28th June 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

Guide to the General Election 2024: Tax implications for your business

As a business owner, you’ll likely be wondering how the upcoming general election on 4 July 2024 is likely to affect your business. A new government can mean significant legislative changes and tax upheavals that can impact your business operations and financial planning.

The parties have issued their manifestos, so let’s break down what they’ve said about tax.

What Labour and the Conservatives have said about tax

Here is a comparison of what Labour and the Conservatives say in their manifestos about tax.

Income Tax

Labour: The basic, higher, and additional rates of income tax will not be increased. Pension reforms will be adopted alongside a review of the pensions landscape. There will be no new taxes on pensions; marginal rate relief and the 25% tax-free lump sum will be maintained. No mention of the High Income Child Benefit Charge.

Conservatives: Income tax rates will not be increased. The tax-free allowance for pensioners will be brought into a new ‘Triple Lock Plus,’ pledging a rise equal to the highest of inflation, earnings, or 2.5%, applicable from April 2025. The tax-free allowance is currently frozen at £12,570 for all taxpayers until April 2028. The High Income Child Benefit Charge will be assessed on a household basis, starting when combined income reaches £120,000.

National Insurance Contributions (NIC)

Labour: National Insurance will not be increased.

Conservatives: A further 2p reduction in the main rate of employees’ NIC is promised, cutting it to 6% by April 2027. NIC will not be extended to employer pension contributions.

Business Tax

Labour: A roadmap for business taxation for the next parliament will be published, enabling confident investment planning. Full expensing and the annual investment allowance will be retained, with greater clarity on qualification criteria to aid investment.

Conservatives: Further reductions in the main rate of self-employed Class 4 NIC, aiming to abolish it by the end of the next Parliament. Extension of full expensing for new plant and machinery once fiscal conditions allow.

Corporation Tax

Labour: Corporation tax will be capped at the current main rate of 25% for the whole parliament, hinting at possible increases for companies with annual profits of less than £250,000.

Conservatives: No increase in corporation tax.

VAT

Labour: The rate of VAT will not be increased but will be applied to private school fees.

Conservatives: The rate of VAT will not be increased. The VAT registration threshold will be reviewed to smooth the current £90,000 cliff edge.

Capital Gains Tax (CGT)

Labour: No specific mention of CGT rates or reliefs. The 'carried interest tax loophole' for private equity executives will be closed.

Conservatives: CGT will not be increased. Business Asset Disposal Relief and Private Residence Relief will be retained. A new temporary 2-year CGT relief for landlords selling to existing tenants.

Inheritance Tax (IHT)

Labour: No specific mention of IHT rates or reliefs. The use of offshore trusts to avoid inheritance tax will be ended.

Conservatives: No specific mention of IHT rates or reliefs. Agricultural Property Relief and Business Relief will be retained.

Stamp Duty Land Tax (SDLT)

Labour: SDLT on purchases of residential property by non-UK residents will increase by 1%.

Conservatives: Rates and levels of SDLT will not be increased. The first-time buyer threshold will be permanently set at £425,000.

Non-domiciled individuals

Labour: The non-domiciled status will be abolished and replaced with a modern scheme for short-term stays.

Conservatives: No mention of plans to curb non-domiciled individuals’ use of the remittance basis from April 2025.

Furnished holiday lets

Labour: No indication given.

Conservatives: Councils will manage the growth of holiday lets, with reforms limiting tax benefits from April 2025.

SME growth initiatives

Labour: No indication given.

Conservatives: The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCT) regimes will be retained.

Research & Development (R&D) and Creative tax reliefs

Labour: No indication given.

Conservatives: R&D tax reliefs will be maintained, prioritizing cutting-edge farming technology. Creative sector tax incentives will remain competitive.

HMRC resources

Labour: A £855 million investment to reduce tax avoidance, modernize HMRC, and strengthen its powers.

Conservatives: A further £6 billion a year to be raised by tackling tax avoidance and evasion. No specific commentary on funding for HMRC but pledges to double digital and AI expertise within the civil service.

Taxpayer digitalisation

Labour and Conservatives: The Making Tax Digital (MTD) initiative is not mentioned in either manifesto.

Other associated pledges

Labour: Commitment to one major fiscal event a year, a genuine living wage with removed age bands, a fairer business rates system, a new plan to ‘Make Work Pay,’ and a windfall tax on oil and gas giants.

Conservatives: The National Living Wage maintained at two-thirds of median earnings, a £4.3 billion business rates support package, creation of more freeport and business rate retention zones, and continued backing for investment zones.

What the other parties have said about tax

The Liberal Democrats, under their manifesto "For a Fair Deal," are proposing a fairer tax system. They're looking at:

·         increasing the global minimum corporation tax rate to 21%. This looks like an increase to the current UK small profits rate of 19%.

·         raising the personal income tax allowance when public finances allow.

The Green Party's "Real Hope. Real Change" manifesto is quite ambitious. They’re advocating for:

·         a £15 per hour National Minimum Wage but allowing small businesses to reduce their National Insurance payments as an offset.

·         a wealth tax for those with assets above £10 million.

·         aligning Capital Gains Tax (CGT) rates with income tax rates.

·         aligning the tax rates on investment income with the combined income and NIC rates paid on employment income.

·         removing the NIC upper earnings limit, which will mean higher earning employees paying NICs on all their employment earnings at the main rates.

Reform UK, with their "Britain Needs Reform" manifesto, includes proposals like:

·         increasing the personal allowance to £20,000 and the higher rate threshold to £70,000.

·         cutting residential Stamp Duty Land Tax (SDLT) to 0% for properties below £750,000 and 2% for properties costing £750,000 - £1.5m.

·         reestablishing the VAT refund scheme for tourist shopping.

·         abolishing Inheritance Tax (IHT) for estates under £2 million and bringing the rate for estates worth more than that down to 20%.

·         lifting the small profits threshold for corporation tax to £100,000.

·         lowering the main rate of corporation tax from 25% to 15% over three years.

·         abolishing IR35 rules.

·         increasing the VAT registration threshold to £150,000.

·         no VAT and a 20% income tax relief on school fees

·         reducing UK tax legislation from 21,000 pages to nearer 500.

