The majority of adults will have flirted with the idea of starting a business and becoming the next Branson or Musk.

That idea would have been firmly buried for many during the pandemic, but new figures show that nearly 13 per cent of UK adults are running fledgling businesses, according to research, the highest percentage since the late 1990s.

They are in the first three months of starting a new business or are already running a young enterprise, according to the Global Entrepreneurship Monitor. This compares to just eight per cent of adults in 2020.

Indeed, more than 70 per cent of Britons believe it is easy to start a business in the UK, but less than one in 10 has any intention of doing so.

For those willing to take the leap, here are just a few tips to get you started:

Be prepared and plan carefully

Overnight success is a rarity, so remember to focus on what’s achievable and be consistent.

You should create good habits and follow routines that power you on when that initial motivation wanes.

Taking one step at a time is important, as diving in headfirst can be disastrous.

The best way to accomplish any business target is to plan it out step by step.

Decide what kind of business you want

Think about what you love and what you are good at can lead you to a brilliant idea for your next business.

If you already have an idea, measure it against the market, consider whether you’re good at it and have the passion to succeed, and most importantly consider whether it is truly profitable.

Research thoroughly

The first stage of any competition study is primary research.

This entails obtaining data directly from potential customers rather than basing your conclusions on past data.

You can use questionnaires, surveys and interviews to learn what consumers want.

You should also review similar ideas within existing markets and see whether your product or service has a sufficient unique selling point that could beat the competition.

Create Your Business Plan

A business plan is a dynamic document that serves as a roadmap for establishing a new business.

This document makes it simple for potential investors, financial institutions, and company management to understand and absorb.

Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems.

Several important changes are happening to research and development (R&D) tax reliefs in April 2023, which could affect what income qualifies for R&D tax relief that businesses need to account for in their plans.

These new measures are still being considered by Parliament, but details of the upcoming amendments to the R&D tax relief system have now been published.

Overseas outsourced R&D

Under the new rules, the costs of overseas workers will not qualify for UK R&D relief, where costs are incurred after April 2023.

The Government has indicated that it does not want to introduce a rule that discriminates against businesses that cannot practically carry out research in the UK.

The Government will, therefore, legislate so that expenditure on overseas R&D activities can still qualify where there are:

• Material factors such as geography, environment, population or other conditions that are not present in the UK and are required for the research – for example, deep-ocean research
• Regulatory or other legal requirements that activities must take place outside of the UK – for example, clinical trials

The Government also needs to consider the international structures and connections of businesses carrying out R&D.

If a blanket ban was imposed, UK groups with overseas subsidiaries conducting work on a UK project may not be able to make a claim, despite the innovation still benefiting the main UK parent company.

Cloud computing and data 

Businesses have been unable to claim for the costs of cloud computing and data use. This has hampered some of the UK’s most innovative tech companies by excluding them from the tax benefits of the R&D credit scheme.

Under the Bill, businesses will be able to include the costs of purchasing data for R&D projects or using cloud computing services.

However, HM Revenue & Customs (HMRC) is still expected to provide clarity on the issues of usage and residual values in its upcoming guidance.

Amongst the other issues to consider is identifying cloud costs that relate to an R&D project. Many businesses use the same cloud services throughout their operations, so apportioning specific costs to R&D may be challenging.

Other qualifying costs for cloud computing costs may also be an issue, as it has been revealed that the costs of ‘data storage’ will not be allowed. Again, further clarity on what these rules cover should be provided in HMRC’s guidance later this year.

Anti-abuse action

There has been growing concern that the R&D tax relief system is open to abuse and so the new measures will include compliance procedures to deter speculative or fraudulent claims. This will include:

• An entirely digital claims system
• Additional details to be submitted with all claims
• Requirements for a named senior officer of the company to endorse each claim
• Companies made to notify HMRC, in advance, of their intentions to submit a claim
• Details of any agent who has advised the company on compiling the claim.

HMRC will also be given new powers and enforcement action to tackle R&D tax advisers. It is thought that alongside these measures, HMRC will invest further resources into conducting additional risk profiling and scrutiny of R&D tax relief claims.

Additional reforms 

During his Spring Statement, the Chancellor alluded to the fact that he planned to introduce further changes to the R&D tax relief system in future to improve access to the support that it offers.

Within the Statement’s accompanying documents, the Treasury says that the steps it hopes to take could support an additional £5 billion of R&D funding by 2024.

One of these steps has already been revealed with the expansion and clarification of qualifying expenditure to include pure mathematics services.

Further details about reforms to the R&D tax credit system are expected later in the year, nearer to the Autumn Budget.

The Government has said that, Where required, legislation will be published in draft before being included in a future Finance Bill to come into effect in April 2023.

Links: R&D tax relief is changing – here’s what you need to know

HM Revenue & Customs (HMRC) is to launch a new mandatory P87 form from 7 May to create a consistent standard for the P87s it receives.

What is a P87 form?

Workers and their agents can use a P87 form to claim tax relief on work expenses. The form can only be used to claim tax rebates for an employee, not if you are self-employed as this is done via the Self-Assessment system.

Taxpayers need to submit a separate P87 for each job they are claiming a tax refund for.

What is changing?

At the moment claims for income tax relief on employment expenses can be made using:

• a self-assessment tax return
• online service available to taxpayers (but not agents)
• print, complete and post the P87 form available on GOV.UK
• by phone (subject to limits) if a claim has been made for a previous tax year
• substitute claim form or letter. Substitute claim forms are widely used by high volume repayment agents.

From 7 May 2022 claims for income tax relief on employment expenses can only be made on the standard P87 form, which can be found on GOV.UK.

HMRC will reject claims that are made on substitute claim forms, but the other options above will remain available.

Although this measure is due to be introduced later this year, the new P87 form is now live here.

Links: HMRC to mandate the format of claims for employment expenses