Business News

King Charles delivered his speech to Parliament last month following the election, setting out the priorities of the new Labour Government for the months ahead.

The speech included 40 pieces of legislation that the Government plan to implement. To help you understand what the next five years may hold, here are the details of all the finance-focused announcements.

Budget Responsibility Bill

During their campaign, Labour pledged that their decisions would be made with sound money and economic stability at the forefront.

The Budget Responsibility Bill requires all significant and permanent tax and spending changes to be subject to independent assessment by the Office for Budget Responsibility (OBR).

The Bill aims to reinforce credibility and public trust by preventing large-scale unfunded commitments that have not undergone an OBR fiscal assessment.

Wage boost

The Government has committed to delivering a “genuine” living wage that reflects the issue of the high cost of living.

They also plan to remove the current minimum wage age bands to ensure that all adult workers benefit.

Draft Audit Reform and Corporate Governance Bill

Labour plans to introduce a revamped regulator to uphold standards and independent scrutiny of companies’ accounts and accountability for company directors.

A draft Bill will establish the Audit, Reporting, and Governance Authority, replacing the Financial Reporting Council.

This new regulator will have the necessary powers to address poor financial reporting and build public trust.

It will include important changes such as:

• Removing unnecessary rules on smaller Public Interest Entities, which will be beneficial for small businesses that face disproportionate requirements.
• A regime to oversee the audit market to protect against conflicts of interest and help minimise the impacts of corporate failures.
• Powers to investigate and sanction company directors for serious failures in relation to their financial responsibilities.

Pension Schemes Bill

The Pension Schemes Bill seeks to assist over 15 million individuals, who save through private-sector pension schemes.

It will help them achieve better outcomes from their pension assets, aligning with the Government’s goal of fostering economic growth.

To do this, it will establish a system for consolidating pension pots from various employments, ensuring people do not lose track of their savings when they change jobs.

Additionally, this Bill aims to boost the savings for pension savers, potentially allowing an average earner, who saves throughout their lifetime in a defined contribution scheme, to have over £11,000 more in their pension pot.

The Bill will introduce a standardised test that requires trust-based defined contribution schemes to demonstrate they deliver value. This should remove the underperforming schemes leading to a more productive investment of funds.

They will also be amending the Special Rules for End of Life (Pension Protection Fund and Financial Assistance Scheme) by broadening the definition of ‘terminal illness,’ enabling eligible members to receive a lump sum payment sooner.

Economic growth and wealth creation

Business investment in the UK has been persistently low, holding back productivity and living standards.

The introduction of the National Wealth Fund (NWF) will be central to the Government’s mission to drive growth and create a greener economy.

With an additional £7.3 billion in funding, the NWF will make transformative investments nationwide, attracting billions of pounds in private sector investment.

The Labour Party will create new partnerships with businesses and workers to overcome cost of living challenges and prioritise wealth creation.

As local leaders typically know more about what their areas need, Labour will introduce a Bill to move power out of Westminster and back to local leaders, giving them the tools they need to drive growth in their communities.

The new laws will give more powers to metro mayors and combined authorities, helping support local plans that bring wealth to communities.

To kickstart investments right away, the NWF will work through the UK Infrastructure Bank, expanding its role.

This will help attract even more private investment, aiming to bring in £3 from the private sector for every £1 invested by the Fund.

The Fund will make it easier for businesses and investors by bringing together key institutions like the UK Infrastructure Bank and the British Business Bank.

By uniting these organisations under the NWF, there will be a clear, streamlined support system for businesses and a compelling opportunity for investors, to use public funds wisely to open up new investment opportunities.

VAT

Measures will be taken to remove the exemption from Value Added Tax (VAT) for private school fees, which will enable the funding of six and a half thousand new teachers.

European Union

The Labour Government will seek to reset the relationship with European partners and work to improve the United Kingdom’s trade and investment relationship with the European Union.

This aims to gain more favourable trade conditions and attract more European investment into the UK and vice versa, leading to increased funding opportunities for businesses, and facilitating growth and expansion.

What is next?

There are still many unknowns when it comes to Labour’s policies regarding personal and business financials, with very little mention of taxes and funding opportunities.

The Budget date has now been announced to take place on 30 October 2024 and is expected to make the Labour policies clearer.

We will keep you updated with any updates that happen between now and then, alongside a Budget summary following the event.

In the meantime, we encourage you to ask any questions you may have about these new policies and how they impact your business.

Please contact us if you have any questions about what the new Government means for your finances.

As the sun rose on Friday morning, Labour began its celebration of a significant victory, claiming a majority that fell short of its last landslide success in 1997.

