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	Use staff training to boost your profitability According to a recent survey, a third of UK employers claim that deficient skills among their staff result in higher operating costs, orders being lost and new product development being delayed. Yet staff training and skills are currently high on the Government’s business agenda. Following the success of the Employer Training Pilot scheme, which has over 100,000 employees registered, last December’s Pre-Budget Report announced the launch of a National Employer Training Programme, along with the allocation of an extra £197 million to fund it. So how could you take advantage of training: firstly to avoid hurting your bottom line, and ultimately to really benefit your business? Beyond the basics Clearly, the minimum you need to offer staff is the training to make them competent to perform the job. For example, your admin team will need the essential computer skills, and your sales team will need a good understanding of your products and services. There are also certain mandatory requirements, such as health and safety training. But beyond these basics, there are benefits to offering non-essential, or ‘added value’ training to your staff. An obvious advantage to offering ongoing training is that it can confer a competitive advantage. For instance, salespeople who are highly qualified with skills in telephone techniques, writing proposals and teamworking will be at an advantage over those who are only given product training and a script. Which training? When deciding on the particular training to offer to staff, the key is to identify any ‘skills gaps’. Define what you want your business to achieve, identify the skills and knowledge required to do so, and then examine where existing staff fall short of the required expertise. You can do this in a management brainstorming session, or take a more comprehensive approach through the Investors in People programme (www.iipuk.co.uk). But there is also an argument that investing in widespread training can be beneficial in and of itself, turning your business into a ‘learning organisation’. Where staff are constantly learning new skills across a range of disciplines and applying these to the business, you should see greater dynamism, innovation and higher motivation, and avoid stagnation. Costs and funding How much you spend will depend on the type of training you want to offer, but according to research by the Industrial Society, businesses with less than 100 staff spend an average of £372 per employee on training every year. There are various forms of funding available to help you, and your local Training and Enterprise Council (TEC) will have more information. But perhaps the best approach is not to view training as a cost, but an investment that will ultimately reward your business’s bottom line. Maximising IHT free gifts It is becoming increasingly difficult to describe inheritance tax (IHT) as a ‘voluntary tax’. Those who die owning even relatively modest homes will find the value of their estate exceeds the £275,000 threshold for paying IHT at 40%. Since April 2005 there has been an additional income tax charge, known as Pre-Owned Asset Tax (POAT), imposed on anyone who gives away significant assets or cash, and continues to enjoy benefits from those gifts. However, there are gifts you can make that are not caught by POAT or IHT, in the following circumstances: Charities Any gifts you make to charities, whether during your lifetime or through your Will after death, are free of IHT as long as no conditions are attached. Gifts to health service bodies, various national museums and to political parties are also free of IHT without limit. Marriage Gifts made to a bride or groom just before or after their marriage are exempt from IHT within certain limits depending on the family relationship. The parents of the happy couple can give up to £5,000 each. As soon as the couple are wed there are no limits on tax-free transfers unless a UK domiciled spouse is making a gift to his or her non-UK partner, when the long standing lifetime tax-free limit of £55,000 applies. Marriage is still the great tax saving ‘device’ for IHT. Those that have never legally tied the knot unfortunately do not benefit from the tax exemption on gifts even if they have been living together for many years. Under the new Civil Partnership Act, same sex couples that have entered into a civil partnership should also be able to make unlimited tax-free gifts to each other. However we will have to examine the detail of the legislation to ensure that this Government promise is actually translated into law. Gifts out of income This less well known exemption can be used to make regular gifts out of your annual income to whomever you choose. As long as you establish a pattern of gifts that can be shown to be satisfied from your income without diminishing your capital assets such as property, shares and investments, the gifts are completely free of IHT. To meet this test it is important that you are left with sufficient after-tax income to maintain your usual standard of living. Annual gifts Gifts of up to £3,000 per year made in addition to the gifts in the above categories are also free of IHT. It doesn’t matter if this amount reduces your standard of living or whether it is given to one person or many. If this annual exemption is not used in one tax year it can be covered in the next to make up to £6,000 of tax-free gifts in the second year. Finally, you can also make small IHT exempt gifts of up to £250 per annum to any number of persons. So why not take steps to ensure that you ‘disinherit’ the Government, and make sure that the people you want to benefit, do so. Contact us, and we can help you. A major retrospective on Pre-Owned Assets The Government dropped a ‘bombshell’ in 2003 when it announced that there was to be a new income tax charge on the benefit people get by having free or low-cost enjoyment of assets they once owned (or provided the funds to purchase), after 17 March 1986, but which they no longer own. The regulations broadly follow the model of the benefit-in-kind charge on employees and apply in or after the tax year 2005/06. The charge is designed to block artificial structures set up to avoid the inheritance tax (IHT) rules about gifts made with reservation (GWR). There are exclusions covering circumstances where deliberate avoidance is not in point. There is also a de minimis threshold of £5,000 and benefits with total annual cash values below this level will be disregarded. The charge does not apply to a person who is not resident in the UK for income tax purposes for the year of assessment. The charge applies to three types of property: · land (includes houses and other buildings) · chattels (such as paintings, furniture, vehicles, boats, jewellery, musical instruments, wines and spirits and collectible items) · intangible property (anything not covered above, such as cash, shares, insurance policies) held in a trust The benefit is based on open market values (rent for land and 5% of capital for chattels and intangibles). The value may be affected by contributions and disposals made by the taxpayer since 18 March 1986. Revaluations are required every five years. There are broadly three ways to potentially avoid the new charge: · dismantle the artificial structures, thereby reinstating the potential IHT charge originally being sought to be avoided. However, this may have other unforeseen effects and should not be undertaken without expert advice · pay a market rent sufficient to trigger the de minimis exemption · elect (by 31 January following the first year of assessment) to have the property in question treated as a GWR. There are provisions to deal with the potential double charge to IHT that this could create Any of these courses of action can have immediate or ongoing tax consequences, so none should be entered into without proper advice and due consideration. Example In June 1997 Keith transferred title to his property to a nominee who then granted Keith a 20-year lease of the property at a nominal ‘peppercorn’ rent. The encumbered freehold reversion was then gifted to his son. Keith continued to occupy the property. Keith would be subject to the income tax charge with effect from 6 April 2005, based on the rental value attributable to the property actually disposed of. Note that if the transfer had been effected after 8 March 1999, it would have been caught by the GWR rules and would not, therefore, be subject to the income tax charge. Back to newsletter