After a flurry of announcements on payday lending over recent weeks, I have been reflecting on options for borrowing. My conclusion is, as usual, that it’s complicated.
Payday lenders are going to be more tightly regulated, so we are told. This is long overdue. There are many horror stories of people with multiple and spiralling debts because they have used payday loans which have become out of control. In some cases normally entirely law abiding people have turned to crime, such has been the desperation.
So what is to be done? The news that payday lending will be better regulated is obviously welcome. The prediction that many will go out of business will not cause swathes of the population to lose sleep. Does this mean though that there will be a gap in borrowing facilities?
As a society, we feel the need to provide whatever services people want. If there is a market we should fill it. Somebody, somewhere will provide the service. That may be the case, but I wonder at what cost?
There have been many calls for credit unions to step up to the plate and replace payday lenders. The Financial Conduct Authority recently raised the cap on credit union interest rates. They can now charge up to 3% a month (42.6% APR) which pales into insignificance when compared to the 4000%+ APR that payday lenders charge. Of course not all credit unions will charge this maximum and those that do will only do so when they need to – when the loan is seen to be ‘risky’.
The trouble is that credit unions are there to provide ‘affordable and appropriate’ credit. They are not allowed, by their rules and the regulation, to lend to people who clearly can’t afford to repay their loan. Apart from being risky, lending to someone who can’t afford to repay is unethical, which doesn’t sit well with the credit union ethos. This is the conundrum that we face; how do we help people to meet their financial needs without sending them into spiralling debt.
The answer is simple to state, but extremely difficult to achieve. It is about a balance of people learning to manage their money lives better and having affordable and appropriate financial products for them to use when they need them.
To hear more on my views on this topic, listen to an interview that I’ve given on SoundCloud.
On April 6th 2014, the UK Government will formally launch a range of tax incentives to help grow the employee ownership sector. There will be an exemption from income tax of £3,600 for certain payments made to employees of qualifying employee-owned companies, and the introduction of a relief from capital gains tax (CGT) for owners selling a controlling interest to a trust which operates for the benefit of all employees. Finally, a tax hook on which to promote employee ownership to those business owners considering their business succession options!!
Although the Centre is disappointed that direct forms of employee ownership, such as the worker co-operative model, have not been recognised, this is still a significant milestone for employee ownership. The tax incentives headline what has been a very busy 18 months of UK policy development in this area, stimulated in the main by the recommendations in the 2012 Nuttall Review of Employee Ownership, ‘Sharing Success ‘
To us at the Wales Co-operative Centre, employee ownership is an economic ‘no brainer’. Giving employees an ownership stake in a business changes their relationship with the business and encourages them to take a positive and proactive role in helping their company grow. Recent research by the Cass Business School supports this by showing that employee owned businesses are more stable and more resilient as a direct result of the employees gaining a real stake in the success of that business.
Here in Wales, we see employee ownership as a crucial succession option which can help keep jobs, business and skills in Wales. Unfortunately it is often the forgotten succession option, not being viewed as a mainstream idea by conventional business advisers. At the Wales Co-operative Centre, we have received support from Welsh Government and European Union Regional Development funding to implement employee ownership in Wales and are actively working with both businesses and advisers to put employee ownership firmly in the mainstream.
To mark the introduction of the new tax regime for employee ownership, the Wales Co-operative Centre is hosting a number of breakfast seminars looking at the benefits of employee ownership and how the new tax incentives can benefit business owners who would like to move on from the business.
The events in Cardiff, Carmarthen and Bodnant in North Wales will also consider the employee trust, how it fits with your business model, and the benefits of the model for the business owner and the employees. The seminars will be of interest to business owners interested in looking at their exit strategies and to business advisors who want to know more about the approach to advise their clients. To find out more click here.
