New approach for a new era?

Last week, the Bank of England (BOE) raised interest rates to 2.25%, the highest level since 2008. They believe the UK economy has shrunk by 0.1% between July and September and, for the seventh time in a row, has made the increase to interest rates in an attempt to halt soaring prices. Inflation is at its highest since the 1980s and prices are expected to rise further in October, with inflation peaking at just under 11%.

We will have more insight in November when the BOE will work out the effect of the government’s recent interventions to bring down inflation and ease the cost-of-living crisis, albeit with vastly increased borrowing.

On Friday the Chancellor Kwasi Kwarteng announced a series of “growth” measures that the government thinks will help businesses and households get through this winter and beyond.

The chancellor announced:

·         The 1.25% percentage point rise in National Insurance contributions will be reversed from 6 November 2022 and the government will not go ahead with the planned April 2023 levy to fund health and social care.

·         The planned increase in corporation tax from 1 April 2023 will not happen and it will remain at 19%, irrespective of the level of company profits.

·         The basic rate of income tax will be cut from 20% to 19% from April 2023.

·         Dividend tax rates will reduce by 1.25 percentage points from April 2023.

·         The 45% and 39.35% ‘additional rates’ of income tax that apply to income over £150,000 will be abolished from 6 April 2023.

·         The annual investment allowance, allowing 100% tax relief on certain capital expenditure including computer equipment and vans, will remain at £1million beyond April 2023, when a reduction had been planned.

·         From April 2023, workers providing services via an intermediary will once again be responsible for determining their employment status and paying the correct amount of tax and National Insurance contributions under the IR35 rules. The complex ‘off-payroll’ working rules for larger employers will be repealed.

·         New ‘Investment Zones’ are to be established across England, with the Government currently in discussions with 38 local authorities. Within each Zone there will be targeted and time limited tax cuts for businesses on offer. The 38 local authorities taking part in discussions can be viewed here.

·         A possible future extension to the tax-advantaged Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). In relation to the Seed Enterprise Investment Scheme (SEIS), there will be a widening of the criteria, allowing companies to raise £250,000 under the scheme, 66% more funding than previously.

·         Enhancements to the tax advantaged Company Share Option Plan (CSOP) scheme. The maximum employee share option limit will be increased from £30,000 to £60,000 for any new options granted from 6 April 2023. There will also be increased flexibility for share options granted from 6 April 2023 due to a removal of conditions around the class of shares used.

·         Modifications will be made to the Universal Credit regime, to support claimants to secure more or better paid work.

·         Stamp Duty Land Tax (SDLT) in England and Northern Ireland has been permanently cut from 23 September 2022. The cut is delivered by an increase in the threshold before SDLT is payable from £125,000 to £250,000. First time buyers currently pay no stamp duty on the first £300,000 and that will be raised to £425,000. The revised rates table can be viewed here.

·         VAT-free shopping for overseas visitors is to be introduced as soon as possible.

·         A package of measures to help households and businesses with energy bills. 

UK Government outlines plans to help households and businesses with energy bills

For households

To provide immediate support for households, an Energy Price Guarantee (EPG) will cap the unit price that consumers pay for electricity and gas. This will mean the average household will pay no more than £2,500 per year for a period of two years from October 2022, and is expected to save at least £1,000 a year, although savings for individual households will vary according to their energy use. The discount is automatic and there is no need to apply or contact energy suppliers.

The EPG is in addition to the £400 support all households will receive from the Energy Bills Support Scheme (EBSS) over the coming winter.

The government will also provide an additional payment of £100 to compensate for the rising costs of alternative heating fuels for UK households not able to receive support for heating costs through the EPG, for example if they are living in an area of the UK that is not served by the gas grid.

See: Energy Bills Support Factsheet - GOV.UK (www.gov.uk)

For businesses

Through a new Energy Bill Relief Scheme (EBRS), the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including UK businesses, voluntary sector organisations like charities and public sector organisations such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the EPG put in place for households.