Plaid Cymru, in their “For Fairness, For Ambition, For Wales” manifesto:

·         Believe that Wales should have full control of economic levers and want the Senedd to have powers to set income tax bands and thresholds, as is the case in Scotland.

·         Pledge to campaign for capital gains tax to be equalised with income tax.

·         Pledges to investigate increasing NICs, introduce a wealth tax, further crack down on evasion and avoidance and to abolish loopholes for non-domiciled individuals.

The SNP’s manifesto, “A future made in Scotland” includes:

·         The demand for the full devolution of tax powers, including over National Insurance, windfall taxation for companies and to crack down on tax avoidance and evasion.

·         Support for the reform of VAT to address imbalances in the rating system, including ending the VAT exemption for private schools.

·         A pledge to introduce a lower VAT rate for hospitality and tourism sectors.

Can you rely on these manifesto pledges?

A government is not legally held to its manifesto or required to stick to the promises they have made. Circumstances change and even a fully intentioned promise made now may or may not be suitable in 2029. So, while it’s reasonable to think that at least some pledges will turn into reality, there is no guarantee.

Whether or not these pledges are actually affordable when it comes down to it is of course another question.

Will we have another budget?

If a new party comes into power on 4 July, then they will likely set out their initial plans in an ‘emergency’ budget. Since the Office of Budget Responsibility (OBR) will need 10 weeks to prepare independent forecasts, this is unlikely to happen until September or October.

Regardless of the election outcome, we are here to support you through any changes. Following the election and the announcement of any budget, we’ll let you know and we’ll be happy to provide you with personalised advice if you want it.

Please feel free to reach out to discuss any concerns or to schedule a consultation. Together, we can navigate these changes!

 

Inflation falls to 2%

Figures released by the Office of National Statistics show that the Consumer Prices Index (CPI) for May 2024 was 2%. This is a reduction from the 2.3% assessed in April and means that inflation has hit the Bank of England’s target rate for the first time in nearly 3 years.

The main reason for the drop is food, where prices are falling now but were rising a year ago. However, it is worth noting that food prices are generally still 25% higher than they were at the beginning of 2022.

The main upward pressure on inflation currently is coming from petrol since prices are rising whereas they were falling a year ago.

The fall in inflation doesn’t mean that prices overall are coming down, just that they are rising more slowly.

The Bank of England met on Thursday last week to discuss their interest base rate. This has been set at 5.25% since August 2023 and they decided to maintain that rate. This means no relief yet for borrowers, but in view of the inflation news, a reduction in the base rate is expected within the next few months.

See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest

 

New rules on distributing tips: Understanding the Employment (Allocation of Tips) Act 2023

On 1 October 2024, the Employment (Allocation of Tips) Act 2023 will come into effect, introducing significant changes to how tips are managed and distributed in the hospitality industry.

This legislation aims to improve fairness by mandating that all tips, gratuities, and service charges are allocated fairly among employees. The new rules address longstanding concerns about the retention and distribution of tips by employers, ensuring transparency and fairness.

Summary of the New Rules

1.    Fair Distribution: Employers must distribute all tips, gratuities, and service charges fairly and equitably among workers. This includes both cash and card tips. The distribution has to be fair and transparent with due regard to a Code of Practice and can include a tronc arrangement.

 

2.    No Deductions: Employers are prohibited from making any deductions from tips, including administrative fees. The only exceptions are those required by law (e.g., tax).

 

3.    Transparency: Employers must clearly communicate their tipping policies to employees and customers, ensuring transparency in how tips are allocated.

 

4.    Record-Keeping: Employers are required to keep detailed records of all tips received and distributed for a period of three years. These records must be made available to employees upon request.

 

5.    Written Policy: A written policy outlining the distribution of tips must be in place and accessible to all staff members.

 

6.    Service Charges: Any service charges added to bills must be treated as tips and distributed accordingly.

Impact on Employers

If you are an employer affected by the rules, you will likely need to make some changes in how you manage tips. It will be crucial that you comply with these regulations to avoid potential penalties and to maintain a fair working environment.

Here are the key impacts with some suggestions for procedures that affected employers will need to consider:

1.    Review and Update Tipping Policies: Employers will need to review their current tipping policies and make sure they line up with the new rules. They will need to establish a clear and equitable distribution method that is communicated to all employees.

 

2.    Implement Transparent Systems: Employers should implement transparent systems for tracking and distributing tips. This might involve using software solutions that automatically record and allocate tips based on predefined criteria.

 

3.    Employee Training: Training sessions should be conducted to inform employees about the new rules and how tips will be managed. This ensures everyone is aware of their rights and the procedures in place.

4.    Maintain Accurate Records: Employers must establish robust record-keeping practices to document all tips received and distributed. These records should be maintained for at least three years and be readily accessible for inspection by employees or regulatory bodies.

 

5.    Communicate with Customers: Clearly communicate tipping policies to customers, possibly through notices on menus or at the point of sale. This transparency helps manage customer expectations and ensures they understand how their tips will be used.

 

6.    Regular Audits: Conduct regular audits to ensure compliance with the Act. This helps identify and rectify any discrepancies or non-compliance issues promptly.

By implementing these procedures, employers can not only comply with the new rules but also foster a fairer and more transparent working environment. This can enhance employee satisfaction and trust, ultimately benefiting the overall business.

If you need any help with the new rules or applying the Code of Practice, please feel free to get in touch and we will be happy to help you.

See: https://www.gov.uk/government/consultations/distributing-tips-fairly-draft-statutory-code-of-practice/draft-code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version

 

Don’t be caught by false claims on business rates appeal deadlines

The Valuation Office Agency (VOA) has issued a warning about false claims being made about the deadline for appealing the 2023 list for business rates.

Some are claiming that the deadline is 30 June, however this is not true. Generally, you are able to appeal your property valuation on the 2023 list at any time until March 2026.

If an agent contacts you trying to pressure you to make a decision or sign a contract; makes claims about ‘unclaimed credits’; says they are acting on behalf of the VOA; or demands large sums of money upfront, then VOA advise you to be cautious.

