Landlords and the Restriction of Mortgage Interest Relief

Posted by Sara Reynolds

Assistant tax and forensic manager at DSG

Thu 26th, Nov

In July 2015 George Osborne announced that the Government will restrict relief on mortgage interest payments and other finance costs to the basic rate of income tax, 20%, for all individual landlords of residential property.

This restriction will be phased in over four years beginning from April 2017.
Currently, landlords can claim relief for all of their mortgage interest payments against their rental profits, and so can obtain relief at 40% or even 45%.

However, it is not only those landlords who currently pay tax at 40% or 45% that will be affected. Those who currently pay tax at the 20% basic rate may be pushed into the 40% higher rate as a result of the changes.

What can be done to lessen the impact?

As the restriction is being phased in from 2017, there is time for landlords to consider their options and to think about ways in which they can lessen the impact.
If you are a residential landlord and you think the restriction may affect you, some straightforward suggestions are:

  • Consider borrowing more against commercial property.
  • If you have a trading company that owes you money, draw down this money and borrow within the company. Another option is to lend monies from new borrowings back to the company as full tax relief may then be available.
  • Consider transferring ownership or part ownership of properties to spouses or family members who pay tax at the basic rate. There may be capital gains tax implications so advice will be needed.
  • Making pension contributions to increase the basic rate tax band available (although there are limits on the amount of pension contributions that can be paid.
  • Consider whether it is worthwhile incurring additional expenditure, for example repairs, to reduce higher rate tax liabilities.
  • Ensure that every possible tax deductible expense is being claimed.
  • Make sure that existing mortgages are at the best possible rate.

What about substantial property portfolios?

For substantial property portfolios more complex strategies are possible, for example:

  • Transferring property into a limited company - the new rules don’t apply to companies so full relief would still be obtained for mortgage interest costs. However without careful planning transferring the property into a company could trigger a capital gains tax charge and stamp duty land tax could be payable. Mortgage lenders would have to be informed of the transfer, and new mortgage terms agreed.
  • In some circumstances a management company could be used to charge a management fee for services provided which would reduce personal rental profits. Care would need to be taken regarding the set up and operation of the company, and there would be company running costs to consider.

 

Our overall advice to landlords is to consider the impact the changes will have on their tax position and to seek our advice if they would like to explore any of the above suggestions in more detail.

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Posted by Jenny Esau

Managing Director of Credit Management Group UK

Wed 25th, Nov

In an ideal world your business would be paid in full before any goods or services exchange hands, however, this is an unrealistic ideal for competitive businesses. Subsequently offering credit to your customers is an ideal to maintain a competitive advantage; there are, however, risks involved in offering credit and therefore we would highly recommend your implement Customer Credit Limits.

Why should you use customer credit limits within your business?

They are necessary for many trade credit insurers

Not so much a reason, but a requirement for many trade credit insurers is to set a credit limit, and often they may take some control over what the credit limit will be dependent on the financial standing of the customer and their ability to pay.

They encourage customers to pay quicker

A credit limit can act as a great form of leverage, for your customer to remain under their credit limit it will be necessary to make more frequent or higher value payments to bring them below their credit limit.

I must add that this only acts as a great form of leverage when you stick to your credit limit; if you highlight to your customers that you will allow them to go over their credit limit, they will not see this as a viable threat to encourage them to make payment.

They limit the amount of potential bad debt you could be exposed to

If you limit the amount of credit your customer can have without payment then you potentially limit the amount of money that can turn into bad debt. If no credit limit is set, then you could potentially find their credit rising and rising, without receiving payment, and subsequently the worst was to happen you are left with a much greater value of bad debt than you would if you had cut the credit off at a lower amount.

They enable you to implement a credit hold function for late payment or reaching credit limit

This must be in your terms and conditions, and you can indeed implement this without having credit limits, but in my opinion it is a much more effective form of leverage when credit limits are applied. Having a credit hold function in your terms allows you to stop any goods or services should there be issues of late payment, or if your customer reaches their credit limit without payment to bring it down.

