23rd February 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Navigating recession: Key considerations for your business
The Office of National Statistics released official figures last week showing the UK is now officially in recession.

Gross domestic product (GDP) for the October to December 2023 quarter dropped by 0.3%. This followed a fall in the July to September 2023 quarter of 0.1%. A fall in GDP in two or more consecutive quarters constitutes a recession.

Experts will generally assess the health of an economy on a number of factors, rather than solely look at the headline GDP rates. However, the “recession” word quickly takes hold in news headlines and brings apprehension and uncertainty with it.

While it may be a time for concern, proactive measures can mitigate its impact and even present opportunities for growth. Here are some key things for businesses to look at when navigating the onset of a recession.

Financial resilience:
Assess how your business’s finances currently look. Where possible, look to strengthen cash reserves and reduce unnecessary expenses.

Are there ways you could diversify your income sources so as to avoid being overly reliant on 1 or 2 major customers?

Prepare cashflow forecasts and see if you can predict where a potential downturn in income might come. Based on this, you may be able to make some contingency plans or time payments on essential expenditure so you don’t leave yourself short at the wrong time.

Analyse your customers’ behaviour:
During economic downturns, spending behaviours generally often change. Priorities are put on essential purchases while what is seen as non-essential or non-urgent is put on the back burner. How will this affect how your customers buy from you? Could you tailor your marketing strategy or the products or services you offer your customers so that they appeal to their current needs and price sensitivities?

Review your supply chain:
It’s a good time to evaluate the resilience of your supply chain. Do you have key suppliers that may struggle with a down-turn? It could be that exploring alternatives would be wise. On the other hand, if you are in a relatively strong financial position, it could be a good time to support a trusted supplier, perhaps ensuring reduced pricing or longer-term loyalty.

Strengthening your relationships with key suppliers and maintaining open communication with them can also help you to anticipate and address potential challenges.

Nurture staff morale:
Continue to invest in and nurture staff morale. Staff can also become anxious in an economic downturn, and this can easily affect morale and productivity. Consider cost-effective strategies that will help you retain talented staff. For instance, flexible work arrangements, skill development programs and performance incentives can help to keep staff incentivised.

Your staff may also have good ideas that will help your business to adapt. Spending time talking with them and giving them the authority to contribute innovative solutions can provide you with a very valuable resource.

Strategic investments:
While there are uncertainties in an economic downturn, there are usually also opportunities. It can be well worth exploring investment opportunities if you are in a position to do so.

Look for undervalued assets or potential mergers or acquisitions that can be done for a reduced price. You may be able to capitalise on the downturn to buy assets at a favourable price and position your business for long-term growth.

Government assistance:
There are many government assistance programs available, and additional ones may be added to support business continuity through a recession. Policy changes, tax relief measures, funding schemes, and loan financing assistance are all possibilities that your business could take advantage of. Stay informed about what is available, as these programs can provide much needed support.

Long-term vision and a positive attitude:
Maintain a long-term perspective, as it will help prevent you getting caught up in negative thinking that can stifle your ability to successfully adapt to change. A recession is a technical marker of the UK-wide economic landscape, but it is not necessarily an indicator for how your business can perform. Keeping a positive attitude will allow you to see the opportunities you have available to you and give you the drive to see them through.

In conclusion, navigating a recession takes good planning and adaptability. But by taking proactive steps, like those we have mentioned, your business can not only weather the economic downturn but also emerge stronger and more competitive in the long run.

We are here to support you during tough times, why not ask us about our Tough Times Action Pack that is designed to provide you with useful guidance and support.
 
Customer satisfaction index drops: how can you avoid the same in your business?
The Institute of Customer Service published its latest UK Customer Satisfaction Index (UKCSI) figures for January 2024. The Index has fallen by 1.7 points since last January to 76.0 (out of 100) - https://www.instituteofcustomerservice.com/research-insight/ukcsi/

Each of the 13 UKCSI sectors showed lower customer satisfaction than a year ago, with Utilities, Transport, Insurance and Service declining by more than 2 points. The highest rated organisations are Ocado (85.7), first direct (85.3) and John Lewis (85.1).

Looking at an index update like this can provide a good opportunity to reflect on the customer satisfaction of your own customers. Good customer service is characterised by several key elements that prioritise and promote positive experiences for customers.

Effective communication
Clear and concise communication that demonstrates an understanding of customers’ inquiries and addresses them promptly is key. This needs to be true wherever the interaction happens, whether through in-person interactions, phone calls, emails, or live chat support.

Empathy
Empathy is essential for demonstrating that you understand a customer’s needs, emotions and concerns. Empathetic customer service will allow your customers to feel a rapport with you that builds trust.

Responsiveness
Customers expect their needs and any issues they have to be dealt with in a timely manner. Prompt response times tell a customer that they are important to you and build loyalty.

Consistency
A high service level in one area of the business can be compromised if other areas of the business do not maintain the same standard. For instance, a high standard in pre-sales support will be undermined if after-sales support is lacking. Consistency across all touchpoints and interactions with customers is therefore important. It gives your customers confidence in your business and contributes to you winning repeat business.

Flexibility
Each customer is unique, so being able to accommodate customers’ preferences and resolve unique situations or challenges is an important part of being able to keep your customers happy. Being willing to go the extra mile, and to tailor solutions to individual customer needs, can significantly enhance satisfaction and loyalty in your customers.

Continuous improvement
Regularly collecting feedback from customers and implementing the insights that it gives you will allow you to adapt and evolve your customer service practices to meet their changing needs and preferences.

Good business systems
Having good business systems in place helps staff in their quest to provide excellent, consistent customer service. Good systems mean that staff know who is responsible for what, and where or who to get information and authorisations from when they need it.