It is not necessary to use an agent, but if you choose to do so then the VOA provide a checklist you can use to select one.

While the vast majority of agents are reputable and will give you a good service, there are a small minority acting in bad faith.

The VOA advise that if you have any concerns about having been potentially misrepresented by an agent, please send any evidence to ccaservice@voa.gov.uk.

See: https://www.gov.uk/government/news/warning-of-false-claims

 

Mackerel fishing deal struck with Norway and the Faroe Islands

Last week, the UK agreed a deal with Norway and the Faroe Islands that will help reduce the fishing pressure on mackerel.

The deal gives access to Norway and the Faroe Islands to be able to fish some of their quota in the UK zone. In exchange for this, an annual transfer of some of their quota will be made to the UK.

It is hoped that this deal will be stepping-stone to a more long-term quota-sharing arrangement between the nations fishing these waters.

See: https://www.gov.uk/government/news/uk-agrees-deals-on-mackerel-fishing-with-norway-and-the-faroe-islands

 

Don’t lose out on Child Benefit available to children in further education

Parents of children aged between 16 and 19 years of age and continuing their education or training after their GCSEs can extend the Child Benefit they receive.

If this is true for you, then HM Revenue & Customs (HMRC) should be in the process of writing to remind you about this. On their letter, it will include a QR code. If you scan this and follow the link, you will be directed to a page on GOV.UK that will allow you to easily update your claim.

You should receive this letter by 17 July. If for some reason, you have not received a letter by then, you can also make the claim via GOV.UK yourself or by using the HMRC app. You will need a Government Gateway user ID and password to be able to do this.

Child Benefit can be worth £1,331 a year for your first or only child, and up to £881 a year for each additional child. Payments will automatically stop on 31 August after the child has turned 16 unless the parents take action to renew their claim.

The payments can be extended if your child is studying full time in approved non-advanced education. This includes:

·         A levels or Scottish Highers;

·         International Baccalaureate;

·         Home education – generally only if started before the child turned 16, unless you have a statement of special educational needs that was assessed by your local authority;

·         T levels; and

·         NVQs, up to level 3.

The following unpaid approved training courses also qualify for extending your claim:

·         Wales: Foundation Apprenticeships, Traineeships or the Jobs Growth+ Wales scheme;

·         Northern Ireland: PEACEPLUS Youth Programme 3.2, Training for Success or Skills for Life and Work; and

·         Scotland: Employability Fund programme and No One Left Behind.

If you have any difficulties with extending your claim or would like help in making the claim, please feel free to contact us. We will be happy to help you!

See: https://www.gov.uk/government/news/dont-lose-out-extend-child-benefit-for-your-16-to-19-year-old

 

Openreach fined £1.34 million after death of an engineer

The Health and Safety Executive (HSE) announced that they have fined Openreach £1.34 million after investigating the death of an engineer.

The engineer, Alun Owen from Bethesda, tragically died while trying to repair a telephone line that ran across the River Aber in Abergwyngregyn.

A number of engineers had been trying to repair the telephone lines in the area over a 2-month period, working both near and in the river. At the time of the incident, because of flooding, the river was much higher and flowing faster than usual.

Mr Owen had gone into the river and made his way to an island in the middle of the river to try and throw a new telephone cable across to the other side by taping it to a hammer and then throwing the hammer. While he attempted to cross the remaining part of the river, he slipped in a deeper part and the force of the river swept him away.

North Wales Police were involved with HSE in the investigation, which found that there was no safe system of work in place. Mr Owen and others working there had not received any training, information or instruction on safe working on or near water.

Openreach pleaded guilty and have been fined and ordered to pay costs.

HSE have stated that Mr Owen should not have been put in an unsafe working situation. Businesses that have staff who may work on or near water are reminded of the need to have an effective safe system of work in place.

See: https://press.hse.gov.uk/2024/06/05/openreach-fined-following-death-of-engineer

 

Meta pauses plans to train AI with user data

Meta, the company behind Facebook and Instagram, have had plans to use Facebook and Instagram user date to train generative AI.

The Information Commissioner’s Office (ICO), shared concerns with Meta that they had received from users in the UK. The ICO were subsequently pleased to report that Meta have responded by pausing and reviewing their plans.

ICO reported: “In order to get the most out of generative AI and the opportunities it brings, it is crucial that the public can trust that their privacy rights will be respected from the outset.”

ICO have confirmed that they will continue to monitor all the major developers of generative AI to check they have appropriate safeguards in place and make sure that the information rights of UK users are protected.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/06/statement-in-response-to-metas-plans-to-train-generative-ai-with-user-data/

21st June 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

Exploring finance options for small businesses: A guide to fuelling growth
Shawbrook Bank recently conducted research that indicated that half of small business owners have had to raid their savings to fund their businesses.
Their survey found that small businesses applying for finance from lenders over the last year said that it didn’t meet their needs. So, they were using savings and credit cards to provide the necessary funds to grow their business.

For small businesses, the path of growth is often obstructed by financial constraints. Whether it’s investing in new equipment, expanding operations, or hiring more staff, accessing the right funding is crucial.

What are some viable options available to small businesses?

