In the world of business, cash flow is king and, for small business owners, it is a lifeline that keeps their ventures afloat and enables growth.

However, in recent times, late payments have been an issue that has been casting a shadow over small businesses across the UK.

Below, we investigate this pressing concern and how it might impact your business finances.

The late payment predicament

Recent data has revealed that late payments to small businesses have reached a concerning three-year high.

On average, small businesses are now waiting for nearly 30 days to receive payments from their customers.

This represents an increase of half a day compared to the earlier part of the year.

September witnessed payments arriving a staggering 7.7 days after their due date.

The impact on small businesses

For small business owners, the repercussions of late payments are multifaceted.

They extend beyond mere financial inconvenience:

• Cash flow crunch: Late payments can lead to cash flow challenges, making it difficult for businesses to meet their immediate expenses, including supplier payments, salaries, and operational costs.
• Disrupted planning: Managing a business requires careful planning and budgeting. Late payments disrupt this planning, as businesses struggle to predict when funds will become available.
• Financial strain: In cases where customers delay payments, business owners may find themselves personally covering expenses or relying on personal credit, leading to financial stress and instability.
• Professional image: Constantly chasing payments can impact the professionalism of your business, as it reflects poorly on your ability to manage your finances effectively.

The Prompt Payment Code

The Prompt Payment Code (PPC) sets the standard for prompt payments from larger businesses to their small business suppliers.

According to the PPC, 95 per cent of invoices from small businesses with fewer than 50 employees should be paid within 30 days.

However, it’s important to note that adherence to the PPC is voluntary, which has led to concerns about its effectiveness.

Seeking solutions

While the Government has launched a review to address late payment issues, it’s crucial for small business owners to take proactive steps to mitigate the impact:

• Clear payment terms: Establish clear payment terms and policies with your customers to ensure they understand your expectations.
• Invoicing efficiency: Streamline your invoicing process to make it easier for customers to pay promptly.
• Diversify income streams: Consider diversifying your income sources to reduce reliance on a single customer or client.
• Communication: Open and regular communication with customers about payment expectations can help prevent delays.

Late payments represent a genuine challenge for small business owners and, as such, it is vital to remain vigilant and proactive in managing this issue to safeguard the financial health and sustainability of your business.

By adopting sound financial practices and advocating for timely payments, you can navigate this challenge effectively and ensure the continued success of your enterprise.

To find out how we could help you manage the consequences of late payments, please get in touch. 

Making sure you’re paying the right amount of tax can be taxing! If you receive a State Pension or other type of pension, then you may still need to pay tax on it.

Without the pay-as-you-earn (PAYE) structure of the workplace, you may find it hard to know when and how to pay tax on your pension.

Here’s what you need to know about your pension and tax liability – to stay compliant and stop tax liabilities from growing.

When do you need to pay tax on your pension?

In addition to the State Pension, some people may also receive payments from a private pension. Those born before 1951 (for men) or 1953 (for women) may also qualify for Additional State Pension.

Following retirement, you might also receive income from investments savings, or casual self-employment.

If the total income from all of these sources exceeds your Personal Allowance – currently set at £12,570 – then you will have to pay tax, even if you claim the State Pension.

How you’ll pay tax on your pension

How you pay tax on your pension depends on where it comes from.

If you receive State and private pensions, then your pension provider will deduct any tax that you owe at source – from both of your pensions.

In cases where you receive more than one private pension, HM Revenue & Customs (HMRC) will nominate just one provider to deduct tax.

If you claim your State Pension in addition to employment, then your employer will deduct tax through PAYE on your income and pension.

Self-Assessment for pensions

What if your pension situation is different? If you receive only the State Pension or you have other income, such as from investments or property, then you’ll be responsible for paying tax yourself.

This usually means filling in a Self-Assessment form and returning it to HMRC.

You will then be told how much tax you owe, and it is your responsibility to pay it – typically through HMRC’s online system.

Is anything new?

Reports of letters from HMRC have caused worry among those receiving a State Pension. Taxpayers have been informed that they are being removed from Self-Assessment, leaving them with no mechanism in place to pay tax.

As well as causing confusion, this has left many people receiving State Pension in a sticky situation.

With no way for HMRC to collect tax at source, taxpayers may be worried that their unpaid balance could pile up quickly.

There is also the concern that, with the rising rates of pensions, the Personal Allowance freeze will mean a real-world fall in income for many receiving pensions.

Seeking support with your pension

To protect yourself and your pension from unpaid taxes, we recommend seeking advice from an experienced accountancy firm.

Our knowledgeable team of experts are here to guide you through the regulations around paying tax on your pension.

