Business News

Small businesses are the lifeblood of the UK economy, but with rapid inflation and other economic headwinds making trade difficult, they can struggle to access support.

There is a wide range of important tax reliefs available to SMEs, which could provide some much-needed financial assistance.

These include:

Employment Allowance claims

This scheme allows eligible businesses to reduce their National Insurance contributions (NICs) bills by claiming up to £5,000 each year of their NIC bill. This is available to employers if their Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.

Super-deduction and Annual Investment Allowance

Businesses can cut their tax bill through the super deduction by up to 25p for every £1 they invest in qualifying equipment, which can include machinery, computers, most commercial vehicles and office furniture.

The temporary £1 million limit for the Annual Investment Allowance (AIA) has also been extended to the end of March‌‌‌ 2023.

The AIA allows businesses to spend up to £1 million on qualifying business equipment, and deduct in-year its full cost before calculating their taxable profits.

Business rates savings

Any tax cut is welcome, which is why the retail, hospitality and leisure sectors, should take advantage of the 50 per cent business rates cut.

The Government says this is worth £1.7 billion for up to 400,000 eligible properties.

The business rates multiplier has also been frozen for another year. This is used to calculate business rates and usually rises with inflation each year, but for the coming year has been held at 49.9p and 51.2p, depending on the type of business.

There is further relief through green technologies, where there will be no business rates from April this year and eligible heat networks will also receive 100 per cent relief.

Big discounts on digital technology

Eligible businesses can receive a 50 per cent discount on buying new software worth up to £5,000 with the Government’s Help to Grow: Digital initiative, which also offers free impartial advice and guidance on the best technology to choose.

Its sister scheme, Help to Grow: Management, is 90 per cent funded by the Government and uses UK business schools and one-to-one mentoring to deliver business expertise on everything from leadership and financial management to marketing and digital adoption.

Claimants for both schemes must:

• Be based in the UK;
• Have actively traded for at least a year; and
• Have between five and 249 staff members.

Fuel duty savings for businesses

The Government has cut fuel duty on petrol and diesel by five pence per litre for 12 months.

The Government says that this represents a saving of £200 for the average van driver and £1,500 for the average haulier.

However, the reality is that many of these savings have been absorbed by fuel retailers who have continued pushing up the price at the pumps.

As a result, Boris Johnson has reportedly asked transport officials to draw up plans to target petrol stations that choose not to pass on the 5p fuel duty cut to customers.

According to reports in The Telegraph, Transport Secretary Grant Shapps has suggested a “pump watch” name-and-shame scheme, with Downing Street officials confirming that they “are considering mechanisms available to expose those companies that aren’t passing on tax benefits to consumers.”

Need help with any of these measures or reliefs? Please speak to our experienced team today.

Link: Five ways SMEs can get financial support for their business

The Bank of England raised interest rates by a quarter of a percentage point on Thursday, taking its base interest rate up to one per cent.

That is the highest interest rates have been since 2009 and was the Bank’s fourth rise in a row.

The rise will leave many homeowners struggling to meet their monthly mortgage repayments, meaning it is a worrying time for many people.

However, it is not only homeowners who stand to be affected by the rise.

Because of the interest rate rise, HMRC’s late payment interest rates have also been revised following the Bank of England’s move.

HMRC interest rates are linked to the Bank of England base rate. As a result, HMRC interest rates for late payments will increase.

When do these changes come into effect?

• 16 May 2022 for quarterly instalment payments
• 24 May 2022 for non-quarterly instalments payments

Late payment interest will be at the base rate, plus 2.5 per cent.

HMRC says that the late payment interest rate encourages “prompt payment” and creates “fairness for those who pay their tax on time.”

According to HMRC, more detailed information on the interest rates for payments will be published shortly online.

Meanwhile, the increase in the late payment interest rate serves as another reminder of the importance of submitting tax returns and payments to HMRC on time.

For advice on tax services and related matters, please contact us.

