Category: ‘Financial Planning’

8 Reasons To Have a Shareholders’ Agreement

Monday, June 27th, 2016


Even though there is no legal requirement to have a formal shareholders agreement, every company with more than one shareholder is well advised to have one. Shareholder agreements ensure that the running of the company and the responsibilities of the shareholders are properly thought through, there is clarity and certainty as to what can or cannot be done and decisions are taken by consensus and discussion. As a result, it will reduce the potential for conflict between shareholders and help the company to be run smoothly and profitably. Putting such an agreement in place is often quite far from everyone’s thoughts when starting a new business, but it is better to get a shareholders agreement put in place at the outset because, further down the line, views will almost certainly diverge, circumstances change and resentment can build between shareholders leading to fractious disagreement in respect of the company. It is, however, essential that a full business owner’s fact find is carried out before setting up a Shareholder’s Agreement. All companies are different and the business owner’s fact find will help to identify other need areas or potential conflicts that may need addressing so that the Shareholders Agreement is set up correctly.



Here are the following key benefits that make having a shareholders’ agreement important:

1.      Protection

The agreement works in conjunction with a company’s articles of association, but will give shareholders greater protection than is provided by the articles alone, not least because companies are often set up quickly and cheaply just with standard articles. These standard articles will not include much detail regarding protective provisions for shareholders or define the limits of their responsibilities.

2.      Flexibility

Ordinarily a company is subject to control in accordance with the comprehensive body of company law (contained in both statute and case law) which governs how a company should be run. However, a shareholders’ agreement can contain any arrangement agreed between the shareholders and can vary what would otherwise be the legal position without it.

3.      Decision Making

Unless agreed to the contrary in a shareholders agreement, the management of the company is determined mostly by the board of directors, while certain key decisions (particularly anything relating to ownership) are required to be made by the shareholders in general meetings (or by written resolution). Therefore an agreement is important to fully determine the basis for important decision making, to restrict the power of the directors where necessary and to provide protection for the parties involved in the ownership of the company against the actions of the others, whether minority, majority or equal shareholders.

4.      Privacy

As opposed to articles of association which is a public document made available at Companies House, the shareholders agreement will remain private and confidential and will not be open to view by others such as creditors or non-member employees.

5.      Dispute Resolution

Having a shareholders agreement is a cheap way to minimise any potential business disputes between owners by making it clear how certain decisions are made and also by providing a framework and procedures for dispute resolution.

6.      Finance Potential

The existence of a shareholders agreement can assist in raising finance from banks or creditors and also demonstrates the stability of the business to other potential partners.

7.      Succession

It prevents situations where changes in one shareholder’s personal circumstances can have an effect on the company or other shareholders within the company, safeguarding each shareholder’s financial interest in the company, and the interests of the shareholders’ families in the event of the death of a shareholder.

8.      Minority Shareholder Protection

A shareholders agreement protects the rights of minority shareholders and the investment value of their shareholding. Without an agreement, majority shareholders may force issues that are not in the minority shareholders’ interests. Once in place a shareholders agreement can only be amended with the agreement of all of the shareholders whereas the company’s articles of association can be changed by a 75% majority meaning that a shareholders agreement provides better protection for minority shareholders.



If you think you might benefit from a Shareholders’ Agreement, please email Warren McCleary at or phone him on the office number 028 3831 6111.


Friday, August 1st, 2014

From April 2014 a new investment relief has been created, the Social Investment Tax Relief (SITR). Investments must be in a social enterprise, which means a community interest company, a community benefit society, or a charity. The money raised must be used for the enterprise’s chosen trade or charitable purpose.

In many ways SITR shares characteristics with the SEIS (Seed Enterprise Investment Scheme) and the EIS (Enterprise Investment Scheme). There are, however, some differences in the Income Tax, Capital Gains Tax and investment limits for each scheme.

Another important distinction is that SITR is the only scheme that can apply to certain debt instruments as well as shares.

A summary of the present tax reliefs available under the three schemes are set out below:

Income Tax

SITR – 30%, SEIS – 50%, and EIS -30%.

Capital Gains Tax

All three schemes provide potential CGT free gains on the growth in investments, if achieved, provided they are held for the minimum holding period.

Additionally, gains on the disposal of any asset can be deferred into SITR and EIS (but not SEIS) investments.

In place of the full deferral relief, investors in SEIS can claim a 50% exemption of the gains reinvested.

At present the maximum amount that an individual can invest in SITR investments is £1m annually. The equivalent maximum amounts for SEIS are £100,000, and EIS £1m.

Further, the maximum amounts that the entity can raise are: SITR Euros 200,000 over 3 years (including any other de minimis state aid received), SEIS £150,000 over 3 years, and EIS £5m in any 12 month period.

