HMRC surprised all taxpayers who own a double cab pickup as a company vehicle on 12 February by announcing that these vehicles would be classified as cars and not vans, which would have led to higher National Insurance Contributions (NICs) for owners. Read more
Chancellor Jeremy Hunt has announced a number of reforms to policies concerning businesses and innovation, in a bid to enhance growth in the economy.
A significant measure concerns various tax relief schemes for businesses in the Research and Development (R&D) sector.
Many operators in this sector are eligible for Corporation Tax relief on qualifying expenditure to ease the burden of investing in capital and encourage growth.
Recent changes have left many businesses, particularly small and medium-sized enterprises (SMEs), in a state of uncertainty around what future claims might look like.
What has changed?
Under previous legislation, businesses conducting R&D could claim tax relief under two separate schemes – the R&D Expenditure Credit (RDEC) and the SME relief.
Each scheme had separate criteria for businesses fitting the standard definition of R&D.
Under new regulations, the SME and RDEC schemes will now be merged in a bid to simplify the process.
Under the new scheme, all qualifying businesses, regardless of staff levels or turnover, will be able to claim against R&D spending at a rate of 20 per cent on all qualifying expenditure from 1 April 2024.
In addition, the notional tax rate for loss-making companies will be reduced from the main rate of 25 per cent to the ‘small profits’ rate of 19 per cent in April 2024.
The new scheme also encourages firms which lack the capital resources to carry out projects to outsource their R&D operations.
By adopting similar rules to the existing SME scheme, the merged relief will allow tax relief claims on almost all outsourced R&D contracts to UK firms.
For the benefit of SMEs, subsidised expenditure is not deducted by the new merged scheme, meaning companies which receive grant funding for part of their R&D costs will not face a reduced amount of relief.
Who’ll be affected?
All businesses who claim R&D tax relief under either of the previous schemes may be affected.
To qualify for this credit, businesses must meet the following criteria:
Aside from the merge, SMEs may now claim additional relief on R&D expenditure if they qualify as ‘R&D intensive’, meaning at least 30 per cent of their expenditure covers R&D, for accounting periods after 1 April 2024.
How will future claims be affected?
The aim of the measure is to simplify the process of claiming R&D tax relief with a single set of qualifying rules.
Its impact on future claims will depend on whether the individual firm is a principal or subcontractor in an R&D agreement.
For firms themselves, this simplified way of claiming capital allowances on R&D expenditure is likely to provide a major incentive to investing in R&D and raising the profile of its R&D programme.
The measure also removes the need for growing companies to transition between the SME and RDEC schemes, meaning that firms can scale their operations and turnover without impacting their eligibility to claim for R&D under the scheme.
However, it is likely that subcontractors, which are currently able to claim under the existing schemes, will see a significant incentive removed as they can no longer claim relief on R&D expenditure under the merger.
This may mean that the R&D sector faces a period of uncertainty and slow growth while operators adjust to new regulations. Outsourcing agreements may also need to be renegotiated to reflect the new tax relief arrangements.
With no transition period between the two schemes, R&D operators may need to seek professional support to quickly identify how these new measures will impact them.
For advice on how your firm will be affected by these new measures, please contact our expert team today.
In a world where technological advancements are reshaping industries, small and medium-sized enterprises (SMEs) cannot afford to be left behind.
The hesitance to embrace new technologies, epitomised historically by movements like the Luddites in the 19th Century, can impede growth and competitiveness.
For SMEs open to innovation, Artificial Intelligence (AI) offers a host of opportunities beyond just financial functions – whether they choose to invest in existing platforms or develop their own innovations.
The crucial need for SMEs to embrace AI
The integration of AI isn’t merely a trend; it’s rapidly becoming a business necessity. While larger companies are often cited in discussions about AI, SMEs have much to gain from leveraging this transformative technology.
Yet, adoption rates remain surprisingly low, making this an opportune time for proactive SMEs to get ahead of the curve.
How AI can benefit your SME across various functions
A balanced future with AI
While the prospect of full business operations automation may seem distant, incorporating AI in various aspects of your SME can provide a harmonious blend of human creativity and machine efficiency.
This balance is particularly vital for SMEs looking to innovate, streamline operations, and stay competitive.
At a time when efficiency and costs are a focus for many business owners, AI might provide useful solutions that merit investment.
