PwC in the Midlands

Employee benefit trusts: knowing your EBTs from your TLCs

PwC — Wed, 19 Jun 2013 15:50:39 +0100

Having been married for nearly ten years you might think I could crack a few jokes about how it has aged me more like 20 years (we also have two daughters) or how I am being constantly nagged (one man versus three girls at home!). But seeing some of the young single members of the team talk about interne t dating you start to see all of the stress that can cause, which makes being married with two daughters look like a walk in the park. WLTM, MSW, TLC, GSOH: there are endless dating abbreviations to make sure you get it all within the word limits, but do we always know what they mean?

I guess tax is rather like dating too; tenuous, but let me explain. The reason I say this is we’re just as guilty of using lots of abbreviations too and bandying them about without thinking to ask if people understand what we mean.

The one which I've seen lots of recently is EBT, which as some of you will know stands for employee benefit trust. There have been many structures put forward over the years using EBTs to try and avoid PAYE and NIC and many private businesses have utilised them, without fully understanding the potential pitfalls. HM Revenue & Customs (HMRC) have long sought to litigate EBT-based remuneration schemes and many will have seen some of the high-profile cases, most recently the Rangers case, where the taxpayer has won. But, in that case, while HMRC has been defeated at the FTT (sorry First-tier Tax Tribunal) it will undoubtedly appeal.

HMRC has stated it has around 5,000 current enquiries into EBTs and some have been ongoing for years. Many companies have simply let these run on, but having unresolved issues like this can really start to cause issues when you’re looking to sell or on events such as refinancing, where shareholders can really lose value. Also, as the tax rules around these schemes have changed recently these problems don’t go away, even if HMRC has missed the opportunity to enquire, or if they eventually lose their arguments that these don’t work. From our experience, the message really is that it’s better to try and resolve ongoing enquiries into EBTs and agree to settle with HMRC. So, as ever, it’s wise to seek advice from your professional adviser at an early stage.

Then you can really say ‘PC W NRE seeks S’ – which translates as either ‘Politically Correct, Widow, Nice Relationship Energy seeks Single’ or ‘Private Company With No Revenue Enquiries seeks Sale’, you choose!.

Will Dowsett is a director in our Private Business team. You can contact him on 0121 265 5589 or by email at william.dowsett@uk.pwc.com.

Local authority confidence about impact of cuts plummets, according to survey

PwC — Wed, 19 Jun 2013 15:20:01 +0100

Council chief executives’ confidence about their ability to protect front line services from budget cuts has plummeted by 40% in a year, according to PwC’s latest survey of local authority leaders in the UK.

The findings of PwC’s third annual survey - The Local State We’re In – consider how local authorities are responding to continued financial pressures, based on the views of council chief executives and the public.

Last year 98% of council chief executives said they were confident that the savings they needed to make could be achieved without seriously impacting the quality of services delivery and outcomes. This year, only 58% are confident.

The report finds increasing signs that cracks are appearing as councils adjust to continued and significant financial pressures, and concern that these will become even more pronounced after the forthcoming Spending Review on 26^th June.

According to the survey, 9 out of 10 Chief Executives and Leaders now believe that some local authorities will get into serious financial crisis or fail to deliver the essential services that residents require within the next three years.

From a West Midlands’ perspective, the report also reveals which services people living and working in the region use most and where they have started to notice the impact of the spending cuts in the last 12 months.

In the West Midlands, the most used / valued services are refuse collection (85%), recycling services (66%), street lighting (53%) and public transport (42%). Over the past 12 months, a third of people in the West Midlands (30%) noticed that spending cuts had begun to impact on road and pavement repairs and 23% had noticed a reduction in library services. However, 39% of people in the region had not noticed any reduction in services over the past 12 months.

Michael Kitts, partner and public sector specialist at PwC in the Midlands, said:

“The public's awareness of the impact of spending cuts on local services is beginning to rise, demonstrating the importance of local authorities making progress on improving demand management, and re- modelling the delivery of front line services. Many already have well-considered plans in place, which have already delivered unprecedented savings over the last three years, and there is an opportunity for local authorities in the Midlands to lead the way.