The costs associated with offering credit

There are substantial costs involved in offering credit to your customers in interest, bank fees, staff costs of chasing outstanding debt, especially when late or non-payment occurs. By having a credit limit you potentially reduce these costs by using your credit limit as leverage and getting paid quicker.

There is a balance between giving a customer too little credit & too much. You don’t want to restrict sales but you should keep your exposure to bad debt to a minimum. Therefore it’s useful to have a documented methodology of setting credit limits that is adhered to. Business is about risk, but we strongly recommend risks should be known and evaluated.

Download our free guide on how much customer credit could be costing your business.

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Heard of ransomware? It’s important that you know about it, so read on…

Posted by Phil Bird

Managing Director - PC Support Group

Tue 24th, Nov

Ransomware is the term given to a type of virus that enters your computer(s) and encrypts all your data in such a way that you can no longer access any of it.  Until you pay a substantial fee (a ransom) to get it back.

There’s a new ransomware virus to be aware of; it’s called Power Worm but unfortunately no amount of ransom can get your data back for you.  Unfortunately, the not-so-clever hackers have made a big coding mistake this time and one variant of their virus destroys keys that could help recover the data it has scrambled – leaving you high and dry even if you are prepared to pay a ransom.

Power Worm infects Microsoft Word and Excel files in the main,  but the latest version goes after many more types of files it finds on your machine.

Malware Researcher Lawrence Abrams makes it clear that anyone hit by Power Worm should not pay the 2 bitcoin (about £500) ransom it asks for because they will not get any data back.  He said “There is unfortunately nothing that can be done for victims of this infection, If you have been affected by this ransomware, your only option is to restore from a back-up.”

The reality is that even when the hackers do have the key they are unlikely to release it even if you pay the ransom so regular reliable backups is the only realistic way to protect your data and your business from these attacks.

Did you know:

  • 34% of companies fail to test their backups, and of those that do, 77% have found back-up failures (Source: Home Office Computing Magazine)
  • 93% of companies that lost their data centre for 10 days or more due to a disaster filed for bankruptcy within one year of the disaster. (Source: National Archives & Records Administration)

It’s worth noting that even if you avoid catching a computer virus, ALL disk drives eventually fail, regardless of brand or type and so backups are arguably the most essential aspect of any IT system.

Backup solutions can vary enormously and it is important to be aware of the consequences of choosing one solution over another. While all of our services provide excellent protection, some cover just data while others cover entire systems. Some enable faster recovery of your systems in the event of a major problem, while others ensure that your systems are safe from physical risks such as fires, floods or theft. We recognise that each business has unique requirements and so we talk to customers to diagnose their potential risks and vulnerabilities, understand what’s important to them and then design a specific BusinessCARE Backup system tailored for their situation.

Call The PC Support Group before it’s too late! You can reach us now on 03300 886116

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What steps can you take to become an anti-bullying organisation?

Posted by Lois Petty

Solicitor in the Employment, Pensions and Immigration Team of Weightmans LLP in Liverpool

Fri 20th, Nov

Today marks the close of Anti-Bullying Week, which has brought this pervasive issue back into focus. Occupational bullying costs UK businesses thousands each year in sickness absenteeism, high staff turnover and reduced productivity. So what steps can you take to become an anti-bullying organisation?

Recognise Bullying Behaviour

We know bullying when we see it, but there is no single legal definition. Intimidating behaviour, inter-personal conflict and misuse of managerial power are often involved. The related concept of harassmentis defined, in part, as ‘unwanted conduct’ which ‘has the purpose or effect of violating an individual’s dignity’ (Equality Act 2010). To be unlawful, harassment must be linked to a ‘protected characteristic’ such as sex, race or sexual orientation. Often ‘bullying’ is used as an umbrella term for both sets of behaviour. New ACAS Guidance sets out some ‘real-life’ examples.

