Business News

Chancellor Jeremy Hunt announced many R&D tax changes in his Autumn Budget, including how the funding is allocated, which will be implemented in April.

He announced changes to the rates paid by the Research and Development Expenditure Credit (RDEC) for larger firms and the small and medium enterprises (SME) R&D relief scheme.

Under these changes, from 1 April, the RDEC rate will be increased to 20 per cent from 13 per cent.

Meanwhile, the SME deduction rate on qualifying expenditure will be reduced to 86 per cent from 130 per cent, and the SME credit rate decreased to 10 per cent from 14.5 per cent.

Changes also announced by the Chancellor in November, included new eligibility criteria from 1 April 2023.

Overseas R&D

Subcontracted R&D expenditure from outside the UK will no longer be eligible for inclusion in R&D claims from April 2024. .

The aim of this is to bring more R&D activity to the UK and incentivise companies to move operations into the UK.

Cloud costs will now be eligible

Currently, costs relating to cloud-based technology can’t be included in an R&D claim.

From April 2023, cloud-based computing costs such as AWS will be eligible for inclusion.

Other changes in April include:

• Claims must be submitted digitally
• Claims must include additional information
• Claims must be supported by a named officer of the company
• Claims must include details of any associated agents

Pre-notification

From 1 April 2023, new rules for R&D Tax Relief claims will also require businesses to submit a pre-notification of their claim to HMRC digitally.

This applies if a business:

• is a new claimant; or
• has not claimed in the last three financial periods.

The requirement to pre-notify HMRC will affect any business that conducts research and development if they are eligible to claim under either the R&D Expenditure Credit (RDEC) or the SME R&D relief schemes.

Looking ahead, HM Treasury also launched an eight-week consultation on the design of a single, simplified R&D tax relief scheme earlier this year, merging the existing RDEC and SME R&D relief. If implemented, the new scheme is expected to be in place from 1 April 2024.

These changes may restrict or alter your R&D plans, so please contact us today for advice.

Businesses should be planning for the rise in Corporation Tax (CT), which comes into force from 1 April 2023, and sees the top rate of tax rising from 19 per cent to 25 per cent.

The tax applies to all profitable limited companies – both from trading income and from the sale of investments or assets.

The new approach to Corporation Tax

After 1 April, small companies with profits of up to £50,000 will continue to pay CT at 19 per cent thanks to the small profits rate. However, companies with profits of £250,000 and over will pay CT at 25 per cent.

Those companies between this upper and lower threshold will pay CT at the top rate of 25 per cent but benefit from marginal rate relief that reduces their effective rate of tax on a sliding scale depending on their level of profitability.

To calculate this, all profits between £50,001 and £250,000 are effectively taxed at a rate of 26.5 per cent.

As an example, if a company enjoyed profits of £150,000 the first £50,000 would be taxed at 19 per cent and the remaining £100,000 at 26.5 per cent.

As a result, the company would receive a tax bill of £36,000, which means that the actual tax rate that applies is 24 per cent.

Associated Companies for Corporation Tax rules have been newly reintroduced and they will apply from 1 April 2023 in the context of the small companies rate of CT.

It applies to clients who own or control more than one company. Where two or more companies are “associated” with each other, the Corporation Tax limits are divided by the number of companies concerned.

Like all taxes, CT can be complicated and there are a variety of ways to plan for and mitigate these changes with the right professional advice.

Do you need advice on managing your Corporation Tax liabilities? Please get in touch or download our latest guide today.

Workers across the UK will get a pay rise from April as higher National Minimum Wage (NMW) rates are introduced.

According to the Government, around two million of the UK’s lowest-paid workers will benefit from the rise in the National Living Wage (NLW) and NMW rates.

From April 2023, the NLW will increase by 92 pence per hour, or 9.7 per cent, to £10.42 whilst the NMW rates for younger workers will also increase.

Currently, the National Living Wage applies to those 23 and over, the age having been lowered from 25 in April 2021.

