22 August 2014

We are proud to support the Invictus Games

We are backing the Invictus Games, the international sports event for ‘wounded warriors’ from theInvictus Games armed services.

The Invictus Games take place from 10-14 September with more than 400 wounded, injured and sick Service personnel and veterans from 14 countries competing in nine adaptive sports at world-class venues such as The Queen Elizabeth Olympic Park in London.

As part of this support we will be providing expertise to help deliver the event as well as volunteers at the Games itself.

Invictus Games2We have also launched a ‘crowdsourcing’ initiative across  our 17,000 strong UK workforce called 'the One Campaign', inviting employees to submit their ideas on how we can further help provide a legacy for wounded, injured and sick (WIS) personnel.

The top suggestions will be implemented across the firm for the benefit of current and future WIS ex-service personnel. 

Tickets for the Invictus Games, which is championed by Prince Harry, can be bought at www.invictusgames.org

Ian Powell, chairman and senior partner, said:

“We are immensely proud to be lending our support to the Invictus Games. Our firm is committed to doing the right thing for the communities we work in, and so we are not just a sponsor, but will be helping by donating our in-house expertise to the delivery of the Games.

“We are all looking forward to helping make the Games a great success. The clock is counting down to the competitors demonstrating their bravery, ambition, teamwork and a determination to succeed - attributes that we greatly admire.  We have a long-standing commitment to employing ex-service people at all levels of our firm and I am hugely impressed by the vision behind the Games.

“By the nature of their experience, many of these ex-servicemen and women have a blended set of skills and experiences that businesses could benefit from – leadership, focus, and working under pressure - to name just a few. How we support our wounded, injured and sick service personnel and veterans and work with them to harness their skills and experiences is important not only to them individually but also to wider society.”

Invictus Games3

Working 9-5? That's no way to make a living

By Lee Stamp, PwC's North East private client leader

PwC recently launched its latest Future of Work report, A journey to 2022. The research reveals that only 14% of UK workers want to work in a traditional office environment in the future. Whereas one in five people say they want to work in a ‘virtual’ place where they can log on from any location or use collaborative work spaces.

People’s desire to break free from the traditional office environment suggests that the way we work in the future could change dramatically and organisations need to prepare themselves for this shift. The research found that a quarter of UK workers believe that traditional employment won’t be around in the future.

Instead, people believe that they will have their own brands and sell their skills to those who need them. They will be working for themselves, where they choose.

In my role as head of private client in the North East, it made me wonder whether the traditional nine to five office environment could soon become a thing of the past and if this could create an increase in entrepreneurs and private business owners.

People’s lack of interest in working in an office reflects the growing desire among many workers to have more flexibility and varied challenges by working freelance or as a contractor for a number of organisations.

We could easily see the rise of organisations that have a core team that embodies the philosophy and values of the company, but the rest of the workforce is not fixed and come in and out on a project-by-project basis. These companies will make extensive use of technology to run their businesses, coordinate a largely external workforce and support their relationships with third parties.

The growth of this vibrant, innovative and entrepreneurial middle market could soon start to challenge big businesses as they can compete on specialism and price due to their slimmed down business model. It’s definitely an interesting trend to watch out for.

PwC’s report ‘The future of work: A journey to 2022’ is based on a survey of 10,000 people in China, India, Germany, the UK and the US who told us how they think the workplace will evolve and how this will affect their employment practices and future working lives. Further input comes from 500 HR professionals across the world.

For more information please contact Lee Stamp, email: lee.j.stamp@uk.pwc.com tel: : 0191 269 4160 or a copy of the report is available at www.pwc.com/futureofwork

15 August 2014

The importance of diversification in wealth management

By Clare Stirzaker, director in PwC's private client team

‘Don’t put all your eggs in one basket’ – this may seem like a very English phrase, but it is one I hear uttered in many countries, even as far afield as Saudi Arabia.