Obviously there is an element of subjectivity involved. One person’s ‘bullying’ may be another’s ‘strong management’. Also, the factual picture is often complex. Allegations of bullying will often crop up in the context of employee ill-health or poor performance.

Is a policy enough?

A robust bullying and harassment policy with clear routes of redress is a great place to start and makes clear that you take the issue seriously. Including some examples of how bullying might look in your business may help set objective standards and encourage employees to understand what behaviour will be considered unacceptable.

Interestingly though, recent ACAS research suggests that placing the onus solely on individual grievance processes is an insufficient framework for the successful prevention of workplace bullying. It’s crucial to back up policy statements with other preventative action.

What else can we do?

Anti-bullying culture starts from the top down. Train your managers and make sure that they role-model positive behaviour.

Be proactive in identifying problems. As well as tackling formal complaints, seek informal feedback about employee experiences. Ask your leavers why they moved on. Was bullying a factor?

Prioritise timely intervention. Could you offer internal or external mediation to resolve conflict at an early stage? Even the small businesses can put in place some employee support structures such as access to confidential counselling.

Don’t be afraid to instigate disciplinary action against offenders for serious incidences of bullying or where behaviour does not improve.

Tackling bullying makes great business sense. Seek expert legal help to bolster your anti-bullying credentials. 

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Warrant Group provides some insight for first time exporters.

Posted by John Burnett

Trade Sales, Business Development Manager at Warrant Group

Fri 13th, Nov

Know your international market

You know what the price of your product is in the UK but what’s it worth overseas? Make sure you thoroughly research your market from its geography to price points. For example, UK food and drink is very marketable at the moment and attracts a high value especially in the Far East and East Asia. 

Also, are you selling into a country where the population is very port centric like Australia or do you have long inward transits to consider?

The  UK Trade & Industry and the International Chamber of Commerce are great sources of data for assessing whether a product is suitable for a specific market.

Costs: understanding incoterms

Incoterms are all about establishing with the buyer who is responsible for the transit costs. Getting your incoterms agreed is very important because these costs need to be covered within your unit cost.

While no one wants to pay the transit costs, everyone wants to be in control of them. If you, as the supplier, is in control of your supply chain and become a savvy exporter, then you can negotiate better prices which increases competitiveness, profits and the prospect of future orders.

Transport

What is the best way of getting the cargo to the customer? There’s a lot to consider here and it’s not just based on cost. Firstly consider your destination, how quickly the customer needs it and cash flow. If paying higher transportation costs means getting paid quicker then that might be important. Alternatively, don’t think that slow transit is negative; it actually offers a period of free storage which could be useful. And of course, think smartly and use a blend of the two.

Getting paid

Clearly establishing how and when you are paid is important – is it 50 per cent up front and 50 per cent on arrival? A Letter of Credit is a safe way of getting paid, enabling payment to be released through a third party once delivery has taken place.

Documentation

Seek professional expertise to ensure all the correct documentation is in place to avoid delays. As a new exporter, the chances of your consignment being checked is high.

Packing

It is the supplier’s responsibility to ensure goods are packed correctly and if not, they are likely to be returned. Many countries have special packing requirements, for example in Australia all pallets have to be heat treated and certified.

Hazardous Cargo

Hazardous goods need to be pre-approved by the carrier so they can be stored safely in transit.

Warrant Group works with a variety of companies demonstrating how dynamic and flexible supply chains can boost business and increase competitiveness. It has pledged its support for Liverpool’s Spark Up business accelerator programme to help create local jobs and investment. UK Trade & Industry International Chamber of Commerce.

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Exporter Clarke Energy discuss the opportunities and challenges for energy security in developing nations

Posted by Alex Marshall

Group Marketing & Compliance Manager at Clarke Energy

Thu 12th, Nov

Many countries in developing nations created power generation networks based upon large centralised power generation stations with significant investment in power transmission and distribution networks. From the African context this has not happened yet there is a huge need to increase power generation capacity. The thought of addressing this through a small number of large gas, hydro, coal or nuclear-fuelled power stations seems attractive at first, however the goals of supplying power for all in Africa, could be better addressed with de-centralised distributed generation, lots of smaller localised power stations, addressing electrification needs quickly.