Those aged 21-22 will earn £10.18 an hour, a £1 rise, whilst 18–20-year-olds will receive £7.49 an hour, an increase of 66p.

Apprentices and 16 and 17-year-olds will receive £5.28 an hour, a 47p increase.

These rates are for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school-leaving age).

The new rates are:

The Low Pay Commission estimates that there were two million workers paid at or below the minimum wage in April 2019, around seven per cent of all UK workers.

Penalties for failing to meet statutory wage rates

If an employer is found by HM Revenue & Customs (HMRC) to have failed to pay the minimum wage, the actions that can be taken against them include:

• Requiring payment of the outstanding amount owed, going back up to six years, through the issuance of a notice
• Imposing a fine of no less than £100 per employee or worker affected, and up to £20,000, regardless of the amount of underpayment
• Pursuing legal action, including criminal proceedings
• Providing the names of businesses and employers to the Department for Business, Energy and Industrial Strategy (BEIS), which may choose to list them publicly.

If you are unsure of how these changes affect your workforce and existing employment practices, please speak to our payroll team today.

Company car drivers will see changes to the amount they can claim back for fuel costs from their employer from 1 March.

HM Revenue & Customs (HMRC) has also confirmed that the way the advisory electricity rate (AER) is calculated has been changed to better reflect energy prices, particularly with soaring electricity costs, when it is reviewed quarterly.

Previously it has been based solely on an annual figure published by the Department for Business, Energy & Industrial Strategy (BEIS), and the electrical energy consumption values for each car model, provided by the Department for Transport (DfT).

Quarterly index

HMRC will continue to use the BEIS and DfT data but will now also incorporate figures published in the Office for National Statistics (ONS) quarterly index for domestic electricity.

The new rates include a 1 pence per mile (ppm) increase in the advisory electricity rate (AER) used to reimburse drivers of electric company cars. This mean that the rate has increased from 8 pence to 9 pence per mile.

In contrast, and to reflect falling fuel prices, petrol, diesel and LPG advisory fuel rates (AFRs) have been reduced from 1 March.

Rates cut for petrol and diesel

The rates for petrol company cars have all been cut, with the AFR for petrol vehicles up to 1,400cc now 13 ppm.

Vehicles powered by 1,401-2,000cc engines see a decrease of 2 ppm, to 15 ppm. For engines larger than 2,000cc the AFR sees the biggest reduction of 3 ppm, to 23 ppm.

For diesel, cars up to 1,600cc there is a reduction of 1 ppm, to 13 ppm, and engines from 1,601-2,000cc see a reduction of 2 ppm to 15 ppm. The 2,000cc rate is cut by 2 ppm to 20 ppm.

For LPG vehicles up to 1,400cc, the rate remains the same at 10 ppm but has been cut by 1 ppm to 11 ppm for vehicles with an engine size of 1,401-2,000cc. For engines greater than 2,000cc, there is also a reduction of 1 ppm to 17 ppm.

Hybrid cars are treated as either petrol or diesel cars for AFR purposes.

It is important that you pay the correct mileage rates. If you need advice on expenses or require advice on any other issues related to the business use of a car, please contact us.

The cost-of-living crisis is posing challenges to firms, so how can you help to support your clients during this time?

Your clients may be facing additional costs with pressures mounting on directors to provide a solution such as cut staffing costs.

Throughout this time, you can help your clients to protect their firms through suggesting these useful tips.

Online accounting

Accounting and financial technology can give instant information on sales, costs and products and allows cloud-based apps to reduce the time needed for vital but time-consuming tasks.

This can include invoicing systems to help with tracking what’s been paid and other apps that help keep track of cashflow.

Research your competitors

Check out the competition, both locally and nationally, to see what they are charging for similar services.

This can often depend on different areas of the country and levels of relative prosperity.

Reminding your clients to check what competitors are doing is an important aspect of ensuring their firm is up to date and fit for success in the current market.

Make maximum use of your accountant

We offer a wide range of services, including strategic advice and money-saving and revenue-boosting ideas.

We can help with managing debt, addressing cashflow and advising on business strategy.