1. Traditional bank loans: Perhaps the most common form of financing, bank loans provide businesses with a lump sum that is repaid over a predetermined period with interest. While they offer stability and structured repayment plans, securing a bank loan can be challenging due to stringent eligibility criteria and lengthy approval processes. 
2. Government Schemes: The government has introduced schemes to facilitate access to finance. For instance, the Growth Guarantee Scheme, which is the successor to the Recovery Loan Scheme, will launch with accredited lenders on 1 July 2024. The scheme provides lenders with a 70% government backed guarantee, thereby reducing the risk associated with lending to small businesses and making finance easier to obtain. (See: https://www.british-business-bank.co.uk/finance-options/debt-finance/growth-guarantee-scheme)
3. Alternative Lenders: With the rise of fintech, alternative lending platforms have emerged as a viable alternative to traditional banks. Known as marketplace lending, peer-to-peer lending, or P2P lending, alternative lending typically takes place through online platforms that bring borrowers and loan investors together. 
4. Angel Investors and Venture Capitalists: For businesses with high growth potential, seeking investment from angel investors or venture capitalists can provide the necessary capital injection. In exchange for equity ownership, investors offer funding along with their own strategic guidance and industry connections. 
5. Crowdfunding: Crowdfunding platforms have gained popularity as a means of raising capital by pooling small contributions from a large number of individuals or investors. These platforms offer businesses the opportunity to showcase their ideas and garner support from the crowd. 
6. Grants and Subsidies: Various government grants and subsidies are available to small businesses across different sectors. These can range from grants for research and development projects to subsidies for hiring apprentices or investing in energy-efficient technologies. While it can be competitive trying to obtain one, securing a grant can provide businesses with non-repayable funds to fuel growth. 
7. Asset-Based Financing: Asset-based financing allows businesses to leverage their assets, such as inventory, equipment, or property, to secure funding. Options like asset-based lending and sale-and-leaseback arrangements enable businesses to unlock the value of their assets without relinquishing ownership. 
8. Revolving Credit Facilities: A revolving credit facility provides businesses with access to a pre-approved line of credit that can be drawn upon as needed. Unlike a traditional loan, where funds are disbursed in a lump sum, revolving credit offers flexibility and allows businesses to manage cash flow fluctuations effectively. 
9. Personal Savings and Friends/Family Loans: Coming back to where this article started, of course personal savings and friends/family loans are often a practical option in the early stages of business growth. While this option may lack the formality of traditional financing, it can provide a quick source of capital without the need for extensive paperwork or collateral.

In conclusion, obtaining finance isn’t always straightforward or easy as a small business. However, there are options out there and by carefully assessing your funding needs and being open minded about the options, you can find the right financing solution to fuel your growth ambitions.
As experienced business advisers we’ve helped many businesses get the finance they need to fuel their business growth. Please feel free to call us at any time and we’ll be happy to help you. And if you are a new business, why not ask us for a copy of our New Business Kit?
 
Latest labour market trends: what they mean for your business
The latest labour market report from the Office for National Statistics shows a few important trends that might affect your business.

First off, it looks like the job market is starting to cool down. It’s estimated that there are fewer job openings now, which means businesses aren't hiring as much as before. On top of that, the unemployment rate has gone up to 4.4%, which is higher than it was last year.

When it comes to employment, the data is a bit mixed. Recent surveys and tax data show a slight drop in the number of jobs. However, the overall picture since December 2023 is more positive, with an increase of 431,000 jobs. So, while there have been some recent declines, the long-term trend still shows growth.

Interestingly, more people are not working or actively looking for work. The rate of people who are inactive in the job market has risen to 22.3%. This could mean more people are staying out of the workforce for various reasons.

On a brighter note for employees, though not necessarily for businesses, wages are on the rise. Regular earnings have grown by 6.0%. After adjusting for inflation, people are still earning more, which is good news for employees and may assist morale in the workplace.

However, there’s also been an increase, both since last month and since last year, in the number of people claiming unemployment benefits. This has now reached 1.629 million.

So, what does all this mean for your business?

• You might want to reconsider your hiring plans for now. With fewer job openings and more people out of work, focusing on retaining and training your current employees could be a smart move. 
• It’s also important to plan for higher wages, as pay rates are going up. 
• Offering flexible work options or training programs could help attract people who aren't currently working.

Looking ahead, although there are some short-term changes, the long-term trend shows that job growth is slowing down. As ever, it’s essential to focus on sustainable business practices and long-term planning to navigate these changes in the job market.

See: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/june2024
 
Invest in Women Hub launched
If you are a female entrepreneur in the UK, you can now access a new resource designed to help you access the finance you need to start, grow, and scale your business. The new hub is designed as a one-stop shop that provides the resources and information you need.

For example, to try and simplify the process of finding a finance partner, the hub has a ‘Find a Finance Provider’ tool. The tool includes business incubators, accelerators, and venture capitalists within the options it provides. The Hub can also help you to connect with networks and to find a mentor.

The Rose Review published in March 2019 said that £250 billion could be added to the UK economy if women started and scaled businesses at the same rate as men. The new hub aims to help female entrepreneurs do just that.

The Hub is run by the Council for Investing in Female Entrepreneurs, a voluntary collective established to encourage and support women in business.

For more information, see: https://iiwhub.com
 
Extended Fisheries & Seafood Scheme now closed
We reported last week that the Fisheries and Seafood Scheme (FaSS) had been reopened after a further £2 million of funding was made available.

However, due to overwhelming demand the scheme has now been closed to new applications.

Any applications received prior to 12.00pm on 10 June 2024 are currently being reviewed. Any applications made after this time will unfortunately not be considered.

See: https://www.gov.uk/government/news/extended-fisheries-and-seafood-scheme-closes-for-2024
 
Buying a second home: what should you think about?
As accountants, we are often asked about the financial and tax implications of buying a second home. Sometimes the pull of a country or seaside retreat might inspire you to think about having a second home. Or maybe you have spare cash or income and are wondering if a second home could be a good investment.

Whatever the reason, before you take the plunge, what are some things you might want to consider?

What are the costs of buying a second home?
It will sound obvious to say, but outside of the purchase price there are a number of other costs to think about that may impact on your decision.

• Stamp Duty Land Tax (SDLT): This is one of the significant costs to consider. For second homes, there’s an additional 3% surcharge on top of the normal SDLT rates. 
• Council Tax: Second homeowners in England should also be aware of potential increases in council tax. From April 2025, under the Levelling Up and Regeneration Act 2023, councils will have discretion to charge up to 100% more in council tax on furnished homes not used as a main residence. This means you could end up paying double the usual amount. 
• Insurance: Because they’re often unoccupied for periods, insurance premiums are sometimes increased for second homes.

How will you pay for it?
Unless you have cash available to buy a second home outright, you’ll likely want to think about how you will finance your purchase. With this there are essentially two options.

• Mortgages: Meeting the conditions to get a mortgage on a second home can be challenging. For instance, a higher deposit is often required than would be the case for your main home. An interest-only mortgage could help to keep the costs down, but over the long term you’ll still need a repayment plan. 
• Equity release: Your main home may have equity that you could release to fund your purchase. You might be able to borrow on the value of this equity using an equity release scheme. These have risks though, so you should get expert advice if you are considering this as an option.

