Monthly Archives: June 2014

How can we save the Cathedral & Creamery Quarters?

Since the onset of the recession, high streets across the country have struggled to keep tenants. From the loss of “the big guys” such as Woolworths, JJB Sports, Game and HMV to name but a few, to the high turnover of new local start-ups and the closure of some long standing, local landmark businesses – it’s been a tough journey.

The consensus seems to be that that journey is coming to an end. I agree with this to a certain extent for certain sectors. But when we come down to a local level, on the face of it, there is still work to be done.

Newry’s Creamery Quarter (Monaghan Street to Monaghan Row) and Cathedral Quarter (Hill Street to John Mitchell Place) were for years central to the local economy. However, a walk down either is an unfortunate eyesore of empty units, to-let signs and fewer and fewer people.

So how do we reverse this trend? There are a lot of elements in the mix here that add up to the problem; more than I will discuss or claim to know much about. But for my part, I think there are some practical things we can do.

1. Incentivise and de-risk entrepreneurship.

Ok, point number one is a mouthful, but very relevant. I had a conversation with a couple of colleagues in the past fortnight about the exact topic of this article and we spoke about the building Woolworths used to trade in and about the number of empty units on Hill Street. The consensus was that “they should do something with those buildings”. But who are they? The landlords? What can they do? If no-one is interested in renting them, what else can they do?

No, “they” are the entrepreneurs. The current and future business owners. The guy that wants to open a bookshop one day, or the couple that want to run their own travel agents or the mum who makes the best cakes in the world but wouldn’t dare dream of starting a business. There’s not enough incentive and too much risk.

Incentive is probably mainly a personal thing. If running your own business isn’t a big dream of yours, you probably won’t do it no matter what other carrots are dangled in front of you, and that’s fine. But for the ones who do dream of taking the leap but stop short we need something extra. And I’m not talking about grants or other sources of funding. I’m talking about the intangibles – the mentoring, support and advice of the people in business. From the planning stage, to opening the doors on day one and beyond.

I was at an event in Newry & Mourne Enterprise Agency and Conor Patterson, the Chief Executive, used a great word in his speech – co-opitition. Cooperative competition. I think, to a certain extent this is happening in Newry. Business owners, by proximity or otherwise, know each other and talk and work together on certain things, all the while competing for the same trade. The logic behind this has a lot of validity – if my shop is packed with customers, yours is also more likely to be packed too and vice-versa.

This co-opetition would be a real kick-start to the next raft of entrepreneurs looking to move in to those empty units. It would probably happen organically anyway but I think to explicitly and formally set-up something like this and let people know it’s happening might just bring those considering starting a business out of the woodwork.

This access to local expertise also goes some way to de-risk the process. But removing the risk from going in to business is tricky. Some risk cannot be mitigated. Another recession is beyond our control, bank lending policies are beyond our control, interest rates are beyond our control. But some risks can be dealt with. One of the main ones, which is closely linked to the problem being addressed here is premises, which leads me to my next point…

2. We need landlords who get it.

Efforts are being made by landlords to get properties let. But for the most part it’s not helping. Three month rent free periods and one year leases are not enough it would seem. And I can understand why. If you want to take a punt on a business idea, it’s scary to think that if you close the doors six months in, you still have to pay rent and rates for another six months with potentially no income for a number of weeks or months.

I also feel for the landlords as well. Vacant rates discounts have fallen (if not gone??) and if they still owe money on the mortgage the bank still want it whether there is a tenant or not.

I think the solution here, or part of it, is for both parties to give up just a bit more than they think they are willing to. It can only really be looked at on a case by case basis, but if a start-up could get a three month lease and had no rent to pay but covered the rates they would have the opportunity to test their trade and, if it worked, keep going and start paying rent.

The landlord should see this as an investment in the individual who had the balls to give it a go. Now the above scenario obviously doesn’t suit if your business idea is a coffee shop with a ¬£30k fit out cost. But pop-up shops, retail trades that just need a space and some racks and shelves, they could really gain from this. And if they get some traction and keep going then we all win. We’re in to job creation, tourism benefits, aesthetic benefits, and who knows what else.

Ideally, the incentive for the landlords would come from Land & Property Services via their rates bill; a discount, a credit, a free month, something to recognise that they are trying to help their local economy. I don’t see that happening however. Rates go up and only up it seems. LPS and local authorities are unreceptive, unresponsive and uninterested in any pleas for reductions. Maybe one day…

3. We need to reclaim Newry Market.

When I was a child, I used to go Newry Market with my parents. Almost every Saturday we wandered about the stalls with the throngs of other shoppers. If I let go of my mum or dads hand, I was a goner. I’d be lost among the masses.