Why not talk to us about how we can help you with improving your business systems for growth? We would be happy to help you!
 
Inflation stays flat
Official figures were released last week showing that inflation remains at 4% in the year to January.

Energy prices have increased due to the new energy price cap, and the price for second-hand cars also rose by 1.5%. However, food prices fell for the first time in two years by 0.4%. Discounts offered by retailers for furniture and household goods in the January sales have also exerted a downward push on inflation.

Of course, inflation staying flat does not mean that prices are not increasing. A 4% inflation rate means that prices are still going up at double the rate targeted by the Bank of England.

The Office of National Statistics (ONS) have also released figures showing that pay, excluding bonuses, grew by 6.2% in the last quarter of 2023. While this and the number of job vacancies have reduced since the summer, pay growth still exceeds inflation. The former deputy governor of the Bank of England said that he would be surprised to see the Bank lowering the base rate until this changes.

Businesses therefore continue to face increased prices for supplies and pressure to increase staff wages to meet their costs of living, while trying to balance what can be passed on to customers.

However, Chancellor Jeremy Hunt took the news as a positive, saying: “Inflation never falls in a perfect straight line, but the plan is working.”

See: https://www.bbc.co.uk/news/business-68285819

Some self-catering holiday let owners being asked to provide trade information
The Valuation Office Agency (VOA) is contacting the owners of some self-catering holiday lets. The lets in question are ones that are currently being assessed for business rates.

The VOA are looking for additional information about the income and expenditure of these properties. This will assist in calculating the rateable value of the property.

This enquiry follows an exercise undertaken by the VOA last year to contact self-catering holiday let owners. The information requested at that time enabled the VOA to decide whether the properties should be assessed for business rates or Council Tax.

The rateable values of self-catering holiday lets must be updated by the VOA every three years, and the information being requested helps them to revalue properties correctly.

Forms will be sent out between February and August. If you receive one, then it must be returned within 56 days to avoid paying a penalty.

If you receive a form and need any help with completing it, please contact us and we will be happy to help. If you are expecting a form and do not receive one, or otherwise believe that the rateable value for your holiday let is incorrect, let us know and we’ll be pleased to help.

For more information on how properties are valued, see: https://valuationoffice.blog.gov.uk/2023/02/20/how-we-value-self-catering-holiday-homes/

See: https://www.gov.uk/government/news/providing-trade-information-for-self-catering-holiday-lets
 
Violence and abuse towards shop workers increases to 1,300 incidents a day
A crime survey carried out by the British Retail Consortium (BRC) shows a 50% increase in levels of violence and abuse towards shop workers. During 2022/23 there were 1,300 incidents a day compared with 870 a day in the previous year.

The abuse includes racial abuse, sexual harassment, physical assault and threats with weapons, and is on a par with the levels of abuse retail workers experienced during the pandemic when safety measures frustrated many.

Theft costs have increased to £1.8 billion from £953 million the year before, with 45,000 incidents a day.

These increases are all despite retailers investing £1.2 billion (compared with £722 million in the previous year) on CCTV, increased security personnel, body worn cameras and other security measures.

The survey also indicated a high level of dissatisfaction with the police, 60% of respondents describing police response as ‘poor’ or ‘very poor’.

Katy Bourne OBE, Sussex Police & Crime Commissioner and APCC Lead for Business Crime, has described the levels of retail crime as revealing “an unprecedented level of selfish lawlessness.” She has urged greater police focus on the problem.

Calls are being made for a standalone offence to be introduced for assaulting, threatening, or abusing a retail worker in the hope that this will help deter offenders. Retail workers in Scotland already benefit from such a law, where this offence was introduced in 2021.
Retail business owners continue to need to assess the risks and consider what measures they can take to effectively protect their staff and business.

See: https://brc.org.uk/news/corporate-affairs/retail-crime-a-crisis-that-demands-action/
 
HMRC warns about an increase in tax refund scams
HM Revenue and Customs (HMRC) are warning that fraudsters could focus on Self Assessment taxpayers.
With the tax return filing deadline having just passed at the end of January, an email, phone call or text message that offers a tax rebate may appear more believable than usual.

HMRC say that they have responded to 207,800 referrals in the year to January, with more than 79,000 relating to fake tax rebates. The total number of referrals has increased by 14% over the previous year, suggesting fraudsters are increasing their efforts.

Scammers are looking to get personal details that they can sell on to criminals, or to gain access to bank accounts and phish for these details using emails, phone calls or texts that appear to mimic an HMRC message.

To protect yourself, avoid rushing into anything and always protect your personal information.

HMRC have confirmed that they will not email, text or phone a customer to tell them that they are due a refund, or to ask them to request a refund. Repayments will be made automatically into the account chosen when filing the tax return. Alternatively repayment amounts can be seen and payment requested in your online HMRC account or in the HMRC app.

If you receive contact that you are suspicious of, you are encouraged to report it to HMRC. You can:

• Forward emails to phishing@hmrc.gov.uk;
• Report tax scam phone calls to HMRC on GOV.UK; or
• Forward suspicious texts claiming to be from HMRC to 60599.

If you are in any doubt whether contact you have received is genuinely from HMRC, please do not hesitate to contact us and we will be pleased to help you!

See: https://www.gov.uk/government/news/warning-to-self-assessment-customers-as-scam-referrals-exceed-200000
 
New trade and investment partnership with Nigeria
Last week the UK signed an Enhanced Trade and Investment Partnership with Nigeria to boost trade and investment between the two countries.

In the year to September 2023, trade between the two countries totalled £7 billion. UK exports to Nigeria were £4 billion in that year, which represented a 3% increase in current prices over the previous year.

The partnership will allow for additional opportunities in the financial and legal services sector, the film and media industry and for UK education providers to offer education in Nigeria.

