15th November 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

Base rate drops to 4.75%
As had been widely expected, the Bank of England reduced the interest base rate to 4.75% last week. This was due to inflationary pressures easing in recent weeks.

The Bank expects inflation to increase slightly again over the next year to around 2.75% and then fall back to the 2% target after that.
In their quarterly report, the Bank outlined that they will be taking a cautious approach and so will not be cutting rates too quickly or too much. It seems unlikely there will be a further cut when the Bank next meet on December 19^th.

However, the Bank have said that “if things evolve as expected, it’s likely that interest rates will continue to fall gradually.”
Obviously, a rate cut can be a mixed blessing depending on whether your business is investing or borrowing. However, if inflation is stabilising this may mean a more stable economy and more certainty for businesses in the year ahead.

See: https://www.bankofengland.co.uk/monetary-policy-report/2024/november-2024
 
Agricultural and business property relief: What happened in the Budget?
Changes to inheritance tax were announced in the Budget that have caused consternation to farmers and business owners across the UK. What exactly is changing and what could this mean for you?

What are agricultural and business property relief?
Agricultural property relief (APR) is a type of inheritance tax relief that helps reduce the amount of tax that is paid when farmland is being passed down to the next generation. Currently, the relief has no financial limit, meaning regardless of the value of the farmland, it could be passed on with no inheritance tax payable.

Business property relief (BPR) is similar but relates to business assets included in a person’s estate. Again, this relief currently applies without any financial limit to the relief.

Clearly, both reliefs have played an important role in families being able to pass on agricultural and business assets without having to worry about inheritance tax.

What changed in the budget?
Based on the Autumn Budget announcement, there will be a new £1 million limit where 100% relief will be given. The relief will then reduce to 50% on the value that exceeds £1 million.

It is important to note that the £1 million allowance is a combined one for APR and BPR purposes. An estate that has both qualifying business and agricultural assets will only have a single £1 million allowance to use.

In addition, (quoted) shares that are designated as “not listed” on the markets of recognised stock exchanges, such as AIM, will only ever get 50% relief regardless of whether they would otherwise qualify as agricultural or business assets.

When will the change take effect?
The intention is that this change will take effect from 6 April 2026. So, these changes do not take immediate effect and mean that there could be some scope for planning or transferring of assets that will minimise your exposure to inheritance tax when the new limits come into force.

If I have agricultural assets valued at more than £1 million, will I have to pay inheritance tax?
Not necessarily. Inheritance tax is calculated by first deducting any reliefs (such as APR and BPR) and then deducting any allowances that apply. Each individual has a nil rate allowance, currently £325,000, and there is a residence nil-rate band limit of £175,000.

What should I do now?
If your estate is likely to be subject to inheritance tax, then it can pay to consider using some estate planning strategies to reduce your exposure to inheritance tax. As a starting place, it is a good idea to assess the current value and makeup of your estate.

Please get in touch with us if you would like any help with doing this, or if you would like to discuss whether there are any estate planning strategies that are open to you. We would be happy to help you!
 
Self-assessment tax returns: Counting down to 31 January
HM Revenue and Customs (HMRC) have begun reminding taxpayers that time is ticking for getting self-assessment tax returns filed in time for the 31 January 2025 deadline.

More than 3.5 million tax returns have already been submitted, however HMRC are anticipating more than 12 million in total needing to be filed by the end of January. So, HMRC are encouraging people to submit their return as early as possible.

Filing earlier does have some advantages, such as avoiding a last-minute panic, and knowing how much any tax payment will be in time to be able to budget for it.

If you need to complete a self-assessment tax return this year but haven’t completed one before, then you will need to register first before you can sent your tax return. The registration process can take a few days so it is best to start this in good time before the end of January.

If you would like any help with completing your tax return, please feel free to contact us at any time and we would be happy to help you.

See: https://www.gov.uk/government/news/on-your-marks-100-days-to-file-self-assessment
 
UK export opportunities in the Caribbean
Marking the second event of its kind, the UK-Caribbean Trade and Investment Summit was held in London last week. Organised by UK Export Finance (UKEF), the UK’s export credit agency, the summit brought together UK and Caribbean government officials, as well as senior investors, to discuss business partnerships and financing for projects across the Caribbean.

In the year leading up to April 2024, UK exports to the Caribbean countries involved in CARIFORUM reached £2.7 billion, a substantial 36% increase compared to the previous year.

