Labour shortages, particularly in the hospitality sector, are creating significant challenges for many businesses this year.

Managing your costs while trying to maintain service quality and customer relations can be a difficult balance.

Given the difficulty in hiring sufficient staff, many of you will be investing in technology to increase your efficiency.

Luckily, the Annual Investment Allowance (AIA) allows you to deduct the full cost of qualifying equipment, such as IT systems and machinery, from your taxable profits.

This includes investments in automation tools, such as self-service kiosks and advanced ordering systems, which can reduce reliance on labour for repetitive tasks.

Taking advantage of the AIA means you can potentially reduce your Corporation Tax bill while also enhancing operational efficiency.

For 2024, the AIA has been set at £1 million, providing substantial room for investments that may significantly reduce your tax liability and reliance on manual labour.

Utilising apprenticeships and employment incentives

To address staffing needs without incurring prohibitive costs, consider hiring apprentices.

Apprenticeships can provide an effective route to onboard new staff while benefiting from Government incentives.

Employers who hire apprentices under 25 years of age may be eligible for grants of up to £1,000, and the Apprenticeship Levy offers an opportunity to access Government funding for training.

The cost of onboarding and training apprentices is lower compared to hiring more experienced staff, and by shaping apprentices’ skills to meet your business needs, you can help fill existing skills gaps.

The additional funding for apprenticeship training also offers long-term benefits to both the business and the workforce.

Implementing tax-free employee benefits to improve retention

In a competitive labour market, retaining skilled staff is crucial.

To incentivise current employees, businesses can make use of tax-free benefits to enhance job satisfaction.

The trivial benefits exemption allows employers to provide benefits of up to £50 per employee without incurring tax or National Insurance.

While seemingly small, regular employee rewards under this exemption can foster a sense of recognition and appreciation.

Other options include the cycle-to-work scheme, which allows employees to purchase bicycles and equipment without tax implications.

Given the increasing costs of transportation, this can be a valuable perk that also aligns with environmental and health considerations, making it a beneficial offering for both employer and employee.

Hiring overseas workers: Financial and tax implications

Hiring from abroad can help address your labour shortages, but it also introduces additional considerations regarding tax compliance and payroll.

As an employer, you must ensure that all legal requirements for work permits and visas are met, and you should be aware of the payroll obligations involved in hiring non-UK workers, including ensuring correct PAYE and National Insurance contributions.

There are also specific allowances for supporting new hires from overseas.

For instance, the relocation allowance allows employers to provide up to £8,000 towards relocation costs without it being subject to tax or National Insurance.

Offering such support can make your job offers more attractive while still being tax efficient.

Using agency workers: VAT and cash flow considerations

Temporary workers can provide much-needed support when labour is scarce, though it is important to be aware of the VAT implications associated with agency fees.

VAT on labour costs can increase the overall cost of hiring agency workers, and while this VAT can often be reclaimed if your business is VAT-registered, it may still impact cash flow.

You should ensure that their accounting systems are set up to track VAT on agency fees accurately and that they have plans in place to manage these costs effectively.

Alternatively, ask your accountant to manage this for you.

For businesses with limited cash reserves, proactively managing these payments can help maintain financial stability during times of labour shortages.

Remember to use the Employment Allowance!

Remember, your business should be making the most of the Employment Allowance, which allows eligible employers to reduce their National Insurance contributions by up to £5,000 each year.

This can be particularly helpful when seeking to maintain employment levels or take on additional temporary staff without bearing the full cost of National Insurance.

The allowance can also be an effective way to manage overheads while maintaining or even expanding your workforce during challenging times.

If you would like more information or guidance on this issue, please get in touch with our team.

Labour’s Autumn Budget is just around the corner (30 October) and many businesses are uncertain of what the next few years may hold for them.

The Prime Minister Keir Starmer has already warned of a “painful” Budget, with big changes to taxation, funding for public services, and incentives for investment.

For businesses, these changes can influence operational costs and market dynamics, so it is important to prepare your organisation and ensure it is agile and able to adapt.

Possible incoming changes

Labour has proposed focusing on correcting fiscal imbalances while ensuring that businesses pay their fair share towards public funding.

While they have confirmed that there will be no changes to Income Tax, VAT, and National Insurance contributions (NICs), this has sparked speculation about other areas of taxation that they may target.

We could potentially see further changes to certain tax reliefs, such as R&D Tax Credits or capital allowances.