It will apply to fixed price contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will initially apply to energy usage from 1 October 2022 to 31 March 2023, before a review is undertaken to inform decisions on future support. The savings will be first seen in October bills, which are typically received in November.

As with the EPG for households, customers do not need to take action or apply to the scheme to access the support. Discounts will automatically be applied to bills.

See: Energy Bill Relief Scheme: help for businesses and other non-domestic customers - GOV.UK (www.gov.uk)

UK intellectual property protection abroad

To protect your intellectual property outside of the UK, you usually need to apply in each country you want protection in.

Intellectual property (IP) rights are territorial. They only give protection in the countries where they are granted or registered. If you only have UK protection, others may be allowed to use your IP abroad without infringing your rights.

If you are thinking about trading abroad then you should consider registering your IP rights abroad.

Some countries may allow you to extend your UK protection, and accept it as protected in that country after completing certain local formalities.

See: Protecting your UK intellectual property abroad - GOV.UK (www.gov.uk)

New Small Business Research Initiative (SBRI) to fund social ventures with the ability to scale and deliver social impact

Organisations can apply for a share of up to £3 million to scale products and services to support healthy ageing.

Innovate UK, part of UK Research and Innovation, is funding a new SBRI to fund social ventures with the ability to scale and deliver social impact.

The competition aims to enable businesses with a social purpose to scale up existing innovative products, processes and services where the innovation element is at a Technology Readiness Level (TRL) between 3 and 7.

To be eligible to apply to this competition, you must address one or more of the seven themes identified by the Healthy Ageing Challenge Framework to support people as they age:

●        Living well with cognitive impairment

●        Sustaining physical activity

●        Maintaining health at work and work in later life

●        Managing the common complaints of ageing

●        Design for age-friendly homes

●        Creating healthy active places

●        Supporting social connections

You must also identify a clear route to market, scalability and sustainability for your product or service, and have a validated business plan to scale your product or service and plan to scale by at least 25% of the current baseline.

See: Competition overview - SBRI: Healthy Ageing scaling social ventures - Innovation Funding Service (apply-for-innovation-funding.service.gov.uk)

Rising Stars 5.0 applications are now open

Tech Nation has opened applications for their Rising Stars 5.0 competition, which looks for the best, most exciting early-stage technology businesses in the UK.

The competition offers a chance to raise your profile on a local, regional and national level, and pitch your business in front of leading investors, influencers and corporates.

Entrants are supported throughout the application process and during each stage of the competition to enable them to compete to their best ability and deliver the perfect pitch.

This year, Rising Stars will choose City Winners - the most exciting innovative businesses on a local level at tech community events across the UK. The City Winners will then go on to pitch at a regional final to get a spot as a regional winner progressing to the semi-finals.

The competition will culminate by celebrating the top 20 finalists, who will be showcased and promoted to a curated audience of investors, corporates and key ecosystem players at the national final event.

Finally, the judges then will select ten companies that will be named this year's Rising Stars, who will feature in a high-profile celebration and be given additional tailored support through the Tech Nation network.

See: Rising Stars - UK pitch competition for early-stage tech startups - Tech Nation

Mini Budget

Below is our summary of today’s ‘Mini Budget’. We’ll follow up with a detailed analysis of how this will all work in practice ASAP.

The Chancellor Kwasi Kwarteng today outlined a series of tax cuts as follows:

• Income tax will be cut to 19% from April next year
• The recent rise in National Insurance tax will be reversed from the 6th November
• The dividend tax increase has also been reversed.
• The planned rise in corporation tax from 19% to 25% has been cancelled
• The threshold before stamp duty is paid in England and Northern Ireland has been raised to £250,000. For first time buyers it will be £425,000.
• The IR35 Reforms, effective in 2017 and 2021 will no longer apply from April 2023. Instead, the original rules will remain, and contractors will be responsible for assessing their own tax.

If you have any questions, please get in touch.

Cheers,

Steve

Steven Hillman ACA
Chartered Accountant
01934 444 100

Tax diary for October

The following dates are important tax deadlines for October. Please contact us if you need support in meeting these filing dates. 

