Welcome to Kingston Smiths School Conference 2017 Where is the - - PowerPoint PPT Presentation

Welcome to Kingston Smith’s School Conference 2017

Where is the education sector heading?

14 March 2017

Housekeeping

Agenda

 Sec

ecto tor update date - Anjali Kothari, Kingston Smith

 The

he Ec Econom

• nomic

ic cl clima mate te - Guy Ellison, Investec Wealth & Management

 HR update

date - Adam Flight, HR Consultancy

 Tax

ax upda date te - Joanne How, Kingston Smith

 VA

VAT update ate - Debbie Jennings, Kingston Smith

 The

he futu ture re of th the sector ctor - Mark Taylor, former Chair of ISBA

Sector update

Anjali Kothari, Partner Kingston Smith LLP

Regulation

 HR

– Gender Pay Gap Analysis – Off Payroll Workers – Apprenticeship Levy

HMRC – VAT & Tax

 Overseas Recruitment agents  Relationship with trading subsidiary  Withdrawal of Salary Sacrifice  Accommodation and BIK

Governance

 Consultation ended in February 2017  What are they looking to improve?

– The role of Chair – Board size and Diversity. Fit for Purpose?

GDPR & Fundraising

 RSPCA fined £25k and the British Heart

Foundation £18k

– Sharing data without consent – Telematching without consent

What the RSPCA did

 The charity told the ICO that it repeatedly wealth

screened all seven million of its supporters. It did not have their consent to do so

 During the investigation, the RSPCA said the

practice was common, it had been doing it since 2010 and it had no plans to stop

 The RSPCA later informed the ICO, in August

2016, that it had suspended wealth screening activities

What BHF did

 The charity told the ICO it had been screening

donors since “at least” 2009. Between April 2010 and August 2014 it provided records to wealth management companies containing the personal data of several million people. It did not have their consent to do this

 During the investigation, BHF told the ICO it had

no plans to continue screening

Conclusion

Cont

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act t det etail ails Anjali Kothari Kingston Smith LLP

• Tel. 020 7566 3656

akothari@ks.co.uk

The Economic Climate

Guy Ellison, Head of UK Equity Research Investec Wealth & Management

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Agenda

• 1. The Year That Was
• 2. Regime Change
• 3. Our Investment Strategy & Positioning
• 4. Vision Topics
• 5. Summary & Conclusions

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The Rights & Wrongs

2016 Ticks & Crosses

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The Rights & Wrongs

2016 Ticks & Crosses

• 1. Global Economy To Muddle Through: US/Europe Solid
• 1. Don’t Worry About China
• 2. Don’t Worry about Commodity Prices

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The Rights & Wrongs

2016 Ticks & Crosses

• 1. Global Economy To Muddle Through: US/Europe Solid
• 1. Don’t Worry About China
• 2. Don’t Worry about Commodity Prices
• 2. Beware of Politics – source of volatility but…
• 1. Brexit Won’t Happen
• 2. Trump Won’t Happen

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The Rights & Wrongs

2016 Ticks & Crosses

• 1. Global Economy To Muddle Through: US/Europe Solid
• 1. Don’t Worry About China
• 2. Don’t Worry about Commodity Prices
• 2. Beware of Politics – source of volatility but…
• 1. Brexit Won’t Happen
• 2. Trump Won’t Happen
• 3. Stay Invested - Stocks To Outperform Bonds
• 1. Overweight EM / Continental Europe.
• 2. Underweight US / UK
• 3. Overweight Property / High Yield Bonds

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Performance

2016 For A Sterling Investor: Asset Class Performance 2016 (£ Total Return)

Source: 12/2016 – IW&I / Bloomberg

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Performance

2016 For A Sterling Investor: Asset Class Performance 2016 (£ Total Return)

Source: 12/2016 – IW&I / Bloomberg

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Performance

2016 For A Sterling Investor: Asset Class Performance 2016 (£ Total Return)

Source: 12/2016 – IW&I / Bloomberg

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Performance

2016 For A Sterling Investor: Asset Class Performance 2016 (£ Total Return)

Source: 12/2016 – IW&I / Bloomberg

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Regime Change

Politics, Economics & Investment Markets

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Regime Change

Politics, Economics & Investment Markets

Dec-81 Dec-16 US Inflation (CPI) 11.8% 2.0% Unemployment Rate 8.6% 4.7% Baby Boomer Median Age 26 years 61 Years Public Debt GDP 32% 85%

Source: 12/2016 – Schiller / Bloomberg / IMF

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Regime Change

Politics, Economics & Investment Markets

Dec-81 Dec-16

US

28% 25%

China

3% 15%

Share of World GDP

Current $

Source: 12/2016 – IW&I / IMF

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Regime Change

Politics, Economics & Investment Markets

Dec-81 Dec-16

10 Year Treasury Yield

12.6% 2.3%

Fed Funds Rate

14.2% 0.8%

S&P 500 P/E Ratio (Trailing)

8.6x 19.0x

S&P 500 Dividend Yield

5% 2.2%

Source: 12/2016 – Schiller / Bloomberg

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Risks - Possible Shock To Growth

Politics Not Getting Any Easier….

