Basis Period Reform – for self-employed individuals and all partnerships / partners

New legislation taking effect in 2023/24 will affect non-corporate trading businesses that prepare accounts to a date other than 31 March or 5 April.

The new rules will alter how the taxable profits of accounting periods are matched into tax years for the purposes of self-assessment profit reporting and income tax calculation.

At the moment, when reporting taxable profits for a tax year, it is necessary to report the taxable profits coming from the accounting period that ends in the tax year in question. For example, a sole trader preparing accounts to 30 June, would usually use the taxable profits from his/her year to 30 June 2021 as the basis of their 2021/22 income tax self-assessment.

From tax year 2024/25 onwards, a new ‘tax year basis of assessment’ will apply. This is not a requirement to prepare accounts to 5 April each year (although a business could choose to do so) but instead will require an apportionment of the tax adjusted results from each accounting period that overlaps into the tax year in question.

For example, a sole trader preparing accounts to 30 June will need to take the tax adjusted results for 30 June 2024 and 30 June 2025 and:

• Calculate 3 months (3/12ths) of the 30 June 2024 tax adjusted results; and
• Add 9 months (9/12ths) from the 30 June 2025 tax adjusted results,

to create a tax adjusted profit/loss figure for the year to 5 April 2025.

The tax year 2023/24 will be a transitional year where, in addition to the accounting results that are brought into account under the current rules, a ‘transitional component’ will also be added in to ’stretch’ the reported taxable profits from the end of the usual accounting period used as the basis to 5 April 2024. If the business is holding something called ‘overlap profits’, these are then deducted in full by way of ‘overlap relief’.

In an attempt at fairness, spreading rules will potentially spread any accelerated profits (and therefore accelerated tax payments) over five tax years, starting in 2023/24.

This area is complicated so please talk to us about your options ahead of the changes, we are here to help!

Don’t forget to claim the Employment Allowance

The Employment Allowance (EA) is a £5,000 allowance set against employers National Insurance Contributions (NICs) and has to be claimed each tax year if the employer qualifies. This allowance was introduced in 2014/15 and was increased to £5,000 from 2022/23. Employers make a claim for the Employment Allowance through their payroll software. They do this by completing and submitting a Real Time Information - Employer Payment Summary (EPS) to HMRC. The employer must enter “Yes” in the “Employment Allowance Indicator” field of the EPS confirming that they are eligible to claim the allowance.

Eligible employers can claim the Employment Allowance at any time during a tax year. Employers may also claim the Employment Allowance against closed tax years, provided they have not already claimed the allowance for those years. However, claims for closed tax years are limited to the four tax years falling before the current tax year.

The Employment Allowance can be claimed by most employers who pay secondary Class 1 NICs on their employees. This includes:

• businesses (includes self- employed persons, companies and partnerships who have employees)
• charities (includes private businesses that have charitable status such as schools, academies, further education colleges and universities)
• Community Amateur Sports Clubs

If two or more companies are connected with one another, or two or more charities are connected with one another, then only one of those companies/charities may claim the Employment Allowance and they must decide which company/charity claims the allowance.

For recently updated guidance on connected businesses see: -
https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim06560

27th May 2022 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Other Employers Excluded from claiming the Employment Allowance
• Writing a Business Plan for your future success!
• The Recovery Loan Scheme is ending soon
• Live music and touring industry specialist hauliers to move more freely between countries

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

Have a great weekend.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Other Employers Excluded from claiming the Employment Allowance

Employers are not eligible to claim the Employment Allowance where their employers’ Class 1 National Insurance liabilities in the previous tax year exceeded £100,000.

Another important exclusion from EA are single director companies where the director is the sole employee of the company.

Employment Allowance counts towards the total de minimis State Aid you’re allowed to get over a 3 year period. Employers that exceed the de minimis State Aid threshold for their sector (Agriculture products for example 20,000 euros) are also excluded from claiming EA.

Please contact us if you need help with your payroll.