Lawyers in both the UK and Nigeria will benefit from the agreement that facilitates them practising foreign and international law in each other’s country.

Nigeria’s economy is the biggest in Africa and is predicted to be in the world’s top 20 by GDP by 2035.

See: https://www.gov.uk/government/news/uk-signs-landmark-economic-partnership-with-nigeria
 
What’s your policy on scanning QR codes?
Since the COVID lockdowns, QR codes have become increasingly commonplace as a quick way to direct people to websites, to log into online video services on smart TVs and TV boxes, or to order or pay for goods and services.

But is your business protected from the risks that may come from criminals using malicious QR codes? Do you have a policy for your staff in place? What issues do you need to consider?

The National Cyber Security Centre (NCSC) have provided some guidance on the subject in a recent blog post.

They advise that QR code related scams are relatively small compared to other types of cyber fraud. The majority of QR code-related fraud usually happens in stations, car parks or other open spaces and often feature an element of social engineering, such as a criminal posing as a bank employee calling to continue the deception.

QR codes are increasingly being used in phishing emails, sometimes called ‘quishing’. This is because people are more suspicious of links in emails and so QR codes may more easily disguise a link to a malicious website. Also, security tools that detect phishing emails may not scan images and so let a QR code through.

Criminals are also aware that a person is likely to use their personal phone to scan a QR code. Personal devices don’t usually have the same security protections as an employer-provided computer.

NCSC make the following recommendations that could be used as the basis for a work policy on use of QR codes:

• QR codes used in pubs and restaurants are likely to be safe.
• Scanning QR codes in stations, car parks and other open spaces is likely to be riskier. Whenever you are being asked to provide what feels like too much information you should be suspicious.
• Exercise caution about scanning a QR code in an email. These types of quishing attacks are on the increase.
• Use the QR scanner that comes with your phone rather than using an app downloaded from an app store.

See: https://www.ncsc.gov.uk/blog-post/qr-codes-whats-real-risk
 
A reminder for businesses on waste recycling responsibilities
A Buckinghamshire-based company has recently made the news, not for their innovative products or services, but for their failure to adhere to regulations on recycling waste packaging.

Hi-Tech Coatings International Limited, located in Aylesbury, found themselves in hot water for neglecting their obligations under the Producer Responsibility Obligations (Packaging Waste) Regulations 2007. As a result of their oversight, the company has had to make a significant financial contribution of nearly £21,000 to a local charity, in addition to covering Environment Agency costs.

The company were proactive in making amends and showing how they will comply with the law in the future. The Environment Agency were willing to accept the company’s offer and did not proceed to prosecution in this case.

Berks, Bucks and Oxon Wildlife Trust are the beneficiaries of the company’s contribution. The money will be used to help protect local wildlife habitats and wetland areas in Buckinghamshire.

The regulations are designed to ensure that businesses take responsibility for the recycling of packaging waste. A senior technical officer for the Environment Agency, Jake Richardson, has said: “Any company handling more than 50 tonnes of packaging a year, and with turnover in excess of £2 million, must register with the Environment Agency or a packaging compliance scheme, and meet their responsibilities for recycling waste packaging.”

This financial penalty serves as a stark reminder of the importance for businesses to stay aware of their environmental responsibilities, particularly when it comes to waste management and recycling. By fulfilling their responsibilities for recycling waste packaging, companies not only mitigate financial and legal risks but also contribute to the preservation of natural ecosystems and the well-being of future generations.

See: https://www.gov.uk/government/news/buckinghamshire-firm-pays-heavily-for-packaging-oversight
 
Sustainable Farming Incentive receives thousands of applications
The Department for Environment, Food & Rural Affairs (Defra) has announced that more than 10,000 farmers across England have applied for the improved Sustainable Farming Incentive since it opened for applications in September.

The Sustainable Farming Incentive provides financial help to farmers for taking actions that support food production, farm productivity and resilience, while protecting and enhancing the environment.

Based on feedback received from farmers, the Incentive has been expanded and improved to include around 50 new actions that farmers can be paid for. The application process has also been made more straightforward and farmers have more flexibility now to choose which actions work best for them.

Farmers are being encouraged to apply now, and Defra are holding webinars in February and March, as well as a presence at upcoming agricultural shows throughout England.

For more information and to apply, see: https://farming.campaign.gov.uk/
 
Nature benefits from new legal requirement for developers
All major housing developments in England are now required to deliver at least a 10% benefit for nature. This Biodiversity Net Gain requirement, which was introduced in the Environment Act, is now a legal requirement for all new planning applications.

Biodiversity Net Gain means that a development needs to avoid harming nature, or if that is unavoidable, new habitats need to be created or existing ones enhanced so that the net result is more nature after a development than before. The gain is preferably to be made within the new site itself, but the requirements can also be satisfied by investing in nature sites elsewhere.

Measures are included in the new requirements to ensure that the Biodiversity Net Gain provides a lasting benefit to the environment over the long term. For instance, significant on-site and off-site gains will need a legal agreement with a responsible body or local authority to monitor the habitat improvements.

Many developers already work to improve nature in their developments, but the new requirements have been welcomed as a positive move in bringing nature back into towns and cities.

See: https://www.gov.uk/government/news/new-housing-developments-to-deliver-nature-boost-in-landmark-move

16th February 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Year-End Tax Planning: Maximising benefits for your business
We are now within the final two months of the tax year, and for many businesses, the end of the tax year is also the end of the business’s financial year. This can be a good time to review your business tax planning to ensure that you minimise tax.

Assessing profit extraction methods
Particularly for limited companies, profit extraction methods can be a key part of tax planning. Whether it involves salaries, bonuses, dividends, or a combination of these, choosing the right strategy can significantly impact tax liabilities.

