Business News

The Government has rejected its own recommendations to increase Legal Aid fees by a minimum15 per cent, sparking widespread outrage from criminal law solicitors.

The author of the Criminal Legal Aid Independent Review (CLAIR) report, Lord Bellamy KC who is now minister for the MoJ in the House of Lords, had stated a 15 per cent increase in Legal Aid fees was the “minimum necessary as the first step in nursing the system of criminal legal aid back to health after years of neglect”.

Instead – and apparently ignoring its own earlier advice – the MoJ has put forward a package that will see an increase in fees of 11 per cent for criminal legal aid solicitors. This increase would not be immediate and would see fees rise by only 9 per cent in 2023 with an increase to 11 per cent in 2024 alongside a restructuring of the Litigators Graduated Fee Scheme and other fee schemes.

The President of the Law Society, Lubna Shuja, has since met with the Lord Chancellor and pressed him on the pressures facing the criminal justice system, arguing that the measures represent “a real-terms cut on fees that have been frozen since the 1990s”.

Ms Shuja said: “Numbers of duty solicitors and criminal legal aid firms continue to fall at an alarming rate – with several police station schemes on the verge of collapse… The [CLAIR] was the last hope that the Ministry of Justice would take the crisis seriously and that there could be a viable future in criminal defence practice for our members.

“Instead, Raab has thrown down a gauntlet to the profession. This reckless decision not only puts many of our members’ futures in jeopardy, it is likely to prove to be a fatal blow to a criminal justice system that used to be the envy of the world.”

Whilst the Law Society is prevented by law from encouraging solicitors to strike, Ms Shuja has warned that it is now considering a legal challenge to the MoJ’s decision.

For expert business advice and information to support your firm’s financial health, please contact us.

HM Revenue & Customs (HMRC) is constantly warning of scammers who are targeting unsuspecting firms.

However, the threat goes much wider than opportunistic scammers so it is important to protect your firm from the growing danger presented from hi-tech fraudsters as criminals use an ever-increasing variety of tools and techniques to defraud even the most fraud-savvy enterprises.

It can be difficult to protect against every type of attack as cybercriminals adapt their methods almost as quickly as security firms create new products and services. But there are several weapons to take on the cyber crooks including:

Protecting your finances

Separate your law firm’s accounts from your private accounts, this will minimise the risk if hackers manage to access one of them.

In addition, understand how money leaves your firm, including payment methods and who makes and checks them.

Beefing up your digital protection

Antivirus technology and a good firewall are a good start. Create and protect strong passwords that are difficult to decipher and have them changed regularly. It is important to ensure a good level of cyber security within your law firm to protect client information.

It is good practice to back up your files via a secure cloud storage system, but this is most important when protecting against potential fraud attacks as it allows you to retrieve and restore files that may have been lost or corrupted.

Knowing your employees

It is vital to know who is working at your firm, so don’t rely entirely on references and work history. Instead, conduct a thorough background check, particularly on those dealing with your finances. This could include checking on anti-money laundering or previous adverse credit checks. You could also request a Disclosure and Barring Service (DBS) check for someone applying for a financially sensitive role.

Some companies can provide this service for you, but make sure you obtain proper permission to run the check.

Need help and advice with financial protection advice for your law firm – get in touch with our expert team today.

The SRA has received a grant of £119,691 from the Regulators Pioneer Fund (RPF) which, it plans to use to develop greater access to alternative dispute resolution.

The project is set to launch in September 2023 and will aim to develop technological solutions to expand the use of dispute resolution, reducing the need for businesses to seek redress through the courts.

Paul Philip, Chief Executive of the SRA said: ‘We welcome this important opportunity to work with our partners to support people in resolving their legal issues without having to use the courts. This has the potential to make a real difference for individual consumers, saving them time and money, as well as relieving pressure on the court system, which benefits the wider community.’

The SRA’s project aims to consult both consumers and public representative groups to better understand potential barriers as well as the future benefits of accessing dispute resolution digitally.

The proposals include sharing and developing best practice which the SRA hopes will then be used by law firms to deliver low-cost ADR solutions for clients.