The forum highlighted the huge potential represented by trade and investment between the UK and rapidly growing Caribbean economies. UKEF is helping UK businesses access billions of pounds in financial support to win and deliver projects in the region. With expanded financing now available in countries like Jamaica, Guyana, Trinidad & Tobago, and more recently Grenada, St Lucia, and St Kitts & Nevis, UK firms have significant opportunities to enter or grow in these markets.

Several UK companies are already benefiting from UKEF’s support. For instance, Severfield Steel won a £4.5 million contract to supply materials for a hospital project in Georgetown, Guyana. In Jamaica, Lagan Construction completed a $7 million resurfacing project at Norman Manley International Airport and is now set to undertake further work in Bermuda.

See: https://www.gov.uk/government/news/uk-caribbean-trade-and-investment-summit-brings-uk-export-opportunities
 
New “failure to prevent fraud” offence for large organisations
A new corporate criminal offence of "failure to prevent fraud" is set to take effect from 1 September 2025, following its introduction in the Economic Crime and Corporate Transparency Act.

This law holds large organisations criminally liable if they benefit from fraudulent acts carried out by an employee, agent, subsidiary, or other associated person on their behalf.

A “large organisation” is defined in the legislation as meeting two out of three of the following criteria:

• More than 250 employees
• More than £36 million turnover
• More than £18 million in total assets

These criteria, and the obligations to prevent fraud, apply to the whole organisation, including subsidiaries. This is regardless of where the organisation is headquartered or where its subsidiaries are located.

The aim is to make it harder for businesses and other large organisations to turn a blind eye to fraud within their ranks, encouraging proactive fraud prevention in a similar way to the UK’s “failure to prevent bribery” law introduced in 2010.

The offence means that, if an organisation is prosecuted for fraud committed by someone associated with it, the organisation must show it had reasonable fraud prevention measures in place when the fraud occurred. Examples of fraud could include dishonest sales practices, the hiding of important information from consumers or investors, or dishonest practices in financial markets.

Newly issued guidance, developed with input from agencies including the Serious Fraud Office, Financial Conduct Authority, HMRC, and the Crown Prosecution Service, offers advice for organisations preparing for the change.

Nick Ephgrave of the Serious Fraud Office stressed the urgency for companies to implement robust fraud prevention strategies before the offence becomes enforceable, warning that failure to do so could lead to criminal investigations.

With fraud now accounting for roughly 40% of crime in England and Wales, it is hoped these measures will help protect businesses and the public from the damaging effects of fraud.

To review the guidance, see: https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta
 
Financial markets approve of Trump winning the presidency
Immediately following the US election results and Donald Trump’s win, the dollar made gains against other currencies. The FTSE 100 index also went up on Wednesday afternoon by 1%.

The positive moves appear to be based on Trump’s plan to cut taxes and raise tariffs, as these will cause inflation to increase and reduce the speed at which interest rates are cut.

US interest rates staying higher for longer will mean that investors get a better rate of return on savings and investments they hold in dollars.
However, there are concerns that the UK economy could be detrimentally affected by Trump’s proposals around trade, and lead to a slow-down in growth.

Financial markets are of course fickle, so by the time you read this article things could have changed again. However, it is useful to maintain a broad awareness of what is happening in the financial markets.

Financial markets influence the price of commodities, currency exchange rates and interest rates. So being aware of trends may help you to manage cash flow for increasing costs, or it may help you to time when you borrow so as to get a lower interest rate.

Consumer spending power and confidence are also affected by the same factors that influence the financial markets. So, trends in the financial markets, particularly when you can identify the reasons for them, can give you an idea of how your customers are thinking. These insights can help you to prepare and adjust as needed.

See: https://www.bbc.co.uk/news/articles/c6246e3w935o
 
Funding granted to small businesses on rural transport projects
The UK government has awarded £1.2 million in funding to small businesses for projects to boost transport links in rural areas.

Through the Rural Transport Accelerator Fund, eight small businesses have received £150,000 each to develop digital tools and other innovations that will improve connectivity for rural communities. By partnering with local authorities, these projects will support rural jobs, community wellbeing, and local economies, with trials beginning in areas from Norfolk to Scotland.

Among the winning projects are digital solutions to address the specific needs of rural residents. For instance, You.Smart.Thing will trial a demand-responsive tool in Warwickshire to help residents without access to a car find shared or community transport options. Another project by UrbanTide will map patient journeys to NHS hospitals in Fife, helping healthcare providers address gaps in transport for those needing hospital services. Additional projects will focus on predictive tools for rural transport needs and creating safer cycling routes using recycled car tyres.

Future of Roads Minister Lilian Greenwood highlighted the unique transport challenges faced by rural residents, emphasising that these projects will allow easier access to essential services, from grocery shopping to hospital appointments.