A walk through the market nowadays is a rather depressing affair. Many stalls are empty. Those that aren’t are terrible. For the most part it’s tat. Some of the stalls are still quite good selling homemade breads & cakes, fresh produce, fish and flowers. But mainly it’s awful. And the worst part is, it has so much potential.

To my mind, there’s no reason why Newry can’t have it’s own version of St. Georges Market in Belfast. I know for a fact that we have some fantastic local food producers, local artists, local craftsmen and women that could really up the standard of Newry Market; people and products that would bring customers in the gates.

And wouldn’t this be a great place for potential entrepreneurs to perfect their craft? A low cost, low risk chance for the girl that makes wedding bouquets to bring them along for sale or order; for the florist who can’t afford premises to begin to build the business; for the local artists to build a reputation and sell their creations. I really think this is one of the biggest missed opportunities in the CIty. But it would take a “mass invasion”, 10-20 willing participants to go in there say once a month, publicise it and do what we can to resurrect this local landmark.

4. Creamery & Cathedral Quarters have free public Wi-Fi. Use it!

A couple of years back I was part of a group of local business people and politicians who approached the council about trying to implement free public Wi-Fi throughout the city. It has been up and running for over a year now (albeit Newry & Mourne District Council did zero to publicise the fact).


This is quite an exciting asset for the area, especially for tourism/tourists. It aids businesses marketing efforts via social media and opens up the doors to any amount of creative marketing strategies such as Phlok, Dealtronic and other such platforms which help incentivise businesses and consumers to shop local.

Over and above just making the most of the WiFi, businesses should make the most of the internet in general. This isn’t particularly specific to the Cathedral and Creamery Quarters but worth mentioning.

A significant cost to many small businesses is obsolete and surplus stock. Many go with the traditional big discount sale when they can realise much higher margins by flogging this stock online – typically around 70-80% of RRP as opposed to 50% when going down the traditional sale route.

For some of the more niche products, there are great websites like Etsy out there to give retailers another low cost outlet for selling stock. Even if you are not particularly tech savvy, there are (local) companies out there that will sell your stuff for you on a commission basis – check out Cargobox.

By embracing online retail for a local level, retailers will actually help mitigate one of their main threats. If Amazon is diverting your customers attention away from you, use it to get it back and then some.

Social media is a huge thing for local businesses too. Many within the town use it and use it well. I could write a blog post on local businesses using social media alone. In short though I think all businesses have their space on social media and should experiment to find out what works well for them. The return to be gained from social media can be different things for different businesses. Some might see the results in their sales, some might just see the value in adding value to their existing customers. Be realistic in your expectations however and, perhaps most critically of all, engage with your customers. Don’t just be a shop window – be the shop keeper; be personable.

5. Carbane Development


This could be the knock-out blow to a lot of local businesses. If this dubious development goes ahead, it will further pull people out of the city centre – that’s a no brainer.

Ok, so 800 jobs are going to be created. But most studies seem to show that out of town developments result in a net loss of jobs. Ok, so it will increase spending in the area. But spending a quid in one of these multi-national stores results in approximately 5p going back into the local economy. Compare this with spending a quid with your small independent local retailer where around 75p goes back in to the local economy and you quickly see how, while spending might increase, the cash is actually being stripped from the local economy.

Aside from the shop local debate, the decision to create a site where ASDA can go seems poorly thought out. Between Tesco, Sainsburys, Dunnes, Fiveways, SuperValu, and two Lidl stores, local supermarkets would already appear to be eating each other’s dinners. Throwing another one in to the mix would further dilute the food retail sector in the city.

I actually think that in order to offset the threat of this development, we need to proactively try to attract some of these bigger retailers on to Hill Street. They will be guys who will bring people on to the street. The idea was never to stop them from turning up – the idea was to bring them in on terms and in locations that were in the interests of the area, its economy and its heritage. But in order to attract them the area needs to be shown as attractive in the first place. Kind of a chicken and egg scenario here.

I have no solutions for this threat to our city centre. Well nothing new I’m afraid. We can petition, talk to Minister Mark Durkan who approved the development, hassle the Council, kick up a fuss etc. But I wouldn’t be surprised if that weren’t enough. If it goes ahead, counteractive measures might be all the arsenal we have.


Newry is not unique in being a town where the local high street is struggling. In fact it’s probably gotten off lightly compared to many others. But that doesn’t change the fact that something needs done about this. The recession picked off a lot of businesses over the course of the past 6 years. I think it would be a shame for those that weathered the storm to fall now because of out-of-town developments, unaffordable rents and rates and, perhaps most cruelly, because the are part of the cycle of business closure/decreasing footfall. The more business that close in the Cathedral/Creamery Quarters, the less people will go there and so on. This cycle won’t just hurt our local traders though. It will have it’s knock on effect on the library, charities, taxi drivers, banks. The whole supply chain gets hit.