With a manifesto focused on change, its proposals for the next five years of Parliament are far-reaching, but not revolutionary.

Now in power, it is important to review their plan in more detail to understand the impact their ideas, if delivered, could have on you and your business in the years to come.

Our experienced team have been busy dissecting and analysing Labour’s proposals, to explore their intentions and potential outcomes, so that you can plan effectively for the future.

While the manifesto is Labour’s plan for the country, it is important to remember that, even with a significant majority, it may not be possible to deliver on each promise and each proposal may be subject to change in the future.

The economy

Labour has undoubtedly inherited a struggling economy, with poor public finances, which it makes very clear in its manifesto.

The new Government has promised to “turn the page on this economic chaos” by implementing two key fiscal rules:

• The current budget moves into balance so that day-to-day costs are met by revenues
• Debt must be falling as a share of the economy by the fifth year of the parliament

Both objectives will be hard to meet, especially as Labour has said it does not intend to “return to austerity.”

Instead, its economic plan is focused on prioritising investment for the future balanced with the need to rebuild public finances.

Personal finances

With the cost-of-living crisis affecting the finances of many people across the UK and driving poor economic growth due to individuals cutting back, Labour has said it will act, by:

• Bringing down the cost of energy, in part through the launch of its own publicly owned green energy investment company – Great British Energy – which will receive an £8.3 billion investment
• Reduce food prices by removing barriers and costs to businesses
• Expand access to childcare to help people be more productive, including the introduction of free breakfast clubs in every primary school
• Increase the availability of more affordable housing

Labour also wants to help people with their mortgages, by bringing down inflation, but plans in this area are less clear at the moment, apart from their continued support of an independent Bank of England.

Personal tax allowances

Labour has pledged to keep “taxes on working people” as “low as possible,” as such it will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.

However, they have also confirmed that they will not change the current freeze of tax rates, which is due to remain in place until 2028.

This effectively means, with the impact of inflation, that many people will be taxed more as their wages and income increase.

That means that taxpayers will still need to address this issue with careful tax planning to make sure they make the most of the allowances and reliefs available to them.

Non-domicile status

Before the election, in the Spring Budget, the former Chancellor Jeremy Hunt announced the abolition of non-dom status in the UK and the eventual removal of the remittance basis, under a transitional process.

At the time, Labour was up in arms about the policy as it mirrored its pledges at the time.

However, in response, the new Government is to double down on its plans announcing a “modern scheme” intended only to support people “genuinely in the country for a short period.”

The transitional arrangements due to be in place from April 2025, will not be retained under Labour’s plans and they have confirmed that they intend to end the use of offshore trusts to avoid Inheritance Tax.

This will, they say, ensure “that everyone who makes their home here in the UK pays their taxes here.”

Non-doms who are concerned about the changes that Labour might introduce and how they might affect them, should watch this space carefully and seek professional advice at the earliest opportunity.

Tax compliance

Labour has been quite critical about HM Revenue & Customs’ (HMRC’s) performance in relation to tax avoidance.

They have pledged to invest in the tax authority to help it modernise. As part of this, it will increase report and registration rules, make a significant investment in technology and enhance HMRC’s powers.

Labour hasn’t been shy in outlining where these efforts will be focused, saying that it wants HMRC to have a “renewed focus on tax avoidance by large businesses and the wealthy.”

This is part of the promise to eliminate unfairness in the UK’s tax system, by closing gaps and making sure that “everyone pays their fair share.”

Given the party’s discussion around the tax system and rules, it is likely that we will see further legislation introduced and a tougher approach by HMRC, which may mean a rise in the number of investigations it launches.

This stands to highlight the importance of tax compliance in the years to come and the value of robust and reliable accountancy services.

Business taxation

Labour has said that it wants to provide certainty to businesses following 14 years where the Corporation Tax rules have changed 26 times.

As such, the party has pledged to cap the current top rate of tax at 25 per cent for the entire life of the Parliament – although they will act if the rate makes the UK less competitive internationally.

The Full Expensing scheme and Annual Investment Allowance introduced by the last Government will be permanently retained but could be subject to further change.

For those uncertain of their eligibility for these reliefs, the Government will provide “greater clarity on what qualifies for allowances to improve business investment decisions.”

Finally, in England, Labour will replace the current business rates system to “level the playing field between the high street and online giants.”

Further details on this policy are vague, but Labour says it hopes to support entrepreneurs, revitalise high streets and improve the environment for investment.

Some of the areas of business taxation outlined by Labour remain unclear, but we are likely to learn more about their plans in the weeks and months to come.

