hand to provide the relevant information when required. It really is rewarding to be involved with a client from the outset and to assist them achieve their growth ambitions.”

As EBC continues to expand its project base, Hamilton Blake will be there all the way.

If you’re an existing client and would like to feature in our Client Focus series, email us and we’ll see what we can do.

The Office, Nearly 2 Years On

Pre-2020, I would have used the word hybrid to describe my bike, not my working week. Like anyone else in a full-time desk job, I would troop to the office five days a week, be this via bike, tube, or car, depending on which stage of my life we’re talking. Work from home arrangements were unusual, often for only one or two days a week, and were generally negotiated behind closed doors with managers for certain team members with extenuating life circumstances. Then, in March 2020, everyone got a piece of the action. In “it’ll all be over by Christmas” style, at first I remember colleagues discussing how it would be temporary, but then after weeks it dawned on us all that this was a seismic shift in working patterns. Like how workers two centuries ago had left their small workshops and flocked to factories in the cities, we were heading home, taking our office space into our own hands, though not voluntarily (at first).

And now, in early 2022, the work-from-home-first mentality has bedded in significantly for many office workers up and down the country. An ONS survey conducted in April 2021 found that 85% of UK adults homeworking at the time wanted to use a hybrid approach in future, with many large companies opting for this approach going forward. I would argue that, pre-pandemic, only lofty-headed futurists could have predicted such a change (at least in the near future), with so many companies still stuck in the 20th century concept of the office cubicle (as open-plan as things had become on the surface). For most, WFH policies had been by special arrangement, for special circumstances, and it was thought that productivity would decrease if workers were left to their own devices, without the watchful eyes of managers across the room. Not so – and this is what made the decision for many firms. Similar, or even increased, output sealed the deal for WFH.

The author, whose home office can spring up anywhere in the house…

Positives abound of course. The Economist reported on ‘digital nomads’ – young workers who seized on their newfound freedom and travelled through Europe, working from chalets, cottages, and seaside apartments. Parents, though initially phased by enforced home-schooling, have cut back on childcare costs and reclaimed commuting time. Suburban businesses also saw an increase in sales. Worker fatigue palpably decreased. Seizing on the more healthy work/life balance available, Sarah Healey, secretary at the Department for Digital, Culture Media and Sport, has said how “wellbeing is at the heart of Civil Service culture”, and that she would soon meet with senior staff to discuss “what our priorities for 2022/23 should be to make us a healthier, happier civil service”. Other government departments have mandated workers to work from the office only 2-3 days per week.

There are downsides to all this sudden freedom though. The Atlantic argued that for those that have not built up strong social and professional networks, home-working can be alienating. The loss of interaction with work colleagues, who for many become their most regular day-to-day social interactions, has exacerbated widespread loneliness in the US. ‘Water-cooler moments’, once poked fun at by Dilbert and the like, are lost in the virtual office; the kind of casual conversations that stimulate innovation (ideas that cannot be scheduled to appear during a Teams call). I vividly remember one such breakthrough happening within my own marketing team last summer.  It is for this reason that Google offers free food to its employees and makes its offices as attractive as possible. Who knows… perhaps Facebook’s Metaverse will be able to stimulate innovation in virtual settings!

For Hamilton Blake, the biggest change to workflow has been the virtual connection with clients. Many are based in London, which called for regular trips to the city pre-Covid. Now though, a hybrid approach to interfacing benefits all – Hamilton Blake can spend more time crunching numbers, while clients retain their own flexibility. Face-to-face is still an option (and favoured for yearly reviews, for instance) but for monthly catchups, video calls are the norm. The lean towards virtual interfacing also opens up new recruitment options. North Norfolk, as beautiful an area as it is, does not quite have the geographical pull of London, and the company could now recruit workers fully remotely, if required.

“It’s a permanent change … I don’t think things will ever go back to the way they were.” These are the words of Jane Gratton, head of people policy at the British Chambers of Commerce. This sentiment is shared by many that I have talked to, with the 5-day in-office mandate an exception now. As the 2-year Great WFH anniversary approaches, firms – Hamilton Blake included – will need to assess their own individual employee policies and be aware of the benefits and risks to productivity and staff happiness.

Me? I’m going to jump on my hybrid and head to the office for a change.

Inheritance: Fail to plan and your planning to fail

Inheritance tax planning is often postponed or neglected in today’s society. In reality it is one of the more important processes as it helps to ensure that a persons loved ones receive the highest possible amount of an estate rather than the taxman. With inheritance tax currently sitting at 40% an estate with little to no planning could be giving nearly half of that value over to HMRC.

In reality a person’s estate is very unlikely to be made up of only liquid assets such as cash or stocks and shares. Therefore if, for example, the main value is in property or other high value items the beneficiaries may be forced to sell these types of assets in order to afford the inheritance tax payment due on the whole estate.

Below we have explained a few of the ways to lower the tax bill before and upon death.

Reduce the size of the estate

The first idea is a simple one; if the size of estate is reduced then, subsequently, the tax payable is reduced. The easiest way to take assets out of an estate is gifting. Gifting is one of the most important tools a person can use to mitigate inheritance tax and increase the value passed on to loved ones. If a person gifts assets to a beneficiary prior to death there is no tax to pay so long as the person gifting survives his or her gift by 7 years. If, unfortunately, the gift is not survived 7 years there is a sliding scale of relief available dependant on the length of survival after the gift.