1 5 2 3 7

Parliamentary Elections Presidential Elections

1 1

Legislative Elections Parliamentary Elections

2 7 2 2

Source: 11/2016 – IW&I

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Global Macro Picture

Economists & Analysts Earnings Revisions

A good inheritance

Source: 6/1//2017 – IW&I / Citigroup / Bloomberg

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Global Macro Picture

30/11/2016 – IW&I / Bloomberg

Unemployment Rate In Developed Markets (%)

Source: Bloomberg / IW&I

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Global Macro Picture

Regime Change in Fiscal Policy - Austerity is History

Source: 12/2016 – Morgan Stanley

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Global Economic Growth

The Power of Synchronisation

Source: 12/2016 – Morgan Stanley / IW&I

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Regime Change Risks

De-Globalisation

Source: 12/2016 – Morgan Stanley

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Regime Change Risks

De-Globalisation

Source: Bank America Merrill Lynch

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China

Litmus Test of Trump Populism v Pragmatism

21/11/2016– IW&I/Bloomberg

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UK Economy

Currency Weakness – Largely Done

Source:1/2017 – IW&I / Bloomberg

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Agenda

• 1. The Year That Was
• 2. Regime Change
• 3. Our Investment Strategy & Positioning
• 4. Vision Topics
• 5. Summary & Conclusions

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Vision 2017

Regime Change: The Great Bond Bull Market (35 Years of Risk Free Returns) +12 % +18 % +9% +2% +7% +7% +1% +4%

Source: 10/2016 – IW&I / Ibbotson / Bloomberg / Robert J Schiller

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Buying the UK market ≠ buying the UK Economy

Estimated revenue split for the 350 largest quoted companies in the UK (FTSE 350)

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Where’s this 20% growth in UK earnings coming from!?

% of All Share 2017E EPS Growth (sterling terms) Contribution to Index Growth Shell 8.2% 85% 7.0% BP 4.3% 120% 5.2% 12.5% 12.1% $ reporters, oil price doubles, fewer write-offs

}

% of All Share 2017E EPS Growth (sterling terms) Contribution to Index Growth Shell 8.2% 85% 7.0% BP 4.3% 120% 5.2% 12.5% 12.1% Rest of the market 87.5% 9% 7.9% Market Growth 100.0% 20.0% $ reporters, oil price doubles, fewer write-offs

}

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Dividends have proved dependable

FTSE All Share dividend yield – next twelve months

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All Share Dividend Cover - next twelve months

Had become too tight for comfort…

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Valuations

Global Earnings

Europe & EM Catch-Up Overdue

Source: Thomson Financial / IBES

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Valuation

Valuation vs. Inflation

Source: 11/2016 – IW&I / Thomson Reuters / Credit Suisse research

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Valuation – Room for Bond Yields To Rise

Valuation vs. Growth & Government Bonds

Source: 11/2016 – IW&I / Thomson Financial / IBES

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Regime Change Opportunities

Value Style

Source: 01/2017 – IW&I / Bloomberg

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Bear Market Checklist

Citigroup

Source: 01/2017 – Citigroup: Red=Worrying, Amber=Needs Watching, White = Normal

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Tactically NEUTRAL

Fundamental Factors Improving – Political Risks Balance the Equation

Economic growth Earnings growth Valuation Investor Sentiment EM / China Commodities $ Policy Error / Fixed Income Volatility US Politics Euro-Zone Politics Market Liquidity

Source: 01/2017 – IW&I

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Summary & Conclusions

Regime Change

• 2016 was a windfall year for £ Investors – it will not be repeated in 2017.
• Central outlook: improving global economic & corporate profits growth

BUT

• Regime changes in both global politics and financial markets have also

increased the risks

• This is not the time to make big bets

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Vision

Enduring Themes

2013 2014 2015 2016 Demographics & Long Term Returns 3-D Printing Next Generation Gene-Sequencing Human Microbiome Banking on a Positive Gold Urban Population Growth E-Cash Ahead in the Clouds Healthcare Cyber-Security Graphene High Yield Bonds Emerging Markets Automobile Technology Collectable Real Assets Fossil Fuel Sunset E-cigarettes Renewable Energy Smart Beta In Defence of Defence Environmental Investing Smart Materials Space Rare but not Endangered Japan Disintermediation (Un)broken China

