Author: Glenn

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It's a widely used financial metric that provides a measure of a company's operating performance, excluding the effects of financing, accounting, and tax decisions. By focusing on earnings from core operations, EBITDA offers a clearer view of a company’s profitability and cash-generating potential.

Why is EBITDA Useful?

1. Standardisation for Comparisons:
   It allows analysts and investors to compare companies across industries or regions without accounting for differences in financing (interest), tax environments, and accounting practices (depreciation and amortisation).
2. Focus on Operations:
   Excluding non-operational expenses like interest or tax, EBITDA highlights the efficiency and profitability of the core business.
3. Cash Flow Proxy:
   Although not an exact measure of cash flow, EBITDA approximates the cash a business generates before paying off capital expenses, taxes, or interest.

Advantages of EBITDA

1. Simplifies Analysis:
   EBITDA ignores factors like tax policies or depreciation schedules that vary by country or industry, making it easier to compare profitability.
2. Evaluating Acquisition Targets:
   Often used in mergers and acquisitions to assess a company’s ability to generate cash and service debt.
3. Non-Cash Adjustments:
   It eliminates the impact of non-cash charges (depreciation and amortisation), focusing on actual operational results.

Limitations of EBITDA

1. Excludes Key Costs:
   By ignoring interest, taxes, and capital expenses, EBITDA can give an inflated sense of profitability, especially for capital-intensive businesses.
2. Not a Cash Flow Substitute:
   While it’s a useful proxy, EBITDA doesn't reflect changes in working capital, capital expenditures, or actual cash flows.
3. Potential for Misuse:
   Some companies may over emphasise EBITDA to mask issues like high debt levels or significant tax liabilities.

A trust is an obligation that binds a trustee, an individual or a company, to deal with assets such as land, money and shares and which form part of the trust. The person who places assets into a trust is known as a settlor and the trust is for the benefit of one or more ‘beneficiaries’. The trustees make decisions about how the assets in the trust are to be managed, transferred or held back for the future use of the beneficiaries.

IHT planning can involve the careful use of trusts. There are a number of types of trusts which are subject to different tax rules. The main types to be aware of are bare trusts, discretionary trusts, interest in possession trusts and mixed trusts.

A discretionary trust is a type of trust where the trustees have some authority to decide how to distribute income and capital among the beneficiaries. Unlike fixed trusts, where beneficiaries have a set entitlement, discretionary trusts allow trustees to exercise their discretion based on various factors, such as the trust deed, the beneficiaries' needs and circumstances. Trustees must act in the best interest of the beneficiaries and follow the terms of the trust deed

Discretionary trusts are sometimes set up to put assets aside for:

• a future need, like a grandchild who may need more financial help than other beneficiaries at some point in their life; or
• beneficiaries who are not capable or responsible enough to deal with money themselves.

The 18% and 28% Capital Gains Tax (CGT) rates currently applied to carried interest gains remain unchanged for the current tax year. This charge applies to individuals who provide investment management services to funds and receive carried interest on which they are liable to pay CGT.

However, as announced in the recent Budget, these CGT rates will increase to a single, unified rate of 32% starting on 6 April 2025. Additionally, from April 2026, carried interest will be subject to a broader set of policy changes, with further details to be announced at a later date. These changes are part of a wider reform package targeting the tax treatment of carried interest.

The new Labour Government has committed to reforming this area of taxation. They believe that the current tax regime does not appropriately reflect the economic characteristics of carried interest and the level of risk assumed by fund managers.

According to HMRC, around 3,100 individuals in the investment management sector who receive carried interest and are subject to CGT will be affected. Those impacted will need to ensure they are aware of the new CGT rates on carried interest going forward.

Securing funding for a new startup is one of the most critical steps in ensuring the success of a business venture. However, obtaining financing can often be challenging. For instance, traditional bank loans may not always be an option, or they might require security conditions like a personal guarantee.

One alternative is the government-backed Start Up Loan scheme, which offers personal loans to individuals aiming to start or grow a business in the UK. Those approved for the loan are also matched with a business mentor for a 12-month period. Importantly, this loan is unsecured, meaning there is no need to provide assets or a guarantor to support the application.

Business owners or partners can each apply for loans ranging from £500 to £25,000, with a maximum total loan of £100,000 per business. The typical loan amount is between £5,000 and £10,000. The scheme offers a fixed interest rate of 6% per year, with flexible loan repayment terms of 1 to 5 years. There are no application fees or early repayment penalties.

To apply for the loan, you must meet the following criteria:

• You live in the UK
• You are 18 years of age or older
• You own (or plan to start) a UK-based business that has been trading for less than 36 months.

The vehicle benefit charges for 2024-25 were announced at Autumn Budget 2024. The government will introduce legislation by statutory instrument in December 2024 to ensure the changes are reflected in tax codes for tax year 2025-26.

Where employees are provided with fuel for their own private use by their employers, the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The car fuel benefit charge will increase in 2025-26 to £28,200 (from £27,800).

The fuel benefit does not apply when the employee pays for all their private fuel use.

The standard benefit charge for private use of a company van will increase to £4,020 (from £3,960). A company van is defined as ‘a van made available to an employee by reason of their employment’. There is an additional benefit charge for fuel for a van with significant private use. The limit will increase in 2025-26 to £769 (from £757). If private use of the van is insignificant then no benefit will apply.