Monthly Archives: January 2017

February Licensing Update

Welcome to our February Licensing Update

This is our second update of the year, taken from items posted to our website over the past month.

Worthy of special mention is the Alcohol Wholesaler Registration Scheme which may catch most operators and which goes live in April 2017. See below.

Our briefing paper around issues surrounding Child Sex Exploitation (CSE) should be available within the next two weeks; certainly an area of increasing interest to the Authorities. Please let us know if you want adding to the distribution list for the briefing paper.

On to the news…

Alcohol Wholesaler Registration Scheme (AWRS) – reminder and update

We have commented on this AWRS scheme many times before. The scheme has been introduced by the Government to try and tackle alcohol fraud. If you sell alcohol to another business, the probability is that you should already have registered under AWRS.  From 1 April 2017, if you buy alcohol to sell from a UK wholesaler, you will need to check that whoever you buy from has registered with HMRC and has an AWRS Unique Reference Number (URN). If you buy alcohol from a non-registered wholesaler when they should be approved and registered with HMRC, you may be liable to a criminal or civil penalty and your alcohol may be seized. Trade buyers will be able to use an online look-up service of approved wholesalers to check that the wholesalers they buy from are registered. This will be available from April 2017. Time to be putting systems in place perhaps.Read more here

Local Alcohol Action Areas (LAAA) phase 2 announced

The Home Office has just released the list of the 33 regions comprising the second phase of the Local Alcohol Action Areas (LAAA) programme. Read more here

Changes to copyright laws – calling all operators! 

We made this the subject of a separate update earlier in the month – but to remind, recently introduced changes to section 72 of the Copyright, Designs and Patents Act 1988 will affect most, if not all, operators and letters of demand for additional licence fees are already in circulation.

This is in addition to any required TV licensing or licences from PPL and/or PRS. MPLC (Motion Picture Licensing Company) are already actively seeking licence fees on behalf of studios they represent from those wishing to show broadcasts in respect of film rights holders to show the film within the broadcast, http://www.themplc.co.uk/

Be aware – and if you require any further clarification, please do contact us.Read more here

The Soft Drinks Industry Levy  – briefing paper

Further to our news last month on this proposed levy, a House of Commons library briefing has just been published which provides an overview of the proposed Soft Drinks Industry Levy, and a background on sugar and health.

Read more here

 

Late Night Levy – Tower Hamlets 

At a Council meeting on 18 January 2017, Tower Hamlets became the latest Authority to approve a Late Night Levy (LNL) scheme. The LNL, which will affect premises operating between midnight and 6am (subject to certain exemptions) will take effect on 1 June 2017.Read more here

Hartlepool – EMRO to be revisited again? 

It may be recalled that in 2013 Hartlepool was the first council to look to adopt an Early Morning Restriction Order (EMRO), only for the attempt to fall away at the eventual hearing which we attended. (Blackpool subsequently followed suit but the adoption of an EMRO was rejected by the Licensing Committee following a five day hearing. No other EMROs have been attempted). We are seeing reports that an online petition calling on Hartlepool Council to change alcohol hours has been launched to try to persuade licensing officials to revert to 2am closing for town centre pubs and bars.Read more here

Licensing Practitioners Course – 9 February 2017 

A reminder that on 9 February 2017 the Award for Licensing Practitioners (Alcohol) Course will be delivered at our offices in Sheffield. This is a British Institute of Innkeeping accredited award and is designed to equip those involved in the administration of the licensing process pursuant to the Licensing Act 2003. When delivered by us in the past it was found to be highly beneficial to Police Licensing Officers, Licensing Authority Officers, Environmental Health Officers. It was also considered to be an insightful course for those involved at a senior level in the management of the hospitality industry. Should you wish to reserve a place, please email lmateer@john-gaunt.co.uk.

Scotland – public health causal link ‘required’  

We have been alerted to a recent appeal court decision in which the Sheriff determined that a Licensing Board must find a causal link between the application to be determined and a finding that an increase in the availability of alcohol would lead to increased consumption and consequently health harm.Read more here

Gambling – Licensed Premises Notification (LPN) ‘to go’? 

Business in Licensing (BIL) and Gambling Business Group (GBG) are proposing that the requirement for premises licence holders to notify Licensing Authorities that they wish to use their automatic entitlement of up to two gaming machines be removed. This one-off notification attracts a fee of £50.Read more here

Gambling – New Commission Consultation 

The Gambling Commission just launched their latest consultation. Entitled “Changes to our enforcement strategy: putting the consumer first” the consultation sets out our proposals for what the Commission refers to as “a new vision for our enforcement action which will guide how we use our powers”…. “It emphasises our expectations that gambling businesses put consumers first, and sets out proposals for credible deterrence.”Read more here

Gambling – Horse Race Levy for Online Bookmakers 

On 31 January 2017 the Horse Racing Levy (HRL) was extended to include bookmakers who operate remotely (principally online) and hold the required remote operating licence (within the meaning given by the Gambling Act 2005) allowing them to trade in the UK.  From 31 January any online bookmaker who has either equipment based in the UK or provides a service accessible from the UK may be caught.Read more here

Gambling – 10 year club gaming permits, club machine permits and family entertainment centre permits due for renewal

The Commission is now reminding that 10 year club gaming permits, club machine permits and family entertainment centre permits issued under the Gambling Act 2005 will come up for renewal this year and that operators affected will need to apply for new permits from their licensing authority.Read more here

And finally……

Scotland & JG&P

One week (week commencing 16 January) – three significant new build developments, three hearings before three different Boards – Aberdeen, East Dumbarton and Glasgow – three grants, and three different partners in attendance. All in all representing some £12 million of inward investment.