If you’re interested in unlocking the potential of AI for your SME and need help with seeking investment to acquire the right solutions, find out how our funding experts can help.
You must file your company accounts, to avoid late filing penalties, Companies House is warning.
All companies must file annual accounts with Companies House each year, regardless of whether they are trading or not, or whether they are public or private. This applies to both large and small companies. LLPs are also subject to these rules.
Private companies and LLPs must file their first accounts within 21 months of the incorporation date, or three months from the accounting reference date, whichever is the longer period.
After this, companies and LLPs must file nine months before the end of the accounting reference period, while publicly listed companies have six months to submit their accounts.
Here are some simple steps to prevent your company from filing late:
The best way to avoid fines
The most effective way to submit your accounts on time is to outsource this responsibility to a qualified accountant.
A professional accountancy firm can maintain your financial records as well as submit all the relevant documentation to Companies House before the relevant deadlines. They will ensure you do not get handed a hefty fine, which can amount to £7,300.
To learn more about how an accountant could help you avoid fines and charges, get in touch.
After the fourteenth consecutive increase in interest rates since 2021, many business owners will be asking themselves the same thing: “When will interest rates finally fall?”
The higher the interest rates, the more money you pay on your debts like loans, overdrafts, and credit cards. Equally, many of your customers will also face higher costs on their debts.
Due to this and other economic conditions, your customers are likely to cut back on spending, which in turn can further restrict your cash flow and investment plans.
Earlier this year there were significant declines in inflation in both the USA and Europe, which is an encouraging sign for the UK, which has itself started to see more significant falls in inflation.
Rising like a rocket, falling like a feather
Inflation has already fallen slightly to 6.8 per cent in July 2023 (the latest figure at the time of publication), which is a good sign for struggling businesses, but don’t celebrate just yet.
At the moment the Bank of England (BoE) continues to increase the base rate, with it sitting at a recent high of 5.25 per cent at the end of August, with it expecting to reach a peak of 5.5 per cent during September 2023 and remain high for the following 12 months.
Any subsequent reduction in interest rates is likely to be slow, with forecasts suggesting that the BoE will have only cut interest rates to three per cent by 2026 as the Bank tries to meet its two per cent inflation target.
This is indicative of earlier predictions that despite the rapid increase in rates, they will be slow to come back down again. So, we are still going to be experiencing high-interest rates for the foreseeable future.
In addition to this, the UK economy witnessed a weakening of its position, with a further contraction likely in the coming year.
What does a fall in interest rates mean for your business?
Put simply, when the interest rate does eventually drop it will become cheaper to borrow and easier to pay back loans. The low interest rates should, therefore, offer an incentive to borrow and invest in your business.
Your customers and clients will likely have more money to spend once interest rates fall and the inflationary pressure on your employees’ wages should decline, helping you to manage costs.
In the meantime, businesses need to find ways to build resilience and manage the costs and challenges that come with high-interest rates.
An experienced accountant can also help you adapt to new market opportunities as interest rates fall and ensure that you have the capital to successfully ride out the current storm.
To receive expert advice on how interest rates affect your business, get in touch.
Stagnation is a prolonged period of little or no growth in the economy and it can have a serious impact on your business.
Whilst talking to The Guardian, Samuel Tombs, a leading UK economist, claimed that stagnation will cause “businesses to cut employment and investment, and trigger a sharp decline in residential investment.”
He added: “GDP will fall one per cent this year”, which, whilst not sounding significant, is a major blow to enterprising businesses.
Here’s an overview of what stagnation means for your business and how to navigate these times of economic uncertainty.
Diminished revenue growth
During times of economic stagnation, consumer spending often slows down. This can lead to reduced sales and revenue growth for small businesses.
Companies in discretionary spending sectors like leisure and retail are often the hardest hit because these tend to be areas in which consumers start to save money during periods of economic difficulty.
However, the effects can be felt across various industries and every business should be prepared to face difficulties.
You may need to focus on cutting costs and increasing profits through offers or adjustments to pricing strategies. In times like these, an accountant can help you make sense of the steps your business needs to take.
Cash flow challenges
Stagnation may lead to increased payment delays from customers, impacting your cash flow. Effective cash flow management becomes essential during these times as regular monitoring and robust credit control procedures can help maintain liquidity.