Investors considering their investment options should seek professional advice as it may not be immediately clear which would be the best scheme to support their investment needs.

Inheritance Tax

Thursday, July 31st, 2014

Inheritance Tax (IHT) is due when a person’s estate (their property and possessions) is worth more than £325,000 when they die. This is called the ‘IHT threshold’.

The current rate of IHT is 40% on anything above the threshold. The rate may be reduced to 36% if more than 10% of the estate is left to charity.

Who pays Inheritance Tax

Usually the executor or personal representative for the person who has died pays IHT using the funds from the estate.

Trustees are responsible for paying IHT on trusts, which are a way of looking after assets (money, investments, land or buildings) for people. A trustee is a person who looks after the trust.

If you’ve got an inheritance or a gift from someone who has died you only owe IHT if their estate is more than £325,000 and either:

  • it says in the will that you should pay Inheritance Tax
  • the deceased’s estate can’t pay it

There are certain reliefs from IHT. These include estates that include certain business assets or agricultural property.


It is also possible to reduce any IHT due on death by reorganising your estate while you are alive. This can be done with the use of trusts or by gifting assets. As you can imagine there are complicated rules that set out how these strategies can be used. Additionally, any assets left to your spouse or civil partner (providing they are UK domiciled) are exempt from IHT.

A new range of apprenticeships under the Trailblazer scheme.

Wednesday, July 9th, 2014

Skills and Enterprise Minister Matthew Hancock announced a new range of apprenticeships that will be developed by employers under the Trailblazer scheme on 27 June 2014. He also called for expressions of interest from groups of employers to become part of the third phase of Trailblazers.

The Apprenticeship Trailblazers, launched in October 2013, have gone from strength to strength. The first phase of Trailblazer sectors includes energy & utilities, digital industries, financial services, life sciences and industrial sciences. Businesses from each sector worked together and produced new concise employer-led standards for key apprenticeship roles in their industry. These were launched in March 2014 and the first apprenticeships under the new standards will be delivered in 2014/15.

Building on their success, the businesses involved will now work on standards for more occupations that they see as crucial to developing their workforce and that will provide new opportunities for young people. The new range of occupations includes:

  • workplace pensions
  • aerospace machinist
  • IT practitioner
  • laboratory and healthcare science
  • investment operations

Skills and Enterprise Minister Matthew Hancock said:

The apprenticeship Trailblazers have already made great strides in developing a simpler and more rigorous system which works for employers and apprentices. Their commitment to develop more apprenticeship standards demonstrates the support our reforms have from employers.

Equipping all young people with the skills they need to begin prosperous and productive careers is a vital part of our long-term economic plan. Apprenticeships give young people the chance to fulfil their potential while helping to drive business growth.

We want to give more employers in more sectors the chance to lead the development of apprenticeship standards for their industries. That is why we will launch a third phase of Trailblazers later this year and I would encourage groups of employers to step forward and take this opportunity.

Please call if you would like to discuss the possibility of developing an apprenticeship scheme for your business.

Prepare for auto enrolment

Monday, July 7th, 2014

The law on workplace pensions has changed to make it easier for people to save for their retirement. Automatic – or auto – enrolment means every employer must enrol eligible staff into a qualifying pension scheme.

Both you and the employee contribute to the pension, as does the government in the form of tax relief.

Find out your staging date

Your start date, known as a staging date, will depend on the number of employees in your PAYE scheme on 1 April 2012. You can find out your exact staging date on the Pensions Regulator website using your PAYE reference but the table below gives an outline:

Number of employees in largest PAYE scheme Staging date
250+ 1 October 2012 – 1 February 2014
50-249 1 April 2014 – 1 April 2015
Fewer than 50 1 June 2015 – 1 April 2017
New employers set up after 1 April 2012 1 May 2017 – 1 February 2018

Create an action plan

The Pensions Regulator website has a chart that sets out each step and the appropriate time schedule for each step and staging date. You’ll have to nominate a contact on the website, who will receive monthly reminder emails and guidance from the Pensions Regulator.

Identify eligible staff

Although your staging date is based on the size of your PAYE scheme, not all your employees will necessarily qualify for auto enrolment.  You have to automatically enrol all staff who:

  • are between 22 and state pension age;
  • work or ordinarily work in the UK; and
  • earn more than £10,000 (2014/15).

Part-time workers, employees on short-term contracts and those on maternity, parental or carer’s leave will have to be automatically enrolled if they meet the above requirements.

Some staff who do not meet this criteria are eligible to opt in to an auto enrolment pension scheme if they wish. These include staff who:

  • are between 16 and 74;
  • work or ordinarily work in the UK; and
  • earn above £5,772 but not more than £10,000 (for the 2014/15 tax year).

Or those who:

  • are between 16 and 21, or state pension age and 74;
  • work or ordinarily work in the UK; and
  • earn above £10,000 (for the 2014/15 tax year).