Small business support

Labour’s specific plans for small businesses and sole traders aren’t significant, although its tax and economic policies, will support SMEs.

However, they have promised to assist with:

• Late payments: Labour plans to implement measures to ensure that small businesses and the self-employed receive timely payments. This initiative could significantly improve cash flow and reduce financial pressures related to delayed payments if delivered well.
• Exporting: The party has committed to enhancing guidance and simplifying the process for small businesses looking to export. This could open new markets for products and services and is a great opportunity to expand business reach internationally.
• British Business Bank reform: Labour proposes to reform the British Business Bank to provide more robust support for growth across all regions. This reform aims to make it easier for SMEs to access the capital needed for expansion and innovation.

Investment

Labour plans to establish a £7.3 billion National Wealth Fund, which will look to encourage private investment by pledging public money to a number of important projects, including:

• £1.8 billion to upgrade ports and build supply chains across the UK
• £1.5 billion to new gigafactories so our automotive industry leads the world
• £2.5 billion to rebuild our steel industry
• £1 billion to accelerate the deployment of carbon capture
• £500 million to support the manufacturing of green hydrogen.

A new 10-year infrastructure strategy will also be implemented to end short-termism and a new public body, the National Infrastructure and Service Transformation Authority, will be introduced to bring together the expertise from a wide range of existing agencies.

To support businesses and investment, Labour also plans to reform the current planning laws to make it easier for projects to get underway.

Businesses may benefit from these investments in several ways, including improved productivity and connectivity as a by-product, or directly through the supply chains that will be required to deliver this ambitious plan.

Fiscal events

As part of its bid to improve financial certainty, Labour has said it aims to only hold one fiscal event each year, where possible.

For some time, the Government has relied on both a Budget and Statement to outline its plans for the economy, but this may no longer be the case under the new Government.

This should provide some stability to the ever-changing tax rules if Labour’s plans are achieved.

Labour will also reform the Office for Budget Responsibility (OBR) so that every change to taxation or spending will be subject to an independent OBR forecast.

This change should help businesses and individuals to plan more effectively each year and remain compliant with changes as they are introduced at a slower pace.

Employment law and pay

Within the next 100 days, Labour plans to launch its “Plan to Make Work Pay: Delivering a New Deal for Working People”.

This will:

• Implement a real living wage that is adequate for living costs, altering the Low Pay Commission’s remit to include the cost of living alongside median wages and economic conditions
• Remove age-based wage differences under the National Minimum Wage scheme to benefit all adult workers
• Empower the Single Enforcement Body and HMRC with the necessary tools to enforce wage compliance, including penalties for non-compliance
• Promote flexible working arrangements as the default from day one.
• Abolish zero-hour contracts
• Guarantee contracts reflect actual hours worked based on a 12-week reference period, ensuring fair employment practices
• End fire and rehire practices.

Change is also on the slate for workplace pensions, with Labour adopting reforms that ensure that schemes utilise consolidation and scale, to deliver better returns.

Where will tax rise?

Despite their ambitious plans, Labour has tried to avoid discussions around tax rises, but taxes will have to rise in certain areas to meet the funding requirements of the manifesto.

Here are the key areas in which tax is slated to increase:

• VAT and business rates to apply to private school fees
• Carried interest tax loophole to be closed for private equity-related performance pay
• An increase in Stamp Duty of 1 per cent for non-UK residents purchasing residential properties
• A further windfall tax on oil and gas giants.

Of course, its decision to increase HMRC’s powers to crack down on tax avoidance, if successful, will also reduce the current tax gap.

What’s next

Like many of us, you are still trying to digest the events of the election and the implications of the new Labour Government.

We aren’t likely to see many of these initial proposals fleshed out in more detail for the next few weeks.

Parliament will soon enter its summer break and Sir Keir Starmer is currently assembling his cabinet.

It is early days, but we are more than likely to see a Budget of some form in the autumn so that the Government can enact its reforms.

We will continue to bring you updates in the months ahead as and when new policies and proposals are announced.

However, in the meantime, if you have any questions, please feel free to contact us.

When developing your business exit and succession strategy, you must consider all possible avenues, including those which might not seem so obvious.

A management buyout (MBO) is one such approach that has gained traction for its flexibility and the ability to leave your business knowing that an experienced team is in place to run it.

With support from professionals, MBOs could be a smart planning move that leaves your business in a position to grow.

Is an MBO right for your business?

An MBO involves the existing management team of your business, whether that be a single director or the entire team, buying the business from you and continuing to run it.

This follows a period of negotiation and valuation of the business when you and your team decide on how much of the business they will buy, what assets are included and the terms of your exit.

