Business News

There seems little doubt now that the working from home phenomenon has become established.

With a laptop, a phone and an internet connection, many tasks can be performed as adequately at home or elsewhere, as in an office.

While returning to the office is a must for many, the recent rail strikes and surge in fuel prices have shown that this kind of flexibility can keep the wheels of industry in the UK turning when businesses and their staff are disrupted.

Usually, this takes a hybrid form with a few days in the office and a couple working from home, or vice versa.

Although many businesses are already implementing this new way of working, there are things that business owners themselves should consider, especially where they intend to operate a business out of their home.

Get advice before taking the plunge

If you decide to run your business from home, some rules and regulations need to be followed.

• You may need permission from the local council, a landlord or a mortgage provider to run your business
• Health and safety issues will also have to be properly managed
• You may need separate insurance.

Planning permission

If you are planning on making alterations to accommodate your business, you may need permission from the council.

You may also need a licence if your business is likely to cause disruption with deliveries and visitors, or if you want to advertise outside your home.

What tax allowances can you claim?

You can include your business costs in your Self-Assessment tax return if you’re a sole trader or part of a business partnership and you can also claim a proportion of the cost of things like council tax, heating, lighting, phone calls and broadband.

Capital Gains Tax

You may have to pay this on the part of your property you used for your business if you sell your home in future, so be aware.

Business rates

You may have to pay business rates on the part of your property that you use for your business, while you’ll still have to pay Council Tax on the rest of your property.

But you may qualify for small business rate relief if your property has a rateable value of £12,000 or less.

Supporting employees in their own homes

Many employees are also enjoying the benefits of WFH, either full-time or under a hybrid system.

As an employer, you must support them as well. For employees, the work-from-home relief, which many claimed during the pandemic, is still available.

However, from 6 April 2022 onwards it is only open to employees where an employer specifically requires a staff member to work from home – for example, to stop the spread of Covid or because the job had been ‘relocated’ and was now contractually regarded 100 per cent as a home-working role.

For basic-rate taxpayers, the relief is worth 20 per cent of the £6 allowance – £1.20 a week – while for higher-rate taxpayers they could claim 40 per cent of the £6 – £2.40 a week.

Over the year, this means that employees can reduce their tax bill by between £62.40 and £124.80 respectively.

For some employees, relief may also be available on:

• Reimbursement by employers for additional household expenses
• Provision of office equipment by employers
• Provision of computers for private use by employers
• Travel for necessary attendance.

If you need help and advice on managing your business as it makes further moves to work from home, please seek advice.

If you need advice on operating your business from your home or intend to introduce a work from home policy for staff, we can help you make the most of the financial savings on offer. Contact us to find out more.

Link: Working From Home

With the current labour shortage affecting pretty much all areas of the economy, taking on an apprentice could reap rewards for many businesses.

There are many reasons why hiring an apprentice can benefit your business, but for hard-pressed employers, with a limited budget, the financial incentives offered by the Government are a major reason to take the plunge.

Why take on an apprentice?

Benefits include:

• Plugging the skills gap: It is obvious that if a business has a skills shortage, training an apprentice in that area will reap rewards.
• Gaining a new perspective on technology: This will allow businesses to equip their workforce with specialist skills and the latest techniques.
• Enhance reputation as an employer: Giving young or underskilled workers an opportunity in this way can only enhance a firm’s reputation and give something back to the community.
• Generating a boost in productivity: Training helps staff become more proficient, but an apprentice can also free up time for more senior staff to focus on key areas of their work.

However, perhaps the best part of apprenticeships is the financial assistance available from the Government, which will provide funding to pay for an apprentice’s training and assessment.

Where you get the funding from depends on where you are in the UK. The amount you get also depends on whether you pay the Apprenticeship Levy or not.

Who needs to pay Apprenticeship Levy?

The Apprenticeship Levy is an amount paid at a rate of 0.5 per cent of an employer’s annual pay bill.

As an employer, you have to pay Apprenticeship Levy each month if you have an annual pay bill of more than £3 million or are connected to any companies or charities, for Employment Allowance purposes, that have a combined annual pay bill of more than £3 million.

How is the funding distributed?

For those who do not pay the levy, you will have to pay five per cent towards training fees and you need to agree on a payment schedule with the training provider.

The Government will then pay the other 95 per cent up to a maximum funding band and deliver it directly to the training provider.

What else is available?

You can get £1,000 to support your apprentice in the workplace if they are one of the following:

• 16 to 18 years old
• 19 to 25 years old with an education, health and care plan
• 19 to 25 years old and they used to be in care

The training provider will present the payment over two instalments of £500 each, with the first payment after 90 days and the second after a year on the scheme.

