The Importance of Good Corporate Governance

With recent, very public governance failures at businesses such as BHS, Carillion and other well known brands, it is clear that business leaders need to do more in terms of living up to their responsibilities, following best practice, etc.

Good governance is a must for SME’s as well as large listed companies. Corporate governance refers to a set of internal policies, rules, and procedures that a company follows on a regular basis in order to ensure that it operates in a fair, equitable, and appropriate manner for the benefit of the company, its management and its stakeholders. Those stakeholders include your staff, customers, investors, suppliers and the wider community.

Most business owners and managers are familiar with the regulatory and compliance requirements of being in business. However, that is just the beginning of good corporate governance. The next step is to make sure that your business creates and delivers its strategy. That strategy should be designed to maximise the opportunities and minimise risk for the benefit of the firm and its stakeholders. You then need to build that into your company and its culture.

Good governance is not about making the “right” decisions. Instead it’s all about ensuring that there is a good decision-making process in place and making sure that the process is followed. Having a robust decision making methodology in your firm can help you to change direction efficiently in order to drive the business forward when opportunities arise.

In large businesses, the management board will probably have a team that is charged with ensuring the firm adheres to the principles of good governance. However smaller business can put a simple governance structure in place. This could be achieved by having a trusted advisor (such as your accountant) or a non-executive director (NED) on the board.

Good governance helps you and your business to manage risk.

It’s easy to get distracted by growth opportunities, business development and so forth. Good corporate governance practices ensure the business stays on top of statutory reporting, annual returns, renewing insurance policies and licenses, etc. Your trusted advisor should hold you accountable and focused on meeting your legal and statutory requirements whilst also helping you see the bigger picture.

Finally, implementing good corporate governance practices encourages the management team to review and update the firm’s strategy on a regular basis in order to maintain and/or improve the performance of the company. From time to time, this may include bringing in external experts to assist with strategic decision-making.

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BUY NEW EQUIPMENT BEFORE 6 APRIL?

Your business year end, not 5 April, is relevant for capital allowances purposes. If however you are running a business and making up accounts to 31 March or 5 April, you should consider buying plant and machinery to take advantage of the Annual Investment Allowance (AIA).  Note that the AIA was increased from £200,000 to £1 million on 1 January 2019, so the allowance for year ended 31 March 2019 would be £400,000, not the full £1 million (£200,000 x 9/12 plus £1 million x 3/12).

The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new car that emits no more than 50g CO2 per kilometer.

SIMPLIFIED IMPORT PROCEDURES IN THE EVENT OF “NO DEAL”

Arrangements have been announced by the government regarding the movement of goods to and from the EU. A simplified import and export system has been implemented by HMRC – in the event of a ‘no deal’ scenario – as a mechanism to ensure that goods move to and from the UK, with a reduced administrative burden for businesses, in terms of the documentation required at the port of entry and exit.

It is intended to make it easier for businesses who import from the EU using roll on roll off (RO-RO) facilities. This development will be of interest to any businesses involved in intra-EU trade. In particular, those businesses whose goods arrive and depart from one of the UK’s RO-RO locations for example, Dover or the Channel Tunnel.

Businesses need to consider whether they wish to make use of this provision. HMRC has advised that businesses will need to register to use Transitional Simplified Procedures (TSP), this can be done from 7th February 2019 via the following link: www.gov.uk/hmrc/eu-simple-importing<http://www.gov.uk/hmrc/eu-simple-importing>.

These transitional simplified procedures reduce the amount of information you need to give in an import declaration when the goods are crossing the border. They do this by allowing you to defer giving a full declaration and paying the relevant customs duty.

NEW WORKPLACE PENSION LIMITS FROM 6 APRIL 2019

The amounts that employers and workers will be required to pay into workplace pensions are due to increase from 6 April unless the worker opts out. The new limits will be 5% from the worker and 3% from the employer. The total minimum contribution will therefore increase from the current 5% overall to 8%.

 

In some schemes, your employer has the option to pay in more than the legal minimum. In these schemes, you can pay in less as long as your employer puts in enough to meet the total minimum contribution of 8%.

YEAR END CAPITAL TAX PLANNING

Have you used your 2018/19 £11,700 annual capital gains exemption?

Consider selling shares where the gain is less than £11,700 before 6 April 2019. In addition, if you have any worthless shares, consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances which could save income tax of up to 45% of the loss.

As far as Inheritance Tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT.

If you have not used your £3,000 allowance from 2017/18 you can make gifts of up to £6,000 before 6 April 2019 without the gift being liable to IHT. Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.

Gifts out of your surplus income are not subject to IHT if properly structured and we can assist you keeping the necessary documentation.

YEAR END PENSION PLANNING

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there continue to be rumours that this generous relief may be reduced in future.