This form of buyout provides a smooth transition with minimal disruption to business operations but may also allow the new owners to apply their vision to the business.

MBOs may be particularly suitable for companies with:

• Strong market potential but poor performance
• A cohesive existing leadership team
• A long-term goal of growth or sale to a group
• No family interest in taking over the business

The funding for this purchase usually involves a combination of personal equity from the managers themselves, along with external financing.

MBOs as an exit strategy

MBOs provide a seamless leadership transition, preserving the existing corporate culture and operational continuity.

This offers assurance to the owner that the business will continue in safe hands and that a growth plan is in place.

Additionally, they assure employees that the interests of the existing business align with those of the new owners, reducing the risk of clashes and low staff retention.

When the time comes for you to retire or move on, consider approaching your management team to discuss the possibility of an MBO, including any questions or concerns from your staff.

In all, MBOs are a compelling exit strategy for founders and business owners wanting to leave their businesses in safe hands.

For advice on MBOs and how to proceed with an exit strategy, please contact our team today.

Whether the hot weather lasts or not, summer is here to stay, bringing with it seasonal challenges and opportunities for business owners.

You may think summer is business as usual, but many companies face disruption and delays due to:

• More people taking holiday than at other times
• The heat disrupting transport or the supply chain
• Increased trade requiring additional staff

How deeply these issues or others impact your business depends on a number of factors, including:

• The size and location of your business
• Your sector
• Your ability to manage delays or meet additional costs
• The sectors and functions of other companies in the supply chain

Tackling challenges head-on

Effectively managing summer disruptions starts long before those first glorious weeks – it should be built into your business strategy.

You may need to:

• Address staffing issues – have sufficient staff to avoid delays and ensure consistency of service.
• Manage cash flow – If you need additional cash to cover delays or busier periods, make sure to factor that in throughout the year.
• Advertise in advance – Leave enough time to recruit good, reliable staff to avoid further costs or losses during busy periods.

Seizing the opportunity

Summer also provides plenty of opportunities for diversification and internal review. By taking advantage of these, you can mitigate any negative impact caused by the summer months and help your business to thrive.

Potential summer opportunities include:

• New markets – If your location and sector provide you with access to tourist markets, you may seek to expand into these markets temporarily, and you may discover a new revenue stream.
• Reviewing your operations – Periods of quiet when clients or suppliers are away may give you the opportunity to review your processes and make improvements.
• Enhancing hiring processes – If you need to take on seasonal staff, this is a great opportunity to streamline your onboarding and recruitment workflows.

If you need additional support in managing your business through the summer and making the most of your business processes, contact our team for advice.

HM Treasury has taken £77.2 billion in Income Tax and National Insurance (NI) since April 2024 – signalling the effect of the freeze in the Personal Allowance and Income Tax bands and thresholds.

Taxpayers have seen two landmark cuts to employee NI payments, falling from 12 per cent to 10 per cent after the 2023 Autumn Statement, before decreasing again to eight per cent following the Spring Budget.

As a result, the amount of NI taken by the Treasury in the period between April and July 2024 has decreased by £1.3 billion compared to the same period last year.

Rising wages

The rise in total personal tax take has therefore arisen due to rising wages, both as a response to the cost-of-living crisis in 2023 and a result of a rise in the National Living Wage (NLW) – increasing to £11.44 per hour and extended to 21- and 22-year-olds for the first time.

More Income Tax is being paid as those in the lowest band, earning between £12,571 and £50,270, earn more with a higher NLW.

Part-time workers have also been pulled into the band by exceeding their Personal Allowance of £12,570.

Staying prepared

The coming years are likely to illustrate the importance of tax planning, particularly within the realms of tax reliefs and allowable expenses for the self-employed.

Contact our team for further advice on managing tax liabilities and changes in tax legislation.

Invoice fraud, affecting one in three companies, involves deceptive practices that trick businesses into making payments to fraudulent accounts.

As fraudsters’ techniques become more sophisticated, businesses must understand their tactics and the potential impact on operations.

Here are some common techniques used by fraudsters:

• Fake invoices: Fraudsters create counterfeit invoices that appear legitimate. They might use details from a genuine supplier, making it difficult to distinguish between real and fake invoices.

• Business email compromise (BEC): In this technique, fraudsters hack into or spoof a legitimate business email account. They then send emails that appear to be from trusted suppliers or senior executives, requesting urgent payments to new bank accounts.

• Phishing attacks: Fraudsters use phishing emails to trick employees into divulging sensitive information, such as login credentials or financial details. This information is then used to carry out fraudulent activities.