Optimising the method and timing of when you extract profits can mitigate tax while ensuring that owners and key staff are compensated fairly.

Dividends
Dividends are a fundamental part of the way any company distributes profit. For an owner managed company, though, dividends frequently play a key role in the owner’s remuneration strategy.

Particularly as the tax year concludes, it is important to check the timing of your dividend payments. For instance, have you earned more this year than you expected? Might another dividend payment push you into higher rate tax? If so, deferring a dividend may help you.

By aligning dividend payments with tax thresholds and allowances, you may be able to reduce your tax exposure.

Capital allowances
Capital allowances are a tax relief available on many types of capital expenditure. Bringing forward or delaying the purchase of capital items, for example IT equipment or a refurb project, can help you to maximise the allowances available.

For companies whose profit level means they pay at the marginal relief rate, optimising capital allowance claims can also help to reduce the tax rate that a company would otherwise pay.

Naturally, it is always important to avoid letting the tax ‘tail wag the dog,’ but using capital allowances effectively can not only reduce tax liabilities but also help to fund vital investment in business assets.

Research and Development Tax Credits
If your limited company is involved in innovating, research and development (R&D) tax credits can be very worthwhile. However, claiming R&D tax credits requires thorough documentation and there are specific criteria that need to be adhered to.

As the business approaches its year end, it is a good time to check that records of R&D activity are up-to-date and complete.

R&D tax credits can reduce tax liabilities as well as provide funding for future innovative activities that keep your business on the front foot.

In conclusion, tax planning as the tax year-end approaches is an important part of leveraging the tax incentives available to you, minimising tax liabilities while staying compliant with tax laws.

If you would like help in proactively managing your tax liabilities, we have a range of tools and calculators as well as expert knowledge of the tax laws. Please feel free to call us, we will be pleased to help you!
 
How to recognise tax scam phone calls, emails and text messages
HM Revenue and Customs (HMRC) have recently published updated their guidance on how to identify tax scams made by phone, email, or text.

They advise that if you receive a phone call, email, or text message that purports to be from HMRC, it is likely to be fake if it:

• rushes you;
• is threatening;
• is unexpected;
• asks for personal information, such as bank details;
• tells you to transfer money; or
• offers a refund, tax rebate or grant.

HMRC also confirm what they will and won’t do if they contact you.

By phone:
HMRC will never threaten arrest or leave a voicemail threatening legal action.

By text:
HMRC do send text messages that may include a link to GOV.UK information or HMRC webchat. They will never ask for personal or financial information. So, a text message that offers a tax refund in exchange for personal or financial details cannot be from them.

By WhatsApp:
If you have subscribed to the UK Government Channel, you may receive occasional tax-related reminders, but you will not be able to reply. HMRC don’t otherwise use WhatsApp to communicate with taxpayers.

HMRC does use QR codes in its letters to take you to guidance on GOV.UK, but they confirm that you would never be taken to a page that requires you to provide personal information. QR codes might also be used after you have already logged in to redirect you to, say, your bank login page.

You can check whether a phone call, email or text is genuine by consulting HMRC’s website here: https://www.gov.uk/government/collections/check-a-list-of-genuine-hmrc-contacts

Guidance, including some examples of HMRC related phishing emails, suspicious phone calls and texts is available here: https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

If you are concerned about any phone calls, emails, or texts that you have received from HMRC, please do not hesitate to contact us and we will be happy to confirm whether or not it is genuine!
 
New Economic Crime Unit to tackle financial crime in the waste sector
A new Economic Crime Unit has been launched by the Environment Agency. Its role is to tackle money laundering and carry out financial investigations in the waste sector.

The Environment Agency has already been targeting waste crime with its Financial Investigations Team, and this new Unit will build on that work.

The Unit will be made up of two teams: the Asset Denial Team and the Money Laundering Investigations Team. The Asset Denial Team will focus on account freezing orders, cash seizures, pre-charge restraints and confiscations. The Money Laundering Investigations Team will be involved in conducting dedicated money laundering investigations that target environmental offences. A money laundering offence could result in a 14-year prison sentence for the offender.

To indicate the scale of the problem that waste crime is causing, Alan Lovell, Chair of the Environment Agency said that waste crime “costs our economy an estimated £1 billion every year.”

The Environment Agency is keen to tackle this problem. For instance, in November 2023 they successfully prosecuted the operators of a quarry near Stevenage. The operators were handed prison sentences for storing and burying enough illegal waste to fill the Royal Albert Hall nearly three times over.

It is hoped that the new Unit will increase the Environment Agency’s effectiveness in this area thereby reducing the load on legitimate business.

See: https://www.gov.uk/government/news/ensuring-crime-doesnt-pay-new-economic-crime-unit-to-tackle-money-laundering-and-carry-out-financial-investigations

Guidance for small businesses using online services
The National Cyber Security Centre have issued some new guidance on “Using online services safely.”

To avoid having to set up and manage their own IT infrastructure, many small businesses use online or cloud services. For instance, these might include email, online storage, online accounting and managing of invoicing, website hosting, and social media.

The guidance is designed to help small businesses reduce the likelihood of cyber attacks when using these services.

The guidance provides help on:

• Choosing a good service,
• Backing up critical data,
• Protecting the domain name you use for your website and email addresses,
• Creating separate user accounts and securing them,
• Protecting your admin accounts,
• Defending against malware,
• Using the security features that are built into the service, and
• Recovering a hacked account or service.

If you are a small business without the resources to employ a dedicated IT specialist, this advice can help you to consider and cover off the risks you face when using online services.