Latest figures released by the Ministry of Justice found that 68% of civil court users would prefer to avoid formal litigation unless all other ADR options have been exhausted.

Despite the overwhelming appetite for consumers to engage in ADR, in 2019 alone the County Courts were served with 2 million civil proceedings, adding to the already over-burdened court system.

For help and advice to support your firm’s profitability please get in touch with our expert team.

The exemption for paying Capital Gains Tax (CGT) is changing.

The CGT annual exemption will fall from £12,300 to £6,000 from April 2023, before being cut in half again to £3,000 from April 2024.

CGT is what you pay on any gains that you make when you come to sell an asset, such as a second home or shares.

However, the annual CGT exemption allows you to make a certain value of gains before you pay tax on any additional gains.

Higher-rate or additional-rate taxpayers pay 28 per cent on gains from residential property and 20 per cent on gains from other chargeable assets.

If you are a basic-rate taxpayer, you will be charged 18 per cent on residential property and 10 per cent on other gains.

Steps that could reduce your CGT liabilities include:

• Ensuring you use your allowance for the current year as soon as possible.
• If you are married or in a civil partnership, you can utilise your partner’s unused allowance. You can transfer your assets into joint names if you are married or in a civil partnership without triggering a tax event. This doubles your £12,300 allowance to £24,600 in one year.
• Utilise tax-efficient investments such as the Enterprise Investment Scheme and Venture Capital Trusts.
• Using Business Asset Disposal Relief when selling a business.

Now is a great time for investors to review their portfolios and decide whether they should transfer or dispose of certain assets before these changes take place.

If you want to take advantage of the current CGT tax rate, please arrange a tax planning session with our team of advisers today.

Companies House has gone fully digital after the announcement of the closure of its office in London and all filing being transferred online.

It has also permanently shut the public counters in Cardiff, Belfast and Edinburgh.

Online services will be available 24 hours a day, seven days a week.

Changes have taken place with improved security features, which include:

• Multi-factor authentication
• The ability to link your company to your WebFiling account to give you more control over your filings
• Being able to digitally authorise people to file on your behalf on WebFiling, and to remove authorisation
• To view who’s digitally authorised to file for your company
• An option to sign up for emails to help you with the running of your company

WebFiling is an online service that Companies House provides, designed to make the submission of official paperwork easier and paper-free.

Once you’ve linked your company to your account, you will not need to enter your authentication code every time you file online.

Key changes include:

• Filing deadlines will not be shortened at the moment, but legislation will be introduced to facilitate future changes.
• Small companies will no longer have the option to prepare and file abridged accounts and will be required to file both their profit and loss account and directors’ report.
• Micro-entities will also be required to file their profit and loss accounts but will continue to have the option to not prepare or file a directors’ report.
• Dormant companies will be required to file an eligibility statement.
• All companies will be required to file accounts digitally, with full tagging.

Managing your Companies House requirements can be time-consuming and distract you from growing your business. Why not find out how we can help you? Speak to our experienced team today.

Chancellor Jeremy Hunt has announced a series of changes to the UK research and development (R&D) tax credit regime, including a cut to the deduction and credit rates for the SME scheme. 

The R&D SME scheme enhanced deduction rate will be cut to 86 per cent from the current 130 per cent, and the payable tax credit rate cut to 10 per cent from 14.5 per cent.

However, the rate of the separate R&D expenditure credit – also known as RDEC – will increase significantly, from 13 per cent to 20 per cent. 

The changes to the SME scheme mean that if you are a loss-making company, you will now only receive £18.60 for every £100 spent from April next year, compared to £33.35 per £100.

These changes are intended to reduce abuse in the R&D tax system, particularly claims for SMEs, which have been the spotlight of several investigations by HM Revenue & Customs (HMRC).

They are scheduled to take effect from 6 April 2023, so there is still time to plan, and it may make sense to bring forward R&D expenditure, where possible, to benefit from more favourable deductions and credits.  

If you have any queries about this change to R&D tax relief or require assistance making the most of the current opportunities on offer, please contact us.