• Change of bank details: Fraudsters pose as legitimate suppliers and inform companies of a change in bank account details. Unsuspecting employees then update the payment information, redirecting funds to the fraudster’s account.

While these may seem fairly simple tricks, they are often elaborate and complex with many underlying layers of deception.

The effects of invoice fraud

Invoice fraud leads to immediate financial losses from payments to fraudulent accounts, which are often difficult to recover.

It also results in time-consuming and resource-intensive fraud investigations that disrupt business operations and delay legitimate payments.

Additionally, falling victim to fraud can damage a company’s reputation, eroding trust among clients, suppliers, and stakeholders, and may lead to legal consequences, including fines and regulatory scrutiny.

Strategies for mitigating the risks

We often recommend protecting your company from invoice fraud, by implementing the following strategies:

• Employee training and awareness: Educate your staff about the common techniques used by fraudsters and the importance of verifying payment requests. Regular training sessions can help employees recognise and respond to potential threats.

• Verification processes: Establish robust verification processes for any changes in payment details. Always verify new or changed bank account information directly with the supplier using a known, trusted contact method.

• Use technology: Implement fraud detection software that can flag unusual payment requests or changes in supplier details. Ensure your email systems are secure and regularly updated to prevent BEC attacks.

• Segregation of duties: Divide financial responsibilities among multiple employees. This separation can help detect and prevent fraudulent activities.

• Regular audits: Regularly audit your accounts payable processes and supplier information. This can help identify any irregularities or discrepancies that may indicate fraud.

Speak to our team if you’re worried about this issue, we can help you implement robust financial checks that help to protect you.

Please get in touch for more information. 

The new UK Government has been formed. Despite the Labour Party’s campaign and pledges around keeping tax rises to a minimum, expert opinion suggests that future rises are inevitable.

The inevitability of higher taxes

For the foreseeable future, the freeze on most tax thresholds is likely to remain in place.

The thresholds’ freeze means that even moderate pay rises push taxpayers into higher brackets, effectively increasing their tax burden without any formal rise in tax rates.

This stems not only from the specific pledges of the main parties but also from the broader economic assumptions that have been made.

Many anticipated spending cuts have been factored into budget forecasts, which will likely boost the Government’s need for higher tax revenues.

Without significant economic growth in the short term, the new Government will face a tough decision between making deep spending cuts or raising taxes.

The trilemma

One may wonder why this scenario must be the case and whether it might be avoided. However, as the Institute for Fiscal Studies put it before the election any Government would face the same “trilemma”.

Speaking to the BBC, Paul Johnson, Director of the IFS, said: “Huge decisions over the size and shape of the state will need to be taken, that those decisions will, in all likelihood, mean either higher taxes or worse public services”.

The IFS says that only three options exist for the Government: “Raise taxes by more than they have told us in their manifesto. Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer.”

Preparing for the future

Regardless of the election outcome, tax liabilities look poised to increase – by how much is now the question.

As accountants, our role is to help you navigate these changes, ensuring you’re properly informed and prepared.

Please get in touch for more information or tailored guidance on this issue. 

Private equity investment has been a significant force in the financial world for some time.

However, the nature of private equity has changed considerably in the last few years and it’s worth knowing how this may affect your business.

Background                             

Traditionally, private equity involved investment firms raising funds from investors to acquire stakes in companies.

These firms work to improve the value of these companies before eventually selling them for a profit.

Historically, large institutional investors and wealthy individuals dominated this sector but that’s no longer entirely the case.

Advancements in technology and regulatory changes have made private equity more accessible.

Crowdfunding platforms and secondary markets now allow smaller investors to participate in private equity deals.

Private equity firms are also no longer limited to buyouts and are exploring a range of strategies, including growth capital, venture capital, and distressed asset investment.

What you need to know

Given these changes, it is essential to keep several key points in mind as you think about private equity investments.

Firstly, be aware of the due diligence process, as private equity firms will thoroughly research your company before acquiring a stake.

Understand their investment strategy, the types of companies they target, and how they add value.

This knowledge will help you assess whether partnering with a particular firm aligns with your goals.

It’s also important to understand the implications of private equity involvement because, while private equity can provide significant capital and expertise, it also comes with expectations.

Investments are often illiquid, meaning changes in ownership structure could tie up resources for several years.

Additionally, the success of these partnerships often hinges on the firm’s ability to improve the value of your company, which is not guaranteed.

You’ll also want to consider whether private equity fits into your long-term business strategy.

Be prepared to commit to a relationship that could last five to 10 years.

Seek professional advice

Your accountant is there to help you make sense of private equity and guide you through the intricacies of acquisitions.

Contact our team for advice and information.