On top of which (and many other applications made), 26 January saw us before the Westminster Licensing Committee on a contested hearing (local residents associations opposing) for a new build 110 hotel development in Soho and within the Westminster West End Cumulative Impact area. The licence was granted for this circa £29 million scheme.

Why you should not buy a Pub Lease. without serious Pub Management experience.

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Why you should not buy a Pub Lease. without serious Pub Management experience.

Buying Pub Leases:-

This is probably the biggest leap into the dark that any sane individual takes when he makes a career move, whether this is caused through boredom with their present job, redundancy or a casual drinker who believes he can run a pub better than the person running the pub, the reasons are endless.

We have for years run a free web site in the vain attempt to stop people buying Pub Leases without doing a serious investigation into the viability of the pub and what their onerous responsibilities in respect of the lease actually are.

My colleagues and I have tried to help far too many people in serious financial trouble with Pub Leases, the reasons are many, the people are honest hard working decent people, who had no idea about the nasties that lurk in a pub lease and the way that these technically legal nasties can be manipulated by unscrupulous Pub Co’s.

They like me, got fed up with a boring well paid job and took a leap into the dark, without doing extensive research into the viability of the project, I fortunately bought a run down freehold freehouse, not a Pub Co. lease calling itself a freehouse.

I had advised a couple of licensees on refurbishing their pubs, with amazing results, this has to be the way forward, not only do I have a living but capital appreciation to boot, at that time there was serious money to be made in running pubs. Brewers were in the business of selling beer, leases were very few to say the least, apart from genuine freehouses, most pubs were short term brewery tenancies until the Pub Co’s. appeared on the scene, http://www.buyingapub.com/?p=1191

Pub Leases were peddled by the bulk of the Pub Co’s as a means to capital growth and a good living, a number of us have worked hard providing information to the various Government Inquiries, to attempt to rectify the vagaries of many companies approach to decent people taking Pub Leases.

As a result legislation has now been passed with the aim of rectifying all or some of these anomalies, many of the Pub Co’s are looking for any and every loophole to exploit, they are prepared to spend a fortune on the very best legal advice to keep the “Status Quo” or as near as can be.

The legislation is a minefield and may take years to sort out.

www.buyingapub.com and www.usenumberone.com have a lot of common sense advice on finding, buying and running a pub, it is all free to make people think before they take a leap into the dark.

The following information is not to put you off buying a pub, but to raise some advisory points that are vital to your well being, especially if you run into problems, should you decide to buy a Pub Co lease.

Finding a Pub or Licensed Property.

The Internet is the first port of call under, Licensed Commercial Agents, Pubs for Sale, Licensed Property, the variations are fairly substantial, it will give you a list of Commercial Agents with Pubs to sell.

The Morning Advertiser, either on line or from your Newsagent, which will need ordering or Daltons weekly.

1. When dealing with Commercial Agents, you will appear to get the feeling that you have insufficient money to buy whatever they have on their books, according to the person you deal with, they don’t tell you that, but that’s how you feel when you walk away afterwards.

Having bought a considerable number of commercial properties, those that know me keep quiet, those that don’t always try it on, one reason is selling finance, if you stretch your initial budget with additional borrowing, they get added commission.

They don’t lie about the business potential, they are economical with the truth, and in many cases have little or no idea about the short comings and potential of the individual business, always remember, these companies do not work for you their client is the Vendor or the Pub Co. selling the lease.

It may cost you for professional advice, but it is worth considering, I was subject to a very clever fraud on one pub, the VAT, Income Tax etc. were all verified by his and my accountant, the details are on the web site. The only thing that made me seriously question the Turnover was the lack of cutlery to do the level of business shown on the accounts.

2. Always use a Solicitor who is used to Licensed Commercial Property, do not use a House Conveyancer or Residential Property Solicitor, especially with Leases, it is a minefield.

Even so, he may suggest that certain clauses are in all Commercial Leases and are normal, don’t accept this get a detailed breakdown of what it commits you to and how draconian it can be if you run into trouble.

3. The Vendor is seldom available after the first two initial visits, especially if the leased business is struggling, which sadly many of those that are for sale, are.

You may get a couple of days guidance with the Vendor, but only after you have exchanged contracts and are totally committed.

4. Your first encounter with a representative of the Pub Co will be all smiles and enthusiastic chat, extolling the virtues of this amazing pub. The present lessee has to leave for family reasons, normally an ageing, sick, close relative, very few will tell you straight up that, they are working their socks off and not paying their way.