Labour is also expected to review taxes on wealth and dividends, potentially increasing the tax burden business owners and shareholders.

The Government has expressed its interest in supporting green initiatives and social enterprises.

This could come in the form of incentives or grants for businesses restructuring their operations to align with environmental or social goals.

Is it time to restructure your business?

Given the potential tax, regulatory, and incentive shifts, restructuring your business now could provide several strategic advantages including:

Adaptability to change

Restructuring your business can enhance agility, enabling you to better respond to both challenges and opportunities.

For example, breaking large teams into smaller, autonomous units can allow quicker decision-making and better alignment with shifting market demands or regulatory changes.

Key strategies include:

• Ring-fencing key operations – By splitting core functions into separate legal entities or divisions, you protect critical assets from risk, enabling faster adaptation in response to regulatory or economic changes. This method also allows for the easier sale or spin-off of non-core divisions, should market conditions make it advantageous.
• Dynamic decision-making frameworks – Smaller, decentralised units can operate under tailored decision-making frameworks that focus on quick responses to local or sector-specific developments, ensuring that the business is better positioned to capitalise on changes.

Resource allocation

Given the way tax reliefs and incentives are changing, now is a good time to reassess your business’s resource allocation strategy.

Areas to focus on might include:

• Maximising capital allowances – With temporary super-deductions and first-year allowances available for certain capital expenditures, now may be the optimal time to invest in new equipment or machinery. These enhanced allowances can deliver significant tax savings and improve cash flow.
• Utilising R&D tax credits – If your business invests in innovation, you could benefit from Research & Development (R&D) tax reliefs. Large companies can claim RDEC (Research and Development Expenditure Credit), while SMEs may qualify for enhanced deductions or cash payments. This can offset staffing and capital costs associated with innovation and technological advancements.
• Green tax incentives – With Labour’s focus on sustainability, aligning your business with environmentally friendly practices can provide access to tax benefits such as capital allowances for energy-efficient equipment and enhanced deductions for expenditure on clean technology. Additionally, businesses operating in certain sectors may be eligible for grants and tax credits by adopting socially responsible initiatives.

Attract and retain talent

Adapting your talent strategy to meet current challenges can help your business stay competitive, particularly given potential changes to employment law and tax treatment of executive pay.

You might want to consider implementing the following:

• Reevaluating executive compensation structures – Higher taxes on executive pay could make traditional cash-based compensation less attractive. Implementing alternative schemes, such as share option plans (e.g., EMI schemes for smaller companies) or deferred compensation tied to long-term business performance, could mitigate the tax impact while still incentivising key executives.
• Offering non-monetary benefits – In light of potential changes in employment law, businesses should focus on enhancing non-monetary perks such as flexible working arrangements, wellness programmes, or professional development opportunities. These benefits can boost employee retention without raising taxable compensation, while also positioning your business as a more attractive employer to top talent.
• Career growth opportunities – Developing a clear progression path and investing in upskilling initiatives can foster loyalty and morale among employees, particularly in a competitive job market. Aligning roles with the long-term goals of your business not only improves efficiency but also boosts employee satisfaction.

What should you do next?

If your business is considering restructuring, it is better to act early.

Engaging professional advice from your accountants can help ensure your restructuring strategy is aligned with both the current state and future direction of the UK economy.

By proactively adjusting to Labour’s policy shifts, your business can be better positioned for long-term success.

If you would like advice on restructuring your business ahead of the Budget, please contact our team.

Capital allowances are a great way to reduce your tax liabilities by claiming deductions on certain property-related expenses.

They allow you to offset the cost of capital expenditure – plant, machinery and certain fixtures – against your taxable profits, especially if you have invested in commercial properties or made major improvements.

Who is eligible to claim?

If you own property that generates income, you may be eligible to claim capital allowances.

This includes:

• Commercial landlords – If you rent out office spaces, shops, or warehouses.
• Investors – Those who purchase commercial properties for refurbishment and subsequent rental or sale.

If you are unsure whether you qualify for this allowance, please seek professional advice from an accountant.

What are the types of capital allowances?

Different types of capital allowances exist for property businesses in the UK, each with its own specific rules and requirements – because each asset serves a unique purpose.

These specific rules help ensure that businesses can fairly claim relief based on the nature and longevity of their investments, encouraging improvements and responsible spending.