In our view, tax should not be the sole driving factor to considering employee ownership. Many of our clients are driven by legacy, and see employee ownership as an approach that engages employees and puts them in charge of their own futures. It helps retain jobs and provides a platform for continued local business ownership and growth. However, having an additional incentive to help promote the employee ownership exit route is never a bad thing and we’ll be working hard to promote the new relief available to business owners here in Wales.
Let’s just hope those clever tax specialists don’t find some loophole which allows companies to abuse the incentive for purposes other than employee ownership, otherwise we could see it withdrawn from the market as quick as at arrived.
Further information can be found on the Wales Co-operative Centres Website http://www.walescooperative.org
Places can be booked directly by calling the Centre on 0300 111 5050.
Rhian Edwards is manager of the ERDF and Welsh Government Business Succession project at the Wales Co-operative Centre. Her team works with micro-businesses and SME’s across Wales to develop employee ownership approaches and employee ownership based succession planning.
New Capital Gains Tax rules encourage owners to sell to their staff / Rheolau newydd ar gyfer Treth ar Enillion Cyfalaf yn annog perchnogion busnes i werthu i’w staff
Business owners across the UK could be benefiting from selling their businesses to their employees when new Capital Gains Tax Reliefs come into force this April. Business owners who sell a controlling stake in their company to an Employee Share Trust, which is owned and run by all the businesses employees will be able to benefit from drastically reduced tax on the profit from the sale.
In Wales, the Wales Co-operative Centre is hosting a number of breakfast seminars looking at the benefits of employee ownership and how the new tax incentives can benefit business owners who would like to move on from the business.
The events in Cardiff, Carmarthen and Bodnant in North Wales will also consider the employee owned trust model, how employee ownership works and the benefits for the business owner and the employees.
The seminars will be of interest to business owners interested in looking at their exit strategies and to business advisors who want to know more about the approach..
Rhian Edwards is Manager of the Welsh Government and ERDF funded Succession project at the Wales Co-operative Centre. She commented,
“This new tax relief makes it extremely attractive for business owners to consider employee ownership as a planned exit strategy. It offers the best of both worlds, a tax efficient exit strategy and an approach that engages employees and puts them in charge of their own futures”.
Further information can be found on the Wales Co-operative Centres Website http://www.walescooperative.org/capital-gains-tax-events.
Places can be booked directly by calling the Centre on 0300 111 5050
Gallai perchnogion busnes ledled y DU elwa ar werthu eu busnesau i’w gweithwyr pan ddaw Ryddhad Treth ar Enillion Cyfalaf newydd i rym fis Ebrill eleni. Bydd perchnogion busnes sy’n gwerthu cyfran reoli yn eu cwmni i Ymddiriedolaeth Perchnogaeth Gweithwyr, sy’n eiddo i holl weithwyr y busnes ac yn cael ei reoli ganddynt, yn gallu elwa ar ostyngiad treth enfawr ar yr elw o’r gwerthiant.
Yng Nghymru, mae Canolfan Cydweithredol Cymru’n cynnal nifer o seminarau brecwast i edrych ar fanteision perchnogaeth gweithwyr a sut y gall y cymhelliant treth newydd fod yn fuddiol i berchnogion busnes a hoffai symud ymlaen o’r busnes.
Bydd y digwyddiadau yng Nghaerdydd, Caerfyrddin a Bodnant yng Ngogledd Cymru hefyd yn ystyried yr ymddiriedolaethau newydd, sut y mae perchnogaeth gweithwyr yn gweithio a’r manteision ar gyfer perchennog y busnes a’r gweithwyr.
Bydd y seminarau o ddiddordeb i berchnogion busnes sydd â diddordeb mewn ystyried eu strategaethau ymadael ac i ymgynghorwyr busnes sy’n dymuno gwybod rhagor am yr ymagwedd er mwyn cynghori’u cleientiaid.