If you get the slightest whiff that they are on a Rescue Package, drop it like a hot cake, though the chances are that you won’t know this until the Vendor has departed. A Rescue Package has a variety of names, it means that they are in debt to the Pub Co, consequently they demand cash with order, which totally screws the existing cash flow and expedites their demise, they invariably get the lessee to sign over all their Fixtures and Fittings to the Pub Co in lieu of the debt. This ensures that the F&F cannot be sold, since they no longer belong to them, the Pub Co will without a large injection of cash, take the lease back and sell it on, with in many cases a copy of the last decent years trading, definitely not the current year, whose accounts have not been completed yet.

Ask the Pub Co Representative if the Lessee is on a Rescue Package, Cash with Order or any similar arrangement that is different to the Pub Co’s. normal trading agreement and would they confirm it in writing to you, as soon as possible.

Don’t sign anything until you get this confirmation, verbally it can be denied later by an unscrupulous Business Manager.

5. The representative will want a Business Plan, I have seen too many where they assume that they are going to set the world alight. A very sobering thought, the Business that the Pub has at that moment of time is it’s Market Share at that time, in the majority of the country there is a limited or falling market. To increase your market share you need to take business from another similar business and they will fight to retain it. So do not make any wild estimations of your expected business, keep all projections below 10% per annum. If you project anything over that, the Pub Co will say you are under performing and in the event of cash flow problems, you are then a statistic classed as Retail Failure or similar words.

Some years ago the failure rates of one Pub Co were in the order of 2,800 in two and a quarter years, the majority were listed as Retailer Failure, the details were sent to the Government Select Committee, which a number of embarrassing questions were asked, the numbers are not that high now, but they are still unacceptable.

The failure rate in leased Pubs has always been unacceptably high, not the weekly closure figures but the term known in the industry as the “Churn”, people failing and being kicked out and replaced by too many decent and honest people, these statistics never see the light of day and only come to light when a Senior Whistle Blower passes them on.

Do not assume that the other pubs in the area are being run badly, they may be under management or just a grubby boozer. I had to inspect a seriously grubby boozer, with some very rough people as customers. The licensee was doing in excess of 500 Barrels a year, with no food, he knew what he was doing and was highly successful, never underestimate a pub in your trading locality, especially if the Licensee has been there for years.

6. I have just been helping a lessee who is nearly out of his mind, the Pub Co. Business Manager knew the Vendors turnover was incorrect, because they have a precise record of the wet purchases, since they supply them all, the BM tried to claim that he had been buying out. Be assured, avoid buying out, it will forfeit your lease and cost you a heavy fine. Buying out is buying cheaper wet stock from another source, if the Pub Co. cannot supply the product you need written permission to do so, do not do it without that permission, Business Managers may give you verbal permission, but some will deny it afterwards, it’s a nasty business. The difference between what the Pub Co. charges you and buying out is substantial, it can be between £2-300.00 per Brewers Barrel, this makes competitive profitability very difficult.

The chances of the Vendor buying out in this case is unlikely, to the magnitude of that shown in the accounts. The Pub Co. would have been examining all the stock for evidence of stock not supplied by them. The draymen would report any anomalies, they know very quickly if someone is buying out in quantity. You are also liable for a spot check when you least expect it, in addition you have Brulines or similar on all your beer lines, which records beer flow and it’s precise accuracy is very questionable with beer line cleaning and the volumes of water being flushed through.

7. The serious nasty, your Solicitor will go through the lease and point out the anomalies, the one really serious nasty is the Guarantee Agreement (AGA). The Solicitor will tell you it is in all Commercial Leases, it makes you responsible for whoever you assign the lease to, for any debts owed to the Pub Co., which can be substantial.

I was asked to intervene with a major Pub Co. by the Local Licensing Officer, the Pub Co. were trying to repossess an elderly retired couples bungalow, who had assigned the lease eight years ago and after successive rent increases and overheads, the people who took the lease went bankrupt, the Pub Co. did get some of their money.

Guarantee Agreement was a kick over from Privity of Contract, a very nasty clause in Commercial Leases see the link it was banned in 1995 http://srb.co.uk/wp-content/uploads/downloads/2012/04/SRBchangeinleaselaw.pdf. You do need to read this to understand your responsibilities within the lease.

It is possible to buy yourself out of the Guarantee Agreement and can cost you in excess £8K, this normally applies when you wish to assign the lease. It is an additional Cash Cow as far as the Landlord is concerned, whether they would consider paying for the AGA to be excluded when you sign the lease is questionable, but it is worth considering when you have capital available.

Regardless of the Pub Co. approving your assignees Business Plan and References you are still liable. Sadly, because the viability of many leased pubs being questionable, the failure rate is far too high, the Guarantee Agreement is one clause in pub leases that many people would like to see removed, if people lose most of their money on propping up a failing pub, to then find the rest is taken by the Pub Co.

The Pub Co. get the Pub back and sell it on a new lease, all perfectly legal and the lessee who assigned it is liable for dilapidations and the debts incurred by the assignee.