For the guidance, see: https://www.ncsc.gov.uk/collection/using-online-services-safely
 
Bounce Back Loan fraudster sentenced
Salih Ozhot from North London has been given a suspended prison sentence of 2 years for applying for a Bounce Back loan in 2020 for his business but then using the funds personally. He is also required to repay the £50,000 he borrowed in full at the rate of £500 per month.

Insolvency Service Investigators found that Mr Ozhot had withdrawn £19,000 within one week of receiving the loan. Their analysis of subsequent transactions showed that he used the money for personal rather than business reasons. Mr Ozhot was declared bankrupt in October 2021.

The Insolvency Service described Mr Ozhot’s actions as “cynical,” “sophisticated,” and “pre-planned.” He is now barred from acting as a company director without permission from a court.

Bounce Back Loans were government guaranteed loans made available to support businesses during COVID-19. However, the Department for Business has come under criticism for being too lax with the application process and HMRC has estimated that the total amount of error and fraud across all COVID-19 support schemes could be as much as £5bn. The government has subsequently launched pilot programs to try and detect potential fraud.

See: https://www.gov.uk/government/news/court-orders-cynical-fraudster-who-abused-covid-support-scheme-to-repay-loan-in-full
 
Unlocking efficiency and growth: The benefits of cloud accounting
In business, staying ahead of, or at least up with, the curve is crucial for success. Over recent years, one of the revolutionary tools that has transformed the way businesses manage their finances is cloud accounting. Cloud accounting offers many benefits over traditional, on-premise accounting systems. Let’s discuss some of them.

What are the benefits of cloud accounting?
Accessibility

Traditional accounting systems often tie businesses to a specific location, requiring users to be physically present in the office to be able to access financial data. Cloud accounting frees a business from this constraint. It gives users access to real-time financial information anytime, anywhere. This kind of flexibility and access can be very valuable, allowing teams to collaborate and decisions to be made regardless of location.

Cost efficiency
Cloud accounting operates on a subscription-based model, avoiding the up-front software licence costs usually involved in traditional accounting systems. Cloud accounting systems also typically receive automatic updates and maintenance, which can reduce the demand for IT support.

Security
The security of financial information is naturally a top concern for a business. Cloud accounting providers use advanced encryption measures to ensure that sensitive information is kept safe. These providers usually have dedicated teams focused on monitoring and addressing security threats too. This provides a level of protection that may be difficult to replicate on your own premises. Cloud accounting systems also include robust backup processes, which reduce the risk of losing data because of hardware failing.

Automation
With many cloud accounting systems - or by means of subscribing to linked automated data entry software – data entry can be automated. By uploading a copy of the invoice or receipt the software can ‘read’ the data and create the entry needed by the accounts system. While such systems rarely achieve 100% accuracy, the time-savings can be considerable and allow those dealing with finance to concentrate on more strategic work.

The benefits of cloud accounting can be transformative to a business and give you a competitive edge in today’s dynamic market. Embracing this technology is not just a trend but can be considered a strategic move towards a more agile, responsive and prosperous business.

We have experience of various cloud accounting systems. If you would like an assessment of your current system to see how cloud accounting might help you, please do not hesitate to contact us!
 
Data sharing powers to continue following statutory review
The Digital Economy Act 2017 gave the government data sharing powers that allow it to combat fraud committed against the public sector.

A statutory review, which was published last week, shows that taxpayers have been saved £137 million because of these data sharing powers. The review showed that the Act has enabled more than 100 data sharing pilots across both local authorities and governments or agencies.

The savings were categorised as £99.5 million from identifying Covid-19 loan scheme fraud, £14.9 million from fraud identified in council tax and housing benefit systems, £5.1 million from identifying companies that were fraudulently misstating their accounting and corporate practices to avoid paying tax, and £5 million from council tax debt owed by those in employment.

As a result of the review, Baroness Neville-Rolfe, who is Minister of State for the Cabinet Office, decided to keep the fraud and debt powers contained in the Digital Economy Act. The government subsequently put a report to the UK and Scottish Parliaments and Welsh and Northern Ireland Assemblies summarising the conclusions of the review.

Four of the data sharing pilots have already been converted to standard practice and there are plans for more to join them. Respondents to the consultation expressed that they had no privacy concerns about the powers.

See:  https://www.gov.uk/government/news/new-data-sharing-powers-save-taxpayers-137-million-since-introduction
 
New digital labelling legislation cuts red tape
UK businesses are welcoming new legislation that introduces digital import labels. The legislation aims to reduce red tape and cut millions in unnecessary regulation costs.

The move towards digital labelling allows businesses to upload regulatory and manufacturing information online rather than physically printing it on products.

This should save both time and money that can be better invested in other business areas.

The new legislation includes continuing to recognise CE marking for products like toys and machinery.

See: https://www.gov.uk/government/news/new-laws-to-introduce-digital-labelling-for-businesses-and-reduce-regulation-costs
 
Next generation broadband coming to a location near you?
The UK government has announced the signing of six new contracts that will allow suppliers to connect businesses and homes in hard-to-reach areas to lightning-fast full fibre internet.

Rural communities in Buckinghamshire, Hertfordshire, Berkshire, Leicestershire, Warwickshire, Sussex, Kent, Bedfordshire, Northamptonshire, Milton Keynes, Nottinghamshire, and West Lincolnshire are the subject of these contracts. It is expected that some 236,000 premises will benefit from the uprated connections with the first being connected in early 2025.

For any business using the internet, speed and reliability make a big difference to productivity. Full fibre can deliver internet speeds of up to 1,000 megabits (or one gigabit) per second. This is up to 30 times faster than connections that rely on traditional copper cables.