Rhian Edwards yw Rheolwr y prosiect Olyniaeth dan nawdd Llywodraeth Cymru a Chronfa Datblygu Rhanbarthol Ewrop yng Nghanolfan Cydweithredol Cymru. Dywedodd,
“Mae’r rhyddhad treth newydd hwn yn hynod o ddeniadol i berchnogion busnes ystyried perchnogaeth gweithwyr yn strategaeth ymadael fwriadol. Mae’n cynnig y gorau o ddau fyd, sef strategaeth ymadael sy’n effeithlon o ran treth ac ymagwedd sy’n ymglymu gweithwyr a’u gwneud yn gyfrifol am eu dyfodol eu hunain.”
Mae rhagor o wybodaeth ar gael ar wefan Canolfan Cydweithredol Cymru http://www.walescooperative.org/capital-gains-tax-events.
Gellir cadw lle’n uniongyrchol hefyd trwy ffonio’r Ganolfan ar 0300 111 5050
Wales Co-operative Centre
The Wales Co-operative Centre was set up thirty years ago and ever since has been helping businesses grow, people to find work and communities to tackle the issues that matter to them. Its advisors work co-operatively across Wales, providing expert, flexible and reliable support to develop sustainable businesses and strong, inclusive communities. www.walescooperative.org
Succession and Consortia Project
The Wales Co-operative Centre’s Succession and Consortia project is funded by Welsh Government and European Regional Development Fund. It offers support to business owners and employees considering employee ownership and creation of worker co-operatives. It also offers support to businesses working to work together to form co-operative consortia.
Canolfan Cydweithredol Cymru
Sefydlwyd Canolfan Cydweithredol Cymru ddeng mlynedd ar hugain yn ôl ac ers hynny bu’n helpu busnesau i dyfu, pobl i gael gwaith a chymunedau i ddatrys y problemau sydd o bwys iddynt. Mae ymgynghorwyr y Ganolfan yn gweithio’n gydweithredol ledled Cymru, gan ddarparu cefnogaeth arbenigol, hyblyg a dibynadwy er mwyn datblygu busnesau cynaliadwy a chymunedau cadarn a chynhwysol. www.walescooperative.org
Prosiect Olyniaeth a Chonsortia
Ariannir prosiect Olyniaeth a Chonsortia Canolfan Cydweithredol Cymru gan Lywodraeth Cymru a Chronfa Datblygu Rhanbarthol Ewrop. Mae’n cynnig cefnogaeth i berchnogion busnes a gweithwyr sy’n ystyried perchnogaeth gweithwyr a chreu mentrau cydweithredol y gweithwyr. Mae hefyd yn cynnig cefnogaeth i fusnesau sy’n gweithio ar gydweithio i ffurfio consortia cydweithredol.
The Wales Co-operative Centre’s Jocelle Lovell returns to the TAI housing conference today following last year’s sell out workshop. She will update the audience at Cardiff City Hall on the work of the Financial Inclusion team to help tenants stay in their homes.
Jocelle is Project Manager of the ‘Tackling Homelessness Through Financial Inclusion’ (THFI) project. The scheme was set up in 2012 and aims to promote the use of Credit Union Rent Accounts to reduce financial vulnerability. The initiative is supported by the Oak Foundation and the Welsh Government.
Jocelle and her colleagues support vulnerable tenants in private rented accommodation by facilitating better money management and preparing people for changes to Welfare Reform. They work in collaboration with local authorities, credit unions, private landlords and their tenants and in particular promote the use of the credit union rent accounts as an alternative to direct payment to landlords. However, the service is personalised to meet each tenants needs.
Welfare Reform and the introduction of Universal Credit have reduced household income for many families. Many of these households are facing significant new challenges around financial management and budgeting, in the context of reduced advice and information services.
Today Jocelle will be reviewing events of the past 12 months, sharing some of the key findings and lessons learned from the THFI project, along with offering some suggestions as to how we can work more effectively. She will discuss the need for us to challenge ourselves and our organisations so we can support some of our most vulnerable citizens as they face these challenges.
Jocelle’s workshop is at 10:30AM today, Wednesday.