Further advice relating to Coronavirus - Issue 3 - 24/04/2020

Impact on Retirement - Pareto Financial Planners

The world has changed quickly in a matter of months, causing almost unprecedented market volatility, which will have impacted on those either approaching or now in retirement. Men and women today may well live into their eighties and beyond, which means retirees often have decades to live and pensions can be complex with so many considerations, including your family circumstances, health and changing pension legislation.

A positive aspect of pensions is the Government continues to encourage us all to save for retirement by providing tax relief on individual pension contributions, which has the benefit of reducing your tax bill and/or increasing your pension fund. In the case of employer contributions, this reduces the employers corporation tax liability.

As financial advisers, Pareto's aim is to manage client expectations as to what retirement will be like for them - both the positive and negative aspects it may bring, so they can better prepare them for a new chapter in their lives. It’s always key to remember that members of pension schemes can access their pension savings early, provided they have reached the normal minimum pension age (currently 55).

The next step, and a crucial one, is deciding what to do with your pension pot as it is a key decision for your future. What are your options to consider? These may include leaving your pension pot untouched for now until markets recover; receive a guaranteed income (annuity) for the rest of your lifetime or receive an adjustable income (flexi-access drawdown); or indeed, a combination of these two. For most individuals, they can also draw up to 25% tax-free, with the remainder being taxable income.

Finally, cash flow modelling should be an integral part of the advice process and an intrinsic part of the client proposition, to ensure all retirees fully understand what the future may look like. The good news is that whatever your situation, and however you want to enjoy retirement, Pareto can help set up and regularly review your pension to ensure they remain right for individuals ever changing circumstances.

Research & Development - Pierce

The government has announced numerous special measures to help businesses to limit the impact of Covid-19, however, a valuable relief has been around for many years and could gain your company access to vital funds at this time.
Research and Development (‘’R&D’’) tax credits can enable companies to reduce their corporation tax bill or generate cash refund from HM Revenue & Customs.

If your company is developing new products or processes, now would be an ideal time to review whether you are eligible for an R&D claim. Pierce can help you can make a claim going back up to 3 years and the claim can be used to reduce future corporation tax payments, get a refund for tax already paid or even obtain a tax credit from HMRC for companies that have not paid any corporation tax.

Companies are entitled to claim R&D tax relief even where they have not resolved the problem they are looking to solve or if the project has not yet been completed, as long as they can demonstrate eligible investment, the project meets the criteria of an advancement in the application of science and technology and there is no existing internal solution.

You certainly don’t have to be wearing a white lab coat to qualify for R&D relief and the number of industries which have successfully made claims is staggering!

Small and medium companies can claim 230% tax relief on qualifying expenditure that can be attributed directly to R&D activities, rather than a standard 100% relief.

Such expenditure includes materials consumed in R&D, staffing time expended on R&D as well as software, consultancy and utility costs incurred on qualifying activities.

In numbers terms, an R&D spend of £50,000 would result in a company being able to reduce its profits saving corporation tax of up to £12,350 at the current UK company corporation tax rate of 19%.

Please contact Pierce if you believe your business may be eligible for this scheme and we can guide you through the claim process.

Commercial Contracts - Farleys Solicitors

Businesses will be concerned whether their contracts are enforceable against third parties and whether third parties can enforce their contracts against them.

Three aspects to consider:

• General rights to terminate on notice;
• Force majeure
• Frustration

If there is a general right to terminate on notice, you need to check

• the right to terminate applies in the circumstances
• the notice period
• any penalties apply and if they are enforceable
• the clause concerning the means by which notice needs to be given and any deemed dates of service

If there is a force majeure clause:

• Check the events that count as ‘force majeure’
• The burden of proof will be on the defaulter to prove that the event falls within the scope of the clause and that the non-performance is due to the event
• Check the period for which the clause relieves the defaulter from performing its obligations and then what happens e.g. rights to terminate if continuing after a certain period
• Have reasonable steps been taken to prevent or to mitigate the effect of the event?

As a last resort consider whether the contract has been ‘frustrated’

Is it physically or commercial impossible to fulfil the contract; or is the obligation to perform now a radically different obligation from that undertaken at the moment of entry into the contract?

Generally speaking a frustrating event:

• Must have occurred after the contract is formed;
• Is so fundamental that it strikes at the root of the contract;
• Was beyond what was contemplated by the parties when they entered the contract;
• Must not be due to the fault of either party
• Renders further performance impossible, illegal or makes it radically different from that contemplated by the parties when they made the contract

A business may be unhappy that a defaulting party is seeking to excuse itself from its obligations. There are different outcomes depending on which (if any) of the above can be relied upon.

Termination on Notice

• Termination does not render the contract as if it had never been made. Instead, from the time of termination, both parties are released from any further duty to perform their primary contractual duties. Some secondary obligations will survive.
• Rights that have accrued up to the time of termination are usually still enforceable
• A party in breach must pay damages unless the contract specifically provides otherwise

Force majeure

• Force majeure suspends a party’s obligations for the period during which an event occurs. It does not dispense with the obligations. When the event comes to an end the contract is re-activated.
• It is important for the affected party to take all possible steps to avoid the event or its impact (to mitigate).
• If the clause allows termination after a period of time it may specify that termination is without liability, except in respect of prior breaches.

Frustration

• A frustrated contract is automatically discharged and the parties released from their future obligations.
• Neither party may claim damages for the other party’s non-performance of obligations falling after the frustrating event.
• Money paid before the frustration event can be recovered.
• Money due before the frustrating event, but not in fact paid, ceases to be payable.
• A party who has incurred expenses is permitted, if the court thinks fit, to retain an amount up to the value the expenses out of any money it has been paid before the frustrating event.
• Where money was due and payable at the time of frustration, a party who has incurred expenses is entitled to recover its expenses incurred.

Farley's team are on hand for any advice on contract issues as a result of COVID-19. Call 0845 287 0939 or email info@farleys.com