Ensuring your customers pay on time and forecasting your cash flow correctly can greatly increase your chances of avoiding cash-related crises. Don’t forget, cash flow issues are one of the most common factors in business insolvencies.
Having a sound financial plan and discussing these issues with your accountant can help to maintain resilience during cash flow instability.
Difficulty in accessing finance
Banks and other financial institutions may become more risk-averse during periods of stagnation, making it harder for businesses to access necessary funding or receive loans.
Exploring alternative financing options like crowdfunding or grants may become essential to secure investment into the business.
In addition, your savings and collateral can make a big difference when banks are unable to lend you money so exploring your surpluses and the value of existing assets is critical to understanding your position.
Potential opportunities
Despite the challenges, stagnation can also present opportunities. Businesses that can adapt, innovate, and find new markets or diversify their services may find ways to thrive in an economic downturn.
Stagnation is a complex issue that requires strategic planning and expert guidance to navigate successfully.
By understanding the potential impacts on your business, and with a proactive approach to management and innovation, you can mitigate risks and even find new avenues for growth.
Our team is here to assist you in developing strategies to survive and thrive during periods of stagnation. If you would like to receive expert advice tailored to your business needs, contact us today.
If your company is involved in the creative industry, then it could be eligible for significant tax relief from the Government.
These tax reliefs support the Government’s objective of becoming the technological centre of Europe by promoting growth in the digital, creative, and other high-technology areas.
Your business can claim creative industry tax relief if it falls into the following categories:
Sometimes the resulting production may need to pass a cultural test, qualifying it for a British Film Institute (BFI) certification, to claim tax relief.
Businesses involved in the production of live-action film, television and video games are entitled to up to 20 per cent of the core production cost back as Corporate Tax relief.
Theatre and orchestra productions, museums and galleries are entitled to up to 25 per cent of the core production costs of the piece.
Productions of animation and animated film can also claim up to 25 per cent as a tax rebate against the expenses of pre-production, principal photography, and post-production of an animated project.
If you are unsure if your business qualifies for creative industry tax relief, get in touch with our expert accountants today.
As experts in the field of accountancy, we understand the unique challenges business owners face when it comes to payroll.
We’ve put together three essential tips to help you manage maternity and paternity pay, ensuring legal compliance and employee satisfaction.
As an employer, it’s crucial to understand your obligations. The former is usually paid for up to 39 weeks, and the latter for one or two weeks.
Familiarise yourself with the eligibility criteria and payment rates and keep up to date.
Proper documentation will not only help in providing transparency but will also make it easier to handle any future enquiries or inspections by HM Revenue & Customs (HMRC).
Open communication and support can create a positive experience for both parties.
Clearly outline your company’s policies and be available to answer any queries your employees may have.
Managing maternity and paternity pay doesn’t have to be a complicated process. By understanding the statutory requirements, maintaining accurate records, and offering robust support, you can ensure a smooth experience for both you and your employees.
If you need assistance in navigating these waters, our dedicated team of professionals is here to help.
Contact us today to discover how we can assist you with this important aspect of your business.
In the second quarter of 2023, overpayments on pension tax in the UK reached £56 million.
This was an increase of nearly £8 million from the first quarter of the year, according to HM Revenue & Customs (HMRC).
This figure is almost double the £33.7 million collected in the same period the previous year.
During this quarter, approximately 16,000 reclaim forms were processed, with an average reclaim amounting to £3,551. This is the second-highest figure since the introduction of pension freedoms in 2015.
Over the past eight years, people aged 55 and over who have been overtaxed on their early pension withdrawals have reclaimed almost £1.1 billion.
The need for taxpayers to reclaim overpayments has arisen because people withdrawing from their pension pots early have typically been charged emergency tax, usually significantly above the amount that is ultimately owed.
The figures suggest that an increasing number of over-55s are using their pension freedoms, with some commentators suggesting that this is a result of the cost-of-living crisis.
The HMRC data also revealed a decrease in the number of transfers into qualified recognised overseas pension schemes (Qrops), falling from 3,900 in 2021 to 2022 to 3,250 in 2022 to 2023.
Despite this, the total value of these transfers increased from £517 million to £680 million over the same period.
If you are concerned that you may have paid too much tax on pension withdrawals in the past, please get in touch.
As the war in Ukraine rages, UK SMEs are facing new import and export headaches on top of any problems already being experienced with Brexit.