See: https://www.gov.uk/government/news/over-1-billion-awarded-to-roll-out-lightning-fast-broadband-in-hard-to-reach-towns-and-villages

9th February 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Streamlining your business: Strategies to speed up customer payments and improve cash flow

Begbies Traynor, a firm of business rescue and recovery specialists, have published their latest Red Flag Alert based on financial data from the last quarter of 2023. It makes worrying reading as they estimate that more than 47,000 businesses in the UK are near collapse because of being in critical financial distress. This is a startling increase of 25.9% from the previous quarter, with particular concern raised for the construction and real estate sectors.

Of course, the Christmas trading period and an expectation that inflation will continue to fall and interest rates with it, provide some counter to any pessimistic claims. However, in the face of such worries, your attention may naturally turn to optimising cash flow, which is essential for sustained growth and success.

One key aspect that significantly impacts a company’s financial health is how quickly customers pay you. Efficiently managing and improving the speed at which customers pay can bolster your cash flow, improve liquidity, and contribute to overall business resilience.

Here are some strategies that can help you to streamline and speed up the payment process.

1. Clear and transparent invoicing
Make sure that your invoices are clear and easy to understand. Show itemised charges so that a customer knows exactly what they are being charged for and include detail of payment due dates and accepted payment methods. Transparency in your billing process fosters trust and can lead to faster payments.

2. Use digital payment platforms
Digital payment solutions provide convenience to your customers. Offering options like online payments, credit cards, and electronic fund transfers can significantly reduce the time it takes for funds to reach your account. Digital platforms not only speed up the payment process, they also enhance accuracy.

3. Implement automated payment reminders
Set up automated reminders to gently prompt customers about upcoming or overdue payments. Automated systems can be customised to send emails or notifications and can help avoid misunderstandings and encourage timely payments.

4. Reward early payments
Consider offering discounts or other incentives for customers who pay their invoices promptly. This strategy can motivate clients to prioritise your invoices and settle their accounts faster to take advantage of the benefits you provide for early payments.

5. Establish clear payment terms
Clearly communicate payment terms and conditions upfront. Whether it's 15 days, 30 days, or any other arrangement, ensure that your customers are aware of what you expect regarding payment timelines. Setting clear expectations can help manage customer behaviour and get them to align them with the payment schedule you want.

6. Build strong customer relationships
Cultivate strong, positive relationships with your customers. Businesses are often more inclined to put first payments to suppliers they trust and have a good working relationship with. Regular communication and exceptional customer service can all contribute to quicker payments.

7. Use invoice financing or factoring
In cases where immediate cash flow is crucial to you, explore invoice financing or factoring services. These financial tools allow you to receive a percentage of the invoice amount upfront, with the remaining balance paid when the customer settles the invoice. While there are usually costs associated with these services, they can provide a quick infusion of cash if this is what you need.

In conclusion, speeding up customer payments needs a combination of clear communication, strategic use of technology, and a customer-centric approach. A seamless and transparent experience for your customers will translate into more prompt payments. By implementing these strategies, you can streamline your payment processes, improve cash flow, and build a solid foundation for sustainable growth.

As experienced business advisors, we have information and tools that can help you and your business weather the tough times. Why not get in touch and see how we can help you!

Cuts to National Insurance rates benefit January pay packets

The 12% to 10% employees national insurance rate cut first announced in the Autumn Statement came into effect in January. This means that many employees will have seen a boost in their take home pay in their January pay packet.

HM Revenue and Customs launched a tool (https://www.tax.service.gov.uk/estimate-jan-24-nic-changes) that enabled workers to estimate how the changes will affect them.

The government is naturally keen to emphasise its generosity in this measure and have claimed that a household with two average earners will be starting to see a yearly benefit from the cut of almost £1,000. Naturally, how much benefit earners actually receive will depend on how near the average their earnings are.

The rate reduction only applies to employees’ national insurance, and not employers’ national insurance. This means there is no direct saving for businesses. However, with many businesses under stress to grant pay rises that will combat the increasing cost of living, the reduction may prove to be a helpful component of pay strategy.

See: https://www.gov.uk/government/publications/changes-to-national-insurance-contributions-from-6-january-2024

Pizzeria owner banned for six years for employing illegal workers

The owner of a pizzeria in Cumbria who failed to conduct right-to-work checks when hiring two illegal workers has been banned from acting as a company director for the next six years.

The workers were found when the premises were visited by Immigration Enforcement in October 2020. Immigration Enforcement subsequently handed the business a £20,000 fine, which remained unpaid at the liquidation of the company.

The owner, Dondu Ozmicco, was the sole director of NM Catering Ltd from its formation in 2019 until it was liquidated in March 2022.

The Chief Investigator at the Insolvency Service, Kevin Read, said: “Dondu Ozmicco’s failure to ensure the required right-to-work checks were carried out led to the employment of two illegal workers, in contravention of the Immigration, Asylum and Nationality Act 2006. This represents a serious breach of legislation and of the standards expected of company directors. As a result of this breach, she cannot be involved in the promotion, formation or management of a company in the UK until January 2030.”

A case like this serves as a stark reminder of the vital importance of conducting right-to-work checks when hiring new staff. If you need help with your payroll procedures including onboarding of new staff, please call us; we will be happy to help you!

See: https://www.gov.uk/government/news/six-year-ban-for-pizzeria-boss-who-employed-illegal-workers

No final decision yet on a digital pound

The Bank of England and HM Treasury have published their response to a consultation on a digital pound that was started in February 2023.

The proposals for a digital pound include:

• • It would complement the role of cash and give people and businesses more choice in how they make and accept payments.
• • The Bank of England would issue it and it would be convenient and widely available.
• • It would hold the same value as the equivalent banknote or coin, i.e. £10 of digital pound would always be worth the same as £10 in banknotes or coins.
• • It would be easily exchangeable with other forms of money, such as cash.
• • The public and businesses would access their digital pounds through digital wallets offered by the private sector through smartphones or smartcards.
• • It would be intended for payments online, in-store, and between individuals. It would not be used for savings and it would not pay interest.
• • At least initially, there would be restrictions on how much a business or individual could hold.