Are there any tax implications to think about?
Besides the SDLT we discussed before, tax implications will depend on how you plan to use your second home and what your future plans are for selling it.

• Tax on rental income: Some second homeowners rent the home out for a period or use it as a holiday let. These can be good ways of helping to cover your costs if you don’t plan to live in the property yourself. However, any rental income you make will need to be declared on your tax return. On the plus side, some of the costs of running a rental property can be offset against the income. 
• Selling your second home: When you sell your second home, any profit will be subject to Capital Gains Tax (CGT). The gain is calculated as the difference between the purchase price and the selling price, minus any allowable expenses and reliefs. This is different to the situation where you sell your main home, which is usually tax-free. If you plan to permanently move to your second home at some point in the future, then any gain you make from that point onwards could be tax-free. 

Given the complexities of tax regulations around second homes, it’s essential to get expert advice. As your accountants, we can help you navigate these rules and make informed decisions. Please just give us a call and we’ll be happy to provide you with personalised advice.

Whether you’re considering buying a second home for personal use or as an investment, understanding the financial and tax implications will help you manage the costs effectively, avoid any surprises, and enjoy the benefits that come from your new place with peace of mind.

Apple Intelligence
At WWDC 2024 last week, Apple unveiled its much anticipated first step into artificial intelligence.

Apple’s strategy is to use AI within its ecosystem to enhance user experiences, focusing on practical applications. These AI features are designed to enhance the functionality of Apple’s operating software for Mac, iPad and iPhone, and one of the standout features is an update to Siri, Apple’s voice assistant, that will improve its voice control and functionality.

During the announcement, Tim Cook expressed his belief that Apple’s unique combination of hardware, software, and services integration gave them an advantage over other tech companies making use of AI.

A key concern for businesses will be how Apple implements privacy and security. While some processing will be done on-device, more complex requests will require the use of the cloud. Apple emphasised that they have robust security measures in place, but due to the privacy and security concerns that can surround AI use it will be important to see exactly how they implement these before committing to widescale use.

Many businesses are also finding it difficult to work out how to apply AI to their work and workflows. It may be that by focusing on practical applications, rather than flashy technologies, Apple Intelligence is able to help users boost their productivity in meaningful ways.

Apple Intelligence is not coming to all devices though. In the current lineup, only the iPhone 15 Pro and Pro Max, and Macbooks and iPads with M1 chips or later, will be compatible with Apple Intelligence. This means that there could be a drive to buy the new iPhones and Macs that are capable of running these advanced AI features. This would be good news for Apple, but perhaps not for your IT budget!

See: https://www.apple.com/apple-events/
 
Microsoft recalls “Recall,” its new screenshot feature
Sticking with an AI theme, Microsoft also recently announced changes to Windows that will incorporate Copilot+, its AI solution.

One of the new features of Copilot+ is called “Recall” where screenshots are frequently captured of whatever desktop activity is happening at that moment and then storing them. This was advertised as a function to make users’ lives easier.

Recall is a feature that can search through a users’ past activity, including their files, photos, emails and browsing history. In addition, the tool also takes screenshots every few seconds and stores them.

Users were understandably concerned about the privacy aspects of this and claimed that hackers may be able to misuse the tool and the saved screenshots. The Information Commissioner’s Office (ICO) also weighed in on the discussion and have said they are making enquiries about it.

As a result of the concerns raised, Microsoft have backpedalled and now confirmed that users will have control over what Recall accesses and saving screenshots will be an opt-in choice during setup that is turned off by default.

Microsoft say the updates will be implemented before Copilot+ PCs officially launch on June 18^th.

See: https://www.bbc.co.uk/news/articles/cd11rje1mrro

14th June 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

How a general election can affect your business
The news is currently full of reports on the general election, so much so that you may be inclined to switch off rather than hear any more about it!
Of course, we have no wish to take sides or promote the views of one party over another. However, regardless of what happens and who eventually wins, a general election represents a significant event that can shape the economic landscape of a country. For your business, these elections bring about a period of uncertainty and potential change.

Let’s pick apart some of the factors it is worth looking out for so that you can be prepared for any potential changes.

Economic Policies and Regulation
One of the most direct ways a general election affects businesses is through changes in economic policies and regulations. When talking about economic policies we’re usually referring to tax and government spending.

Broadly speaking, policies that favour lower business taxes and deregulation can often boost business investment and growth. Conversely, policies that focus on increasing tax and bringing in more stringent regulations may mean higher costs for businesses but increase government spending that may benefit the economy and your business in a different way.

Key Considerations:

• Taxation: Changes in the company tax rates will directly affect a company’s profitability. Lower taxes generally increase net income, while higher taxes reduce it. 
• Regulations: Alterations in employment laws, environmental regulations, and industry-specific standards could make it easier or more complicated to run your business.

Market and Consumer Confidence
General elections can significantly influence market and consumer confidence. The period leading up to an election often brings uncertainty, so businesses and consumers delay spending money while they wait to see what the outcome is.
 
Key Considerations:

• Investment: Businesses might delay major investments or signing off on purchase orders until after the election. Once they have a clearer picture of what future policies are likely to be, they may revisit spending and investment decisions that haven’t been committed to yet.
• Consumer Spending: Consumers may become more cautious, reducing their spending. This can particularly impact retail and service-related businesses.

Currency and Financial Markets
Elections can also impact financial markets and currency values. Investors react to the anticipated and actual outcomes of elections, which can lead to volatility in stock markets and fluctuations in currency exchange rates. For businesses, especially those involved in international trade, such volatility can affect profit margins and pricing strategies.

Key Considerations:

• Stock Markets: Election outcomes perceived as business-friendly may lead to market rallies, while those seen as unfavourable could cause market declines.
• Currency Values: Changes in government policies on trade, fiscal stimulus, and economic management can lead to currency appreciation or depreciation.

Public Spending and Infrastructure
Government spending priorities can shift significantly with a change in administration. A new government may prioritize different sectors for public spending, impacting businesses associated with those sectors. For example, increased spending on infrastructure can benefit construction companies, while cuts in public services might adversely affect healthcare providers.