Do not assume that the dilapidations will be a small sum, always have a survey, don’t let any Pub Co, representative tell you that a survey will be carried out by the company at every change, it doesn’t happen, one BDM moved on and left all his lessees with massive dilapidations bills, with this misinformation.

8. The majority of major Pub Co’s have Codes of Practice which are supposed to regulate their activities, many are expert at at weaving their way round these regulations, added to the fact that the hapless lessee is by then under massive financial pressure to survive and extricate himself from a worsening debt crisis.

New legislation has come in to improve these trading conditions, unfortunately a large number of Licensees have a very strange psyche, they are reluctant to admit that have made a serious error in buying a pub, without realising the implications of the small print and the onerous legal responsibilities imposed on them.

This is exacerbated by the amount of pubs that appear to be doing well, having inspected many thousands of pubs, the majority being leases, behind the scenes many of the lessees are literally working their socks off for minimal real return.

9. The Pub Co’s are expert at exploiting the weakness of a struggling cash strapped lessee, originally they claimed it cost £30K when a lessee went belly up, now they get the lease back with all the F&F and they can write a new lease with new small print, to fit the latest legislation and sell it to the next lessee at a comfortable profit.

Dilapidations are invariably totally over valued, to ensure the lessee sees as little of his return deposit, that is why it is essential to always have a survey with dated camera evidence, not all companies are like that, but too many are.

10. You need an Accountant who is experienced in Pub Co leases and will spot the shortcomings in the Vendors accounts.

The majority of Pub Co’s, have a variety of convenient calculations and methods that they use to extract as much as possible from the lessee.

They supply the bulk or all the Wet Sales to their lessees, they get the maximum discount from the Brewers, you might get minimal discount if you are a Retail Genius, you have little or no chance of competing with genuine Freehouses or Brewers Managed Houses Wet Sales, who enjoy maximum discounts, even more so for multiple operators.

11. The Divisible Split, a method of calculating the profit in a lease, depending on the circumstances it is used to calculate the rent. The Pub Co’s. arrive at a calculation splitting the profit 50/50, what they do not do is include their massive discounts of all products that they control/supply in this calculation.

Not only do they charge in far too many cases unsustainable rents for their leases, if a reasonable proportion of the discounts were passed on far more leases would become viable.

12. Rents should be between 6-9% of Turnover, as they used to be when a pub was a good viable career for life, the lower the Turnover, the closer the rent should be to 6%, because the bulk of the overheads are almost the same, but your profitability is far less, as a quick yardstick.

13. Fair Maintainable Trade, a term used for the supposed available business for a specific pub. The over estimation of FMT, would involve at least a 50% increase in brewing capacity across the country, see Clause 5.

14. If you can, take Tenancy from a Family Brewer, which has limited responsibility time wise and dilapidations, your contract can be for a year with a trial period and the responsibilities are internal painting and decorating. Cut your teeth on that, understand the real profitability, then talk to some Pub Co lessees about viability with their particular company.

It is more profitable to buy a genuine Freehouse, if you have a reasonable deposit and some working capital, the mortgage in real terms works out at less than a lease rent, which invariably goes up.

Editors Comment.

The AGA, Guarantee Agreement should not apply to leased licensed businesses, because they involve families living on the premises, most having little knowledge of the draconian actions that can be taken by the landlord.

Commercial Leases normally apply to factories, lock up shops etc., without domestic accommodation, most are leased by Limited Companies which can be folded in the event of failure at very little cost to the individuals involved.

Individuals or Partnerships assigning a lease are pursued for any financial shortfall incurred by the Assignee owed to the Landlord, whilst holding the Lease, the Pub Co’s avoid Limited Companies without personal guarantees where ever possible.

Far too many of the Pub Co’s have become expert at forcing licensees out, when they run into problems. The Pub Co having accepted the Business Plan approved the Lessee’s financial state, they know pretty well how much business the previous lessee has been doing, in a number of cases declining to produce these figures as being inaccurate.

The debt to the Landlord, through trading problems, unsustainable rent increases and over valued dilapidations incurred by a failing or bankrupt assignee will be pursued years later, possibly after the assigning lessee has retired.

The Landlords control the rents and the prices of the supply tie, the undisclosed discounts they receive are never made public and they now recoup in selling the existing or new lease.

Note:-I used to own a small Pub Co, which started as leased commercial property, my comments are not “Sour Grapes”. I cancelled the Privity of Contract which was replaced by the Guarantee Agreement, which I took out of all the leases, chasing cash strapped lessees is not my way of operating, you get the leased property back by mutual agreement, to be re let.

You do not have the responsibility of reducing decent people to bankruptcy for the sake of a few thousand pounds, when the lease can be resold at a reasonable profit, the slur that the last  lessees all went bankrupt is not a reputation to have on any commercial property.

I would suggest the Pub Co’s. remove the Guarantee Agreement from all their leases and suggest that three months notice by the departing lessee would be a better deal, the lease would also be worth more money.