See: https://www.gov.uk/government/news/12-million-to-boost-rural-transport-in-the-uk
 
CMA provisionally approves Vodafone and Three merger
The Competition and Markets Authority (CMA) have provisionally concluded that with certain commitments the proposed merger of Vodafone and Three would not be a competition concern.

Vodafone and Three first proposed merging in June last year, however the CMA have been investigating the proposed deal because of concerns that the merger would lead to higher prices for customers as well as harming mobile virtual network operators.

The CMA have identified remedies including a commitment to upgrading the merged company’s network across the UK, including 5G rollout, and short-term customer protections that would solve competition concerns and allow the merger to go ahead.

Currently, O2 and EE are the largest operators in the mobile market. While merging Vodafone and Three would reduce the main operators from four to three, by applying the remedies, it is thought that the merger would result in three more equal networks that could aid competition in the long run.

Responses are due to the CMA this week and then it will make its final decision by December 7^th.

See: https://www.bbc.co.uk/news/articles/ckgznpx44q3o
ICO guidance on using AI for recruitment
As use of artificial intelligence (AI) tools to help with employee recruitment increases, the Information Commissioner’s Office (ICO) has published guidance on key data protection considerations.

While AI tools can help you improve efficiency in the hiring, there is need for caution. AI tools can unfairly exclude jobseekers from roles or compromise their privacy. ICO recently audited a number of providers and uncovered several areas where improvement is required leading to almost 300 recommendations being made. ICO plans to continue working with these businesses over coming months.

The ICO is also encouraging any organisation that is planning to use an AI tool for recruitment to make sure that their provider is complying with data protection law.

The key questions provided by the ICO are as follows:

1. Have you completed a Data Protection Impact Assessment (DPIA)?
2. What is your lawful basis for processing personal information?
3. Have you documented responsibilities and set clear processing instructions?
4. Have you checked the provider has unmitigated bias?
5. Is the AI tool being used transparently?
6. How will you limit unnecessary processing?

To review the questions in more detail, please see the ICO’s guidance at: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/11/thinking-of-using-ai-to-assist-recruitment-our-key-data-protection-considerations/
 
Stress awareness week reminders from HSE
Last week was Stress Awareness Week 2024. The Health and Safety Executive (HSE) used the occasion to remind employers of their need to carry out their legal duty to prevent work-related stress and support good mental health at work.

According to HSE figures, 17.1 million working days were lost to work-related stress in 2022/23. An average employee suffering from work-related stress, depression or anxiety takes an average of 19.6 days off work a year, almost the equivalent of a working month.

Clearly, it is in an employer’s interest to do what it can to reduce and minimise stress in the workplace.

Employers have a legal duty to:

• Carry out risk assessments for stress and then act on them.
• Take steps to prevent work-related stress.
• Write down the risk assessment if there are five or more employees. (It is still recommended to write it down if you have less employees.)

The HSE provides free online learning, a risk assessment template and a ‘talking toolkit’ that can help structure your conversations with staff.

See: https://press.hse.gov.uk/2024/11/03/stress-awareness-week-employers-have-to-fulfil-legal-duty

8th November 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

Autumn 2024 Budget speech: History in the making?
On 30 October 2024, Rachel Reeves delivered her first Budget speech. As the first Budget speech ever delivered by a female Chancellor of the Exchequer, the occasion was bound to be one for the history books regardless of what was said.

The Chancellor’s speech lasted 76 minutes and right from the start she claimed that difficult decisions were having to be made because of the £22bn ‘black hole’ left in the public finances by the previous government.

Once the speech had concluded there was a feeling that the Budget may not have been as bad as we might have expected. This is likely the effect the Chancellor was hoping for and may have had something to do with the fact that the main way of increasing taxes – from a rise in Employers National Insurance (NI) – had already been strongly indicated before the Budget took place.

For working people, the Budget maintained the status quo with no increases to income tax, national insurance or VAT. The personal allowances and tax rate bands were frozen by the previous government as a way of raising taxes known as ‘fiscal drag’. This is because as pay increases, more earnings are likely to be taxed at higher rates. The Chancellor did promise that from 2028/29, personal tax thresholds would be uprated in line with inflation once again.

However, businesses were one of the big losers in the Budget, largely through the aforementioned Employers NI increases as well as increases to the minimum wage rates, which are both explored in the two articles below.

Retail, hospitality and leisure (RHL) businesses received some support through continued business rates relief. For the 2025/26 tax year, RHL businesses will be given a 40% relief on their business rates, subject to a cap of £110,000 per business. The small business multiplier will also be frozen in 2025/26.

