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.

As experts in the field of accountancy, we understand the unique challenges business owners face when it comes to payroll.

We’ve put together three essential tips to help you manage maternity and paternity pay, ensuring legal compliance and employee satisfaction.

• Understand the statutory requirements: In the UK, employees are entitled to Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP).As an employer, it’s crucial to understand your obligations. The former is usually paid for up to 39 weeks, and the latter for one or two weeks.

  Familiarise yourself with the eligibility criteria and payment rates and keep up to date.

• Maintain accurate records: Maintain clear records of when maternity or paternity leave begins and ends, and the amounts paid.Proper documentation will not only help in providing transparency but will also make it easier to handle any future enquiries or inspections by HM Revenue & Customs (HMRC).

• Offer support and communication: Maternity and paternity leave are significant life events for your employees.Open communication and support can create a positive experience for both parties. Clearly outline your company’s policies and be available to answer any queries your employees may have.

Managing maternity and paternity pay doesn’t have to be a complicated process. By understanding the statutory requirements, maintaining accurate records, and offering robust support, you can ensure a smooth experience for both you and your employees.

If you need assistance in navigating these waters, our dedicated team of professionals is here to help.

Contact us today to discover how we can assist you with this important aspect of your business.

If your company is involved in the creative industry, then it could be eligible for significant tax relief from the Government.

These tax reliefs support the Government’s objective of becoming the technological centre of Europe by promoting growth in the digital, creative, and other high-technology areas.

Your business can claim creative industry tax relief if it falls into the following categories:

• It is liable to Corporation Tax.
• It is directly involved in the decision-making, production, and development (from start to finish) of:
• Films
• High-end, animated and children’s television
• Video games
• Theatrical productions and orchestral concerts
• Museum and gallery exhibitions

Sometimes the resulting production may need to pass a cultural test, qualifying it for a British Film Institute (BFI) certification, to claim tax relief.

Businesses involved in the production of live-action film, television and video games are entitled to up to 20 per cent of the core production cost back as Corporate Tax relief.

Theatre and orchestra productions, museums and galleries are entitled to up to 25 per cent of the core production costs of the piece.

Productions of animation and animated film can also claim up to 25 per cent as a tax rebate against the expenses of pre-production, principal photography, and post-production of an animated project.

If you are unsure if your business qualifies for creative industry tax relief, get in touch with our expert accountants today.

Stagnation is a prolonged period of little or no growth in the economy and it can have a serious impact on your business.

Whilst talking to The Guardian, Samuel Tombs, a leading UK economist, claimed that stagnation will cause “businesses to cut employment and investment, and trigger a sharp decline in residential investment.”

He added: “GDP will fall one per cent this year”, which, whilst not sounding significant, is a major blow to enterprising businesses.

Here’s an overview of what stagnation means for your business and how to navigate these times of economic uncertainty.

Diminished revenue growth

During times of economic stagnation, consumer spending often slows down. This can lead to reduced sales and revenue growth for small businesses.

Companies in discretionary spending sectors like leisure and retail are often the hardest hit because these tend to be areas in which consumers start to save money during periods of economic difficulty.

However, the effects can be felt across various industries and every business should be prepared to face difficulties.

You may need to focus on cutting costs and increasing profits through offers or adjustments to pricing strategies. In times like these, an accountant can help you make sense of the steps your business needs to take.

Cash flow challenges

Stagnation may lead to increased payment delays from customers, impacting your cash flow. Effective cash flow management becomes essential during these times as regular monitoring and robust credit control procedures can help maintain liquidity.

Ensuring your customers pay on time and forecasting your cash flow correctly can greatly increase your chances of avoiding cash-related crises. Don’t forget, cash flow issues are one of the most common factors in business insolvencies.

Having a sound financial plan and discussing these issues with your accountant can help to maintain resilience during cash flow instability.

Difficulty in accessing finance

Banks and other financial institutions may become more risk-averse during periods of stagnation, making it harder for businesses to access necessary funding or receive loans.

Exploring alternative financing options like crowdfunding or grants may become essential to secure investment into the business.

In addition, your savings and collateral can make a big difference when banks are unable to lend you money so exploring your surpluses and the value of existing assets is critical to understanding your position.

Potential opportunities

Despite the challenges, stagnation can also present opportunities. Businesses that can adapt, innovate, and find new markets or diversify their services may find ways to thrive in an economic downturn.

Stagnation is a complex issue that requires strategic planning and expert guidance to navigate successfully.

By understanding the potential impacts on your business, and with a proactive approach to management and innovation, you can mitigate risks and even find new avenues for growth.

Our team is here to assist you in developing strategies to survive and thrive during periods of stagnation. If you would like to receive expert advice tailored to your business needs, contact us today.

After the fourteenth consecutive increase in interest rates since 2021, many business owners will be asking themselves the same thing: “When will interest rates finally fall?”

The higher the interest rates, the more money you pay on your debts like loans, overdrafts, and credit cards. Equally, many of your customers will also face higher costs on their debts.