A digital pound would be a claim on the Bank of England, like banknotes. So, it would have intrinsic value and be stable, unlike cryptoassets that are unbacked.

There has been no final decision to pursue a digital pound, but work will continue to explore its feasibility and potential design choices.

Feedback received from the consultation seems largely to have been supportive, however concerns have been raised about what a digital pound implies for access to cash, privacy for users, and control of their money.

The published response has confirmed that legislation would be introduced to protect and guarantee users’ privacy and control if the decision to go ahead does occur. It also confirms that neither the Bank of England nor the government would have any access to personal data and users would be free to spend their digital pounds as they choose.

While there is no final decision as yet, clearly there is a willingness to continue considering the idea of a digital pound and this is unlikely to be the last word on the subject.

See the response in full at: https://www.bankofengland.co.uk/paper/2024/responses-to-the-digital-pound-consultation-paper

ICO Targets Non-Compliant Advertising Cookies: A Call to Action for Website Owners

The Information Commissioner's Office (ICO) is intensifying its efforts to ensure compliance with data protection laws regarding advertising cookies, targeting some of the UK's top websites. In November, the ICO sent letters to 53 of the country's top 100 websites, cautioning them about potential enforcement action if changes were not made to align with data protection regulations.

The ICO report that the response was positive. Out of the 53 organizations contacted, 38 have already adjusted their cookie banners to comply with regulations. Additionally, four organizations have committed to achieving compliance within the next month.

In line with data protection laws, websites are expected to offer users a fair choice in consenting to the use of advertising cookies or similar technologies. Businesses that disregard these legal requirements will face consequences, as the ICO vows to extend its enforcement beyond the top 100 websites. The regulator is already gearing up to contact the next 100, and the 100 after that!

To speed up their work in this area, the ICO is developing an artificial intelligence solution that will help them identify websites with non-compliant cookie banners. A 'hackathon' event scheduled for early 2024 will explore the practical implementation of this AI solution.

The ICO's advice to all organizations is clear: take proactive measures to achieve compliance now, before they come knocking.

With the ICO taking proactive steps to uphold data protection laws, it may be a good time for you to consider whether your website’s cookie banners are compliant.

For guidance on the use of cookies, see: https://ico.org.uk/for-organisations/direct-marketing-and-privacy-and-electronic-communications/guide-to-pecr/guidance-on-the-use-of-cookies-and-similar-technologies/

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/01/ico-warns-organisations-to-proactively-make-advertising-cookies-compliant/

AI Opportunity Forum members now appointed

AI continues to be high on the agenda in business and UK government policy. Members for a new forum, the AI Opportunity Forum, have now been appointed to help boost AI adoption amongst businesses.

Microsoft, Google, Barclays and Vodafone are all included in the member ranks, with the first meeting to take place in February.

AI is a hot topic in business, but adoption is slow. Estimates are that only one-in-ten organisations are currently fully prepared to roll out the technology. Whether those promoting AI fully understand the reasons for slow adoption is unclear from the press release. However, it is hoped that the new Forum will help to share best practice and identify measures businesses can adopt to improve their readiness for AI.

Talking about the Forum, Michelle Donelan, who is Technology Secretary, said: “We want to see organisations across the UK tapping into the transformative power of AI to boost their productivity, unlock new opportunities, and drive growth. The AI Opportunity Forum brings together our brightest minds from the worlds of AI and business to drive forward that effort.”

See: https://www.gov.uk/government/news/business-and-tech-heavyweights-to-boost-productivity-through-ai

January 2024 Labour Market Overview highlights

The latest Labour Market Overview by the Office for National Statistics (ONS) showed the following highlights for the final months of 2023.

Vacancies decline yet remain above pre-COVID levels:
The report reveals a continued decline in job vacancies, with the estimated number of vacancies in the UK decreasing by 49,000 in October to December 2023, marking the 18th consecutive quarterly fall. However, despite this prolonged decrease, the current estimate of 934,000 vacancies remains above the pre-coronavirus pandemic levels.

Robust earnings growth:
Annual growth in regular earnings (excluding bonuses) reached 6.6% in September to November 2023. Simultaneously, the annual growth in employees' average total earnings, including bonuses, was 6.5% during the same period. In real terms, accounting for inflation, total pay rose by 1.3% year-on-year, and regular pay saw a 1.4% increase.

Lowest working days lost due to labour disputes since May 2022:
The report highlights a significant drop in working days lost due to labour disputes in November 2023, totalling 69,000. This marks the lowest number since May 2022. Notably, over half of the labour disputes that did occur were in the transport, storage, information, and communication industries.

Payrolled employees decrease in December 2023:
Estimates of payrolled employees in the UK for December 2023 show a decrease of 24,000 from the November 2023 figure, settling at 30.2 million. However, the number of payrolled employees is well above pre pandemic levels.

Alternative employment estimates introduced:
Due to increased uncertainty surrounding the Labour Force Survey (LFS) estimates, the ONS have introduced an alternative series of estimates for September to November 2023. These figures indicate a 0.1 percentage point increase in the UK employment rate (16 to 64 years), bringing it to 75.8%. The unemployment rate (16 years and over) remained largely unchanged at 4.2%, while the economic inactivity rate (16 to 64 years) decreased by 0.1 percentage points to 20.8%.

What do these statistics mean for you?

The fact that job vacancies have decreased but the number of payrolled employees has also dropped suggests that there has been an overall reduction in jobs available. This may be further supported by the fact that while the unemployment rate has stayed unchanged, it is up on the year and remains higher than pre-pandemic rates.