A challenge with large centralised power stations is how to maximise the energy content of the valuable fuels. Coal power stations may convert energy in the fuel to only 40% electricity. With the most modern efficiency gas-turbine power plants this may be increased to 60%. All of the remaining energy is lost through heat. In addition, further power losses occur through transmission lines, where moving electricity from point of generation to user, can be as much as 2%. The investment in this transmission infrastructure is also significant as well as time consuming and poses its own challenges.

Developing countries are now moving towards more decentralised power systems, producing power close to the site of use, reducing losses and improving energy efficiency. If it incorporates a combined heat and power plant total fuel efficiency may be as high as 90-95% by using both the electricity and waste heat created during the production of power and utilisation of the original fuel. The heat can be used to generate steam, hot water or can be used directly in a drier or industrial facility. It can also be converted to cooling, though an absorption chiller. Industrial plants in Nigeria are moving towards CHP and trigeneration technology. Diageo’s Guinness Ogba brewery was one of the African pioneers.

If there is no opportunity for the deployment of biogas in a given area, an alternative would be to use natural gas or diesel. Both of these are costly fuels and are not renewable sources of energy. Therefore if these are used, then a key requirement for the asset is the maximisation of fuel efficiency. GE’s new ‘616’ diesel generator is a 2.5MW engine, that requires only 184g/kWh of fuel, meaning significant fuel savings and reduced carbon emissions versus established technology. This is currently being deployed for the first time globally at a major flour mill in Nigeria.

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Posted by Camille Flores-Kilfoyle

Business Development Manager at PSL

Tue 10th, Nov

Powder Systems Limited (PSL) has been exporting internationally for 26 years. The secret of PSL’s success is a strong commitment to be a true international SME. The vision of the company has always been to treat every overseas markets like its home one. Understanding local markets and cultures is what has brought PSL to its leading position today.

Established in 1989 in Speke Liverpool, PSL’s first contract outside the UK was in Ireland in 1990, but true international trade started in 1992 with first contracts coming from Singapore. For 4 years, PSL mainly worked with UK, USA and sporadically other European countries, pushed by the demand in pharmaceutical process equipment.

PSL opened its first overseas office in 1997 in Boise Idaho (USA) followed by 4 more offices and more than 15 partners around the world, PSL live and breathe its international relationships. PSL’s team of multi-national professionals sustains a culture that values engineering innovation and excellence. With staff coming from different countries, PSL understand every market needs and is able to provide suitable solutions to its worldwide customer base.

With a record turnover this year, PSL accounted more than 95% of their orders coming from outside the UK and sold in 30 countries. These past three years, PSL accelerated its international expansion with the launch of innovative technologies and penetrated new markets such as South Korea or Brazil.

PSL has been honoured to be nominated to several awards for its export success in 2015 and the company is looking forward to the coming year with exciting new projects such as the establishment of a new office in Singapore and the launch of the C.O.P.E (Center Of Process Excellence) in the USA, to support its customers with process development consultancy and feasibility trials.

PSL is an international manufacturer of filtration, drying and complete containment solutions. We have been supporting pharmaceutical, biopharmaceutical, chemical, speciality chemical and laboratory industries since 1989. Our worldwide customer base contains industry leaders including Pfizer, GSK, BMS and Sanofi-Aventis.

PSL’s solutions enable clients to bring new generation drugs into the market place faster, using the latest technology in containment and production equipment.

Please click here for more information.

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Posted by Claire Delahunty

Superport Manager - Liverpool City Region LEP

Wed 28th, Oct

The Northern Powerhouse aims to decentralise and stimulate the Northern UK economy. The Northern Powerhouse report by Transport for the North outlined a transport strategy through which investment will drive growth. Improving East-West links shall enhance connectivity and business growth by linking City Region economies.