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Vision 2017

Topics

• 1. Regime change
• 2. The intelligent building
• 3. The business of sport
• 4. Robojobs
• 5. Share-raising
• 6. Gene editing

Contact Details

IW&I Research Department Guy Ellison Head of UK Equities Telephone: +44 (020) 7597 1234 Email: guy.ellison@investecwin.co.uk

Bath 01225 341580 Edinburgh 0131 226 5000 Liverpool 0151 227 2030 Belfast 02890 321002 Exeter 01392 204404 London 020 7597 1234 Birmingham 0121 232 0700 Glasgow 0141 333 9323 Manchester 0161 832 6868 Bournemouth 01202 208100 Guildford 01483 304707 Reigate 01737 224223 Cheltenham 01242 514756 Leeds 0113 245 4488 Sheffield 0114 275 5100

Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange and the Investec Group. Please note that the value of investments and the income derived from them may fluctuate and investors may not receive back the amount originally invested. Past performance is not necessarily a guide to the future. Current tax levels and reliefs may change and the investments and investment services referred to may not be suitable for all investors. Investec Wealth & Investment Management Limited is registered in England. Registered No. 2122340. Registered Office: 2 Gresham Street. London. EC2V 7QP

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What’s happening in the world of HR?

Adam Flight, Principal Consultant Kingston Smith HR Consultancy

Shared Parental Leave

Issues facing Schools

Social Media in Schools

An ageing workforce

Status of Workers

The Slavery Act

Interesting cases

Cont

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act t det etail ails Adam Flight Kingston Smith HR Consultancy

• Tel. 020 7566 7942

aflight@ks.co.uk

Employment Taxes

Joanne How, Senior Manager Kingston Smith LLP

Apprenticeship Levy

 Annual allowance of £15,000 available to all

employers so levy of 0.5% applies to employers with an annual pay bill in excess of £3 million

 The annual bill is based on earnings subject to

employer’s Class 1 NICs

 Connected companies or charities  Accessing levy money

Payrolling of benefits

 Tax benefits through the payroll instead of through

P11Ds

 All benefits can be included except:

– Beneficial loans – Accommodation benefit

 For the 2017/18 tax year, employers must have

registered before 6 April 2017 using HMRC’s PAYE Online service

 Form P11D(b) required to calculate and pay the Class

1A National Insurance

Accommodation

 What are the issues for schools?  Automatic exemptions  Day schools  HMRC consultation to be published 20 March

2017

Employment Status

 What are HMRC currently looking at?  Who is the contract with?  Self-employed worker or employee?  Employment status tool on HMRC website  From 6 April 2017, off-payroll working in the

public sector legislation effective - could be expanded to include the private sector in due course

Other topical issues

 Salary sacrifice arrangements  Abolition of £8,500 P11D exemption  Trivial benefits exemption

Cont

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act t det etail ails Joanne How Kingston Smith LLP

• Tel. 020 7566 3847

jhow@ks.co.uk

What’s new with VAT?

Debbie Jennings, VAT Principal Kingston Smith LLP

Introduction

 VAT update  Top tips and practical hints  Questions and discussion opportunities

Topical VAT updates

 Durham Cathedral: VAT savings  Longridge-on-Thames: clarifying VAT reliefs for

building projects

 Overseas Agents and VAT liabilities

Durham Cathedral

 VAT incurred on works to the grounds  HMRC: no VAT recovery, not relating to any

“business”

 Durham: argued that the costs relate to all the

activities

 A matter of interpretation

Durham Cathedral cont.

 Tax Tribunal supported Durham  HMRC’s view too restrictive  This decision in line with ECJ decision in

“Sveda”

 Costs an overhead, VAT is partly recoverable

Longridge

 Charity operating an outdoor centre, providing

training/activities

 Nominal charges made for participation  Procured a new building  Application of VAT relief?

Longridge cont.

 VAT relief: if building used for non business

purposes

 Nominal charge: not commercial but has to be

paid

 Court of Appeal: activity carried out permanently

for payment

 Therefore business, therefore building works

subject to SR VAT

Overseas Agents and VAT

 Recent Tribunal decision re overseas agents

fees and UK VAT

 Who is the agent providing his services to:

university, student, both?

 Place of supply: if university, then reverse

charge in UK

 If reverse charge, is any VAT recoverable?

Overseas Agents and VAT cont.