“The scale of concern about the impact of sustained austerity should not be underestimated. The vast majority (83%) of people in the region have said that they are ‘concerned’ or ‘very concerned’ about what is going to happen to public services in the future. Local councils must heed this warning and put fresh impetus behind their plans.”

The report also finds that:

Councils across the UK have once again achieved planned budget savings, by focusing on improving service delivery processes, support activities and third party expenditure;
36% face the same level of savings two years in a row, and 40% have even bigger targets;
There is universal expectation that this month’s Spending Review will mean further savings targets announced above and beyond those already in place;
While public understanding or perception of ‘cuts’ to date remains quite low, of those aware of cutbacks to their local council services, or believe they have been introduced, more than half (53%) oppose them, up from 36% two years ago;
Environmental services such as road repairs, parks, and street cleaning are the biggest areas of concern for cuts for the public;
Community budgets (where all parts of the public sector work closer together with a single budget) were met with general scepticism in the survey, with only 23% of chief executives and 6% of leaders believing they will lead to significant savings and transformational change.

While there is some evidence in this survey that councils across the UK are getting better at engaging with their communities about the difficult choices they face, there remains a very wide gap between how local authorities believe they are doing in this respect and how the public perceives they are performing. Leaders (75%) and chief executives (53%) level of confidence that the public are well informed about the reasons for cuts is over twice that of the public (26%).

In the face of longer term budget cuts, and the decline of traditional central government support, the PwC survey highlights how local authorities are increasingly looking to new sources of revenue to balance their budgets, including increases in charges or new fees, reducing concessions, and increasing commercial/trading activities.

The survey also highlights local government’s enthusiasm for the reforms proposed by Lord Heseltine, but finds that the jury remains out on whether the Government’s actions to enable local growth will be sufficient to support councils in generating regional growth.

Click here to download the full report.

Contact details
Email: Michael Kitts
Tel: +44 (0)1509 604025

Skills gap is hindering growth for Midlands businesses

PwC — Wed, 19 Jun 2013 13:59:19 +0100

Midlands business leaders are calling for the Government to prioritise initiatives that help foster a skilled workforce, as nearly two thirds of UK CEOs (65%) say a lack of key skills is hampering their growth prospects.

A global PwC survey of over 1,300 CEOs reveals UK business leaders are more concerned about the availability of key skills than any of their Western European counterparts, rating it as the greatest threat to their business’ growth.

The research shows Midlands businesses are looking to the Government to help them plug this skills gap. Three out of four UK CEOs said creating and encouraging a skilled workforce should be the Government’s highest priority for business for the year ahead.

This is in contrast to businesses’ own immediate investment priorities, with only a third of UK CEOs placing filling talent gaps as a major priority for the year ahead. Instead, they see it as a longer-term goal; with 70% of respondents saying they plan to increase investment in their workforce over the next three years.

The research reveals that mining, energy, and engineering and construction companies report the most chronic shortage of skilled employees.

Kirsty Cook, reward expert at PwC in the Midlands, said:

“Midlands businesses are struggling with a widening mismatch between the skills of their workforce and the skills they need to achieve strong growth. There needs to be a joint approach to addressing the problem, with business and Government working together to plug the skills gap. Apprenticeship programmes are a great example of where business and the Government are already working together to tackle this issue.

“At a time when growth is top of all businesses’ agendas, investment in employee training and development should be a key priority for CEOs in the Midlands for the year ahead rather than a longer-term aspiration.”

The research reveals UK businesses are planning to hire this year, with more UK businesses planning to increase their headcount (45%) than make cuts (35%). The remaining respondents (17%) expect their headcount to remain relatively static.

Kirsty Cook, reward expert at PwC in the Midlands, said:

“Despite the difficult economic backdrop, it is encouraging that Midlands businesses are continuing to hire. While headcount has been an obvious target for cost cutting in the past, many business leaders are finding smarter ways to strip costs out of their business which won’t damage their employees’ engagement and leave them with talent shortages in the future.

“The most successful companies will combine recruitment with developing the people they already have. Those with a balanced approach to growing their own talent and buying in key skills are most likely to succeed."

Contact details
Email: Kirsty Cook
Tel: +44 (0)121 265 5870