Planning for the future is essential when running a business and, ideally, you should have a perspective of where you want to be in three to five years.

Goals or targets provide a sense of direction, focus, and motivation. But how do you set aims effectively?

You could try the SMART method. This relies on five key criteria – Specific, Measurable, Achievable, Realistic, and Time-Based – which allow you to create a clear target for success.

What is the plan to get you there?

It may be that small steps are needed before achieving the ultimate goals and could include:

• Establishing your USP. What can you offer that the competition cannot?
• Identifying your ideal customer, do you need to pivot the business to attract new clients?
• Maximising talent. Your staff are your most important asset.

How you can build SMART goals into your business plan:

Specific

A specific goal clearly defines what needs to be achieved, by whom, where and when it is to be achieved (and sometimes why).

Measurable

Measuring draws your focus, and the latest tracking software can measure this accurately.

When you measure, you need to ask certain questions:

• How much?
• How often?
• How many?

Achievable

When you set goals, ensure they’re achievable. It’s a mistake to set unreachable goals because you’re setting yourself up for failure from the beginning.

Realistic

Make sure the goal that you set has long-term importance in what you want to achieve as an individual or an organisation.

Time-based

It sounds obvious but set up a timeframe. A deadline can be an excellent motivator.

Struggle to set goals? Need help monitoring your KPIs? It makes the most sense to seek professional support so you can create a SMARTer approach to working.

If you would like advice on your business strategy, backed up by the latest business intelligence, please get in touch.

Millions of new taxpayers will be created by the extended freeze on the income tax thresholds.

In the Autumn Statement, the Government froze the thresholds until 2028 – two additional years on its original plans.  

The income tax thresholds for basic (20 per cent) and higher rate (40 per cent) taxpayers will remain unchanged, while the £12,570 personal allowance, the amount you can earn before you start to pay tax will also remain the same. 

In addition, for those paying the additional rate of 45 per cent, the threshold has been reduced from £150,000 to £125,140 from 6 April 2023. 

In what has been described as a stealth tax, the freeze is likely to lead to many taxpayers being fiscally dragged into higher tax bands by inflation, and with it many individuals’ wages and income.

There are many tax-efficient ways of mitigating what you pay in tax, including: 

Pension top up 

You can reduce your income tax by topping up your pension using your annual tax-free allowance. Personal pension contributions within the annual £40,000 pension allowance lower your ‘adjusted net income’, which HMRC uses to calculate your tax bill. 

ISA allowances 

ISAs are a tax-efficient way of saving. You don’t pay income tax or Capital Gains Tax (CGT) on investments inside an ISA, and you can withdraw money whenever you like, tax-free. You can currently invest up to £20,000 in ISAs.

Double your tax allowance 

If you’re married or in a civil partnership, your tax allowances can, in some cases, be combined to increase your household’s income tax allowance. For example, the Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner if they haven’t used it.

If you are unsure of the tax-saving opportunities available to you, you should seek professional advice. To find out how we can help, please contact us.

The message from the Chancellor, Jeremy Hunt, in the days before he rose to the despatch box in the House of Commons to deliver the Autumn Statement was clear; he would be outlining billions of pounds of tax rises and spending cuts.

These spending cuts and tax rises, he said, would affect everybody and were necessary to re-establish the markets’ trust in the future health of the public finances.

What was less clear was exactly who the announcements would affect the most and how they would be impacted.

Of course, the challenges for the Chancellor extended well beyond winning the trust of the markets in relation to his stewardship of the public finances. He will also have been thinking about inflation, the cost-of-living crisis, interest rates and promoting economic growth, not to mention the political optics.

These are competing but intricately related pressures; action to address the cost of living carries with it the risk of further inflation; action to reassure the markets brings the twin dangers of not addressing the cost-of-living crisis or promoting economic growth. Different economic considerations do not exist in a vacuum.

Further underscoring the scale of the challenge, just a day earlier, the Office for National Statistics announced that inflation had reached a 41-year high of 11.1 per cent.