Sadly the Pub Co’s. have a “Cash Cow” that can be exploited for short term gain and not long term financial stability in the Industry.

http://www.buyingapub.com/?p=6877

Changes to copyright laws – calling all operators!

JG & Partners

Changes to copyright laws – calling all operators!

We think this is sufficiently topical and far-reaching to merit a one-off update. Please bear with us on this (and read on!). Recently introduced changes to section 72 of the Copyright, Designs and Patents Act 1988 will affect most, if not all, operators and letters of demand for additional licence fees are already in circulation.

This is in addition to any required TV licensing or licences from PPL and/or PRS.

Detailed scrutiny of the relevant law arising from the Sky prosecutions apparently revealed a possible flaw or inconsistency in copyright law which this change, detailed below, is designed to correct.

It affects the public showing of TV broadcasts. Previously section 72 allowed an exemption of the requirement for having the permission of certain copyright holders, including ‘film’. Film has now been removed as an exemption.

What this apparently technical change means is that those wishing to show broadcasts in public may now need to gain the permission of film rights holders to show the film within the broadcast, as is currently the case for certain other rights within the broadcast. Operators will be familiar with the required licences from PPL and PRS in relation to music contained in a broadcast or made more widely available.

MPLC (Motion Picture Licensing Company) are already actively seeking licence fees on behalf of studios they represent.

Intellectual Property Office guidance on this can be found here.

Be aware – and if you require any further clarification, please do contact us.

January 2017 licensing update

JG & Partners

Welcome to our January 2017 licensing update

Welcome to our slightly delayed first monthly update of 2017 – and a very happy New Year. Hopefully, the delay will cut down on the number of ‘out of offices’ we would otherwise have received!

Not a matter for this newsletter, but something on which we will be majoring on in the next month, are child exploitation issues for the hospitality industry (and the hotel sector in particular) and where we are seeing increasing Authority concerns in this area and indeed examples of ‘test purchasing’. A fuller brief will be issued shortly. It is an area which should be of concern to all operators (a sad reflection of the times in which we live). If you would like to register to receive a copy of that brief, please email us.

On to the news, as posted to our website in the past month.

Health Survey for England 2015 – report published 

The Health Survey for England series is designed to monitor trends in the nation’s health; estimating the proportion of people in England who have specified health conditions and the prevalence of risk factors and behaviours associated with these conditions. This covers alcohol consumption among adults and children.

Read more here

HoL Select Committee on the Licensing Act 2003: the Health objective and Scotland 

At the suggestion of the Clerk to the Committee, we have filed some additional written evidence to the Committee on our experiences of the health objective, and how it works, in Scotland. In case of interest, it can be found here:

‘Select Committee on the Licensing Act 2003: the Health Objective and Scotland’.

Soft Drinks Industry ‘Sugar’ Levy – policy paper published 

The Government has just issued a policy paper on this ‘sugar’ levy. This confirms (in part) that the levy will affect all UK producers of soft drinks, importers of soft drinks, retailers of soft drinks and consumers who buy soft drinks in the UK. Alcoholic drinks with an alcohol by volume of up to 1.2% are included in the levy.

Read more here

‘Recognising the terrorist threat’ 

Although this item was posted in anticipation of the festive season and reflecting on international terrorist outrages, the warnings still are unfortunately relevant. Government guidance on planning for a possibility of a terrorist incident and what action to take in the event of such an attack has recently been updated and can be found here: ‘Guidance: Recognising the terrorist threat’

Read more here

Court of Appeal rules against tobacco companies’ appeal on plain packaging 

The Court of Appeal ruled on 30 November 2016, rejecting several tobacco companies’ appeal against the introduction of plain packaging on tobacco products. This follows a ruling in May which determined that the law was valid and lawful in all respects.

Read more here

Rotherham Council to be ‘handed back licensing powers’ 

It is being reported that Rotherham Council will be given back control of taxi services, although commissioners will oversee licensing decisions until 31 March 2019.

Read more here

Licensing Practitioners Award – 9 February 2017 

On 9 February 2017 the Award for Licensing Practitioners (Alcohol) Course will be delivered at our offices in Sheffield. When delivered by us in the past it was found to be highly beneficial to Police Licensing Officers, Licensing Authority Officers, Environmental Health Officers. It was also considered to be an insightful course for those involved at a senior level in the management of the hospitality industry.  Course places are limited to 12 so as to ensure that all candidates achieve the maximum from the day and to provide sufficient time for discussion. Should you wish to reserve a place, please email lmateer@john-gaunt.co.uk.

Read more here

Best Bar None Sheffield 2017 

John Gaunt & Partners are again proud sponsors of the Sheffield BBN awards – with the presentation awards ceremony held at Sheffield City Hall on 9 February 2017.

PPL new tariff – small hotels and guesthouses 

UK music licensing company, PPL, has announced a revised tariff for Small Residential Hotels and Guesthouses. The changes came into effect on 1 January 2017 and are the product of a consultation that was launched earlier in the year with licensees and trade bodies to discuss a revised tariff to cover playing background music in public areas and the supply of music to guest bedrooms.