1 October 2022 – Due date for Corporation Tax due for the year ending 31 December 2021.

19 October 2022 – PAYE and NIC deductions are due for the month ending 5 October 2022. (If you pay your tax electronically, the due date is 22 October 2022)

19 October 2022 – The filing deadline for the CIS300 monthly return for the month ending 5 October 2022. 

19 October 2022 – CIS tax deducted for the month ending 5 October 2022 is payable by today.

31 October 2022 – Latest date you can file a paper version of your 2021-22 self-assessment tax return.

Working capital finance explained

Working capital finance solutions offer businesses the opportunity to improve cash flow. The world of commercial finance and asset-based lending (ABL) is complex and expansive with products, terminology and contractual interpretation varying from lender to lender.

The benefits of arranging working capital include:

●       Up to 90% of outstanding invoice value can be advanced within 24 hours;

●       Flexible lending – funding increases in line with your growth (UK and Export);

●       Confidentiality – lenders can offer a completely confidential service – your customers need not know you have a facility in place;

●       Lenders allow you to manage your funding at all times;

●       Sector-specific finance is often available;

●       Structured ABL – funding for management buy-outs/management buy-ins;

●       Trade Finance & Supply Chain Finance Solutions.

Specialists in this area can advise on:

●       Invoice Finance - an effective way of quickly accessing a proportion of the value (up to 90%) of your invoices. Effectively, a business ‘sells’ its invoices to the lender in return for accessing cash at the point products and services are sold. Specific sector-based offerings are available, as is the ability to arrange finance for selected invoices only.

●       Structured ABL - generate a higher level of funding by unlocking the maximum value tied up in the combined assets within your business, including Debtors, Inventory, Plant & Machinery and Property. Additional forms of funding can be structured in addition to this, such as top-up loans in order to drive growth.

●       Trade Finance - supply chain finance with various options, enabling the purchasing of goods from overseas where you are otherwise unable to obtain credit from suppliers.

Typically, you will need to ensure that your management accounts are up to date, you make available current detailed lists of debtors and creditors, and you might need to provide up-to-date projections before an expert will consider your application. Please talk to us about finance - our working capital finance experts have many years of experience and success in advising businesses across a wide range of sectors in obtaining working capital finance solutions. We can help you find a specialist to help you find the right solution for your business. 

Thinking of retirement?

The ultimate aim of every serious business person is to build a company that has value, so that it can be sold or transferred, allowing the entrepreneur to exit gracefully and profitably.

Recently, we have been helping a number of our entrepreneur clients develop exit strategies. There are many factors to consider:

•       When do you want to retire?

•       Can the business be sold to your employees?

•       Is a trade sale more likely?

•       Are there children involved?

•       How much is the business worth?

•       What needs to be done to enhance the value of the business?

•       How long will it take?

•       Do you want or need to stay on after the sale or transfer?

•       What are the tax consequences?

We have a tried and tested methodology to address these issues and to help you prepare your business for sale, find potential buyers and help you negotiate to get the maximum price. If you would like to discuss your personal exit plans, we would be happy to do so with you — Just give us a call!

Successful recruitment strategies

The latest official figures released by the Office for National Statistics (ONS) show that the UK's unemployment rate fell to its lowest level since 1974 in the three months to July. The jobless rate fell to 3.6% over the period, although this may change with a future recession.

For many businesses, recruiting employees remains challenging, and we’ve seen some very inventive clients adopting new strategies. For example, some employers are now offering “Wellbeing leave” in addition to the usual holiday package. If you want to recruit, you have to get serious about the process and be on it 365!