If employees who fit these requirements ask to join your auto enrolment pension scheme, you must enrol them.

In addition, certain other staff can ask to join a pension scheme. If they ask, you must put them in a scheme. However, the rules are not the same as auto enrolment and you don’t have to pay an employer contribution.

Annual earnings (2014/15)



16 – 21

22 – state pension age

State pension age – 74

Less than £5,772

Has a right to join a pension scheme

(referred to as ‘entitled worker’)

£5,772 – £10,000

Has a right to opt in

(referred to as a ‘non-eligible jobholder’)

Over £10,000

Has a right to opt in

Automatically enrol

(referred to as an eligible jobholder)

Has a right to opt in


Choose a pension scheme

Once you know which employees are eligible, you can choose a pension scheme suitable for auto enrolment.

You may be able to use an existing defined contribution pension scheme if it satisfies the Pensions Regulator’s auto enrolment criteria.

There are 3 sets of requirements that a pension scheme must meet:

  • minimum requirements
  • qualifying criteria
  • automatic enrolment criteria.

Minimum requirements

Minimum requirements vary according to pension type. Minimum requirements for defined contribution occupational pension schemes are based on contribution rates.

Qualifying criteria

Schemes must:

  • be an occupational or personal pension scheme;
  • be tax registered; and
  • meet minimum requirements.

Automatic enrolment criteria

In addition to meeting minimum requirements and qualifying criteria, schemes must not:

  • prevent you from making arrangements to automatically enrol, opt in or re-enrol staff; or
  • require staff to express a choice or to provide information to remain in the pension scheme.

There are additional criteria concerning consultancy charges for money purchase schemes. 

You can use a non-UK scheme based within the European Economic Area but there are additional requirements for these schemes, so it is important to seek professional advice.

Enrol staff

Once you have assessed who is eligible and chosen a pension scheme, you will need to give your pension provider information about eligible employees. This includes basic personal information, national insurance number and auto enrolment date. You will also need to give enrolment information to eligible employees.

It is important to keep records of this process to demonstrate that you are complying with your auto enrolment duties. You’re still legally responsible for ensuring records are kept even if you outsource your pension administration to a third party.

Level of contributions

Auto enrolment requires employers to make a minimum contribution, which is usually a percentage of an employee’s qualifying earnings (earnings between £5,772 and £41,865 for the 2014/15 tax year).

Date Employer minimum contribution Minimum total contribution
Employer’s staging date to 30 September 2017 1% 2%
1 October 2017 – 30 September 2018 2% 5%
1 October 2018 onwards 3% 8%

Register with the Pensions Regulator

You must register your scheme online with the Pensions Regulator within 5 months of your staging date. You will have to provide details of your pension scheme, including the number of people enrolled.

Inform employees

The next step is to write to all employees to tell them how they will be affected by auto enrolment. This includes:

  • when enrolment starts
  • the pension operator
  • the type of pension
  • the level of contributions from employer and employee
  • how to opt out.

You will also need to provide this written information to employees who start after your staging date and any employees who become eligible for auto enrolment. 

Opting out

Employees can choose to opt out of your pension scheme after they have been enrolled. Usually, employees who want to opt out complete a form from the pension scheme provider and give it to you.

You will need to refund contributions of staff who opt out within 1 month of enrolment.

You will have to re-enrol any employees who have previously opted out every 3 years (assuming they still qualify for auto enrolment).

Monitor changes in employee status

You will need a process to monitor when employees move categories as they may become eligible for auto enrolment. This is particularly important when:

  • employees reach the age of 22
  • employees who earn less than £5,772 or less than £10,000 change salary.


    Getting auto enrolment right is vital. Seeking expert advice can help, so please contact us to discuss auto enrolment and your specific business needs.

Pension contributions and high income earners

Monday, June 2nd, 2014

Our previous government enacted legislation that removed the personal allowance for certain high income earners. The present government has made no change to this process. Basically, for every £2 your income exceeds £100,000, your personal allowance is reduced by £1.

Take, for example, the case of Joe Smith who has income for 2014-15 of £100,000 and a personal tax allowance of £10,000 – this leaves income subject to tax of £90,000 and a tax bill of £29,627.

Joe’s best friend, Charlie, has income of £120,000. Based on the £1 reduction for every £2 of income over £100,000, Charlie has lost entitlement to his personal allowance of £10,000 and his tax bill amounts to £41,627.

Charlie’s extra tax, compared to Joe’s, is £12,000. His income is £20,000 higher than Joe’s and accordingly, his marginal rate of tax on this amount is 60% (£12,000/£20,000).