Writing a Business Plan for your future success!

A business plan is an essential tool, whether it is for raising finance or for putting your objectives into writing. In either event, a business plan will give you some form of direction and help you set goals, and most importantly, enable you to monitor your success!

Business plans should be as clear as possible, and since brevity aids clarity, they should also be as short as possible. A useful way of achieving this without losing any important points is to stratify the plan by confirming all details, where possible, to an appendix, leaving only the overall message in the body of the document. This will enable the reader to master the basic points of the proposal more quickly.

We have considerable experience in helping clients write plans, forecasting results and monitoring their success against goals. We would be delighted to help you and we also have access to a range of finance providers and can help your business succeed! 

The Recovery Loan Scheme is ending soon

The Recovery Loan Scheme supports access to finance for UK businesses as they grow and recover from the disruption of the COVID-19 pandemic. The Scheme is to help businesses of any size access loans and other kinds of finance so they can recover after the pandemic and transition period. The Recovery Loan Scheme will accept applications until 30 June 2022. Up to £10 million is available per business. The actual amount offered, and the terms, are at the discretion of participating lenders.

The government guarantees 80% of the finance to the lender. As the borrower, you are always 100% liable for the debt. Loans are available through a network of accredited lenders, listed on the British Business Bank’s website.

See: Recovery Loan Scheme: current accredited lenders - British Business Bank (www.british-business-bank.co.uk)

Live music and touring industry specialist hauliers to move more freely between countries

Hauliers serving music concerts, sports and cultural events will be able to move their vehicles freely between Great Britain and the EU thanks to new measures for the haulage sector announced earlier this month.

Designed in consultation with the live music, performing arts and sports sectors, the new dual registration measure is expected to come into force from late summer 2022. It will apply to specialist hauliers that transport equipment for cultural events, such as concert tours or sports events.

Dual registration will mean drivers with an established base in Great Britain and in another country outside of the UK will be able to transfer their vehicle between both operator licences without the need to change vehicles, have their journeys limited or pay Vehicle Excise Duty in Great Britain. 

See: Major boost for live music and touring industry specialist hauliers to move more freely between countries - GOV.UK (https://www.gov.uk/government/news/major-boost-for-live-music-and-touring-industry-specialist-hauliers-to-move-more-freely-between-countries)

20th May 2022 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Eurostars funding webinar and brokerage event
• Queen’s Speech 2022
• Capital Expenditure Tax Breaks
• Cash Flow management is key in a turbulent economy
• The Queen's Awards for Enterprise open for 2022

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

Have a great weekend.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Eurostars funding webinar and brokerage event

Eurostars is the largest international funding programme for small and medium-sized businesses wishing to collaborate on research and development (R&D) projects that create innovative products, processes or services for commercialisation.

The Enterprise Europe Network (EEN) in partnership with the Eureka National Project Coordinators (NPC) in Ireland, UK & Northern Ireland, Spain, Iceland, Denmark and Netherlands invite you to participate in an international online partnering event on Eurostars on Wednesday 8th June @ 09:00 Dublin Ireland time (10:00 CET time).

Businesses are offered an opportunity to register their interest in attending this free, two-hour long virtual event to:

• discover what Eurostars is about
• hear about the latest call for proposals closing on 15 September 2022
• find out why they should apply
• gain insights from the National Contact Points for Eurostars
• get a chance to network and forge winning partnerships of the future

The programme will include presentations from the Eurostars Project Officers from each of the participating countries and a case study.

The brokerage event will allow you to extend your international network and create strategic partnerships through scheduled virtual one-to-one meetings. Participants will also have the opportunity to meet with representatives from their national Eurostars office and the Enterprise Europe Network.

See: Eurostars Funding Webinar & Brokerage Event - June 2022 - Home (https://eurostars-webinar-brokerage-event.b2match.io/home)

Queen’s Speech 2022

Prince Charles, standing in for the Queen, delivered her speech to both Houses of Parliament last week.  The speech highlighted some of the 38 laws that ministers intend to pass in the coming year. This number includes some bills carried over from the previous session of Parliament, which ended last month.