Global connectivity

This chimes with the aspirations of Superport Liverpool, an integrated cluster of logistics assets and expertise that will deliver faster, greener global access for business to and from northern UK and Ireland via an enlarged deep water container terminal, Liverpool2, at the Port of Liverpool (doubling container capacity to 1.5m TEUs pa). It will be followed next Spring by the new wider Panama Canal, further opening up global trade.

Already 45% of North American container traffic enters the UK through Liverpool and this is set to increase as global supply chains adapt to market opportunity. With the growth of online retail, transporting goods to the right place quickly will be crucial. The forecast is for e-commerce to increase by double digits year on year in the UK for the foreseeable future with Amazon seeing 39% growth recently.

Market proximity

Liverpool is a gateway providing cargo owners with easy access to market. The port is within 150 miles of 35 million people and by transporting goods directly into the heart of the UK the potential for same-day delivery and late cut-off is greatly increased.

We can compete with the rest of the world by offering an alternative route for cargo owners to bring in goods to the north of England, Scotland and Ireland while cutting cost, time and carbon from supply chains. There is recognition that the UK transport network is over centralised on the North-South axis and over concentrated which supports the expansion of a Northern East-West multimodal transport corridor.

Liverpool City Region benefits from excellent motorway connectivity with direct motorway access as well as two rail mainlines; both supported by a multimodal freight facilities such as 3MG (Mersey Multimodal Gateway) utilised by Tesco.

The £600m Mersey Gateway Bridge is currently under construction and will create a 6 lane crossing opening in 2017. It will contribute to relieving congestion and boosting the local economy.

The 36 mile Manchester Ship Canal linking Liverpool with Manchester has seen container volumes increase from 3,000 in 2009 to 30,000 in 2013 as cargo owners, primarily retailers like Regatta, Kellogg and Princes, recognise the benefits of removing road miles entirely from their supply chain.

An unbalanced economy

We already know that the UK economy is imbalanced. This is put into stark clarity when despite 60% of demand being closer to northern England and Ireland, currently 91% of deep sea containers enter via southern ports.

This adds to congestion and unnecessary environmental impacts from containers being transferred via road. This is unproductive for the UK economy. Liverpool2 will simultaneously handle two 13,500 TEU ships offering a viable alternative and boosting productivity through more efficient supply chains as goods get to market more quickly.

A balanced economy

Liverpool City Region has the highest density of large warehousing (over 9,000sqm) in proximity to a port, at 28%, that’s more than the Golden Triangle (20%). Demand remains high as research by Colliers International highlighted that between June 2014-2015, rental values for sheds over 100,000sqft in Liverpool jumped by 17%, against a North West increase of 15%.

So not only does Liverpool offer global connectivity and market proximity we have the infrastructure and assets to service the anticipated increase in containers.

Next March the Northern Freight and Logistics Strategy will identify the wider infrastructure requirements to raise efficiency by reducing freight transport costs, linked to major ports. This strategy will ensure end to end connectivity as it is being led by freight operators who currently experience the frustrations of the network on a daily basis.

Liverpool is part of the solution to rebalancing the UK

Liverpool is on the cusp of real change and Superport Liverpool presents a unique opportunity to further develop the freight and logistics hub for the north of the UK. By working collaboratively with public and private sector the benefits include:

  • Significantly enhancing competitiveness and rebalancing of the UK economy
  • Integrating our plans with national infrastructure
  • Helping businesses grow by offering faster access to market
  • Further investment in infrastructure to recognise and support growth
  • Helping to reduce congestion in overheated areas
  • Realising economic potential
  • Contributing to the Northern Powerhouse
  • Positioning Liverpool as the gateway to North America and beyond

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Posted by Sarah Woolley

Export Documentation Manager - Liverpool & Sefton Chambers of Commerce

Wed 21st, Oct

If you have seen any news about the government’s plans to grow the British economy, you will be well versed in the Chancellor’s ambitious export target of £1tn by the end of the decade.