Due to this and other economic conditions, your customers are likely to cut back on spending, which in turn can further restrict your cash flow and investment plans.

Earlier this year there were significant declines in inflation in both the USA and Europe, which is an encouraging sign for the UK, which has itself started to see more significant falls in inflation.

Rising like a rocket, falling like a feather

Inflation has already fallen slightly to 6.8 per cent in July 2023 (the latest figure at the time of publication), which is a good sign for struggling businesses, but don’t celebrate just yet.

At the moment the Bank of England (BoE) continues to increase the base rate, with it sitting at a recent high of 5.25 per cent at the end of August, with it expecting to reach a peak of 5.5 per cent during September 2023 and remain high for the following 12 months.

Any subsequent reduction in interest rates is likely to be slow, with forecasts suggesting that the BoE will have only cut interest rates to three per cent by 2026 as the Bank tries to meet its two per cent inflation target.

This is indicative of earlier predictions that despite the rapid increase in rates, they will be slow to come back down again. So, we are still going to be experiencing high-interest rates for the foreseeable future.

In addition to this, the UK economy witnessed a weakening of its position, with a further contraction likely in the coming year.

What does a fall in interest rates mean for your business?

Put simply, when the interest rate does eventually drop it will become cheaper to borrow and easier to pay back loans. The low interest rates should, therefore, offer an incentive to borrow and invest in your business.

Your customers and clients will likely have more money to spend once interest rates fall and the inflationary pressure on your employees’ wages should decline, helping you to manage costs.

In the meantime, businesses need to find ways to build resilience and manage the costs and challenges that come with high-interest rates.

An experienced accountant can also help you adapt to new market opportunities as interest rates fall and ensure that you have the capital to successfully ride out the current storm.

To receive expert advice on how interest rates affect your business, get in touch.

You must file your company accounts, to avoid late filing penalties, Companies House is warning.

All companies must file annual accounts with Companies House each year, regardless of whether they are trading or not, or whether they are public or private. This applies to both large and small companies. LLPs are also subject to these rules.

Private companies and LLPs must file their first accounts within 21 months of the incorporation date, or three months from the accounting reference date, whichever is the longer period.

After this, companies and LLPs must file nine months before the end of the accounting reference period, while publicly listed companies have six months to submit their accounts.

Here are some simple steps to prevent your company from filing late:

• Mark your diary or calendar to remind you.
• Sign up for email reminders from Companies House.
• Allow for enough time for postage if you are filing via the post.
• File online to speed up the process.

The best way to avoid fines

The most effective way to submit your accounts on time is to outsource this responsibility to a qualified accountant.

A professional accountancy firm can maintain your financial records as well as submit all the relevant documentation to Companies House before the relevant deadlines. They will ensure you do not get handed a hefty fine, which can amount to £7,300.

To learn more about how an accountant could help you avoid fines and charges, get in touch.

In a world where technological advancements are reshaping industries, small and medium-sized enterprises (SMEs) cannot afford to be left behind.

The hesitance to embrace new technologies, epitomised historically by movements like the Luddites in the 19th Century, can impede growth and competitiveness.

For SMEs open to innovation, Artificial Intelligence (AI) offers a host of opportunities beyond just financial functions – whether they choose to invest in existing platforms or develop their own innovations.

The crucial need for SMEs to embrace AI

The integration of AI isn’t merely a trend; it’s rapidly becoming a business necessity. While larger companies are often cited in discussions about AI, SMEs have much to gain from leveraging this transformative technology.

Yet, adoption rates remain surprisingly low, making this an opportune time for proactive SMEs to get ahead of the curve.

How AI can benefit your SME across various functions

• Enhanced customer engagement: AI-powered chatbots and customer service tools can handle routine queries 24/7, offering a superior customer experience while freeing up human resources for more complex tasks.
• Optimised marketing: AI can analyse consumer behaviour and market trends, enabling more targeted advertising and effective campaigns, thus maximising your return on investment.
• Streamlined supply chain: Real-time tracking and predictive analytics can make your supply chain more responsive and efficient, reducing costs and improving reliability.
• Human resources management: AI can help in talent acquisition by sorting through CVs more quickly and efficiently than a human can, as well as assist in ongoing personnel assessments and career development plans.
• Innovation and product development: AI algorithms can assist in product design by simulating how various factors could affect performance and durability, thereby streamlining the research and development process.
• Cybersecurity: Machine learning algorithms can identify patterns and anomalies in your network, offering an extra layer of security against cyber threats.

A balanced future with AI

While the prospect of full business operations automation may seem distant, incorporating AI in various aspects of your SME can provide a harmonious blend of human creativity and machine efficiency.

This balance is particularly vital for SMEs looking to innovate, streamline operations, and stay competitive.

At a time when efficiency and costs are a focus for many business owners, AI might provide useful solutions that merit investment.

If you’re interested in unlocking the potential of AI for your SME and need help with seeking investment to acquire the right solutions, find out how our funding experts can help.