For further advice, please contact us today.

Financial initiatives to support business growth are continually being announced by the Government, local authorities, individuals and private-sector companies.

Funding from private companies often aims to nurture specific industries, particularly high-growth sectors like technology, sustainable manufacturing and healthcare. They might target general growth or specific projects, such as the development of a new product.

If your business is considering obtaining funding to achieve its goals, here’s what you need to know.

How to access funding

Depending on the provider, there are many different ways to access private-sector financing. You’ll need to consult the providers’ individual criteria to decide whether you’re eligible for the funding and whether it’s right for you.

Here are a few key items to consider when trying to access funding:

• Eligibility criteria: Each funding option comes with specific eligibility criteria. Make sure to read the fine print and understand what’s required before you apply – including all relevant information in your application pack.
• Professional support: Consulting with an accountant can help you prepare a winning application, complete with financial projections and other essential documents.
• Networking: Connections within your industry could lead you to investors or inform you of funding opportunities you might not otherwise be aware of.

An accountant will be able to help you identify the right sources of funding for you.

Managing the funding for growth

Securing funding for your projects is only the first step towards achieving genuine growth. Once you have obtained your funding, you must effectively manage it to optimise its potential. Here’s how:

• Budget is everything: A detailed budget will help you to allocate funds to different business departments according to the business plan that you presented in your funding application – making the most of your cash.
• Set milestones: Your budget should be linked to specific business milestones. Quantitative data and key performance indicators (KPIs) can help you easily track your progress and make adjustments as needed.
• Don’t stop monitoring: Regular financial reviews will help you understand if you’re on track to meet your goals or if you need to adjust your strategy.
• Transparency: If your funding comes from investors or grants that require reporting, make sure you maintain complete transparency in how the funds are being used.

Make the most of funding

Before you seek private funding for your business – and throughout the process – we encourage you to consult an accounting expert to make sure that it’s the right thing for you.

For example, an accountant can help you assess your current financial health – showing you whether you’re ready for further funding, and how you can maximise its impact.

Please don’t hesitate to contact our team for further guidance on growing your business through external funding.

Recent years have held a lot of uncertainty for small and medium-sized enterprises (SMEs) and independent businesses. While there are signs of recovery, SMEs have seen slow growth in recent months.

However, with employment increasing at a faster pace than in large firms, there is a variety of ways in which small businesses can protect themselves against sluggish growth.

Here’s what you need to know about sustaining growth for SMEs during periods of uncertainty.

Nurturing growth

Need help planning for growth? These are some of the most effective strategies to keep SMEs growing at a steady pace and prevent downturns:

• Financial planning & budgeting – With a robust financial plan and budget, you can identify areas that need investment and areas that can be managed with cost-cutting measures. Your financial plan should outline your business goals, both short-term and long-term, and allocate resources accordingly. Without a financial compass, it’s easy to get lost in a sea of possibilities.
• Diversification – If your primary offerings are facing a decrease in demand, you might want to consider diversifying your product or service line. This approach would not only allow you to attract new customer bases but also spread out the risks.
• Invest in talent – The most successful businesses, particularly fledgling enterprises, invest in the right people. The news that SME employment has risen is a clear sign that businesses are investing, even when growth has slowed.
• Market Research – Identifying trends, customer preferences and the activities of your competition will help you to position and market your products or services effectively.

Avoiding the stall

A positive outlook that focuses on growth will put your business in a strong position to weather a slowdown.

But you should also keep in mind the most common pitfalls that impact SMEs, including how to avoid them:

• Overextension: While ambition is good, taking on more than you can manage can result in failure. Each new product line or market segment should be carefully considered and well-planned.
• Ignoring cash flow: Rapid expansion can lead to cash flow problems. Even if the business is profitable on paper, you may find yourself struggling to cover operational costs. You should keep a cash reserve and continuously monitor your cash flow.
• Neglecting existing customers: Within your strategy to acquire new customers, don’t forget your existing ones. Customer retention is often more cost-effective than customer acquisition, and results in more stable income levels.
• Mismanaging debt: While taking on some debt – usually in the form of a business loan – can fuel growth, poor debt management or loans with very high interest rates can take a large chunk out of your revenue.

Taking control of your business finances

We recommend that you seek guidance from an experienced professional to support your business through uncertainty.

You’ll get the advice that you need to achieve stable, sustainable growth that can weather any storm that comes over the horizon.

Our team is skilled in a wide range of financial advice for businesses, with experts on major sectors for SMEs.

For advice on how to protect your business from slow growth, please don’t hesitate to contact our team today.