In the context of wealth management, it’s a great saying to highlight the importance of diversification. However, diversification is not only relevant for financial investments in your portfolio. How you own and manage, and where you keep, your assets are just as important.

International diversification

Economic uncertainty and geopolitical tensions are two key factors that are causing our international clients to consider how best they manage their diversification strategy, both to maintain their level of wealth and protect themselves from external risk.

The Middle East countries, for example, rich in hydrocarbons, with economies which are heavily invested in oil and gas, have widely recognised the importance of diversifying to build a sustainable economy.

Families in the region, who have greatly benefitted from such economies, are equally aware of the need to diversify their personal wealth and so are active investors in a wide range of businesses and real estate in Europe, and particularly the UK. Their primary aim is often to broaden their exposure to other geographies and asset classes, to provide them with the best chance of preserving and growing their wealth.

However, entering new territories poses a number of diversification challenges, which we encourage our clients to consider. Typical questions we help clients to address include:

  • What is their investment strategy in new markets? Do they have a clear investment plan in place, which is constantly reviewed and developed?
  • Have they considered the tax and legal implications of investing in new markets?
  • What legal structure could and should be used for the purpose of holding investments?
  • Are they co-investing with family members and have they considered how best to govern the management of investments shared within the family?
  • How will the liquidity generated from such diversification programs be shared between the family?
  • Where trusts are being used, where are they located and which third parties are involved in managing the structures?
  • Could their move into new markets trigger tax issues for them personally? For example, if they invest heavily in the UK will they be spending more time in the UK and could this cause them to become UK tax resident? If they do not fully understand the tax residence rules do they know they may expose themselves to UK taxes on a worldwide basis?

With these questions and many more to think about when diversifying internationally, it may seem much simpler to put ‘all your eggs in one basket’, but not diversifying will give rise to risk.

To find out more about how to plan a sensible diversification strategy, contact Clare Stirzaker, director in PwC's private client team, on clare.r.stirzaker@uk.pwc.com or 020 7804 2504

08 August 2014

Cyber threats: they are real, rising and affecting you

By Chris Willoughby, risk assurance, PwC

Recent cyber breaches have added to the seemingly endless list of victims of cyber crime that seems to be a constant feature of the news. This got me thinking; is anyone truly resilient to cyber attack?

The trick with this is in the wording. Like it or not, there are very few, if any, individuals or businesses that can say they are resistant to cyber attack. Resilience is another matter though. Being resilient is almost an acceptance that you can’t be fully resistant and is therefore more concerned with the ability to deal with the consequences well, and quickly.

It may be inevitable that a determined attacker can breach your defences but if your defences are well configured and you follow good security behaviours, then you are reducing the risk of attack and you may just be a less attractive target than your neighbour or competitor. However, this will be dependent on who the attacker is and their motivation. In any case good security practice will help you manage a crisis if you can say you’ve considered the risks and taken every possible step to mitigate them.

A good starting point is to assess the information you hold and to ensure that is appropriately protected. So what is ‘appropriate’? Well ultimately it’s your call but I would suggest the encryption and secure transmission of any data that is not already public. This is a huge task as it will involve any device or media that stores or transmits data being encrypted, but ultimately this is worthwhile and it pays not to cut corners.

You also need to ensure that your identity and access management controls are strong. Attackers tend to target the easiest way in and that is often your people. Be careful how privileged access is assigned and who to and ensure that your password controls are strong across all applications, databases, networks and infrastructure. You may want to consider multi-factor authentication which could range from a device similar to what you would use for your internet banking to a biometric such as fingerprint authentication.

An important part of being resilient to cyber attack is your ability to detect that you’ve been attacked in the first place. It’s all too common that the victims of the attacks don’t even realise until weeks and months after the event.

Those that are truly resilient can turn a potential disaster into a competitive advantage. You need to be able to demonstrate that you have taken every reasonable precaution to secure your information and resist an attack.