The current National Minimum Wage rate for an apprentice is £4.81 per hour if they are aged:

• 16 to 19
• 19 or over and in their first year

If an apprentice is aged 19 or over and has completed their first year, they must be paid the National Minimum Wage or National Living Wage rate relevant to their age.

If you are looking to hire an apprentice and need advice our payroll team can help you. To find out more about our services for employers at Clemence Hoar Cummings, please get in touch.

Link: Apprenticeship Funding

Unincorporated businesses, including sole traders, the self-employed and trading partnerships, will be taxed on profits generated in the 12 months to 5 April each year from 2024/25.

This is a significant change to taxation, which removes the basis period rules and prevents the creation of further overlap relief in a new system known as the ‘tax year bases.

These changes were meant to be brought in a year earlier but were delayed by the Government in September 2021 to give those businesses affected more time to prepare.

Now the clock is ticking once again on these changes and unincorporated businesses must start preparing now.

The basis period system

Unincorporated businesses are not required by law to produce accounts by a particular date, meaning they can choose any accounting date they like.

Instead, they are currently taxed on profits or losses arising in the accounting period for the 12 months ending with the accounting date which falls in the tax year, known as the ‘current year basis’.

For example, an accounting period ending on 31 December 2022 would be taxed on profits arising in the 2022 calendar year, rather than the 2022/23 tax year.

As a result of this, an unincorporated business’s profit or loss for a tax year is usually the profit or loss for the year up to the accounting date in the tax year, called the ‘basis period’.

However, specific rules do determine the basis period during the early years of trading.

Where the accounting end date is not 5 April or 31 March, which is the equivalent of 5 April for the first three years of trade, the rules can create overlapping basis periods.

This creates a tax charge on profits twice and generates ‘overlap relief’, which is received when the unincorporated business eventually ceases trading.

The new tax year basis

The latest reforms will change the basis period for all unincorporated businesses to the end of the tax year (5 April) from 2024/25, regardless of their current accounting period.

This will create the need for interim arrangements for businesses that do not currently have year-ends falling between 31 March and 5 April each year.

These businesses will potentially face a single, higher tax bill from their profits arising in the year-end falling in the 2023/24 tax year to 5 April 2024.

According to HM Revenue & Customs (HMRC), businesses with a different accounting period end date to the end of the tax year:

• Will need to apportion profits/losses
• May need to use provisional figures in their tax returns
• The statutory rule that deems 31 March to be the 5 April in the first three years of a trade would be extended to apply to all years.

Despite the changeover, reliefs, allowances and tax band thresholds will remain unchanged and will not be pro-rated.

As a result, some taxpayers could move into higher tax bands, while also reducing their ability to benefit from various annual reliefs and allowances during the transition year.

Businesses with year ends not aligned with the tax year will also have a much shorter time between when they generate profits and when tax is due, which could have cash flow implications.

What help is available? 

HMRC is still considering an election to allow businesses with higher profits, due to the change, to spread those additional profits equally over five years. The tax authority will also provide ‘Time to Pay’ arrangements for those needing to spread the costs further.

Businesses can also use all overlap relief accrued when they began trading during the transition year (2023/24) to soften the blow. This would mean that businesses in this position will only have tax to pay on 12 months’ profits.

However, overlap relief dates back to the first year a business traded, when it is likely to have been much less profitable.

Due to the introduction of these rules, new businesses will not generate overlap relief from 2024/25 and there will be no special rules required for starting or ceasing trading or for a change in the accounting period end date.

For the many unincorporated businesses that already have year-ends aligning with the tax year, nothing will change.

However, for those with year-ends that are not synchronised with the tax year, there are several considerations and careful tax planning may be necessary.

Are you affected by these upcoming changes to taxation? Speak to our experienced tax team today.

Link: Basis period reform

From 6 July 2022, the Primary Threshold (PT) for National insurance will increase to £12,570. This is the threshold at which employees begin paying National Insurance contributions (NICs).

This will bring the rate in line with the current rate of personal allowances for income tax and means those earning below this amount each year will pay no tax or NICs.

It also means that a larger proportion of a person’s income will be free of NICs, meaning that most employees will enjoy a cut to their NICs.

This jump in the PT comes at a time when many employees are experiencing difficulties due to the cost of living and follows the Government’s decision to increase NIC rates in April.

On April 6th, the rates of NICs increased by 1.25 percentage points. This means, for example, that the main rate for employees rises from 12 per cent to 13.25 per cent.

The increase in NICs was legislated for to increase spending on health and social care and will be formally replaced by a new Health and Social Care Levy in April 2023, which will maintain this increase to provide funding to these sectors.

The increase in the PT means that most employees should see minimal change in their NIC bill, while lower earners below the limit might see their contributions cut entirely.

How does this help self-employed individuals?

The Lower Profits Limit (LPL), the point at which self-employed people start paying Class 4 National Insurance, will also be increased to £12,570 at the same time.