Some of the most utilised allowances include:

• Annual Investment Allowance (AIA) – This allows you to claim 100 per cent of the cost of qualifying assets (like machinery and equipment) up to £1 million in the year of purchase, making it a great option for immediate tax relief.
• Writing Down Allowance (WDA) – For assets that exceed the AIA limit, the WDA lets you deduct a percentage of the remaining value each year, spreading your tax relief over time.
• Enhanced Capital Allowances (ECA) – If you invest in energy-saving equipment, you can claim 100 per cent of the cost in the year of purchase through ECAs, promoting environmentally friendly practices.
• Integral Features Allowance – This applies to certain building fixtures, such as heating and ventilation systems. You can claim capital allowances on the cost of these integral features over a longer period.
• Structures and Buildings Allowance (SBA) – This allows businesses to claim a 3 per cent deduction annually on the costs associated with constructing or renovating non-residential buildings and structures. It encourages investment in new and improved business infrastructure.
• Full expensing – Under full expensing, businesses can claim 100 per cent of the cost of qualifying machinery in the year of purchase, offering a way to write off the total cost upfront and supporting investment in business growth.

If you are not sure which of these you can claim, talk to one of our accountants. They’ll help you figure out what you are entitled to and find ways to reduce your tax bill.

How do you make a claim?

To claim capital allowances, start by identifying qualifying expenses and gathering any receipts or invoices you will need.

Then, calculate your claim and include it in your annual tax return, making sure everything’s to keep things smooth and hassle-free.

Your next steps

Whether you are an experienced or a first-time landlord, being savvy about capital allowances is key to enhancing your property’s profitability and ensuring your financial success.

By claiming the allowances you are entitled to, you can reduce your tax bill and reinvest those savings back into your property or other ventures.

If you have questions or need assistance with your capital allowance claims, our expert team is here to help.

Taxpayers have a fundamental right to reclaim input tax, also referred to as input VAT.

However, HMRC has the authority to refuse this right under certain conditions if they can demonstrate that the taxpayer was aware, or should have been aware, that their transactions were linked to fraud.

There has been a noticeable rise in businesses from various sectors over the last year receiving notifications from HMRC denying the recovery of input tax based on these grounds.

For businesses, the risks linked to Kittel VAT include denied VAT recovery, hefty fines, reputational damage, and increased scrutiny from tax authorities.

To protect your business, here are key strategies to avoid such risks:

1. Conduct due diligence – Always verify the VAT registration and reputation of suppliers and partners to ensure they are legitimate.
2. Monitor transactions – Regularly review transactions for irregularities or signs of fraud to catch issues early.
3. Educate your team – Train your finance and procurement teams on the risks of VAT fraud, ensuring they can spot warning signs.
4. Maintain clear records – Keep thorough documentation of all transactions as evidence of your due diligence.
5. Consult professionals – Seek advice from VAT specialists to navigate complex regulations and strengthen your compliance.

By implementing these steps, your business can avoid costly fines, penalties, and reputational damage.

For tailored guidance, please contact our team.

As the Autumn Budget approaches, the Government has pledged that it will “make the tax system fairer” and avoid raising taxes on working people and certain businesses.

The Government has said that it will not raise:

• Income Tax
• National Insurance (NI)
• Corporation Tax
• VAT

While Corporation Tax is not levied on individuals, the fact that the Government is not changing it may be good news for consumers.

Freezing VAT and Corporation Tax should keep a handle on price rises as businesses will not need to pass on additional costs to clients or customers.

This is a significant announcement, given that the Government seeks to make up a substantial shortfall in public finances.

What does this mean for businesses?

The budget is likely to be good news for businesses, particularly regarding VAT and Corporation Tax.

With no additional taxes to be paid in these areas, businesses may have more room to reinvest in growth – a priority for the Government, particularly in sectors such as sustainable technology.

However, some business owners may still call for the 2023/24 reductions in NI to be extended to employer NI contributions, which seems unlikely under the current Government.

How will this impact individuals?

The pledge will come as a relief to individuals who pay only Income Tax and NI, which includes most workers whose only income source is a regular salary or hourly pay.

However, individuals with additional assets such as property, private pensions, dividends or investments may reap less of a benefit.

With the Government seeking to levy additional income through taxes, these individuals will likely face an increased tax burden on their wealth through a rise in Capital Gains Tax (CGT), for example.

It is, therefore, important for those with high-value assets to engage promptly with proactive tax planning.

Want to optimise tax liabilities on your assets? Contact us today.