Prince Charles outlined that it was the governments priority to grow and strengthen the economy and help ease the cost of living for families. Critics have argued the government is not doing enough to help struggling families as inflation soars.   

Some of the main business points include:

• The Brexit Freedoms Bill which will give ministers the power to change current EU laws;
• A Levelling up and Regeneration Bill to give councils new planning and redevelopment powers;
• Changes to business rates;
• The new UK Infrastructure Bank, a body designed to increase financing of infrastructure projects;
• An online safety Bill to improve regulation of content appearing on the internet;
• A Data Reform Bill to replace EU rules on data protection;
• The Electronic Trade Documents Bill to enable more digitisation of trade-related paperwork;
• An extension of 5G mobile coverage and new safety standards for digital devices;
• A draft Digital Markets, Competition and Consumer Bill to tackle fake consumer reviews and boost competition;
• An Economic Crime and Corporate Transparency Bill will strengthen the investigatory powers of Companies House and aim to increase corporate transparency;
• A Financial Services and Markets Bill will aim to simplify EU rules governing the sector; and
• The Procurement Bill will replace EU rules on how the government buys services from the private sector.

The new Financial Services and Markets Bill, announced in the Queen’s Speech, will support consumers by protecting access to cash. It will ensure the continued availability of withdrawal and deposit facilities across the UK, and that the country’s cash infrastructure is sustainable for the long term.

The Bill will also enable the Payment Systems Regulator to require banks to reimburse authorised push payment (APP) scam losses, totalling hundreds of millions of pounds each year. This will ensure victims are not left paying for fraud through no fault of their own.

We will keep you updated over the next few months of business-related developments and once legislation is passed we will ensure you get the information you need if these changes affect you.

See:   Queen’s Speech 2022 - GOV.UK (https://www.gov.uk/government/speeches/queens-speech-2022) 

Capital Expenditure Tax Breaks

Here is a summary of the main tax breaks for capital expenditure that are currently available: -

• 130% relief for investment by limited companies in new plant and machinery that would normally be dealt with in the general pool
• 100% relief for investment in new and used plant and machinery by all businesses but limited to the first £1 million
• 50% relief for investment by limited companies in new plant and machinery that would normally be dealt with in the special rate pool (typically fixtures in buildings and long-life assets)
• 18% writing down allowance for plant and machinery in the general pool
• 6% writing down allowance for plant and machinery in the special rate pool
• 3% straight line write off for expenditure on the construction or refurbishment of commercial buildings.

Some of these generous tax breaks may continue beyond 31 March 2023. We await further announcements – probably in the Autumn Budget. Please talk to us about capital spending and planning ahead of the Budget. 

Cash Flow management is key in a turbulent economy

Do you agree?  Most of our other clients do.  In this economy cash is king and managing your cash flow is more important than ever.

If you are concerned about the future of your business, then take some time to reflect on where you are and what could happen in the next few months. It is now vitally important for all businesses to plan ahead for a range of scenarios. Cash flow and business planning in these uncertain times may appear difficult but there are some practical steps you can take to minimise potential disruption to your business.

• Review your Budgets and set realistic and achievable targets for the remainder of 2022.
• Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues. 
• Review and flow chart the main processes in your business (e.g. Sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
• Put extra effort into making sure your relationships with your customers are solid.
• Review your list of products and services and eliminate those that are unprofitable or not core products/services.
• Pull everyone together and explain the business strategy and get their buy-in.

We specialise in helping our clients manage their cash flow.  We do this by preparing and updating detailed cash flow forecasts, using the latest and most powerful software.  We can also help you negotiate or renegotiate overdraft facilities and find specific funding to help you grow!

Please talk to us about cash flow planning for the next few months, we can help with a template so you can do this yourself or work together to produce estimates for a variety of scenarios.

