Highlights of 2015 Budget Summer Update

The most significant changes announced in the summer update to the 2015 Budget are as follows:

-The income tax personal allowance will increase from £10,600 to £11,000 in 2016/17, and further increase to £12,500 by 2020.

-The main rate of corporation tax will be reduced from 20 per cent to 19 per cent in 2017 and will reduce to 18 per cent by 2020.

-The taxation of dividends will be reformed with the dividend tax credit being abolished from April 2016 and replaced by a £5,000 tax free allowance for dividends. The Individuals who receive significant dividend income will pay more under the new rules. Most Limited Company Contractors are likely to be affected.

-Mortgage interest relief will be restricted for buy to let landlords who will only be able to claim tax relief at the basic rate on their mortgage payments.

A more detailed analysis of the Budget will follow. Please monitor the website for updates. Belsize Accountancy are specialist accountants for contractors and small businesses.

Making Successful Use of Risk Management

Many growing businesses will reach an appropriate size whereby they will need to place emphasis on effective Risk Management policies. This becomes essential for companies looking to float on the stock exchange where greater scrutiny will be placed on management and their corporate governance procedures.

We provide some guidance on making successful use of risk management:

-Develop a Risk Matrix for the business to be approved by the Board.

-Review the Risk Matrix on a regular basis. This can add value to the growth of your business and enhance the reputation of management. This is more than a form filling exercise as evidenced by the fact that all major businesses should have one in place.

-The Board should develop tolerance limits for significant business risks.

-Strong risk management will result in fewer unwanted surprises. This is essential for a growing business, particularly if it is reporting to investors and the market.

-Cultural change may be required in order to achieve new objectives set during the Risk Management process. A strong management team will be required to instigate this change.

-Clear dialogue is required between management and the Board who must be engaged in order to utilise the Directors’ expertise to deliver improved performance.

-Internal controls should be geared towards the specific business risks identified during the process.

-Successful Risk Management will improve the governance processes throughout the Group.

-It is important that all staff members understand what is expected of them.

-Set up quality reporting to the Board. The Board require information not data.

-A strong finance team is required in order to enable the Board to make decisions.

-Effective Internal controls must be established and monitored.

-The Board must have sufficient information in order to enable them to identify the key inherent risks in the business and link these to the mitigating controls.

-Non compliance with new RM procedures must not be tolerated in the organisation.

-Ensure that the Bribery Act is adhered to when doing business overseas. This creates a lot of work for large organisations planning to do business overseas. A responsible business will generate investor confidence.

-Without appropriate risk management there is the risk that the CEO and executive management can drive the business in the wrong direction. Glencore is an example of this with its failed attempts to merge with Xstrata. The terms of the merger were rejected by the shareholders who believed the deal was not in the best interests of the company.

-It is important to have a strong Non Executive Director (NED) presence on the Board in order to provide an independent view.  NED’s must have the necessary ability to exercise control.

-Enterprise Risk Management will enable a Board to take on more risk under an improved control environment.

-It is important to engage the Audit Committee and utilise their experience.

-Strong Risk Management can root out inappropriate incentives in the business.

We hope that you have found this a useful insight into Risk Management. Feel free to contact Belsize Accountancy if you require further details.

Tesco Reports £6.4 Billion Loss

Tesco, the UK’s largest supermarket chain reported a loss of £6.4 billion for 2014, the largest loss in the history of the FTSE100.  The loss was driven by a £4.7 billion write down in the company’s property portfolio and a further £0.9 billion goodwill impairment in relation to its Chinese business. The major UK supermarket chains have suffered as a result of deflation in the global economy and increased competition from budget chains Aldi and Lidl. Earlier in 2014, Tesco issued a profit warning following accounting irregularities and the share price has dropped by more than 30% since that time.