New rules on overtime and holiday pay Em

New rules on overtime and holiday pay

Employers are being advised to review their employee holiday pay arrangements, following a recent landmark Employment Appeal Tribunal ruling that overtime should be taken into account when calculating holiday pay.

The ruling

Until recently, it was generally considered that only basic pay and overtime that was guaranteed to be paid counted for the purposes of calculating holiday pay. However, the Tribunal found that under the UK Working Time Regulations (WTR) holiday pay must also include pay for non-guaranteed overtime.

The ruling applies only to non-guaranteed, compulsory overtime – ie, overtime which an employee is contractually required to work but which the employer does not promise to offer, as opposed to overtime that is undertaken voluntarily.

The ruling applies to the first four weeks of holiday in a given holiday year, as provided under the EU Working Time Directive, and does not take into account any additional holiday provided under the WTR or an employee’s contract of employment.

The likely impact

Up to five million people currently work overtime in the UK and the ruling could potentially impact on many businesses. While it may yet be referred to the Court of Appeal, experts believe that the underlying principle is unlikely to change.

Furthermore, following the ruling businesses could also be vulnerable to claims for additional holiday pay to cover previous periods of compulsory overtime, although the Government has since announced new rules meaning that from 1 July, holiday pay claims can only be backdated for a period of two years. Until that date, workers will be able to make claims under the existing arrangements.

This is not the only case on holiday pay that has found its way to the courts. A recent European Court decision held that commission payments constituted an intrinsic link to an employee’s tasks he was required to perform. The payments therefore should also be included when calculating holiday pay.

Protecting your business

In the light of these recent rulings, business owners are advised to review their holiday pay arrangements with a view to minimising the potential financial impact of the changes. Some of the steps you may wish to consider taking could include:
making appropriate adjustments to ensure that compulsory overtime is included in calculations for holiday pay
considering the potential impact of any potential claims for past unpaid holiday
reviewing employment contracts to allow for voluntary overtime, as opposed to non-guaranteed overtime employing alternative staff resources, such as agency staff, to cover overtime needs.

This article is for general information only and you are advised to seek professional guidance before taking any action.

Social investment tax relief The social

Social investment tax relief

The social investment tax relief (SITR) offers investors upfront tax breaks and capital gains tax exemptions, similar to those given for buying shares in Enterprise Investment Schemes (EIS). Potentially you could reclaim one or more of the following, subject to various conditions:
Income tax relief: This is available at 30% of the amount you invest. There is no minimum investment limit but the maximum annual limit is £1 million.
Capital gains hold-over relief: You can defer payment of tax on a capital gain if the gain is reinvested in shares or debt investments that would also qualify for SITR income tax relief.
Capital gains disposal relief: If you’ve had income tax relief on the cost of your investment, and you dispose of your investment after you’ve held it for at least three years, any gain you make on your investment is free from capital gains tax.

SITR will be in place for investments made, or capital gains arising, in the period from 6 April 2014 to 5 April 2019.

It is available for investments by individuals (but not companies or partnerships) in ‘Social Enterprises’. In essence, the company or organisation in which the investment is made must provide services for the ‘benefit of society’, such as housing, community transport, youth organisations, sporting facilities or healthcare, so typically they will be charities or community benefit companies.

The Social Enterprise need not necessarily be in the UK, and there is no defined list of what qualifies, however there is a list of activities that do not qualify. The good news is that if you are an investor you will not need to worry about judging whether the recipient of your investment meets the conditions, because any organisation offering SITR qualifying investments to the public should have already gone through an HMRC clearance process in order to be able to do so.

This process has only been available to social investment organisations since July 2014, so the options for investment are currently limited, but the numbers are expected to grow.

When you make an investment, the Social Enterprise will give you a Compliance Certificate in respect of your investment in it, confirming they have met the conditions. You won’t be able to claim for any of the tax reliefs without such a certificate.

None of the reliefs is available if you have had relief for the investment under the EIS, the Seed Enterprise Investment Scheme or Community Investment Tax Relief.

There are numerous qualifying conditions and complications, so professional advice is essential. If you would like to discuss with us your eligibility to claim SITR please contact us on 020 7330 0000.

Setting up a property syndicate Although

Setting up a property syndicate

Although the property market in the UK has seen a downturn in recent years, putting money into property can still be a good choice for those wanting to invest or generate an income.

Property syndicates involve a group of investors combining their funds to make a joint investment in commercial or residential property. Here, we outline 5 legal and practical considerations to take into account when buying property with others.

Be clear about the aim

First, the aim of the syndicate will need to be clarified. Is the plan to retain property in order to generate rental income over a longer period (this would be treated as an investment for tax purposes)? Or perhaps to develop property in order to sell it on at a profit in a shorter time frame (where the company will be treated as trading)

Getting the business structure right

The business structure will depend on which approach is taken. A limited company, limited liability partnership or trust can all be used to formalise the investment. Anyone intending to set up a syndicate should take detailed advice on the best structure to use. Some investments could fall into the category of a collective investment scheme or alternative investment fund, which are formally regulated and require a qualified manager who is authorised by the Financial Conduct Authority.