The Queen's Awards for Enterprise open for 2022

The Queen's Awards for Enterprise recognise and encourage the outstanding achievements of UK businesses in the fields of:

• innovation
• international trade
• sustainable development
• promoting opportunity (through social mobility)

Businesses of all sizes and from all sectors can apply. The awards are free to enter, and you can apply for more than one award.

See: The Queen's Awards for Enterprise: About the awards - GOV.UK (https://www.gov.uk/queens-awards-for-enterprise)

13th May 2022 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Off-payroll working rules (IR35)
• The British Business SME Awards 2022
• Import controls delayed for this year
• How much is my business worth?

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

Have a great weekend.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Off-payroll working rules (IR35)

It has been over one year since the off payroll working rules (IR35) changed in the private and voluntary sectors.

Some organisations who engage contractors in those sectors who didn’t need to apply the rules for 2021-22 as they did not meet the size conditions — may now need to apply the rules.

Ensure you check the Employment Status Manual (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10006) for whether the rules apply to your business every year.

This is particularly true if you have:

• become a newly formed business
• been bought by another organisation
• grown in size over the last few years 

If you are new to the rules, you should find it helpful to read the steps needed to implement off-payroll working rules (https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35).

The British Business SME Awards 2022

Now in their fifth year, the awards have recognised and celebrated the innovative and outstanding achievements of small and medium size British businesses across all industries.

The British Business Awards offers you and your colleagues the opportunity to gain the industry and country-wide recognition you deserve.

These awards are open to any businesses in the UK which fall within the traditional definition of an SME – namely up to 250 employees. Ideally the business should have been trading at least since January 2020, but the judges will consider younger businesses formed after this date. The awards are also open to those service providers and investors who help create the ‘eco-system’ which enabled SMEs to flourish and survive particularly over the last two years.

Nominations will close on 27 May 2022.

See: Advice and Ideas for UK Small Businesses and SMEs (https://smallbusiness.co.uk/). 

Import controls delayed for this year

The remaining import controls on EU goods will no longer be introduced this year, instead, traders will continue to move their goods from the European Union to Great Britain as they do now.

Russia’s invasion of Ukraine, and the recent rise in global energy costs, have had a significant effect on supply chains that are still recovering from the pandemic.

The government has concluded that it would be wrong to impose new administrative requirements on businesses who may pass-on the associated costs to consumers already facing pressures on their finances.

There will now be a review how to implement the remaining controls in an improved way. The new Target Operating Model will be based on a better assessment of risk and will use data analytics and technology. It will be published in the Autumn and the new controls regime will come into force at the end of 2023.

This process will build on existing work already taking place as part of the 2025 Border Strategy, including on the UK Single Trade Window – a new digital platform that will help traders to move goods more easily. The goal is to create a seamless new ‘digital’ border, where technologies and real-time data will cut queues and smooth trade.

The controls introduced in January 2021 on the highest risk imports of animals, animal products, plants and plant products will continue to apply alongside the customs controls which have already been introduced.

See: New approach to import controls to help ease cost of living - GOV.UK (https://www.gov.uk/government/news/new-approach-to-import-controls-to-help-ease-cost-of-living)

How much is my business worth?

How much is my business worth?
This is a question many of our clients want answering! The truth is it depends on a range of factors and any valuation is only useful as a guide for planning forward. The ultimate value of a business is the price a willing buyer is prepared to pay for it.   

The prevailing economic climate and state of the business’ sector can affect company valuation for better or worse, as can your reasons for selling. If you need a fast sale due to ill health, for instance, the value may be lower than if a sale was taking place under more favourable circumstances.

Valuing a business is a complex process and we are available to support you throughout.

So, what are the most common methods of valuing a business?

Price to earnings ratio (P/E)
The price to earnings ratio uses multiples of profit, so may be an appropriate valuation method if you own a well-established business with a good track record of profits. ‘Price’ refers to the company’s current share price, and ‘earnings’ to the earnings per share (EPS). The P/E ratio indicates the business’ expected growth in earnings per share in the future.