Read more here

Liverpool City Council – Late Night Levy – update 

This Levy will commence from 1 April 2017. The Licensing Authority has confirmed that there will be an opportunity to make application for a Minor Variation in respect of which the application fee will not apply. The window for such applications to be lodged is between 31 January 2017 and 1 April 2017.

Read more here

Gambling – Proposals for Commission fees from April 2017 

Following a joint consultation carried out by the Department for Culture, Media and Sport (DCMS) and the Gambling Commission, the Commission now published the responses to this consultation. These are detailed within the responses document: Proposals for Gambling Commission fees from April 2017 – consultation response. There will be fee reductions for around 1,900 operators while fees will be held at their current levels for around 1,000 operators, and around 75 operators will be subject to an increase in fees. The fees structure that will take effect from April 2017.

Read more here

Gambling – 10 year club gaming permits, club machine permits and family entertainment centre permits due for renewal

The Commission is now reminding that 10 year club gaming permits, club machine permits and family entertainment centre permits issued under the Gambling Act 2005 will come up for renewal this year and that operators affected will  need to apply for new permits from their licensing authority.

Further detail (including details of how to renew) can be found here: Gambling Commission: Club gaming and machine permits

Read more here

Gambling – Young People and Gambling Report released 

The Gambling Commission’s Young People and Gambling Report – a newly released report – indicates that 450,000 children are gambling in England and Wales every week and also is said to show that around 9,000 of these are likely to be problem gamblers.   The findings indicate that ‘the overall rate of gambling among 11-15 year olds is around 16%. This figure compares to 5% of 11-15 year olds who have smoked and 8% who have drunk alcohol in the last week, while 6% have taken drugs in the last month’.

Read more here

Gambling – Commission facts and figures guide updated 

The Gambling Commission has updated their facts and figures guide to include the latest industry statistics and the Young People and Gambling Report 2016.

Read more here

And Finally…

 

We are pleased to announce that we are strengthening our already market leading team of solicitors. Paul Henocq joins us having spent 11 years at Cartwright King.

He brings to our Licensing Team his proactive, personable approach and is a proven advocate. At his previous firm Paul was a key member of a Regulatory Law Team which focused on defending businesses and people from regulatory investigations and prosecutions by organisations like the Health and Safety Executive (HSE), the Environment Agency, Local Authorities’ Trading Standards and Environmental Health departments and many more.

He also enjoys a specialist interest in Road Traffic Law and was recognised as a key contact in the Nationally (Outside London) for this field in Chambers and Partners Legal Directory 2016.

 

January Tax Tips & Accountancy News

Welcome…
To January’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

Please contact us for advice on your own specific circumstances. We’re here to help!

January 2017
· Changes to the VAT flat rate scheme
· Abolition of Class 2 NICs
· Company cars: ultra-low emissions vehicles
· Disguised remuneration and the self-employed
· January questions and answers
· January key tax dates
Changes to the VAT flat rate scheme top
In a surprise announcement in the 2016 Autumn Statement, the Chancellor announced that changes are to be made to the existing flat rate scheme for VAT (FRS) in order to tackle perceived ‘aggressive abuse’. The changes, which will take effect from 1 April 2017, are designed to ‘reduce the incentive for firms and agencies to move employees to self-employment to exploit VAT simplification aimed at small businesses’. The subsequent HMRC policy paper published on 5 December sets out the details of the changes, which will affect any users, or prospective users, of the FRS.

The FRS is a simplified VAT accounting scheme for small businesses, which currently allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. From 1 April 2017 a new 16.5% FRS rate will be introduced for businesses with limited costs. Interestingly, HMRC’s policy paper on this change comments that ‘many labour only businesses’ may be affected. Although not yet clarified, this may mean the adjustments will not apply to service-related businesses such as journalists, architects or engineers.

Between now and 1 April 2017, anyone currently using the FRS for VAT, or thinking of joining the scheme, will need to decide whether they are a ‘limited cost’ business. For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

A ‘limited cost’ business is defined in the draft legislation as one whose VAT inclusive expenditure on goods is either:

– less than 2% of their VAT inclusive turnover in a prescribed accounting period;
– greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

– capital expenditure goods;
– food or drink for consumption by the flat rate business or its employees;
– vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services).

These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.

To support businesses implement this change, HMRC have said that they will be launching an online tool that will enable both current and prospective users of the FRS to determine whether they must use the new rate.

Abolition of Class 2 NICs top
Originally announced at Budget 2016, the 2016 Autumn Statement confirmed that Class 2 National Insurance Contributions (NICs) will be abolished from April 2018, hopefully achieving the desired effect of simplifying National Insurance for the self-employed and making the system fairer for employed and self-employed individuals.

At the same time as the abolition of Class 2 NICs, the system for Class 4 NICs will also be reformed to include a new threshold – to be called the ‘small profits limit’ (SPL). The amount of the SPL for 2018/19 is yet to be confirmed but is likely to be around £6,025.