This measure also reduces Class 2 NICs liabilities to nil on profits between the Small Profits Threshold (SPT) and LPL.

This ensures that no one earning between the SPT and LPL will pay any Class 2 NICs but continue to accrue National Insurance credits.

What about employers’ contributions?

The changes to the NI thresholds do not affect the Secondary Threshold. This is the point at which employers must start making contributions, which remains at £9,100 per year.

As such, employers will have to continue paying NICs for their employees once they earn £9,100 per annum or more, even though the employee does not have to contribute until they earn £12,570 per year.

Do Directors enjoy the same threshold?

The PT for Directors for the entire tax year is £11,908 per year. Changes to the NI rules and an increase in dividend tax rates mean that it is important to reassess your remuneration strategy to minimise the tax burden on the business and individuals.

If you need assistance complying with the changing rates of National Insurance, please speak to our specialist payroll team.

Link: Rates and thresholds for employers 2022 to 2023

The ‘biggest change to rent law in a generation’ will be delivered with the Renters Reform Bill (the Bill).

The Government says it says it will improve the lives of millions of renters by driving up standards in the private and social rented sector, delivering on the Government’s mission to level up the country.

Levelling Up and Housing Secretary Michael Gove said: “This is all part of our plan to level up communities and improve the life chances of people from all corners of the country.”

A new Private Renters’ Ombudsman will be created to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.

The new law will be put in place for the 4.4 million households privately renting across England by extending the Decent Homes Standard to the private rented sector for the first time – giving all renters the legal right to a safe and warm home.

It is designed to ensure all renters have access to secure, quality homes, levelling up opportunities for the 21 per cent of private renters who currently live in homes of an unacceptable standard.

Part of the Bill will also ban Section 21 ‘no fault’ evictions, protecting tenants from unscrupulous landlords, while strengthening landlords’ legitimate grounds for taking back their property.

If you are a property investor and fear that your portfolio may be affected by these changes it is important that you get in touch with us.

Link: The Renters Reform Bill

Research from the Federation of Small Businesses (FSB) shows that successful applications for finance among members have dropped to the lowest level on record.

Conversely, figures from the Bank of England show the annual growth rate of lending to big corporates has increased significantly since the start of the year.

It has led to the accusation that banks are “pulling up the drawbridge” on lending to small businesses.

The FSB’s quarterly Small Business Index (SBI) show just 43 per cent of applications have been approved and that just nine per cent applied in the first quarter of 2022.  That is the lowest number since SBI records began.

Lack of finance ‘a threat to economic growth’

The business body has now called for a culture change in financing and has warned that economic growth will be threatened otherwise.

Commenting on the survey, FSB national chair Martin McTague said: “Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.

“Businesses are born every day across the UK – many need funding to get off the ground, ensuring they reach a stage where they’re profitable and creating opportunities.

“A lot of those who’ve worked tirelessly to adapt, survive and thrive over lockdowns need finance too, empowering them to take their firms to the next level, driving our economic recovery and the transition to net zero in the process.”

A large proportion of what is available is being used to cover cashflow problems, often caused by late invoice payments from customers, according to the FSB.

Managing cash flow problems caused by late payments

The survey shows that 61 per cent sought traditional overdraft or loan products, while a quarter applied for asset-based finance, such as invoice finance.

Other methods included smaller numbers seeking funds through peer-to-peer platforms (seven per cent) and/ or crowdfunding (five per cent).

Your accountant will be able to provide advice and guidance.

How can businesses obtain necessary finance?

Measures that might persuade lenders to provide finance might include:

• Keeping balance sheets and other documentation to show the business has been well run
• Improving the company’s credit rating
• Producing a business plan that is strong, concise and clear
• Opting for the appropriate kind of loan, like instalment, short term or line of credit
• Having the ability to provide collateral for the loan

If you are looking to finance your business, you should seek professional advice beforehand. To find out how we can help you to finance your business, please speak to us.

Link: Lending to small businesses hits all-time low

A leading business organisation has highlighted the problems faced by industry after new figures show a steep rise in business costs.

According to figures from the Office for National Statistics (ONS), producer input price inflation stands at a record-high 18.6 per cent, and the consumer prices index at nine per cent and could go higher.

It says the disparity between the two figures shows how businesses are having to absorb rising costs rather than pass them on to the consumer.

How could Government help businesses manage costs?  

The FSB says that although the Government cannot control the wholesale price of oil and gas, it can go further to help small firms with property costs – increasing the ceiling for small business rates relief and extending the energy support issued via the council tax system to the rates system.

In addition, a sick pay rebate for the smallest businesses would give them a measure of breathing space.

However, what can businesses do for themselves now?