Inheritance tax (IHT) can be a sore subject for some taxpayers, especially when it comes to passing on the family home to the next generation.

Often referred to as a “death tax” it cannot be ignored if you intend to leave considerable wealth to your beneficiaries.

Recent developments indicate that more families than ever could be affected by IHT due to frozen tax thresholds and escalating property values.

The current law

As it stands, the law stipulates that any estate worth more than £2 million starts to lose a tax break on the family home, known as the residence nil-rate band.

This additional allowance of £175,000 per person allows married couples and civil partners to pass on up to £1 million completely free of IHT by pooling this allowance from each person and combining it with their standard nil rate band, which offers an additional £650,000 per couple.

Despite skyrocketing property prices, this allowance has not been updated since its introduction in 2017 and will remain frozen for five more years.

The growing concern

According to a recent article by The Telegraph, the number of families affected by this rule is set to rise dramatically as a result.

Five years ago, only 2,200 families were impacted by IHT, but by 2028, this number is expected to soar to over 5,000 families per year.

This is largely due to the Government’s decision to keep the nil-rate thresholds frozen while property values continue to rise.

What are the implications for you?

If you are a homeowner with an estate valued over £2 million, you stand to lose this valuable tax exemption.

The residence nil-rate band begins to taper off, reducing by £1 for every £2 over the £2 million threshold. For estates worth more than £2.7 million, the allowance is wiped out entirely.

If you are nearing or above this threshold, proactive estate planning is crucial. Whether it’s through gifting, setting up trusts, or other tax-efficient strategies, there are ways to mitigate the impact of these IHT changes.

What can you do?

We strongly recommend reviewing your estate and speaking with one of our expert accountants to explore the best strategies for your specific situation.

The aim is to ensure that your hard-earned assets, especially your family home, are passed on to your descendants in the most tax-efficient manner possible.

While the residence nil-rate band was introduced with good intentions, its complexities and frozen thresholds are catching more families in the IHT net.

As a trusted accountancy firm, we are here to guide you through these intricate tax landscapes. For a personalised consultation, please don’t hesitate to contact us.

The recent update to HM Revenue & Customs’ (HMRC) Employment Income Manual is a significant development for businesses and employees utilising company cars, particularly electric vehicles (EVs).

The revised guidance now aligns with existing legislation, specifically, Section 239 of the Income Tax (Earnings and Pensions) Act 2003, which states that reimbursements for expenses incurred in connection with a taxable car or van are not subject to Income Tax.

The impact of Section 239

Previously, the manual incorrectly advised that if an employer reimbursed an employee for the cost of charging an electric car at home, it would be considered a taxable benefit in kind (BIK). This has now been rectified.

The exemption under Section 239 does apply to the cost of domestic electricity used for charging a company car at home.

Therefore, if the electricity reimbursed is solely used for this purpose, there will be no tax liability.

A point of contention in the updated guidance

However, it’s crucial to note a new, somewhat contentious, point in the updated guidance.

It suggests that if a car is used solely for private purposes, the reimbursement for home charging should be taxed as earnings.

This is in direct contradiction with the legislation, which makes no such distinction based on the usage of the car – be it wholly private, mixed business and private, or wholly business.

This could potentially lead to complications and it’s advisable to keep an eye on any further clarifications from HMRC on this matter and discuss these issues with your accountant.

Opportunity for overpayment refunds

For those who have been following the old guidance, there’s good news! You may be entitled to claim tax overpayment refunds, which could be substantial in some cases.

For instance, a director spending approximately £20 per week on charging an EV at home could claim just over a thousand pounds a year in reimbursed electricity costs.

What to do next

The updated HMRC guidance brings much-needed clarity but also introduces a point of contention that contradicts existing legislation.

It’s essential to review your current reimbursement policies for electric vehicle charging to ensure they are in line with the new guidance, while also being prepared for potential future amendments.

This is an opportune moment to consult with your tax adviser to assess the impact of these changes on your tax position and take any necessary corrective actions.

Your tax adviser could help you streamline your tax efficiency and strengthen your reimbursement policies. Get in touch today to see how we can help you and your business.

The recent survey by the British Chambers of Commerce (BCC) reveals a concerning lack of preparedness among UK small and medium-sized enterprises (SMEs) for ongoing EU regulations and tax changes.

A staggering 80 per cent of SMEs surveyed are unaware of the reporting requirements for the EU’s new Green Tax, which took effect on 1 October 2023.

Known as the carbon border adjustment mechanism, this tax requires companies to report on carbon emissions related to certain imported goods, such as steel, aluminium, and fertilisers.

From 2026, businesses will need to purchase certificates to offset the pollution embedded in these products.