There are a number of actions you can take to make your business attractive to new staff. In addition to reviewing your pay and conditions to be as competitive as possible, some things you could do to improve include:

●       Tasking recruitment as a permanent process; 

●       Regularly asking existing staff, customers and suppliers for introductions;

●       Offering incentives for referrals;

●       Make sure you are running constant online social media posts and local advertisements;

●       Embracing flexibility in hours and location in your business;

●       Introducing a “Golden Hello” and loyalty bonuses based on length of service (typically one to three years);

●       Advertising testimonials from existing staff;

●       Using government initiatives for apprentices;

●       Make your company and the job sound as attractive as possible by outlining the position to sound prestigious and challenging - These two factors are big incentives for bright potential candidates;

●       When advertising the role, knowing that job satisfaction comes from feeling respected and having the opportunity to learn new things and excel in the face of obstacles; and

●       Conveying your business's personality so potential employees get a feel for what it would be like to work for you.

Useful guidance on the procedures for recruitment can be seen in the ACAS guide “Recruiting staff” which can be seen here:  Recruiting staff (acas.org.uk)

New beginnings in uncertain times

The 70-year reign of Queen Elizabeth II was marked by her sense of duty and her determination to dedicate her life to her throne and to her people. For many of us, she became a constant in a rapidly changing world. King Charles lll paid tribute to the reign of the late Queen, “unequalled in its duration, its dedication and its devotion”, as he was formally declared the nation’s new Monarch.

A new era begins for us all. Not only is there a new Monarch, but we also have a new Prime Minister and Cabinet facing the toughest economic conditions in decades.

So what actions can we expect from the government in the next few weeks?

Chancellor Kwasi Kwarteng will outline how the government intends to fund the measures to help with the cost-of-living crisis on Friday 23rd September in what is described as a “fiscal event”. We can also expect further details about the household annual energy cap and the support for businesses. Government plans also outline the lifting of the ban on fracking and new licenses for North Sea oil and gas to help increase UK domestic supplies.

One of the key questions is whether Liz Truss will keep her promises on tax cuts.

During the run-up to the leadership election, the new Prime Minister promised tax cuts to stimulate economic growth, including the abolition of the 1.25% Health and Social Care Levy and cuts in corporation tax and income tax. It will be interesting to find out if and when those tax changes take effect. We should find out by the end of September as part of the “fiscal event” outlined above.

Normally before a formal Budget, there needs to be a report by the Office of Budget Responsibility which reports on the state of the economy and the likely impact of the fiscal announcements. These reports provide reassurance to the financial markets. Many commentators, including the Chairman of the Treasury Select Committee, Mel Stride, have strongly recommended that such a report should be prepared. If the markets are spooked then interest rates could escalate as a result, increasing government borrowing costs. There are already concerns about the exchange rate against the dollar, the lowest since the 1980s which will result in higher UK inflation.

The main concern is the likely increase in government borrowing, which some estimate could be as much as an extra £200 billion over the two-year period of support. Liz Truss has categorically refused to introduce a further “windfall tax” on energy companies stating that would discourage investment in the UK and stifle growth. Therefore, the major question is can the country still afford the promised tax cuts in light of the massive increase in government borrowing? Remember that when the Health and Social Care Levy was announced, we were told that the new Levy would bring in an extra £36 billion over three years. That seems a small amount compared to the potential cost of support for energy bills. With a general election within the next two years, tax increases are unlikely but future generations may well have to bear the brunt of paying the spiralling government debt.

Faced with uncertainty, what actions should a business owner take right now?

Take some time to look at your business’s strengths, weaknesses, opportunities and threats. Get a clear understanding of its position in the marketplace, the competition, the systems and the way things are done to find improvements that could be made. Focus on what the business is to look like when it is “complete” or running profitably and successfully. Then, you can determine priorities – the big issues that need to be focussed on – and make a plan.

It is also a good idea to plan for a range of scenarios (good and bad) so you can be flexible about the direction your business should take. 

Please talk to us about your plans, we can assist with cash flow planning and “what if” scenarios.    

Queen’s State Funeral

All members of our team are united in sadness following the death of Her Majesty The Queen. She provided the stability and continuity for the whole United Kingdom and the Commonwealth through seventy years of both wonderful and turbulent times. We are deeply grateful for her service, and our thoughts are with all those affected.