These are interim measures as the government intends to introduce permanently lower tax rates for RHL properties with rateable values under £500,000 from 2026/27.

The Chancellor also announced investments in public services and home building. These may mean contracts and work for businesses across various sectors.

If you are concerned about how any of the Budget measures will affect you and your business, please get in touch at any time and we will be happy to provide you with personalised advice.
 
Businesses count the cost of increases to Employers National Insurance
As has been widely expected in the last few weeks, the Chancellor, Rachel Reeves, made some significant changes to the Employers National Insurance (NI) rate and threshold in the Autumn Budget.

From 1 April 2025, the rate for Employers National Insurance (NI) will increase from 13.8% to 15%. At the same time, the level at which employers start paying national insurance on each employee’s salary will be reduced from £9,100 per year to £5,000. The combination of these two changes means a potentially significant increase in payroll costs for businesses.

To counteract this, the employment allowance will be increased from its current £5,000 to £10,500. The Chancellor claimed that this would mean that “865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less than they did previously.”

An employer who employs 4 full time (35 hours per week) employees at the National Living Wage rate will not have to pay NI on their wages.
However, there is some encouraging news for larger businesses. Previously the Employment Allowance could only be claimed by an employer if their Employers NI liability was less than £100,000 in the tax year. This restriction will be removed and mean that all employers that otherwise qualify will be able to reduce their national insurance liability by £10,500.

Businesses planning their headcount and budgeting payroll costs for next year will want to factor in the increased national insurance costs. If you need any help with doing this, please do not hesitate to give us a call.

See: https://www.bbc.co.uk/news/articles/c4g7x6p865zo

Bus fare cap to increase to £3
Two days before the Budget, the Prime Minister announced that the cap for single bus fares would be increased to £3 from its current £2.

The current fare cap is due to expire at the end of 2024. Without intervention, prices for some routes looked set to rise significantly. The new £3 cap will run until the end of 2025.

The cap means that no single bus fare on routes that are included in the scheme can exceed £3. Routes where the fare is less than £3 can only increase in line with inflation.

For workers that are reliant on bus fares, the new cap means an increase in their costs but at least continues to provide some relief.
See: https://www.gov.uk/government/news/over-1-billion-to-boost-bus-services-across-the-country-as-bus-fares-capped-at-3
 
Employers now required to take “reasonable steps” to prevent sexual harassment
From 26 October 2024, employers were given a new legal duty to take “reasonable steps” to prevent sexual harassment of employees.

This duty requires employers to anticipate when sexual harassment may occur and take reasonable steps to prevent it. If sexual harassment has already taken place, then an employer would need to take action to stop it from happening again.

It is not possible for an individual to make a claim against their employer for failing to take preventative action. However, if they successfully bring a sexual harassment claim, the employment tribunal will automatically consider whether the employer failed in its duty to prevent the harassment from happening. If they find that the employer was negligent then they can order an uplift in the compensation paid to the employee.

ACAS have provided guidance to employers on what to do, including advising on things that should be included in a sexual harassment policy.
To review the guidance, see: https://www.acas.org.uk/sexual-harassment
 
Why staying up-to-date with your accounts is essential: Lessons from a recent insolvency case
In a recent court case, a company director from Bury was sentenced to prison for failing to comply with basic accounting and legal responsibilities. Vezubuhle Ndlovu, the former director of VN Electrics Limited, was jailed for 10 months after he failed to provide the required records when his company went into liquidation, leaving over £200,000 in unpaid taxes.

This case serves as a stark reminder of the consequences for businesses that do not prioritise accurate accounting, particularly when dealing with financial and tax obligations. Let’s examine why keeping up-to-date records is so important for businesses of all sizes and sectors.

What happened?
Ndlovu's company, VN Electrics, which operated as a wholesale trade business, was petitioned for liquidation by HM Revenue and Customs (HMRC) in 2019 due to an outstanding tax bill of £221,600.

After the company entered liquidation, Ndlovu was required by law to provide the company’s financial records to the Insolvency Service. His failure to do so prevented the Official Receiver from assessing the company’s assets, income, and financial position.

Ndlovu repeatedly refused to cooperate. Even after being disqualified as a director for seven years, he still failed to respond or attend interviews requested by the Insolvency Service. Manchester Crown Court have subsequently sentenced him to 10 months in prison.

The legal responsibilities of directors
Company directors have a legal duty to keep accurate financial records and to be transparent with stakeholders, especially in times of financial distress.

