New research from the #SBS State of the Nation Roundtable report has revealed that 72 per cent of small and medium-sized enterprises (SMEs) feel they are surviving, rather than thriving.

Fewer than one-third of small businesses have enough cash in hand to be able to keep their businesses afloat for more than six months, while 58 per cent have not invested in their business over the past year because of economic instability.

More than one-third of small business owners have taken a salary cut just to keep their businesses afloat.

Challenges and opportunities

The report highlights the financial strain SMEs are under, with many facing challenges such as rising costs, Brexit-induced red tape, and a lack of access to finance.

On the positive side, nearly half of small businesses are already employing Artificial Intelligence (AI) in their business, with 60 per cent saying they are excited about it.

The advent of AI provides an unparalleled opportunity for SMEs to level the playing field with larger counterparts, allowing SMEs to think big.

Strategies for thriving

While the report casts a shadow over the future growth of many SMEs, it is important to take stock of strategies that are at hand to help businesses thrive. These include:

• Cash flow management – Regularly review your cash flow and make adjustments as needed.
• Access to finance – Explore different financing options, including grants and low-interest loans.
• AI integration – Utilise AI for automating mundane tasks and data analysis.
• Digital marketing – Invest in online marketing strategies to reach a wider audience.
• Export opportunities – Microbusinesses have shown the way in exports, with nearly half making exports last year. SMEs should explore international markets for additional revenue streams.

• Budgeting – Keep a close eye on expenditures and cut down on unnecessary costs.
• Outsourcing – Consider outsourcing non-core activities to reduce operational costs.

While the current economic conditions remain a challenge for many SMEs, remaining proactive and utilising the options above are key to ensuring a thriving business.

Our expert team of accountants can offer further advice on helping your business grow. Please contact us today.

HM Revenue & Customs (HMRC) has recently launched a consultation on new rules aimed at simplifying the reporting of salary advances.

This change is expected to have a significant impact on employers, streamlining administrative processes and reducing costs.

Under existing legislation, salary advances are treated as a payment on account of earnings. Employers are required to submit additional Real Time Information (RTI) reports to record these advance payments.

For income tax in respect of PAYE income, Regulation 67B and Schedule A1 of the Income Tax PAYE Regulations 2003 set out the requirements for reporting relevant payments, including salary advances, to HMRC. These must be reported on or before the date they are paid.

The proposed changes

The technical consultation by HMRC proposes amendments that will allow employers to delay reporting a salary advance until the payment of the remainder of that salary instalment, provided certain conditions are met.

The key proposed amendments are:

• Employers will have a clear and consistent approach to reporting salary advances to HMRC.

• The administrative burden for employers will be eased, as they will not need to submit extra reports to HMRC.

Reduced errors and increased efficiency

HMRC acknowledges that additional returns can impact processes, such as the risk of PAYE coding or Universal Credit errors. The new rules aim to reduce such errors by simplifying the reporting process.

The proposed changes will also ease the administrative burden on employers. They will no longer have to submit additional RTI reports for salary advances. This will ultimately save time and resources.

Clarity and consistency

The new rules will provide clarity to employers on how to report advance payments, ensuring a more consistent approach across the board.

Limitations

Amendments will not apply where the employee’s normal payment interval is less than a week or more than a month. They are also not intended to impact other PAYE/RTI processes.

The proposed changes by HMRC to simplify the reporting of salary advances are a welcome move for businesses.

They promise to reduce administrative burdens, cut costs, and minimise errors, thereby making the process more efficient and effective. The consultation process is due to close on 9 October 2023, at which point more information should be released by HMRC.

If you would like more information and advice about how the proposed changes impact your business, please reach out to us today.

HM Revenue and Customs (HMRC) has recently reported a significant increase in Corporation Tax receipts for 2022/23.

The receipts have risen by £17.3 billion, reaching a record £84.7 billion. This represents a 26 per cent increase on the previous tax year, which is a substantial figure by any measure.

This increase occurred in the year before the increase in the top rate of Corporation Tax and the introduction of marginal tax relief, so a further increase in receipts may be recorded in the current tax year.

Cash flow concerns 

One of the immediate impacts of increased Corporation Tax receipts could be on the cash flow of businesses. Higher tax liabilities mean that companies will have less cash available for other operational needs, such as expansion, hiring, and research and development.

Investment decisions

The increase in Corporation Tax could also affect investment decisions. Businesses might be more cautious about making significant investments in new projects or technologies due to the reduced cash flow. This could potentially slow down innovation and growth in the long term.

Strains on smaller businesses

Small and medium-sized enterprises (SMEs), which often operate on thin margins, could be hit harder by the increase in Corporation Tax.

The added financial burden could lead to layoffs, reduced hours, or even closures in extreme cases.

The outcomes of higher tax receipts for the nation

The increase in Corporation Tax receipts to a record £84.7 billion is a double-edged sword. While it indicates a stronger economy and provides the Government with additional revenue, it also poses challenges for businesses.

While it will be how the Government utilises this additional revenue, business owners should ensure that they are prepared for any additional Corporation Tax payments and remain financially healthy.

If you would like more information about this and would like advice about managing your Corporation Tax responsibilities, please contact us today.

HM Revenue & Customs (HMRC) has continued to run campaigns to ensure that overseas workers, registered in the UK, are paying the correct taxation rates.

Taxpayers that have overseas assets and income may still be obligated to pay UK tax rates under certain circumstances.

The first step HMRC will take to determine your tax obligations is establishing your residence and domicile status.

Your tax obligations differ based on whether you are a resident, non-resident, or domiciled in the UK.

Double taxation agreements (DTAs)

The UK has DTAs with many countries to ensure that you don’t end up paying tax on the same income in two jurisdictions.

However, it is your responsibility to claim these reliefs, and failure to do so could result in unnecessary tax burdens.

Who’s exempt?

Not everyone working overseas is required to pay UK tax. Here are some scenarios where you might be exempt:

• Non-resident status: If you spend fewer than 16 days in the UK (or 46 days if you haven’t been classed as a UK resident for the three previous tax years), you may qualify as a non-resident and be exempt from UK tax on your overseas income.
• Split-year treatment: In the tax year that you move abroad, you might be eligible for split-year treatment. This means you’ll only pay UK tax on the income you earn in the UK for the part of the year you are a UK resident.
• Foreign income exemption: If your income is taxed in another country and you have claimed double taxation relief, you may not have to pay UK tax on that income.

Penalties for non-compliance

Failure to comply with HMRC regulations can result in severe penalties:

• Late payment penalties: These start at five per cent of the tax unpaid at 30 days, rising to ten at six months and fifteen per cent at 12 months.
• Late filing penalties: A £100 fine is immediately levied for late filing, with additional fines accruing over time.
• Investigations and prosecutions: In severe cases, HMRC can launch an investigation, which could lead to prosecution and even imprisonment.

• Asset seizure: HMRC also has the authority to seize assets to cover unpaid taxes.

Working overseas offers a range of opportunities, but it also comes with complex tax obligations.

Understanding your tax liabilities and staying compliant with HMRC regulations is crucial to avoid unnecessary financial burdens and legal complications.

You should always consult with a tax advisor to ensure you are meeting your obligations and taking advantage of any exemptions or reliefs available to you.

Ignorance is not an excuse in the eyes of the law, and the penalties for non-compliance can be severe.

For help staying informed and keeping compliant, please speak to one of our expert tax advisers.

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.

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.