This 60% Income Tax rate can be avoided. For instance, Charlie could pay a net contribution into his pension of £16,000 (gross premium £20,000) and this will reduce his taxable earnings to £100,000 saving him £8,000 in Income Tax – Charlie also receives 20% tax relief at source of £4,000 – the combined tax saved is therefore £12,000.

There are other strategies that can be employed to similar effect. If your income is likely to exceed £100,000 for the first time this tax year please call so we can discuss your options in more detail.

7 Questions to ask when choosing your accountant

Wednesday, May 28th, 2014

Are you a member of any professional body?

Unlike other professions, anyone can open an office and call themselves an accountant, no training or qualifications are required!  There are many unqualifieds out there, I suspect that many of their clients don’t realise they are unqualified!  You wouldn’t go to an unqualified doctor, so why take a risk with your financial health?  If your accountant is qualified, he will normally append the qualification to the firm name, for example, McCleary & Company, Chartered Accountants & Registered Auditors. The main professional bodies for accountants in practice are; Chartered Accountants and Association of Chartered Certified Accountants.  Beware of firms who call themselves simply ‘Accountants and Auditors’, they may not have any formally qualified staff!

As members of ‘Chartered Accountants Ireland’, we are subject to regulation and regular independent third party review.  This gives assurance that our standards will be maintained.  Accountants who are not members of professional bodies do not have this level of assurance, so their quality may suffer.


Who regulates you for Money Laundering purposes?

Accountants are a regulated profession under the Money Laundering Regulations, generally the professional bodies regulate their own members, however, ‘accountants’ who are not members of a professional body are supposed to be registered with HMRC for money laundering purposes.  If they are not registered, they are breaking the law.


How do you keep up to date with changes in legislation?

Rules and regulations, especially tax, are constantly changing.  Members of professional bodies have a CPD (Continuing Professional Development) requirement to do a minimum number of hours study per year.  Any professional who does not do at least this amount of study, cannot possibly hope to keep up to date.  An out of date accountant can prove to be very expensive, even if his fee is small!


Who pays your fees in the event of a tax investigation?

Anyone can have a tax investigation, while generally targeted, the HMRC computer selects some on a completely random basis.  Investigations are worrying and time consuming, often the professional fee will far outweigh any additional tax that might be due.  For this reason we include our Tax Investigation Service in our annual fee.  Our firm pays an insurance premium, which means that the insurance company, not the client, will pay our fees in the event of a Tax Enquiry.  Some other firms also offer this service, so it’s worth checking if it can be included.


How many times will we meet a year?

Some clients only want a set of accounts and a tax return and are happy to only meet once a year to finalise them, however, if you want to minimise your tax bill, it is better to meet before your year end, when it is still possible to plan, once the year end passes, your planning options are limited.  I believe that you should meet your accountant at least twice a year.  A pre-year end tax planning meeting a couple of months before the year end, will enable you to discuss advancing expenditure and various other options to legally minimise your tax bill.


What happens if you are unexpectedly absent from the business?

A one man band accountant, working from home, will often be a cheaper option than a slightly larger firm but this option does come with some risks.  What happens if your accountant becomes ill just before a deadline?  Will your work get done and who will pay any fines or penalties?  Members of professional bodies, who are sole traders, are required to have alternates that will stand in for them, although they are often busy dealing with their own clients, so your job may not be their first priority.

Do you have any Professional Indemnity Insurance?

Even in the best firms things can go wrong, firms who are regulated by the main professional bodies are required to have Professional Indemnity Insurance, so that if a client suffers a loss due to the firm’s negligence, they have some redress.  Some unqualified accountants also have insurance but not all of them, so it is worth asking the question.




Some business people choose their accountant based purely on price, but all accountants are not the same, you could be comparing apples with oranges!  This list is not exhaustive but I’d suggest that satisfactory answers to these seven questions should be a pre-qualifier for developing your shortlist.  Price is obviously a consideration but it should not be the only one, in the words of Warren Buffet ‘Price is what you pay, Value is what you get.’

Pension decision period extended

Tuesday, April 29th, 2014

Last month we touched on the changes that HMRC is introducing to the treatment of defined contributions pensions. HM Treasury has now issued the following update that clarifies the position of people who have recently taken a tax-free lump sum from their defined contribution scheme.

“The government has announced today (Wednesday 9 April) that people who have recently taken a tax-free lump sum from their defined contribution pension will be given 18 months rather than 6 months to decide what they wish to do with the rest of their retirement savings, and will not be put at a disadvantage should they wish to wait to access their pension savings more flexibly.

This follows an announcement on 27 March confirming that the government would take action to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required to make a decision regarding their pension, either by buying an annuity or entering into capped drawdown.

Currently, if this is not done, the lump sum is then taxed at 55%. This extra time will allow people to make the right decision for their pension.”

Exchequer Secretary to the Treasury, David Gauke, said:

“At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly. However, we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the budget.”

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