Define roles of members

The role of individual syndicate members also needs to be defined. By ensuring that all syndicate members have a say in how the syndicate is run, you should avoid disagreements later down the line. You will still need to appoint others to handle other responsibilities, such as legal, accounting and letting services. A managing agent will deal with day-to-day issues regarding tenants, keep suitable records and if appropriate, distribute funds to members.

Legal documents

A number of additional key elements will need to be set out in a legal document.

This includes:
defining the type of property to be invested in
the length of investment
how much each member will be required to invest
whether additional lending will be sought.

Draw up clear rules

There will need to be rules that govern how the syndicate is run. The rules should cover:
how many of the syndicate will be required to agree to make decision
how profit and interest payments will be allocated (note that tax will be payable on net rental income)
a process for exiting the syndicate before the time agreed
how new investors will be chosen and admitted.
a procedure if any of the investors in the syndicate defaults on a payment – for example, do the others have the option to buy out the investor?
a statement to outline how or when the property will be sold.

Get help

At ABG we offer services to a wide range of property investors and syndicates, from large portfolios to single properties. Contact us to find out how we can help with an existing or planned property investment. Call or 020 7330 0000 email

Creative Sector Tax Creative Industry Ta

Creative Sector Tax

Creative Industry Tax Reliefs are a group of tax reliefs specifically targeted at Companies undertaking certain activities in the entertainment industries. There are 4 different groups of reliefs targeting specific industries and these are:-

• Film production (Film Tax Relief)

• Television production (Television Tax Relief)

• Video games development (Video Games Development Tax Relief)

• Theatrical production (Theatre Tax Relief)

The effect of the reliefs is to provide either an enhanced tax deduction for relevant qualifying expenditure or to give a repayable tax credit whereby the company can surrender a relevant trading loss to obtain a repayment directly from HMRC.

As with all tax reliefs there are detailed rules and conditions which must be met. There are restrictions for instance where a Company has made a claim to enhanced tax relief under the Research and Development legislation, but with up to a 100% additional tax deduction available the reliefs can be very valuable and the tax savings substantial.

If you wish to read more about Creative Sector Tax Relief you might like to read our full publication which is available on our website

If you would like to discuss your eligibility to claim Creative Sector Tax Relief please contact our specialist team on 020 7330 0000.

FRS102 – How will this impact on your bu

FRS102 – How will this impact on your business?

The Financial Reporting Council (FRC) has replaced current UK GAAP with FRS 102 : The Financial Reporting Standard applicable in the UK and Republic of Ireland with effect from periods beginning on or after 1 January 2015, with earlier adoption permitted.

FRS 102 is based on the International Financial Reporting Standard for Small and Medium sized Entities (IFRS for SMEs), amended for use in the UK.

FRS 102 will apply to the majority of UK entities other than those applying IFRS (International Financial Reporting Standards) or the FRSSE (Financial Reporting Standard for Smaller Entities). The FRSSE will be amended before 2015 to make it more consistent with FRS 102.

FRS 102 doesn’t just apply to companies, it will also be applicable for financial institutions (including charities) and Limited Liability Partnerships. For the first time ever special considerations for public benefit entities have been included within the accounting standards and these will be supplemented by various SORPs (Statements of Recommended Practice).

Overall FRS 102 is a significant change to UK GAAP and many of the changes can directly affect profit figures meaning that companies will need to consider its impact on profit sharing agreements, banking covenants, tax liabilities and the level of reserves available for dividend distribution.

In addition, the adoption of FRS 102 will lead to some changes to the format of the financial statements and the disclosures required.

Transitional arrangements

Application of FRS 102 is mandatory for accounting periods commencing on or after 1 January 2015.

Early application is permitted for accounting periods ending on or after 31 December 2012. For those entities that are within the scope of a SORP, early application is permitted providing it does not conflict with the requirements of a current SORP or legal requirements for the preparation of financial statements. If an entity applies FRS 102 before 1 January 2015 it needs to disclose that fact.

The starting point for applying FRS 102 will be to restate the opening balance sheet at the beginning of the comparative period for the first accounts prepared under FRS 102. This is known as the date of transition. If a company prepares its first accounts under FRS 102 for the year ending 31 December 2015, its date of transition will be 1 January 2014. FRS 102 includes provisions to ease the transition.

Overview of major changes

There are many areas of difference between FRS 102 and current UK GAAP and advice should be taken on how this may affect specific entities. ABG would be happy to assist in this area. For some entities there may be little or no significant areas of change.

An overview of some of the key changes is provided below:-

Investments in listed shares

Under current UK GAAP, investments held in listed shares may be measured at cost or fair value. FRS 102 requires the use of fair value for investments in shares which are publicly traded or where the fair value can be measured reliably. Movements in this fair value are recognised in the profit and loss account.

Intangible assets

A change in the definition of intangible assets will result in the recognition of a greater range of intangible assets, particularly upon business combinations. Separately identifiable intangibles not currently recognized under current UK GAAP could include brand names and acquired customer lists. Goodwill and intangibles will continue to be amortised but the presumed life will be five years unless a reliable estimate of the life of the asset can be made.