Key Considerations:

• Infrastructure Projects: Businesses in construction and related industries may see new opportunities open up to them.
• Public Services: Businesses providing services to the government may experience changes in demand based on shifts in public spending priorities.

Employment Market
The employment market is another area where general elections can have a profound impact. Policies on minimum wage, worker rights, and immigration can affect costs and your ability to recruit the right workers for jobs.

Key Considerations:

• Wage Policies: While a further imminent increase seems unlikely, changes in the policies around minimum wage laws could increase employment costs for businesses. Businesses in low-margin industries can be particularly sensitive to these changes.
• Immigration Policies: Adjustments in immigration laws can affect the availability of skilled and unskilled labour, with knock-ons to your recruitment strategies and employment costs.

Conclusion
General elections are pivotal events that can have wide-ranging effects on businesses. However, by understanding the potential effects on your business you are better able to proactively plan and make adjustments so that your business continues to grow and enjoy stability.

If you have questions about how any proposed policy could affect your business or tax situation, please do not hesitate to call us. We will be happy to help you!
 
Advice for charities to concentrate on their positive work
The Charity Commission has recently concluded its regulatory compliance case into the Actors’ Benevolent Fund and has drawn out some lessons that can benefit all charities.

The case was opened in February 2022 over concerns about how the Fund was being governed and its financial controls. There were significant disagreements about how trustees were appointed to the charity’s board as well as how they were removed or retired from it. Needless to say, these disagreements have been very disruptive to the charity and its ability to deliver on its charitable aims.

As a result, the Charity Commission are advising trustees of all charities to consider how they can avoid disputes over trusteeship and, where they do arise, how a disagreement can be handled while minimising the impact on the charity.

They have advised trustees to:

• Check that the charity’s governing document is fit for purpose and not open to differing interpretations. It should particularly be clear on how to appoint trustees and honorary roles. The Charity Commission provides guidance that will allow trustees to do this.
• Ensure good practice on governance essentials. This includes running effective meetings and being clear on how to appoint or elect trustees in line with the charity’s governing document. 
• Ensure trustees are regularly rotated. The Charity Governance Code recommends a rigorous review of the reappointment of any trustee who has served for nine or more years.
• Ensure that decision-making and governance processes are transparent. Taking minutes at meetings helps to protect a charity when there’s an internal dispute or external critics on a decision made. 

The Charity Commission has acknowledged that disagreements can occur but encourages trustees to never lose sight of the best interests of the charity as a whole or the good work it does for those that rely on it.

As implied by the points made above, the Commission found that the Actors’ Benevolent Fund had an unclear governing document and had insufficient financial policies which had contributed to the dispute. The charity’s governing document has since been updated and a new board of trustees was appointed by election in January this year.

While the Charity Commission cannot referee differences of opinion between trustees, this case demonstrates that they can step in and appoint trustees where they feel it’s required.

The wider lesson then is not to allow a disagreement to spoil a good thing!

See: https://www.gov.uk/government/news/dont-allow-disagreements-to-overshadow-your-charitys-positive-work-says-regulator
 
More indicators of a cut in interest rates to come
The Bank of Canada announced a cut of a quarter of a percentage point to its key interest rate last week, bringing the rate down to 4.75%.

Canada is the first country in the G-7 to cut rates following the moves in recent years to increase rates throughout the worldwide economy. Canada has been increasing rates since March 2022 to deal with inflation.

The Canada central bank felt confident that inflation is moving towards its target of 2% and so were willing to make the cut.

Economists are predicting that this will start a move across the G-7 economies to cut interest rates. This would be good news for UK businesses. The International Monetary Fund (IMF) have also recommended that UK interest rates could be cut to 3.5% by the end of the year.

See: https://www.bbc.co.uk/news/articles/cldd6x6gglxo
 
Choosing passwords: the three random words method
With our personal and work lives now requiring us to have so many passwords, it is difficult to keep coming up with new passwords.

The National Cyber Security Centre (NCSC) have been championing the three random words method as a strategy to help with this problem. This method involves choosing three words at random and combining them to make a password, for example: paperhumbleconnect.

Weak passwords can be easily cracked, but the longer and more unusual your password is, the more difficult it is for a cybercriminal to crack it.

In recent years much advice has been given about using long, complex passwords that contain random letters, numbers and symbols. However, generating, remembering, and entering this kind of password is impractical for most of us.

So, faced with yet another password to choose we may be tempted to opt for a variation of a familiar word, name or date, or perhaps reuse a password we use elsewhere. Common tactics include substituting numbers for letters.

Of course, the problem then is that tactics are familiar to cyber criminals who adjust their approach to match.

While a random password created by a password manager may be the strongest option, NCSC note that take-up of password managers remains very low.

And security that is not usable for people doesn’t work.

The three random words method is considered to be long enough and strong enough for most purposes and is easy enough for most people to understand and use.

NCSC also say that if you want to write your password down, that’s ok, as long as you keep your written note somewhere safe.

See: https://www.ncsc.gov.uk/collection/top-tips-for-staying-secure-online/three-random-words
 
Cutting edge technology coming to fishing industry
The UK government has announced a new initiative to enhance the sustainability of fish stocks through the implementation of Remote Electronic

Monitoring (REM) technology in English waters. This technology includes cameras, gear sensors, and GPS units to ensure accurate recording of catches and prevent unlawful discarding of fish. The data collected will help manage fish stocks sustainably and increase confidence in the sustainability of UK fish among retailers and consumers.

Starting this summer, volunteers from five priority fisheries will begin using REM systems. Their feedback will refine the UK’s monitoring objectives and ensure the technology is effective for fishers. Once these objectives are met and the technology is proven effective, REM systems will become mandatory for all vessels in those fisheries, including non-UK vessels.

The use of REM is expected to support the long-term profitability of the fishing industry and enhance the UK’s food resilience and security. Fisheries Minister Mark Spencer highlighted that leaving the EU has provided an opportunity to adopt a new fisheries management approach that benefits the UK fishing industry, future generations, and the marine environment.