This followed warnings from the Bank of England’s Monetary Policy Committee, as it increased interest rates to three per cent in early November, that the UK faces a “prolonged” recession.

The only real questions concerned the detail of what the Chancellor would do. Which taxes would be affected? Will they rise now or in the future? Would tax rates rise? Would the focus be on freezing thresholds? How much pain would there be? Who would bear the brunt?

And, most importantly, would it work?

• Public finances
• Personal tax
• Business tax
• National Living Wage, Energy and Pensions
• Conclusion

Public finances

Addressing the Office for Budget Responsibility’s (OBR) economic forecasts, the Chancellor said that the economy is now in recession and is expected to shrink by 1.4 per cent in 2023/24 before growing in 2024/25.

Meanwhile, he said unemployment is expected to rise to 4.9 per cent in 2024, up from 3.6 per cent now, before falling to 4.1 per cent the next year.

Borrowing this year stands at 7.1 per cent of GDP, according to the OBR. Debt as a percentage of GDP is expected to peak at 97.6 per cent in 2025/26 before falling to 97.3 per cent in 2027/28.

Personal tax

Beginning with personal tax, the Chancellor said that the threshold for the additional 45p rate of Income Tax will fall from £150,000 to £125,140 from April 2023.

At the same time, National Insurance, Inheritance Tax and Income Tax thresholds and Allowances will be frozen at their current levels for a further two years to 2028.

He said the Dividend Tax Allowance will fall from its current level of £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.

Turning to Capital Gains Tax, the Chancellor said the current Annual Exempt Amount will fall from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25.

He then turned his sights to electric vehicles, saying that a road tax will apply to them from 2025.

Finally, on personal tax measures, he said that the Stamp Duty Land Tax (SDLT) cuts announced by his predecessor, Kwasi Kwarteng, in September 2022 will end on 31 March 2025 and will not be permanent.

Business Tax

Turning to business taxes, the Chancellor said he would reduce the enhanced deduction rate for Research & Development (R&D) Tax Relief for SMEs from 130 per cent to 86 per cent of qualifying expenditure from April 2023. The tax credit for loss-making SMEs will fall from 14.5 per cent to 10 per cent.

On Business Rates, he said that the revaluation exercise will go ahead as planned in April 2023. £13.6 billion of support will be provided over five years to help businesses transition to the new bills.

He said the Business Rates multipliers will be frozen in 2023/24 and there will be extended and increased relief for businesses in the retail, hospitality and leisure sectors. That relief will increase to 75 per cent.

The National Insurance Secondary Threshold will remain at £9,100 until April 2028.

National Living Wage, Energy and Pensions

Turning to the National Living Wage (NLW) and National Minimum Wage (NMW), the Chancellor announced he would increase the rates for those aged 23 and over by 9.7 per cent to £10.42 an hour from 1 April 2023.

Meanwhile, the rate of NMW for those aged 21 and 22, 18 to 20, and 16 and 17 will rise to £10.18, £7.49, and £5.28 an hour respectively. The apprentice rate will also rise to £5.28 an hour.

Moving to address energy costs, the Chancellor said the current Energy Price Guarantee (EPG) will remain in place until April 2023, limiting typical energy bills to £2,500 per year. From April 2023, the EPG will rise to £3,000 for the typical household.

Concluding his speech with pensions, the Chancellor said that the State Pension Triple Lock will remain in place, meaning the State Pension will rise in April 2023 in line with September 2022’s rate of CPI – 10.1 per cent.

Conclusion

The economy is a complex and dynamic system, and there are limits to what can be known about how it will respond to any particular intervention – it is the sum of the ever-changing actions of millions of individuals.

What is more, the Chancellor only has his hands on some of the levers of economic influence, not all of them, and moving one of the levers he controls can stop him from moving another.

Mr Hunt will be hoping he has pulled the right levers by the right amount and that the factors out of his control move in the direction he wants them to.

For businesses and business owners, the impact of the changes is likely to vary considerably and a renewed focus on tax planning is likely to be needed.

Link: Autumn Statement 2022