Navigating the complexities of VAT changes

Another notable change is in the EU’s value-added tax (VAT) regime, which will come into force in January 2025.

Changes to EU VAT rules will require businesses to pay VAT in the customer’s residing country, even for electronically provided services.

For example, if you offer online cooking classes to EU customers, you will be required to pay VAT in the customer’s country starting from January 2025.

The importance of product quality marks

The survey also found that 43 per cent of UK manufacturers are unaware of the UK’s development of an alternative product quality mark to replace the EU’s.

This lack of awareness could lead to additional bureaucratic hurdles for UK exporters.

Given these impending changes, businesses must review their EU import footprint and assess the compliance and organisational impact on their trade.

The divergence in regulations and taxes between the UK and the EU post-Brexit undoubtedly creates additional complexities for UK businesses looking to trade with the Continent.

Therefore, it’s imperative to stay informed and prepare for changes in advance to mitigate their impact on your operations.

Government’s role in supporting businesses

The Department for Business and Trade has stated that it is working on tailoring regulations to benefit UK businesses post-Brexit.

However, businesses need to take proactive steps to understand and adapt to these new regulatory landscapes.

This includes discussing potential import/export/overseas trading issues with your accountant who can help you develop a firm strategy going forward.

Speak to your accountant today and develop a path to import/export profitability.

Research and development (R&D) tax relief claims are a vital way to offset your business costs against profits and promote technological innovation and advances.

However, filling in the mountain of paperwork associated with R&D claims can be tedious and time-consuming – and has only gotten more so with recent changes.

Almost half of businesses that spent hours filing tax relief claims have had them sent back unapproved by HM Revenue & Customs (HMRC) because they failed to complete a new vital piece of compliance.

As of August 2023, R&D tax relief claims now require an additional information form (AIF) to support all claims.

What is it?

The newest addition in the landslide of R&D claim forms is the AIF. The key elements of the form include:

• A detailed project description
• A breakdown of eligible R&D costs
• Supporting evidence and documentation
• Details of any partnerships or collaborations

Why does it matter?

Quite simply, if you don’t submit the AIF your R&D claim will automatically be rejected and taken off your company’s tax returns. This means you will receive absolutely no tax relief for your hard work on R&D projects.

Additionally, the AIF provides HMRC with the ability to analyse company claims more accurately and efficiently.

The form also allows you and your business to demonstrate compliance and transparency, protecting you from future disputes and improving your chances of having your R&D tax credit claim accepted.

To speak to an accountant about making an effective and compliant R&D tax credit claim, please speak to our team.  

Businesses are holding their breath as the upcoming Autumn Statement threatens to change the tax landscape of the UK.

Chancellor of the Exchequer, Jeremy Hunt, announced that he will present the Statement to Parliament on 22 November 2023.

The cost-of-living crisis is becoming a serious political issue ahead of an upcoming General Election and rising tax rates could see spending decrease and business costs rise.

Why the Autumn Statement matters

The Autumn Statement outlines the Government’s fiscal plans for the upcoming year, including any changes to tax rates, allowances, and reliefs that could directly impact a company’s bottom line.

Businesses rely on this information to plan their budgets, assess their financial health, and make informed decisions about investments and growth.

What changes are likely?

The Chancellor will no doubt want to show that the Government is still committed to supporting businesses, but he has historically been known as a tax raiser as he attempts to maintain fiscal responsibility.

In fact, he entirely reversed the previous Chancellor’s growth-based approach, which would have seen an end to high stamp duty thresholds.

Having said this, the UK has been on the brink of recession for the last few years, which might mean that the Government chooses to reduce restrictive policies on businesses soon.

In addition, with an upcoming election just around the corner, Hunt may plan to encourage voting for the Conservatives with a generous approach to business and personal taxation.

Early warning signs

In the past, we have seen taxation plans leaked to determine public opinion for new policies. There have already been rumours of plans to alter or even entirely cut Inheritance Tax (IHT) ahead of the next election to woo voters.

Therefore, it is worth keeping an eye on developments running up to the Autumn Statement for indications of new regulatory changes.

What should you do to prepare?

Preparing for the Autumn Statement is vital for businesses looking to maximise their tax efficiency going into the next financial year.

Businesses should engage in proactive financial planning to prepare for potential changes in the tax landscape.

Keeping abreast of the latest developments in Government policy could be the difference between a profitable business and one that fails to comply with regulation changes.

Discussing these issues with an accountant can help simplify your tax obligations and reduce the strain on your business.

We will be bringing you further updates from the Autumn Statement in future, but if you have any immediate queries about taxation contact us.