Additionally, a new approach to managing discards will be implemented in England. From 2025, both landings and discards will be counted against quota allocations, with the quota used to cover discards varying based on vessel and gear types. Discard reduction schemes will be established to minimize unwanted catch, working collaboratively with regulators and the industry to overcome barriers to using improved gear.

For clients in the fishing industry, this initiative offers several benefits. It promotes sustainable fishing practices, ensuring long-term profitability and market confidence in sustainably sourced fish. The new monitoring and discard management approaches can lead to more efficient quota usage and reduced waste, further supporting the industry's economic viability and environmental responsibility.

See: https://www.gov.uk/government/news/uk-fishing-industry-to-benefit-from-cutting-edge-technology-to-help-manage-fish-stocks

7th June 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

Choosing the best way to finance business asset purchases: Lease, Contract Hire or Hire Purchase?
Picture this: your business is booming, and it’s time to invest in some new equipment or a company vehicle. But with so many financing options out there, how do you decide which one of them is right for you? Let’s break down three popular choices – leasing, contract hire, and hire purchase – so you can make an informed decision without getting lost in financial jargon.

Lease
Leasing means renting an asset (such as machinery, vehicle or computer) from a finance company for a set period. After the lease term ends, you usually return the asset, although sometimes there is an option to be able to buy it.

Short-term rentals where the payments cover the asset’s use, rather than its full value, are known as operating leases. At the end of the lease, you return the item and can lease a newer model.

Longer-term rentals where the payments cover the full value of the asset over time are known as finance leases. The leasing company legally owns the item, but you use it as if is yours.

Here’s why leases can be good:

• Better cashflow: Low upfront costs and spread-out payments help keep your cash in hand.
• Stay updated: Easily upgrade to newer equipment or vehicles.

Here are some things to think about with leases:

• No ownership: You don’t own ever own the asset.
• Higher long-term cost: Over many years, leasing can be more expensive than buying.

Contract Hire
Contract hire is often used for vehicles. Contract hire is like leasing, but usually includes maintenance and servicing in the monthly payments.

Here’s why contract hire can be good:

• Fixed costs: You’ll know exactly what you’ll pay each month, including upkeep.
• Cash flow friendly: Like leasing, it spreads out the cost.

Here are some things to think about with contract hire:

• Mileage limits on vehicles: Exceeding agreed mileage can cost extra.
• No ownership: You can’t keep or modify the vehicle.

Hire purchase
With hire purchase, you buy the asset over time. You make a deposit and then regular payments. Once all payments are made, you own the asset.

Here’s why hire purchase can be good:

• You own it: At the end, the asset is yours.
• Predictable payments: Fixed monthly payments make budgeting easier.

Here are some things to think about with hire purchase:

• Bigger upfront cost: Requires a higher initial deposit compared to leasing.
• Maintenance responsibility: You’re in charge of upkeep and repairs.
• Cash flow impact: Higher monthly payments can strain cash flow initially.

Making the decision
To choose the best option for you, you may want to consider the following points:

1. Cash flow: How much can you afford each month? Leasing and contract hire usually have lower monthly payments.
2. How long you’ll use it: If you need the asset short-term or it becomes outdated quickly, leasing or contract hire might be best.
3. Ownership needs: If owning the asset is crucial, hire purchase is the way to go.
4. Financial impact: Leasing keeps liabilities off your balance sheet, while hire purchase adds both an asset and a liability.

Conclusion
Choosing how to finance your new asset doesn’t have to be complicated. By considering your businesses cash flow, how long you’ll need the asset, and whether ownership matters, you can pick the best option for you.

Tax can also be a factor in the decision. For personalised advice, please feel free to contact us at any time. Our team of experts is ready to help you navigate the complexities of asset financing and find the best solution for your business.
 
Business Insights
The Office for National Statistics conducts a fortnightly Business Insights and Conditions Survey (BICS). The voluntary responses received from the latest survey revealed the following insights.

Worker shortages decreasing
21% of businesses with 10 or more employees said that they are experiencing worker shortages. This has reduced since May 2023 where 28% of businesses were reporting shortages at that time.

More sales are happening
21% of businesses reported that their turnover had decreased in April 2024 when compared with March 2024. This is a similar proportion to last month.

However, 19% reported that the turnover was higher. Last month this was 16%, and so suggests that, in line with the recent exit from recession, there is more sales activity happening.

This seems to be feeding into optimism for businesses, since 18% of businesses reported expecting a drop in turnover in June 2024, compared with 22% who expected lower turnover in May 2024. 59% of businesses expect turnover to stay the same, compared with 56% last month.

National Living Wage increases hard to absorb
13% of businesses said that the price of their goods or services sold in April 2024 had increased compared with March 2024, compared to 9% reporting similarly last month. This is the largest proportion since June 2023 and many businesses have commented that they have been unable to absorb the cost of the National Living Wage increase.

To review the information in full, see: https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/businessinsightsandimpactontheukeconomy/23may2024
 
Digital Markets, Competition and Consumers Act becomes law
The Digital Markets, Competition and Consumers Act has now received Royal Assent and become law in the UK. This new legislation aims to protect consumers and promote fair competition, particularly targeting large technology companies.

Here’s a summary of the key points of the Act:

Consumer Protection:

• Clearer Subscriptions: Businesses must provide transparent information about subscription costs, remind consumers when trials are ending, and make it easy to cancel subscriptions. 
• Hidden Fees: All costs, including any hidden fees, must be clearly stated upfront. This should end the problem in online shopping of being caught by unexpected charges when checking out. 
• Fake Reviews: The Act bans fake reviews, ensuring consumers can trust the feedback they see online.

Empowering Regulators:

• Competition and Markets Authority (CMA): The CMA now has more power to stop big tech companies from unfairly disadvantaging competitors and consumers. 
• Market Conduct: The CMA can set specific rules for powerful tech companies to ensure fair treatment of users and competition.

Penalties:

• Companies that break these rules could face significant fines, potentially in the tens of billions of pounds. 
• The CMA can enforce these rules directly, ensuring swift action against violators.

Additional Oversight:

• The Act also gives new powers to the CMA to monitor road fuel prices to help prevent any malpractice in that sector.