Gifts should be used where possible, however, caution must be taken so that the person giving away assets does not leave themselves in a position where they are unable to enjoy life to whatever standard they would like. Extreme care will need to be taken with properties as if a person’s home is gifted to another and the donor continues to reside their then rent will be payable at the market value to the beneficiary which is taxable income.

All in all, however, gifts are a great way of moving assets out of a person’s estate and therefore reducing any inheritance tax payable.

Keep your company

With the number of small businesses always on the rise the amount of people owning large portions of companies which form part of their estates is also rising. Upon retirement a person may be tempted to liquidate small companies and therefore release any residual value from the company into their own possession. In some cases it can actually be of great benefit to leave the company as it is and to bequeath the shares upon death. In this instance the value of the business could attract relief via business property relief from IHT of up to 100% and therefore reduce the overall value of the taxable estate.

Increase your nil rate band

Currently every single person who is domiciled in the United Kingdom will receive a nil rate band of £325,000 upon death. This means that an estate is only taxable upon the value above £325,000. This seems like a lot, however, with rising house prices it often does not cover a person’s full estate. Often upon death a husband or wife will leave the entirety of his or her estate to the other which attracts no tax whatsoever regardless of value. The other important thing about this transaction is that the surviving spouse or partner also inherits the deceased’s nil rate band.

This creates a situation where the surviving party now has a nil rate band of £650,000 which means that this amount can be left via their estate tax free.

In addition to this, as of 2017, an extra nil rate band is available on main property if the total taxable value of the estate is under £2,000,000. This amount begins at £100,000 but will rise to £175,000 by 2020. This could, in some cases, create a situation where a person can pass on £825,000 worth of estate to family tax free.

Conclusion

Hopefully the above illustrates just how important planning can be in ensuring that your estate is steered to your loved ones without HMRC taking a large chunk first. Each person’s situation is individual and, therefore, will need tailored advice on the best ways to reduce inheritance tax.

If you, or a loved one, are currently in need of estate planning or just want to talk through how it could benefit you please contact us via this website or on 01760 336730 to arrange a meeting.

Liquidation Changes

Members Voluntary Liquidations

As of April HMRC have changed the rules regarding MVL’s in an attempt to stop ‘Phoenixing’ and ‘Moneyboxing’. The end result is that leaving large cash reserves in a business in the hope of extraction at a low tax rate has suddenly become not such a sure thing.

Prior to April if a person had had enough of the business world and wanted to wind up a company then in the majority of cases all residual funds could be extracted with capital tax treatment and would also be subject to entrepreneurs relief giving an effective tax rate of 10%. This has now been changed in order to trap people who misuse the rules and leave large cash reserves retained within the company which is called money boxing and, also, parties who use MVL as a way of removing funds from the company cheaply before immediately starting up an identical company and repeating the process, called phoenixing.

Money boxing

This applies to a situation where a director who is also a shareholder retains profits within the company over a long period of time in effect using the company as a savings account before deciding to wind up the company. It would seem that the new legislation dictates that any funds removed from the company would be treated as income and taxed as such which, obviously, is disadvantageous in comparison to capital gains tax.

It remains to be seen how HMRC are hoping to enforce this and all guidance on the matter is rather shaky at best. It seems that if it can be proved there is a genuine commercial reason for having large cash deposits within the company, for example any business that requires regular large capital expenditure, then the MVL should not be caught by the new legislation and will be treated as capital and allowable for entrepreneur’s relief as before.

Phoenixing

Phoenixing is slightly easier to identify and is associated mainly with property development firms. In essence the idea is that a contract is completed and a large amount of cash is paid into the company. Instead of drawing this as salary or dividend the directors will wind up the company, through an MVL, and remove the residual cash at the substantially lower 10% tax rate. The owners will then create a new company and repeat the process which allows individuals to receive large amounts of income at a low tax rate.

Again the enforcement will be a challenge for HMRC however, after deciphering the guidance available, it would seem that any person or a related person who incorporates a new business within 2 years of a MVL in a similar trade will be subject to income tax rather than capital gains tax. The main problem arises in family owned business. If a father retires and winds a company up, as is expected, the son who may be in the same trade risks imposing a large tax bill on his own father if he were to incorporate a company within 2 years.

Final thoughts

As is always the case with new legislation it will be a waiting game to see how far the HMRC boundaries can be pushed before we get definitive answers to the above questions. It would seem reasonable that anyone embarking upon a MVL for genuine commercial reasons should not be punished. However, as the past will show sometimes legislation misses the mark and affects unintended parties. One thing is clear though, MVL could be about to get a whole lot trickier.

Welcome to our new website!

After neglecting the old site for a few years we have finally caught up and are proud to unveil our brand new website! We will be using the site to send across important changes in regard to accounting and taxation as they come up. We will be uploading a summary of the changes announced in the budget shortly after this update for you to view at your leisure.

Now April is here, which for many signals the end of an accounting period, you will need accounts and/or tax returns for the tax year 2015/16. If this is the case then please feel free to drop in for a chat with one of our team and get the ball rolling!

We look forward to catching up with all of our clients over the coming months.

Budget Report 2016

The new budget was announced earlier this year and with it came the inevitable changes proposed by government. In order to keep all our clients up to date with all these changes we have put together a report outlining the most important parts. If anything within the report concerns you in anyway please contact us and arrange a meeting to discuss your situation.

Here you can download a copy of the latest 2016 budget report.