Our security practice has more than 30 years’ experience with over 200 cyber security professionals in the UK and 3,500 globally. Our specialists understand the dynamic cyber-challenges and threats in the UK and globally, to provide our clients the confidence and trusted advice they seek.

If you would like more information about cyber security please contact Chris Willoughby, senior manager in our risk assurance practice on 0191 269 4448 or chris.p.willoughby@uk.pwc.com

01 August 2014

Can guidance really address the big retirement question?

By Saq Hussain, pensions director, PwC

The Chancellor's budget reforms back in March, ushered in a new era for defined contribution (DC) pension savers.

Suddenly, pensions have become attractive and flexible tax efficient savings vehicles freed from their previous shackles. We are finally to be trusted with managing our own savings – with a little guidance from the government along the way. The reforms are certainly popular. Our research shows that given the choice, over three quarters of people retiring with a DC pension will not buy an annuity, preferring to manage their own money.

But I can’t help thinking that engaging people to really understand the risks they face in retirement will be an uphill task. Will we still be as enthusiastic in 20 years’ time about these changes, or will we be repenting at leisure?

The Australian experience suggests that we may be repenting. In Australia, half of all retirees take their pension as a lump sum and a quarter deplete their pension savings by age 70. The tax and pension environment is very different from our own, but an Australian Government inquiry has become concerned enough to consider some form of compulsory annuitisation. The recent Murray review concluded that the retirement phase of Australia’s superannuation market is ‘underdeveloped' and ‘does not meet the risk management needs of many retirees'. It also noted that the availability of a lump sum at retirement can encourage greater pre-retirement consumption and potentially debt.

Australia has a well-developed DC pension funds system, but OECD figures show that the Australian annuity market is one of the least developed in the world. Yet the same organisation lists two of the key characteristics for ensuring good DC outcomes as encouraging annuitisation as a protection against longevity risk and promoting the supply of annuities and cost-efficient competition in the annuity market.

Trusting people not to be feckless spendthrifts with their retirement savings is probably correct, but it still leaves individuals with the challenge of how quickly or slowly they should spend the money given that they will not know when they will die. An annuity remains the simplest way for an individual to hedge against outliving his or her retirement pot.

Most people know, and dislike, that with an annuity your capital is lost when you die. What is often less well understood is that the “lost” capital of those dying young is actually spread across the annuity pots of those annuitants who are still alive. As everybody gets older, the additional capital received every year by the pots of the still-living annuitants from the pots of fellow annuitants who die allows the annuity to continue to be paid to the ever dwindling band of survivors, even if the long-lived ones live to be over 100.

The amount of capital automatically redistributed in this way from those who die young to those living longer increases with age as the probability of dying increases. A person in income drawdown will not get this benefit and would need to earn extra investment returns to keep up. (On the other hand, in income drawdown the person still has their own retirement fund on death). The redistribution effect is relatively low at younger ages but soon climbs to become powerful in the 70s and above. It is this that makes drawdown a less efficient option for providing retirement income, but an efficient way to leave funds to your heirs if you intend to die young.

The aims of the new guidance regime are laudable, but there is no certainty people will engage. If they do, it is crucial that guidance helps people understand the risks of a long retirement and running out of money. The big question facing anyone retiring is ‘how long am I going to live?’ Helping people understand that the answer is both “unknown because it varies” and equally importantly that “it could be a very long time” will be key to ensuring retirement security for millions of people.

For more information please contact Saqib Hussain, email: saqib.x.hussain@uk.pwc.com tel: 0161 245 2554

18 July 2014

The early bird catches the worm when it comes to filing tax returns

By Penny Lupton

By now, all UK employees should have received their 2013/14 P60s and P11Ds. Banks are also in the process of sending out interest certificate for the year and for many UK taxpayers these forms cover the bulk of their income and the process of completing the tax return can begin in earnest.
While the deadline for filing returns for the 2013/2014 year is still some way off - the deadline for paper returns is 31 October 2014 and for electronic returns it is 31 January 2015 - there are a number of advantages to getting it in early.