Discounted cash flow
Discounted cash flow relies on estimating future cash flows for the company, and a residual business value, and may be suited to businesses with few assets.

Entry cost
Entry cost valuation involves calculating how much it would cost to build your business to the stage that it’s reached now, including Start up and recruitment costs, marketing, and the value of assets. Any savings that could have been made should then be deducted to arrive at the valuation.

Asset valuation
The asset valuation method may be suitable if your business is well established and owns high levels of tangible assets. The Net Book Value (NBV) of assets is calculated, and then adjusted to take account of external factors such as depreciation and inflation.

Valuation based on industry
Some businesses are valued based on the industry in which they operate. The retail industry is one such example, where the number of outlets is an important element for consideration. Industry ‘rules of thumb’ use factors specific to an industry and can provide a more accurate calculation in some cases.

Other considerations when valuing your business
Intangible assets are a key factor when valuing a business. Intellectual property, goodwill, business reputation, and even a premium business location, can all add considerable value in the eyes of potential purchasers.

Spotlighting these intangible assets also allows you to improve their value where appropriate – for example, registering ownership of a trademark or patent, building up their reputation even further, or improving the condition of their premises.

Please talk to us about valuing your business as this can lead to a range of important considerations and actions.   

6th May 2022 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Possible Changes to SDLT Multiple Dwellings Relief
• ATED Returns and Revaluations
• New competition law to replace EU rules

If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.

Have a great weekend.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100

Possible Changes to SDLT Multiple Dwellings Relief

HMRC have been consulting on changes to the relief from stamp duty land tax (SDLT) when two or more properties are acquired at the same time. This indicates that a change in the rules is imminent, and purchasers should take advantage while the relief continues to apply.

Currently where at least two dwellings are purchased in a single transaction, or as part of a series of linked transactions between the same vendor and purchaser, the purchaser can choose to have the rate of SDLT determined by the average value of the dwellings purchased, rather than their combined value. Purchasers can therefore benefit from multiple nil-rate and lower percentage bandings, significantly reducing the amount of SDLT payable. Multiple dwellings relief doesn’t apply automatically; it must be claimed in a land transaction return and your solicitor may not be aware of this important relief.

ATED Returns and Revaluations

The Annual Tax on Enveloped Dwellings (ATED) was introduced in April 2012 and is charged where certain residential properties are owned within a corporate structure. This tax not only catches UK properties owned by wealthy oligarchs via offshore companies but also applies to UK resident companies. Originally the charge only applied where the value of the property exceeded £2 million but that threshold has been subsequently reduced to £500,000.

The charge for 2022/23 starts at £3,800 and rises to £244,750 where the property value is more than £20 million.

Properties need to be revalued every five years and the latest valuation date is 1 April 2022. With significant increases in property values in recent years this may mean that more companies may be required to complete an ATED return.

There are numerous exemptions and reliefs from ATED but companies still need to submit an ATED Relief Declaration Return.

MAIN ATED RELIEFS

The main situations where there is a relief from ATED are where the property is:-

• let to a third party on a commercial basis
• being developed for resale by a property developer
• owned by a property trader as the stock of the business for the sole purpose of resale
• a farmhouse occupied by a farm worker or a former long-serving farm worker

New competition law to replace EU rules

A new law will help UK firms do business while maintaining strong protections for consumers and will come into effect on 1 June 2022 the UK government has announced.

Currently, the UK has retained EU rules that exempt businesses from competition law in certain circumstances. The UK government has received expert advice from the UK’s Competition and Markets Authority, which recommended a new, bespoke competition law exemption for the UK, replacing the retained EU rules, which expire on 31 May 2022.

See: New law to make doing business simpler while protecting consumers - GOV.UK (https://www.gov.uk/government/news/new-law-to-make-doing-business-simpler-while-protecting-consumers)