Last week, ministers met with Chinese representatives for a four-day visit to discuss trade and investment deals worth more than £40bn, which also included talks between Mr Xi and Prime Minister David Cameron.

But what does this mean for business owners on the ground? And how does this translate to companies which are struggling to find the support to develop their presence overseas?

In June this year, a survey of more than 4,500 businesses released by the British Chambers of Commerce shows that the share of Chamber members which export continues to increase. However, the findings also suggest that gaps surrounding the general know-how of how to take a product or service overseas are holding back firms from taking the initial step towards exporting.

But exporting doesn’t have to be difficult.

At the Chamber of Commerce, we know that the intricacies of taking a product to market can play a big part in preventing a company from capitalising on global opportunities.  

For example, buzzwords like ATAs, EUR1s and certificates of origin can be viewed as complex barriers to trading overseas.

That’s why we provide a tailored certification service to help businesses overcome the logistic complexities of getting a product into the hands of a customer.

Last year, we issued over 20,000 export docs, approximately 15,000 of which were European Certificates of Origin alone. Similarly, completed certificates to Egypt and Turkey have increased by 25% in just a year.

This has helped hundreds of local firms to minimise risk, avoid delays and prevent extra costs when exporting their goods overseas.

Having a certificate will also enable a business to trace and secure the goods entering a country, making the process as straightforward and stress-free as possible.

Businesses, not David Cameron, are in the driving seat for global prosperity. The question is will you take the wheel?

Does your product need certification? Contact Sarah Woolley for further information on 0151 227 1234.

For a full list of our International Trade Services

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Posted by Geoff Shalders

Managing Director - Brodex Ltd

Tue 20th, Oct

There is much confusion surrounding the need for Legionella Risk Assessments in the housing sector, especially when it comes to testing for landlords of private residential properties. This is despite the fact that it is crucial landlords are aware of their legal responsibilities and lettings and property management agencies give correct advice.

Domestic hot and cold water systems provide favourable conditions for the growth of the group of bacteria known as Legionella, which is responsible for causing Legionnaires’ disease.Legionella is most likely to grow where temperature is between 20-45°C, water is stored for a period of timeand there are deposits such as rust and scale. These deposits provide nutrients that speed up the growth of Legionella. Legionnaires' disease is then contracted through the inhalation of small droplets of water from water outlets containing the bacteria, for example shower heads or taps.

What the law says
Contrary to recent reports, there has been no change to UK legislation with regard to the requirements for Legionella risk assessments. However, Section 3(2) of the Health and Safety at Work Act 1974 (HSWA)requires landlords to ensure that their tenants are not exposed to health and safety risks. The Control of Substances Hazardous to Health Regulations 2002 (COSHH) provides a framework of actions to control the risk from a range of hazardous substances, including biological agents. This includes a requirement for landlords of both domestic and business premises to assess the risks of exposure to Legionella. While it is not a legal requirement to produce a Legionella water sample test certificate, a landlord may be liable to prosecution under HSWA if a tenant were tocontract Legionnaires’ disease from the water system in their home. The landlord would then have to provide evidence to a court that they had fulfilled their legal responsibility.

The Legionella risks facing landlords
With this in mind,landlords would be wise to consider levels of risk within their properties and take appropriate action. Since thethreat of the water system becoming contaminated with Legionella is higher when water is allowed to stagnate, high risk properties include those that have stood empty for any length oftime such as student accommodation. To help control the risk of exposure to Legionella the HSE advises flushing out the system, avoiding debris getting into it, setting temperature control parameters and removing redundant pipework.

About the author: “Geoff Shalders is the MD of Brodex Ltd, an independent and experienced water treatment and hygiene company based in Merseyside. The company, which specialises in Legionella risk assessments and water management schemes, also has offices serving customers in the Midlands, the South-East and South-West.”

For more information on Brodex Ltd and water treatment

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