Completing your tax return will highlight any additional tax you have to pay. And even if you submit your return early you don’t have to pay any extra tax until the 31 January deadline.
Getting your affairs in order now will provide extra certainty of the amount due, and provide time to arrange payment, especially if an additional payment on account is needed.

Equally, if you are due a repayment, HMRC will repay this to you once they have processed your return. And with the bulk of returns being submitted later in the year or near to the deadline date, getting it in early can help your repayment jump the queue, and you therefore get your money back to you sooner.

HMRC has powers to enquire into your return. However, these are limited to the twelve months after your return was submitted. Getting your return in sooner rather than later, means that the enquiry window will close earlier and provide you with increased certainty that you have no further tax to pay.

Completing your return earlier will also give you more time if your affairs are unexpectedly complex. Capital gains transactions, share schemes, property income and large pension contributions are just some of the entries that may require extra consideration.

Getting started now will give you the time you need to get your tax return correct, or leave plenty of time if you want professional help with your return.

For more information please contact Penelope Lupton in our private client team, Email: penelope.j.lupton@uk.pwc.com Tel: 0191 269 4098

09 July 2014

VIDEO: PwC calls for entrepreneurs to enter the Yorkshire Post Awards 2014

The search is on for the brightest and the best companies in Yorkshire for the Yorkshire Post's annual Excellence in Business Awards.

Gemma Clark, PwC's private client and private business leader in Yorkshire is encouraging the region's entrepreneurs, family businesses and private business owners, to enter so we can recognise and celebrate individuals and companies who are leading the way in helping to rebuild our region’s economic health.

You can watch Gemma here, talking about the importance of private businesses and why they should enter the awards.

There are eleven categories in total:

  • Companies with a turnover up to £10m
  • Companies with a turnover between £10m and £50m
  • Companies with a turnover above £50m
  • Young business, for companies up to three years old
  • Outstanding employer, for excellent employment practices
  • Innovation of the Year, for companies that can demonstrate innovation in their approach to growth and development
  • Community, for businesses actively working in the community to enhance education and skills development
  • SME Manufacturer, for companies with a turnover up to £10m
  • Young Entrepreneur of the Year, for owner managers and directors aged 35 and under
  • Exporter of the Year, for companies that have made progress in overseas markets
  • Individual award

You can enter the awards here www.yorkshirepost.co.uk/business/awards or for more information contact Andrew Devonald Email: andrew.p.devonald@uk.pwc.com Tel: 0113 2894894

18 June 2014

Statutory residence test

By Penny Lupton

On 6 April 2013 the statutory residency test (SRT) was introduced. This significantly changed the rules surrounding who would be considered resident in the UK for tax purposes.  Those about to complete their 2013/14 returns will face a number of different questions to determine their residency position.

Residency has a major impact on a person’s liability to UK tax.  A UK resident pays UK tax on their worldwide income and capital gains.  A non-resident is only liable to UK tax on their UK income– their foreign income will not be taxed in the UK and they do not pay capital gains tax.

The SRT introduced a series of tests to determine whether a taxpayer is automatically resident or automatically non-resident.  These tests are based on the number of days the individual is present in the UK, or working in the UK or abroad.

If these ‘automatic’ tests are not conclusive then the individuals residency status will be determined by looking at the number of ‘ties’ they have to the UK.  These ties involve:

  • Having a UK resident partner or visiting children in the UK
  • Having accommodation available in the UK
  • Having been present in the UK for more than 90 days in either of the last two tax years
  • Spending more than 40 days working in the UK
  • Spending more days in the UK than any other country

The number of ties an individual has will determine how many days they may spend in the UK before they are resident.  The rules for leavers and arrivers are slightly different, with it being harder to lose UK residency than to gain it.  As few as 16 days in the UK may be sufficient to keep residency.