Payment of Class 2 NICs by the self-employed – a standard weekly contribution of £2.80 per week in 2016/17, rising to £2.85 per week from April 2017 – gives eligible individuals access to certain contributory benefits such as contribution-based employment and support allowance, basic state pension and bereavement benefits.

Class 4 NICs are paid by the self-employed on profits above the annual ‘lower profits limit’ (LPL). For 2016/17 contributions are payable at the rate of 9% on profits between £8,060 (the LPL) and £43,000 (the ‘upper profits limit (UPL)). Contributions are then paid at the rate of 2% on profits above the UPL. For 2017/18 the LPL will be £8,164 and the UPL will be £45,000.

After abolition of Class 2 NICs from April 2018, those with profits between the SPL and the LPL will not be liable to pay Class 4 contributions but will be treated as if they have paid Class 4 contributions for the purposes of gaining access to certain contributory benefits. Those with profits at or above the Class 4 LPL will gain access to the new state pension, contributory employment and support allowance (ESA) and bereavement benefit. Those with profits above the LPL will continue to pay Class 4 contributions.

The special arrangements that currently apply to share fishermen and volunteer development workers that allow them to pay special rates of Class 2 NICs to gain access to a wider range of benefits than currently available through Class 2 will also be abolished from April 2018. Transitional provisions will apply.

Class 3 contributions, which can be paid voluntarily to protect entitlement to the state pension and bereavement benefit, will be expanded from April 2018, to give access to the standard rate of Maternity Allowance (MA) and contributory ESA for the self-employed. Rates of Class 3 NICs are £14.10 per week for 2016/17 rising to £14.25 in 2017/18.

Concerns over these changes have been expressed within the tax profession. Anthony Thomas, Chairman of the Low Incomes Tax Reform Group (LITRG) said that some parts of these proposals are good news for self-employed workers on low earnings, but by no means all. Those with profits between the Class 2 exemption limit (currently £5,965) and the Class 4 LPL (currently £8,060) will be better off because they will pay no NI but be credited with contributions. The Group’s concern is for those with lower earnings than £5,965 who would have to pay voluntary Class 3 contributions in the future to protect their benefits entitlement if they did not obtain NI credits through receipt of other benefits, for example tax credits, child benefit or Universal Credit. Class 3 contributions will cost almost five times the amount they are paying now (£14.10 per week compared to £2.85 per week) and may mean the cost is unaffordable, leading them to rely more on means-tested benefits in the future.

Company cars: ultra-low emissions vehicles top
At Budget 2016, the government said it would consult over the summer on changes to the ultra-low emission vehicles (ULEV) bands for taxing company cars to ‘focus incentives on the very cleanest cars’. As a result of the consultation, HMRC have now published details of eleven new bands, which will be introduced for ULEVs with emissions below 75gCO2/km from 2020/21, including a separate zero emission band.

Some of the lowest CO2 bands are based on the ‘electric range’ of the vehicle, as well as the CO2 emissions. This is the maximum distance the vehicles can travel in pure electric mode without recharging the battery or using the combustion engine of the plug-in vehicle. The aim is to distinguish between ULEV’s with different plug-in hybrid technologies and improved battery range, which will focus incentives on the very cleanest cars that allow most journeys to be zero emissions.

The seemingly complex provisions are included in Finance Bill 2016 and provide that, from 6 April 2020, the graduated table of company car tax bands will include a differential for cars with emissions of 1 to 50 gCO2 per km based on the electric range of the car.

For cars with an electric range of 130 miles or more, the appropriate percentage will be 2%; for cars with an electric range of between 70 to 129 miles, the appropriate percentage will be 5%; for 40 to 69 miles, the appropriate percentage will be 8%; for 30 to 39 miles, the appropriate percentage will be 12%; and for less than 30 miles, the appropriate percentage will be 14%.

For cars that can only be driven in zero-emission mode, the appropriate percentage will be 2%.

For all other bands with CO2 emissions of 51 gCO2 per km and above, the appropriate percentage will be based on the CO2 emissions only. For cars with emissions of 51 to 54 gCO2 per km the appropriate percentage is 15%. For cars with emissions above 54 gCO2 per km, the bands are graduated by 5g CO2 per km and the appropriate percentage increases by 1% for each 5 gCO2 per km band. For example, 16% for 55 to 59, 17% for 60 to 64, up to a maximum of 37%. For cars with emissions above 90 gCO2/km, the appropriate percentage will increase by 1% in comparison to 2019/20 levels.

Disguised remuneration and the self-employed top
Following the announcement in the Autumn Statement, HMRC have published the details of a measure designed to tackle the future use of avoidance schemes currently being used by some self-employed people to avoid paying income tax and NICs on their income.

The measure will also tackle the existing use of schemes involving loans with a new charge (a ‘loan charge’) on outstanding loans taken out as part of avoidance arrangements. This charge will apply if tax is not paid on the loan and the loan is not repaid by 5 April 2019.

Various ‘disguised remuneration’ avoidance schemes currently exist, but they commonly result in a loan from a third party that is on such terms that mean it is unlikely to ever be repaid. At Budget 2016 the government announced that legislation would be introduced in Finance Bill 2017 to tackle this perceived tax avoidance by the self-employed. This announcement goes alongside a similar package of measures to curtail current and future use of disguised remuneration avoidance schemes by employees.

