Fine
if you do: fined if you don't!
Where a company
issues shares or grants unapproved share options to its
directors or employees by reason of previous, current or
future employment, it is obliged to disclose such details
to the Inland Revenue by completing form 42. These transactions
require to be reported whether or not an income tax or national
insurance liability will arise. Form 42 is also required
in respect of shares issued on incorporation of a new company,
except in the case of subscriber shares where these are
issued to a formation agent. However it should be noted
that the transfer of shares from the formation agent to
a director or employee of the company is likely to be a
reportable event.
The terms attaching
to such shares will need to be considered. For example where
employees are required to sell the shares back to the company
at a fixed price, say at par on leaving the company or are
not able to sell the shares for a period of time after leaving,
such restrictions may affect the value of the shares at
the time of issue to the director or employee. Form 42 requests
such details together with the restricted and unrestricted
valuations. Where this is applicable the employer and employee
can elect to pay the income tax arising on the higher benefit,
i.e. the unrestricted valuation, immediately which would
result in any future gain on the sale of the shares being
subject to capital gains tax. If the election is not made
a portion of the sale proceeds will be subject to income
tax which would mean that taper relief is not available.
Such an election must be made within fourteen days of the
issue of the shares. However if an election is made and
the shares do not increase in value then tax may have been
paid unnecessarily. Not fair..unless you are the Inland
Revenue.
Forms 42 should
contain details of all shares issued to 5 April each year
and must reach Inland Revenue by 6 July following the end
of the fiscal year otherwise late filing penalties will
be incurred which means an early decision on the tax treatment
is needed.
Another bureaucratic,
and potentially expensive minefield, but we are here to
help if you wish.
Return
to top
Gone
Phishing?
Have you received
an e-mail recently which has asked you to visit a website
via a link in the e-mail in order to confirm, for example,
your bank account details or password relating to an internet
trader from whom you purchase goods?
If so the chances
are you are the victim of a phishing attack.
Phishing is a
relatively new term which is used to describe attempts to
con individuals into disclosing sensitive information to
websites which are operated by criminals. Such attempts
are directed at business' customers rather than the business
itself. All companies who conduct trade via the internet
are prone to phishing attacks, which normally involve the
perpetrator sending a spam e-mail to as many live addresses
as possible. These e-mails are designed to look as though
they are sent by established organisations which are known
to conduct trade via the internet. The e-mail will typically
contain an excuse to request that recipients confirm their
account and security details and attempt to redirect the
recipient to a bogus, but realistic website via a link contained
in the message.
Once these details
have been entered onto the bogus website they can be used
by the fraudster to access the individual's account. The
fraudster will then transfer funds to accounts under their
control in a money laundering process thus benefiting from
the proceeds.
This type of fraud
is very difficult to prosecute as the perpetrator may be
based in any part of the world and that country's legal
system may not be adequate to deal with the crime.
The quality of
phishing e-mails is variable, with some being very convincing
and almost indistinguishable from a bona fide e-mail from
the company being impersonated. Others contain spelling
and grammatical errors which is a strong indication that
the scam is being operated from outwith the UK.
Once an ISP becomes
aware of a phishing scam it will notify the organisation
concerned so that it can take appropriate action. An attempt
will also be made to disable the bogus website, but this
can take a considerable amount of time if the website is
hosted by a lesser developed country.
Organisations
need to take action to minimise the risk of their customers
falling victims to phishing scams. Some ways in which this
could be achieved are listed below.
-
Adopt policies
which do not require their customers to provide security
information in response to e-mail communication.
-
Make customers
aware of phishing by placing warning notices in the
login section of their websites.
-
Set up hotlines
thereby enabling customers to report suspected phishing.
-
Review password
policy and allow customers to use as many different
characters as possible.
-
Remind customers
to use up to date anti-virus software.
For
further information visit www.fraudadvisorypanel.org
or contact Bill Griffin on telephone number 01224 625554.
Return to Top
Guest
Feature: Protect Your Future
In an earlier
newsletter we briefly looked at the issues affecting a business
when untimely death or a serious illness occurs. This time
we turn to look at the personal financial issues that arise
for those left i.e. the co-directors and the family. We'd
like to pose the question:
How would
you like to be in business with my spouse?
That's really
the question every co-director or partner should ask of
his business colleagues. If the thought of that might seem
appealing, now try it the other way, "how would I like to
be in business with your spouse?"
Underlying the
above potentially amusing thought, is the serious issue
of do I know what plans are in place should I die or become
seriously ill? Are there any plans?
It is generally
accepted that on the death or serious illness of a business
owner, those who remain, keep control of the business and
are able to continue trading. Death or illness rarely happens
at a convenient moment.
Normally the main
problem facing the remaining business owners is money. There
will often be a requirement to find additional capital to
buy out the interest of a business owner who has died or
is critically ill.
What solutions
would be available?
Perhaps the remaining
directors or partners have plenty of personal wealth and
the value of this business share can be funded with no difficulty.
Perhaps not.
Perhaps the bank
will be willing to advance the money and increase the indebtedness
of those left. Perhaps not, particularly if the deceased
was essential to the success of the firm. In fact it might
be the very time when the bank might like to start tightening
its credit exposure to that business.
Partnership or
shareholder protection by means of insurance can help in
the above circumstances. It is all about getting the right
money in the right hands at the right time.
