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Latest reports indicate that the economy may have shrunk over the past quarter.

Many of the City economists are reducing growth forecasts amid fears that economy is falling a long way behind the Government’s official growth expectations.

The Treasury have stressed that the recovery was never going to be easy because of the imbalances in the economy, the continuing turbulence in the eurozone and the steep rise in commodity prices over the past year.

This is very relevant to all of us as we need to be aware of any potential dip in the economy and be ready to protect our profits as much as possible

We will look at action points in a series of blogs

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There are three main methods of incorporating a business, each having different capital gains tax considerations.
1. Transfer of a business wholly in exchange for shares in the new company. Incorporation relief is claimed so that any gain for the transferee is deferred until the shares are sold. This method requires that all the assets of the business are transferred into the new company. Where this includes a property a charge to stamp duty land tax arises.
2. Gift of goodwill to the new company. Goodwill and assets are gifted to the company. The company is then treated as acquiring them at their base cost. There is no requirement to transfer all assets, so the stamp duty charge can be avoided.
3. Sell goodwill and business assets to the company, leaving a balance on the director’s loan account. In recent years many business incorporations have been structured as a sale of the goodwill at its full market value. This requires a supporting independent valuation. HMRC will argue that goodwill should not be recognised where it relates to the personal skills of the proprietor, but goodwill from a business’s brand or good name, reputation, employee expertise, customers and client base is capable of being sold for value. In most cases entrepreneur’s relief will be available and therefore it should be possible to sell the goodwill to the new company at its fair market value with a tax charge of just 10% on up to £10 million of gains.
For further guidance contact Haxton Chartered Accountants West London.

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You may feel that the economy is travelling in a downward direction pulling your business with it.

But don’t carry out any dramatic changes to respond to what is probably a short-term difficulty. Stay with the policies that worked when the economy was in your favour.

Reducing prices or fees is not a recommended method of increasing business levels – price cutting or margin cutting can devastate margins and undermine your long term image for quality. Continue with what you are good at – add value without being cheap. Chasing business by pricing low is not a sustainable model as there is always someone cheaper.

Consider other options. Look at your costs, there will always be costs that you don’t need when you take a close look at your expenditure. Use this time to make staff redundant who you feel add nothing to the business. In the good times redundancy is difficult to justify – with difficult economic conditions the process is easier to manage and justify.

This may be a good time to reduce costs but never reduce standards as this can lead to a damaged brand and reputation. Concentrate on cash, it may be much more important than profit as you need the cash flow to take advantage of opportunities once the next upturn arrives.

Haxton, Chartered Accountants for West London, are here to assist you with strategies to ensure you survive the current negative forces in the economy.

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Lord Alan Sugar starts his hunt for the Apprentice again. The prize is a salary of £100,000 for the winner. Not many of us can afford that level of salary unless the candidate is very experienced and can add value from day one.

Recruiting a skilled work force via the normal channels of recruitment agencies is an expensive option for many businesses

A solution for employers is to develop young staff in house to gain the skills that will enable the business to grow in the medium term. This can be achieved through the apprenticeship scheme run under The Apprenticeships Programme – Opening Doors to a Better Future (www.apprenticeships.org.uk)

Apprenticeships can help businesses across all sectors by offering a route to harness fresh new talent. UK businesses consider skills shortages and recruitment difficulties a bigger threat to performance than soaring oil prices and declining consumer spending.

Apprenticeships can take between one and four years to complete depending on the level of Apprenticeship, the apprentices’ ability and the industry sector. The minimum salary is £95 a week; however, many apprentices earn significantly more.

The recession has taught us two key things: that businesses’ long-term commitment to investment in their workforce really pays off, and that young people must be effectively brought into employment. Apprenticeship programmes offer both of these factors. We would strongly advise you, and indeed all businesses, to consider apprenticeships as part of their recruitment strategy

At a personal level we have recently recruited a 17 year old on this scheme to train as an accountant via AAT and then ACCA . To date the employee has been a real asset and we are planning a second apprentice in six months . It does involve management time but the short term pain is already yielding results.

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