Rest in peace, Your Majesty.

As announced by the Government and our new King, Monday 19th September, the date of the Queen’s State Funeral, will be a national bank holiday.

In order for our staff to pay their respects in whatever way they personally feel appropriate it is our intention to observe this national holiday.

Consequently, our office will be closed on Monday 19th September. We reopen at 9am on Tuesday 20th September. 

Growth support for creative businesses

The Business and IP Centre (BIPC), part of the British Library, has launched a free, three-month programme designed to help creative businesses grow.

The Get Ready for Business Growth programme will run from October to December 2022, and will aim to help companies in the creative sectors:

• launch new products
• reach new markets
• explore new opportunities

Every three months, the BIPC will select 25 high-growth, creative businesses from across the UK to give specialist support and tailored one-to-one advice.

The programme will run digitally, with modules including:

• getting the growth mindset
• good governance and building purpose into your organisation
• refining your business model and growth strategy
• product and service innovation
• maximising your intellectual property (IP)
• building your brand
• creating a marketing strategy
• financial planning for growth
• business and IP research

In addition to the modules, participants will benefit from one-to-one, online meetings with experienced business consultants.

See: Get Ready for Business Growth | The British Library (bl.uk)

Finance and support for your business

The Department for Business, Energy & Industrial Strategy has a webpage listing 151 schemes both locally and for all the UK. If your business needs support, it may be worth looking through the webpage which is in alphabetical order. You can search for specific topics such as finance, grants, loans and other support. 

In these tough times please contact us if you need help and we will do our best to assist or direct you to resources as needed.

See:  Finance and support for your business - GOV.UK (www.gov.uk)

Your long-term financial stability

With the economic chaos just now, this may seem a strange time to be thinking about financial stability but if we want to provide those we love with security then we should always be thinking long term.

The pandemic, spiralling inflation and the current economic downturn show all too clearly good health, and even life itself cannot be taken for granted.

When both partner’s income and assets are vital for the household’s financial security, it will inevitably mean financial difficulty for the survivor should either of them die. 

With the right financial planning you can minimise the problems for your loved ones and here are a few reminders of the essentials:

1. Write your will

Without a will, your assets will be distributed according to intestacy rules. This would mean if you have surviving children, grandchildren, or great-grandchildren, your partner will inherit your personal property and only the first £270,000 and then half of the remainder of your estate.  This could mean losing their home.

Writing your will should therefore be a priority, especially if you’re not married or in a civil partnership.  Common-law partners have no automatic legal right to inherit anything at all.  

Getting help on the financial side of will writing could mean avoiding tax problems for all concerned.

2. Look at your pension

Your pension may be one of the largest assets you own. Many people are surprised that it is not covered by their will. 

 Instead, you will need to make your wishes clear to your pension provider to let your partner access the money within your pension. 

 You should also think about how you will take your pension. You could take an annuity; in return for your pension pot, an annuity can provide a guaranteed income for the rest of your life. A joint annuity is designed for couples and will provide an income so long as either partner lives – but the income provided will be lower.

 A drawdown arrangement might offer a more rewarding alternative and provide greater flexibility to allow a surviving partner to make the financial arrangements they need.

 It is a good idea to seek independent advice to ensure your pension can go on providing for your loved ones. 

3. Take out a life insurance policy

Life cover is probably the most important step of all. A life insurance policy is designed to pay out a lump sum on death of the life or lives assured, providing your partner with the means to pay off things like the mortgage and help replace your income.

 There are many kinds of life insurance and in an attempt to keep the premiums to a minimum with a maximum level of cover, (subject to health and meeting underwriting conditions) most of us seem to choose term insurance, which ceases when we reach an agreed age. The facts show we are living longer, and this type of cover may run out. A whole of life policy will cost more but will potentially allow you to provide for your loved ones whatever age you reach.

 You also need to ensure that you have the right level of cover. Inflation may mean that a lump sum that was adequate 10 years ago is far from sufficient now.