Companies that currently have goodwill or other intangibles being amortised over more than five years will have to consider whether they are capable of making a reliable estimate in order to justify a longer useful economic life.

Investment properties

FRS 102 requires annual revaluations with changes recognised through the profit and loss account rather than…

Creative Industry Tax Reliefs Creative I

Creative Industry Tax Reliefs

Creative Industry Tax Reliefs are a group of tax reliefs specifically targeted at Companies undertaking certain activities in the entertainment industries. There are 4 different groups of reliefs targeting specific industries and these are:-

• Film production (Film Tax Relief)
• Television production (Television Tax Relief)
• Video games development (Video Games Development Tax Relief)
• Theatrical production (Theatre Tax Relief)

The effect of the reliefs is to provide either an enhanced tax deduction for relevant qualifying expenditure or to give a repayable tax credit whereby the company can surrender a relevant trading loss to obtain a repayment directly from HMRC.

As with all tax reliefs there are detailed rules and conditions which must be met. There are restrictions for instance where a Company has made a claim to enhanced tax relief under the Research and Development legislation, but with up to a 100% additional tax deduction available the reliefs can be very valuable and the tax savings substantial.

Some conditions are common across the 4 reliefs but there are other conditions which are specific to each relief and a broad outline of each of the reliefs is provided below.

Film Tax Relief

• Commenced for principal photography on or after 1 January 2007 (or before then and not yet completed at 1 January 2007)
• The film must be a qualifying film which means it must be intended for theatrical release, it must be certified as a British film and there is a minimum proportion of the relevant expenditure which must be UK expenditure.
• The additional tax deduction is based on the amount of core expenditure with this limited to pre-production, principal photography and post production
• UK expenditure is core expenditure which is used or consumed in the UK.
• There are special rules for co-production and multi-period productions.
• There are special provisions for the calculation of profits for this purpose (income and expenditure timing of recognition etc)
• There are different rates of relief for “limited budget films” and “other films”.

Television Tax Relief

• Commenced 1 April 2013 and relates only to Television Production Companies conducting a television production trade.
• The company must actually produce the relevant programme so it must be responsible for pre-production, principal photography, post production and delivery of the programme on completion.
• The programme must be British and intended for broadcast.
• A relevant programme is a programme (with or without sound) which is produced to be seen on television and consists of moving or still images or of legible text or of a combination of those things.
• Television includes the internet for these purposes
• The company can sub-contract some of the activities but must retain overall responsibility and have active involvement – it cannot simply commission the entire programme or simply hold the creative copyright
• It is possible for more than one company to meet the requirements for qualifying as a Television Production Company for a relevant programme and in such a case the company which is “most directly engaged” will be the Television Production Company.
• There are special rules for co-productions.
• The programme must be a drama, documentary or animation and not an excluded programme (news, current affairs, quiz shows, games shows, panel shows, chat shows, programmes consisting of competitions, broadcasts of live events or of theatrical or artistic perform and given otherwise than for the purpose of being filmed – so sports events etc)
• There are conditions relating to the slot length, the level of core expenditure and where the core expenditure is incurred with separate rules for animation.

Video Games Development Tax Relief

• Commenced 1 April 2014 and relates only to Video Games Development Companies in relation to Video Games.
• There is no specific definition of a video game so it takes its…

Residence & Domicile Explained When it c

Residence & Domicile Explained

When it comes to determining the amount of tax you need to pay in the UK, your nationality and citizenship aren’t particularly relevant. Two key terms – residence and domicile – are more important for tax purposes and we briefly define both below.


Residence is determined by the location of any homes you have, your place(s) of work and the number of days you spend in the UK each year. It’s possible to be resident for tax purposes in more than one country so any tax treaties between the different countries will apply. The general rule is that you are only liable for tax on any income, gains and earnings accrued in the UK if you are non-resident here.

There are complex exceptions to this rule, so please contact us if you need further clarification.

The Statutory Residence Test is used to establish the basis on which you pay UK tax and it replaces the concept of ordinary residence. There are three parts to the test, the basic idea being that the individual is a UK resident if two of these – the automatic residence test and the sufficient ties test – are met.


Your domicile is the country where your father (or mother if your parents were unmarried) had a permanent home at the time you were born. It can therefore be different to your own nationality.

You can of course have a different residence and domicile if you don’t intend to stay in the UK permanently or if you were born abroad and retain links to your country of birth but currently spend most of your time in the UK. You can only have one domicile at any one time but it is possible to change it.

If you have any foreign income or capital gains and are resident but not domiciled in the UK, the amount of income tax and capital gains tax you pay will be affected by your domicile. You’ll have the option of paying tax on your foreign income and gains on either the arising basis (all of your foreign income is taxed) or remittance basis (only the money you bring into the UK is taxed).

Payment of inheritance and corporation tax can also be affected by your domicile, and if you complete a self-assessment tax return you may be asked about your country of domicile.

Get in touch for more help

Although this blog provides a short introduction, the rules around residence and domicile can be complex. Read our guide to residence and domicile

Or call us on 020 7330 0000 to discuss this area of tax in more detail.