September may seem far away, but it is not too early for any individual or firm with a trust to be prepared for the key registration deadline for the Trust Registration Service.

Almost every trust, regardless of its size or type, will need to use HMRC’s Trust Registration Service (TRS), including non-taxable trusts by 1 September 2022.

The scheme was originally launched in 2017 and was limited to only certain taxable trusts who were required to register where they incurred a specific tax liability in the tax year.

Now, the TRS is being extended to all express trusts save for a limited number of exempt categories.

This means non-tax paying trusts will now need to register and provide information such as the details of trustees, beneficiaries and any UK land or property held by the trust.

Law firms that have trusts set up must be aware of this deadline and the steps they must take to be prepared for the September deadline.

Failure to register on time could lead to action being taken against a trustee, including potential penalties, so action must be taken if needed.

Which type of trusts now need to register?

From 1 September 2021, the TRS is now open for non-taxable trust registrations. Many trusts will now need to be registered and this includes trusts set up years ago, which may have been forgotten about but still exist.

According to HMRC, this includes:

• All UK express trusts unless they are specifically excluded,
• Non-UK express trusts that acquire land or property in the UK; or
• Have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.

How to register a trust

Before trusts can be registered by a trustee, they need to have or already hold, an Organisation Government Gateway user ID and password.

Trustees should register their trust online by following HMRC’s guidance.

HMRC recommends that these trustees and their agents get to grips with the TRS system and gather the information required to register well in advance of the deadline.

For expert advice on trust-related tax matters, please contact us.

From 1 September, changes to the rules regarding the Trust Registration Service (TRS) mean that more trusts will need to be registered with HM Revenue & Customs.

The TRS was introduced five years ago to make the beneficial ownership of assets held in trust more transparent.

While many trusts have had to sign up for the service already, the remit of the service is expanding to include a greater number and type of trusts than ever before.

What changes are being made to the Trust Registration Service?

From September, the requirement to register with the TRS will apply not only to trusts with a tax liability but to all trusts.

This includes trusts set up many years ago, which may have been forgotten about or left dormant, but which remain extant.

This registration process has been open since 1 September 2021, but time is running out to complete it.

Will your trust need to register?

If you operate a trust the answer is likely to be yes. Under the changes, only a limited number of exemptions exist.

Some other less common types of express trusts that are set up for particular purposes are also excluded from registration unless they are liable for tax.

Be aware that this change to the rules means that for the first time some offshore trusts will also need to be registered.

How do I register for the Trust Registration Service?

To comply with the registration requirements, trustees will need to input details of the settlor, trustees and beneficiaries into an online portal.

At a minimum, trustees will need to confirm annually that there have been no changes and notify the TRS of any changes within 90 days.

Some trusts may have already completed a 41G form containing some of this information. However, HMRC has confirmed that this did not collect sufficient evidence to meet the requirements of the new rules.

Therefore, those trusts which registered separately with HMRC before using this form, must register and resubmit information via the TRS.

HMRC strongly recommends that trustees familiarise themselves with the TRS system and obtain the information required to register in advance of the deadline in September.

Need help with trust registration? Speak to our team at Clemence Hoar Cummings.

Link: Manage your trust’s details

When HM Revenue & Customs’ (HMRC’s) current guidance on the tax treatment of tips and troncs was first published back in 2014, tips and troncs were paid almost exclusively in cash or through card transactions.

Of course, in the eight years since, things have changed dramatically and payments are frequently made via app-based platforms, whether for delivery drivers or waiting staff.

Now, HMRC has updated its guidance to take account of these changes and clarify the tax position that applies to different arrangements.

Importantly, the new guidance does not change the tax status of payments made through app-based platforms. Instead, it offers further clarification of the position and its application in various circumstances.

The two key takeaways are:

• Tips and troncs passed from an app to an employer without an independent troncmaster are subject to National Insurance and PAYE, even if they are intended by the customer to be passed to a specific member of staff.
• Tips paid directly by third-party apps to employees are not subject to National Insurance and PAYE. The onus is on employees to notify HMRC of this income.