The first step
would be to look at what agreements are in place to
deal with these situations. In most instances there needs
to be an additional agreement made to identify how funds
should be used in the event of a claim. These agreements
are invariably effected on an option basis as opposed to
a binding contract for sale. This is to avoid the danger
of losing inheritance tax business property relief.
Double
option agreement
Most Cross Option
Agreements cover claims for both life and critical illness
insurance. The surviving business owners have the option
to buy the share of their ill or dead colleague's business
within six months of the event. The agreement requires the
person insured (or his or her beneficiaries or legal personal
representatives) to sell his or her share of the business
to the other business owners if asked to do so.
Similarly, the
agreement requires the remaining business owners to buy
out the shares of the person insured, if asked to do so
by him or her (or his or her beneficiaries or legal personal
representatives).
The remaining
business owners use the proceeds of the insurance policy
to buy the business share. It is not a binding contract
for sale, so there is no danger of losing inheritance tax
business property
relief. If new
owners join the business and need this protection, they
must complete a new double option agreement.
Single
option agreement
This clause covers
critical illness and total permanent disability claims.
Under this agreement, the critically ill partner or shareholder
can demand that the remaining business owners buy the share
if he or she wishes, but the remaining owners cannot insist
on the sale.
This clause can
be combined with a double option agreement covering the
life insurance on the partner or shareholder. Like the double
option agreement, it is not a binding contract for sale,
so again there is no danger of losing IHT business property
relief.
Automatic
Accrual Agreements
Some partnership
agreements include a clause where each partner's share will
accrue to the remaining partners on death.
To protect the
deceased partner's family, each partner has in place a Life
Assurance policy written in trust for his or her own family
to cover the value of his or her share of the partnership.
If an automatic accrual agreement is in place, the agreement
requires each partner to maintain the insurance to cover
the full value of his or her share of the partnership. If
the partner leaves the partnership, the plan can continue
for his or her family's benefit.
In our next issue
we will consider the different types of products available
to protect the business and family. We will also consider
the use of trusts and equalising of premiums.
This article has
been supplied by Paul Shanahan of Futura Investments, 15
Victoria Street , Aberdeen AB10 1XB Tel: 01224 624113 E-mail:
paul@futurainvestments.co.uk. Futura Investments is an Appointed
Representative of Sesame Ltd., which is authorised and regulated
by the Financial Services Authority.
Futura Investments
cannot accept any responsibility for any loss arising from
actions taken as a result of the information contained in
this article. The article is not intended nor should it
be taken to create any legal relations, contractural or
otherwise.
Return to Top
Ivory
Tower to the Coal Face: A STEP in the Right Direction
Is there a project
which you would like to undertake, but which can't be carried
out because you do not have the time to devote to it. Well
fear not because help is at hand from STEP (Shell Technology
Enterprise Programme) which is an initiative which enjoys
the support of the Department of Trade and Industry. The
initiative is aimed at helping small businesses kick-start
and manage new development projects. STEP enlists undergraduates
who it then seeks to place with small to medium sized enterprises
and community organisations in order to carry out specific
projects. STEP seeks to match the needs of the organisation
with the student possessing the skills most appropriate
for the assignment.
The programme
is proving very successful in highlighting the worth of
the undergraduate within the business community and also
in encouraging undergraduates to seek a career within the
small business sector.
Examples of projects
that may be suitable for STEP may be:
Undergraduates
are paid a weekly training allowance of £175 which
is free of income tax and national insurance contributions.
In addition there may be a small administrative charge levied
on the organisation.
For further information
visit the STEP website at www.step.org.uk
or contact Step Enterprise Limited on telephone number
0870 036 5450.
A
Government Bribe.....and it's Legal!
For a business
which has less than 50 employees and submits their annual
PAYE / NIC return manually there will be an entitlement
of up to £825 tax free over the next five years if
you elect to submit your PAYE / NIC return on-line. From
2009 it will be an Inland Revenue requirement for all end
of year documents to be submitted electronically but for
those who elect to start early there are early incentives
available. These incentives reduce as the compulsory date
gets closer and are as follows:
Tax Year
|
Incentive
|
2004/05
|
£250.00
|
2005/06
|
£250.00
|
2006/07
|
£150.00
|
2007/08
|
£100.00
|
2008/09
|
£50.00
|
Electronic submission
does not come without attendant costs but the Inland Revenue
hope that early adoption will allow you to benefit from
the incentives. It is the intention of the Inland Revenue
that the incentive will be credited to your PAYE / NIC record
or, if you make an appropriate election, for the incentive
to be repaid to you. It is unclear as to when the payment
will be credited or notification made.
Our
Services
As chartered accountants,
registered auditors and business advisers some of the other
services we offer are listed below:
Business
assurance Taxation services
-
Accounts Capital
taxes planning
-
Audit Corporate
tax
-
Corporate finance
Personal tax
-
Business plans
PAYE, NIC and VAT
-
Business valuations
-
Expert witness
-
Due diligence
-
Management
accounts
-
Payroll
Insolvency
services I.T. services
-
Personal insolvency
SAGE authorised reseller and trainer
-
Business rescue
and monitoring Computer consultancy and installation
-
Corporate insolvency
E-business solutions
-
Solvent liquidations
Interested?
Call Us Now
For further information
or to arrange a free consultation contact Bill Griffin on
telephone number 01224 625554.
We can also be contacted by e-mail
at griffinb@mestonreid.com
or by fax on 01224 626089, or visit our website at www.mestonreid.com
and complete our interactive questionnaire.
Return to Top