These areas of our city mean a lot to a lot of people. The people that own these businesses, work in them, shop in them or supply them. Some have been around as long as I can remember, some are new to the party but fit in well. I would love to see these Quarters really thriving however. Busy, bustling street of shoppers, coffee drinkers, families, tourists. A vast array of grocers and restaurants and crafts stores and jewellers and coffee shops and music stores and butchers and bakers and candle stick makers. No to-let signs. No empty units. Ok, so potentially no estate agents as they gradually go out of business but, you know what they say – every war has its casualties ūüôā

To find out more about the Cathedral & Creamery Quarters including history of the area, news, what’s on, what to do and where to stay, visit Hello Newry

Changes to taxation of savings income can benefit owner-managed businesses

From the 6th April 2015, individuals deriving their income from interest on savings will notice a marked reduction in the amount of tax they are likely to suffer on this income. The Chancellor announced in his Budget 2014 speech back in March that the starting rate of tax for savings would be reduced to 0% for the first £5,000 of savings income over and above the personal allowance (PA).

As has always been the case with the starting rate for savings, if there is other income falling above the PA the reduced rate of tax is ignored and the income is taxed at the basic rate (20%).

When the 0% rate kicks in from 2015-16, the standard personal allowance will be at £10,500. Add to this the savings rate threshold of £5,000 and an individual earning £15,500 from savings (and notably nothing else) will have no tax bill. A husband and wife with joint savings will be able to earn £31k of interest without a penny going to the taxman.

Anyone whose main source of income is in fact savings and are having tax deducted at source by the bank can apply to receive the interest gross if the changes mentioned above are likely to mean you won’t have any tax to pay. To do this you will need to fill out form R85.

However, given typical savings rates are currently around 2-3%, to earn ¬£15k in interest per annum, you need ¬£500,000 – ¬£750,000 sitting on deposit. So it’s not necessarily going to affect most people while interest rates remain low.

However, there is a distinct opportunity here for owner managed businesses to save tax on both their own earnings and the income of their owners.

Charging Interest on Directors Loan Credit Balances

If the company owners invested personal funds into the company for which they are still to be reimbursed, they are entitled to charge interest on this balance. The interest is deductible for the company and is taxed at 0% if no other income is earned in the hands of the business owners.

Previously, directors would have taken a salary equal to the personal allowance and then declared dividends to keep their income within the basic rate band of tax and therefore avoided any further charge to tax. Whilst this is still the most efficient manner of getting circa £40k a year from the company, it is certainly worth considering looking at charging interest on directors loan credit balances; especially in years of poor earnings or perhaps when accounting losses deplete reserves to the point where dividends are not an option.

The Tax Savings

The advantage here is for, say, a husband and wife who own and run their own company. They can pull an extra £10k from the company in the year, pay no income tax and save an extra £2,000 in Corporation Tax, not to mention the Employers NIC saving.

If we compare a salary of £15,500 to an interest charge of £15,500, the effect is the company is better off by £814 and the owner by £1,885. So overall almost £2,700 more stays with the company and its owners for each individual who is charging interest.

The trade-off then is the restriction of earnings. If you choose to take dividends as well you lose the 0% bracket but still get the CT deduction and NIC saving.

The key to this though is having sufficient funds owed by the company to its owners and being consistent and reasonable in the rate of interest you charge. Scenarios I’ve seen in the past that lead to this mechanism being utilised¬†are typically when business owners secure funds personally to buy premises or high¬†value assets¬†for the company. In this instance, further savings can be made by claiming Qualifying Loan Interest relief on the interest charged to the owner. This effectively recharges the interest to the company (assuming similar interest rates) but this will counteract the utlisation of the savings rate band.


So while the above mechanism may have limited uses, it can still provide significant savings when the conditions are right. The relief for Qualifying Loan Interest, whilst it can counteract the usability of the savings rate band, can also help. The relief is given regardless of the type of income so if owners do wish to take dividends for their tax efficiency, the relief on the interest being suffered can help increase the amount of dividend that can be taken before hitting the higher rate threshold.

Engineering the above scenario simply to get the tax deduction would be inefficient. However, if the circumstances are in place, or the owners are considering transactions that might put them in place such as providing finance for the purchase of premises, then this interest income offers some flexibility to owners wishing to extract funds from their company in a tax efficient manner.

How do grants affect a company’s R&D Tax Credits claim?

Since the introduction of the R&D Tax Credits in to the UK Corporation Tax regime, there have been two strands to it – the Small and Medium-sized Enterprise (SME) scheme and the Large Company scheme. Since August 2008, the definition of SME has been a company with less than 500 employees and, either less than ‚ā¨100m or a balance sheet with less than ‚ā¨86m.