App-based tipping arrangements can be set up in many different ways, with seemingly small variations in how they’re operated having sometimes significant impacts on the tax positions of employers and employees alike.

It is crucial not to make assumptions about the tax status of any app-based set-up you are using as errors can lead to HMRC inquiries and potentially hefty penalties.

The rules around tipping can be complex, so get in touch if you have any queries.

There has been a surge in new company formations in the last few years, as entrepreneurs develop new and exciting business ideas and bring them to market.

On top of this, there are a growing number of workers with ‘side hustles’, who are quickly scaling up their operations to deal with demand from their customers and clients.

While many businesses may initially rely solely on the work of their founder, there comes a time when operations grow so much that they need to consider hiring their first employee.

Hiring your first employee will lighten the workload, but it also brings with it new tax and payroll requirements.

If you have previously been one of the 4.2 million businesses in the UK with no employees, other than yourself, and you are looking to bring in a new worker here are our top tips to get you started.

Inform HM Revenue & Customs

Before you can hire someone, you need to register as an employer with HMRC. Doing so will provide you with an employer PAYE reference number so you can manage your payroll.

This must be done within four weeks of your new employee’s first payday. The registration process is fairly quick, but receipt of your reference number can take up to five working days, so you must factor this in.

Set up effective payroll processes

You will need to manage your payroll online each month, report this information to HMRC and make the correct payments of tax and National Insurance, as well as paying into any benefit schemes or pensions offered to your employees.

As such you will need to implement processes and payroll software systems that allow you to do this.

You may already have existing systems in place that manage your personal payroll, but you should consider whether these are still sufficient when you hire your first employee.

Don’t forget, you may also need to deduct student loan repayments, pension contributions, Payroll Giving donations and child maintenance payments.

The weekly or monthly administration of your payroll can be time-consuming and is often complicated by regular changes to the rules surrounding pay, which is why many businesses choose to have their accountant manage it for them.

Create a basic workplace pension scheme

If any of the workers you hire are eligible for a workplace pension you will need to set up and manage a scheme for them.

You must automatically enrol your staff into a pension scheme and make contributions to their pensions if all of the following criteria apply:

• They are classed as a ‘worker’
• They are aged between 22 and the State Pension age
• They earn at least £10,000 per year
• They usually (‘ordinarily’) work in the UK.

You will also need to calculate and make an employer’s contribution of at least three per cent each month to the scheme and ensure that an overall minimum contribution of eight per cent is made.

The additional five per cent is usually made up of an employee contribution, but both you and an employee can offer to contribute more should you wish to.

Your employees can choose to opt out and leave the scheme, but you will still need to re-enrol them every three years.

Paying the National Minimum Wage

You are legally required to pay your employees at least the correct National Minimum Wage (NMW) or National Living Wage (NLW) for those aged 23 and above. Failing to do so could result in you being fined and publicly named and shamed.

The current NMW rates, as of April 2022, are as follows:

Be careful if you make deductions from pay, other than for tax, National Insurance or a small number of other exceptions, as these cannot normally reduce a worker’s pay below the National Minimum Wage – even if they agree to it.

Many employers have previously been caught out by this, as well as other important changes, such as a person’s birthday where it carries them into the next NMW band.

Protect your business

Although not directly related to tax or pay, businesses should take steps to protect their interests. This includes ensuring the new staff member has the correct legal status to work in the UK, producing clear, written employment contracts and policies, and taking out employer’s liability insurance in case of accident or injury at work.

Failing to take these steps could leave your business exposed to costly risks, including fines and potential compensation payments.

Seek help

These are only a few of the steps that you as a prospective or new employer may need to take and it is well worth seeking payroll and HR advice before hiring your first employee, both to protect yourself and to take away the administrative burden.

Looking to start a new business or expand your current one? Find out how we can help you by contacting us.