 Decision: wef January 2010, place of supply is

UK

 Supply is a single supply to the university  University does not use the services for taxable

supplies

 HMRC writing to educational bodies who may

need to account for RC VAT

Top tips

 Sports facilities/lettings: Exempt  Room hire and residential accommodation:

Exempt and SR

 Partial exemption and VAT recovery methods:

still fit for purpose?

 Keeping up to date

Conclusion

 VAT is complex and changes  Come to events like this to keep up with

developments

Cont

• ntac

act t det etail ails Debbie Jennings Kingston Smith LLP

• Tel. 020 7566 3735

djennings@ks.co.uk

The Future of the Sector

Mark Taylor, former Chair of ISBA The King’s School, Canterbury

A sector overview

The King’s School, Canterbury

www.kings-school.co.uk

Location

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www.kings-school.co.uk

History

 The origins of our historically rich School can be traced back to the year 597 AD, when St. Augustine was sent from Rome to evangelise England  In 1541 the School was re-founded by Royal Charter under Henry VIII earning its name as The King’s School  Situated in the World Heritage Sites of Canterbury Cathedral and St. Augustine’s Abbey, the architecture reflects a respectful mix of old and new, ranging from the 13th Century Meister Omers House to the 21st Century New Grange

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Independent Schools: what are the key pressures

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Importance of non-fee income generation

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Parental affordability – key research results

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How is fundraising in the Independent sector and how are schools beginning to react to the additional recruitment pressures

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The Budget cycle

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The American model – are there lessons to be learnt?

www.kings-school.co.uk

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• 6. About half of the schools in the sector (c.1,300) are

registered as charities. Schools with charitable status, like

• ther charities, must demonstrate that they meet Charity

Commission ‘public benefit’ rules – that is to say they benefit a reasonably wide section of the public rather than a narrow group of individuals. The most common way in which this is done is through the use of funds to give bursaries and fee discounts.

• 7. We propose to set new benchmarks that

independent schools are expected to meet, in line with their size and capacity. We think it is essential that independent schools deliver these new benchmarks. If they do not, we will consider legislation to ensure that those independent schools that do not observe these new benchmarks cannot enjoy the benefits associated with charitable status, and to result in the Charity Commission revising its formal guidance to independent schools on how to meet the public benefit test, putting the new benchmarks on to a statutory footing. Independent schools Case for change

• 1. The UK’s independent schools have a long history and

the best have a world-wide reputation for excellence. They produce excellent exam results and well-rounded citizens who go on to excel in a variety of fields.

• 2. However, despite the fact that many of the top public

schools began life as foundations for poor, bright pupils, these same schools are now increasingly out of reach. Average fees have increased by more than 20% over the last 5 years. At the same time, there has been a 33% increase since 2008 of non-British students with overseas parents attending these schools. 6

• 3. Recognising this, many public schools offer

scholarships and bursaries to enable pupils from ordinary backgrounds to attend. But there is much more they should be doing so that children from a much wider variety of backgrounds truly benefit from the excellent education they can deliver.

• 4. Many of these schools enjoy charitable status, and the

associated advantages including relief from business

• rates. We believe independent schools could and should

do more as a condition of these benefits and their privileged position. We want to see them doing more to increase the number of good and outstanding school places in the state system and to give more ordinary students access to the education they deliver.

• 5. Our proposals will ensure that independent schools are

doing more to benefit ordinary families, particularly those who are just about managing. These families cannot afford independent school fees but are also often earning enough not to be eligible for direct state support. The quality of their local school is important to them. We are asking independent schools to spread their expertise through the state system to benefit families like these, by setting an expectation that the best independent schools sponsor state schools and offer funded places.

www.kings-school.co.uk

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Challenges for the sector

Expenditure

Insur e Tpt Fue l Foo d Bld gs

Affordability

Pa y NI C TP S

Staff Costs

VA T

Non fee income generatio n

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Leading Schools’ Development www.idpe.org. uk Enabling every school to develop a culture of giving so that they can provide outstanding educational opportunities www.idpe.org. uk

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January Budget holders sent budget forms and given 2 week window to return budget submissions also to include furniture staffing etc. February SMT review initial cut of the budget and particularly any bids that seem out of the ordinary! March Initial budget submitted to Governors F&GPC committee meeting, changes made and then submitted to Full Governors for approval. Once approval received letter to parents telling them what the fee increase will be (term’s notice). April Pupil number projections reviewed and budget adjusted. May Budget ratification process with F&GPC after finalising the pupil numbers – budget presented to Full Governors for final approval.

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Any Questions

Thank ank you u for co comi ming ng Don’t forget to complete your feedback forms Pl Plea ease se join n us for lu lunch ch