In essence, this Act is designed to create a fairer, more transparent market environment, especially in the digital space, benefiting both consumers and businesses by ensuring honest practices and fair competition.

See: https://www.gov.uk/government/news/digital-markets-competition-and-consumers-act-receives-royal-assent
 
Report on Companies House progress released
The Economic Crime and Corporate Transparency Act 2023 brought in reforms to Companies House procedures and powers with the first phase applying from 4 March 2024.

The reforms will contribute to making the information held in the company register more reliable and usable, protecting individuals and businesses from fraud and preventing the misuse of UK companies by international money laundering networks.

The Department for Business and Trade has published a progress report on the implementation and operation of the Act and will continue to do so every 12 months until 2030.

The report notes that between 4 March and 1 April 2024, Companies House had:

• Removed 4,000 inappropriate registered office addresses.
• Removed 2,100 officer addresses and 2,300 people with significant control addresses.
• Redacted 3,600 incorporation documents to remove personal data used without consent.
• Removed 1,250 documents from the register, including 800 false mortgage satisfaction findings that would previously have required a court order to remove.
• Contacted 3,800 companies that have PO Boxes as their registered office address to make them aware these were no longer legally compliant and asking for an alternative appropriate address. By 1 April 2024, the number of companies using a PO box had been reduced to 1,900.

Companies House have made further changes to the way companies are set up so that it is much harder to make anonymous filings and discourage those who try to hide company ownership through nominees or opaque corporate structures.

To read the report in full, see: https://www.gov.uk/government/publications/economic-crime-and-corporate-transparency-act-2023-progress-report
 
£750,000 fine for data breach … it could have been £5.6 million!
A spreadsheet released by the Police Service of Northern Ireland (PSNI) in response to a freedom of information request contained personal information about all 9,483 serving PSNI officers and staff. The information which was included in a “hidden” tab in the spreadsheet was published online.

The Information Commissioners Office (ICO) found that PSNI’s internal procedures and sign-off protocols for safely disclosing information were inadequate.

The information released has created a heavy impact on the lives of many. Because of the fear of threat to life, some have had to move house, cut themselves off from family members or completely alter their daily routines. Naturally, this has caused anxiety and distress not just to those affected but also their family and friends.

The ICO have fined the PSNI a provisional amount of £750,000 for the breach. However, in arriving at this amount they applied a “public sector approach.”

This allows them to ensure that public money isn’t being diverted from where it is needed. Without this approach, the ICO would have set the fine at £5.6 million!

Bearing in mind these consequences, both to people’s lives and financially, this case serves as a reminder that businesses need to ensure that they have robust measures in place to protect personal information.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/05/psni-facing-a-750k-fine-following-spreadsheet-error-that-exposed-the-personal-information-of-its-entire-workforce/
 
New guidance issued on machine learning principles
The National Cyber Security Centre (NCSC) has issued guidance to help developers, engineers, decision makers and risk owners in creating and using machine learning systems.

Machine learning is a type of artificial intelligence where computers find patterns in data or solve problems automatically.

To explain, imagine you’re teaching a child how to recognise different animals. Instead of telling them all the rules to identify a cat or a dog, you show them lots of pictures of cats and dogs and tell them which is which. Over time, they get better at telling cats from dogs just by looking at them.

Machine learning is like that, but for computers. Instead of giving the computer a strict set of instructions for every possible scenario, you feed it lots of examples and it learns from these. For instance, if you want a computer to recognise emails that are spam, you show it many emails that are labelled as “spam” and ‘not spam.” The computer looks at all the examples and starts figuring out the patterns. Then, when it sees a new email, it can guess whether it’s spam based on what it has learned.

In simple terms, machine learning is about teaching computers to learn from examples so they can make decisions or predictions on their own.

The pace of development in machine learning is high and NCSC are concerned that security could be left as a secondary consideration. They are encouraging that security be made part of the design from the outset and that it be a core requirement throughout the life cycle of the machine learning system.

The new guidance includes principles that can help developers, engineers, and decision makers to make informed decisions about their system. The end goal being to assure stakeholders and end users that a machine learning system is safe and secure.

To review the guidance in full, please see: https://www.ncsc.gov.uk/collection/machine-learning-principles
 
Reforms to leasehold properties become law
The Leasehold and Freehold Reform Act has become law and will affect owners of freeholds for leasehold properties as well as house builders.

The new reforms mean that leaseholders no longer have to wait two years before they can buy or extend their lease. If they do extend their lease, the Act increases the standard lease extension term to 990 years for both houses and flats. Previously this was 50 years for houses and 90 years for flats. These changes are designed to allow leaseholders to have more security in their home.

Sales of new leasehold homes are now banned so that, other than in exceptional circumstances, every new house in England and Wales will be freehold from the start.

Freeholders and managing agents are now required to issue bills in a standardised format to make charges more transparent, and it will now be easier and cheaper for leaseholders to take over management of their own building.

The government also requires freeholders who manage their building themselves to belong to a redress scheme. This was already a requirement for managing agents.

For more details on the changes, please see: https://www.gov.uk/government/news/leasehold-reforms-become-law
 
Fisheries & Seafood Scheme reopens for applications
The Fisheries and Seafood Scheme (FaSS) has reopened for grant applications. An additional £2 million of funding has been made available to support England’s seafood sector.

The scheme is administered by Marine Management Organisation (MMO) on behalf of the Defra and is designed to help the fisheries and seafood sector in a number of ways. Health and safety of fishing crews, the value and quality of fisheries products, modifications that improve the energy efficiency of vessels, mitigating climate change, and innovations that support the longevity and diversification of the seafood sector all come within the aims of the scheme.

FaSS has award over £27 million to over 1,300 fisheries projects in England since it opened in May 2021. The additional funding provides an opportunity for further projects to receive funding over the next year.

Funding is being granted on a first come first served basis. Once all funding has been allocated, the scheme will close.

All projects funded by FaSS need to be completed by the time the scheme closes on 31 March 2025.

For more information about FaSS, eligibility and how to apply, see: https://www.gov.uk/guidance/fisheries-and-seafood-scheme