With the tight economic climate, businesses may well be looking at their workforce and reviewing the value of certain roles, not replacing leavers or even making some roles redundant.

This highlights the value of taking time to think strategically about your business. While no one wants to make an employee redundant, an employee leaving does provide a trigger point for reviewing the requirements of a role. Questioning whether a leaving employee needs to be directly replaced can open the door to savings, or to improving business processes and efficiency.

Strategic thinking about your business often starts with having a plan in place that you can regularly review. If you need help putting together a strategic plan for your business, please get in touch. We will be pleased to help you!

See: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/january2024

Launch of 2024 Business Council

On 31^st January 2024, the Prime Minister, Rishi Sunak, launched this year’s Business Council. The Council is comprised of leaders from FTSE 100 companies to small and medium-sized businesses. It will meet with the Prime Minister at Downing Street on a regular basis to share information.

Chief executives from businesses such as BT Group, Nationwide, Scottish Power, Unilever, Barratt Developments, ITV, Raspberry Pi, and Greggs, as well as many other firms, will represent their business on the Council. The firms involved account for over 200,000 employees and cover a spread of industries across the UK.

It is hoped that the Business Council will help to bring a real-world perspective on how business is being impacted by the current economic climate, as well as look at how government and industry can work together.

For more information, see: https://www.gov.uk/government/news/2024-business-council-launched

2nd February 2024 – Hillmans Weekly Update

Welcome to our latest round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!

Have a great weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

YEAR END TAX PLANNING

It’s not too late to undertake some end of year tax planning. If you have some spare cash, an obvious tax planning point would be to maximise your ISA allowances for the 2023/24 tax year (currently £20,000 each). You might also want to consider increasing your pension savings before 5 April 2024.

USE A LIFETIME ISA (LISA) TO SAVE FOR YOUR FIRST HOME

Those aged between 18 and 40 can set up a Lifetime ISA (Individual Savings Account) to buy their first home or save for later life. You can put in up to £4,000 each year until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.  Note that the Lifetime ISA limit of £4,000 counts towards your £20,000 annual ISA limit.
You can withdraw money from your ISA if you’re:

• buying your first home,
• aged 60 or over, or
• terminally ill, with less than 12 months to live.

However, you’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (an unauthorised withdrawal). This recovers the government bonus you received on your original savings.

PENSION PLANNING

Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension, the government tops this up to £5,000. If you are a higher rate taxpayer there is a further £1,000 tax relief when your tax liability is calculated, reducing the net cost to £3,000.

Additional pension contributions can be even more effective if your income is between £100,000 and £125,140 as the gross pension contribution reduces net income for the purposes of the reduction in the personal allowance. Note that for every £2 of income in excess of £100,000, the £12,570 personal allowance is reduced by £1, with reduction to nil where net income is £125,140 or more. This is effectively a 60% tax saving.

CAPITAL GAINS TAX PLANNING

You might wish to consider bringing forward capital gains to before 6 April 2024 where you haven’t used your £6,000 CGT annual exemption. This exempt amount reduces to just £3,000 for gains made in 2024/25.

CAPITAL EXPENDITURE PLANNING

Unless the business year end is 31 March or 5 April, the end of the tax year is not a significant date as far as capital allowances are concerned. In order for new equipment to attract capital allowances, the expenditure must be incurred on or before the end of the accounting period. Limited companies buying new (not second hand) equipment are entitled to fully expense the cost of most acquisitions against business profits. There is no financial limit on expenditure qualifying for this “full expensing” relief.

Unincorporated businesses are entitled to 100% write off for the first £1 million spent on new and used equipment in a 12 month period. This “annual investment allowance” (AIA) is also available to limited companies buying second hand equipment. The AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new zero-emissions motor car.

Where equipment is bought under a hire purchase contract, the capital allowances outlined above are available on the full cost of the asset provided it has been brought into use by the end of the accounting period. This is despite the fact that the payments may be spread over a number of months.

GET READY FOR MORE R&D CHANGES

On top of the major changes to research and development (R&D) tax relief that took effect from 1 April 2023, there are yet more changes that take effect from 1 April 2024.

The main change from 1 April 2024 is that most companies carrying out qualifying R&D will be entitled to a 20% expenditure credit. The 20% is calculated on the amount of qualifying expenditure. Qualifying expenditure is extended to include subsidised expenditure from 1 April 2024, although R&D carried out overseas will no longer qualify unless the work cannot be undertaken in the UK.

“R&D intensive” companies that make trading losses will continue to be entitled to a tax refund instead of the expenditure credit. The definition of “R&D intensive” is reduced from 40% to 30% from 1 April 2024, which means a company that spends at least 30% of total expenditure on qualifying R&D.
R&D tax relief continues to be a complex area and we can work with you to help you prepare a valid claim.

ADVISORY FUEL RATE FOR COMPANY CARS

The table below sets out the HMRC advisory fuel rates from 1 March 2024. These are the suggested reimbursement rates for employees' private mileage using their company car.
 
Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.
 

Where there has been a change the previous rate is shown in brackets.
 
You can also continue to use the previous rates for up to 1 month from the date the new rates apply.
Note that for hybrid cars you must use the petrol or diesel rate.
For fully electric vehicles the rate is 9p per mile.

DON’T BE LATE IN PAYING YOUR PERSONAL TAX BILL

2022/23 income tax, CGT, class 2 and 4 NIC liabilities should have been paid by 31 January 2024 unless you have agreed a payment plan with HMRC. Note that if the balance is still unpaid at the end of February 2024, a 5% surcharge penalty is added in addition to the normal interest charge unless a payment plan has been agreed.