Link: Becoming an employer for the first time? What you need to know

HM Revenue & Customs (HMRC) has retained its online portal for claiming working from home tax relief for the 2022/23 tax year.

But, while the rules and value of the relief remain unchanged, unless there are any further lockdowns this year far few people are likely to be able to claim.

That is because only people instructed by their employers to work from home some or all the time can make a claim. The rules once again require that costs must have increased as a result of the arrangement.

With most hybrid workers free to work in the office if they wish, most people in this situation will not be eligible for the relief.

Relief worth £6 a week can be claimed through the online portal without needing to provide evidence of increased expenses. Taxpayers benefit according to the rate at which they pay income tax. A basic rate taxpayer will save 20 per cent of £6 a week (£1.20).

If you have been instructed to work from home and have incurred increased costs as result, you can check your eligibility and claim here.

If you need assistance with tax-efficient benefits and expenses for employees, speak to our payroll team today.

Throughout the pandemic and into the current recovery period, the Government has offered a number of loans to help businesses survive and invest for their future.

However, only the Recovery Loan Scheme remains open, and this is due to end on 30 June, with no replacement taking its place.

Despite the popularity and value of these loan schemes, there are concerns that, without them, small businesses will struggle to access the finance they need.

However, it is understood that the Treasury is now in talks with the banking sector about making Government-backed loans to SMEs permanent to help businesses grow.

According to an article in the Financial Times, the loans could mirror previous Covid financial support schemes, including the use of Government backing to give banks the confidence to loan to more businesses.

A source close to the ongoing talks told the Financial Times that the focus of any future funding would be on growth, rather than survival – as had been the case with the previous loan schemes.

Questions are now being asked about the level of support from the Treasury, whether personal guarantees would be needed, and what sort of companies should be eligible.

It is hoped that additional details about new loan schemes could be made public in the coming months, although concern remains about the abuse of COVID financial support measures after the Department for Business, Energy and Industrial Strategy revealed that £4.9 billion could be unrecoverable from the £47.4 billion Bounce Back Loan scheme.

Until then, the current Recovery Loan Scheme, which guarantees 80 per cent of a bank loan up to £10 million remains open until the end of June to support those in need.

Already more than £3 billion has been lent by British banks under this scheme, according to a senior industry executive speaking in the same Financial Times article.

Do you need access to finance? We have helped lots of businesses access funding and can help you, please get in touch.

Link: Treasury small business loans could be permanent

HM Revenue & Customs (HMRC) is issuing fresh warnings to employers to ensure their payment reference numbers are correct so that payments are recognised.

Each payment reference number relates to a specific employer and covers a particular accounting period.

HMRC uses these reference numbers to allocate payments and to help process taxes related to PAYE payments as quickly as possible.

The tax authority has said that the use of the incorrect PAYE reference number could result in it issuing penalties and charges even if an employer has paid on time.

To complicate matters further, online banking services may also default to a previous payment reference, creating additional confusion, so employers must check this is right every time a payment is made to HMRC.

How to check if the payment reference number is correct?

Businesses need to make sure that they use the correct Accounts Office reference, which can be found on:

• The letter HMRC sent when they first registered as an employer
• The front of their payment booklet
• The letter from HMRC that replaced the booklet
• Their Business Tax Account if they’ve already added Employer PAYE enrolment to it.

Where an employer is not paying for the current period, they need to add four additional characters to the end of the reference number that indicates the year and the month or quarter the payment is for.

Each tax period has a different payment reference number, so it’s important to make separate payments for each period.

Ensuring you use the correct reference can be complicated. HMRC wants to make sure that employers get this right and avoid penalties, which is why it is encouraging businesses to use its ‘Pay now’ tool on GOV.UK to find the right reference number to use each time.

If this is a further admin burden you don’t need when you are trying to run a business, get in touch with us today to find out how we can take payroll headaches off your plate.

Link: Support from HMRC