This case highlights the severe consequences for not complying. Under the Companies Act and Insolvency Act, it is a criminal offence to fail to keep proper accounting records, and persistent failure to cooperate with authorities can result in prison sentences.

The impact on the stability of your business
Maintaining up-to-date accounts is more than just an administrative task; it is a core responsibility that can safeguard the future of a business.
Businesses that regularly review their accounts are better positioned to make informed decisions, identify potential financial issues early on, and avoid the kinds of tax and debt problems that led to VN Electrics’ liquidation. Without clear records, even the day-to-day management of cash flow, payroll, and expenses can become difficult to handle, potentially leading to further financial instability.

Protecting relationships with stakeholders
For any business, building trust with creditors, suppliers, and partners is essential. Reliable accounting practices demonstrate that a company is well-managed, financially sound, and transparent in its dealings.

In the case of VN Electrics, the lack of financial transparency not only damaged the company’s reputation but also strained relationships with stakeholders who were left uncertain about the company’s financial position.

Key takeaways
The case of VN Electrics serves as an important reminder for all business owners and directors:

• Legal accountability: Directors are legally accountable for maintaining accurate records, which must be available to stakeholders and regulators as needed. 
• Financial health and oversight: Up-to-date accounts provide a clear picture of a company’s financial health, helping to avoid situations where debt builds up unaddressed. 
• Stakeholder confidence: Reliable records enhance trust with creditors, suppliers, and partners, making it easier to do business and manage financial obligations. 
• Early problem detection: Regular reviews of financial records help identify issues early, allowing businesses to take corrective action before problems become unmanageable.

In a time when economic challenges and tax obligations continue to impact businesses, staying on top of financial records is one of the best ways to protect a company’s future, meet legal responsibilities, and ensure transparency with all stakeholders.

If you need advice about or help with your accounts please feel free to get in touch and we would be happy to help you!

See: https://www.gov.uk/government/news/bury-director-jailed-after-failing-to-produce-accounts-for-company-which-owed-more-than-200000-in-tax

Protecting young people online: The ICO taking action on data privacy for children
In today’s digitally connected world, social inclusion has extended into virtual spaces, and young people are increasingly exchanging personal information to stay connected with friends and access social media platforms. This trend has raised significant privacy concerns, especially as recent research by the Information Commissioner’s Office (ICO) reveals how critical data handling is for safeguarding children online.

The ICO’s Children’s Data Lives research has highlighted the importance of enforcing stronger privacy practices to protect young users who may not fully understand the implications of sharing their data.

Data as a form of currency
For many children, personal data has become a form of currency. According to the ICO’s findings, young people often feel they must exchange personal details to access apps and social media platforms, which are central to their social lives.

The research emphasises that, while children seek acceptance in digital spaces, they are largely unaware of how their data is being collected or used by companies. Many young users place their trust in well-known platforms, assuming they are safe, but these platforms’ designs can obscure data-sharing practices, making it difficult for children to make informed decisions about their privacy.

The ICO’s strategy for child privacy protections
In response, the ICO has taken several steps to promote safer digital environments for children. Through its Children’s Code strategy, the ICO aims to ensure that online services prioritise the needs and privacy of young users. This initiative holds businesses accountable for implementing privacy practices that protect children’s rights and enable them to interact safely online.

The ICO has reviewed the privacy practices of 34 social media and video-sharing platforms as part of the Children’s Code strategy. This review assessed issues related to:

1. Default privacy settings: Since many children rely on default settings, the ICO is pushing for these defaults to be set to privacy-friendly options, minimising exposure to unnecessary data sharing from the outset. 
2. Geolocation: The ICO is addressing the risks associated with geolocation data, which can reveal a user’s location. They advocate for stricter control over location settings to reduce the risk of exposing children’s whereabouts unknowingly. 
3. Age assurance: Verifying the age of users helps ensure that privacy features are appropriately tailored for children, preventing them from inadvertently sharing personal data in adult-oriented environments.

Holding businesses accountable
As part of their commitment to enforcing the Children’s Code, the ICO requested further information from 11 companies to understand how their privacy practices align with child-friendly standards.

While most companies have engaged voluntarily, the ICO had to issue formal information notices to three companies—Fruitlab, Frog, and Imgur—to compel them to provide detailed responses on critical matters such as geolocation, default privacy settings, and age verification. Frog and Imgur have now responded, and the ICO is carefully reviewing their submissions.

A safer online future for children
As digital spaces play an ever-growing role in children’s social lives, the ICO remains committed to its Children’s Code strategy, and will continue to encourage businesses to adopt stronger, more transparent privacy practices.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/10/statement-on-ico-s-work-to-protect-children-online/