Make better use of space

Maximise office space by checking whether you are stocking too many supplies or making optimum use of office furniture. You may also be able to renegotiate your lease or find cheaper premises.

With advances in communication technology, you could also explore the possibility of running your business from home or on the road.

Review your suppliers

Make sure you are getting the best value for money, particularly in areas like communication with mobile phone deals and the cost of broadband and consider cloud-based software for general bookkeeping and data management.

Go for ‘nearly new’ equipment

Sometimes, it may not be possible to invest in the latest piece of equipment and so it may be worth considering refurbished or remanufactured supplies.

Properly refurbished computer equipment can result in big savings as can equipment like copiers, without sacrificing too much performance.

Many refurbishment companies even offer warranties on the goods they sell. However, you should be aware that the purchase of refurbished or recycled goods could affect your ability to claim certain reliefs, such as Capital Allowances.

Make better use of your accountant

While accountants can manage your books and compliance tasks, they can also provide strategic advice and identify areas where savings can be made.

Struggling with rising costs? Find out how our experienced accounting team at Clemence Hoar Cummings can assist you by contacting us.

Link: Input price growth hits record-high

New legislation allows HM Revenue & Customs (HMRC) to recover Coronavirus Job Retention Scheme (CJRS) grants that have been overclaimed.

Those who fall foul of the legislation could face interest charges, financial penalties and even be named and shamed.

If a business overclaimed a CJRS grant and has not repaid it, it needs to inform the tax authority within 90 days.

The new legislation allows looking for incorrect claims, but the authority says by paying back anything owed, any tax liability can be avoided.

However, firms may be penalised if they did not notify HMRC within the notification period that they were chargeable to income tax on an overclaimed CJRS grant.

If a penalty is applied, there are factors taken into consideration which include:

• When the CJRS grants were received;
• When it became repayable; or
• When it became chargeable to tax because circumstances changed.

The authority can then charge a penalty of up to 100 per cent of the amount the business was not entitled to receive.

If the business was aware it was not entitled to a grant and did not disclose that within the notification period, the law says that the failure was deliberate and concealed and substantial penalties could apply.

When determining the amount involved, HMRC will make a tax assessment of the amount the business was not entitled to and have yet to repay.

Penalties and interest payments

The outstanding amount identified by the assessment must be paid within 30 days or any late charge will incur interest.

A further penalty may also apply if the bill has not been settled by 31 days after the due date.

What happens with a partnership?

If a partnership receives an overclaimed CJRS grant that it does not repay, HMRC may assess any of the partners for income tax who will be jointly and severally liable for the amount assessed.

What happens with insolvent businesses?

If a company is insolvent and HMRC cannot recover the tax it owes, company officers can become personally liable to pay the tax charged on their company’s overclaimed CJRS grants.

Naming and shaming defaulters

HMRC says that if a deliberate penalty is imposed it may publish details of the defaulter.

If you believe that you may have made an error when claiming a CJRS grant, speak to our team today.

Link: Penalties for not telling HMRC about Coronavirus Job Retention Scheme grant overpayments

Changes to charges and penalties applied to late submission of VAT returns will kick in from January next year.

For the VAT period starting on or after 1 January 2023, new penalties will replace the default surcharge for returns submitted or paid late.

Any VAT returns received late will also be subject to late submission penalty points and financial penalties.

What happens if I submit my VAT return late?

A new points-based system is set to be introduced for late submission penalties. For each late return, you will receive one penalty point.

Once a penalty threshold is reached, you will receive a £200 penalty and a further £200 penalty for each subsequent late submission.

The late submission penalty points threshold will vary according to your submission frequency.

How am I affected if I pay late?

Up to 15 days overdue – No penalty charge if you pay in full or agree to a payment plan on or between days one and 15.

Charge at 16 and 30 days overdue – The first penalty charge will be at two per cent on what you owe on day 15, if you pay in full, or agree to a payment plan on or between days 16 and 30.

Overdue by 31 days or more – On top of what you owe on day 15, there will be a further two per cent added to what you owe on day 30. In addition, you will incur a second penalty at a daily rate of four per cent per year for the duration of the outstanding balance.

HM Revenue & Customs (HMRC) is giving people some breathing space to familiarise themselves with the new arrangement and will not be charging a first late payment penalty for the first year from 1 January 2023 until 31 December 2023, if you pay in full within 30 days of your payment due date.

How much interest will I pay on late payments?

From next January, HMRC will charge interest on late payments from the day your payment is overdue until it is paid off in full.

The rate is the Bank of England base rate plus an additional 2.5 per cent.

More detailed guidance on VAT penalties is set to be published in December.

Don’t get caught out by these upcoming changes to VAT penalties. Get in touch to find out how we can help you with VAT compliance.

Link: Prepare for upcoming changes to VAT penalties and VAT interest charges