A ‘UK day’ is one in which the individual is present in the UK at midnight.  A UK workday is one in which more than three hours of work is carried out.  HMRC will take a very broad definition of work, including business travel as work time. 

It is vital that individuals affected by these changes keep sufficient records of their movements and additional evidence of their ties to the UK.  Those who lose track of their number of UK days or work days may have an unpleasant surprise when they complete their tax return if they have unexpectedly become UK resident.

For more information please contact Penny Lupton, Email: penny.j.lupton@uk.pwc.com Tel: 0191 269 4098

16 June 2014

Inheritance tax update: Single nil-rate band proposal for relevant property trusts

HMRC has proposed a single "settlement" nil rate band as part of their latest consultation on simplifying relevant property inheritance tax (IHT) charges.

The broad aim of the relevant property trust regime is to ensure the equivalent of a full IHT charge is paid on trust property once in every generation (30 years).

This new proposal forms part of a series of measures targeted at reducing the administrative burden, cost and complexity of assessing IHT charges for trustees. In particular, HMRC is looking to manage the risk that settlors might seek to reduce their IHT liabilities by fragmenting ownership of property across a number of trusts in order to maximise the availability of the nil rate band exemption (currently £325,000).

The new rules would mean that for the purposes of the ten yearly anniversary and exit charges each settlor would become entitled to a single "settlement" nil-rate band (SNRB) which is separate from and unconnected with their own personal nil-rate band. They will decide how their SNRB is to be allocated between the settlements they create and will be responsible for providing that information to trustees.

It is proposed that the SNRB will be the same as and will change in line with the IHT nil-rate band.
HMRC has further proposed a standard  6% tax rate to be used in the calculation of periodic (ten-year) and exit charges.

The new measures would take effect from 6 April 2015 but would apply to any settlement established after 6 June 2014 and to any property added to trusts after the same date.

This is one to watch, with the consultation period coming to a close on 29 August 2014.

If you have any questions on this issue or for more information, please contact Katherine Gunn Email: katherine.e.gunn@uk.pwc.com Tel: 0207 804 8765

15 May 2014

Update on renewals basis for landlords

By Penny Lupton

Landlords are facing increased complexity and potentially higher tax bills this year after HMRC withdrew a concession which allowed the cost of replacement white goods and furnishings to be deducted from rents.

Relief for spending on replacement goods, such as fridges, washing machines, curtains and carpets, used to be obtainable in two ways. 

Property that was let fully furnished could benefit from a fixed deduction of 10% of the rent received to cover the cost of replacing the furniture provided. This hasn’t changed.

Or landlords of fully furnished properties could elect to use the ‘renewals basis’ instead.  This allowed a deduction to be claimed every time an item was replaced.  For landlords of properties that were not fully furnished this was the only way to obtain relief for their purchases.

From 6 April 2013 landlords have not been able to use the renewals basis.  This change therefore needs to be considered when calculating tax liability for 2013/14, which is due for submission to HMRC by 31 October 2014 (paper returns) or 31 January 2015 (electronic returns). 

But it can get confusing as integrated appliances may still attract relief. This is because they are considered to be part of a larger asset, such as a fitted kitchen, and so are considered to be repairing part of that larger asset.  Repairs in general, such as a new pump for the washing machine, will remain allowable in full. 

Certain small items, such as crockery, will also be an allowable deduction under a separate set of rules aimed at ‘utensils and trade tools’. But HMRC has confirmed that this relief will not apply to larger goods.

So potentially landlords who supply items such as carpets, curtains and white goods, will receive no relief on the expenditure incurred on replacing them. Landlords could therefore start to consider converting their properties to fully furnished lets to gain the advantage of the 10% allowance.

Updated guidance will be available soon to allow landlords to make their own judgment, but if you are a landlord and would like advice on this or any other matter please let us know.

For more information please contact Penelope Lupton Email: penelope.j.lupton@uk.pwc.com Tel: 0191 269 4098