In the context of Northern Ireland, the vast majority of companies will fall into the SME category and will be able to claim under the SME scheme. Which, from a tax perspective, is a good thing! The tax man will allow you to claim an additional 125% on top of the cost of R&D activities. So if you spend £10,000 on qualifying Research and Development, you are treated as having spent £22,500 and your taxable profits are reduced (or your tax relievable loss is increased).

Under the Large Company scheme, the additional relief given on top of the actual spend is just 30% – still a worthwhile relief, but pretty much miles behind the SME scheme.

However, although the vast majority of companies who are claiming R&D tax credits in Northern Ireland meet the criterion of an SME, there is a situation when they will not be able to claim under this scheme: whenever they claim grants which are State Aid Notified.

Being a member of the EU, the UK must comply with the laws surrounding State Aid – that is, the government using tax-payers money to give assistance to one or more organisations that give them an advantage over others. The laws are generally concerned with distorting competition across the EU and aim to stem any such distortion by monitoring and measuring the money Member State governments dish out to these organisations.

There is a de minimus level of state aid – a threshold of state aid a company can receive without causing any issue. This level currently sits at ‚ā¨250,000 in any 2 year period.

The R&D Tax Credits are a form of State Aid. More often than not, the scheme doesn’t result in cash being given to a company (although this can happen) but the enhanced tax saving available is deemed to be financial assistance.

So, in order to try to ensure that the de minimus level of State Aid is not breached by any company claiming under the SME scheme, the government has had to exclude from the scheme any SME that was in receipt of a government grant that was State Aid Notified.

In Northern Ireland at the minute this causes a problem. Some of the most common grants available are either awarded by Invest NI or a third-party on behalf of Invest NI. And, you guessed it – they are almost all State Aid Notified.

This is unfortunate. Not least because the companies carrying out this expensive and essential R&D are exactly the ones most likely to seek and claim grant funding.

However, there are a few things you can do in order to maximise your claim to R&D Tax Credits and, if the circumstances allow for it, claim a few pound back from HMRC in cash.

1. Ask Invest NI to award your grant under the “de minimus” rules.

Up until recently, Invest NI wasn’t able to do this. All grants were dished out as State Aid notified and no-one really complained. That was until the accountants told these companies that they were losing out on the uplift in their R&D expense and potential cash payments.

So, after a bit of pressure being put on, Invest NI have found a work around and are now able to offer de minimus grants where grant funding is ¬£100k or less.. While there seems to be an awareness of this now with Invest NI staff, make sure you ask that the grant be awarded in this way. You should still make sure that the combined grant, plus all other grants in the past two years and the tax relief don’t push you over the de minimus limits.

2. Can your R&D spend be broken down into separate projects?

It is actually possible to claim under both the SME scheme and the Large Company scheme. If a company is carrying out a number of R&D projects, any that receive grants are relieved under the Large Company scheme whilst those that do not receive government assistance are able to remain under the remit of the SME scheme.

Say for example your business is researching a new medical vaccine and it receives a proof of concept grant in relation to a piece of new equipment that is being designed to administer the vaccine. This piece of equipment is separately identifiable from the vaccine and, has its own research activities and development activities. The grant was also given specifically in relation to this equipment. So it would be treated as a separate project for R&D tax credits and, due to being in receipt of the grant would receive tax relief under the Large Company scheme. This divisibility also protects the rest of the R&D project and ensures that it can still receive the 225% relief on its spend.

3. Reject the grant. Seriously.

This seems somewhat counter intuitive but, depending on your total R&D spend, it may be better for you to reject or not seek grant funding. This comes down to the differential in the SME and Large Company scheme uplift rates (125% – 30% = 95%) multiplied by the rate of Corporation Tax (usually 20%). So, if your total R&D spend times 19% (95% x 20%) is greater than the grant amount – you’re worse off I’m afraid.

Now, this is a purely mathematical and pragmatic view of things. Naturally there are other factors to consider with grant funding. The main one being, R&D is expensive and suppliers do not accept magic buttons or well wishes in lieu of payment so if you need the cash – take the grant! Remember also that tax relief will only actually materialise if you, one day, make a profit. Grants funding can also be more valuable than potential tax relief from the point of view that it may come with some professional advice, a chance at further grant funding or an introduction to potential equity investors.


So, whilst the R&D scheme is a pretty generous tax relief, SME needs to be careful not to fall in to the trap of excluding themselves from claiming the the maximum relief possible under the SME scheme. Remember also that grants are a taxable income stream themselves. So not only might they reduced you R&D uplift, but the may in fact cancel out the uplift that you do qualify for.

As with everything in business, consider the wider context when deciding on issues of tax planning and fundraising. Never undertake a transaction solely to gain a tax benefit. Weight up all the factors, including tax, and then see what’s best for you and your business.