For advice on how to protect your firm during the cost-of-living crisis, contact us today.

How can your firm best ensure to protect against money laundering? The UK Financial Intelligence Unit received and processed 901,225 Suspicious Activity Reports (SARs) in 2022, a 21 per cent increase on the previous year.

Out of these 901,225 SARs, 2,052 were made by solicitors, and 1,160 were requests from solicitors and firms who raised concerns regarding suspicious activity they had noticed.

In order to protect against money laundering, your firm should ensure to make a SAR if you know or suspect money laundering.

Not only will this help your firm to protect against criminal activity, but these reports also help law enforcement authorities to reduce criminal activity with intelligence you provide.

There are many resources you can use to put in place effective anti-money laundering systems such as ensuring to keep your business safe through risk assessments. These assessments should consider economic crime and business ethics.

Making a Suspicious Activity Report (SAR)

You will need to ensure your firm is up to date with how and when to make a SAR, what to include, how to request for defences against money laundering and the consequences if you fail to report suspicious activity.

Is your firm up to date with the latest ways to comply with its responsibilities? Staying updated is an important part of ensuring your firm runs smoothly and you continue to offer a high quality of legal service.

The Solicitors Regulation Authority (SRA) has released a list of actions they will be taking to ensure solicitors are complying with regulations.

The Regulator have announced this in response to the Legal Services Boards recent statement of policy on ongoing competence.

The Chief Executive of the SRA, Paul Phillip said: ‘We expect the profession to deliver a high standard of service to those who need their help. That means we must make sure that solicitors and the employees of firms we regulate have up-to-date skills, knowledge, and behaviours.’

Throughout 2023, the SRA aims to work with firms who are not meeting standards and to take action where firms fall short to ensure customers are protected.

Through this approach, the SRA is prioritising annual goals for compliance.

The plan outlined by the SRA includes ensuring thematic reviews which will target areas where competence is an identified risk. They will also continue to review training records, especially so for pre-identified high-risk areas.

Other objectives are to respond to specific cases of incompetence on an individual basis and to take action where it is needed. This could be in terms of providing supervision. They will also aim to create an enhanced follow up approach to competence records which are below their standards.

Firms should recognise these annual aims and ensure to stay in line with guidance which will ensure maintaining high standards.

Your business may be sailing along quite nicely, or it may be struggling with the effects of shortages, rising prices and an energy crisis.

In both cases, it could be time to step back and reflect on where you are, develop what has worked and abandon methods that don’t.

It is time to plan out a strategy for the long term. It could be a one-year or five-year plan that considers:

• Where the company is heading
• What you hope to achieve
• The challenges you anticipate along the way
• What investment will be necessary
• The people, technology and skills required to achieve your goals.

Within this plan, you will need to consider commercial guidance and tailored business planning, including funding, financial management, advice on succession planning, your business structure and strategy and of course financial reporting.

You may take pride in how you run your business, but it makes sense to enlist professional support. That advice can save you money and help plan for future growth.

Don’t let your business run on autopilot – take action today by contacting us.

With the Spring Budget looming in March, it is easy to be tempted to delay tax planning until afterwards in hopes of favourable tax cuts.

However, the Chancellor has made it clear that significant cuts to taxation aren’t likely to be announced and so businesses should be taking steps now to prepare for the changes already being introduced in the months ahead.

Tax planning for businesses doesn’t have to be complicated. Small business owners can take advantage of certain deductions, credits and other tax benefits to help reduce the amount of tax they owe.

Corporation tax is a major tax for companies and tax planning allows businesses to reduce liabilities by taking advantage of capital allowances, R&D tax relief or other initiatives that encourage investment by offsetting expenditure against profits.

Your taxation planning should be part of a wider business plan, which helps you to:

• Outline your business’s goals
• Plan for investments and expenditure
• Identify and be prepared for potential problems
• Have the ability to measure your progress

A robust and well-prepared corporate tax plan can help you to make the most of the money and assets within your company. If you would like a carefully tailored tax plan for your business, please get in touch.