Broadly, Finance Bill 2017 will include provisions designed to counter arrangements that are intended to secure a deduction from income, where such a deduction ultimately is used to provide a loan or other benefit to the individual or anyone connected to them. The legislation will also counter arrangements involving the self-employed that seek to exclude an element of the taxable earnings of the self-employed individual whilst at the same time using that element to provide a loan or other benefit, either to themselves or persons connected with them. These changes, in enacted will have effect from 6 April 2017.

Legislation in Finance Bill 2017 will also introduce a charge to apply to any balance of disguised remuneration loans made after 5 April 1999, as used by the self-employed as part of the avoidance arrangements. The charge will apply on 5 April 2019 to any such loans still outstanding on that date. The amount of the loan outstanding is, broadly, the principal of the loan less any repayments. Generally, only money payments will be recognised as repaying the loan. Any money payment connected with a tax avoidance arrangement, excluding the arrangement under which the loan was made, will be disregarded. The loan charge will also apply to situations where one loan is replaced by another loan, some other form of credit or a payment purporting to be a loan, referred to as quasi-loans in the legislation.

January questions and answers top
Q. I am thinking of renting out a small outbuilding that I own to a friend so that he can store his work equipment in it when he’s not using it. The rent is likely to be less than £1,000 a year. Will I have to declare this income to HMRC on a self-assessment return? My tax affairs are quite straight-forward – I am employed and currently I don’t need to send in a tax return.

A. Two new annual tax allowances of £1,000 each are being introduced from April 2017. One allowance is for trading income and the other is for property income. If your income from property is less than the annual limit, you will not have to declare it to HMRC or pay tax on it.

The new allowances will apply to all types of property and trading income of an individual but not to partnership income from carrying on a trade, profession or property business in partnership where special rules apply.

It is also worth noting that the allowance will not apply in addition to relief given under the rent-a-room rules (currently £7,500 per annum).

Q. Several of my employees have expressed an interest in purchasing electric cars but have pointed out that as our office is situated in a remote location they will be unable to make their whole commute without charging. If the business pays for an electric charging point to be installed at the business premises, would capital allowances be available for the expenditure incurred?

A. As luck would have it, the Autumn Statement announced that from 23 November 2016, businesses (large and small) can claim a 100% first-year allowance (FYA) for qualifying expenditure incurred on the acquisition of new and unused electric charge-points. Initially the allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

Whilst this measure sounds like a big ‘giveaway’ from the government, prior to the change, the expenditure could have been covered by the capital allowances annual investment allowance (AIA), which means that, in practice, it impacts only on those businesses with qualifying plant and machinery expenditure above the level of the AIA (currently £200,000).

Do note however that there are separate workplace grants available for businesses who install electric charge points for use by their employees. It may be worth investigating this further.

Q.Ten years ago my husband inherited a share of his father’s property when he died as a joint owner with his partner. My father-in-law’s will specified that his surviving partner could continue living in the property for as long as she wanted. Both my husband and my deceased father-in-law’s partner are on the deeds for the property. The partner has recently died and the property is empty. Will my husband have to pay capital gains tax on his share when it is sold, even though he could not live there because the partner was in residence?

A. I am assuming that your husband is now in possession of the whole property, even though originally the partner owned half of it. If so, she must have transferred her half to him. When your husband sells the property, for capital gains tax purposes he will effectively be making two sales, namely the half which he inherited on his father’s death and the half he has recently acquired from the deceased partner. I’m afraid he will be liable to capital gains tax on the half he has owned for the last ten years, even though the partner was still living there. He will also be liable to capital gains tax on the recently acquired half. However, the base cost for the second half will be the market value of that half at the date the partner transferred it to him. The higher base cost should help is should help reduce the chargeable gain on that part.

January key tax dates top
1 – Due date for payment of Corporation Tax for the year ended 31 March 2016

14 – Return and payment of CT61 tax due for quarter to 31 December 2016

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/1/2017 or quarter 3 of 2016/17 for small employers

31 – Deadline for filing 2016 Self Assessment personal, partnership and trust Tax Returns – £100 first penalty for late filing even if no tax is due or tax due is paid on time

– Balancing self assessment payment due for 2015/16
– Capital gains tax payment due for 2015/16
– First self assessment payment on account due for 2016/17
– Interest accrues on all late payments
– Half yearly Class 2 NIC payment due
– Further penalty of 5% of tax due or £300, whichever is greater for personal tax returns still not filed for 2014/15
– 5% penalty for late payment of tax unpaid for 2014/15 self assessment

 

Disclaimer
The information contained in this newsletter is of a general nature and no guarantee of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.

Howard and Company is the trading name of GM Howard & Company Limited, a company registered in England and Wales. Reg No 5307665. Registered office, Unit 17, Park Farm Business Centre, Fornham St Genevieve, Bury St Edmunds, Suffolk IP28 6TS.