 You might need to include some extra benefits to your life policy, for example Critical illness cover and Long-Term Income Protection cover. In addition, you may need to consider a further type of cover Accident, Sickness and Unemployment. All these types of protection have a part in providing real financial security. 

4. Get expert help

Security for your loved ones is simply too important to leave to chance. Expert help with the planning is vital to ensure they have the financial future you want them to have, whatever happens to you. If you do not have an independent adviser then ask us for a recommendation or see:   Finding an adviser | FCA 

How does a new Prime Minister affect you?

The reality for many small businesses and households has taken a turn for the worse recently as prices continue to surge, particularly energy. So, what’s on offer from the new Prime Minister?

The first announcement of the new Prime Minister, Liz Truss, was a plan to freeze energy prices for two years at £2500 for the average home and with the £400 rebate previously announced, takes this to £2100. There will be equivalent help for Northern Ireland. The amount saved by each family will depend on how much energy they use, and households have been urged to reduce their overall usage if they can because of the serious Europe-wide shortage of the natural gas which powers much of the heating and electricity network.

Liz Truss also said that a fund will be created to support those who are not covered by the cap. More details are expected in the next two weeks.

Unlike domestic customers, energy bills for businesses are not capped and the rising cost is proving critical for many companies, especially smaller firms. Liz Truss announced that businesses will get an "equivalent support" for a six-month period, but it is not clear what that means as the UK government have not yet published the unit cost per unit of gas and electricity that they are using to generate the domestic cap and cannot yet confirm whether the same unit cost will be applied to business customers. After the six-month period, further support will be targeted at "vulnerable industries". We will update you when further information is available.

The new Prime Minister also has a recession to deal with and the Bank of England has warned that little can be done to stop the UK falling into a recession as the war in Ukraine continues. Its governor, Andrew Bailey, said it would "overwhelmingly be caused by the actions of Russia and the impact on energy prices". The Bank expects the economy to shrink in the last three months of 2022 and keep shrinking until the end of 2023.

To address the recession one of her strategies could be a change in taxation policy designed to increase economic growth by putting more money in our pockets and allowing businesses headroom to invest. We will keep you informed over the coming weeks if taxation policy changes.

As with any downturn in the economy, some types of business are more likely to run into cash flow problems, while other types appear to be more resilient. If you are a business owner, you might be wondering which category your business falls into. No matter how inventive or simple your business model is, you can still have problems with cash flow.

To understand and predict how cash flows in your business, start by performing a health check on your accounts. Look at your latest profit and loss statement and check that your income is sufficient to cover your expenses. If your profit is falling behind your expenses and cash flow is slowing down you might need to take action.

Talk to us about preparing a cash flow statement and budget so that we can work with you to maximise your business’s resilience over the next two years.

Tax breaks for locating your business in a freeport area

HMRC have published detailed maps setting out the precise location of all 8 Freeport tax and customs sites in England with the latest update at the end of August. The original 8 locations were announced in the Spring 2021 Budget:

●       East (Felixstowe and Harwich)

●       East Midlands Airport

●       Humber

●       Liverpool City

●       Plymouth and South Devon

●       Solent

●       Teeside

●       Thames

More maps of Freeports customs sites and Freeport tax sites will be added after they are designated.

Businesses in these designated areas will be able to benefit from generous tax and customs duty reliefs including:

●        An enhanced 10% rate of structures and buildings allowance.

●        An enhanced capital allowance of 100% for plant and machinery.

●        Full relief from Stamp Duty Land Tax.

●        Business rates relief.

●        Relief from employer National Insurance contributions where employees spend at least 60% of their time working in the designated area.

Businesses operating in the designated areas will be able to import goods into the Freeport customs sites with simplified customs documentation and they can also delay paying tariffs. Manufacturing businesses may then manufacture goods using these imports, before exporting them again using the simplified customs procedures without paying the tariffs.

For detailed maps see: Maps of Freeports, Freeport customs sites and Freeport tax sites - GOV.UK (www.gov.uk)